KYIV BLOG: With political startups and comebacks, Ukraine’s oligarchs are on the move

KYIV BLOG: With political startups and comebacks, Ukraine’s oligarchs are on the move
By Sergei Kuznetsov November 30, 2015

Rinat Akhmetov, Ukraine’s richest businessman, is considering abandoning his support of the pro-Russian Opposition Bloc to launch a new political project. Meanwhile, fellow billionaire businessman Dmitry Firtash intends to return to Ukraine from Vienna in early December in a move that could signal the start of a new cycle of oligarch influence.

The Opposition Bloc was created by associates of former president Viktor Yanukovych after he fled into exile in early 2014 as his regime crumbled in the face of pro-European protests and his Party of Regions collapsedThis new political force made up of old faces secured almost 10% of the popular vote during snap parliamentary elections in 2014, becoming Ukraine’s fifth biggest party.

Akhmetov is one of the ‘shareholders’ of the Opposition Bloc, and as far as I know he is going to exit [from the party] and create his own political project,” Gennady Korban, a leader of the Ukrop opposition party and a close business associate of billionaire Ihor Kolomoisky, tells bne IntelliNews.

Akhmetov, who is said to have supported the Party of Regions in exchange for business favours from the previous government, became a sponsor of the Opposition Bloc, say Kyiv-based experts. The oligarch’s confidant, businessman Borys Kolesnikov, headed the party’s shadow government, while a co-owner of Akhmetov’s mining and metallurgical holding Metinvest, Vadim Novinskiy, became one of the lawmakers responsible for the Opposition Bloc’s parliamentary faction.

At the same time, the political force has another main ‘shareholder’, controversial gas oligarch Dmitry Firtash, who has two key figures in the party: Serhiy Lyovochkin, a businessman and  former chief of staff for Yanukovych, and Yuri Boyko, a controversial former energy minister. Both men are also responsible for the Opposition Bloc’s faction in the parliament.

Firtash makes a comeback

“There are rumours that these two oligarchic groups – controlled by Akhmetov and Firtash-Lyovochkin – will break apart within the next few months. It will be a political divorce,” Volodymyr Fesenko, head of the Kyiv-based think-tank Penta Political Centre, tells bne IntelliNews. The Opposition Bloc will be rebranded. And after that we will see which [of the oligarchs] takes what [part of the Opposition Bloc with them].”

Meanwhile, Firtash intends to return to Ukraine from Vienna, where he has spent the last year and a half pending unsuccessful efforts to extradite him to the US where he is wanted for allegedly bribing Indian officials to gain mining licences. Firtash denies the charges. Firtash's spokesman Eugene Smaglyuk tells bne IntelliNews that the oligarch will take part in an assembly of Ukraine's Federation of Employers, headed by the businessman, on December 2.

But the oligarch's legal troubles are not confined to the US. In May, Ukrainian Interior Minister Arsen Avakov said his authority had sent a summons to the oligarch for questioning over suspected embezzlement in connection with a probe into alleged corruption at Ostchem Group, controlled by the businessman, and “the theft of state property of Ukraine”. On November 28, Avakov reaffirmed that Firtash will be detained by Ukrainian police if he returned to the country, under an appeal by the US Department of Justice.

However, many experts and politicians believe Firtash is confident that it is safe for him to return to Kyiv. “On the eve of Firtash's arrival there appears information that there will be no questioning of Firtash,” Serhiy Leshchenko, an MP from the eponymous parliamentary bloc of President Petro Poroshenko, said on the TV talk show "Shuster.Live" on November 27. “We are seeing a backstage agreement between a team of the current prime minister and Firtash. Firtash also has a special relationship with the president, which was secured during their meeting in Vienna.”

Protection of business interests

Korban says Akhmetov is ready to launch a new political project that will also be “a business project for business people”, while “another part of the Opposition Bloc, headed by Lyovochkin and others, will start its own project – something like [a party] for peace and order [in Ukraine]”.

Akhmetov, like other oligarchs in Ukraine, relies on political ties to protect his assets from potential attacks by business rivals or government officials acting on behalf of rivals. It is also traditional for oligarchs to use political leverage to obtain preferential help for their companies.

Andrei Marusov, chairman of Transparency International in Ukraine, told bne IntelliNews in early November that all major Ukrainian businessmen who have made fortunes since the collapse of the Soviet Union “arose, existed and can continue to exist only with direct or indirect support from the government or politicians”.

“That’s why they [oligarchs] buy political parties and government officials in the areas that regulate their businesses,” he explains, pointing in particular to Akhmetov, who has significant assets in the country’s energy market, and who had significant influence over energy officials while Yanukovych was president.

Recently, Akhmetov has been forced to defend Naftogazvydobuvannya, Ukraine’s largest private gas producer that he owns. In recent months, the Prosecutor General’s Office has applied to the courts several times to seize the company’s property and ban the sale of its products.

Local media believe Poroshenko is trying to pressure Akhmetov in order to re-assert control over the company – the president had a significant stake in the gas company a decade ago – and the fact that current Prosecutor General Viktor Shokin is loyal to the president is fuelling these suspicions. “Some time ago Poroshenko had a conversation with Akhmetov. He [Poroshenko] demanded the return of his stake in Naftogazvydobuvannya,” Kyiv-based news outlet Insider wrote in June, quoting an unnamed source.

Akhmetov’s business structures were also locked in court disputes with the Prosecutor General’s Office in 2015, when the latter demanded that the privatisation of a 25% stake in Dniproenergo, a regional power company controlled by the oligarch’s DTEK holding, be cancelled. 

Threat for oligarchs

However, another danger is appearing in Ukraine that could threaten all of the country's oligarchs. “The gap between this group of rich people and the population is becoming a threat,” says Korban. “With the aim of avoiding a ‘proletarian revolution’, they should give up part of their assets and the state should channel a part of the income from these assets to improving the social standards of the people … Otherwise, the oligarchs will lose everything. And they are aware of this threat.”

Korban reveals that he has already discussed the idea of selling strategic assets in energy, mining, telecommunications and chemicals with both Akhmetov and Kolomoisky, and that his Ukrop party is campaigning on a offer to the oligarchs to sell their stakes in such companies on the international market within a year.

“If they fail to do this, the state will receive the preferential right to obtain these assets. After that the government should consider IPOs for these companies, and then transfer management of the companies to one of the largest international management firms with an impeccable reputation,” Korban says.

“Kolomoisky said that he will agree if the rules are the same for everybody,” Ukrop’s leader claims. “Akhmetov said the same.”

Both billionaires have avoided commenting on this initiative publicly, but some observers believe the time of Ukraine's oligarchs is coming to an end.