Ukraine Oligarchs

The oligarchs dominate key sectors of the Ukrainian economy, including natural resources, and have been accused by critics of blocking competition, including from foreign investors. Reducing the influence of tycoons would open up Ukraine's economy to more investors and entrepreneurs, benefiting the country. When there is concentration in one hand of not just influence but also access to capital and resources, it does not contribute to the normal development of the economy. However, Ukraine also needed strong corporate governance, especially at its largest state-owned companies, in order to attract more investment.

The word oligarchy comes from the Greek root words oligos or óligon (which means “few”) and arkhein or arkho (which means “rule”). Between about 800 BC and 650 BC, most Greek city-states were ruled by a small group of men. These men were called oligarchs, and they often ruled like kings who shared power together. In Ancient Athens, which is a classic example of an oligarchy, the top government positions were only held by the elite class, or the aristocracy. The oligarchs of ancient Greece used their power to ignore the needs of the people. Over time, hatred for the oligarchs grew. Eventually, the poor people turned to other leaders.

Ukraine’s richest man, Rinat Akhmetov, announced 11 July 2022 his investment company will exit its media business to comply with legislation passed last year aimed at curbing the influence of “oligarchs” in the country. In a statement sent to the Reuters news agency, Akhmetov said Media Group Ukraine would hand over the licences for its television channels and print media to the Ukrainian state and cease online media. Akhmetov said his System Capital Management (SCM) investment company was unable to sell its media business on market terms because of Russia’s war in Ukraine and a six-month term outlined by the anti-oligarch legislation for the sale of media assets. “Being the largest private investor in the Ukrainian economy, I have repeatedly stated that I have never been and am not going to be an oligarch,” he said.

Many Ukrainian oligarchs are involved in corrupt acts that undermine rule of law and the Ukrainian public’s faith in their government’s democratic institutions and public processes, including using political influence and official power for personal benefit. Oligarch's efforts to undermine Ukraine’s democratic processes and institutions, which pose a serious threat to its future.

Although the names and fortunes have changed, the oligarchic system of rule has come to characterize Ukraine and is the most significant reason why reforms continue to elude the country. Many of Ukraine's political parties are linked in one way or another to the oligarchs, who view business and political life as indivisible. Taras Kuzio, an expert on Ukrainian politics, writes, "Ukraine's oligarchs do not commit to deeply held ideological preferences, and personalities matter more than political party programs. Western Ukrainians have dominated the pro-Russian gas lobby even though the region was always anti-Russian in its national identity."

Most of the time, two-thirds of parliamentarians have been business millionaires, who look at their seat as an exchange for money and state favors. A perennial issue is the existence and abuse of parliamentary immunity, afforded to every Member of the Rada, which oligarchs exploit when they feel legally threatened.

The oligarchs represent the single most significant factor behind the persistence of corruption in Ukraine. Ukrainian oligarchs have successfully managed to block the creation of parties that could have promoted reforms that would have been in the interest of all Ukrainian citizens.

Kuzio writes, "Oligarchs prevent the emergence of a level playing field in politics by blocking the entrance of genuine political parties into the political arena." Every party is a piece in the oligarchs "politics-as-business" and reliant on oligarchs for the funding necessary to compete. Thereby, parties become indebted to oligarchs and support their political preferences, which are non-ideological and tolerant of corruption. This influence peddling is facilitated by Ukraine's lack of constraints on political donations. Moreover, Ukraine's ``winner-take-all'' political system makes it possible for oligarchs to prevent the emergence of any truly national force that could crack down on corrupt practices.

Oligarchic interest groups have promoted politicians and parties of all kinds who have focused solely on securing clear regional voting bases, and pitting different segments of Ukrainian society against each other, by exploiting the fault lines in Ukrainian identity and historical memory for their own political and economic purposes. Kuzio comments, "Their funding of pro-Western political forces (for example) should not be misunderstood as backing reforms, fighting corruption, or promoting European integration, but instead understood as opportunism and survival tactics."

For example, a pro-Russian campaign targeting primarily southeastern Ukrainian citizens, mainly Russian-speaking and ethnic Russian, led to Kuchma's first electoral win in 1994. Only five years later - once his oligarch supporters' personal, political, and economic calculations required a change in political orientation - he managed to campaign and win elections on a pro-Western, ethnic Ukrainian platform targeting mostly western Ukrainians, a traditionally more nationalist voting base.

While Presidents Yushchenko and Yanukovych did not flip-flop on their core constituencies, both built their presidential campaigns, and later governed, based on the divisions of identity in Ukrainian society, instead of attempting to build real national parties. Kuzio concludes, "The key to Ukraine breaking free of the partial reform equilibrium and entering the path of European integration is the political will to demonopolize Ukraine's economy, politics, and media by reducing the power of the oligarchs and separating business and politics."

The general weakness of the oligarchs in the post-Euromaidan world, exemplified by Rinat Akhmetov's tremendous financial losses, led to corruption retreating to the Rada, where parliamentary immunity protects against, or at least delays, prosecution and grey cardinals finance parliamentary factions through corrupt funds in exchange for loyalty guarantees. Until this holdout is tackled, business and politics will not be separate in Ukraine.

Ukrainian President Volodymyr Zelenskiy's Servant of the People party on 01 July 2021 approved in the first reading a draft bill -- known as "the oligarch law" -- that seeks to introduce a legal definition for a tycoon and impose limitations, including blocking them from financing political parties.

Bill #5599 on de-oligarchization noted that " this law is aimed at overcoming the conflict of interest caused by the merger of politicians, media and big business, ensuring Ukraine's national security in economic, political and information spheres, protecting democracy, ensuring state sovereignty and avoiding manipulation of citizens with intentionally distorted information in order to gain access to resources owned by the Ukrainian people."

According to the bill, a person would be designated an oligarch if he or she meets three of four criteria, including

1. holding a near monopolistic position in a particular industry;
2. possessing "significant" media assets;
3. being active in the nation’s political life; and
4. possessing more than 2.27 billion hryvnyas ($84 million) in net wealth.

Ukraine had 100 people with a net worth of at least $125 million as of 2021, according to Forbes. The influence on mass media means being a beneficial owner and/or controller of mass media. Or if a person sells such media to a person who does not have “an impeccable business reputation” after the adoption of the law and it's coming into force.

And "participation in political life" means being in the office of the president of Ukraine, Chairman of the Verkhovna Rada, First Deputy and Deputy Chairman of the Verkhovna Rada, parliamentarian, Prime Minister, First Vice-Prime Minister, Vice-Prime Minister, Minister, his/her First Deputy and Deputy, etc.; having position in the leading bodies of a political party; or financing a political party, political agitation or holding rallies or demonstrations with political demands. For the second reading, the point is added that one of the signs of “participation in the political life” is the payment of money, performance of activities, provision of goods or services in favor of partakers of political agitation, protests, or rallies with political demands or members of their families. In fact, almost every citizen can fall under such criteria.

The sign of the significant influence on mass media is not considered absent in case if the status of the beneficial owner (controller) of a proper mass media was handed from a person included in the register to the person tied with him/her or a person who does not have “an impeccable business reputation”.

An impeccable business reputation means the presence of criminal history on record; sanctions introduced by Ukraine and other states (except Russia) or interstate unions, or organizations; inclusion of a person to the list of people tied with the execution of terrorist activity; deprivation of a person of the right to occupy particular positions according to the indictment; improper holding of duties on payment of tax, fees and other obligatory payments, if the total sum equals or exceeds 100 minimal month wages; purchase of mass media on significantly lower marker price for money, which source is not confirmed documental; significant and/or systematic violations of the demand of legislation on mass media, banking, financial, currency, taxation legislation, legislation on financial monitoring, legislation on securities, stock companies, and share market.

People who are put in the register of oligarchs are forbidden:

1. to pay contributions (directly or indirectly through other people) to support political parties in accordance with the Law of Ukraine On political parties in Ukraine;
2. to finance any political agitation, holding of protests or rallies with political demands or slogans (change for the second reading).
3. to be a purchaser (beneficiary of a purchaser) in the process of privatization of objects of big privatization in the sale of state assets. While Ukraine has sold off many assets and companies it inherited when the Soviet Union collapsed, it still held hundreds in its portfolio. Zelenskiy had said he plans to accelerate privatizations.

In case of contact of an official with a person, included in the register, or his/her representative, such official is obliged to file a declaration on contact. Contact means meeting and talk (including online) of any content. ill also contains a list of officials, who will be obliged to file declarations on contacts in case of contact with an oligarch or his/her representative. Such duty will be provided to:

1. president, chair of parliament, first vice speaker and vice speaker; MPs, PM, all members of government and their deputies, SBU Head and his deputies, prosecutor general and his deputies, the National Bank head and his deputies;
2. judges of the Constitutional court, judges;
3. heads of permanently working subsidiary bodies created by the president and their deputies;
4. chair and members of the National Council on TV and Radio Broadcasting, Anti-Monopoly Committee, Accounts Chamber, Central Election Commission, other state collegiate bodies, chair and members of the Highest Council of Justice;
5. NSDC Secretary and his deputies;
6. chair and deputies of the State Committee of TV and Radio Broadcasting of Ukraine, State Property Fund, National Agency on Corruption Prevention, National Anti-Corruption Bureau of Ukraine, State Bureau of Investigations, Financial Investigations Service;
7. commissioner of the Ukrainian parliament on human rights;
8. officials who occupy positions of category A (category B was added for the second reading);
9. heads of local state administrations, their first deputies and deputies;
10. military men of the Armed Forces of Ukraine and other military formations with top of grade;
11. persons from the senior officers of the law enforcement bodies and employees of other bodies who have top of grade;
12. foster servants of the President’s Office, the Verkhovna Rada of Ukraine (including assistants of MPs) (second reading);
13. heads of the state enterprises and heads of enterprises where the state is the majority stakeholder (second reading).

The declaration of contacts will have to be submitted through the Security and Defense Council website no later than the next day after the meeting, indicating the date and place of the meeting and a summary of the conversation. Failure to submit a declaration will entail political and/or disciplinary liability.

Ukrainian lawmakers approved the draft bill directed at limiting the influence of oligarchs, and the day after a car carrying a top aide of President Volodymyr Zelenskiy, who pushed for the reform, was riddled with bullets as it traveled through a village. The second and final reading of the proposed legislation -- known as "the oligarch law" -- was adopted by the Verkhovna Rada on 23 September 2021. Zelenskiy's team suggested anger at the law could be behind an attempt to assassinate Serhiy Shefir, a top aide and close friend of the president, on September 22. Shefir was not injured, but his driver was hospitalized with gunshot wounds.

According to the bill, Ukraine's National Security and Defense Council would make the final determination of whether an individual meets the criteria of a person having significant economic or political influence in public life, or oligarch. The Council of Ministers, members of the central bank, the Defense Council, the Anti-Monopoly Ministry, or the Security Service (SBU), have the right to submit the name of a tycoon for review by the council.

Petro Poroshenko, Zelenskiy's main political rival, could potentially meet the criteria, which has raised concerns that the bill may be used to target political opponents. Poroshenko, who heads the political party European Solidarity, is a billionaire with assets ranging from chocolate bars to media.

Zelenskiy said the sanctioning of his political rival and tycoon Viktor Medvedchuk in February 2021 was “just the beginning" of his "de-oligarchization" agenda. Medvedchuk, the leader of a Kremlin-leaning political party who is also under sanctions by the United States, was accused by Kyiv of supporting Moscow-backed rebels in two regions of eastern Ukraine. His assets in Ukraine, including his media companies, have been frozen and he is currently on trial for treason, charges he calls politically motivated. "There will be many more such measures until all of Ukraine’s oligarchs are cut down to size and reduced to the status of ordinary big businessmen," Zelenskiy said.

The United States has long called on Ukraine to tackle the handful of tycoons who wield enormous political influence from behind the scenes to the detriment of the country and its citizens. “The US State Department is persuading Zelensky to cut off the oligarchs from public budget money flows, deprive them of their monopolies, the media and the ability to influence the parliament through groups of their deputies. President Zelensky publicly announced the beginning of the process of de-oligarchization, but he cannot just cut himself off from the oligarchs – his victory in the 2019 elections was possible thanks to the oligarchic consensus against Poroshenko: I. Kolomoisky, R. Akhmetov and D. Firtash played a key role in this process”, the Fakeoff wrote.