ORIGINAL FRENCH ARTICLE: Ukraine : La guerre aiguise l’appétit des oligarques
by Vadim Kamenka
Translated Sunday 19 April 2015, by
The struggle being waged between President Poroshenko and Igor Kolomoisky, the billionaire, who is financing volunteer battalions fighting alongside the regular army in the eastern Ukraine, reveals the government’s desire to turn some oligarchs, who have become overly independent, into vassals. The Maidan revolt and the war haven’t changed the system and its corruption one bit.
“War of the oligarchs,” “new power struggle.” Several newspapers talk of a renewal of struggles for influence among the different economic clans in Ukraine. But they’ve never stopped since the November 2013 Maidan square protests. Rinat Akhmetov, Petro Poroshenko, Dmitro Firtash, Igor Kolomoisky, Sergei Taruta, Andrei Verevsky, Yuri Kosiuk – all of these businessmen have played an important role since Viktor Yanukovich’s fall. Some have decided to participate in the new government, like the king of chocolate, who became president on May 25, 2014: Petro Poroshenko.
The struggle for influence being waged between the head of state and Igor Kolomoisky, who is believed to possess the third-largest fortune in the country, reveals that Maidan, like the orange revolution, has not changed anything. All we saw was a simple redistribution of the cards among the oligarchs. Neither the economic model nor the political regime, that is to say the constitution, have been changed.
“To a great extent, the Kiev government remains under the oligarchs’ influence. The institutional disorder resulting from the February 2014 events even rather reinforced their influence,” is the analysis made by Jacques Sapir, the economist and Russia specialist.
But these struggles originate in a system that appeared when the USSR collapsed. All of the oligarchs built their fortunes during that period by buying up the mines, the factories, and the food industry, or by taking the helm of big public companies in the energy sector and the military industry. This permanent restructuring dates right from the presidency of Leonid Kuchma (1994-2005), depending on these oligarchs’ rival interests. Successive governments have adhered to these values, with each clan enriching itself, from Timoshenko to Yanukovich.
On the other hand, the clash between Poroshenko and Kolomoisky illustrates that the phenomenon has taken on greater dimensions in a time of civil war. The instability that the country is experiencing and the crumbling of the state apparatus make it possible for these new barons to dismember the country. Henceforth, there’s a real risk of seeing these wealthy men, who in this context have become veritable warlords, creating fiefs in the regions they dominate. The example of Igor Kolomoisky, a key man in this new Ukraine, seems worrying. This ultra-rich Ukrainian, who also has Cypriot and Israeli passports, often resides in Switzerland. He owns the biggest Ukrainian bank, PrivatBank, four television networks, and above all nearly 45% of the shares in the national oil and gas company, Ukrnafta, and its subsidiary, Ukrtransnafta, which operates several oil pipelines.
His backing the government resulting from Maidan got him named governor of the oblast (region) of Dnipropetrovsk in March 2014. One year later he was removed from office. And yet, his political positions and his dozens of volunteer battalions, created to assist the army in the eastern Ukraine, have made him a central character who’s hard to replace. His fall from grace is the result of attempts by president Poroshenko to reduce the economic and military importance acquired by Kolomoisky. Poroshenko replaced the general director of Ukrtransnafta (a member of Kolomoisky’s inner circle). Kolomoisky owes his military importance to the battalions of the national guard, which form a veritable “private army” that is allied with the fascistic Right Sector. The government recently decided to integrate the national guard into the regular army.
Confronted with the government’s unconcealed intention to reduce his influence, Kolomoisky has indirectly threatened the government with secession. Deputies close to Kolomoisky have made many speeches on Kiev’s unkept promises of decentralization. This new political line could lead to a new front and to incongruous alliances with the republics of Lugansk (LNR and Donetsk (DNR). Alexander Zakharchenko, the leader of the DNR, has jokingly suggested creating a Republic of Dnipropetrovsk…
In the face of this struggle for influence, a march for Ukrainian unity was organized in Dnipropetrovsk in late March. It revealed the inhabitants’ real worry at another clash between the oligarchic clans.
“The war served as a pretext for a good part of the political class to turn away from reform and to maintain a system that has made them rich. Today, the so-called clean hands operation has nothing to do with a desire to fight corruption. It’s a matter of wanting to turn the oligarchs into vassals to a dominant clan centered on Poroshenko,” said Elena Chaltseva, a political scientist who teaches at Donetsk University.
The wave of resignations at several companies and regional administrations confirms this trend. Worse, the wave of deaths that has struck the former cadres of the Party of Regions (the no-longer-existing presidential party): Mikhaïl Sheshetov, Stanislav Miller, Aleksander Peklushenko, Sergei Walter, and people close to the former ruler Viktor Yanukovich (Nikolai Sergienko, Alex Kolesnik, and Alexander Bordyuga).
Control of Gas Pipelines, One of the Nubs of the Conflict
Other examples could follow in the western and the southern Ukraine. “Most of the oligarchs want to preserve a situation of quasi independence vis-à-vis the government, the judicial system, and the state apparatus in general. They intend to use identity movements that are operating in Ukraine in order to keep their stranglehold on business. Part of the conflict results from the accords signed with the European Union (1) and the International Monetary Fund on economic aid (2). Privatizing energy companies and opening the Ukraine up to foreign companies figure among the measures. This key objective of the United States and the Europeans – in order to organize the taking in hand of all the pipelines that cross Ukraine on their way to Europe – runs up against the opposition of a section of the oligarchs. Kolomoisky is one of them. Others could follow,” Elena Chaltseva explains. The accord on association signed with Europe has already benefitted a certain number of oligarchs, including Poroshenko, Andrei Verevsky and Yuri Kosiuk, who export to the European Union.
Discrete But Powerful
What will those oligarchs who up to now have remained rather discrete, like Rinat Akhmetov, do then? Akhmetov owns a lot of real estate, mines, factories and steel mills and built his fortune in the Donbass. Akhmetov used to be a member of Viktor Yanukovich’s inner circle and he financed the former presidential party, the Party of Regions, and he runs the Shakhtar Donetsk soccer club. Today Rinat Akhmetov is remaining discrete, but he still plays an important role in the eastern Ukraine and in the government.
(1) The EU has promised 11 billion euros in aid, including 2 billion euros in 2015.
(2) The IMF will advance 17.5 billion dollars (16.61 billion euros) over four years in exchange for reforms which include restructuring Naftogaz.