On April 27, the Supreme Court of Ukraine will hold a crucial hearing that may cost Ukrainian taxpayers more than $1 billion. Just a week ago, this topic was being covered only by some business media, NGOs and parties without representation in parliament. Now the threat has become more visible: Prosecutor General Iryna Venedyktova recorded a special YouTube video just to warn Ukrainians about what is going on.
The issue in question is a lawsuit filed by the oligarchic family of brothers Ihor and Hryhoriy Surkis against state-owned PrivatBank, the National Bank of Ukraine (NBU) and the National Deposit Guarantee Fund.
Read also: What is happening with PrivatBank court cases and why is this such a big deal
“The overall sum of the claim against the state in this lawsuit and related ones is more than Hr 29 billion (nearly $1.1 billion). It equals one-quarter of Ukraine’s yearly healthcare budget,” said Venedyktova. “After the nationalization of PrivatBank, the state spent more than Hr 160 billion ($5.5 billion) just to recapitalize it — that’s more than our defense budget for 2020!”
That’s true. But what’s this all about?
The Supreme Court is just a cassation instance here. The state already lost in the first instance and the court of appeals in 2017-2019. So this is the final battle.
In December 2016, the state, represented by the NBU and Deposit Guarantee Fund, nationalized PrivatBank, previously owned by oligarch Ihor Kolomoisky and his partners. The bank was in terrible condition because of insider lending — but it also was too big to let it fail, holding more than 30% of the Ukrainian bank services market. As the authorities stated, Kolomoisky had turned the bank into a giant “vacuum cleaner,” providing loans to proxy offshore companies controlled by him and his partners. Of course, Kolomoisky denied this accusation — and the companies that took the loans denied connections with the bank owners.
So did the Surkis brothers, owners of a number of companies that bought PrivatBank’s Eurobonds.
Still, during the nationalization, the state declared them persons connected with Kolomoisky — and for a good reason. They are partners in a number of important businesses. Among them is the 1+1 TV channel. It is one of the largest broadcasters in Ukraine and also a powerful tool of political leverage that played a major role in President Volodymyr Zelensky’s victory in the 2019 election. Also the Surkis brothers’ A-Bank was technically launched on PrivatBank facilities.
What happened when some of the bank’s contributors were declared connected to its owner? The NBU used bail-in procedures: Their contributions were converted into stocks.
Read also: Court orders PrivatBank to pay $259 million to Kolomoisky associates
Now the main quest of the Surkis brothers and Kolomoisky himself is to prove that this (and any other fragment of the nationalization procedure) was illegal. For the Surkis brothers, it’s about money. For Kolomoisky, the stakes are higher.
First, Kolomoisky is a defendant in a number of cases in foreign courts. PrivatBank and the NBU accuse him of money laundering. This has already led to the arrest of some of his assets, attention from the FBI and the need to change his personal lifestyle. He had to leave Switzerland, where he lived for years, and even his “safety house” in Israel, and return to Ukraine — which he wanted to avoid. Now he’s using his influence in Ukrainian courts to save himself from foreign ones — at a minimum, to create leverage, as a maximum, to destroy his opponents from the inside.
Second, Kolomoisky is struggling to change the management of the NBU to make it loyal to him. In this struggle, he is using his media, his pawns in the Ukrainian parliament and even organized demonstrations near the NBU headquarters in Kyiv. And, of course, he is using the courts. It’s both his personal vendetta against officials who halted his activities with the nationalization of PrivatBank and his wish to have control over a crucial part of the Ukrainian financial system.
Third, if he and his partners win in the PrivatBank cases, he will gain great economic and political leverage and get an opportunity to dictate his terms to the Ukrainian authorities.
And all of this will be Ukrainian taxpayers’ problem. In total, all the companies that once had PrivatBank’s eurobonds will claim Hr 29 billion. But that’s just a start. To give to the oligarch leverage over the biggest bank in the country during a financial crisis is an enormous risk for the state itself.
Maybe that’s the reason the authorities are on alert, the Prosecutor General turned into a video blogger and the national parliament is trying to adopt an ad hoc law preventing the execution of a possible judgment in Kolomoisky’s favor. It is a true national emergency.
During the previous hearing in the Supreme Court, PrivatBank managed to make the hearings partially open, with press and the representation of international structures. It will be interesting to watch who from the Ukrainian authorities will attend the next hearing.
The result of this lawsuit could determine the fate of the Ukrainian economy in this difficult period. And it will have an impact on the career of most current authorities — even the president.
Victor Tregubov is a Ukrainian columnist, political blogger and the former editor-in-chief of Petr and Mazepa online news outlet. He is also a co-founder of the Democratic Axe (Demokratychna Sokyra) political party.
