Does the case against Ihor Kolomoiskyi signal the end of oligarchs in Ukraine?

Maidan Square in Kiev, Ukraine

“Billionaire’s arrest has been touted as a sign of change, but predictions of an end to oligarchy may be premature.”

( – Andrii Ianitskyi – Sept. 13, 2023)

Born in Sevastopol in 1983, Andriy Ianitskyi has lived in Kyiv since 2007 after graduating from the Sevastopol branch of Moscow State University. He works as a journalist and editor in the business media, including Ukrainian News, Kommersant-Ukraine, Delo, as well as the online political publication

At first glance, the 60-year-old heavy-set man with a grey beard and unruly ash-coloured curls, wearing glasses and a blue tracksuit and carrying a leather briefcase, looks like a caricature of an Eastern European businessman from the 1990s.

But this is how one of Ukraine’s richest and most influential men, Ihor Kolomoiskyi, appeared in court last week.

It comes as Ukrainian authorities are pushing a new, wartime anti-corruption drive – something signalled most recently by president Volodymyr Zelenskyi earlier this month. Describing a Ukraine of the future in his daily public address, Zelenskyi said the situation would change for “those who ransacked Ukraine and put themselves above the law” in the past.

Ukraine’s Bureau of Economic Security suspects the businessman of fraud and money laundering. The Ukrainian Security Service delivered Kolomoiskyi to court. He was offered bail, set at $14m (about £11.2m), but he refused and remains in custody.

Then, on 7 September, another law enforcement agency – the National Anti-Corruption Bureau of Ukraine (NABU) – brought a new charge against Kolomoiskyi, accusing him and five other employees of stealing 9.2bn hryvnia (£200m) from Privatbank, a bank he owned, in 2015. Those funds were later returned to the bank in the form of additional shareholder capital. But it did not save Privatbank from collapse.

In 2016, Ukraine’s finance ministry had to nationalise the institution, pouring $5.5bn (£4.3bn) into the bank to prevent the collapse of Ukraine’s entire banking system. Privatbank had been the largest private bank in the country, with the equivalent of one in every two adult Ukrainians having an account there. After this, in 2017, Kolomoiskyi fled Ukraine: first to Geneva, and then to Israel. “Our property was stolen from us,” he said in 2019 on the nationalisation.

The businessman returned triumphantly after Zelenskyi was elected in 2019. He had openly supported the comic-turned-politician in the elections from abroad, and rightly felt like he was on the winning side. But now he sits in a prison cell awaiting a court decision.

Kolomoiskyi’s lawyers argue the fraud charges “have no basis”, and have not commented on the new money laundering charges. They are now awaiting appeal.

Roots of a fortune

Kolomoiskyi was born in Dnipro, Ukraine and made his fortune in the 1990s, first by importing goods into Ukraine, and then by currency speculation and the privatisation of Soviet state-owned enterprises. The heart of his empire was Privatbank.

As one of Kolomoiskyi’s original business partners in the Privat group, Oleksiy Martynov, recalled in a 2010 interview: “We started the business by trading in industrial consumer goods and computer equipment. It was a common speculation.” Another Dnipro businessman, Serhiy Tihipko, later “suggested that we create our own bank”, Martynov said.

That bank, Privat, helped Kolomoiskyi buy assets and finance numerous businesses (as I reported together with journalist Graham Stack in our book, A Private Story).

By the 2000s, Kolomoiskyi and his partners controlled Ukraine’s largest airlines, and ferroalloy and oil businesses, ranging from mining and refining to retail gas station networks. And this is not counting influential TV channels, upscale resorts, luxury real estate and his hometown football club, Dnipro. In the chaotic aftermath of Ukraine’s 2014 Euromaidan revolution, he served as regional governor of Dnipro for a year.

Forbes magazine estimates Kolomoiskyi’s worth at $1bn in its billionaires list, describing him as a citizen of Israel. The businessman also has a Cypriot passport. Whether he has a Ukrainian passport is not known for certain. Last year, Zelenskyi allegedly stripped him of Ukrainian citizenship, but the decree was never officially passed.

Even if this decree exists, Kolomoiskyi could challenge it in court – he loves to litigate and knows how it’s done.

Business partners

Discussing Zelenskyi, Kolomoiskyi told popular website Ukrainska Pravda on the eve of the Russian invasion: “I sympathise with him; everything suits me in principle.”

Indeed, Zelenskyi and Kolomoiskyi used to be business partners. Zelenskyi’s production studio has filmed shows and series for Kolomoiskyi’s TV channels for many years. Zelenskyi acted in many of these shows himself – that’s how he became known across the country.

Prior to the 2019 elections, his familiarity from TV sent his ratings as a candidate soaring. Kolomoiskyi’s popular 1+1 TV channel openly promoted Zelenskyi to viewers. On the eve of the elections, 1+1 broadcast films and shows featuring Zelenskyi almost around the clock, including talk shows in his support.

So when Zelenskyi won the presidency with 73% of the vote, Kolomoiskyi beamed with happiness and gave interviews left and right. He was photographed in the president’s office. It was almost as if he was the one who had won the election.

Indeed, after the election, Kolomoiskyi’s lawyer, Andrii Bohdan, became the head of the Office of the President. And Kolomoiskyi’s people appeared on the lists of Zelenskyi’s party in the parliamentary elections which followed.

In total, thanks to candidates in different parties, Kolomoiskyi had the support of over approximately 65 Ukrainian MPs out of 424, according to an interview with one MP, Egor Chernev. It was an impressive informal faction.

‘Our home oligarch’

It is not surprising that during the height of Ukraine’s 2019 election campaign, opponents of Zelenskyi called him ‘Kolomoiskyi’s puppet’. And as late as 2023, a high-ranking associate of Zelenskyi referred to Kolomoiskyi as “our oligarch”.

The situation has since turned upside down. Kolomoiskyi has lost his representation in the Office of the President, and his influence on parliament has also weakened. But while he still retains some degree of influence in Ukraine, things are not going well abroad for him.

Privatbank, now owned by the Ukrainian state, has filed a lawsuit against Kolomoiskyi in the High Court of London, which has frozen the businessman’s assets around the world.

At the same time, the US authorities have become interested in the origin of the funds with which associates of Kolomoiskyi bought factories and real estate in Ohio. Kolomoiskyi previously described this lawsuit as “fake”, claiming it was intended to “cover up” alleged wrongdoing during the nationalisation of Privatbank.

But Kolomoiskyi’s position was finally and fatally undermined by the Russian invasion of Ukraine in February 2022.

After the invasion, the Ukrainian authorities brought all the country’s major television channels together to form a single news channel. As a result, Kolomoiskyi’s 1+1 TV channel came under the informal control of Ukraine’s Ministry of Information Policy.

The Ukrainian state has also confiscated his oil production companies and replaced managers at state-owned companies who were previously loyal to him.

“Kolomoiskyi has lost control over [state-owned companies] Ukrnafta, Ukrtatnafta and Ukrnaftoburinnya,” Oleksandr Parashchiy, director of the analytical division of Ukrainian investment bank Concorde Capital, told openDemocracy.

Nevertheless, it is not yet a done deal that Kolomoiskyi’s losses are irreversible. And he still controls regional energy companies, ferroalloy plants and a chemical plant.

‘The end of the era of oligarchs’

After Kolomoiskyi was detained on 2 September, Ukraine’s justice minister Denys Malyuska wrote on Facebook that the “era of oligarchs has come to an end”.

As Malyuska put it, there had always been a weak link in Ukraine’s law enforcement and judicial system, whether it was the investigator, prosecutor or judge, when it came to high-profile cases. But this time, in the Kolomoiskyi case, the system had worked smoothly, Malyuska said.

Given everything we know, there is another, more cynical interpretation of events. Perhaps the Ukrainian security services, which are subordinate to the president, detained Kolomoiskyi when they did to get ahead of Ukraine’s more independent anti-corruption agency, NABU.

“It cannot be ruled out that [Kolomoisky’s detention] is part of some big game,” said Parashchiy.

Kolomoiskyi’s case continues – and so does the era of oligarchs, at least for now.

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