The Kings of Donbas: Where are they now? Моя стаття для New Eastern Europe про олігархічні клани України
26 вересня 2014, 20:37
Заснований у Польщі міжнародний журнал New Eastern Europe опублікував мою статтю про олігархічні клани України, які навіть після втечі Януковича зберегли свій вплив. Читайте повний текст:
The Kings of Donbas: Where are they now?
Following the escape of Viktor Yanukovych to Russia, many of Ukraine's oligarchs followed. But some of the clans who benefited under the Yanukovych presidency are now building new strategies and alliances which will ultimately benefit their interests and undermine the success of the Maidan protests.
Just recently, before this year, Ukrainian state officials, oligarchs and pro-government politicians had only one public holiday – the birthday of President Viktor Yanukovych. Members of Yanukovych's inner circle spent considerable time deciding which presents would surprise and please the president the most. Since Yanukovych was driven from office, some of the gifts he received have been found in his tasteless residence. One can find everything – from an American military Studebaker to Faberge gold and silver utensils for eating caviar.
During a recent interview for Ukrainian Channel 5, Ukrainian oligarch and Dnipropetrovsk governor, Ihor Kolomoiskyi, described Yanukovych's birthday celebration in Ukrainian Crimea last year. "There were two parts of the celebration. The first one was for all the invited guests. A special bus collected the guests at the helicopter platform. One didn't need to bring gifts to the President directly as one could leave them on the platform, and, while congratulating the president, just show the picture of the present. The second part included a party for his narrow circle of friends. A well-known showman conducted the party. I was there for the first time..."Total corruption
This story illustrates the striking transformations which have happened in Ukraine during 2014. This year, Yanukovych's birthday on July 9th was celebrated in a completely different atmosphere and environment. He celebrated his 64th birthday for the first time in years without throngs of officials and oligarchs surrounding him, hoping to pay their respects. Since February 2014, Yanykovych and his family have been under international sanctions and live in exile in Russia. Some of the oligarchs who attended his birthday party last year, following his dismissal as president, have joined the interim government as saviours of the nation. Another group of oligarchs, who were sometimes called the "Kings of Donbas", have lost control over the situation.
Ukrainian oligarchs emerged from the ruins of state property. When the Soviet Union collapsed and the process of privatisation began, different business groups appeared and gradually gained strength. The common feature for this process was the enrichment of certain individuals under the purview of corrupt politicians. One of the first oligarchs, Yulia Tymoshenko, made her fortune in the mid-1990s due to the support of then prime minister, Pavlo Lazarenko. Lazarenko founded the United Energy Systems of Ukraine, a company which was the largest supplier of natural gas from Russia. For his political and economic support, Tymoshenko had to pay Lazarenko 50 per cent of her income.
These corrupt schemes of "50 to 50" proliferated under Yanukovych's presidency. He became the shadow shareholder for many oligarchic groups. To cover up his wrongdoings, Yanukovych tried to destroy all the documents by tossing them in the Dnieper River, which surrounds his grand residence. The luxury of his personal residence, as well as the documents which were later found in the river, revealed the total corruption of his presidency.
Three big oligarchic clans surrounded Yanukovych and took advantage of their connections with the president. All three clans now have different destinies. The most important clan during his presidency, the so-called Family, is broken. The corruption money they earned was not from the privatisation of state enterprises. The Family took advantage of illegal currency speculation, smuggling, grain exportation, the alcohol industry, coal industry, energy industry and the telecommunications industries. Even this is not a complete list of the corruption of the Yanukovych clan.
Following Yanukovych's departure from office, his clan was destroyed. The major actors of the clan fled to Russia, including the ex-president's eldest son Oleksander, ex-First Vice Prime Minister Sergiy Arbuzov, ex-Revenue Minister Oleksandr Klymenko and the wunderkind oligarch Serhiy Kurchenko. Kurchenko is only 27-years-old and, with the help and protection of his friends, earned huge sums of ill-gotten assets. Today, this clan has managed to save some art of their assets. For example, in the banking sector, banks such as Kurchenko's BrokBussinessBank, Oleksandr Yanukovych's Ukrainian Development Bank and Klymenko's Unison Bank still function.
The clan has saved their media assets as well: six months before the Maidan, Kurchenko acquired Ukrainian Media Holding for 370 million US dollars. This holding includes several dozen newspapers. Among them is the Ukrainian version of the Russian newspaper Komsomolskaya Pravda and even the Ukrainian version of Forbes magazine, which is published under an American license. Interestingly, the seller of this media holding was Boris Lozhkin, the current head of the Administration of the President of Ukraine. Presently, this media group continues to operate in Ukraine, although Forbes has demanded that the license be revoked.
However, one of the most influential mass media groups is the Vesti media holding. It includes a radio station which is run by journalists from the Echo of Moscow, the magazine Vesti Reporter and the free newspaper Vesti, which is run by the ex-editor of Moscow News. Even in post-revolutionary Kyiv, one can see long queues of people at the metro station waiting to get free copies of the publication produced by members of the Yanukovych clan. Indeed, Ukraine's Office of the Prosecutor recently confirmed that Klymenko, who had a close business relationship with Yanykovych's son and Kurchenko, finances the newspaper.Where's Akhmetov?
Members of Yanukovych's former clan are currently under EU sanctions and live in Moscow and Russian-occupied Crimea. The offices of Oleksandr Yanukovych in Switzerland were searched and his accounts frozen. The same happened with the rest of the clan. Recently, they began to hire international lawyers and lobbyists for the lifting of sanctions. Klymenko personally confirmed with the author of this article that he has hired the Israeli law firm Lone Star Communications for the removal his sanctions from the West. In addition, he has made no secret of his intentions to negotiate with the new government and return to Ukraine.
The other two powerful clans which were beneficiaries of President Yanykovych have had similar problems. One of these was the clan of Rinat Akhmetov, Ukraine's richest person according to Wprost magazine. Akhmetov stood in solidarity with Yanukovych until his last moments. He didn't stop supporting Yanukovych until the protestors started be the objective of a bloody safari on the Maidan in February. Even after Yanukovych fled, Akhmetov, who for many years was considered the so-called "uncrowned king of Donbas", didn't show much enthusiasm for discouraging separatism. Ukrainian journalists listened to live broadcasts of negotiations between Akhmetov and the separatists. He tried to persuade them to negotiate with Kyiv, but conducted no action except for organising small siren-protests by his factory workers.
The General Prosecutor of Ukraine, Vitaly Yarema in a discussion with the author of this article, recalled how Akhmetov behaved in the negotiations with the separatists: "We sat until 4 am in the Donbas Palace and negotiated," he said. "Akhmetov said only one phrase in the beginning, 'guys, Donbas is Ukraine and that's it. Now let's start the conversation'. But they didn't listen to him. They left me and Akhmetov at the negotiating table to call someone, probably their patrons in Moscow, for consultations. After they came back, they told Akhmetov: 'No, we do not agree.'"
Meanwhile, the former head of the presidential administration, Serhiy Pashynsky, said that Akhmetov has not created a battalion of volunteers yet, as the governor of Dnipropetrovsk region Ihor Kolomoiskyi has done: "Local elites didn't support us in Luhansk or in Donetsk. I have no facts of Akhmetov supporting the separatists. But on the other hand, while volunteer battalions of the Ministry of Internal Affairs were being establishing throughout the whole of Ukraine, there wasn't a single unit created in Donetsk. Akhmetov withdrew from the process, even though we asked him to help us."
However, separatists and Akhmetov probably have a pact of nonaggression. This comes from the fact that during months of looting and robberies conducted by the militants, they have not touched Akhmetov's luxurious palace in the city's botanical garden or the stadium of his football team, Shakhtar. After Yanykovych was driven from office, Akhmetov, in tandem with the Party of Regions, supported the appointment of Arseniy Yatsenyuk as prime minister. Meanwhile, Yatsenyuk guaranteed that he would not pursue a policy of property redistribution. The government did not attack the financial interests of the oligarchs. It increased rents for iron ore, which is the basis of the financial wealth of the oligarch, but did not dismiss the people in the National Electricity Regulatory Commission who were loyal to Akhmetov.Trouble abroad
The early parliamentary elections in Ukraine, which will most likely be held in October, contradict Akhmetov's plans. This is because in the territory where Akhmetov's companies are located, where his dedicated employees live, the election may not proceed due to the situation in the region. After the separatists rose up in Donetsk, Akhmetov moved to Kyiv. He advised his son and wife to stay in London where he owns the most expensive apartment in the world at the One Hyde Park complex, which he bought for more than $200 million. Akhmetov himself doesn't travel to Europe anymore, as he is afraid of the same trouble that oligarch Dmytro Firtash encountered.
The founder of the scandalous gas mediator between Ukraine and Russia, RosUkrEnergo, Dmytro Firtash was a member of the third clan that earned benefits from the Yanukovych presidency. Political support for his business dealings was provided by his partner Serhiy Lyovochkyn, the head of the presidential administration for almost four years during the Yanykovych presidency. The third actor of the clan, Yuriy Boyko, as vice prime minister and minister of energy, guaranteed his interests in the oil and gas industry.
During the Yanukovych presidency, Firtash managed to return 12 billion cubic meters of gas, which used to be confiscated by the Tymoshenko government. With the financial aid of Russian oligarch Arkady Rotenberg, Firtash purchased chemical factories in Sievierodonetsk, Horlivka and Rivne on the secondary market. He privatised the regional gas company in a questionable auction and illegally grabbed Zaporozhye Titanium and Magnesium Combine plant through creating a joint venture with the state. When Yanykovych used violence for the first time on the Maidan on November 30th, this clan protected themselves from possible international consequences. Lyovochkyn resigned as head of the presidential administration. But trouble awaited them abroad. On March 8th, Firtash celebrated International Women's Day at a French ski resort at Courchevel together with his wife and later went to Vienna, where the office of his company Centragas is located. He was arrested there by the Austrian police upon the request of the American FBI, which was investigating a criminal claim against Firtash.
According to WikiLeaks, Firtash admitted in a conversation with the ambassador of the United States to Ukraine that he used the services of crime boss Semion Mogilevich, who is one of the FBI's top 10 most wanted criminals. But the official version of Firtash's arrest by the Americans was in regards to another case. He was accused of bribing Indian officials to obtain permits for the exploration of titanium in India which was then sold to the American aircraft company Boeing. The investigation showed that since 2006, there were approximately $18.5 million worth of bribes to Indian officials and that the annual profit from the project potentially reached $500 million. Firtash personally held negotiations with Indian officials and gave the order for the allocation of funds in exchange for preferential treatment.
Finally, after spending almost two weeks in jail, the court allowed Firtash to await extradition to the United States on bail. The oligarch was released after Russian oligarch Vasily Anisimov paid a record 125 million euros for Firtash's bail. The arrest and no entry permission status to foreign countries destroyed the game of the clan – Firtash had to hire a large number of lawyers, among whom was the former minister of justice of Austria along with lobbyists who could help clean up his reputation. These lobbyists include the British company of Lord Bell, Bell Pottinger, and also the American consultant Lanny Davis, who helped former president Bill Clinton during the Monica Lewinsky scandal. Firtash's PR managers sent information reports to the British Parliament and reported that their client is vital to Ukraine. For good PR, Firtash made a deal to provide financial support to the Saatchi Gallery in London (Firtash has a house in London).
Meanwhile, the Ukrainian government is looking to confiscate part of his titanium assets. The Fund of State Property warned the oligarch that they will not lease deposits of titanium to him. Trying to secure the loyalty of Petro Poroshenko before the presidential elections, Lyovochkyn and Firtash both supported his candidacy. In fact, the gas-clan of Firtash and Lyovochkyn are more prepared for the early parliamentary elections of 2014 than Akhmetov's clan. They own the TV channel Inter, which is very popular among Russian viewers in southern and eastern Ukraine. The presence of such a powerful tool already makes their chances for success during the election campaign quite high. In addition, they can use the TV channel to target political rivals. Earlier, this Yanukovych media asset was a faithful mouthpiece of government propaganda. After the Maidan, Inter targeted Kolomoiskyi's oligarchic clan.Creating new political projects
The "gas lobby" has a few political projects in development. They have some influence over UDAR, the party of Vitali Klitschko, who became mayor of Kyiv in 2014. Two close friends of Lyovochkyn, his neighbour and the former assistant to his sister, became deputies of Mayor Klitschko. Lyovochkyn's second project, the Development Party of Ukraine, is headed by his former deputy in the presidential administration. A third project, the Radical Party, is headed by a member of the parliament, the scandalous Oleh Lyashko. Lyashko started his political career in the party of Yulia Tymoshenko, but later quit the party. In the midst of the events on the Maidan, when everyone was more honest than in peacetime, the famous journalist Savik Shuster said that he regularly invited Lyashko to be a guest to his TV talk show upon the request of the presidential administration, which has then headed by Lyovochkyn. More evidence to support that Lyovochkyn backs Lyashko can be found in the phone records of another Ukrainian oligarch, Ihor Kolomoiskyi, who instructed his TV manager to start a campaign against Lyashko.
Kolomoiskyi was another beneficiary of the Yanukovych regime, although on a smaller scale. During the years of Yanukovych's reign, Kolomoyskyi managed UkrNafta, one of the largest Ukrainian companies, a majority of which belongs to the state. Obviously, this was not possible without the support of the former president. Kolomoyskyi already admitted that in previous years within a court trial with another oligarch, Viktor Pinchuk, politicians forced him to share the profits from UkrNafta to keep his people in management positions in the company.
Kolomoiskyi also owns the largest bank in Ukraine, Privatbank, and the popular TV channel 1+1, which he uses in the political struggle against Firtash and other oligarchs like Lyovochkyn. Kolomoyskyi illegally has citizenship in a few countries – Ukraine, Israel and Cyprus – and became a civil servant in March 2014, when he became the governor of Dnipropetrovsk to secure the region from separatists. Initially, it was assumed that he would be a temporary governor, but he succeeded and quickly expanded his influence, appointing a close ally, Igor Palitsya, as head of the Odesa region.
Moreover, in the summer of 2014, a deputy of Kolomoiskyi began to outright blackmail the Ukrainian government, warning that their supporters might burn down the building of the regional administration if President Poroshenko removed Kolomoiskyi from office. Kolomoyskyi became very popular among residents of Dnipropetrovsk because he blocked all attempts of separatism and personally insulted Russian President Vladmir Putin by calling him "schizophrenic". This brought him quick support in social networks. He also organised the formation of a battalion of volunteers, Dnipro-1, which fights in Donbas and provides security in Dnipropetrovsk. In addition, he achieved the maximum financial support for his bank from the government. Kolomoyskyi also received concessions from Yatsenyuk to reduce tariffs from the government by one-third when he introduced the excise tax on bioethanol gasoline, in which he specialises.
Kolomoyskyi realised that it makes no sense to pay politicians for defending his interests if the money can be invested in their own promotion and lobbying interests without intermediaries. Therefore, Kolomoyskyi is interested in holding early parliamentary elections and his popularity is high due to the Russian aggression. Due to this support, he could have good results in the elections. However, after the events on the Maidan, the rise of oligarchic clans is a challenge for Ukrainian society. Protests from last winter emerged not only because of the authoritarianism of Yanukovych, but also because of the total injustice in the distribution of public goods – when a few families control Ukraine's economy. To some extent, Kolomoyskyi is the face of the counter-revolution because his being a governor is a snub to the Maidan, which fought for an honest government without corruption.
President Poroshenko also used to be an oligarch. During the 16 years of his political career, he changed parties several times and worked as the secretary of the national security council under President Viktor Yushchenko and as the minister of economy in Yanukovych's government. He amassed a fortune of $1.3 billion, was the owner of the Roshen chocolate corporation, sugar factories, the TV channel 5 and the fashionable Fifth Element sports centre.
Therefore, it seems that Poroshenko doesn't fully meet the requirements of the ideals of the modern European type of politician as the people on the Maidan demanded. However, the revolutionary events didn't produce a single leader and Poroshenko capitalised on the losses of other politicians. Now Petro Poroshenko has a chance to fulfil an historic mission – to become the first successful president of Ukraine. For this, he has to remove all oligarchic influences from politics. His first priority should be the public interest, not the desire to enrich a few oligarchic clans who might quickly adapt to changes in the government and leech off Ukrainian politics.Translated by Lisa Yasko