The end of Ihor Kolomoisky’s oil empire

Ukraine’s largest gas station chain, owned by Ihor Kolomoisky’s Privat group and its partners, is out of fuel. For any network, the disappearance of at least one item from the assortment for at least an hour is an emergency. “Privat, on the other hand, has been dry on some items for the past three months.

At the peak of its power, around the end of the noughties, Privat controlled more than 1,600 gas stations – 25% of the total number in Ukraine – and sold every third liter of fuel on the market. Their influence was so powerful that they were able to blackmail governments by tweaking prices or removing price boards. Not to mention the genocide of competitors, which was used to acquire many gas stations.

But the secret of this power was very simple. In the fall of 2022, the state nationalized the semi-state-owned Ukrnafta and Ukrtatnafta, which had been under Privat’s control since 2003 and 2007, respectively. Ihor Kolomoisky himself was imprisoned. Since then, the chain has literally started to crumble.

First, Ukrnafta pulled its 537 filling stations out of the consolidated network (Privat once sold these stations to Ukrnafta for a “bargain”, but they continued to work for the former owner to the last).

Later, 245 gas stations were returned to PrivatBank, where they were pledged as collateral for loans, but for 8 years they were also used by private individuals.

About 200 stations remained in the occupied territories.

Today, the network includes about 550 gas stations, many of which are closed. The mobile app currently contains 430 addresses. The market share in sales is 5%.

But the main thing is that the company’s own stations began to fold.

Stores, a vital element of a modern gas station, were almost immediately empty.

In the summer of 2024, signals began to arrive about delays in staff salaries and salary cuts for regional managers.

At the same time, there were rumors of a lack of money to pay fuel suppliers. And in October, fuel started to disappear. At the beginning of January, diesel completely disappeared, and today A-92 gasoline is available at 28% of the operator’s stations, A-95 – at 12%, and liquefied gas – at 5%. Sales through the app have been stopped, and it is not known how many coupons and cards are left, but I think it is a lot.

Why did this happen? Why are the rest of the stations operating and striving for development, while such an extensive network is in decline?

Because Privat has never made any money on gas stations. “Privat made money on Ukrnafta and Ukrtatnafta by turning its gas stations into cash dispensers for its owners.

Earlier, I have repeatedly written about the heyday of the Ukrnafta robbery schemes, when Privat earned more than $1 billion in 2009-2010 by selling Ukrnafta’s oil at a reduced price alone.

A similar amount was siphoned off from the company in 2015, when Ukrnafta shipped 1 million tons of oil to Privat’s firms without paying them and purchased huge amounts of fuel from the same firms that it has not yet received.

According to the head of Ukrnafta and Ukrtatnafta, Serhiy Koretsky, Privat firms owe these state-owned companies at least UAH 100 billion.

Even the war did not change anything. At the end of April 2022, an auction was held to sell Ukrnafta’s liquefied natural gas, and the resource was sold to Privat at a reduced price. Ukrnafta’s losses amounted to UAH 380 million. Eventually, the assets were nationalized for refusing to pay taxes…

Tell me, why bother with a network, invest, take risks, hire thousands of people, dress and train them, if you can earn money sitting in your office that those gas stations have never even dreamed of?

But when Privat’s main source of income was taken away, it was only a matter of time before it went under . The biggest advantages were wide coverage and low prices, which were subsidized by the aforementioned revenues from the exploitation of state assets.

At the same time, competitors without steamship plants were improving their facilities and services. A real arms race ensued: specialty coffee, burgers under the knife, and other consumer-friendly perversions. The price has also leveled off, as Privat has found itself on a level playing field with the rest of the market in fuel purchases. Who will go to an old gas station with a toilet in the landing if there are buns with maple syrup, cleanliness and fuel for the same price?

What’s next? Over the past year, there have been reports of Mikhail Kiperman’s (head of Privat’s oil business) attempts to regroup in the new environment. There were talks of bringing in external managers, of transferring part or all of the network to management. There were also offers from the market to sell some of the stations. But nothing took off.

The longer this nightmare goes on without an end, the more terrible the end will be. It will be harder for these gas stations to return to the market every day. Consumers are fleeing, many people are holding unredeemed coupons, and this is not something you forget.

And if the assets are distributed sooner or later, we can forget about Privat as a player in this market. Privat proved to be unable to operate in the face of fierce competition, just like any oligarchic business. Parasitizing on state assets, monopoly and access to tariff regulation are the secrets of success. And in the fuel market, you have to bend over backwards for every penny and lick your customers.

This is a very revealing and instructive story. How much public money has gone into the pockets of oligarchs? How many businesses have not been born or have died because of their suppression by monopolies? What kind of country would we have if we used state resources and enterprises efficiently? Who knows, maybe we would not be in the hole we are in now.

Sergiy Kuyun
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