Medvedchuk’s pipe: what benefit does Ukraine have from the important asset of Putin’s godfather?

The oil product pipeline “Samara-Western direction”, which in Ukraine received the sonorous name “Medvedchuk’s pipe”, since it was Putin’s godfather, taking advantage of the legislative mess, extracted excess profits from it for years, finally became the property of the state. .

The trumpet is calling

In the case of the Ukrainian part of the oil product pipeline “Samara-Western direction”, better known in Ukraine as the “Medvedchuk pipe”, a final point has been reached. This was recently announced by the head of the State Property Fund, Vitaly Koval. The final chord was the decision of the Supreme Court that this infrastructure facility should remain in state ownership.

“The Samara-Western direction pipeline was built back in Soviet times,” Naftorinka expert Alexander Sirenko tells Apostrophe. – It was intended to transport diesel fuel to Hungary. Since it was low quality fuel with a high sulfur content, it was further refined at one of the Hungarian oil refineries, after which it was supplied to the countries of the socialist camp.”

After Ukraine gained independence, that part of the pipeline that was located on our territory (the pipe goes to Ukraine from Russia through Belarus) was supposed to become the property of the state.

“A significant part of the pipeline system of the Soviet Union was located in Ukraine,” Vladimir Omelchenko, director of energy programs at the Razumkov Center, said in a comment to the publication. “Pipes passed through our territory, through which gas, oil, diesel fuel, and ammonia were transported to the countries of the socialist camp. And, according to the law “On Pipeline Transport”, they all had to become the property of Ukraine. And most of them were indeed nationalized. However, due to some opaque schemes, the oil product pipeline became private property and was actually managed by the Russian enterprise Transnefteproduct.

The main beneficiary of this facility in Ukraine in recent years has been Putin’s godfather, Viktor Medvedchuk.

“Formally, the owners were various kinds of front companies and individuals, including Israeli citizens,” says Vladimir Omelchenko. “However, the pipeline was actually controlled by the Russians. And a significant part of the income went to Viktor Medvedchuk, as well as income from the Glusco gas station network, which has now also been transferred to the management of the state.”

Medvedchuk had significant assets in the oil sector in Russia, in particular, one of the oil fields was transferred to him. Therefore, it is likely that it was the raw materials from this field that were used to produce the product, which was transported through the “Medvedchuk pipe” and sold through Medvedchuk’s network of gas stations, providing excess profits to the oligarch.

“The Russians gave this money to Medvedchuk to finance pro-Russian parties, bribe deputies and officials, and prepare the ground for Russian occupation,” says Vladimir Omelchenko. “However, he stole a significant amount of this money, which contributed to the failure of Russian plans in Ukraine.”

The Ukrainian government has been trying for a long time to return the pipeline to state ownership, but the process has proven difficult and lengthy. The first attempts in this direction were made by the State Property Fund (SPF) 13 years ago – in 2011. Then they turned out to be unsuccessful.

In 2017, the National Anti-Corruption Bureau of Ukraine and the Specialized Anti-Corruption Prosecutor's Office began an investigation into the circumstances of the transfer of ownership of the pipeline and in 2021 achieved its arrest. At the same time, the State Property Fund filed a lawsuit with the Economic Court of the Zhytomyr Region, where it asked to recognize the state’s ownership of the pipeline. A positive decision in this case was made in June 2023. And finally, in January 2024, the Supreme Court rejected the cassation appeal of the former owners, which means the final transfer of the property to state ownership.

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Now the question is how to use this resource. After all, the pipeline was once created to transport petroleum products from Russia to the western border of the Soviet Union. Moreover, after the collapse of the “socialist camp” and Ukraine gaining independence, it was used rather irregularly.

“Over the past decades, pipeline transportation volumes have fluctuated greatly,” says Sergei Kuyun, director of the A-95 consulting group, in a conversation with Apostrophe. – In some periods, the transit of petroleum products to Hungary was quite active along it. However, there were also periods when it was practically not used. The pipe worked most actively in 2016-2019. During this period, it was used almost to the limit of its capabilities. Moreover, most of the fuel that came through the pipeline was not intended for transit to Hungary, but for supply to the Ukrainian market.”

According to Alexander Sirenko, in the most productive years, up to 1 million tons of diesel per year entered Ukraine through the filling station in Zvyagel (in the Zhytomyr region) (with a total consumption of 5-6 million tons per year).

But with the onset of the full-scale Russian invasion, importing diesel from Russia and Belarus to Ukraine became impossible. And it can be assumed that even after the end of hostilities, such supplies are unlikely to resume. Therefore, the pipeline actually lost its original purpose, and the state received ownership of a kind of “suitcase without a handle.”

However, according to experts, the situation is not hopeless. And in the future, the “Medvedchuk pipe” can still play a significant role in providing Ukraine with the necessary fuel.

“The pipe will obviously no longer work in its main direction,” explains Alexander Sirenko. “However, after the war it is quite possible to use it in reverse mode. It will be possible to organize supplies of petroleum products from European countries. It is capable of providing up to 10% of the state's diesel fuel needs. This makes it a valuable asset and a promising infrastructure asset for post-war economic recovery.”