VZCZCXRO4615
RR RUEHDBU RUEHSL
DE RUEHKV #1826/01 2931306
ZNY CCCCC ZZH
R 201306Z OCT 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 8625
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 001826 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR, EUR/UMB, EEB/OMA 
 
E.O. 12958: DECL: 10/19/2019 
TAGS: EFIN EREL ETRD PGOV PINR UP XH
SUBJECT: BRAINS BEHIND TYMOSHENKO'S BANKING DECISIONS 
 
REF: KYIV 1472 
 
Classified By: Economic Counselor Edward Kaska for Reasons 1.4 (b) and 
(d) 
 
¶1.  (C) Summary.  Despite his modest title at Ukraine's 
Ministry of Finance, Timur Bagirov has emerged as an 
intellectual force in the Tymoshenko government.  By his own 
account, he serves as the Prime Minister's personal advisor 
on banking sector issues and is often asked to explain 
detailed financial matters in preparation for Tymoshenko's 
public statements.  A relatively unknown former investment 
banker, Bagirov has been at the center of highly politicized 
decisions to recapitalize three domestic banks.  He is the 
GOU's brains behind the impending liquidation of Ukrprombank, 
while serving as a key broker among competing interests 
surrounding troubled Nadra Bank.  Bagirov notes that 
Tymoshenko is fully engaged in financial sector developments 
and focuses on even the "smallest details" of the Ministry's 
work.  End summary. 
 
KEY ADVISOR TO TYMOSHENKO 
------------------------- 
 
¶2.  (C) As the director of the Ministry of Finance's recently 
established bank recapitalization unit, Bagirov has become, 
in his own words, Prime Minister Tymoshenko's personal 
advisor on financial sector matters.  Bagirov told Econoff 
that Tymoshenko called him "multiple times" per week, often 
bringing him to her office for "hours" at a time.  Bagirov 
said that the Prime Minister wanted to know "all the details" 
on key banking institutions and had taken a primary role in 
determining the fate of Ukrainian domestic banks.  Bagirov 
characterized Tymoshenko's interest in the financial sector 
as a "mixed blessing," as she now focuses on even the 
"smallest details" of the Ministry's work. 
 
¶3.  (C) Timur Bagirov's recapitalization unit is in a 
position to determine the fate of Ukrainian financiers, many 
of whom are Rada (Ukraine's parliament) deputies that own 
"pocket" banking institutions to protect personal business 
interests.  Bagirov reports to Deputy Minister of Finance 
Andriy Kravets, and together the two represent the Ministry 
at working-level meetings of the bank recapitalization 
committee, which formally Tymoshenko convenes as chair.  On 
difficult cases that draw the attention of the Prime 
Minister, such as the resolution of Nadra and Ukrprombank, 
Bagirov admitted that negotiations of the recapitalization 
committee are "extremely sensitive" and "highly politicized." 
 He has implied repeatedly that the committee often heeds his 
expert advice, most recently on a decision to liquidate 
Ukrprombank. 
 
¶4.  (C) Since Bagirov took on his position at the Ministry of 
Finance in April 2009, just weeks after Deputy Minister 
Kravets himself returned to the Ministry, he has overseen the 
hiring of staff members to build his newly formed bank 
recapitalization unit.  Bagirov recently said that over 70% 
of the 23 foreseen positions were filled, though it was 
difficult to find professionals for the remaining slots, 
"even among the many unemployed managers" in Kyiv.  Bagirov 
has explained that his staff now assists in adjudicating the 
resolution of problem banks, as well as supervises installed 
management at recently nationalized Kyiv Bank and Ukrgasbank. 
 (Note:  A third recapitalized bank, Rodovid, continues to 
operate under the leadership of temporary administrator 
Sergiy Scherbyna, reputedly a Bagirov ally.  End note.) 
 
A FUTURE IN BUSINESS OR POLITICS? 
--------------------------------- 
 
¶5.  (C) Before joining the Ministry of Finance, Bagirov 
focused on corporate finance and investment banking as a 
partner at ARTA Investments, the firm he co-founded in 2002. 
According to U.K. citizen and U.S. resident Giles Farley 
(protect throughout), now working as Vice President at ARTA, 
Bagirov has apparently continued to visit his former business 
office since transferring corporate signing rights to ARTA 
partner Timur Khromaiev and joining the Finance Ministry. 
Farley described Bagirov as a "financial wizard but socially 
awkward, disinterested manager," who had personally overseen 
major business transactions in Ukraine's energy sector. 
Farley thought that Bagirov's desire to return to ARTA had 
increased of late, particularly given Khromaiev's prominent 
role with newly formed, Cyprus-based Squire Capital on 
Naftohaz's $1.7 billion debt restructure (reftel).  (Note: 
 
KYIV 00001826  002 OF 002 
 
 
Farley has said that the U.S.-educated Khromaiev now desires 
to merge ARTA with Squire Capital and rebrand the business 
under the Squire moniker.  It is unclear whether Bagirov 
agrees with this move.  End note.) 
 
¶6.  (C) Farley could not confirm that Bagirov had ties to 
Naftohaz's recent debt restructure negotiations.  Farley 
acknowledged rumors of Bagirov's conflict of interest with 
bank recapitalization decisions made at the Ministry, 
particularly those related to Ukrgasbank, but could not 
substantiate any particular fraudulent incident. 
 
¶7.  (C) In recent meetings with Econoff, Bagirov has grown 
notably nostalgic for his days in business.  He has suggested 
that his term with the Ministry is a "project of patriotic 
duty" which could end after the presidential election in 
January 2010.  Nonetheless, some market analysts have 
suggested that Bagirov is positioning himself to be named a 
senior economic advisor to Tymoshenko, either in the 
presidential secretariat (were she to be elected) or in the 
Cabinet. 
 
¶8.  (C) Bagirov has been considered a protege of Sergiy 
Tigipko, the commercial banker and former NBU governor 
currently running for President of Ukraine.  But with 
Tigipko's slim chances of winning the presidential race, 
Bagirov appears to have decided it is more beneficial to 
remain close to Tymoshenko at this point.  In 2001-2002, he 
was first deputy chairman of Tigipko's TAS-Invest Bank, in 
charge of overseeing capital markets and investments. 
Bagirov served until 2001 as an advisor to Viktor Yushchenko 
during his tenure as Prime Minister.  From 2001-2006, Bagirov 
was a member of the supervisory board at Naftohaz. 
 
¶9.  (C) Bagirov graduated from the National University of 
Economics in 1995.  He completed training courses at the 
University of Vienna and Merrill Lynch in New York. 
 
COMMENT 
------- 
 
¶10. (C) Despite a mid-level staff position at the Ministry, 
Bagirov has had remarkable proximity to Tymoshenko. 
Likewise, meeting with delegations from the IMF and World 
Bank, he has impressed outsiders with his exceptional command 
of tricky policy questions, articulated in flawless English. 
As there are few in Ukraine who can combine such a rich 
Rolodex of local and foreign contacts, together with 
knowledge of the energy and banking fields, Bagirov's 
apparent reluctance to stay on board at the Ministry has 
raised questions among Kyiv insiders about his motivations. 
In any case, Bagirov appears to be a fixture in the country's 
financial sector and may play increasingly prominent public 
and/or private sector roles in the near future. 
 
PETTIT