Tories took donations from Briton linked to Ukrainian billionaire

The Conservative Party has accepted more than £57,000 in cash donations from a British businessman who oversees the assets of a controversial Ukrainian billionaire embroiled in a battle over the control of gas supplies to a large part of western Europe, an investigation by The Independent has revealed.

Robert Shetler-Jones, a 39-year-old property developer who is the chief executive of Group DF – the holding company for the multi-billion pound assets of Dmitry Firtash with offices in Knightsbridge, has made a series of donations over the last two years to Conservative Central Office as a private individual and through Scythian Ltd, a company listed at Companies House as “dormant”.

The contributions to Conservative Party coffers coincide with the emergence of Mr Firtash as a public figure and the holder of a 45 per cent stake in RosUkrEnergo (RUE), a lucrative gas trading company which until this month had a monopoly over supplies from Russia into Ukraine and then onwards to European Union customers such as Poland and Hungary. RUE has been the subject of an investigation by the US Department of Justice for links to a notorious international criminal, Semyon Mogilevich. The company has always denied any connection with the alleged mobster.

Mr Firtash, 43, whose business empire stretches from fertiliser production to real estate, has adopted an increasingly high profile in Britain.

He attended a Mansion House dinner given by the Queen for the Ukrainian president Viktor Yushchenko in 2005 and earlier this year his charitable foundation, part of Group DF, made a donation to Cambridge University to fund Ukrainian language courses. At the same time, the university received a £500,000 anonymous donation to set up a five-year lectureship in Ukrainian studies.

Shortly after the formation in 2007 of Group DF, which has offices in London, Vienna and Kiev, Mr Shetler-Jones said the privately-owned company was considering floatation of some of its companies on a major European market such as the London Stock Exhange within two years.

Conservative Party fundraising has come under increased scrutiny after the Shadow Chancellor George Osborne was accused of soliciting a donation from Oleg Deripaska, the aluminium magnate who was until recently Russia’s richest man, during a drinks party on board the billionaire’s yacht off Corfu this summer.

Mr Shetler-Jones, a fluent Russian speaker who is a director of the British Ukrainian Society, made two personal donations to Conservative Central Office of £15,000 each in December last year and this August. Scythian, the UK company belonging to Mr Shetler-Jones, donated £8,000 in September 2006 and £19,580 in January this year.

The money from Mr Shetler-Jones has gone to the highest echelons of the party. Dame Pauline Neville Jones, the career diplomat who is now the shadow security minister, revealed in the latest Register of Members’ Interests that she receives £5,000 a quarter or £20,000-a-year from Mr Shetler-Jones.

Another senior Tory, the former armed services minister Nicholas Soames, also declares on the register that he receives an undisclosed sum as a strategic adviser to Scythian Limited, which has had listed assets of no more than £2 since 2006 and has given a total of more than £27,000 to Conservative Central Office.

But although Mr Shetler-Jones meets the requirement that a donor must be registered to vote in Britain, the transfer of the donations has not been entirely smooth.

The latest donation from Scythian, described as a consultancy advising companies looking to make acquisitions in the former Soviet Union and officially registered to a Milton Keynes office block, has been the subject of a review by the Electoral Commission after concerns were raised that it was not a trading company and therefore ineligible to give funds to a political party.

Scythian is listed as “dormant or non-trading” by Companies House for the last two years and according to its last available accounts, filed in March 2006, had been “dormant” since its foundation in 1996.

Under Electoral Commission rules, a company can only give money to a political party if it can be described as “carrying on business” in the United Kingdom, which means conducting a “continued series of transactions”.

The Independent has learned that the Commission posed a series of questions to the Conservatives about whether Scythian met the “carrying on business” criteria and is continuing to monitor the situation regarding the company’s trading status.

A spokeswoman said: “The commission raised this matter with the [Conservative] Party in the course of our normal compliance checks after the Quarter 1 2008 donations and borrowing reports were submitted. We are currently making enquiries and keeping the matter under review.”

Mr Shetler-Jones insists that Scythian has been trading “for at least 2.5 years” and the Conservative Party last night insisted it has now submitted new accounts to the Commission which show that Scythian is a trading company and that this evidence has been accepted by the watchdog’s enforcement team in a letter sent last month. In a statement, the party said: “These donations have been declared to the Electoral Commission and are entirely permissible under the rules. The Party has received confirmation that this company is carrying on business in the UK and the Electoral Commission has written to us stating they have no issues. All of our donations are declared to the Electoral Commission and we always adhere to the rules rigidly.”

There is no evidence to suggest that any funds from Group DF or Mr Firtash have been used to make the donations from Mr Shetler-Jones and Scythian. In a statement, Mr Shetler-Jones said: “All donations have come from me personally or from my UK company, Scythian Ltd… These donations reflect my personal support for the Conservative Party and were not made in consultation with Dmitry Firtash or at his request.”

There is, however, no doubt that Mr Shetler-Jones and Mr Firtash and their businesses are closely intertwined. Mr Firtash has described the Briton as “my partner and financial consultant”.

Scythian’s business address in London is listed 25 Knightsbridge, a prime location opposite Hyde Park and the same address as the DF Foundation, the charitable arm of Mr Firtash’s empire set up this February, which lists among its objectives “the establishment and funding of a chair in Ukrainian studies at any university”.

Mr Shetler-Jones, who also has an address in Knightsbridge, first met Mr Firtash in 2003 when the Briton was working in the Ukrainian capital, Kiev, and the two men began collaborating on business ventures involving gas trading and property deals.

Mr Firtash, who last year fought a divorce battle with his wife, made his initial fortune during the early 1990s through bartering food and other supplies with Turkmenistan for gas to be piped to Ukraine but he first came to prominence in the West in April 2006 when he was named as the previously anonymous major shareholder in RUE, which is half owned by the Russian energy giant Gazprom.

Three months earlier, the gas trading company emerged as the major beneficiary of a bitter dispute between Russia and Ukraine over gas prices. RUE won effective control over the flow of gas from Russia and central Asian countries to the Ukraine and onwards to the European Union. About 80 per cent of Russia’s Europe-bound gas passes through the Ukraine.

The result is a lucrative but hotly-contested trade. RUE, which is registered in Switzerland, last year made a net profit of 795 million dollars (£397 million) from revenues of just under £5 billion but the company has faced repeated challenges from the Ukrainian government and others to its position as the sole trader for Russian gas entering Ukraine.

According to a report in the Wall Street Journal in December 2006, the company has faced two investigations – one from the Ukrainian intelligence service, the SBU, the other by the US Department of Justice – into whether it had any links with Mr Mogilevich, an alleged international crime baron wanted by the FBI who was arrested in Moscow this year.

Neither reported probe has resulted in any charges and Mr Shetler-Jones has strongly denied that there has ever been any “business relations” between Mr Mogilevich and Mr Firtash.

When asked by the BBC’s Panorama programme in 2006 why he could say with certainty that Mr Firtash was not being used as a figurehead for Mr Mogilevich, who was suspected as being a shareholder in RUE, Mr Shetler-Jones said: “Given how close I am to him [Mr Firtash] and his business I would know. I would argue that RusUkrEnergo is not a murky company, in fact it is very open and transparent.”

The formation of Group DF has been held up by Mr Shetler-Jones as evidence that of the company’s desire to have a “clearer, more unified structure to its business interests” based in western Europe.

As part of this, Mr Firtash has become a more familiar figure in Britain. As well as attending a state dinner at the Mansion House and establishing links with Cambridge University, he bought a major shareholding a British oil company, JKX Oil, which counts a former Conservative trade minister, Lord Peter Fraser, as its chairman.

The Ukrainian’s increased profile here may also be well timed. Earlier this month, the Ukrainian authorities announced they have signed a new gas deal with Moscow stripping RUE of its intermediary status.