Vladimir Kudrytsky’s recent resignation as head of Ukrenergo, the state-owned company overseeing Ukraine’s distribution networks, has raised serious concerns among experts and industry participants regarding the effectiveness of crisis management in the energy sector.
Following extensive Russian attacks on energy infrastructure in late August and ahead of a particularly difficult heating season, these issues are becoming increasingly critical.
However, in addition to energy issues, the new leadership of Ukrenergo will also have to address other problems—likely related to systemic corruption at the level of courts and high-level state patronage. An example of this is the story of a small Ukrainian bank, Alliance, linked to old elites, which is attempting to undermine decades of anti-corruption efforts.
After massive terrorist strikes on energy infrastructure, Ukraine is suffering from a catastrophic shortage of electricity—both in terms of generation and distribution capacities. Through the heroic efforts of energy workers, who restore power lines under gunfire and bombings, electricity is being supplied to Ukrainian homes, hospitals, and industrial enterprises under unstable schedules. The cost of rebuilding energy supply systems is measured in years and tens of billions of dollars. Funds for this are being sought worldwide. The country has become significantly dependent on electricity imports, the construction of new diversified alternative sources, and the technical condition of nuclear generation units.
Against this backdrop, over the past few months, attacks on the key energy management body—the distribution system operator Ukrenergo—have unfolded in Ukraine’s information space. Since the beginning of autumn 2022, the company has faced a variety of absurd accusations—from alleged corrupt transformer procurement to the purchase of bulletproof vests at inflated prices at the start of the war. Recently, the High Anti-Corruption Court ordered the National Anti-Corruption Bureau, and later the State Bureau of Investigation, to open a case against former Ukrenergo head Vladimir Kudrytsky, allegedly on corruption charges.
According to the local anti-corruption publication Nashi Groshi, the initial attacks may have been orchestrated by representatives of the Ministry of Energy and the Office of the President. They allegedly sought to gain control over financial flows from electricity exports to Europe, its distribution, and later over funds for the restoration of energy networks after the war. Recently, Kudrytsky was dismissed from his position by a decision of the Supreme Commander-in-Chief’s Staff. The new leadership will likely eliminate all traces of inefficiency left by its predecessor.
However, one critical issue remains, which cannot be personalized to the former director. At the same time, it serves as a litmus test for the true anti-corruption intentions of Ukraine’s top authorities.
Energy corruption
This concerns a small but audacious Ukrainian bank—Alliance. The essence of its case lies in its participation in a scheme to embezzle over 700 million UAH of Ukrenergo funds, which was under investigation by the National Anti-Corruption Bureau (NABU) until the beginning of 2024.
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In the fall of 2021, Alliance Bank issued a bank guarantee to the company United Energy for the purchase of electricity or other trading operations. Alliance issued guarantees to United Energy for over 1 billion UAH, which critically exceeded the credit risk limits for a single client.
When United Energy approached Ukrenergo for electricity supply in March 2022, it refused to pay for the goods, citing the guarantee. Alliance declined to honor its obligations, citing formalities.
As a result, Ukrenergo (and effectively the Ukrainian state) suffered losses estimated between 700 million and 1.7 billion UAH. NABU opened a criminal case involving Ukrenergo officials, Alliance Bank, and United Energy, which is linked to the sphere of influence of Igor Kolomoyskyi, a well-known oligarch accused by Washington of money laundering schemes involving U.S. real estate.
NABU issued a wanted notice for Yulia Frolova, the head of the board of Alliance Bank, who is currently hiding abroad. Meanwhile, Ukrenergo filed a commercial lawsuit against Alliance for 1.2 billion UAH. The Supreme Court of Ukraine ruled that payments under bank guarantees must be unconditional.
Additional accusations
The interests of Alliance Bank are represented by the law firm Miller, publicly associated with Masi Nayem, a war veteran and volunteer, and brother of Mustafa Nayem, former head of the Reconstruction Agency. Mustafa Nayem was recently dismissed together with Deputy Prime Minister for Reconstruction Dmitry Kubrakov, shortly before the arrival of U.S. auditors.
One of Miller’s lawyers, Alexey Nosov, was charged with attempting to offer a $200,000 bribe to NABU detectives and prosecutors of the Specialized Anti-Corruption Prosecutor’s Office. Nosov is the son of Sergey Nosov, head of the regional reconstruction agency in Zhytomyr.
Shareholders with a trail
Formally, Alliance Bank is controlled by Aleksandr Sosis, while the second-largest shareholder and chairman of the supervisory board is Pavel Shcherban.
Previously, Shcherban was involved in companies linked to Sergey Dyadechko, financiers close to fugitive president Viktor Yanukovych, and to Rodovid Bank, which at one time was linked to oligarch Dmitry Firtash.
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Firtash has been under house arrest in Vienna for nearly a decade and faces extradition requests from the United States related to defense procurement abuses. Ukrainian media have repeatedly suggested that Alliance Bank falls within Firtash’s sphere of influence, despite official denials by Group DF.
Problematic bank
According to the National Bank of Ukraine, Alliance Bank was repeatedly fined for violations related to domestic government bonds, financial monitoring failures, and suspicious transactions. The bank was also linked to GlobalMoney, a payment system accused of financing the terrorist organizations LNR and DNR.
Despite this, Alliance Bank regularly received refinancing from the National Bank of Ukraine: nearly 2.8 billion UAH in 2022, 1.3 billion in 2021, and 1 billion in 2020—despite clear warning signs and withdrawn credit ratings.
