Ukraine’s international reputation is not to be envied. Despite years of strong budget discipline, three years of growth now averaging 3 percent, reforms that have resulted in a reduction in corruption flows amounting to 6 percent of GDP, and the stymying of Russia’s advance in eastern Ukraine in part through the building of a strong military, most people still see the country as a failing state in thrall to a small group of kleptocratic oligarchs.
In truth, the picture is far more complicated, and the battle over Ukraine’s future is too important to be understood in such simplistic terms.
To be sure, Ukraine has its inordinate share of billionaires, and the super-rich control proportionally more of their country’s wealth than their Western counterparts. Some of them trace their origins to the rough and tumble days of post-Communist privatization, when vast fortunes were acquired by former black-marketeers, young communist league officials, and mobsters. But in the nearly three decades of Ukraine’s independence, the country has also seen significant wealth creation through individual entrepreneurship, intelligent management, and innovation.
When people typically invoke the title “oligarch” in the context of Ukraine, they often do so in relation to all of the above phenomena, both good and bad. That said, Ukraine’s oligarchs (even the bad ones) differ fundamentally from their Russian counterparts. In Russia, oligarchs all march to the beat of Vladimir Putin’s drum (especially after he destroyed the fortune of uppity oligarch Mikhail Khodorkovsky, imprisoning him for more than a decade).
Unlike in Russia, where billionaires are required to walk in lockstep with Vladimir Putin and the ruling security service elite, in Ukraine oligarchs are powerful but usually act on their own, and often in competition with one another over rents, including tariffs, subsidies, and tax incentives. Happily this competition—as well as a strong civil society—has meant that Ukraine has retained a high degree of political pluralism.
Naturally, Russia has sometimes sought to disrupt this delicate balance by establishing economic footholds in Ukraine and seducing Ukrainian billionaires with the promise of easy and corrupt transactions. And occasionally, as was the case with disgraced former President Viktor Yanukovych (now in protected exile in Russia), someone in Ukraine seeks to use the state to disrupt this balance by concentrating inordinate wealth and power in his or her own hands.
Petro Poroshenko, the incumbent President, came into power in 2014 with 54 percent of the first-round vote. He arrived in the aftermath of a national tragedy that was the outcome of the disintegration of Yanukovych’s corrupted regime. In power, he was confronted by the outsized influence of big business and the oligarchs—in particular their influence over large numbers of legislators and their media holdings. Television stations owned by the richest Ukrainians control approximately 60 percent of the daily primetime audience and also wield significant influence through online news sites.
At first, Poroshenko needed the help of these oligarchs in stabilizing Ukraine, which was faced with the takeover of Crimea, Russian-supported violence, and a Russian military occupation of parts of eastern and southern Ukraine. Indeed, in the early stages of the conflict, Poroshenko was forced to rely on the patriotism of several power-broker oligarchs in stabilizing the regions in which Russia was using subversion as a prelude to open military operations. One such man was Ihor Kolomoysky, a powerful oligarch with vast business interests in banking, non-ferrous metals, and, of course, media.
Over time, Poroshenko began to rebuild Ukraine’s military capabilities. And it was then, sometimes at his own initiative and sometimes with the insistent prodding and backing of the West, that he began to take on some of these magnates—haltingly at times, earning the wrath of an impatient civil society and electorate that wanted him to go after everyone with wealth all at once. To take on all oligarchs in a time of Russian aggression, given their media and parliamentary influence, would have been political suicide. Indeed, it would have doomed the possibility of drumming up the votes necessary for the very reforms the West demanded. Thus Poroshenko acted slowly.
First, he went after the gas oligarchs’ cash cows. He and Prime Minister Arseniy Yatseniuk implemented price reforms and empowered an innovative team of young managers headed by Andriy Kobolyev to begin the clean-up of Naftogaz, the country’s oil and gas monopoly, which was sucking at least $3 billion annually out of the state’s coffers. That reform attacked the interests of exiled oligarch Dmytro Firtash, who is currently living in Vienna and fighting extradition to the United States, where he is wanted on corruption charges unrelated to Ukraine. It also ensured the enduring hostility of Firtash’s powerful television holding, Inter.
Poroshenko’s second target was Ihor Kolomoisky. First, his government successfully attacked Kolomoisky’s grip on UkrNafta, the state oil and natural gas extraction company, a key firm that had for years been delinquent in paying out dividends to the government. On March 25, 2015, Kolomoisky was called into President Poroshenko’s office late at night and removed as Governor of Dnipropetrovsk as the battle over his hold on the company intensified. Days later, his business associate Ihor Palytsia was removed as Governor of Ukraine’s sixth-most-populous province, Odessa.
Then, in 2016, Poroshenko authorized the nationalization of PrivatBank after an audit uncovered billions in allegedly dodgy lending to supposed shell companies related to Kolomoisky and his partner Gennadiy Bogolyubov. After a subsequent assessment conducted by the investigative group Kroll, the National Bank of Ukraine alleged that PrivatBank had been subjected to “a large scale and coordinated fraud over at least a ten-year period ending December 2016, which resulted in the Bank suffering a loss of at least USD 5.5 billion.” Ninety-five percent of the lending had been made to “parties related to [former] shareholders and their affiliates.”
Attacking Kolomoisky was a risky move. As Governor, the oligarch had genuinely helped stabilize the populous Dnipropetrovsk region in eastern Ukraine. Kolomoisky’s major media empire included Ukraine’s highest-rated television channel. And by attacking the owner of Ukraine’s largest bank and the financial institution through which as many as half of Ukraine’s businesses conducted their credit card and payment transactions, Poroshenko ran the risk of vast disruptions to the national banking system. Yet he willingly took on all these risks.
Kolomoisky has long touted his reputation for having sharp elbows and a sharp tongue to match. He is highly litigious and a clever political tactician. A major donor to Jewish religious and cultural causes in Ukraine, as well as cultivating a close friendship with Ukraine’s Lubavitcher rabbinate, Kolomoisky also likes to project an image of bravado. He loves trash-talking like a gangster and goes by the nickname of “Benya,” invoking the famous criminal reprobate from Isaac Babel’s Odessa Tales.
Within weeks of his dismissal as Governor, it was clear Kolomoisky would live up to his take-no-prisoners image. His media holdings went on the attack against the government and the President. And most importantly, he and his business partner, comedian Volodymyr Zelensky, began planning a television series that was developed to be an instrument for an attack against the political establishment.
Eight months after his dismissal, Zelensky appeared on Kolomoisky’s 1+1 channel in a new comedy series playing Vasyl Holoborodko, an everyman high school history teacher who is accidentally elected President following a viral video of his rant about how everything is wrong in Ukraine. (The first season is available in the United States on Netflix.) The show clearly struck a nerve, becoming the foundation of a new political party that early this year helped launch Zelensky’s campaign for Ukraine’s presidency.
Since the government froze many of his assets and launched lawsuits to recover allegedly stolen bank funds, Kolomoisky has stopped traveling to Ukraine. But his influence over Zelensky remains strong, through a coterie of trusted advisors. Just a year ago, Kolomoisky trotted out Zelensky at his birthday party and presented him as “our President.” This year, at Kolomoisky’s birthday-in-exile in Tel Aviv, according to one attendee, the mood was one of ebullient self-satisfaction at the electoral support for Zelensky.
Polls from late March show Zelensky running a strong first in Ukraine’s March 31 presidential race, polling more than 30 percent. He leads both President Poroshenko, hovering around 17 percent, and left-leaning former Prime Minister Yulia Tymoshenko, whom Kolomoysky’s media assets have generally handled with kid gloves (close to 13 percent). Significantly, in a runoff Zelensky is projected to beat both his challengers handily, with overwhelming support from young voters who see him as an honest fighter against corruption, long-standing links to Kolomoisky notwithstanding. A three-week interval before an expected second round, however, is ample time for a shift in public sentiments.
If the idea of a country under partial Russian occupation being run by a political neophyte linked to a powerful oligarch concerns you, well, it should. That is, unless you’re Vladimir Putin, in which case you must be licking your chops at the thought of squaring off against a counterpart who has never engaged in politics, run a complex business, served as an officer in the military, occupied a top management position in the private sector or government, or expressed a single thought about geopolitics.
But that outcome is now a very real possibility—as is the successful political revenge of one of Ukraine’s most powerful oligarchs.