International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Russian opposition activist Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Russian opposition activist Navalny calls for supporters to take to the streets this weekend
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
OUTLOOK 2021 Slovakia
FDI inflows to CEE down 58% in 1H20 but rebound expected
Slovakia to invest €1.2bn in digitisation
Corona-induced slump in global clothing sector dragged down Albania’s 2020 exports
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Storming parliaments: New Europe's greatest hits
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Bulgaria’s government considers gradual easing of COVID-related restrictions
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Socialist lawmakers in Moldova scrap settlement on $1bn bank frauds
Montenegrins say state administration is most corrupt institution
75% of Montenegrins want EU membership
Montenegro’s new ruling coalition carves up top state jobs
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
Romanian construction companies' activity slows in November after intense 2020
OUTLOOK 2021 Serbia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Turkcell denies any affiliation with $1.6bn loan in default extended by Ziraat Bank to Virgin Islands company
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Download the pdf version
Ukrainian President Volodymyr Zelenskiy has been the great hope for real change in Ukraine after three decades of stagnation and deep rooted corruption. But hopes that Ukraine was going to “do a Poland” rapidly faded after oligarch Ihor Kolomoisky, who sponsored Zelenskiy's election campaign, returned from self-imposed exile in Israel and launched what the National Bank of Ukraine (NBU) branded a “terror” campaign on its staff that included arson and personal violence against former NBU governor Valeriya Gontareva, among other things.
The former banker has launched a blitzkrieg of legal suits against the NBU and now state-owned PrivatBank, which was his until the NBU found a $5.5bn hole in its balance sheet and nationalised it in 2016, in his efforts to try to regain control of the bank.
Gontareva threatened to bring criminal charges against Kolomoisky and forced him to sign a letter saying that he would return some of the depositors’ money looted from PrivatBank, but Kolomoisky successfully got a Ukrainian court to invalidate that promise. No investigation or charges have been brought against him in Ukraine, although the US recently revealed a Grand Jury investigation has been launched into him for money laundering on a massive scale in Cleveland. Likewise, the new management at PrivatBank has successfully had $2bn of his assets frozen in a London court ruling and has just launched another $5.5bn claim in Cyprus.
Kolomoisky also holds assets in media, banking, power, metallurgy and owns the country’s flagship carrier Ukraine International Air (UIA), most of which benefit from sweetheart deals with the state that boost their profitability.
Zelenskiy has just completed his first year in office, but throughout has held less than a handful of press conferences in that time and has said little about his relations with his backer and friend. But has that now changed?
Zelenskiy was backed into a corner over the International Monetary Fund (IMF) insistence that the Verkhovna Rada pass the so-called anti-Kolomoisky banking law as a pre-condition to signing off on a new $5bn standby agreement (SBA). The law bans the government from returning a bank to its former owners if it has been nationalised.
Faced with an almost certain default and major economic meltdown if a new IMF deal had not been secured by the end of May, Zelenskiy was faced with a stark choice between his friend and the country. And he chose his country: the law was passed in its first reading at a dramatic midnight session on March 30.
However, Kolomoisky did not take the challenge lying down. Zelenskiy's parliamentary fraction Servant of the People (SOTP) has a majority in the Rada of 246 seats out of the total of 450. But after more than dozen of SOTP deputies rebelled the president was forced to enter into a temporary coalition with his nemesis and rival in last year’s election, former president Petro Poroshenko, to get the bill through.
And the fight didn't end there. As bne IntelliNews reported in detail, deputies loyal to Kolomoisky then introduced 16,000 amendments that would have tied up the second reading of the draft for at least five months in a bid to kill the bill. A new law was rushed through that allowed deputies to consider amendments in bulk to get past that obstacle and the bill was finally passed last month. The first tranche of $1.9bn of IMF money is due next week. But again, on the day of the vote for the second reading Zelenskiy went down to the parliament building to lobby lawmakers in person to make sure the vote was not derailed again.
The passage of the law is a serious blow to Kolomoisky. Sources close to the case have told bne IntelliNews that Kolomoisky is fighting so hard to regain PrivatBank now that it is not simply a question of regaining control of the biggest and most profitable bank in the country; he wants to kill the lawsuits, as he now faces the real prospect of losing all his money and even being jailed for crimes he committed during the asset-stripping of PrivatBank.
Now in the last few days it seems that Zelenskiy has acted again for the sake of the country and against Kolomoisky’s interests.
In a surprise raid, dozens of armed police officers appeared at the offices of Centrenergo, one of Ukraine’s best power companies, to ensure the new temporary director of the utility could enter the building and take up his post.
The government, via the State Property Committee, owns 78% of the company, which is one of the most attractive assets on this autumn's privatisation list, and had previously tried to change the manager in February, but the candidate was simply locked out of the building and unable to take over. One theory as to why Zelenskiy shook up the government with a major reshuffle on March 3 is the attempt to change management at Centrenergo was instigated by technocrat and reformist Prime Minister Oleksiy Honcharuk, who was then ousted at Kolomoisky's instigation in revenge.
"Today we returned Centrenergo to state control despite all the resistance: judicial trolling, repeated mining of the State Property Fund's building, pressure on the supervisory board," Head of the State Property Fund (SPF) of Ukraine Dmytro Sennychenko wrote on his Facebook page. The Fund has previously complained of bomb threats to its offices that were intended to stop it meddling in the company.
In a military strike-like corporate actions day the State Property Fund rushed through all the legal documents to get their man into his post.
"We conducted a one-day quick-fix operation: the court's decision, convening the supervisory board, amendments to the register and the introduction of the new head of Centrenergo. All this today, literally in 4-5 hours," Sennychenko said.
The task now will be "to find out everyone who has switched to the dark side of the force," Sennychenko said, since the Fund, which controls the majority stake in the company, today does not have information about the state of affairs at the enterprise, and the previous management of Centrenergo hid the audit data.
While Kolomoisky does not formally own Centrenergo, the former director was reportedly close to the oligarch and the state lost an estimated UAH100bn ($3.4bn) in revenue after Centrenergo underpriced power sales to metallurgical companies controlled by Kolomoisky over the last five years, in a classic rent-seeking scheme favoured by oligarchs in Ukraine.
"We are doing all this so that Centrenergo turns from a black hole of the Ukrainian budget, where about UAH100bn has disappeared since 2004, to the door to economic development and investment. From transparency and order at the enterprise to successful and reasonable privatisation, the road is direct and short. And the first step has already been taken," Sennychenko wrote.
Again Zelenskiy has found himself in between a rock and hard place. Even with the new IMF SBA, plus the access the deal gives Ukraine to other IFI loans, the country still needs to raise a total of some $17bn this year to cover its debt obligations. Thanks to the popularity of Ukraine’s domestic debt market among foreign investors the Ministry of Finance should be able to manage, but as bne IntelliNews reported, inflows into the bond market have slowed in the last month. At the same time, Ukraine received $15bn as remittances from workers overseas in 2019, but that sum is anticipated to fall to $10bn this year.
The bottom line is money will be tight this year and Zelenskiy’s administration is targeting major privatisations as a way of raising revenue and reforming companies long seen as beholden to vested interests that drain on the state budget. The sale of Centrenergo is amongst the most attractive of all the state-owned companies the state has to sell.
But despite these two examples, Kolomoisky has his tentacles everywhere. Former Economics Minister Aivaras Abromavicius told bne IntelliNews that when he was reforming the state auctions for oil supplies one of the issues was Kolomoisky had captured an intermediary company in the process that was effectively getting a 15% discount on all fuel that it then sold on to the state companies, pocketing the difference. It was a scam that was generating hundreds of millions of dollars a year.
UIA has also been lobbying the state for some $200mn in compensation after the government banned overflights of Russian airspace. The company complained that it had to fly around Russia to get to Asian destinations, adding hours to the flight times, whereas the company’s Asian competitors had no such restriction and were undercutting UIA on ticket prices as a result.
And most famously, Kolomoisky has interests in Odessa Port Plant (OPP), a major and valuable chemical plant on the country’s Black Sea coast. The government has already tried to privatise this plant several times, dropping the price repeatedly to entice buyers.
Several oligarchs are interested in acquiring the asset for themselves. Kolomoisky is one of them and has laden the company with debt. The plant is a now a legal time bomb, as any new owner would be immediately hit with bankruptcy writs and unlikely to be able to hold on to its ownership given the venal state of Ukraine’s legal system.
The shell game
Zelenskiy's stand against some of Kolomoisky interests doesn't not mark the start of an anti-oligarch campaign in the fashion that defined Russian President Vladimir Putin’s first year in office, when he made it clear that any oligarch that didn't toe the Kremlin line would end up in jail.
Zelenskiy's stands seem more like gambits to raise money in specific cases, but Kolomoisky is still not under investigation and he continues to interfere in politics with impunity.
Just this week Kolomoisky, in a statement addressed to Prosecutor General Iryna Venediktova, asked that the new General Prosecutor start a pre-trial criminal investigation targeting Poroshenko, Gontareva and her deputy Kateryna Rozhkova. He is pressing charges of misappropriation of the assets, money laundering, illegal collection and use of confidential banking information, and abuse of power, based on revelations in the “Derkach tapes.”
There have several of these leaks recently. Former PM Honcharuk was also caught up in a scandal after a tape caught him deriding Zelenskiy's understanding of economics during an official meeting at the NBU on macro policy.
For his part, Zelenskiy seems to be distancing himself from Kolomoisky but at the same time wooing the other oligarchs to act as a counterbalance to Kolomoisky’s influence. Men associated with Rinat Akhmetov, Ukraine’s richest man, have been promoted to government posts recently.
“I suspect that Zelenskiy and his crew have been bought. I don't know by whom, but his crew is too poor, and the rich in Ukraine are too rich. I think the government change on March 4 and the sacking of [the] Prosecutor General on March 5 were acts of corruption,” says one well-informed Ukraine-watcher.
No one is actually sure what is going on or what Zelenskiy's plans are. But Zelenskiy has continued to fire liberal reformers in the government associated with the independent law enforcement agencies, some of them set up at the IMF’s insistence.
Zelenskiy sacked Ruslan Riaboshapka on March 5, who was dubbed “Ukraine’s first honest General Prosecutor”, and replaced him with Venediktova to the displeasure of Ukraine’s donors. This week he also sacked the widely respected head of the Anti-Corruption Action Center’s executive board Vitaly Shabunin from his position on National Council for Anti-Corruption Policy, adding Venediktova and scandal-ridden Interior Minister Arsen Avakov.
There are not pretty appointments but they are loyalists. It looks very much like Zelenskiy is digging in for a big and long fight, as he has found himself in the middle of a nest of oligarchic vipers that would have no compunction about biting him if he gets in their way.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: