Zelensky vs Oligarchs: are we finally seeing the long awaited show down?
Elina Kent: Welcome to the Kyiv Post Podcast, where you can tune in to stories that give you a deeper understanding of Ukraine.
I’m your host Elina Kent. I’m a multimedia producer and lifestyle journalist here at the Kyiv Post.
President Volodymyr Zelensky ordered the National Security and Defense Council to draft legislation to limit the powers of Ukrainian oligarchs on April 15.
For decades, oligarchs have used their economic might and political influence to bend governments to their will and win privileges. Now, in the president’s words, the oligarchs must become law-abiding business people.
Here to discuss his article and this week’s cover story “The other war: Is Zelensky willing, able to tame Ukraine’s oligarchs?” is journalist Oleksiy Sorokin.
Welcome Oleksiy!
OS: Thank you
EK: Oligarchs and corruption were among the main issues people were hoping a new face like Zelensky could curb when he started his presidential campaign back in 2019. Did he promise that this was something he would work on if elected President?
Oleksiy Sorokin: Well basically President Zelensky came with promises to solve all problems that Ukrainians have. He would end the war, he would end corruption, and he would obviously curtail the oligarchs influence and we know that a lot of people were watching his TV show, Servant of the People. Which aired before he became president and the main plot was Zelensky basically saving Ukraine from oligarchs.
EK:However two years into his presidency, Ukrainian oligarchs still wield tremendous power over the media, industry and politics.
And this past year we’ve seen Zelensky losing favor even within his own party, recently he’s been making some key decisions regarding corruption and oligarchs.
In early February, the Zelensky-led Security Council stripped possessions from pro-Kremlin politician Viktor Medvedchuk, who co-heads the 44-member Opposition Platform — For Life party, and shut down the pro Russian propaganda TV channels and other businesses of Medvedchuk’s closest ally, lawmaker Taras Kozak.
Medvedchuk lost his 4% share of Ukraine’s media market.
Ex-President Petro Poroshenko also came under pressure. As many as 27 criminal cases were opened against him for corruption, abuse of office and even treason. Some remain open today.
Zelensky also recently sanctioned Ukraine’s alleged top smugglers.
But is Zelensky doing enough? There are several oligarchs who haven’t been impacted by the recent developments.
OS: Well today we see that the process is pretty selective.
We know that the first to fall was Viktor Medvechuk, and that was an obvious choice he is a pro russian agent, he is known for travelling to Moscow, he’s known for spreading Russian propaganda.
And a lot of people in Ukraine who don’t even support Zelensky think that Medvedchuk was supposed to be sanctioned because of his attitude towards Ukraine and basically everything Ukrainian.
First when Medvedchuk was sanctioned it wasn’t seen as the war on the oligarchs it was basically seen as defending Ukraine as Russian propaganda.
Now if we are talking about oligarchs, there’s a lot of wealthy Ukrainains who are using state owned companies to enrich themselves.
We know that Rinat Akhmetov, has been successfully using the state-owned railway monopolist Ukrzaliznytsia to transport iron ore and coal at below-market prices, costing the company billions.
We also know that Dmytro Firtash and Victor Pinchuk are also rarely mentioned in the media. Who are mentioned in terms of scandals in terms of business interests.
But they also have monopolies in the fertilizer sector in the titanium markets.
Punchuk controls Ukraine’s pipe production.
And we know that these businesses use unfair regulations to basically enrich themselves. And if Zelensky wants to actually fight oligarchs. He doesn’t have to take one person, he has to attack the whole system by which they exist today in Ukraine.
EK: Why is dealing with oligarchs so important for Ukraine?
OS: Ukrainian oligarchs aren’t directly breaking the law, they are using their influence to make regulations that benefit them. So if we are talking about the Ukrainian railway. Ukraine’s Ukrzaliznytsia is heavily on that, is losing billions of hryvnias each year because the government places below market prices for transportation of coal, iron ore, and everything that is produced by companies owned by the oligarchs. And because of that Ukraine loses the chance to have actually working state owned railway company.
And we can trace this influence to each sector of the economy.
For example with electricity, the electricity market is controlled by Akhmetov DTEK. And DTEK is known for, for example it was fined 5 million hryvnias for shutting down its electricity plants to influence the market. And when we are talking about a system where 5-6-8 people have monopolies in key sectors of the economy, the state doesn’t work.
Ukraine loses billions of dollars. Ukraine loses billions of dollars on state owned Centrenergo state owned company, on state owned oil company UKRNAFTA, and it’s done in a sense where the law isn’t broken in a direct way. But the whole system is created to benefit a certain people instead of Ukraine as a state.
EK: When Zelensky was elected, and even during his presidential campaign, his relationship with Ukrainian oligarch Ihor Kolomoisky raised the most questions.
OS: I think that the relationship between Ihor Kolomoisky is the best depiction of how Zelensky was working with the oligarchs, probably until February or early March this year. Kolomoisky helped Zelensky get elected, Zelensky’s tv shows were aired on Kolomoisky’s channels, they knew each other very well. And when Zelensky needed help to promote himself, basically Kolomoisky was there to help.
After Zelensky was elected president, a lot of people who worked with Kolomoisky either in his TV business or other businesses, they joined Zelensky’s Servant of the People Party, and now over 30 lawmakers are said to be helping Kolomoisky and pushing his agenda in parliament.
Rinat Akhmetov also allegedly has 30-50 lawmakers. Kolomoiksy was able to build his own party for the Future Party. So through helping Zelensky, Kolomoisky got a very big foothold in Parliament. And after Zelensky became president in 2019, Kolomoisky started to influence Centrenergo, which he doesn’t one, is a state owned company, but suddenly Kolomoisky was benefiting from selling overpriced coal to the company and receiving cheap electricity in return.
Since Zelensky took office, the first year of his presidency there were legit fears that this specific oligarch was becoming more and more oligarch. From March or even May 2020 we see that Kolomoisky influence began to decline.
EK: Last year the U.S. Department of Justice filed a civil forfeiture complaint to seize some of Kolomoisky’s stateside properties. The DOJ didn’t charge Kolomoisky with a crime but it did accuse him of profiting from corruption and money laundering.
PrivatBank was taken away from the oligarch when it nationalized in 2016. Ukrainian prosecutors allege that Kolomoisky used insider lending to fleece the bank of $5.5 billion, forcing nationalization and a massive taxpayer bailout.
And recently, Kolomoisky’s associates in Ukraine were charged with embezzlement. And in March, top former PrivatBank officials were charged with embezzling $315 million, and one was even pulled out of a plane when he tried to flee Ukraine.
So what is this new anti-oligarch bill Zelensky’s introduced?
OS: Well we don’t know, because what happened was that Zelensky mentioned some bill he wants to pass through parliament. But as we know it’s practically impossible to pass a bill that would curtail oligarchs influence through the oligarch controlled parliament.
His Servant of the People party which has 246 lawmakers, and that’s over 20 lawmakers needed for a majority, isn’t actually able to pass any crucial piece of legislation. We know some lawmakers are influenced by some oligarchs, we know that the party was created very fast and a lot of people with polar opinions were drawn under the same umbrella.
And basically if Zelensky wants to pass some kind of legislation that is crucial for the fight against Ukrainian Oligarchs. He has to make a deal with Ukrainian oligarchs for them to support this bill.
EK: However, the president recently showed that he sometimes doesn’t need parliament or courts to advance his agenda.
OS: Today Zelensky has all the means necessary to battle oligarchs’ influence in key sectors of Ukraines economy. Ukraine’s Anti-Monopoly Committee and National Energy and Utilities Regulatory Commission can be his tools to curb oligarchs’ influence in Ukraine.
In March the Regulatory Commision fined 3 DTEK plants for a total of 5 million hryvnias for cutting supplies during the coldest weeks of winter. Ukraine’s Finance Minister Serhiy Marchenko has also been pushing for a tax code reform that would increase the price for rent for iron ore extraction.
For example for Akhmetov’s Metinvest, he would have to pay $22 per ton instead of the today’s only $3 per ton.
So if we bring taxes and tariffs to European standards and European tariffs and taxes, we can force oligarchs to be law abiding citizens. As lawmaker Gerus told me “We need fair competition and here, the role of the Anti-Monopoly Committee is crucial.”
EK: What do you think the future holds for oligarchs in Ukraine?
OS: Well we know they are very resilient. If we look at the photo of the oligarchs that met President Viktor Yushenko in 2005, they are all the same faces. Yushenko is long gone from politics, but the oligarchs are still there. It’s good that Zelensky is talking about this.
As Gerus said, it’s good that this problem is public now. Because it forces the President to act on it. But will he be able to actually force oligarchs to live and work by the law? Only time will show.
EK: Well thank you so much for sitting down and talking with us about your article this week.
OS: Thank you.
EK: That was this week’s episode of the Kyiv Post podcast. I’m your host Elina Kent. You can subscribe to our podcasts on all streaming platforms and follow along the Kyiv Post website. Stay safe, stay home, and subscribe to the Kyiv Post.
