Ukraine : war of the oligarchs

Note kindly translated by Anne-Marie de Grazia

The events of the past days in Kiev show tendencies at disintegration at work in the political system. These tendencies are becoming now more and more explicit. Nevertheless they were a kin of hidden undercurrent to Ukrainian politics since the beginning. But these very tendencies may bring hope concerning the conflict which has engulfed the country since February 2014.

The war of the oligarchs

The power in Kiev remains largely under the influence of the oligarchs. Moreover, the institutional disorder resulting from the events of February 2014 has tended to reinforce their influence. United in their opposition to the former President, M. Yanukovich, they have pieced out the country between them and have been tearing each other heartily apart for one year now. We must cite Rinat Ahkhmetov, whose fortune is concentrated in the steel industry, the present President, Poroshenko, whose fortune comes from agro-business, Dmitro Firtash (presently under arrest in Vienna in a corruption affair) and M. Igor Kolomoisky[1]. It was Dmitro Firtash who, out of his domicile in Vienna, where under house arrest he convened these oligarchs and convinced them to act against M. Yanukovich, himself an oligarch, but the legally elected President of the country.

This « plot of the oligarchs » played an important role, both because it made it possible to deviate the Maïdan movement which, at the beginning, was anti-oligarchs and anti-corruption, but also because it played an important role in the sequence of events which drove President Yanukovich out of Kiev. However, this alliance has by no means put an end to the ferocious oppositions dividing the oligarchic milieu. In some way, the latter have been made more acute due to the brutal contraction the economy has been going through. In a country in which GDP shrank by -7% in 2014, which has been overtaken by a brutal inflation and where payments are uncertain are best, only the control over unearned incomes or over the revenues of foreign income (economic aid), can satisfy their appetites. This is reinforcing old enmities, which were overridden for a while by their common opposition to Yanukovich.

This opposition took a particularly spectacular turn with the eviction of M. Igor Kolomoisky in the evening of Tuesday, March 24 from his post as governor of the region of Dnepropetrovsk. But the stakes in this conflict go well beyond a mere revocation. What played itself out between March 22 and 24, with a rise in tension already observable several weeks prior between M. Poroshenko and M. Kolomoisky, is not only a new episode in the classic “war of the oligarchs” [2]. Indeed, the personality of M. Kolomoisky reaches beyond the sole domain of the economy. The political positions which he has taken over the past year have made out of him the key man in the Kiev power.

Who is Igor Kolomoisky ?

Kolomoisky was until that date the governor of the region of Dnepropetrovsk and, from any viewpoint, one the great barons of this semi-feudal Ukraine which has emerged since the events on Maïdan Square. Igor Kolomoisky is a very rich man. He has a Cypriot passport (as well as an Israeli one) and is a resident of Switzerland, all without having given up his Ukrainian nationality. He notably owns PrivatBank, the first bank in Ukraine, and the TV station 1+1. He owns also 43% of the shares in the national oil and gas company UkrNafta and in its daughter company UkrTransNafta, which manages several oil pipe-lines. He controls in fact a large amount of the circulation of fuels in Ukraine. His strategic position has confirmed itself since the beginning of the crisis. He has dedicated part of his fortune, evaluated at between two and three billion dollars, to creating battalions of voluntary fighters. A present, there are 10 battalions of the National Guard which are directly financed by Igor Kolomoisky. These battalions are largely present in the South of Ukraine, around Mariupol. His initiative has revealed itself crucial at a point when the government army was unable to face alone the separatists in the East of the country. So that their sponsor endorsed a political role in becoming the governor of Dnepropetrovsk, a strategic province, as it is located next to the one of Donetsk. Within a few months, he set himself up as a “rampart” against the rebellion of the provinces of the East of Ukraine and in order to do so, he entered strange alliances with the fascistoid group “Right Sector.”

Yet, these battalions of the National Guard constitute a « private army, » the logistics of which, as well as its armament, escape the real control of the regular army. It is understandable that the newly elected President, M. Poroshenko, took umbrage of this and has sought to reduce the power of M. Kolomoiski. This is the framework in which the events of the past days must be understood. They are akin to the scenario of a king seeking to reduce the power of a great feudal lord. French history is resounding with the echoes of similar conflicts. But these have come to an end three centuries ago. The fact that they are occurring in Ukraine today is an undisputable indicator of the fact that this country is not yet a country in the modern sense of the term.

The Kolomoisky affair

So that President Poroshenko decided to limit the economic power of his rival. He decided to replace the board of Ukrnafta. Kolomoisky’s reaction was swift and brutal. The building of UkrNafta was occupied by men in arms, evidently members of the Dnipro-1 battalion, financed and armed by Kolomoisky. Poroshenko’s reaction was swift as well, and he dismissed Kolomoisky from his functions as governor of Dnepropetrovsk. He also had Sergey Bochkovsky and Vasily Stoyetsky arrested after a meeting of the council of ministers, they being respectively the director and deputy-director of emergency situations. These two men were accused of various financial misappropriations. But Igor Kolomoisky responded by calling for the recognition of the leaders of the insurgent entities of Donetsk and Lugansk, NRD and the NRL. The deputies and leaders of Dnepropetrovsk then started evoking the promises of decentralizing which have not been honored by Kiev. It is well known that the power in Kiev is presently dismissing any idea of decentralizing and federalizing. In fact, said deputies and leaders, whose proximity with Igor Kolomoisky cannot be ignored, have made statements echoing those of the leaders of Lugansk and Donetsk. In turn, the leader of the NRD Alexandre Zakhartchenko suggested to the Kiev government to create a Republic of Dnepropetrovsk.

Meanwhile, Valentyn Nalyvaichenko, responsible for Ukrainian security services, faithful to President Poroshenko, has accused the two deputy-governors of Dnepropetrovsk, MM. Gennady Korban and Svyatoslav Oliynyk, « to belong to an organisation with criminal aims ». These two persons are of course protesting the accusations, and are threatening to sue M. Valentyn Nalyvaichenko for libel.

At bottom, the reduction of the economic power of M. Kolomoisky seems to be as important as the integration of the battalions of the National Guard into the regular Ukrainian army. Yet, the commanders of these battalions, if they declare themselves not to be opposed to such an integration, maintain that it is for them a matter of integration as is, and not of individual integration. Their demand is of course turned down by the Kiev government. At the present time, it is clear that both sides are trying to avoid the irreparable but that no understanding on this basis has been found. The risk of seeing Kolomoisky’s barony seceding and allying itself with those whom it fought so fiercely only yesterday cannot be excluded.

One indication is the appeal which Kolomoisky has been broadcasting in Ukraine, in which he positions himself as the direct adversary of the President and the defender of the « spirit of Maïdan » (which will have been put to a great many uses…) and a defender of the « spirit of dignity » in the face of a government of the incapable and of the corrupt. He is also showing concern for the wave of suspicious deaths involving former leaders of the party of Yanukovich, the “Party of Regions,” and which the present Kiev government is describing as suicides. [3].

Translation of Igor Kolomoisky’s proclamation

We know, indeed, what value to give to such descriptions since the suicide of Stavisky in 1934 in France…[4] Behind the formulas and postures, there is one reality: a ferocious fight for power. Kolomoisky has been calling for demonstrations in the whole country on Saturday 28.

Possible evolutions

It looks therefore like the crisis will endure. It is coming at a time when the Minsk agreements are being respected in part (the cease-fire, the exchange of prisoners), but are held in abeyance as to the essential, as the Kiev government is still refusing to negotiate with the insurgents and doesn’t seem to be ready to promote a true law of federalisation. It also bears witness to the fact that Ukraine finds itself in a situation of political and institutional crisis of utter gravity. The existence of autonomous baronies, apt to become independent, is not limited to the South-East of the country.

In reality, the potential dynamics at work today in Ukraine could either lead to a resuming of combats, for instance if both sides decide to give in to nationalistic one-upmanship, or in the contrary open the road to peace if this crisis leads to the question of the federalisation of the country being taken seriously. This can only happen if this crisis effectively leads to a serious and open treatment of the question of federalisation.

The best way to put an end to the « war of the oligarchs » would be indeed to approach in full transparency and without humming and hawing the institutional and constitutional question in Ukraine. This approach should have been taken as soon as M. Yanukovich took flight. His flight signified that the old “national pact” which founded the Ukrainian State was no longer valid, or else one would have had to recognize M. Yanukovich as being still the elected President. One cannot say that there was a “revolution,” which implies the suspension of the constitutional order, and pretend all at once that this same constitutional order goes on existing.

This in no way implies that there cannot be a “national pact” and that Ukraine cannot survive, but it is mandatory that it be reformulated. It is clear that some degree of federalisation, or of confederation, will impose itself for cultural, religious and linguistic reasons. The refusal to recognize this situation has driven the decision of the inhabitants of Crimea to rejoin Russia, as well as the insurrection in the East of Ukraine. It must be stressed here that Russia has consistently refused to recognize the republics of Donetsk and Lugansk. The issue needs to be reconsidered. There is great urgency. For lack of doing so, and doing so fast and honestly, only war and, in time, the dismantling of Ukraine, would remain the options.

_______________

[1] http://www.rts.ch/info/monde/6651675-un-milliardaire-ukrainien-fait-trembler-kiev-et-berne.html

[2] B. Jarabik, « Ukraine, the kingdom of the oligarchs », Carnegie Foundation, http://carnegie.ru/eurasiaoutlook/?fa=59487

[3] Among the « suicided » persons :

  1. On 26 January 2015 suicide of Nikolai Sergienko, 57, former deputy chief of the « Ukrainian Railroads, » shooting himself with a hunting rifle.
  2. On 29 January the body of Alex Kolesnik, former president of the regional administration of Kharkov is found at his domicile.
  3. On 25 February the mayor of Melitopol, Sergei Walter, 57, is found hanged.
  4. On 26 February the body of Alexander Bordyuga, 47, deputy-chief of police of Melitopol, is found in his garage.
  5. On 28 February, the former vice-president of the Party of Regions Mikhaïl Chechetov «jumps » from the window of his apartment.
  6. On 10 March, suicide of the former deputy of the Party of Regions Stanislav Miller.
  7. On March 12, suicide of the former president of the regional administration of Zaporozhye, Oleksandr Peklushenko.

[4] Stavisky, who had corrupted (and was protected by) part of the political class of his time was supposed to have committed suicide by shooting himself in the head from a distance of two meters, so that Le Canard Enchainé had a headline: «how it helps to have a far-reaching arm… Ce que c’est que d’avoir le bras long…».

 


Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s'est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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