Ukrainian de-oligarchization. How the Ukrainian authorities fight the oligarchs

The recent house arrest of Viktor Medvedchuk was another step in the long and complicated policy of “de-oligarchization” that the second Ukrainian president and fifth government are trying to pursue in one way or another. Reducing the influence of the oligarchs on politics, and even withdrawing the very concept of “oligarch” from Ukrainian political and economic life, was a direct requirement of the Revolution of Dignity in 2014 and has remained valid in Ukrainian society ever since.

Therefore, Ukrainian politicians cannot ignore this topic and, in one way or another, try to use it to increase their own popularity. However, in practice, the oligarchs still play a huge role in the Ukrainian economy (and politics, respectively), keeping all its branches.

The Kolomoyski case

Immediately after Yanukovich’s escape and the appointment of the first government of Arseniy Yatsenyuk and the acting president, Oleksandr Turchynov, the new Ukrainian authorities, in the face of Russian aggression against Crimea and Donbas, needed the support of local oligarchs. As a result of the temporary convergence of the interests of the state and the oligarchs, the latter were appointed as heads of regional state authorities. In the Donetsk region, this position was taken by one of the richest people of Ukraine, Serhiy Taruta, in the Odessa region – entrepreneur Volodymyr Niemirowski (after the tragedy on May 2, 2014 he was replaced by Ihor Pałycia, who was close to Ihor Kolomoyskyi), associated with the production of steel ropes, in the Dnipropetrovsk reserve – Ihor Kolomoysky (it is interesting that in March 2021 the US Secretary of State Antony Blinken commented on Kolomoyskyi’s activities in this position: “As the official governor […] Kolomoyskyi took part in corrupt practices that undermined the rule of law and the faith of Ukrainians in democratic government institutions, including his political influence and official powers for personal gain ”¹).

In June 2014, Petro Poroshenko became the president of Ukraine, and the first months of his term of office were rather related to foreign policy and the war in Donbas, the most active period of which was in the summer of 2014. The dismissal of Ihor Kolomoysky from the post of chairman of the Dnipropetrovsk Regional State Administration of Ukraine in March 2015 may be considered the beginning of Poroshenko’s “de-oligarchization” policy. It was related to the scandal surrounding the change of management of the state-owned enterprise “Ukrnafta”, when Kolomoyski announced that an illegal takeover of this enterprise was taking place and shouted vulgar at the journalist of Radio Swoboda. This reaction was due to the fact that, according to journalists, the previous leadership of Ukrnafta was associated with Kolomoyskyi and after his dismissal, the oligarch lost influence over the company, and at the same time, after his dismissal – political power in the Dnipropetrovsk region.

New oligarchs

After these events, the word “de-oligarchization” was used more and more in Poroshenko’s rhetoric. The next step was the dismissal of the chairman of the Odessa Oblast State Administration associated with Kolomoyskyi, Ihor Pałyca at the end of May 2015, and the appointment of Mikheil Saakashvili to this position. During the presentation of the former Georgian president in his new position, Poroshenko said that “there will be no more oligarchs in Ukraine […] the de-oligarchization program will be implemented regardless of the name of this or that oligarch” ². However, after a year Saakashvili himself became a political opponent of Poroshenko, and almost the entire “de-oligarchization” focused on the political struggle of the then president with Ihor Kolomoysky, who even had to leave Ukraine. Kolomoyski’s media criticized Poroshenko, while the authorities tried to reduce the oligarch’s influence. The nationalization of PrivatBank, the largest bank in Ukraine, co-founded and owned by Ihor Kolomoyskyi, can be considered the greatest event of the Ukrainian “de-oligarchization” (before the arrest of Medvechuk). It took place in December 2016 and it was the pinnacle of “de-oligarchization” at this point. As a result, the remaining oligarchs almost lost their own influence.

The decrease in Rinat Akhmetov’s capital was associated rather with the Russian aggression in the Donbas and the change in the situation on the energy market (despite this, according to Forbes magazine, Akhmetov remains the richest Ukrainian), and he retained his influence: the son-in-law of former president Kuchma Viktor Pinchuk, Kolomoyskyi’s business partner Hennadi Bogolubov, oligarch and pro-Russian politician Vadym Novinski and others. On the other hand, the former head of the presidential administration during Kuchma’s time and one of the most influential pro-Russian oligarchs, Viktor Medvechuk, even strengthened his position by buying several influential Ukrainian TV channels in 2017-2019. At the same time, as Wojciech Konończuk from OSW pointed out, new oligarchs, connected with the ruling parties, started to emerge. Their influence was much smaller than that of the “traditional” oligarchs, but the very appearance of such people spoke a lot about the attitude of the authorities towards “de-oligarchization”. These “new” oligarchs include, for example, Mykola Martynenko, associated with Yatsenyuk, and Ihor Kononenko, former MP from the Petro Poroshenko Bloc.

2019 elections

After the nationalization of PrivatBank, statements about “de-oligarchization” began to slowly disappear from the mouths of President Poroshenko and other officials. In the first half of 2017, Mikheil Saakashvili became Poroshenko’s main enemy, who was eventually forcefully expelled from Ukraine. Later, the media related to Poroshenko began to fight the president’s potential competitors in the upcoming elections – Yulia Tymoshenko, Anatoly Hrytsenko and Andriy Sadowy. The question of “de-oligarchization” finally went away at this point and did not even appear in Petro Poroshenko’s election program in the 2019 presidential election. Oleg Medvedev, spokesman of the Poroshenko election staff, explained then that this term “is perceived by the society as controversial” ⁴.

On the other hand, in November 2015, the TV series Servant of the Nation, starring the actor Volodymyr Zelensky, was launched on the 1 + 1 TV channel owned by Ihor Kolomoyskyi. In December 2016, the premiere of the movie Servant of the Nation took place, and in November 2017 – on the same “1 + 1” – the second season. It was the first time that the name of Volodymyr Zelensky began to appear in presidential polls, but the actor himself did not speak about his potential political career for a long time. Finally, on December 31, 2018, Zelensky announced that he would run for the presidential election. Kolomoyskyi television was quite sympathetic to Zelensky and at the same time critical of Poroshenko. Three days before the first round of presidential elections, the premiere of the third, last season of the Servant of the People took place at “1 +1”. Due to such strong media support, Zelenskiy was perceived as a person associated with Kolomoyskyi. After his victory in the elections, the oligarch returned to Ukraine, but he failed to restore PrivatBank. In May 2020, the Supreme Council (the majority of which already had the Zelensky Servant of the People party) adopted a law preventing the return of previously nationalized facilities. In the media, this law was referred to as the anti-kolomoyskyi law.

Zelensky’s decision

However, the topic of “de-oligarchization” returned to the Ukrainian political discourse in the spring of 2021, when Volodymyr Zelensky announced the beginning of work on the law on the status of an oligarch, which is to provide instruments to limit the influence of oligarchs on the political life of the country. A few weeks after the president’s statement, the National Security Council of Ukraine announced that when introducing the criteria of the term “oligarch” to this law, its authors would mean 13 specific people. However, the names were not mentioned. Anyway, on May 11, 2021, the Prosecutor General of Ukraine, Iryna Wenediktova, announced that suspicion of high treason was directed against Medvechuk. Two days later, the court ordered Medweczuk under house arrest. It is worth noting that at the beginning of the year, Medvechuk TV channels were blocked on the territory of Ukraine, later, at the request of Ukraine, the broadcast of these channels was blocked even on YouTube. In his article for the “Focus” magazine, Zelensky wrote that Ukraine has “minus one oligarch – Medvechuk” and promised that “there will be other drawbacks – until the oligarchs become simply big businessmen” ⁵.

However, both the future of the Medvechuk case and the prospect of a general continuation of the fight against the oligarchs raise serious doubts. There are several arguments for this. Firstly, commenting on the Medvechuk case, Russian President Vladimir Putin made it clear that the case might trigger a reaction from Russia. In practice, this means that the actual arrest of Medvechuk may lead to a further aggravation of the situation in Donbas, and then the issue of “de-oligarchization” and other internal reforms will become less important in terms of security. Currently, Zelensky does not have international instruments to stop Putin from tightening again, so this threat remains in the first place.

Secondly, there has been no court reform in Ukraine, which means that there is a good chance that the influence of the oligarchs will be large enough to effectively influence court decisions in cases conducted by the Prosecutor General’s Office.

Thirdly, at present it is difficult to imagine that the “de-oligarchization” will really apply to all oligarchs, given Zelensky’s ties to Kolomoyskyi, the fact that the current prime minister Denys Shmygal was previously associated with Akhmetov’s business, and many Servant of the People’s deputies have ties to these or other oligarchs. However, if “de-oligarchization” does not apply to all oligarchs evenly, it will in practice be another oligarchs’ war, as it was in Poroshenko’s time.

Is there any chance for a real “de-oligarchization”?

Fourth, contrary to appearances, Zelensky does not have the power in Ukraine to start a fight against the oligarchs. Interior Minister Arsen Avakov remains in his position, who has been holding it since March 2014 and has a great influence on Ukrainian internal forces, while the Servant of the People party is no longer as uniform as it seemed after the 2019 elections and internal divisions beyond the influence of even Zelensky have already appeared many times. Given the influence of individual oligarchs on the party’s deputies and on the government, this could play a decisive role to Zelensky’s disadvantage if he starts a real de-oligarchization. Therefore, the promise that the oligarchs will only become big businessmen seems to be rather good PR for Zelensky for the time being, but in practice such intentions of the Ukrainian president raise serious doubts. It can be assumed that the fight against the oligarchs inconvenient for Zelensky (Medvechuk or Poroshenko) will continue, but the country is unlikely to be truly de-oligarchized.

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