The term oligarchy was originally used by Plato to describe a social system where power is concentrated in the hands of a narrow circle of wealthy individuals. Karl Marx identified oligarchs as the class in a bourgeois society that wields power by virtue of its great wealth. According to Marxist doctrine, the oligarchs are the allies of the bourgeoisie against the proletariat. In reality, however, the oligarchs are primarily engaged in struggle with the bourgeoisie and are adept at forging alliances with the oppressed workers.
The term oligarch came back into fashion in the former Soviet Union in the 1990s. It is said to have been introduced into general circulation by Russia’s former Deputy Prime Minister Anatoly Chubais. The first political scientist to apply the term in Ukraine was probably Mykola Tomenko, director of the Institute of Politics.
Tomenko defines oligarchs as individuals who operate in several domains at once, namely politics, business and media. Just having a lot of money is not enough in itself to make you an oligarch. Not even if you are actively involved in politics – after all, few Ukrainian and Russian politicians are short of money. What sets the oligarchs apart is their influence over the electorate through their media outlets.
The Russian and Ukrainian oligarchs made their fortunes during the transition from the socialist system, where nobody owns anything, to a market economy. Few of the future oligarchs emerged from the old Communist elite. Rather they were the sort of people who did not want to stand in line waiting for the automatic promotions and material benefits dispensed under the Soviet system.
The oligarchs can be classified in terms of their origin.
The first group is made up of former activists of the Komsomol youth organization. In the spring of 1991 following an internal decree of the Communist Party of the USSR on stimulation of the business activity among young people, Komsomol leaders started to channel cash into commercial structures. As a result of this decree, many of the former first secretaries of Komsomol regional committees became bankers. Ukrainian representatives of this trend include Labor Party leader Serhy Tyhypko who founded Privatbank.
Another clutch of oligarchs emerged from the ranks of the Soviet academic elite to apply their education in business and politics. Among the Ukrainian representatives of this trend are Rada deputy Viktor Pinchuk, Democratic Party leader Hanna Antoneva, who owns the Artemida liquor producer, Social Democratic Party of Ukraine (United) leader Viktor Medvedchuk.
The third category arose from Soviet economic structures and includes former managers of warehouses and housing offices, and other minor functionaries. This group includes Rada deputy Oleksandr Volkov, who ran a vegetable depot, and Rada deputy Hryhory Surkis, a former construction manager.
There is one significant difference between the Ukrainian and Russian oligarchs. Whereas the Russians tend to possess their own raw‑material base in the form of oil, gas and metal extraction enterprises, Ukrainian oligarchs are mostly traders, who are dependent on their Russian colleagues for raw materials. As the gas trader Ihor Bakai said back in 1998, “All the richest people in Ukraine made their money from Russian gas.”
There have been signs recently that the current oligarchic system in Ukraine is in decline. The new trend toward granting greater powers to the regions aims at creating a new “pyramid of power” headed by two or three groups close to the president and controlling the Presidential Administration, Cabinet of Ministers and parliament, while local elites will be given greater freedom of action at the regional level. In place of 5‑7 strong oligarchs, Ukraine will have 25 regional oligarchs more or less controlled by and dependent on the center.
Over the last four years or so, the ranks of Ukrainians oligarchs have been in constant flux. The list currently includes the following individuals:
n Representatives of the Donetsk Clan, such as Energy Minister Vitaly Hayduk, businessman Rinat Akhmetov and Oblast Governor Viktor Yanukovych. Among their political projects are the Party of the Regions, and its constituents – the Labor Party, Party of Regional Revival and others, as well as the now moribund Party of Muslims of Ukraine. The Donetsk group effectively controls the domestic coal industry and part of the steel industry, the First Ukrainian International Bank and Donetsk City Bank, the firms Luks, Danko, Vizavi and Industrial Union of Donbas. The group recently increased its influence in the Cabinet with the appointment of Hayduk as energy minister and Ihor Yushko as finance minister. The clan has media representation through the daily newspaper Segodnya and a number of local TV channels.
n Viktor Pinchuk. The 42‑year‑old Rada deputy is deputy chairman of the Ukrainian Jewish Congress and one of the leaders of Labor Ukraine. He is exceptionally close to the president thanks to his common‑law marriage to Olena Kuchma. Pinchuk controls the Interpipe association – the country’s largest producer of wide‑diameter pipes. In addition, Pinchuk controls a significant share of Ukraine’s steel sector as well as steelworks in Russia and Belarus. His media empire includes the mass‑circulation tabloid Fakty and the TV stations STB and ICTV.
n Andry Derkach. The 35‑year‑old son of the former head of the State Security Service (SBU) is one of the leaders of the Labor Ukraine party and the Center democratic movement. He is one of the leading advocates of closer ties with Russia. Formerly a friend and business partner of Pinchuk, there is now a barely concealed rivalry between the two men. Derkach’s business interests include rail freight transport in Ukraine and abroad, as well as the pharmaceutical market. He controls the Internet newspaper Versii, the weekly newspaper Kievsky Telegraf and the Era TV company.
n Viktor Medvedchuk and Hryhory Surkis. The leaders of the Slavutych business group and the Social Democratic Party of Ukraine (United). Their media includes the daily Kievsky Vedomosti, Obozrevatel Web site and Inter TV channel.
n Oleksandr Volkov. The 54‑year‑old former Democratic Union party leader, Rada deputy and presidential adviser has influence on the agricultural market and the oil and gas market. Volkov has influence over UT‑1, the newspapers Nezavisimost and Prezydentsky Vestnik, and Prezydent magazine.
n Vadym Rabynovych. This 49‑year‑old Israeli citizen is active in the Ukrainian advertising and media spheres, and intermediary business. Having lost what control he once had over the Studio 1+1 TV channel, his media interests now include the weekly newspapers Stolichniye Novosti and Stolichka.
n Yevhen Marchuk. The 61‑year‑old secretary of the National Security and Defense Council has close business ties to SDPU(u) structures. He is reported to control the Ukrainian arms market and the Ukrspetsexport state arms trading monopoly. Through Ukrtransnafta he has established control over the main transit flows of oil across Ukrainian territory. He has controlled the Den newspaper since the murder of its founder the Donetsk businessman and Rada deputy Yevhen Shcherban in 1996.
Kost Bondarenko is an analyst with the Penta Political Consulting Bureau.
