President Volodymyr Zelensky submitted a de-oligarchization bill to the Verkhovna Rada on June 2.
Figures who are officially recognized as oligarchs will be banned from donating directly or indirectly to political parties and taking part in the privatization of state assets, according to the bill.
Zelensky launched what he calls a “de-oligarchization campaign” in early 2021.
Associates of billionaire oligarch Ihor Kolomoisky have been charged in an embezzlement case, while Viktor Medvedchuk, a pro-Kremlin politician who is alleged to own a business empire, has been sanctioned and charged with high treason. In 2020 another oligarch, ex-President Petro Poroshenko, was charged in an abuse of power case.
Zelensky’s critics say that the de-oligarchization campaign is not genuine. They argue that no law enforcement reforms have been carried out, which makes the fight against oligarchs meaningless.
The case against Poroshenko has stalled for a year without any results, and it is not clear whether the investigations into the $5.5 billion embezzlement at PrivatBank, formerly owned by Kolomoisky, and Medvedchuk’s alleged crimes can lead to verdicts.
Criteria
The bill seeks to create an official legal definition for oligarchs.
Oligarchs are defined as persons meeting at least three of four criteria: involvement in political activities, considerable influence on mass media, being a beneficiary of monopolies recognized by anti-trust authorities and ownership of assets exceeding Hr 2.2 billion ($81 million), excluding media assets.
“Considerable influence on mass media” can imply being a beneficiary of media outlets or controlling mass media indirectly without formally owning them, according to the bill.
If, after the law comes into effect, an oligarch sells a media outlet to an affiliated person or anyone who does not have an impeccable business reputation, they will still be considered an oligarch.
Involvement in political activities implies being a president, a member of parliament, a minister or deputy minister, the head of a state agency or a presidential advisory body, the head of the Security Service of Ukraine, the prosecutor general or the head of the National Bank of Ukraine, according to the bill. A person affiliated with people in these positions can also be classified as an oligarch.
Moreover, a person who has financed political parties, political advertising or protests with political demands can also be defined as an oligarch, according to the legislation.
Other aspects
All top government officials will be required to declare any contacts or meetings with oligarchs, except for public official meetings.
A person can be recognized as an oligarch by the National Defense and Security Council based on requests by members of the council, the Cabinet of Ministers, the National Bank of Ukraine, the Security Service of Ukraine or the Anti-Monopoly Committee.
The National Security and Defense Council will also keep a public register of officially recognized oligarchs.
If signed into law, the bill will formally come into effect on the following day and will be implemented within six months. The legislation will be in force for 10 years.
According to the bill, certain officials must be fired if they violate the anti-oligarch legislation – for example, by failing to declare contacts with oligarchs. These include the head of the Security Service of Ukraine, the head of the National Bank of Ukraine, members of the Central Election Commission, the head of the National Anti-Corruption Bureau of Ukraine and their deputies, and members of the High Council of Justice, the judiciary’s main governance body.
For most other officials, the bill envisages lighter punishment for violating the de-oligarchization law: so-called “disciplinary penalties,” which may include reprimands or warnings.
Criticism
Zelensky’s critics have dismissed the bill as a publicity stunt that aims to compensate for the absence of genuine rule of law reforms.
“It’s impossible to defeat oligarchs with a law on oligarchs,” columnist and investment banker Serhiy Fursa wrote on Facebook. “It’s impossible to defeat oligarchs without the rule of law and functioning institutions.”
Kira Rudyk, head of the opposition party Voice, agreed with this assessment.
“The president’s initiative was submitted to parliament only as a PR stunt,” Rudyk said in a statement. “Instead of reforming the judiciary and creating fair courts in the country, the president is submitting a populist bill that will not change anything fundamentally.”
She also argued that the anti-oligarch bill increased the powers of the presidentially controlled National Security and Defense Council and was part of efforts to replace the law enforcement system with the council’s decisions. The legislation gives the National Security and Defense Council arbitrary authority to decide whether someone is an oligarch, she added.
Critics were also skeptical about the prospects of de-oligarchization after a bill targeting oligarch Rinat Akhmetov’s interests was amended in his favor.
Initially, the bill was supposed to increase taxes on iron ore extraction, the bulk of which being controlled by Akhmetov’s DTEK group. The initial plan that the government presented would see Akhmetov’s enterprises pay an additional $1 billion per year in taxes.
However, Prime Minister Denys Shmyhal and members of Zelensky’s Servant of the People party on Feb. 2 submitted a bill that raises the tax by just $500 million per year.
Response
Mykhailo Podolyak, an aide to Zelensky’s chief of staff Andriy Yermak, responded to the criticism of the bill by arguing that it was a genuine de-oligarchization drive.
“The bill radically changes the traditional system of secret relations between oligarchs and public officials,” Podolyak told the Kyiv Post. “…Before Volodymyr Zelensky nobody in Ukrainian politics tried to take such steps aimed at legally defining the (oligarch) phenomenon and later dismantling the oligarchic system.”
However, failed de-oligarchization campaigns were announced by former presidents Viktor Yushchenko and Petro Poroshenko. Ousted former president Viktor Yanukovych also had scuffles with oligarchs over the redistribution of assets.
“Oligarchs and people affiliated with them have long held a special position in our politics and economics,” Podolyak said. “They did not obey the law, bought politicians, lawmakers and judges. They could blackmail the state through their mechanisms and seize public resources. Now all of this will be blocked.”
