Along with a clear pro-European mandate, the newly elected parliament so far appears to be the least captive to oligarchic interests, which for years remained intensely allergic to outside competition.
Whether securing parliamentary seats themselves or through their proxies – reverting on occasion to getting their chauffeurs elected – the nation’s tycoons have often enacted favorable legislation to benefit and protect their spoils, impede deregulation and obfuscate laws.
As a result, the nation progressed toward a far-ranging, free-trade deal with the European Union at a snail’s pace, and avoided other measures that would have opened up markets and eased business operations.
The question now remaining is to what extent big business interests will clash with state-building endeavors that should include open and rules-based markets, the rule of law and respect for property rights.
Although never elected to parliament, chemicals tycoon Dmytro Firtash has had close associates in power and in the legislature. In the previous decade he played a major role in importing Russian natural gas to Ukraine. He currently is the nation’s leading nitrogen fertilizer producer.
Yuriy Boyko, the former energy minister who was Firtash’s power-of-attorney in the past, got elected with the Opposition Bloc, a newly formed political force that is a reincarnation of the former ruling Party of Regions. Firtash’s former business partner in gas trader RosUkrEnergo, Ivan Fursin, got elected in a single-seat district in Odesa Oblast. Yevhen Bakulin, the former CEO of state-owned Naftogaz when Boyko was energy minister, successfully ran in a Luhansk Oblast constituency. Serhiy Lyovochkin, with whom Firtash co-owns the Inter television channel, also got in with the Opposition Bloc.
“I have close relations with (Opposition Bloc leader Yuriy) Boyko, we’re friends. With Seryozha (Serhiy Lyovochkin) too, for many years,” Firtash said in an Oct. 20 interview with Lb.ua conducted in Vienna where he is awaiting extradition to the U.S. on racketeering charges.
When asked about being close to former President Viktor Yanukovych, whom Ukraine accuses of killing more than 100 EuroMaidan protesters, Firtash said: “I’ve never made a secret of this (that we’re close).”
Opposition Bloc remains the biggest hope of oligarchs like Firtash and Rinat Akhmetov, the nation’s richest man, who made his $10.5 billion fortune, by Bloomberg estimates, on energy and metallurgy. Former Deputy Prime Minister Oleksandr Vilkul got elected with the Opposition Bloc – he formerly ran several companies belonging to Akhmetov’s System Management Capital.
Both Firtash and Akhmetov purchased existing wealth through privatization auctions, usually at cheap prices. Bidding conditions for state-owned assets often were rigged to favor a select few buyers, often at the expense of foreign investors willing to pay more.
Since parliament appoints the head of the State Property Fund, a body that has legal ownership of government-run assets, this is especially a sensitive issue signifying the marriage of politics and business. Also at stake is which business groups will win lucrative public procurement projects – last year the state awarded $24 billion in contracts.
Former Russian citizen Vadim Novinsky, worth an estimated $1.4 billion, is a member of the Opposition Bloc too, as well as Vadim Rabinovych, whose fortune was valued at $255 million before the 2008-2009 economic crisis, according to Focus, a weekly magazine. Novinsky voted for the so-called “dictator laws” on Jan. 16 at the height of the EuroMaidan Revolution that severely curbed civil liberties.
The bloc’s seventh spot was Nestor Shufrych, who controls 25 percent of Naftogazvydobuvannya, a major privately-owned oil and gas producer, according to an investigation by The Insider, a Ukrainian website. He also voted for the January draconian laws.
However, since the Opposition Bloc is a relatively minor political force, the parliamentary majority will be a target of oligarchic interests, some of which appear to be already entrenched.
President Petro Poroshenko is often placed in this category. He owns big businesses in confectionery and media that he hasn’t sold so far, even though the law obliges him to do so.
Former energy oligarch Yulia Tymoshenko re-enters parliament as a leader of Batkivshchyna party. She has been known for her personal opposition to Firtash. “Please notice, I haven’t touched her. It’s she who waged war against me. Why, I don’t understand. I didn’t have a business with her, I didn’t share any money with her. No intersection points,” Firtash said in the Lb.ua interview.
Ihor Kolomoisky, the billionaire Dnipropetrovsk governor who controls the country’s largest bank, Privat, and several major assets in energy and metals, tried to reach an agreement with populist politician Oleh Lyashko, whose Radical Party received 7.4 percent of the votes, according to The Insider. However, Kolomoisky didn’t succeed and is looking for another parliamentary force for support.
“Kolomoisky’s felt that we’re weak and simply wants to destroy us, to take all we have,” Fursin told The Insider. After the Cabinet of Ministers turned down Firtash’s bid to prolong the lease agreement regarding Irshansk and Vilnogirsk mining and concentration complexes, Kolomoisky placed his managers there. Moreover, Opposition Bloc leader Boyko accused Kolomoisky of pressuring his political force during an Oct. 27 news conference.
Political analyst Volodymyr Fesenko says Kolomoisky’s key interest is to retain and effectively monetize his 48-percent stake in Ukrnafta, a gas and oil extraction unit of state-run monopoly Naftogaz.
Breaking up Naftogaz and selling large stakes to private investors has been on the agenda of current Prime Minister ArseniyYatsenyuk. This issue will likely lead to conflicts between oligarchs vying for control of the company, especially its profitable gas transportation and storage system. Kolomoisky is close to Yatsenyuk’s People’s Front as well as to Samopomich and several members of Poroshenko’s Bloc, according to Fesenko. His deputy governor, Borys Filatov, got elected in a single-seat district of Dnipropetrovsk Oblast.
Kolomoisky didn’t respond to a Kyiv Post request to provide a comment on his affairs with Radical Party, People’s Front and Poroshenko’s Bloc.
Billionare Viktor Pinchuk owns a major pipe-making business and is also close to Yatsenyuk, Fesenko says. Pinchuk didn’t respond too.
Viktor Kryvenko, No. 5 in the Samopomich list, which came in third, believes the tycoons will oppose the tax hike on subsoil use – a measure that the government enacted to boost revenues amid a budget shortfall.
Meanwhile, Samopomich’s leader Andriy Sadovy, the mayor of Lviv who refused to take a seat in the Rada, can be seen as a business-related figure too, despite Samopomich’s numerous statements about being absolutely independent of any businesses. Sadovy controls Lux, a radio and television company in western Ukraine, through his wife. The company’s key asset is Channel 24, a popular television station. Since Lux, like the rest of the local media market, is unlikely to make earnings, Sadovy needs to subsidize it.
Not everyone views the power that oligarchs wield as a totally evil system.
“Kakha Bendukidze was one of Russia’s junior oligarchs during the (Boris) Yeltsin era. In the late nineties, however, he went home to Georgia and became one of his native country’s leading economic reformers,” wrote Chrystia Freeland, a member of the Canadian parliament of Ukrainian descent, in a June article on Politico website.
“We’ve got used to the oligarchs in Ukraine and the way the politics is being managed here,” Serge Lyuty, vice president of Carval Investors in London, told the Kyiv Post. “When we work with oligarchs, we want to have some leverage against them.”
Volodymyr Ohryzko, the nation’s former foreign minister who failed to get a seat in the Rada, wrote in a blog recently: “In society’s conscience, parliament remains a place where one should go to ‘resolve (their own business) problems’ rather than write laws.”
Meanwhile, the official monthly salary of lawmakers is $500 a month, which is below the earnings of some high school students in the U.S. who devote their spare time to delivering pizza or making sandwiches.
Kyiv Post associate business editor Ivan Verstyuk and staff writer Oleg Sukhov can be reached at [email protected] and [email protected], respectively.
