Graham Stack in Donetsk -
Ukrainian President Petro Poroshenko looks ready to crack down on Ukraine's most powerful oligarch: Ihor Kolomoisky, owner of the crisis-stricken country's largest bank, governor of Dnipropetrovsk - one of its wealthiest regions - a fuel and aviation magnate, media tycoon, and sponsor of batallions of irregular troops fighting Kremlin-backed rebels in the East.
What started out on March 19 as a night-time altercation between Kolomoisky and a journalist outside the offices of a state-owned energy company had escalated by March 23 into tit-for-tat accusations of murder and organised crime by Kolomoisky's associates and Ukraine's security service chief.
The swelling conflict between Kolomoisky and Poroshenko marks the biggest political crisis of the latter's presidency to date, 10 months after his election on May 25, 2014. The crisis over Kolomoisky's role at Ukrnafta, Ukraine's largest oil company, is only the most spectacular in a number of pushbacks by entrenched bureacratic interests against government reform attempts, which are also triggering attacks on Prime Minister Arseny Yatsenyuk.
While the crisis with Russian-backed separatists in East Ukraine has helped maintain political unity in Kyiv, this now seems to be crumbling quickly following a ceasefire, as Poroshenko and Yatsenyuk move ahead with reform plans aimed at vested interests.
On March 18, Ukraine's energy ministry fired the Kolomoisky-backed head of the state oil pipeline company Ukrtransnafta. Then on March 20, parliament passed a law that potentially removes Kolomoisky's backdoor control of one of his key assets for over a decade, state-owned Ukrnafta.
The moves prompted Kolomoisky to defend the former management's position in Ukrtransnafta by reportedly sending in armed fighters from the feared 'Dnipro batallion' of irregular volunteers, twhich Kolomoisky has funded to repulse Russian-backed separatists in East Ukraine.
On March 21, a group of masked Dnipro irregulars with weapons drew up in an armoured personnel carrier to Ukrnafta's headquarters in the heart of Kyiv. While workmen welded steel bars into place for extra fortification, they took up positon to defend the building.
The deployment of Dnipro batallion members in the capital to protect Kolomoisky's business interests may have crossed a red line in Poroshenko's eyes.
In apparent response to the events in Kyiv on March 19-22, the president's close ally Valentin Nalivaichenko, the head of Ukraine's SBU security service, launched a counter-attack on both the volunteer battalion squad and Kolomoisky's Dnipropetrovsk administration. He accused them being an "organised crime group" involved in extortion, smuggling and murder in the rebel-held areas of East Ukraine.
Nalivaichenko claimed at an emergency press conference in Kyiv on March 23 that this group had murdered one of his own officers on March 21 at a border crossing in Donetsk region town of Volnovakha. The SBU head also accused Kolomoisky's Dnipropetrovsk administration of protecting and financing the group, and of trying to stall an investigation into the murder.
"A criminal gang is operating across the Donetsk and Dnipropetrovsk regions, comprising gangsters who use weapons against law enforcement officers and kidnap people," Nalyvaichenko told media. There was cause to suspect officials of the Dnipropetrovsk regional administration of financing them, he added.
“We have grounds to suspect some officials of regional state administrations of committing abductions, torture, smuggling of highly liquid goods, especially alcohol and cigarettes," he added. "Officials in the Dnipropetrovsk regional administration are currently threatening our investigators to stop the investigation and to prevent the arrest of the killers," he alleged, as quoted by Interfax.
Nalyvaichenko indicated that the activities were being run from within Ukraine's armed forces, including by the irregular battalions. He referred to “corruption, looting and kidnappings. highly dangerous crimes committed by corrupt servicemen, officers of the Armed Forces, of the Ukraine Security Service, the Interior Ministry and a variety of battalions operating under different names."
The SBU had discovered the illegal activities after widespread reports of extortion of bribes by Ukrainian forces for moving cargo into rebel-held territories and for allowing individuals to move to and from Ukrainian-held and rebel-held territories.
Backing up Nalyvaichenko's sudden pressure on the irregular battalions that have been at the forefront of Ukraine's war effort in the east - and have been the source of much national pride - Poroshenko warned in a speech on March 23 that “none of our governors will have puppet armed forces".
Dnipropetrovksk officials reacted furiously to the security chief's broadside, firing back counter-accusations, demanding more power for the regions, and threatening to reveal the "truth"about the war in the East.
Hennady Korban, deputy governor of Dnipropetrovsk, and Kolomoisky's longstanding business partner, claimed that it was in fact Nalyvaichenko's SBU that had been running the criminal schemes.
"We are stating today with absolute certainty that we know that it was SBU people who organized the schemes of moving goods into the zone of military operations, and who are organising cargo flows and smuggling of scrap metal, vodka and cigarettes," Korban said at a rival press conference held in Dnipropetrovsk.
Korban said it was now time that Dnipropetrovsk gained more autonomy. "Kyiv pledged decentralisation and economic independence for us. There have been many pledges and nothing has been done,” he said.
Heightening the crisis, Ukraine's National Guard, comprising interior troops, tweeted - apparently in response to Korban's words - that its units in Dnipropetrovsk had been placed on high alert, with reinforcements called in from neighbouring regions. It later retracted the statement.
Korban at the press conference also threatened to tell what he said was "the truth” about the conduct of the war in East Ukraine. “We want to tell Kyiv: stop lying to your people. Stop these lies about decentralisation, about successes scored in the counter-terrorist operation [military operation against Russian-backed rebels] and about the casualties at the front," Korban said at the press conference, as quoted by Interfax.
"We have exact figures which we have been gathering all this time. Stop lying about the situation in the Ukrainian armed forces and about its material state," he added.
As a result of Nalyvaichenko's allegations, four Kolomoisky-linked MPs announced they would quit the parliamentary group of the Petro Poroshenko Bloc to set up a new parliamentary group, because of disagreement with Poroshenko's position.
The president's bloc later said it would back removing the parliamentary immunity of the four MPs if the prosecutor general found there were grounds to prosecute them.
Yatsenyuk also in the firing line
In another sign of political crisis, Prime Minister Arseny Yatsenyuk faced down mounting opposition among top officials to government policy, in particular the recent attempts to root out corruption.
With rising public concern at the continued rot, on March 23 Ihor Bilous, head of the state fiscal service, resigned during a cabinet meeting. Yatsenyuk had backed Bilous' appointment as a reformer to the post in February 2014. Yatsenyuk then fired Bilous' deputy heads, Volodymyr Khomenko, in charge of the tax service, and Anatoly Makarenko, in charge of customs, while promising a “purge” in every department. Bilous' successor is now to be hired via a time-consuming competitive recruitment process.
One other top official, who had been suspended by Yatsensyuk during an anti-graft investigation, hit back at the prime minister with damaging allegations. Mykola Gordienko, whom Yatsenyuk suspended as head of the Ukrainian State Financial Inspectorate on March 4, publicly accused Yatsenyuk on TV and in parliament of running corruption schemes totalling billions of hryvnia. Gordienko claimed that Yatsenyuk had fired him after he exposed the schemes.
In another major dispute, the management of South-West Railways is resisting its firing by the acting head of Ukrainian Railways, reform-minded former investment banker Maksim Blank. South-West Railways covers central Ukraine including Kyiv.
"Taking into account the fact that Ukrainian Railway's top managers issued illegal orders, from now on the employees of South-West Railways will not execute the orders and resolutions of Ukrainian Railways," the company said in a statement. The former head of Ukrainian railways was suspended in December after a corruption probe, and a competitive recruitment process is currently underway to find a new head.
Adding to Yatsenyuk's woes were reports on March 23 of foreign criminal investigations against two key political allies. Mykola Martynenko, deputy head of the parliamentary group of Yatsenyuk's party People's Front, and head of the parliamentary fuel and energy committee, was reported in Swiss media to be under investigation in Switzerland for taking bribes of CHF30mn in 2013 in connection with the nuclear power sector. Martynenko denied there was an investigation against him and said he was a victim of Russian-initiated conspiracy.
Interpol posted another Yatsenyuk ally on its international wanted list on March 23. Mykola Knyazhitsky, also a member of Yatsenyuk's People's Front party and head of the parliamentary committee for culture and spiritual affairs, is wanted by Camobodia on rape charges, according to Interpol. Knyazhitsky also blamed the move on a Russian plot against him.
Given the growing levels of political crisis in Kyiv, a fresh opinion poll published on March 23 suggests that public dissatisfaction with the president and government is surging, but that they currently have no obvious contenders.
The Research & Branding Group poll shows that 58% disapprove of Poroshenko's performance, while 33% approve. 68% are unhappy with the performance of Yatsenyuk as prime minister while 24% approve.
Were elections to be held now, Poroshenko would win with 19.2% of the vote, according to the poll, His nearest contenders are former prime minister Yulia Tymoshenko at 5.3% and populist head of the Radical Party Oleh Liashko, taking 5%. Yatsenyuk would garner only 1.7% of the vote, according to the Research & Branding poll.
The latest ratings are a blow to Poroshenko, who was elected by 55% of voters in a landslide victory on May 25, 2014.
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