Crisis managers hope to turn Ukraine around

By bne IntelliNews September 5, 2014

Graham Stack in Kyiv -


Ukrainian President Petro Poroshenko and the top two men in his administration are worth hundreds of millions of dollars, in a country where many struggle to get by on little over a hundred dollars a month. Poroshenko came to power after a revolution driven by fury at the fusion of political power and personal wealth under ousted president Viktor Yanukovych. So has anything changed?

Yes, say experts, because Poroshenko and his colleagues are not of the same ilk as the businessmen who came to power under Yanukovych. “Poroshenko, Lozhkin and Kosyuk are all self-made businessmen who built up successful empires focused on Ukrainian consumers,” says political commentator Volodymyr Fesenko, head of the Penta Center for Applied Political Research. This, he say, contrasts with many politician-oligarchs of the Yankovych era who simply grabbed hold of Soviet-era facilities and export commodities to the world market, and then bought into political power. “Lozhkin and Kosyuk, despite being magnates, are not public figures, and Poroshenko chose them because he trusts them and wants managers like himself – crisis managers,” says Fesenko. 

Over the longer term their role might also be to introduce modern management principles to Ukraine's archaic state bureaucracy, according to political scientist Oleksiy Haran.

President Poroshenko is famous in Ukraine for his confectionary business – which bears an abbreviation of his name – Roshen. It holds an estimated 22% of the domestic confectionary market, placing it among the world's top 20 producers, according to the Candy Industry Top 100 ranking. The Roshen brand is ranked among Ukraine’s top five brands, according to Research and Brand pollsters. A Kiev cake from Roshen features at almost any festive gathering in Ukraine, so the name Poroshenko triggers mouthwateringly positive associations. 

Roshen is so ubiquitous in Ukraine, it is hard to imagine that in the 1990s when Poroshenko built his empire domestic production had collapsed: producers could no longer source cacao internationally, domestic sugar refineries had no cash for fuel, and brightly packaged imports flooded the market. Poroshenko turned the situation around, piecing together new supply chains and barter deals on the production side, while creating a marketing model able to compete with imported candy. 

Self-made pragmatists

Like his boss Poroshenko, new head of the presidential administration Boris Lozhkin “is as self-made as one can get in Ukraine, having spent 22 years of Ukrainian independence piecing together his empire,” according to Concorde Capital's Zenon Zawada. Lozhkin's media empire was from the start a relentlessly commercial project, rather than an oligarch's play thing. Starting with a weekly TV guide, it later expanded into licences for Russian-language mass print publications in Ukraine that were mostly Soviet-era brands – such as the tabloid Konsomolskaya Pravda, Ukraine's most read paper, with a print run of nearly 230,000. Lozhkin always put profit before politics: Konomolskaya Pravda, for instance, was a pillar of support for  Yanukovych, while Forbes Ukraine, which Lozhkin launched in 2011, published searing investigations into the corruption of his regime.

New first deputy head of the presidential administration, Yury Kosyuk, likewise built up his domestic grain farming and poultry breeding business into what is now one of Europe's largest chicken producers, MHP. “I learnt the hard way that if you want something done well, you have to do it yourself,” he told bne in an interview in 2010, explaining his company's vertical integration from corn field to shop shelf. Like Poroshenko and Lozhkin, Kosyuk not only solved the production bottlenecks for which Ukrainian agriculture is notorious, but also built a nationwide brand for his chicken, Nasha Ryaba, ranked alongside Roshen in Ukraine's top 5 brands. Kosyuk's new role in government  is to organise logistics for the army in east Ukraine. 

Their business skills have pushed the three men to the top of Ukraine's gilded elite: According to Forbes Ukraine, Kosyuk and Poroshenko are tied on sixth place, each worth $1.3bn. Lozhkin is omitted from the Forbes Ukraine list: he sold his United Media Holding concern to controversial Yanukvych-linked gas oligarch Serhiy Kurchenko for an undisclosed sum, estimated to be as much as $500m, in a deal that closed in November 2013.

Despite coming to power on the back of a revolution triggered by demands for closer ties with Western Europe, all three have done good business with Russia over the years. “This is in fact not surprising, because they are all oriented towards consumer markets, and Russia is a huge market,” says Fesenko.

Poroshenko's Roshen concern has a plant in Lipetsk, Russia, while Kosyuk's MHP spent $50m buying land in Russia in 2013. Lozhkin was even decorated in 2013 by the chairperson of Russia's Federation Council, Valentina Matvienko, for his contribution to Russia-Ukraine business ties. According to Fesenko, their business history means the three men are “pragmatists” on Russia. “The presidential administration behind the scenes is dovish compared to the security council, government and parliament,” he says. 

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