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The War Has Helped Ukraine Rein in the Oligarchs

Mykhailo Minakov

On February 24, 2022, the Russian invasion of Ukraine profoundly changed the political regime and social order in the country. However, the commitment of President Zelensky’s administration to deoligarchization not only survived the start of the large-scale war, it increased—in part because of wartime policies.

By May 2022, the Ukrainian government had adapted to the war situation and endorsed a multidimensional approach, simultaneously pursuing deoligarchization and anticorruption policies while mounting an all-out rebuttal to the Russian invasion. Deoligarchization and a continuation of anticorruption efforts were critical for preserving the trust of Ukraine’s Western allies, which were providing Ukraine with increased military, political, and financial support.

The Zelensky administration also started preparing the country for the possibility of a long war, and for the future reconstruction of Ukraine. The fight against the oligarchs and corruption is central to both efforts. And the martial law situation has provided the president and his team with more opportunities to crack down on the oligarchy.

Declining Asset Values and the Anti-Oligarch Law Have Hit Billionaires

In August, I wrote about how the administration’s struggle with the oligarchy had forced Rinat Akhmetov to exit his media business and Vadym Novynsky to relinquish his MP mandate; how the pursuit of deoligarchization had resulted in rolling the investigations of ex-president Petro Poroshenko and pro-Russia oligarch Viktor Medvedchuk into one criminal investigation; and how the war was making an impact on the Ukrainian oligarchy by physically destroying the oligarch-owned industrial complexes. I also reported on the speed with which the oligarchs’ net value fell.

Using Forbes magazine data on the real-time value of billionaires’ assets and data from Forbes Ukraine magazine on the market values of Ukrainian oligarchs’ holdings before the war (both expert teams used the same methods for data collection), it is possible to compare the change in the value of their assets. Based on these data, the wealth of the following individuals dropped considerably from January 15 to November 14, 2022, and continues to fall daily:

·       Rinat Akhmetov: from $13.7 billion to $4.3 billion;

·       Victor Pinchuk: from $2.6 billion to $2 billion;

·       Vadym Novinsky: from $3.5 billion to $1.3 billion;

·       Genadiy Boholyubov: from $2 billion to $1.1 billion;

·       Ihor Kolomoisky: from $1.8 billion to less than $1 billion;

·       Petro Poroshenko: from $1.6 billion to $0.7 billion.

The Zelensky administration has also moved forward with implementing the Anti-Oligarch Law, which envisages the creation of an oligarchs’ registry. Last week the Security Council’s secretary Oleksiy Danylov said that the registry is under construction while his team investigates the legal grounds for declaring eighty-six citizens oligarchs. In October 2022 the Security Council announced a tender for the creation of the registry’s software. Moving ahead with plans for the registry has already had a noticeable impact on the oligarchs’ activities, though the registry itself does not yet exist.

The Zelensky administration has also continued stripping some of the oligarchs of Ukrainian citizenship. So far the best known of those who have lost citizenship are Ihor Kolomoisky, Hennadiy Korban, and Vadim Rabinovich. Rescinding the citizenship of these prominent figures has added to the general pressure on all oligarchs.

The Oligarchs Lose Shares in Industries Critical to the War Effort

The next critical step in deoligarchization was taken on November 6, 2022, when the National Commission for Securities and the Stock Market implemented the decision of the headquarters of the supreme commander-in-chief to seize the shares of major industrial companies owned by the oligarchs. This was done, in part, because of the importance of these companies to the war effort and in accordance with the Law of Ukraine “On the transfer, forced alienation or seizure of property under the conditions of the legal regime of war or state of emergency,” which calls for “forcefully alienat[ing] into state property” the shares of strategically important enterprises. The takeover affected, among others, five big oligarch-owned industrial companies:

·       Ukrnafta (42% of shares belonged to Kolomoisky);

·       Ukrtatnafta (60% of shares belonged to Kolomoisky and Henadiy Bogolyubov);

·       Motor Sich (56% of the shares were almost sold to Chinese investors by Vyacheslav Bohuslaev, but the deal was stopped by the Antimonopoly Committee, and Bohuslaev himself is under arrest);

·       AvtoKrAZ (owned by Kostyantyn Zhevago); and

·       Zaporozhtransformator (owned by Konstantin Hrygoryshyn).

The confiscated shares now are considered military property and are managed by the Ministry of Defense of Ukraine. At the end of martial law, in accordance with the law, either these shares will be returned to the owners or the owners will be reimbursed their value.

All the above-mentioned steps of the Zelensky administration show that deoligarchization not only is back on track during the war, it is now a much more radical process, changing the established political economy in Ukraine. The ongoing war and imposition of  martial law have provided the government with the opportunity to destroy the existing oligarchic clans.

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.

About the Author

Mykhailo Minakov

Mykhailo Minakov

Senior Advisor; Editor-in-Chief, Focus Ukraine Blog
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Kennan Institute

The Kennan Institute is the premier US center for advanced research on Russia and Eurasia and the oldest and largest regional program at the Woodrow Wilson International Center for Scholars. The Kennan Institute is committed to improving American understanding of Russia, Ukraine, Central Asia, the Caucasus, and the surrounding region though research and exchange.  Read more