At least for now, Ukraine’s oligarchs have been reined in by the war

At least for now, Ukraine's oligarchs have been reined in by the war


For weeks, he fought off Russian attacks by hiding in a giant steel mill under a hail of missiles and mortars. And when Ukrainian troops guarding the Azovstal plant finally surrendered in May 2022, the mill was reduced to rubble and twisted metal.

The battle at Azovstal, in the besieged city of Mariupol, was a key moment in the early months of Russia’s full-scale invasion of Ukraine.

It was also a major blow to the plant’s owner, Ukraine’s richest man.

With the destruction of Azovstal, the owner, Rinat Akhmetov, lost an industrial gem that accounted for one-fifth of Ukraine’s steel production – a billion-dollar loss that dealt a severe blow to his long-held hold on the Ukrainian economy.

Experts say Mr. Akhmetov’s case underscores how the war, by devastating Ukrainian industry, has curbed the power of the country’s so-called oligarchs, the tycoons who long ruled the economy and Used his wealth to buy political influence.

In the first year of the war, the combined wealth of the 20 richest Ukrainians declined by more than $20 billion, According to Forbes magazine, Mr. Akhmetov was hit the hardest, losing more than $9 billion. He is one of only two billionaires left in Ukraine, down from 10 before the war. The New Voice of Ukraine newspaper,

Now, Ukrainian officials plan to use their wartime powers to break ties to the oligarchs. It aims to reduce their influence on the economy and politics, and prosecute those involved in corrupt practices, carrying out policies that President Volodymyr Zelensky had promised to pursue before the invasion.

“They are vulnerable, and this is a unique opportunity to achieve justice in the context of how the country should be run,” Ukraine’s Justice Minister Denis Maliuska said in an interview.

Rinat Akhmetov in 2014. Credit…Thomas Trutshall

Ukrainian officials say these efforts are about rebuilding a post-war country that is more democratic and prosperous, and they also show they are fighting corruption, a ploy to garner support from Western allies. It is an important step.

The move could eliminate influence buying, but it could also reduce pluralism in Ukrainian politics and sideline some of Mr. Zelensky’s opponents. Before the war, one of the highest-profile investigations of a businessman was into Mr Zelensky’s main political rival, former President Petro O. Poroshenko, who had made a fortune in the candy business. Mr Poroshenko has avoided criticism of Mr Zelensky since the start of the war, instead portraying himself as a loyalist willing to fight for his country.

Some critics also say that the concentration of power around the government in times of war may give rise to a new oligarchy, and analysts say that oligarchs still retain important levers of influence.

“The oligarchs have all the resources they need to regain their influence,” Mr. Maliwska said. “The threat still exists.”

Like other Ukrainian tycoons, Mr. Akhmetov made his fortune in the 1990s, when newly independent Ukraine transitioned to a market economy, cheaply privatizing lucrative state-owned assets. He took over Soviet-era coal and steel plants and built a business empire that also included major stakes in agriculture and transportation.

Dmytro Goryunov, an economist at the Kyiv-based Center for Economic Strategy, said that oligarchs were a major obstacle to Ukraine’s economic development, hindering competition through monopoly. Before the war, they controlled more than 80 percent of industries such as oil refining and coal mining, according to a study He co-wrote.

Experts say Ukrainian oligarchs used their profits to buy or launch television channels to influence politics and the judiciary, as well as shape public opinion.

Mr Akhmetov once owned 11 channels and supported former pro-Russian President Viktor Yanukovych, whom Ukrainians ousted in 2014.

Unlike in Russia – where oligarchs have largely conformed to the Kremlin under pressure or for their own self-interest – the rivalry between Ukrainian tycoons and their support of a wide range of politicians has provided greater diversity to Ukraine’s media and political landscape. Is of.

Their large industrial and agricultural companies have also fueled the economy, employing hundreds of thousands of people and attracting foreign investment.

But Daria Kaleniuk, executive director of the Anti-Corruption Action Center of Ukraine, said the oligarchs’ stake in business, politics and news media had created a “vicious circle” where most of the levers of power were under their control, leading to corruption. found.

When Mr Zelensky was elected president in 2019 – with the support of Ihor Kolomoisky, a veteran – he promised an all-out attack on the oligarchs. But his efforts, which included an overhaul of the judiciary and a crackdown on corrupt public officials, “did not significantly reduce the influence of oligarchs at the time,” Mr. Maliwska said.

Then in February 2022, Russia attacked.

Because Moscow’s attacks focused on Ukraine’s east and south, the country’s industrial heartland, many of the oligarch’s factories were destroyed.

In Mariupol, two huge steelworks were destroyed, including Mr Akhmetov’s Azovstal. There was also the country’s largest oil refinery in central Ukraine, owned by Mr. Kolomoisky. Today, fierce fighting around the eastern town of Avdiivka has forced the closure of Europe’s largest coke plant, one of Mr Akhmetov’s properties.

“My business has been hit the hardest by the war,” Mr. Akhmetov said in written answers to questions. Their wind and thermal power plants “are constantly being exposed to Russian missile and drone attacks” and their steel and coke plants “have been seriously damaged or temporarily captured”, he said.

Mr. Akhmetov’s steel and mining group Metinvest lost about a third of its assets in the first year of the war, according to the Center for Economic Strategy. Mr. Kolomoisky’s oil assets were reduced by two-thirds.

But perhaps it was the political influence of the elite class that was most affected.

In the early days of the war, as the country united behind its president, oligarchs had no choice but to put aside their political agendas and help the war effort.

Again, Mr. Zelensky signed a decree Merging all cable news into a single program is intended to counter Russian disinformation and boost morale – depriving oligarchs with media arms of a vital tool of influence. The program has been described as a way for the government to suppress criticism.

And by the summer of 2022, many veterans had given up ownership of their media businesses to comply with legislation passed before the war to curb their power. The law states that any person meeting three of four criteria – involvement in politics, significant media influence, ownership of a business monopoly or a net worth of at least $70 million – will be designated an oligarch and Privatized states would be barred from buying assets and funding political parties. ,

Mr Akhmetov handed over his television and print media licenses to the state in July 2022. “I am no longer an oligarch in the legal sense of the word,” he said.

As the war progressed, Ukrainian authorities cast a wider net to prosecute oligarchs.

In September, police arrested Mr. Kolomoisky on suspicion of fraud and money laundering, and he has been detained since. Authorities are also trying to extradite from France Konstantin Zhevago, a Ukrainian oligarch on fraud charges, and Dmytro Firtash, another man on embezzlement charges. Mr Akhmetov is not facing personal legal proceedings.

“For decades, it was unimaginable to have an oligarch in a pretrial detention center,” Mr. Maliwska, the Justice Minister, said. “Now, it’s a reality.”

Mr. Maliuska acknowledged that “the power of the state is greater” during the war, which facilitated efforts to free the oligarchs from control over the economy. But he also said Ukraine’s current actions are also aimed at earning an anti-corruption reputation that is vital to securing much-needed Western aid.

For example, the EU agreed last month to begin accession talks for Ukraine, but has stressed the need to build “a credible track record of investigation, prosecution and final court decisions in high-level corruption cases.”

It is unclear what effect this will have on the powers of the elites.

Economist Mr Goryunov said Ukraine is dependent on the businesses of many oligarchs. Mr. Akhmetov’s energy holding, DTEK, accounts for two-thirds of the country’s thermal coal production.

Mr. Akhmetov said in written comments that he intended to play a role in the country’s postwar reconstruction. “As the largest Ukrainian investor, SCM will not sit on the sidelines,” he said, referring to his holding company.

Some in Ukraine also fear that the oligarchs will be replaced by a new oligarchic system emerging from the wartime concentration of power around the government.

Valeria Gontareva, who was governor of Ukraine’s central bank from 2014 to 2017, said she was concerned about the seizure of oligarchs’ assets during the war and how government officials could use them for personal gain.

In late 2022, Mr. Kolomoisky’s oil refinery and Mr. Zhevago’s AvtoKrAZ company, which makes heavy trucks, were nationalized, with officials saying it was a way to secure vital military supplies. But some actions, like Seizure of Mr. Zhevago’s shares in mining plantshave been controversial and criticized as inappropriate,

“This is state capitalism,” Ms. Gontareva said. “The threat now is not from the old oligarchs, but from new ones who benefit from the war through redistribution of property and business sectors.”

Ms Kaleniuk of the Anti-Corruption Action Center agreed. “In the fight against dragons,” she said, “we have to be careful not to become dragons ourselves.”



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