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Thirty Years After Independence From Moscow, Ukraine Struggles To Throw Off Oligarch Yoke


Ukrainians demonstrate in front of the Communist Party's Central Committee headquarters in Kyiv on August 25, 1991.

When Ukraine’s Constitutional Court dismantled much of the nation’s anti-corruption legislation in October 2020, dealing a blow to Kyiv’s reform agenda and its reputation abroad, many observers discerned what they believe was the influence of powerful local magnates.

By declaring it unconstitutional to force political candidates and officials to declare their assets and to penalize them for lying about their wealth, the nation’s top court blew the door wide open for wealthy businesspeople to buy the loyalty of lawmakers, cabinet members, and judges, critics of the ruling said.

It represented just the latest setback for reformers battling vested interests in an attempt to build a society based more firmly on the rule of law and put Ukraine on a clearer path toward European integration.

Ukraine’s parliament adopted an independence declaration on August 24, 1991, three days after the demise of an attempted coup in Moscow by hard-liners bent on preventing the Soviet Union’s collapse. Ukrainians overwhelmingly approved independence in a December 1 referendum, and the U.S.S.R. ceased to exist later that month.

'Stranglehold'

Thirty years later, Kyiv is fighting a war against Russia-backed separatists in eastern Ukraine and struggling to stave off Moscow’s efforts to maintain influence. At the same time, civil society activists, representatives of foreign business, Western officials, and even President Volodymyr Zelenskiy say Ukraine is still in the debilitating grip of homegrown tycoons who are undermining the country’s development.

Since the late 1990s, critics say, tycoons known as “oligarchs” have dominated Ukraine’s political and economic landscape, using the money earned from former Soviet assets to back candidates, influence corruptible judges, and support media outlets that advance their agendas.

The tycoons “still have a stranglehold on the country. Their power over the judiciary and parliament is just far too great,” said Morgan Williams, the president of the U.S.-Ukraine Business Council, a Washington-based association that represents the interests of foreign businesses operating in the country. Williams refers to the tycoons as “monopolists” on account of their industry dominance.

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In an investigative report published in January, the Kyiv-based media outlet Bihus.info analyzed how lawmakers in the Verkhova Rada voted on bills affecting Rinat Akhmetov, Ukraine’s richest person according to Forbes magazine, and Ihor Kolomoyskiy, the fourth-richest. Based on that information, it alleged that each of them “controls” dozens of members of the single-chamber parliament.

Akhmetov and Kolomoyskiy are major players in the nation’s metals, mining, and energy industries and their profits hinge in part on government-imposed taxes and tariffs.

The tycoons denied the report. In a statement to the media in January, Akhmetov’s firm said “we firmly deny the unsubstantiated allegations of ‘control’ over any members of parliament.” Kolomoyskiy told RFE/RL’s Ukrainian Service earlier this year that he communicates with deputies but does not influence anyone, and said his business “does not depend” on any laws.

Former President Petro Poroshenko, the seventh-richest person in Ukraine, heads the third-largest party in parliament, and Russian-leaning lawmaker Viktor Medvedchuk, who is ranked 12th by Forbes, heads the second-largest.

Critics like Williams contend that the tycoons’ dominance over key industries and officials has hampered political reform, including what they believe are crucial changes to the judiciary and law enforcement, and has stifled foreign investment and competition.

Ukraine has underperformed average global economic growth since achieving independence and is among Europe’s poorest countries, despite possessing significant natural resources, including natural gas and iron ore, rich agricultural land, and a highly educated population.

Since independence, Ukrainians have taken to the streets twice -- in the 2004 Orange Revolution and in the Euromaidan protests of 2013-14 -- to protest against official corruption and seek to put their country on a path toward European integration.

Early Euromaidan protests in downtown Kyiv in November 2013
Early Euromaidan protests in downtown Kyiv in November 2013

That path -- which advocates say promises to bring benefits and lift the country out of poverty in exchange for tough reforms -- has at times been opposed by the nation’s elite, observers say.

“Many of the oligarchs are very happy with the status quo and wouldn’t want to see changes that may require them to adapt. But it is not good for the economy and not good for the people of Ukraine,” Andy Hunder, the president of the American Chamber of Commerce in Kyiv, told RFE/RL.

President Volodymyr Zelenskiy, a former comic and TV star who swept into office in 2019 on an antiestablishment platform, has promised to take on the magnates, but more than two years into a five-year term, some observers question his resolve and his policies.

“Are you ready to work legally and transparently?” Zelenskiy asked of the tycoons on March 13 of this year. “Or do you want to continue to create monopolies, control the media, influence deputies and other civil servants? The first is welcome. The second ends.”

Three months later, Zelenskiy submitted a bill into parliament that would ban those deemed to be oligarchs from financing political parties or buying assets sold by the state.

According to the draft law, a person is deemed to be an oligarch if he or she meets three out of four criteria, including total wealth, industry monopolization, media assets, and political participation.

Zelenskiy has already taken action against some of the nation’s richest individuals. In February, he imposed sanctions on Medvedchuk, accusing him of supporting Russia-backed separatists in eastern Ukraine and threatening the country’s territorial integrity. As part of the punitive measures, the state froze assets believed to be ultimately owned by Medvedchuk, including three television stations.

The U.S. Embassy in Kyiv said at the time that it supported Ukraine’s “efforts to protect its sovereignty and territorial integrity through sanctions,” but the punitive measures also caused concern among some in the West. Medvedchuk denied the accusations and called the sanctions "illegitimate" and "illegal."

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In a May post, Zelenskiy said the moves again Medvedchuk were just the start of his “deoligarchization” program. In June, he imposed sanctions on Dmytro Firtash, who made a fortune in the murky natural-gas trade between Russia and Ukraine in the 1990s and 2000s and lives in Austria, where he is fighting extradition to the United States on charges of participating in a bribery conspiracy.

Control Over The Media

However, some fear the anti-oligarch law could be used as a tool to go after political opponents. The stations allegedly owned by Medvedchuk regularly slammed Zelenskiy and were believed to have impacted the president’s ratings. Meanwhile, Zelenskiy’s government has been investigating Poroshenko, a billionaire who is currently seen as Zelenskiy’s biggest rival.

Ukraine observers say Zelenskiy may struggle like some of his predecessors to rein in the tycoons -- even if his intent is genuine -- due to the tycoons’ vast control over the nation’s media.

Akhmetov, Zelenskiy, and Poroshenko, as well as Viktor Pinchuk, the nation’s second-richest person, all own significant media assets. Other tycoons also own media platforms.

Hunder said that some reform-minded officials have been driven from office following attacks by media outlets controlled by tycoons. He said that most media assets are believed to be loss-making, raising suspicions that they are more about winning the hearts and minds of the electorate rather than turning a profit.

Rinat Akhmetov is Ukraine’s richest person, according to Forbes magazine.
Rinat Akhmetov is Ukraine’s richest person, according to Forbes magazine.

Pinchuk’s representatives told RFE/RL his StarLightMedia “is a business focused on leadership and operating profit” and claimed it is the only media group in Ukraine earning money.

In a statement sent to RFE/RL, Poroshenko’s office said that media assets he has stakes in are focused “not on the interests of the owner, but on the interests of Ukrainian society and the independent Ukrainian state.”

Roman Waschuk, the Canadian ambassador to Ukraine from 2014-2019, told RFE/RL that it is “really hard” for a candidate to get elected unless the person has major commercial media behind them.

“That means that whoever gets into politics has to make deals with these guys,” said Waschuk, who is retired from government but continues to follow developments in Ukraine.

Serhiy Verlanov, the former head of Ukraine’s state tax service who was fired in April 2020, complained of “relentless attacks” from tycoon-controlled media.

The tycoons’ “near-complete control of the Ukrainian media has made it possible to marginalize and discredit democratic forces,” he wrote in a November 2020 post on the website of the Atlantic Council, a Washington-based think tank. “Their pervasive influence throughout the civil service, law enforcement, business, and especially the judiciary has allowed them to sabotage, block, stifle, and ultimately reverse reform after reform.”

“As long as we continue to play by the rules of the oligarchic system, Ukraine will remain doomed to go round in circles,” Verlanov wrote.

Kolomoyskiy’s media assets are widely believed to have helped propel Zelenskiy into the presidency. The government’s treatment of the tycoon -- who is being investigated by the United States on suspicion of laundering money from a Ukrainian bank but has not been targeted with any legal action by Kyiv -- is seen by some as a test of his commitment to cutting down the tycoons.

The rise of Ukraine’s tycoons dates back to the privatizations of the 1990s, when a select few were able to acquire the nation’s best assets following the collapse of the Soviet Union.

Williams said the tycoons have monopolized certain industries, wield influence over state-owned companies, and have outsized influence on government contracts, all of which hurts the nation’s investment climate.

However, Waschuk said the power of the 1990s era Ukrainian tycoons is slowly on the wane because they are largely involved in “old school” coal and steel industries.

He said new powerful businessmen will emerge from the IT and agriculture industries and diffuse the influence of the 1990s generation that still holds sway.

Earlier this month, another technology entrepreneur entered the list of top 25 richest Ukrainians when his company sold shares to an investor, valuing his startup at more than $1 billion.

However, it remains unclear how involved such technology entrepreneurs will become in domestic politics, especially considering some relocate to Silicon Valley and are less impacted by government policies than extraction industries.

Waschuk also said it would take coordinated action by Ukraine and the West to cut the tycoons down to size, in part because the magnates have integrated themselves into the Western financial system.

He cited as an example the Western-backed nationalization of Kolomoyskiy’s PrivatBank to prevent its bankruptcy and the triggering of an economic crisis in Ukraine.

“It would actually require a pincer movement between Western governments and Ukrainian authorities to put the squeeze on these people,” Waschuk said.

“The West has to show it has some political skin in the game.”

RFE/RL’s Ukrainian Service contributed to this report
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    Todd Prince

    Todd Prince is a senior correspondent for RFE/RL based in Washington, D.C. He lived in Russia from 1999 to 2016, working as a reporter for Bloomberg News and an investment adviser for Merrill Lynch. He has traveled extensively around Russia, Ukraine, and Central Asia.

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