Ukrainian new President Volodymyr Zelenskiy, left, and US Energy Secretary Rick Perry share a joke during their meeting in Kiev, Ukraine, Monday, May 20, 2019. Television star Volodymyr Zelenskiy has been sworn in as Ukraine's next president after he beat the incumbent at the polls last month. (Mykola Lazarenko/Presidential Press Service Pool Photo via AP)
After push from Perry, backers got huge gas deal in Ukraine
By Desmond Butler, Michael Biesecker, Stephen Braun and Richard Lardner/The Associated Press
(Kyiv, Ukraine) — Two political supporters of U.S. Energy Secretary Rick Perry secured a potentially lucrative oil and gas exploration deal from the Ukrainian government soon after Perry proposed one of the men as an adviser to the country’s new president.
Perry’s efforts to influence Ukraine’s energy policy came earlier this year, just as President Volodymyr Zelenskiy’s new government was seeking military aid from the United States to defend against Russian aggression and allies of President Donald Trump were ramping up efforts to get the Ukrainians to investigate his Democratic rival Joe Biden.
Ukraine awarded the contract to Perry’s supporters little more than a month after the U.S. energy secretary attended Zelenskiy’s May inauguration. In a meeting during that trip, Perry handed the new president a list of people he recommended as energy advisers. One of the four names was his longtime political backer Michael Bleyzer.
A week later, Bleyzer and his partner Alex Cranberg submitted a bid to drill for oil and gas at a sprawling government-controlled site called Varvynska. Their proposal was millions of dollars lower than their only competitor, according to internal Ukrainian government documents obtained by The Associated Press. But their newly created joint venture, Ukrainian Energy, was awarded the 50-year contract because a government-appointed commission determined they had greater technical expertise and stronger financial backing, the documents show.
Perry likely had outsized influence in Ukraine. Testimony in the impeachment inquiry into Trump shows the energy secretary was one of three key U.S. officials who were negotiating a meeting between Trump and the Ukrainian leader.
The sequence of events suggests the Trump administration’s political maneuvering in Ukraine was entwined with the big business of the energy trade.
Perry made clear during trips to Kyiv that he was close to Bleyzer, a Ukrainian-American investor and longtime Perry supporter who lives in Houston, and Cranberg, a Republican mega-donor who provided Perry the use of a luxury corporate jet during the energy secretary’s failed 2012 presidential bid.
Perry’s spokeswoman said Wednesday that the energy secretary has championed the American energy industry all over the world, including in Ukraine.
“What he did not do is advocate for the business interests of any one individual or company,” said Shaylyn Hynes, the press secretary for the Energy Department.
Jessica Tillipman, who teaches anti-corruption law at George Washington University, said even if Perry did seek to influence foreign officials to award contracts to his friends, it is likely not illegal.
“My gut says it’s no crime,” she said. “It’s just icky.”
Zelenskiy’s office did not respond to requests for comment.
In a statement to AP, Bleyzer denied that Perry helped his firm get the gas deal.
“I believe that Secretary Perry’s conversations with Ukrainian government officials, if they in fact took place, did not play any role in Ukrainian Energy winning its bid,” Bleyzer said Tuesday. He said the process was competitive and transparent and “will hopefully serve as an example of how the Ukrainian energy market can be opened for new investments.”
Amy Flakne, a lawyer for Cranberg’s company Aspect Holdings, said Wednesday that Perry and other U.S. officials supported “a fair, competitive process to bring foreign capital and technology to Ukraine’s lagging energy sector.”
“Aspect neither sought, nor to our knowledge received, special intervention on its behalf,” Flakne said.
As Trump’s energy secretary, Perry has flown around the globe to push for U.S. exports of liquefied natural gas, which he calls “Freedom Gas.” He’s made multiple trips to Ukraine and other former Soviet-bloc nations, where shipments of American gas and drilling technology take on strategic importance as a potential alternative to continued dependence on imports from Russia.
Ukraine has long suffered from a reputation for political corruption, particularly in its oil and gas sector. In the chaotic days following the breakup of the Soviet Union, the newly independent Ukrainian government sold off many state-owned businesses worth billions to a cadre of well-connected oligarchs who amassed immense fortunes.
As Ukraine sought economic and security support from the U.S. and other Western democracies, those countries pressed it to put in place a more open and transparent process for awarding oil and gas exploration rights on state land.
At the urging of Western partners, Ukraine’s government created a process requiring that exploration contracts be put out to bid and awarded following review from a selection board appointed by the president’s cabinet of ministers. The board recommends the winners, pending final approval from the ministers.
Those Western partners also advised Ukraine to appoint an independent supervisory board at Naftogaz, the state-owned energy company, as a guard against corruption and self-dealing.
In February, the Ukrainian government opened up bidding for nine oil and gas blocks encompassing 4,428 square miles (11,469 square kilometers) of land. Ukrainian Energy, the joint venture between Bleyzer’s investment firm SigmaBleyzer and Cranberg’s Aspect Energy, submitted a single bid for the largest block, which covers 1,340 square miles (3,471 square kilometers).
Under the contracts, the winning bidder is awarded exclusive rights to extract petroleum for up to 50 years. After the initial costs are recovered, the company and the government split the profits.
An internal review of the proposals by the Ukrainian Ministry of Energy and Coal Mining obtained by the AP show they were not the highest bidder.
The only competing bidder, UkrGasVydobuvannya, known by the acronym UGV, offered more than $60 million for the first phase of the project, compared with $53 million from Bleyzer and Cranberg, the document shows. UGV is Ukraine’s largest domestic gas producer and is a subsidiary of Naftogaz, the state-owned company where Perry sought to replace board members.
Despite the lower upfront investment, the selection board gave the Americans higher scores for technical expertise and overall financial resources, according to the document reviewed by AP.
Of the nine gas deals awarded on July 1, Bleyzer and Cranberg’s bid was the only one of the winners that didn’t include the participation of a Ukrainian company. UGV won four of the remaining bids.
Two members of the board that helped select the bid winners told the AP that the process is designed to be difficult to improperly influence because it is a mix of government representatives and industry experts.
Roman Opimakh, a commission member who is the head of the State Service of Geology and Subsoil of Ukraine, said the government was looking for foreign investment, particularly U.S., and the board considered that as a factor. He said it’s an advantage if a company is well-connected in Washington but added that he saw no indication that U.S. officials influenced the process.
Perry, who served 14 years as the governor of Texas, has publicly championed the potential of U.S. hydraulic fracturing technology to boost oil and gas production in Ukraine and pressed for the bidding process to be opened up to U.S. companies.
At an energy industry roundtable in Kyiv in November 2018, Perry said the potential for oil and gas development in Ukraine is “staggering.” Ukraine, he declared, had a chance to become “the Texas of Europe.”
At the same event, which was co-sponsored by the nonprofit U.S.-Ukraine Business Council, Perry plugged Cranberg’s expertise. Both Cranberg and Bleyzer were in the room, along with several American and Ukrainian energy industry officials.
“You know, Alex Cranberg, who has been in this business a long time, can attest to this probably as well as anyone sitting around the table, that we have the potential to change the world,” Perry said, according to a transcript released by the U.S. Embassy in Kyiv.
During the same 2018 trip, Perry had a private meeting with then-Ukrainian President Petro Poroshenko, where they discussed deepening the ties between the two country’s energy industries, according to a U.S. Embassy summary of the meeting
Records suggest Perry has also met regularly with Bleyzer. Visitor logs released by the Energy Department through a public records request show Bleyzer entering through the VIP check-in desk at the building where Perry’s office is at least three times, most recently on May 8.
Less than two weeks later, Perry was on a plane to Kyiv to attend the inauguration ceremony for Zelenskiy, who had defeated Poroshenko in an April election. It was during that trip that Perry presented his list of recommended advisers that included Bleyzer and remarked on their long friendship, according to a person in the room who spoke on condition of anonymity for fear of retaliation. Attendees left the meeting with the impression that Perry wanted to replace an American representative on the Naftogaz board with someone “reputable in Republican circles,” according to the person who was there.
Bleyzer said Tuesday that he had been included in what he described as a brainstorming session with Energy Department officials about creating an informal group knowledgeable about Ukraine’s energy industry to help develop U.S. strategy, but he had no idea his name would be forwarded to the country’s new president.
“I was not aware at any time that my name was recommended by Secretary Perry to the Ukrainian government to act in any capacity,” Bleyzer said.
Perry’s work in Ukraine places him at the center of the House impeachment inquiry into efforts by Trump and his personal lawyer Rudy Giuliani to press Zelenskiy to open an investigation into Biden and his son Hunter’s business dealings with Burisma, another Ukrainian gas company.
Perry, who announced last month that he is resigning by the end of the year, has refused to cooperate with the congressional probe. In an Oct. 4 interview with the Christian Broadcasting Network, Perry said that “as God as my witness” he never discussed Biden or his son in meetings with Ukrainian or U.S. officials.
But Perry was at the White House for a key July 10 meeting where senior Ukrainian officials were told continued U.S. support was conditional on Zelenskiy’s government opening investigations into Democrats and Burisma, Army Lt. Col. Alexander Vindman, an aide on Trump’s National Security Council, testified last month.
Bleyzer and Perry’s ties go back at least a decade. As governor, Perry appointed Bleyzer in 2009 to serve as?a member of a Texas state advisory board overseeing state funding to emerging technology ventures. The following year, Bleyzer contributed $30,000 to Perry’s 2010 campaign for Texas governor.
The Ukrainian-born Texan cuts a flamboyant figure in the energy world. A 2012 profile in the Houston Chronicle is set in his modernist 15,000-square-foot mansion. In an accompanying photo, he stands next to his wife, a mane of gray hair to his shoulders, on a balcony overlooking a swimming pool.
A former engineer at Exxon, Bleyzer was born in Ukraine’s Kharkiv region and trained in digital electronics and quantum physics. In 1994, he founded SigmaBleyzer Investment group, a private equity firm that specializes in developing corporate stakes in Eastern Europe. The company says it manages about $1 billion in assets.
Bleyzer also has ties to Giuliani. In 2008, Bleyzer’s company hired Giuliani’s former Houston-based law firm, Bracewell & Giuliani, to help it acquire and consolidate cable holdings in 16 Ukrainian cities, including Kyiv, according to an announcement at the time. The same year, Bleyzer donated $2,300 to Giuliani’s presidential campaign.
Bleyzer’s company is the primary funder of the U.S.-Ukraine Business Council, which promotes the interests of American businesses operating in Ukraine. According to tax records, the business council is run out of the Washington, D.C, offices of its president and CEO, Morgan Williams, who is also listed as the government affairs director for SigmaBleyzer.
The council, which sponsors events that feature senior U.S. and Ukrainian government officials, pushes for policy priorities that dovetail with Bleyzer’s business interests — including lobbying to create the very process that opened Ukraine’s state-controlled oil and gas fields to foreign investment, according to the webpage of the state geology service.
Days after the government in Ukraine posted the gas blocks for bidding in February, visitor logs show Williams accompanied Bleyzer through the VIP entrance at the Energy Department.
On May 28, the day the bids were due in Kyiv, Williams again accompanied Bleyzer, who photos show was sporting a Western-style shirt with a Stars and Stripes pattern, to the offices of Ukraine’s energy ministry to submit their company’s bid.
On June 5 — while Bleyzer and Cranberg’s proposal was under review — Williams met with a key Zelenskiy adviser, Oleg Ustenko, and told him that significant expansion of oil and gas production in Ukraine could only be achieved with investments from private companies, including ones from the United States, according to a summary of the meeting posted on the business council’s website.
In an apparent dig at the company competing against Bleyzer and Cranberg for the gas deal, Williams also told Ustenko that the “participation of the state monopoly player” undermined the chances of private companies to win, according to the summary.
What the council’s media release failed to mention is that, like Williams, Ustenko serves dual roles. In addition to advising the Ukrainian president, the economist is the longtime executive director of The Bleyzer Foundation, a Kyiv-based nonprofit organization founded by Bleyzer in 2001. The group’s website describes its mission as promoting private-sector investment in Ukraine.
Less than four weeks later, Ukraine Energy was named the winner of the Varvynska block over the Naftogaz subsidiary.
Bleyzer would not say whether he considered it a conflict for his employee to simultaneously be leading the international trade group while also advocating for his private business interests.
He said the U.S.-Ukraine Business Council is just one of many organizations that strongly support the participation of foreign companies in the bidding process “as one of the key factors in helping Ukraine achieve its energy independence from Russia.”
As with Bleyzer, Cranberg also has longtime ties to Perry.
A graduate of the University of Texas in Austin, Cranberg was appointed by Perry in 2011 to serve a six-year term on the state university system’s board of regents. He is a generous political donor, giving more than $3 million since the mid-1980s primarily to Republican candidates and fundraising committees, according to federal and state campaign finance records.
In the last 13 months, Cranberg has contributed just over $650,000 to two committees focused on electing Republicans to House seats, $637,000 to the National Republican Senatorial Committee and $258,000 to the National Republican Congressional Committee. He and his wife each gave $50,000 last April to Trump Victory, the joint entity that funds the president’s reelection campaign and the Republican National Committee.
When Perry campaigned for president in 2011, federal disclosures show his campaign paid more than $16,000 to a holding company for a private jet used by Cranberg.
Cranberg is also among those who entered through the VIP desk at the Energy Department, logging in with his wife for a visit in April 2018.
His company last year hired Perry’s former campaign manager, Jeff Miller, as a lobbyist. Miller has been to the Energy Department’s headquarters at least a dozen times since Perry became secretary, according to the visitor logs. He mostly signed in through the VIP entrance.
Biesecker, Braun and Lardner reported from Washington.