Ukraine's oligarchs have hit a rough patch financially, but they still wield too much influence over the nation's politics and economic life, according to a report published by Transparency International Ukraine on Aug. 5. Political parties are dependent on them for money, and reforms get undermined as a result.
Comparing net worth assessments conducted by Focus magazine, practically all of Ukraine’s richest have seen their wealth plunge since 2013, as revolution and war pummeled the country. The top 15 richest are worth only $22.8 billion, down a whopping $19 billion from 2013, according to Focus.
Some have lost a lot less than others, however.
Viktor Pinchuk is one of them. One of Ukraine’s longest-serving oligarchs, Pinchuk has weathered political and economic storms before, and he looks to be riding out the present one as well.
Pinchuk started out acquiring assets at fire-sale prices and profited without much reinvestment, according to Mykhailo Honchar, president of the Centre for Global Studies Strategy XXI. Such oligarchs also benefited from state spending at inflated prices, he said.
“They wouldn’t survive in a competitive economy,” Honchar said, putting Rinat Akhmetov, Dmytro Firtash and Ihor Kolomoisky in the same category. “But Pinchuk has established a state-of-the-art metals plant, and is slowly transforming into another breed – the investment-focused oligarch.”
Another oligarch who has risen relative to others is Russian citizen Konstantin Grigorishin.
The Ukraine-born Grigorishin has fared well because of his close affiliation to President Petro Poroshenko, but his luck might be running out, Honchar said. Recently the Security Service of Ukraine blocked and nullified a major Hr 6 billion deal for Grigorishin to supply the power grid with new transformers.
Vitalii Kulyk, from the Center for Civil Society Studies, agreed, said that Grigorishin is a temporary ally of Poroshenko, who sees him as a competitor since Poroshenko is branching out into offshore banking and energy.
So while the participants in the oligarch system are plainly suffering at present, the oligarch grip remains firmly in place.
Much of the fall in wealth of Ukraine’s richest can be attributed to the hemorrhaging of the value of the national currency, the hryvnia, which has lost more than 50 percent of its value since 2014, amid mass public protests against the corrupt rule of Viktor Yanukovych.
Still, many of their present problems stem from the system they created.
Economists Basil Kalymon and Oleh Havrylyshyn, writing in the New Atlanticist on Aug. 3, see the culture of oligarchic corruption in Ukraine as the root of economic woes.
“The system of bureaucrats, police, prosecutors, judges, and politicians controlling governance for the oligarchs’ benefit must be broken or Ukraine will sink under the weight of a totally failed economy,” Kalymon and Havrylyshyn warned.
Unfortunately, there’s no clear evidence that either President Poroshenko or Prime Minister Yatsenyuk, while loudly proclaiming a drive to mitigate the influence of oligarchs, are actually doing anything to bring one about.
Poroshenko, an oligarch himself, has moved up the rich list in relative terms, and is yet to divest himself of assets he promised to get rid of once he was elected head of state in May 2014.
Moreover, Kalymon and Havrylyshyn say that Ukraine’s oligarchs, far from being under attack by the new authorities, are still enjoying their protection.
“Many of the oligarchs who supported the Yanukovych regime, (such as Akhmetov, Firtash and Serhiy Lyovochkin, for example), continue to thrive – abusing their control over state companies and manipulating blocks of deputies in the Verkhovna Rada, Kalymon and Havrylyshyn wrote. “Their interests, together with those of regime-affiliated oligarchs continue to be protected at the highest levels of government.”
The Aug. 5 Transparency International report arrives at a similar conclusion.
Evaluating Ukraine’s fight with corruption, the report found that while some progress has been made, the influence of the government and oligarchs is undermining reform efforts.
“The research states that the major reason why parties cannot represent social interests is their strong dependence on wealthy donors, i.e. oligarchs, due to the lack of limits on private donations and lack of annual public financing,” the group’s news release reads.
Taras Beresovets, the director of the PR-company Berta Communications, said on the other side said the
political leadership had done a lot to diminish oligarch influence – pointing
at new energy laws and regulations that sidelined both Firtash and Kolomoisky.
The biggest problem remains the oligarchs’ control over the media, he said.
Meanwhile, Honchar sees hope that the “parasite” oligarchs will slowly transform into ones that invest in an even “playing field.” He counted Poroshenko as being among them.
“They’re trying to preserve the old corruption (system), but they will be unsuccessful,” Honchar said. “Reforms will proceed slowly, like an old Soviet car, and Poroshenko will go with the flow rather than lead the reform drive. He will try to avoid sharp underwater stones in the stream, but he can’t stop the stream itself.”
Honchar added that Poroshenko was a product of the system that formed under second Ukrainian President Leonid Kuchma, and much like the latter, he sees himself as an arbiter of the oligarch system, not its nemesis.
Kulyk said that although the oligarch system will undergo change, its days are not yet numbered in Ukraine.
“(Poroshenko) will civilize the oligarch system, not dismantle it,” he said.
Kyiv Post staff writer Johannes Wamberg Andersen can be reached at [email protected]
