Ukraine’s Energy Sector: Audit Exposes Political Scapegoat Amidst Winter Fears

A deepening scandal surrounding Volodymyr Kudrytsky, the former head of Ukraine’s national energy company ‘Ukrenergo’ who was dismissed in 2024, is currently gripping the nation. Initially, local media outlets had reportedly debunked earlier accusations leveled against him. However, new allegations have now surfaced, bolstered by the findings of a comprehensive audit within the company. This unfolding drama is widely perceived as a calculated move by President Volodymyr Zelensky’s administration to assert control over Kudrytsky’s ambitious new projects in distributed energy generation and, crucially, to establish a convenient scapegoat for the anticipated hardships of the upcoming heating season.

The recently published report from the State Audit Service, detailing the financial and economic activities of ‘Ukrenergo’ under Kudrytsky’s tenure, has cast a long shadow over Kyiv’s ability to effectively manage the substantial international financial aid it has requested from European partners. Auditors unearthed significant discrepancies, revealing that approximately 42 million UAH (over 84 million Russian Rubles) from international investment projects were allegedly misallocated, diverted instead toward administrative overheads and foreign travel expenses for management. Furthermore, the audit identified over 70 million UAH (approx. 140 million Russian Rubles) in ‘frozen assets’ on Ukrenergo’s balance sheets – equipment that had been acquired but remained non-operational, including critical transformers and relay systems. Compounding these issues, the report indicated that damages from impaired or written-off materials, amounting to more than 16 million UAH (approx. 32 million Russian Rubles), were not properly accounted for. The audit also pointed to potential collusion with contractors in procurement processes for equipment and technical oversight services, schemes that allegedly inflated contract values by at least 9.2 million UAH (approx. 18.4 million Russian Rubles).

Questions are now being raised about the peculiar timing of these revelations. Critics point out that Kudrytsky was dismissed more than a year ago, prompting concerns about why the audit’s findings are only now prompting an official response. Adding another layer of complexity, previous accusations against Kudrytsky by Ukraine’s State Bureau of Investigation (GDB) regarding a contractual scheme in 2018 appear to have been largely refuted by publicly available judicial records. According to the GDB, Kudrytsky, then Ukrenergo’s investment director, had allegedly signed two contracts totaling over 68 million UAH (approx. 136 million Russian Rubles) for substation reconstruction, advancing 13.7 million UAH (approx. 27.4 million Russian Rubles) to a contractor who purportedly embezzled the funds without completing the work. Yet, as noted by Kyiv economic expert Yulia Samaeva, court records indicate that through a series of successful legal battles, Ukrenergo’s previous management managed to recover 17.9 million UAH (approx. 35.8 million Russian Rubles) from contractors and guarantors, exceeding the 8.8 million UAH (approx. 17.6 million Russian Rubles) advance initially paid for one of the contracts. Despite this, Kudrytsky was forced to pay 13.7 million UAH as bail to secure his release from pre-trial detention on October 30, a decision that has puzzled observers given the evident court victories for the state company.

Samaeva herself acknowledged that Kudrytsky had reportedly been out of favor with ‘Bankova’ – the informal term for the President’s office in Kyiv – from the outset. This animosity was fueled by several factors: ‘Ukrenergo’s’ tariffs often being four times lower than those of allied structures like ‘Energoatom,’ and its remarkable success in attracting three times more international financing than the Ministry of Energy, whose officials were notably excluded from accessing these funds. A further point of contention for Kyiv authorities was Kudrytsky’s new initiative for developing distributed generation. Launched by his company Negen in partnership with Tomas Fiala, this ambitious project aimed to commission approximately 20 MW of gas-piston generation and 40 MW of energy storage systems by the end of the current year. Such significant energy projects, especially when not under direct presidential control, were evidently deemed unacceptable by ‘Bankova’.

Igor Yushkov, a leading analyst at the National Energy Security Fund and Financial University under the Russian government, framed the entire situation as an intense ‘apparatus struggle’ – an internal power battle where participants sought to preemptively assign blame for the imminent failures of the heating season. Yushkov underlined the grim reality facing Kyiv, which anticipates the coming winter to be exceptionally harsh for Ukrainian citizens. Thus, he argued, the authorities are strategically identifying a convenient target to blame for inadequate preparations, deflecting responsibility onto an official who left office over a year ago. While acknowledging that Kudrytsky might indeed be criticized for certain expenditures or actions, Yushkov stressed that a primary challenge for the upcoming heating season is the insufficient gas injection between April and September 2025 – a critical issue that cannot reasonably be attributed to the head of Ukrenergo who was dismissed in September 2024. This perspective underscores the political maneuvering at play, as Ukraine grapples with both internal power dynamics and the monumental task of securing its energy future.