KYIV 

By VITALY PORTNIKOV 

During the NATO summit in Brussels, U.S. President Joe Biden said that Ukraine had first to deal with corruption in order to join the Atlantic alliance.

This was not the first such statement by a Western political figure. It was a recurring indication of the country’s main problems – in addition, of course, to constant confrontation with Russia.

But corruption in Ukraine is largely linked to oligarchs’ outsized influence – meaning, individuals who exert influence as essentially monopolists, extend control over the media, or deploy legions of lobbyists, thus distorting rational national priorities.

WHO IS AN OLIGARCH?

President Volodymyr Zelensky’s solution to putting an end to the oligarchs’ “stranglehold” is a bill submitted to parliament entitled “Ending the threat to national security linked to the excessive influence of individuals with considerable economic or political impact on public activity (oligarchs)”.

This “law on oligarchs”, in the president’s view, should place limits on their actions, but from the outset, it must be established just who he has in mind.

WHO MIGHT BE LABELLED AN “OLIGARCH”?

The bill sets down four criteria to define an oligarch:

• Taking part in political activity
• Significant influence on the media
• An individual who is an owner or beneficiary of an industrial site that, from the day the law comes into effect, acts as a natural monopoly or holds a monopoly (dominant) position on commercial markets and maintains such a position for at least a year
• Confirmation that an individual’s (or groups who are beneficiaries) assets exceed a sum equivalent to 2.27 billion hryvnias ($83.3 million)

Anyone meeting three of these criteria may be defined as an oligarch.

And that is the interesting thing.

Categories two and three indicate people who are monopolists. Categories one and four would define as oligarchs practically any independent individual with an interest in politics.

Analysts say the inclusion of point four – regarding assets – is far from a coincidence. If not for that provision, Zelensky’s main political opponent – former President Petro Poroshenko – would not qualify. Poroshenko is an influential political figure and leader of the European Solidarity party. He also owns the Pyatiy (Fifth) and Pryamiy (Live) television channels, but unlike other major business people, that does not make him a monopolist.

So why draft a law which would seem aimed at including him?

As the law was being readied, it was said that oligarchs would be barred from political activity – running for election, for instance – but that would have made it seem that the bill was directed personally at Poroshenko.

MAGNATES OUT OF SPOTLIGHT

Other big business figures prefer to fly below radar, out of the political spotlight such as the President’s former partner Ihor Kolomoisky, metals magnate Rinat Akhmetov, former President Leonid Kuchma’s son-in-law Viktor Pinchuk, and businessman Dmytro Firtash. Firtash is currently in Austria awaiting the outcome of extradition proceedings to the United States. The U.S. Justice Department alleges Firtash is an “upper-echelon [associate] of Russian organised crime”. In addition, he faces federal U.S. charges involving an alleged bribery scheme.

The law’s provisions call for those to be included in a “register” of oligarchs as defined by Ukraine’s National Security and Defence Council.  It stipulates only that they cannot contribute funds to political parties or take part in the purchase or be a beneficiary of large industrial sites due for privatisation.

It is unlikely that being declared an oligarch would change the way society views this or that individual. They would continue to be called oligarchs. The one most mocked – Kolomoisky – has pledged to sew an appropriate insignia on his dress jacket – an obvious insinuation that he is a victim of anti-semitism as Hitler’s Third Reich forced Jews to wear emblems – essentially six-sided stars – so they could be easily identified. Kolomoisky is Jewish, and he holds triple Ukrainian-Israeli-Cypriot citizenship. Ukrainian law forbids dual citizenship, but Kolomoisky, widely seen as the second richest man in the country, argues that it does not forbid triple citizenship. Few take his claim to oppression seriously.

And if Poroshenko is included among them – as Justice Minister Denis Malyuska has already suggested – he would claim he was being persecuted as an opposition politician. However, as contributions to political parties in Ukraine are already a murky business, this ban would be unlikely to change much.

KEEPING OLIGARCHS OUT OF PRIVATISATIONS

Of greater importance is the ban on taking part in privatisations. Would such a decision not clear the way for new oligarchs – magnates close to Volodymyr Zelensky?

If that were to happen, Ukraine would come to look much like the country it faces in conflict – Russia.

Kremlin leader Vladimir Putin started his political career by declaring himself “equidistant from oligarchs”. But, unfortunately, equidistant came to mean a departure into emigration for media boss Vladimir Gusinsky and business magnate Boris Berezovsky and the arrest of energy boss Mikhail Khodorkovsky.

All the other oligarchs dating from the time of Putin’s predecessor, Boris Yeltsin – Roman Abramovich, Mikhail Fridman, Oleg Deripaska, Vladimir Potanin among them – retained their wealth and influence.

But appearing alongside them were new oligarchs close to Putin – Gennady Timchenko or Roman Rotenberg. Along with, of course, the “state oligarchs” who for decades maintained control over leading Russian state companies – Igor Sechin, Aleksei Miller, and former economy minister German Gref.

If Ukraine’s law on oligarchs wins approval, the oligarchs themselves will keep their assets intact and – more importantly – maintain their influence on various sectors of the economy and control over television channels.

But in their midst, new oligarchs could well appear – the president’s friends.

Consider, for instance, how the head of state oil and gas company Naftogaz was removed. By cabinet order and not through normal corporate governance — a move roundly condemned in the West, including an in-person rebuke by visiting U.S. Secretary of State Antony Blinken.

This would seem to indicate that the idea of “state oligarchs” is not so alien to Zelensky. After he was elected Russian President in 2000, Putin also launched a determined drive to put his own allies in charge of gas giant Gazprom.

There remain, however, serious doubts that parliament will endorse the law on oligarchs. And Zelensky clearly shares those doubt – he has made it plain that if the assembly fails to back his proposal, he would put it to a national referendum.

Therefore, the president’s law is not just a battle to burnish his image in fighting the influence of oligarchs, but also a means to help him call a snap parliamentary election if his office determines that there is little chance of securing the votes in parliament.

 POSSIBLE TO PLEASE VOTERS AND WESTERN CREDITORS AT ONCE?

And what of the oligarchs themselves? Are they truly so invincible that the government is simply putting together a bill on combatting their influence not so much to resolve the problem but a mere imitation to keep voters – and Western creditors – happy?

Surely not.

To stop oligarchs from being oligarchs, there is no need to reinvent the wheel through a law unlikely to change much. Instead, Ukraine needs effective legislation on controlling monopolies and creating an economy where competition can thrive.

Regarding television channels, the government needs to provide effective mechanisms to prevent owners from influencing editorial decisions. But, again, at issue here is not so much business as it is political influence.

Whether the Ukrainian authorities have a real interest in introducing such change remains an open question. Because once the oligarchs are gone, the politicians they helped put in office will be gone too.