KYIV, Ukraine (AP) — Two men with close ties to Rudy Giuliani leveraged their political connections to pursue a deal to export natural gas from the U.S. to Ukraine intended to benefit Republican donors and friends of President Donald Trump's family.
The plan centered on replacing the head of Ukraine’s state-owned gas company Naftogaz with its No. 2, Andrew Favorov, in hopes that the dual U.S. Ukraine citizen would be more amenable than his boss to the proposal. To make that happen, they also pushed to eliminate the U.S. ambassador to Ukraine, Marie Yovanovitch, who was known for fighting corruption.
Favorov, in a series of interviews with The Associated Press in Kyiv, described his dealings with Giuliani’s associates, Soviet-born Florida businessmen Lev Parnas and Igor Fruman. His tale, corroborated with interviews with key witnesses, shows how Parnas and Fruman were able to use their contacts in Republican circles to suggest they had access to the people and money that could make a complex business and geopolitical deal happen.
The effort ran parallel to their work in Kyiv with Giuliani, Trump’s personal lawyer, to push Yovanovitch aside and convince Ukraine’s leaders to investigate Trump’s political rival, Joe Biden, and his son Hunter’s business ties to another Ukrainian energy company called Burisma.
The story illustrates an essential backdrop of both the impeachment drama roiling U.S. politics and the criminal investigation of Giuliani and his associates: the decades-long tug of war between Russia and the West over Ukraine, in which geopolitical influence, natural resources and corruption are major themes.
With Western help, Ukraine has been working to wean itself from dependence on Russia. Anti-corruption reforms at Naftogaz were a key to that effort. The company built enormous capacity to store natural gas, just as the gas boom in the United States has left Texas producers with so little storage capacity that they’re burning off their excess.
Yovanovitch, who fought to keep those anti-corruption safeguards in place, is now a key witness in the impeachment inquiry, and federal prosecutors investigating Giuliani have interviewed both Favorov and Naftogaz CEO Andriy Kobolyev.
Parnas and Fruman were arrested Oct. 9 at an airport outside Washington carrying one-way tickets to Europe and are charged with conspiracy, making false statements and falsification of records in a case centered on alleged campaign finance violations. Fruman's lawyer did not respond to requests for comment and Parnas' lawyer did not immediately answer written questions posed by AP.
Favorov says Parnas and Fruman’s campaign started in March, on the fringes of an energy conference in Houston during a dinner with Harry Sargeant III, a billionaire from Florida who made his fortune in shipping and energy.
Favorov recalls the group discussed the potential to export as much as 100 shiploads of liquified natural gas from the U.S. to Ukraine.
Chris Kise, Sargeant’s lawyer, said in an email to AP that the billionaire had no specific business in mind when he attended the dinner.
“Mr. Sargeant simply provided broad industry guidance and his expert view on the challenges presented by operating in foreign markets,” Kise said.
Later that evening, in a smoky Houston bar, Favorov says Parnas and Fruman proposed he replace his boss as CEO of Naftogaz.
“You’re a Republican, right?” Parnas asked. Favorov says he nodded.
“Then you’re our man,” Parnas replied.
They also casually informed him that Trump would soon be removing Yovanovitch, who was a key backer of the anti-corruption efforts at Naftogaz.
Favorov says he wasn’t inclined to take the men seriously. But then pieces of their puzzle began to fall into place.
Kobolyev’s leadership of Naftogaz was indeed in a precarious position. Ukraine’s leaders under then President Petro Poroshenko took steps to remove the authority of Naftogaz’s independent supervisory board to appoint key executives, including the CEO. They also pressed Kobolyev to forgive millions in loans to a Ukrainian oligarch, Dmitry Firtash, who is closely aligned with Russian President Vladimir Putin, according to people familiar with the effort.
Yovanovitch was recalled to Washington in May, months before her tour was scheduled to end. The move put Favorov on alert.
Favorov and Kobolyev returned to Washington in late April, shortly after Volodymir Zelenskiy, a comedian who ran for president of Ukraine on an anti-corruption platform, defeated Poroshenko.
Once again Parnas and Fruman came calling. The pair arranged a lunch at the Pennsylvania Avenue steakhouse The Capital Grille, where Favorov pitched gas imports to the group which included an employee of Sargeant’s company. Kise, Sargeant’s lawyer, described it as a “social lunch.”
The following day, Favorov and Kobolyev went to the Trump International Hotel where Parnas and Fruman introduced them to Jeff Miller, a former political adviser to Perry and now vice finance chair for the 2020 Republican National Convention, and Tommy Hicks Jr., a private equity investor who is co-chairman of the Republican National Committee and a friend of Donald Trump Jr. Three people with direct knowledge of the meeting described it to AP on condition of anonymity.
The group discussed how much gas could be shipped to Ukraine and at what price, according to the people. And they talked about the major challenge: To move the quantity of natural gas envisioned, the pipeline from Poland to Ukraine would have to be expanded.
Parnas and Fruman, the people said, claimed to have connections who could take care of the bottleneck.
Hicks declined to comment. A person with direct knowledge of Miller’s account says he came to the meeting only because Parnas said he would be introduced to potential clients and left after a short time because he doesn’t represent foreign companies.
Three months later a U.S. delegation went to Poland, where Perry signed a memorandum of cooperation with the Polish and Ukrainian counterparts, pledging to build the infrastructure necessary to accommodate huge shipments of natural gas.
The dream of their gas deal died when Parnas and Fruman were arrested in October on campaign finance charges.
Favorov is left wondering what kind of influence they really had.
“I’m thinking, did Lev Parnas and Igor Fruman really play a role in advancing and shaping U.S. policy?” he asked.