Oligarchs step in to save Ukraine’s sovereignty

Igor Kolomoisky, the controversial billionaire owner of PrivatBank, was appointed to head Dnipropetrovsk Oblast and Serhiy Taruta, the owner of the Industrial Union of Donbass, is taking over the Donetsk Oblast administration. Acting President Olekandr Turchynov made the appointments on March 2.

Other oligarchs have been approached by government envoys with offers to take charge of other potentially troublesome regions since the rise of separatist sentiments in eastern and southern Ukraine, heated up by Russia’s ongoing invasion of Crimea, which began on Feb. 27. Some of them have already refused the offers.

Ukraine’s oligarchs, who own much of Ukraine’s industrial economy, have always exerted their influence on government, but running the government would give them more direct responsibilities and power.

Taking charge of the most troublesome regions is a precedent. Economy Minister Pavlo Sheremeta explains it quite simply: “The country is in danger.”

Ukraine’s government hopes that by appointing some of the richest and most influential people as governors, they will have a chance to unite the nation.

Russian President Vladimir Putin “is hurriedly preparing a split of Ukraine. The participation of major businessmen under these extreme circumstances may help the fight against separatism,” said Oleksiy Haran, political scientist and professor at Kyiv-Mohyla Academy. “But if talking about reforms, this will not favor the reforms.”

Kolomoisky, whose wealth Korrespondent magazine puts at $3.5 billion, is a leader in the Jewish community in Dnipropetrovsk, which could dampen Kremlin propaganda that the EuroMaidan Revolution is an anti-Semitic movement.

His business interests include chemical production, finance, media, metallurgy, oil extraction and sports. News media reported that Kolomoisky had been providing financial support for the Ukrainian Democratic Alliance for Reform, Vitali Klitshcko’s liberal political party that holds 42 seats in parliament. However, Klitschko denied this repott.

Taruta, whose fortune is estimated at $730 million, was said by his close circle to realize that he has agreed to a “suicide mission” by agreeing to govern Donetsk, Ukraine’s most populous oblast with nearly 10 percent of the nation’s population of 45 million people.

“I have never wanted to work within state executive power, but today, I am sure, on the day of danger I address the Ukrainian government and declare own readiness to head Donetsk Oblast State Administratoin,” he said in a March 1 statement.

“They want to serve and help their regions rise,” a source in Taruta’s close circle told the Kyiv Post. “He actually has done quite a lot for Maidan, both him and his daughters were there from the start.”

Taruta’s main businesses are metallurgy and sports. His personal connections involve former Prime Minister Yulia Tymoshenko and ex-Deputy Prime Minister Sergiy Tigipko.

Under Ukrainian legislation, the governor is an oblast’s chief executive and manages the local budget. His power is balanced by the regional council, which is elected by voters.

The appointments were negotiated by Yuriy Lutsenko, the former interior minister and political prisoner, his spokeswoman Larysa Sargan said. Lutsenko added that Tymoshenko was participating in the negotiations too, “She called Kolomoisky, afterwards – Akhmetov and Taruta. She stressed that this was temporary decision. Not a real power, but rather a political symbol of Ukraine’s unity.” 

Lutsenko also attempted to recruit billionaire philanthropist Viktor Pinchuk to head Zaporizhzhya Oblast’s government.

Pinchuk, also a native of Dnipropetrovsk in eastern Ukraine, turned down the offer because he “doesn’t know the region, doesn’t know anyone there and did not feel he was capable of achieving anything there,” one source familiar with negotiations told the Kyiv Post.

“Only if politicians and big business rise to this challenge will Ukrainians be able to channel their energy into reforming and rebuilding the country,” wrote Pinchuk in his Feb. 24 opinion piece for the Financial Times.

Other oligarchs have expressed their concerns over the situation in Ukraine.

Rinat Akhmetov, owner of System Capital Management, issued a statement calling for peace. But his most recent March 2 statement doesn’t talk about taking any government post.

“Nowadays, the economy is a real political force. Our aim is providing security for the people, their families, the stability of work of all the companies in the country,” Akhmetov emphasized.

Former Russian citizen Vadim Novinsky, who controls Smart Holding, easily won parliamentary elections in Sevastopol in 2013, making him a strong candidate to become the Crimean governor. Local residents see Novinsky as an effective businessman who shares their political views. The mogul owns metallurgical limestone producer Balaklava Rudoupravlinnya near Sevastopol.

Political observer Vitaly Portnikov reacted by calling these “wartime appointments” accepted by responsible businesspeople “in the face of aggression.”

Since the overthrow of Viktor Yanukovych as president on Feb. 22, speculation has increased over the prospect of reprivatizing assets owned by the largest businesspeople who purchased them from the state at rock-bottom prices under non-transparent auctions held by the State Property Fund.

Oleksandr Bondar, the former State Property Fund chairperson who is seen as a candidate to take this position again, publicly declared his support for reprivatizing some properties.

However, as long as oligarchs hold their seats in the government administrations, the chances of reprivatization are slim.

Editor’s note: The story has been updated to include a quote from Yuriy Lutsenko.

Kyiv Post associate business editor Ivan Verstyuk and deputy chief editor Katya Gorchinskaya can be reached at verstyuk@kyivpost.com and katya.gorchinskaya@gmail.com