The Yalta European Strategy (YES) conference that took place in Kyiv on Sept. 10–12 has become a parade of forces on the eve of a big battle: the battle for deoligarchization.
This battle will have consequences both in Ukraine and outside. If the deoligarchization plan works in Ukraine, this way of curbing the influence of the richest people on politics can be “exported” to other countries. According to Justice Minister Denys Maliuska, Ukraine’s draft legislation on oligarchs is unlike anything that exists in the world today.
Deoligarchization at YES
Deoligarchization got a separate panel at YES, and it proved to be the most interesting discussion on domestic politics.
Consider the venue — a conference thrown by Victor Pinchuk, a billionaire oligarch who wants to escape an official register of oligarchs that the new legislation seeks to establish. Naturally, the participants were picked in a way to ensure criticism of President Volodymyr Zelensky’s deoligarchization plan.
This was a game being played on the opponent’s field, using his rules. People who raised their hands to attack the project were eagerly given the word.
Opponents of the deoligarchization project insisted that it violates the Constitution by limiting the rights of the richest. Defending the bill were two people: Maliuska, the justice minister, and Oleksiy Danilov, the secretary of the National Security and Defense Council.
Danilov used the opportunity to rebuke Pinchuk for privatizing the Kryvorizhstal steel plant in 2004 for just Hr 4.2 billion, about $800 million back then, many times below its real market value. Pinchuk privatized the factory together with Rinat Akhmetov in the last year of rule of President Leonid Kuchma, Pinchuk’s father-in-law.
When Kuchma was succeeded by his opponent Viktor Yushchenko, the privatization was canceled and a new auction saw the factory sold to ArcelorMittal for Hr 24 billion — six times the price that Pinchuk and Akhmetov paid Hr 24 billion — or $4.8 billion back then.
It was the first time Pinchuk was rebuked for that transaction at one of his YES conferences. The oligarch has said in the past that he regrets participating in the initial privatization of Kryvorizhstal.
This discussion was disappointing. Most participating foreigners didn’t understand the proposed project well and, consciously or not, were broadcasting misconceptions.
Stephen Sackur, the host of the BBC HARDtalk, surprisingly compared Ukraine’s sanctions against Kremlin agent Viktor Medvedchuk to Vladimir Putin’s persecution of Mikhail Khodorkovsky in Russia. Sackur called commentators who are linked to Pinchuk’s foundation “independent0minded observers” and welcomed their opinions.
I also disagree with economist Anders Aslund’s definition that “an oligarch is a person who is strong enough to be able to defend even a big enterprise as his property against the predatory state.”
In my opinion, an oligarch is a person who has taken over the state and has officials serve his interests.
Similarly, I disagree with Stephane Fouks, a member of the YES board, who protested the creation of a register of oligarchs in Ukraine. Fouks made a ridiculous comparison, saying that the last time France “made a register of a certain category of population, it was 1941 when we collaborated with Nazis.”
Such an argument attempts to substitute a rational discussion with emotions. French businesses use political influence to promote their interests, too — like when they make Ukraine order French-made Alstom locomotives, hinting that the deal can influence the support that Ukraine gets from France within the Normandy Format, a peace-talking initiative.
I also think that another participant of the panel, Daron Acemoglu, a co-author of “Why Nations Fail,” was wrong to compare Ukrainian oligarchs to the owners of Google. They have little in common.
Natalia Jaresko, a former finance minister and a long-time partner of YES conferences, also criticized the deoligarchization bill. And Aleksander Kwaśniewski, former president of Poland and chair of the board at YES, openly mocked the project.
Foreign commentators don’t only misunderstand the Ukrainian context, they also can’t or don’t want to study the proposed deoligarchization bill itself.
For example, they are convinced that the bill seeks to strip oligarchs of their TV channels and essentially will redistribute the media resources, benefiting the government.
But in fact, the bill doesn’t seek to seize the oligarchs’ property. It won’t cause oligarchs any material damage, only a reputational one — they will be legally identified as oligarchs. Each of them will have a choice: They can choose to get rid of their media assets or political influence and be out of the register.
The bill defines an oligarch as an individual that has a monopoly in a certain area of business, owns media outlets, and is linked to politics. An individual who matches all three criteria will be recognized as an oligarch. To get rid of this label, an oligarch doesn’t have to get rid of his media — he can get rid of his representatives in the parliament or end his monopoly.
Price of oligarchy
The key argument against the draft law from the chorus of critics is that we need institutional constraints, such as the Anti-Monopoly Committee, rather than a register of oligarchs.
I’d like to comment on that since I assess my personal experience on the topic of deoligarchization as extensive. I have known Pinchuk for 20 years, since his Workers Party convention in Myrhorod in 2001.
So, the oligarchy is such a powerful all-grasping monster that it can only be defeated with a combination of efforts. We shouldn’t contrapose the Anti-Monopoly Committee to the deoligarchization law, rather combine the two.
I will explain why simply having the Anti-Monopoly Committee will not be enough.
A lot of oligarchic activity has nothing to do with monopolies. They can, for example, seek subsidies from the budget, as did Yuri Kosiuk, the owner of a private yacht fleet, for his chicken business MHP.
Kosiuk’s oligarchic influence allowed him to lift the subsidy limits which allowed Kosiuk to receive Hr 1 billion ($37 million) from the state in 2018. The parliament initially planned to limit the subsidy amount to Hr 50 million ($1.85 million) per company.
A year earlier, Kosiuk’s business received Hr 1.4 billion ($52 million) in agrarian subsidies which accounts for a third of all budget allocations for the assistance of small and medium-size businesses. And the Anti-Monopoly Committee wouldn’t be able to prevent that.
Another example is oligarch Rinat Akhmetov, who recently bought the former palace of Belgian King Leopold II on the French Riviera for 200 million euros.
According to Ukrainian law, Akhmetov doesn’t control a monopoly in the energy sector, since his coal plants — which constitute 80 percent of all coal plants in Ukraine — are diluted by state-owned nuclear power plants.
Yet, Akhmetov’s coal plants are key, since they not only produce electricity but also balance the energy market during peak hours. This gives the oligarch extensive power over the country — he can threaten it with power shortages.
Under my watch as a lawmaker in the previous parliament convocation, oligarch Dmytro Firtash was ruled to be recognized as a monopolist in the nitrogen fertilizers market.
Moreover, Firtash bought his chemical plants with loans from Arkady Rotenberg, a Russian oligarch — and now his company’s shares are pledged to Russian state-owned funds. But what happened next? Firtash won the appeal, canceling fines imposed on him for abusing the monopoly position in the fertilizer market.
Therefore, the misapprehensions of people who are against the deoligarchization law are easily shattered by Ukrainian realities.
Today, the biggest battering ram against the deoligarchization is ombudsman Lyudmyla Denisova.
Other government representatives, who are already corrupted by oligarchs, are simply trying to avoid this topic to avoid public criticism. But Denisova voiced her opposition to the idea of deoligarchization — she not only demanded an expert examination of the bill by the Venice Commission but also came and criticized the bill at the YES conference.
Based on Denisova’s letter, Speaker Dmytro Razumkov sent the draft law to the Venice Commission for evaluation.
At the same time, it was important for Razumkov to get support for his line not only from the Opposition Platform — For Life faction led by oligarchs Medvedchuk, Serhiy Lyovochkin and Vadym Stolar, or the European Solidarity faction led by oligarch Petro Poroshenko, or the Batkivshchyna faction where there are lawmakers connected to Akhmetov, Medvedchuk, or even ex-Ecology Minister Mykola Zlochevsky.
Razumkov needed the support of the liberal Voice (Golos) faction to show the wide backing of his decision to appeal to the Venice Commission — and he received it.
But the Voice faction has been internally divided for months. The majority of the Voice’s 20 lawmakers demand the resignation of faction leader Yaroslav Zheleznyak, yet he’s not resigning.
That’s why the letter from Zheleznyak to Razumkov, where he claims that the deoligarchization bill “violates human rights and fundamental freedoms” can’t be perceived as the opinion of the whole faction.
Thus, the behind-the-scenes attempts to topple the deoligarchization bill are becoming increasingly clear. From my own experience, I can say that even the proposal of the bill has had good results. The oligarchs are losing influence, and this is evident in the example of state-owned Ukrzaliznytsia railway company. (Editor’s Note: Sergii Leshchenko is a member of the supervisory board of Ukrzaliznytsia).
Despite opposition, we managed to raise Ukrzaliznytsia’s tariffs on the shipping of iron ore produced by oligarchs, which will generate $500 million of additional income for the company. A year ago, this initiative was blocked by oligarch-friendly officials.
The deoligarchization effort went too far to be stopped. The stakes are too high now. Either Zelensky will make the final push for deoligarchization or the oligarchic system will regroup and destroy him as an independent president.
Sergii Leshchenko is an investigative journalist and was a member of Ukraine’s parliament from 2014–2019. He became a columnist for the Kyiv Post in October 2019.
