Kyiv Dynamo: 1. PrivatBank: 0.
That’s the score as of last month, after Ukraine’s Supreme Court ruled against the National Bank of Ukraine in a lawsuit with Kyiv’s Dynamo soccer team.
Dynamo sued the NBU over a bail-in of funds at PrivatBank after the government took over the troubled lender. The team’s owners — Grigory and Ihor Surkis — were deemed related parties of the bank, causing them to lose nearly $40 million when bank assets were written off.
And the Surkis brothers are far from the only related parties afflicted by the nationalization that have the desire and the means to fight back against the government.
Former PrivatBank co-owner Hannadiy Boholyubov’s ex-wife lost Hr 500 million ($19 million) in the bail-in, while Boholyubov’s business partner, the oligarch Ihor Kolomoisky, has filed scores of lawsuits around Ukraine challenging aspects of the nationalization.
Concorde Capital analyst Oleksandr Paraschiy says that the legal issue at the heart of the Dynamo case comes down to National Bank of Ukraine officials failing to certify a list of related parties as the bank was nationalized in December 2016.
“Now Kolomoisky and Surkis and other guys, who naturally are related, are claiming that there is no legal basis for declaring them as related parties, because nobody recognized this relation,” Paraschiy said.
Some observers in Kyiv suggest that the Surkis’s victory in the Supreme Court could presage a far more explosive scenario: that the bank’s former owners Kolomoisky and Boholyubov manage to overturn the nationalization decision in the courts, restoring their control over the lender while nuking western confidence in the Ukrainian government.
The Ukrainian government took control of PrivatBank in December 2016 to fill a $5.6 billion hole in the teetering lender, after Kolomoisky and Boholyubov allegedly embezzled billions from the bank through a series of insider loan agreements.
‘Can’t sue myself’
Speculation around Kolomoisky’s strategy comes in part from an interview he gave to German broadcaster Deutsche Welle in May.
In the interview, the oligarch confirmed that a $2.5 billion asset freeze against him and his business partner Boholyubov is a problem.
Calling the nationalization “illegal,” Kolomoisky said that he had a series of court cases in Ukraine against the nationalization “going with fluctuating success.”
“I think that once these court processes reach an end, I’ll be able to optimistically look at the future,” he said. “More than 80 banks were liquidated in Ukraine, and now many of (the liquidations) have been recognized as illegal, orchestrated, and incorrect.”
“And if it was incorrect, then the whole London process must end by itself, because we cannot sue ourselves,” he said, referring to ongoing legal action in courts in London, in which PrivatBank is suing Kolomoisky for losses it incurred.
But it’s not clear how much success Kolomoisky will have.
“No,” said Paraschiy, when asked if Kolomoisky’s plan made sense.
Others are more fearful. For the courts to return PrivatBank to Kolomoisky, a number of different factors would have to fall into place, not least of all tacit agreement from the Presidential Administration for the court to approve such a return.
But with presidential elections coming in March 2019 and with Kolomoisky openly supporting Batkivschyna Chief Yulia Tymoshenko, some in Kyiv see such an agreement as a distinct possibility.
The results could be explosive for Ukraine’s relations with its foreign backers.
“It would be a nuclear bomb going off in the center of Kyiv,” said former Finance Minister Oleksandr Danylyuk of the consequences for Ukraine, if PrivatBank were to be returned to Kolomoisky.
