Andriy Bohdan, much skepticism has been expressed about your appointment as head of President of Ukraine Volodymyr Zelenskiy’s administration. This comes from your long running career providing legal services to high level and often controversial Ukrainian business people including perhaps the most controversial now, Ihor Kolomoisky.
Some might say that previously you were servant of the oligarchs, but now you are servant of the people.
People have warned that the risk is that you continue to serve the interests of your former clients and Kolomoisky in particular. But actually the challenge is more than that given the particular risks around the legal challenge to the nationalization of Privatbank, Ukraine’s largest bank. Most likely to actually be a servant of the people you will have to work against the interests of the very same oligarchs you previously served. Are you prepared to do that? Are you up for that challenge?
Just to remind you of the risks around Privatbank.
First, the de-nationalization of Privatbank would put the bank back in the situation it found itself in 2016 – effectively bankrupt with a $5 billion hole in its balance sheet. The state was subsequently forced to inject $5 billion of taxpayers money (5 percent of gross domestic product) onto its balance sheet to prevent the collapse of the bank and to prevent the inevitable loss of the entire deposit base, causing huge and systemic problems across the Ukrainian economy – think widespread bank runs, massive devaluation, hyperinflation and default. If the bank is now denationalized and unless former owners can find $5 billion to fill the hole in the balance sheet of the bank, then similar risks will present themselves. Do you get that?
Second, a scenario where the Privatbank nationalization is reversed and former owners fail to stump up sufficient funds to recapitalize the bank, are unduly and unfairly compensated for losses suffered as a result of the prior nationalization and are not pursued for damages to the state from the original failure of Privatbank means the end of international financial institutions lending and likely also the lack of market access for Ukraine. This will just make the scenario from point one that much more difficult. How is Ukraine going to meet this financing shortfall? Are your oligarch friends going to put their hands in their pockets to make up the likely large financing shortfall to become servants of the people as well?
But the risks are that failure to address the Privatbank issue in a way that best serves the interests of Ukraine could see the country back years – a decade or more in development terms.
This is now more than a legal game of taking from one oligarch to compensate another but the future of Ukraine is at stake. Do you get this and are you ready to really serve your country? If you serve some other purpose, then you risk the macro-financial stability and indeed the very future of your country. The choices you face really are that stark.
I wish you well and hope you make the right choice.
