Whether out of honesty or arrogance, Ihor Kolomoisky has revealed the corrupt ways of Ukraine’s oligarchy, in which a tiny elite thrive at the nation’s expense. “His entire business…is based on a conflict of interest and a merger of business and government,” said lawmaker Mustafa Nayyem.
Editor’s Note: The following article is part of the Ukraine Oligarch Watch series of reports supported by Objective Investigative Reporting Program, a MYMEDIA project funded by the Danish government. All articles in this series can be republished freely with credit to their source. Content is independent of donor.
Story At A Glance
- Ihor Kolomoisky, a pudgy jokester, is no laughing matter for Ukrainians. He is accused of corporate raidership – a polite term used in Ukraine to describe theft of other people’s businesses by exploiting corrupt courts and deficient legislation – and large-scale tax evasion. He denies all accusations.
- He’s a perennial oligarch, thriving no matter who is in power, often in a top position behind Rinat Akhmetov in wealth. He clocks in with Forbes recently at No. 2 at $1.46 billion, slightly ahead of his business partner, Henadiy Boholyubov, and his rival, Victor Pinchuk.
- He has dominant or monopolistic positions in many sectors — including banking, airlines and oil production.
- Kolomoisky rallied the nation to the defense of Dnipropetrovsk Oblast after Russia’s invasion of Ukraine in 2014 – protecting the motherland and his businesses – by bankrolling volunteer battalions when Ukraine’s army was weak. But then he came into conflict with President Petro Poroshenko, who removed him as oblast governor on March 25, 2015.
- Kolomoisky delivers personal insults, even to Russian President Vladimir Putin, whom he called “a schizophrenic of small height” who has “completely lost his mind.” Putin returned the insults, calling Kolomoisky “a unique con man.” In a Dec. 21 interview with Oliver Carroll in Politico, Kolomoisky also took aim at Poroshenko, saying the only difference between him and overthrown President Viktor Yanukovych is “a good education, good English and a lack of a criminal record.” Everything else is the same: “It’s the same blood, the same flesh reincarnated. If Yanukovych was a lumpen dictator, Poroshenko is the educated usurper, slave his absolute power, craven to absolute power.”
Ihor Kolomoisky
Date of birth: Feb. 13, 1963.
Place of birth: Dnipropetrovsk
Wealth: $1.46 billion, second richest person in Ukraine, according to a 2016 Forbes ranking.
Key Assets: PrivatBank, Ukrnafta, Ukraine International Airlines, 1+1 Media.
Personal: Married to Iryna Kolomoiska; one son and one daughter.
Praised for: Successfully stopping Russian aggression from spreading to Dnipropetrovsk Oblast during his stint as governor in 2014-2015; admitting that oligarchs got rich from assets “stolen from the state.”
Criticized for: Profiteering from his links to the government; blocking state oil company Ukrnafta’s tax and dividend payments; strong-arm tactics, including raidership.
STORY STARTS HERE:
For many years, he was one of Ukraine’s most camera-shy oligarchs, rarely appearing in public and giving almost no interviews.
In recent years, however, Ihor Kolomoisky has burst into the spotlight, revealing himself to be one of the country’s most colorful, comical — and confrontational billionaires.
For some, his bizarre behavior explains why he is nicknamed Benia, after a kind lion with a fluffy mane from an old Soviet cartoon. Seemingly proud at times of his reputation as a corporate raider, he has joked about being able to control a company after buying just a small stake. “Give me a 1 percent stake and I will take over the entire company,” he has been quoted as saying.
Sadly for Ukraine, Kolomoisky’s real behind-the-scenes antics are no laughing matter. He is not to be taken lightly by Ukraine or its citizens.
Kolomoisky has been accused of bleeding the state dry by not paying his fair share of taxes while profiteering through rent-seeking schemes at state enterprises by exploiting ties to government officials.
The Kyiv Post had conversations with Kolomoisky, but he refused to be interviewed for this story.
‘Political corruption’
“His entire business and everything he does is based on a conflict of interest and a merger of business and government,” said Mustafa Nayyem, a lawmaker from President Petro Poroshenko’s bloc in parliament. “Kolomoisky is one of the biggest factors of business influence on government… His business and the preferences he got would have never existed without the cooperation of state bodies, which is political corruption in the strict sense.”
One of the most notorious examples is unpaid dividends and tax evasion at majority state-owned oil production giant Ukrnafta, the management of which Kolomoisky and partners controlled for years.
Authorities say it cost the state $600 million of unpaid taxes.
Just over a year ago, Kolomoisky appeared to be on the defensive, losing the governorship of his native Dnipropetrovsk Oblast and effective control of Ukrnafta.
Poroshenko claimed back then that his crackdown on Kolomoisky was the beginning of a de-oligarchization drive that would, once and for all, break the country free of the grip of oligarchy and pervasive kleptocracy. But the promise by the president, who is himself an oligarch, was not kept.
Failed de-oligarchization
After a hiatus, Kolomoisky again started exploiting leverage for tradeoffs – to preserve and increase his influence, while other oligarchs also remain untouched.
He now holds the balance of power in parliament, with his loyal lawmakers helping to secure key votes for Poroshenko’s wafer-thin ruling majority. Political analysts said Kolomoisky played a major role in the appointment of Prime Minister Volodymyr Groysman in April and Prosecutor General Yuriy Lutsenko in May – both presidential loyalists.
‘Hello, anybody home?’
The billionaire looks like a comic character – a short, energetic man with a shaggy grey beard and a thick, wavy full head of hair.
Some of his quotes, such as “hello, anybody home?” or “wanna grab a coffee?” have become internet memes shared on social networks.
In contrast with conventional bureaucrats and tycoons, he has an informal, offhand and down-to-earth, sometimes coarse style.
“Kolomoisky wore a grey t-shirt and grey jeans, and didn’t resemble a governor in the classical sense,” said Borys Braginsky, who was a spokesperson under Kolomoisky.
The tycoon is notorious for impulsive outbursts of anger, which can transform in a flash into dry humor.
In October 2014, Kolomoisky admitted having Israeli and Cypriot citizenship, apart from his Ukrainian one. This is a violation of Ukrainian law, which bans dual citizenship. “The Constitution says that dual citizenship is banned. It doesn’t ban triple,” Kolomoisky told Serhiy Andrushko, a Radio Liberty journalist.
Threatening manner
On March 19, 2015 Kolomoisky rudely insulted the same journalist during a standoff with Poroshenko over control of oil producer Ukrnafta and oil pipeline operator Ukrtransnafta. Irritated with Andrushko’s previous reporting on him, Kolomoisky swore at the journalist and called him a “prostitute.” He also asked him whether he had “stuck” his tongue “up his ass.”
“You’re spying for me like a chick who’s spying on her cheating husband,” he yelled at Andrushko, who approached him for a comment.
Newly appointed Dnipropetrovsk Oblast governor Ihor Kolomoisky (L) meets Yuriy Bereza, then head of regional pro-Ukrainian self-defence unit in Dnipro (then Dnipropetrovsk) on March 4, 2014. Bereza symbolically granted Kolomoisky the keys to the regional administration. One month later Bereza headed the Kolomoisky-sponsored Dnipro-1 volunteer battalion. (UNIAN)
In 2015 lawmaker Sergii Leshchenko published a recording of an alleged phone conversation between Kolomoisky and Andriy Kobolev, CEO of state oil and gas firm Naftogaz. In the conversation, which allegedly took place in September 2014, a man with a voice resembling Kolomoisky threatened to send loyal soldiers to capture a power plant and the office of the state’s gas pipeline operator Ukrtransgaz.
“Don’t provoke us to send people from the war zone. Don’t fuck with us,” said the voice that resembled that of Kolomoisky.
Then in May 2015, Kolomoisky called then-Economy Minister Aivaras Abromavicus a monkey at a meeting of Ukrnafta’s board of directors. Despite his explosive persona, Kolomoisky’s brain “works like that of an engineer,” Braginsky said. “He always calculates, and his brain functions at lightning speed.”
Ruthless competitor
Back in 2007, Kolomoisky turned to black humor in order to get rid of annoying neighbors – Russian oil company TNK-BP – which had an office next to him in the Millennium office building in Kyiv. One day in April, office workers were shocked to see an exhibition of expensive coffins in the Millennium’s lobby. Men in black suits were distributing leaflets promoting a funeral company whose abbreviation in Ukrainian was TNK-BP. A few months after that incident, TNK-BP moved to another office.
Although his business grouping has never held power on the national stage and was often sidelined by rivals in prized privatization auctions, Kolomoisky has developed a knack for survival and success no matter who is officially in power.
Known for his aggressive and litigious style, harking back to the “wild ‘90s” of gangster capitalism, Kolomoisky and partners in his so-called Privat business group control a diversified portfolio of business assets spanning from Ukraine and extending to an ore mining enterprise in Australia, all via a web of offshore companies.
Business and political savviness has helped him outlive all previous political regimes in Ukraine, said Svyatoslav Oliynyk, an ally of Kolomoisky who was a deputy Dnipropetrovsk Oblast governor under him.
To Ukraine’s defense
Prior to 2014, he and partners never directly got involved in politics. He broke that rule after the 2013-14 EuroMaidan Revolution that drove President Viktor Yanukovych from power.
When Russia started its war against Ukraine soon after the revolution, he was appointed governor and played a key role in fending off the Kremlin’s onslaught.
Kolomoisky burst out of the shadows and switched from being an oligarch who rarely appeared in public or gave interviews, to being the most outspoken one.
Oliynyk said Kolomoisky proposed that fellow oligarchs Rinat Akhmetov and Victor Pinchuk become governors of Donetsk and Zaporizhzhia oblasts, respectively, but they refused.
Pro-Ukrainian fighters aim an anti-tank gun during their training at the Right Sector base in Dnipropetrovsk Oblast on May 17, 2015. (Volodymyr Petrov) (Volodymyr Petrov)
Kolomoisky also said that he had advised Kharkiv Mayor Hennady Kernes, a Yanukovych ally, to support the post-revolutionary government instead of siding with pro-Kremlin protesters, and that Kernes had agreed.
In some of his first comments as governor of Dnipropetrovsk, he dismissed claims by Russia that a coup by Nazi Ukrainian nationalists had seized power in Kyiv, claiming instead that Russia’s leadership itself was Nazi and fascist in its views and behavior.
“If Nazis made me a governor, then either they are not Nazis or I’m not a Jew,” Kolomoisky said.
Spars with Putin
Kolomoisky has also insulted Russian President Vladimir Putin on occasion, even though angering the Kremlin strongman has led to extremely unpleasant – even fatal – consequences for his enemies.
At his opening press conference as Dnipropetrovsk Oblast governor on March 3, 2014, Kolomoisky called Putin “a schizophrenic of small height.” “He is completely delusional. He lost his mind completely. His mission to recreate the Russian empire within the boundaries of 1913 or the Soviet Union within the boundaries of 1991 may bring the entire world to catastrophe,” he said.
Putin returned the favor, calling Kolomoisky a “unique con man,” claiming that he had defrauded Russian oligarch Roman Abramovich. “And now this scoundrel was appointed governor of Dnipropetrovsk Oblast,” he said. “… As a result of dishonest privatization, some people got rich, and now they’re joining the government.”
Kolomoisky kept up the feud in March 2015, telling the Financial Times he understands why Putin seized Crimea. “He was just taking advantage of the situation. He’s just as much a raider as we are.”
Dnipro’s protector
One of his first moves as governor was to prevent the spread of Russian-engineered separatism from the eastern Donetsk Oblast to his neighboring Dnipropetrovsk Oblast. He ordered checkpoints to be set up on the border to defend the region.
As the country’s financially starved army proved unable to fight in early days of the crisis, local self-defense units, sponsored by Kolomoisky’s entourage, proved crucial in manning checkpoints and fending off Russian and separatist forces.
Located between Kharkiv, where Russian-backed separatists took over the regional administration briefly in April 2014, and Donetsk, which remains a separatist stronghold to this day, Dnipropetrovsk became a bulwark of the pro-Ukrainian movement. A major hospital for wounded soldiers and a center for the release of prisoners of war were established.
‘There was no army…’
“Effectively there was no army and no police,” Kolomoisky’s ex-spokesman Braginsky said. Starting from late March, Kolomoisky’s team started creating the volunteer Dnipro-1 Battalion to help the weak and poorly equipped Ukrainian army to fight separatists.
Oliynyk, who was Kolomoisky’s deputy during his governorship, said the oligarch was funding the equipment, lodgings, food and logistics of the unit, but all the weapons and wages were provided by the government.
Dnipropetrovsk activist and blogger Vyacheslav Poyezdnik told the Kyiv Post that Kolomoisky was paying some Hr 5,000 to Hr 7,000 per month to Dnipro-1 fighters.
Oliynyk also said that Kolomoisky’s team had helped the Right Sector paramilitary group, which was comprised mostly of EuroMaidan Revolution activists, basing them at a former summer camp and supplying them with food.
Among other battalions supported by Kolomoisky were also Dnipro 2, Azov, Shakhtarsk, Poltava, Sicheslav, and several regular army battalions.
At the end of April 2014, Kolomoisky’s deputy Borys Filatov offered to pay $10,000 to anyone who captured a Russian mercenary fighting in eastern Ukraine.
‘Protecting business’
Poyezdnik said that, although Kolomoisky had not been seen often in Dnipropetrovsk, his team had been trying hard to get positive publicity by showing grenade launchers allegedly taken from enemy saboteurs and separatists supposedly captured on the war front.
“Their defense of Dnipropetrovsk was largely a publicity stunt,” Poyezdnik said. “Why did they start defending Dnipropetrovsk? They were protecting their business.”
Ihor Kolomoisky and PrivatBank chairman Oleksandr Dubilet at a press conference in Kyiv on April 2, 2003. (UNIAN)
Kolomoisky controls Ukraine’s largest commercial bank, Privatbank and, in Dnipropetrovsk Oblast, the local soccer team Dnipro, ore mines and many other businesses.
Kolomoisky also spread his influence to Odesa Oblast when his ally Ihor Palytsya served as governor of the region from May 6, 2014 into half of 2015.
In the course of the war, Kolomoisky and his allies gained more influence in southeastern regions and elsewhere in Ukraine and – critics say – started widely using it to advance their businesses.
Poroshenko conflict
As Kolomoisky’s clout grew nationwide, some observers say that he aspired to the role of Ukraine’s oligarch No. 1, similarly to Akhmetov, Ukraine’s richest man, under disgraced former President Viktor Yanukovych. But these ambitions appeared to set him on a collision course with Poroshenko in March 2015.
At that time, the Verkhovna Rada passed a bill curtailing Kolomoisky’s de facto management control of majority-state-owned oil and gas producer Ukrnafta, while a Kolomoisky protégé was fired from the CEO position at state oil transportation monopoly Ukrtransnafta. Kolomoisky responded by sending armed men to blockade both companies.
Kolomoisky accused Poroshenko’s business partner and “grey cardinal” Ihor Kononenko of being behind the takeover of Ukrnafta and Ukrtransnafta.
Eventually Kolomoisky was dismissed as governor of Dnipropetrovsk Oblast.
Political consultant Taras Berezovets said Kolomoisky had become too powerful and had started to irritate many with his rudeness to journalists and others. As a result, nobody supported him at a critical moment.
In an interview published Dec. 21 in Politico, Kolomoisky remained angry with Poroshenko, saying the only difference between him and overthrown President Viktor Yanukovych is “a good education, good English and a lack of a criminal record.”
Everything else is the same: “It’s the same blood, the same flesh reincarnated. If Yanukovych was a lumpen dictator, Poroshenko is the educated usurper, slave to his absolute power, craven to absolute power.”
‘Needed to be reined in’
“He completely lost it. He stopped taking into account that he is just one of Ukraine’s 27 governors and can’t be equal to the president,” Berezovets said.
Nayyem, the lawmaker from the Poroshenko Bloc, said that the oligarch probably had patriotic motives at the beginning of his governorship, but later his business interests prevailed. “Eventually his government post became an appendix to his business,” he said.
Oliynyk, a deputy governor under Kolomoisky and now a member of the Oblast’s legislature from the Vidrodzhennya Party, played down the conflict between the oligarch and Poroshenko saying Kolomoisky had not planned to stay in office for long. “We were planning to serve for six months at most.
But then the battle of Ilovaisk started. We couldn’t leave,” he said. “When the situation stabilized, Kolomoisky left. It just happened six months later than we initially planned.”
Political analyst Volodymyr Fesenko said that in 2014 to early 2015 Kolomoisky aspired to be “one of the key figures in the government.”
“But after the conflict with Poroshenko he decided to return to the his previous traditional tactics, when he reached agreements with (ex-President Leonid) Kuchma, (ex-President Viktor) Yushchenko, (ex-Prime Minister Yulia) Tymoshenko and (ex-President Viktor) Yanukovych,” he added.
Deal with Poroshenko?
Kolomoisky told online newspaper lb.ua in late 2015 that he had reached an agreement with Poroshenko in March on settling their dispute. The deal covered economic, political and media aspects. It also envisaged no legal troubles for his allies, he added.
One of them, ex-Ukrtransnafta CEO Oleksandr Lazorko, is wanted in Ukraine on embezzlement charges and has applied for political asylum in the United Kingdom.
But the conflict between the tycoon and the president flared up again after another Kolomoisky ally, Gennady Korban, set up Ukrop, an opposition party with staunch anti-Poroshenko rhetoric, in June 2015. Korban clashed with pro-presidential candidates in the Chernihiv parliamentary by-election in July 2015 and the Kyiv mayoral election in September 2015 and lost.
In October 2015 Korban was arrested on embezzlement, organized crime, kidnapping and hijacking charges in a case that he called a vendetta by Poroshenko for his political activities.
Both Korban’s defense and other lawyers say there were numerous procedural violations during his arrest.
Korban said that Pavlo Demchyna, a top state security official and a protege of Kononenko, was behind the operation.
A coup attempt?
Borys Lozhkin, Poroshenko’s former chief of staff, wrote in a book he published in early 2016 that there had been rumors that Kolomoisky was planning a coup against the government using the Ukrop party.
“Kolomoisky allegedly made a deal with ‘junior’ factions of the government coalition, Rinat Akhmetov and someone in the cabinet, and was aiming to replace the government,” Lozhkin wrote.
Oliynyk argued, however, that Korban’s political project was independent from Kolomoisky and that his arrest stemmed from his own personal conflict with the president, rather than from the Kolomoisky-Poroshenko dispute.
New deal
Analysts speculate that Kolomoisky’s team and Poroshenko reached another deal after Korban’s arrest.
Braginsky argued that Korban’s release from a detention center in March was part of the deal. Korban was put under house arrest and received a suspended sentence in the kidnapping case in April. Ukrainska Pravda reported on June 14 that he had fled to Israel.
Another part of the agreement is likely that Kolomoisky, his allies and lawyers should keep silent about Poroshenko’s policies, Braginsky said.
“Non-compliance with this deal could entail big problems,” he said. “That’s why this topic is just being bypassed.”
Korban’s press office told the Kyiv Post that he was not giving any comments for the time being, while a spokeswoman for Filatov, mayor of Dnipro and ex-deputy governor of Dnipropetrovsk Oblast under Kolomoisky, said he could only comment on municipal issues, not on political ones.
Supporting Poroshenko
Another aspect of the alleged deal with Kolomoisky concerns the support of his allies in parliament for Poroshenko’s agenda.
The governing coalition, which has a wafer-thin majority, desperately needs additional votes to pass laws and appoint officials. It makes it dependent on situational alliances and trade-offs with lawmakers and parties outside the ruling coalition.
The 23-member Vidrodzhennya group, which pundits have linked to Kolomoisky, voted for the appointment of Poroshenko loyalist Volodymyr Groysman as prime minister on April 14 and the selection of Yuriy Lutsenko as prosecutor general on May 12.
Both Fesenko and Braginsky said that Kolomoisky had played a major role in both appointments. “This wouldn’t have been done without Kolomoisky,” Fesenko said.
Despite the agreements, Braginsky compared the Kolomoisky-Poroshenko conflict with the Minsk ceasefire with Russia.
“This conflict is smoldering like a cigarette,” he said. “At any moment it can be re-ignited.”
Ihor Kolomoisky argues with security at the entrance to the Kyiv office of state-owned energy giant Naftogaz on May 29, 2015. Kolomoisky came for a meeting of the supervisory board of subsidiary oil producer Ukrnafta, where he has a minority share. (Ukrinform)
Wild 1990s
Kolomoisky’s rebellious and conflict-prone spirit harks back to his youth.
He was born in 1963 to a Jewish family of engineers in Dnipropetrovsk, which is now known as Dnipro. In 1985 he received a degree in metallurgical engineering and started working at a state design bureau.
But he didn’t follow his parents’ career. Together with his friends, Kolomoisky started travelling by train to Moscow to purchase computers and other office equipment to re-sell them in Dnipropetrovsk, according to Forbes.
In the late 1980s, Soviet leader Mikhail Gorbachev started promoting small business initiatives known as co-operatives. Kolomoisky benefited from this, initially working at the Fianite co-operative together with Gennadiy Bogolyubov. In 1991, they co-founded Sentosa Ltd., naming it after an island resort in Singapore where they once spent a vacation, according to Forbes.
In the following years, Kolomoisky and Bogolyubov switched their attention to metal trading, and in 1992 they launched Privatbank, today Ukraine’s largest commercial bank with over 20 percent of the nation’s banking assets alone.
Supports Jewish causes
Calm, non-emotional and camera shy Bogolyubov, the complete opposite of the flamboyant Kolomoisky, is still a 50 percent partner with him in many businesses.
In 1995 Bogolyubov started actively practicing Judaism and now he is one of the main financiers of the influential global Chabad Jewish religious group.
Speaking in November 2010 in Brooklyn, New York, at a Chabad conference, Bogolyubov said his charity donations had grown in tandem with the growth of his business. While in 1995 he donated $10,000, in 2007 his donations had risen to $10 million. “Business was above the roof, it was a golden rain,” he said speaking in English about that period.
The Menorah Center, the world’s largest Jewish community center, a seven-story complex of some 50,000 square meters, opened in Dnipro in October 2012. Bogolyubov and Kolomoisky were the main sponsors of the project.
Ihor Kolomoisky (R) participates in the opening ceremony of Menorah, the world’s largest Jewish community center in Dnipro (then Dnipropetrovsk) on Oct. 16, 2012. (UNIAN)
Corporate raiding
Sidelined from many lucrative privatization dealings, Kolomoisky’s Privat group allegedly built much of its wealth by acquiring companies through litigation and corporate raids. In Ukraine, a country with weak law enforcement and judicial systems, where underpaid and corrupt judges often issue rulings to the highest bidder, court rulings have readily been used to seize company shares and assets.
Korban, a business partner of Kolomoisky, is widely considered the group’s main specialist in corporate raiding. He argues, however, that there is nothing wrong with this.
“I didn’t offend a single honest or poor person,” Korban told the Kyiv Post last November. “These activities are called ‘mergers and acquisitions’ worldwide. There is no Criminal Code article for what I was doing, because many people do this around the world, for example George Soros.”
Korban is also known for his ruthless approach to business dealings and politics. In April he pleaded guilty to kidnapping Serhiy Rudyk, head of Ukraine’s land management agency, in 2014.
Privatization wars
In the early 2000s, Kolomoisky and Gennadiy Bogolyubov appeared to have cooperated with Victor Pinchuk, another native of Dnipro and son-in-law of then President Leonid Kuchma. Kolomoisky claims he and Bogolyubov were making deals with Pinchuk, who was using his government connections to acquire the most lucrative pieces of Ukraine’s industry.
The details of the murky privatizations of the early 2000s would have probably stayed secret if not for bitter arguments between participants years later, which led to several lawsuits being filed at the High Court of Justice in London.
In testimony given in September 2013, Kolomoisky claimed the Privat group had cooperated with Pinchuk in the privatization of several big plants.
According to Kolomoisky, Pinchuk was using his influence as the president’s son-in-law to buy assets at a lower price, while Kolomoisky with Bogolyubov had to pay bribes to Kuchma.
Kolomoisky mentioned a written agreement reached in January 2003 regarding the management of Ukrnafta. Kolomoisky claimed that he and Bogolyubov were obliged to make payments “of no less than $5 million per month until November 2004” into a fund intended to be used for Kuchma’s next presidential campaign.
The Constitutional Court allowed Kuchma to run for the presidency in the autumn of 2004 – a right that he didn’t use in the end. Kolomoisky said at the court that some $100 million accumulated in the fund had been used for Pinchuk’s personal needs instead.
‘Stolen from state’
Kolomoisky claimed to have been extorted by Pinchuk and Kuchma again when speaking at a parliament committee in March 2015. He called the privatization of iron ore producer Ukrrudprom, the Nikopol Ferroalloy Plant and steel producer Kryvorizhstal as “the most outrageous” cases of privatization, when some chosen oligarchs were able to buy the strategic businesses for next to nothing.
“Everybody plays soccer here but only Germany wins. Everybody takes part in privatization but only Akhmetov purchases,” Kolomoisky joked at the committee, referring to Ukraine’s richest oligarch.
In June 2005, the government cancelled the privatization of Kryvorizhstal, which had been sold in 2004 to Pinchuk and Akhmetov for $800 million. In October 2005 the Indian-owned Mittal Steel bought the steel mill in a repeat privatization for a record price of $4.81 billion.
Kolomoisky argued that other state companies bought by the oligarchs at lower prices should also be re-sold “through nationalization and expropriation.”
Ukrnafta
One of Kolomoisky’s key assets, a 40-plus percent stake in Ukrnafta, is currently at the center of a large-scale corporate conflict.
Viktoria Voytsitska, a lawmaker from the Samopomich Party, wrote in a Nov. 23, 2015 letter to the State Fiscal Service that Ukrnafta had received revenues worth Hr 20 billion from September 2014 through October 2015 and had enough cash to pay taxes. But Ukrnafta “deliberately” failed to pay taxes by hiding its cash and not showing it on its bank accounts, she added.
Last December the State Fiscal Service opened a tax evasion case against Ukrnafta. Ukrnafta’s tax debt amounted to Hr 12.2 billion (or $478 million) as of Sept. 30, according to investment bank Concorde Capital.
Kolomoisky has denied the accusations, blaming instead government officials for extorting his and other businesses in the country.
Moreover, Kolomoisky had blocked the payments of Ukrnafta’s dividends worth Hr 2.4 billion for 2011-2014 to state-owned Naftogaz, which holds 50 percent in Ukrnafta, before the government passed a law in March 2015 to prevent him from obstructing shareholder meetings. As a result, the dividends were paid later in 2015.
Timur Khromayev, head of the National Securities Commission, said in January that Ukrnafta’s management had also repeatedly failed to pay dividends to non-Privat minority shareholders since 2006.
But Kolomoisky argues that Ukrnafta can’t pay the tax debt and the dividends because it was crippled by Naftogaz, which he says illegally seized a big amount of gas from the company.
In early June, Kolomoisky filed a $4.67 billion lawsuit against the government, seeking compensation for the gas that was seized.
This amount exceeds Ukraine’s budget spending on security and defense in 2016, the third year of war in the country. Kolomoisky’s opponents say this is at odds with the tycoon’s claims to be a patriot.
Oleksiy Shalaisky, head of Nashi Groshi anti-corruption watchdog, said Kolomoisky was profiting for years thanks to his control over the majority state-owned Ukrnafta.
“For years it was the only company which could make all the purchases without tenders as they had a special law for that,” Shalaisky said. “As a partly state company it was also obliged to sell [hydrocarbons] at state-regulated prices but in fact they were selling it the way they wanted.”
PrivatBank dilemma
Kolomoisky also owns the country’s largest bank, a media empire and Ukraine’s near-monopoly passenger airliner. This leverage is enough to at least trigger a panic or even bring about the collapse of entire industries.
In June 2014, the National Bank of Ukraine started cleansing country’s banking system of insolvent banks, many of which were oligarchs’ “pocket banks,” used to plunder depositors, central bank refinancing and launder illicit proceeds.
Banks whose shareholders could not boost capital were shut down. But the biggest challenge to banking reform is PrivatBank, which needs to increase its capital by millions of dollars.
The situation at PrivatBank has led to months of arguments between its main shareholder Kolomoisky and Valeria Gontareva, the National Bank of Ukraine governor.
They couldn’t agree on how much the oligarch should invest in his bank to keep it afloat.
“The problem is that one day she (Gontareva) talks about 128 billion hryvnias ($5.7 billion) and then the next day she says it’s 15 billion ($678 million). And today she has her tongue stuck up her arse because she doesn’t know what to say next,” Kolomoisky said in an interview with Politico in December 2015.
Critics say Kolomoisky has used PrivatBank as leverage as part of a broader attempt to protect his business interests.
As of beginning of 2016, Privatbank accounted for 21 percent of the entire country’s banking system and 35 percent of Ukraine’s personal deposits, said Oleksandr Zholud, an analyst at the Center for Economic Strategy.
Oleksandr Savchenko, president of the International Institute of Business, said the entire banking system would collapse if Privatbank were shut down.
“The payments that had not come from PrivatBank would go to other banks, a series of bankruptcies would begin, and there would be panic,” he said.“Re-launching the system would take around one or two months; the loss to GDP would be around 2 to 3 percent.”
In early June, Gontareva said in an interview with Ukrainska Pravda that she had reached a deal with Kolomoisky on PrivatBank. “He has given personal guarantees on almost all of our refinancing,” she said. The restructuring plan requires the Privatbank to reduce a massive amount of related party loans and pledge assets belonging to Kolomoisky’s business group as collateral.
Media empire
Kolomoisky also owns one of the largest media groups in the country – 1+1 Media, whose main asset is the popular TV channel 1+1. Critics said the oligarch often uses his channel to defend his interests and provide positive coverage of political leaders in return for trade-offs or to attack his enemies.
An audio recording posted on a YouTube video in early July 2014 features a man with a voice resembling that of Kolomoisky allegedly giving instructions to Oleksandr Tkachenko, head of 1+1 media, to start a campaign against Radical Party leader Oleg Lyashko. In an interview with Novoye Vremya, Tkachenko claimed that Kolomoisky regularly meets the channel’s staff, but doesn’t directly influence the coverage.
Kolomoisky in his interview with lb.ua, gave a qualified denial to pressuring the channel. “In a primitive, vulgar sense, I definitely don’t,” he said.
Aviation monopoly
Another key asset is Kolomoisky’s control of the skies. Ukraine’s airline industry experienced a shock in 2013, when one of Ukraine’s two largest airlines, Aerosvit, went bankrupt. Aerosvit was co-owned by Kolomoisky.
Subsequently the market was monopolized by Aerosvit’s main competitor, Ukraine International Airlines, a company that Kolomoisky at the time took over.
People sit at Kyiv Boryspil airport on May 30, 2013 with a view of an airplane operated by Ihor Kolomoisky’s Ukrainian International Airlines. (UNIAN) (Courtesy )
People sit at Kyiv Boryspil airport on May 30, 2013 with a view of an airplane operated by Ihor Kolomoisky’s Ukrainian International Airlines. (UNIAN)
Andriy Guck, an aviation specialist and lawyer, said Kolomoisky’s aviation empire is believed to also include Dniproavia, Dnipro Airport and cargo handling services.
Kolomoisky’s proteges have also run Kyiv’s Boryspil Airport, giving rise to accusations of sweetheart deals for Ukraine International Airlines. “The industry is in one person’s hands now,” Guck said.
Big appetite
Even after acquiring large chunks of Ukraine’s economy, Kolomoisky still has an appetite for yet more acquisitions.
Parliament has approved a plan to privatize 450 state companies in 2016. Despite a failed auction in July at which no bids were submitted, the State Property Fund still hopes this year to auction off Odesa Portside Plant, the largest fertilizer manufacturer in Ukraine.
This is one of most lucrative subjects of privatization, and it may well be of interest to Kolomoisky, experts say. In 2009 he along with business associates won a privatization tender, offering $625 million for the plant, but the auction was cancelled by government officials, who sought a higher price.
Braginsky said the fairness of the Odesa Portside Plant’s future privatization would depend on whether the plant was sold to firms linked to Poroshenko’s ally Kononenko.
“(Kolomoisky) will not deny himself the pleasure of earning a few billions,” political analyst Viktor Nebozhenko said.
The next wave
Political analyst Vitaly Bala believes that Kolomoisky and Poroshenko would rather find peaceful and mutually beneficial co-existence. Evidence of an accord would include a situation where Kolomoisky keeps control of Ukrnafta, ownership of PrivatBank and secures an interest in Odesa Portside Plant.
Kolomoisky and Poroshenko “are survivors from the 1990s, where those who couldn’t come to an agreement did not stay in business. Those who found an agreement, stayed afloat,” Bala said. “Our so-called oligarchs kind of have some wars, but they don’t lead to any casualties.”
In 2016, Kolomoisky managed to secure his business interests and regain power using his political leverage. Unlike in 2014, however, the oligarch is now trying to keep a lower profile.
But being adventurous, he may soon get bored with staying in the shadows and try to openly challenge Poroshenko and his allies, Berezovets said.
“Kolomoisky catches the wave, he always uses opportunities – when his opponents allow it,” Berezovets said.
While Kolomoisky’s power peaked in 2014, “it doesn’t mean he won’t have new peaks in the future,” Berezovets added.
