On the occasion of International Anti-Corruption Day on Dec.9, U.S. authorities imposed sanctions on two Ukrainian figures – Oleksandr Tupytsky and Andriy Portnov.
The U.S. continues to focus on the cleansing of politics and the judiciary in Ukraine. In an interview for the Kyiv Post last week, Michael McFaul said that Ukraine remains the last stronghold on the path to democratization over the past 15 years among countries like Tunisia, Myanmar and Sudan which soon went off track.
Although Ukrainian democracy is very turbulent, it remains strong and viable. The country experiences changes in government, has a diversity of voices in the media and protests in the streets are not suppressed but have become a normal feature. Meanwhile, the oligarchic clans, which enrich themselves through politics and placing their candidates in line for the presidency, have – for the first time – been taken on by the authorities and their attempts to renegotiate the social contract.
Curtailing the power and influence of oligarchs will be at the forefront of the second part of Volodymyr Zelensky’s presidency. This is evident from his public appearances in recent months, including a message to the nation in early December where he outlined plans to use rent payments for the use of Ukrainian natural resources to create Economic passports for Ukrainians.
On the road ahead, more battles remain in which the oligarchs look to be in a losing position. It will be increasingly difficult for their agents of influence with parliamentary badges to oppose Zelensky’s idea of redistributing national wealth from several families for the benefit of future generations.
From the tactical point of view,
“Zelensky has struck a blow to the very heart of the propaganda machine“
since voters will a priori be on his side.
In addition, the law on de-oligarchization is due to come into force in May 2022 which provides for the creation of a register of oligarchs. They will be restricted in their rights to privatize and finance parties and will be forced to file income tax returns. Furthermore, politicians and other officials will be required to report their contact with such individuals.
Ukraine is creating expertise in this sphere since there is no similar precedent for fighting oligarchs in other countries. Similarly, Ukraine has been a testing ground for the anti-corruption vertical, which includes the National Anti-Corruption Bureau of Ukraine (NABU), Specialized Anti-Corruption Prosecutor's Office (SAPO) and the Supreme Anti-Corruption Court. And experience has shown that the approach of separating new anti-corruption bodies from the rotten system has paid off.
The presence of a billionaire in Ukraine’s register of oligarchs will significantly affect the prospects of such individuals in the West. International banks are likely to be much more careful in their vetting and compliance procedures.
In the long run, the presence of oligarchs in the register may lead to targeted sanctions and ruffle the feathers of those who proclaimed the new law on de-oligarchization to be weak and toothless. It was after the law was passed that billionaire Rinat Akhmetov's rhetoric changed significantly, and President Zelensky dramatically announced a possible coup being hatched, based on intercepted conversations between Ukrainian and Russian establishment figures.
But in the context of recent events, another initiative has remained unnoticed: the Cabinet of Ministers has approved a roadmap for "fighting" the oligarchs. It is these measures which are needed to supplement and reinforce the law on de-oligarchization.
De-oligarchization Law final votes September, 23, 2021 / Photo Verkhovna Rada
Firstly, the oligarchs will receive the status of high-risk customers by commercial banks. This is not just about their personal credit cards but the businesses they own, especially given Ukraine’s register of final beneficiaries.
Moreover, all such organizations that are subject to primary financial monitoring - banks, insurance companies, postal operators, payment systems, auditors, accountants - will arguably have to take a much more cautious stance towards the oligarchs.
The process of de-oligarchization will also see the adoption of a new law on lobbyists. It is important that this law does not lead to the legalization of corruption, therefore it is planned to go hand-in-hand with other initiatives, These include a state registration of lobbying activities, creation of a register of lobbyists, reporting of lobbyists’ contacts with the authorities, publication of contracts for the provision of services, as well as financial reports.
The framework of de-oligarchization also proposes strengthening the powers of the Antimonopoly Committee, the State Energy Supervision and the Ministry of Energy. The latter has already submitted plans for public discussion that aim to curb oligarchic provocations and a bill on the introduction of temporary administrations on private energy infrastructure.
“The government's plan for de-oligarchization also includes preventing manipulation of wholesale energy markets and establishing the responsibility of participants for insider trading.“
In other efforts to delimit the influence of oligarchs, the law “on Media” is expected to be adopted by the end of 2022. This aims to reduce the concentration of media in the hands of a small number of owners. Linked to this, the National Council on Television and Radio Broadcasting will be empowered to revoke licenses for television channels and cancel registration for the media.
This is the most sensitive initiative because the television channels have contributed significantly to the influence of oligarchs. With the help of the media, they have been able to promote their interests, support their political puppets or attack opponents. For example, in 2020, planned new tariffs for oligarchs to transport products through state rail operator Ukrzaliznytsia (UZ) were not introduced. Various officials were intimidated by what they saw or heard in the media, and the little-known State Regulatory Service was bought off and it ultimately disapproved the draft order.
UZ has received less than Hr 8 bn this year. With a loss of Hr 12 bn in 2020, this is very significant. The situation was corrected this year. But the new UZ tariffs for oligarchs will be fully operational from Jan. 1, 2022, when tariffs for iron ore transportation will increase by 30 percent.
In total, tariff initiatives will bring UZ Hr 15 bn next year - new passenger cars, new Kryukivka diesel trains, different salaries for railway workers.
Also, in terms of de-oligarchization, the creation of a national airline separate from the influence of the oligarchs is a way to protect the country from blackmail by Igor Kolomoisky, who has already brought down Aerosvit and virtually ruined Ukraine International Airlines (UIA).
The main impact of the new law on de-oligarchization will be psychological. The state has a legal right to limit the power and influence of oligarchs, but oligarchs have no right to blackmail the state. And the current self-serving gimmicks against Zelensky on Rinat Akhmetov's TV channels has already become a reason for international partners to pay attention to these richest people who have challenged the state. This means that they will have to spend even more on lobbyists and spend even longer undergoing checks in Western banks.
In conclusion, if the state has genuinely taken on the oligarchs and is not simply going through the motions, it is bound to win. Crucially, all this must not become a selective game, nor a struggle for influence over the media, but a real desire to reduce the influence of money on politics. And here it’s the role of civil society and journalists to keep an eye on the possible temptations that exist in any government.
