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Sergii Leshchenko

Throwing Their Weight Around

President Yanukovych is losing his support among Ukraine's oligarchs -- and that could be the key to his fate.


When Rinat Akhmetov celebrated his birthday a few years back, he counted among his gifts a painting and best wishes from none other than Viktor Yanukovych, the president of Ukraine. Few of their compatriots paid much attention. After all, Yanukovych and Akhmetov, who both hail from the same hardscrabble industrial town, have been close allies for decades. Many Ukrainians, indeed,regard the president as a virtual protégé of Akhmetov, who happens to be the richest man in the country.

But a lot has happened since then. In November, Ukrainians took to the street to protest their president's last-minute decision to back out of an agreement on closer cooperation with the European Union. For a while it seemed as if Akhmetov was unwilling to distance himself from his old friend, at least in public. But after Ukrainian security forces opened fire on protestors last month, killing several, Akhmetov (estimated personal wealth: $15.4 billion) published a statement on his company website that condemned the deaths and called for "peaceful action" and "constructive negotiations and results." Just hours later, Yanukovychoffered jobs in his cabinet to two leaders of the opposition -- who quickly denounced the offer as too little, too late. Either way, it was hard to avoid the conclusion that Yanukovych isn't feeling pressure only from the streets.

The protests in the center of the Ukrainian capital of Kiev have now spread across the country. But it is not the protestors alone who will decide the president's fate. 

The political class will also have its say -- and no one within that class is more powerful than Ukraine's oligarchs, the billionaire business tycoons who together own a vastly disproportionate share of the country's wealth.(Akhmetov, for example, commands the loyalties of around 50 of the 450-member parliament -- among them his former driver, his head of security, and his family lawyer. This group has generally supported Yanukovych throughout the crisis.)

Some oligarchs have opposed the president from the start, of course. Perhaps the best example is Viktor Pinchuk, who amassed many of his assets during the reign of previous President Leonid Kuchma -- who happened to be Pinchuk's father-in-law. In more recent years Pinchuk has rebranded himself as a fan of shareholder-friendly business practices and close ties with the West. The owner of a mansion in one of London's priciest neighborhoods, Pinchuk opened an event during last month's World Economic Forum in Davos with a moment of silence for the protesters who were killed in the center of Kiev. Pinchuk came out in favor of the protests early in December, and his newspaper, Facts, suddenly began reprinting articles from online media that were sharply critical of the president.

Yet Pinchuk may be motivated less by his admiration for Western values than by cold self-interest. Like many of the other oligarchs, he evidently sees closer alignment with the European Union as a prelude to tariff-free access for his exports -- and he also knows that an authoritarian crackdown by Yanukovych would be likely to prompt European and United States sanctions that could complicate doing business with the outside world. And moving closer to the Moscow-engineered Customs Union, which already includes ex-Soviet republics such as Kazakhstan and Belarus in addition to Russia itself, could potentially make Ukrainian businessmen vulnerable to takeover bids by their Russian rivals.

Can Pinchuk's camp bring others to its side? One candidate for defection is Dmitry Firtash, whose personal fortune is estimated at $3.8 billion. Firtash, who also controls a significant bloc of parliamentary votes, is a former firefighter who once allegedly admitted to U.S. diplomats in Kiev his ties to mobster Semyon Mogilevich, one of the FBI's "Ten Most Wanted Criminals." (Firtash has since denied "any partnership or other commercial association" with Mogilevich.) A founding member of the scandal-plagued gas trade company RosUkrEnergo, which has earned hundreds of millions of dollars from its monopoly on gas, Firtash has long remained close to Yanukovych. Among other signs of support, he transformed his TV channel, Inter(the biggest network in Ukraine), into a government propaganda machine.

But now Firtash, too, is trying to hedge his bets. Over the past few years, Firtash has tried to polish his reputation in the West by launching PR campaigns and cozying up to the British elite -- part of an effort to fend off possible sanctions by the United Kingdom or the EU. (He's already persona non grata in the United States.) Recently, a close Firtash ally named Sergii Liovochkin resigned from his job as Yanukovych's chief of staff -- then turned up in Davos, where he took care to present himself as a thoroughly pro-European politician.

It's Akhmetov, though, who -- thanks to his long years of association with the embattled president -- may face the biggest challenge when it comes to straddling the growing gulf between president and opposition. Akhmetov, ranked by Forbes as the 47th richest man in the world, rose from obscure beginnings in the industrial city of Donetsk to amass vast assets in mining, metals, real estate, and telecommunications. (He first attracted national notice when he became the head of the Donetsk soccer club after his predecessor in the job, a well-known local criminal, was blown up by a bomb.) And even as Akhmetov luxuriates in his $200 million London flat and his $30 million French chalet, he has done his best to cultivate his contacts on both sides of the political divide back home in Ukraine.

Publicly, Akhmetov still supports Yanukovych -- but he also negotiates regularly with opposition leader Arseniy Yatsenyuk (one of the opposition figures who was offered a job by the president). It has also been widely noted in Kiev that Akhmetov has yet to cut off the power supply to protester-controlled areas of the capital, even though he controls the relevant energy distribution company. Akhmetov's normally pro-government Ukrainian television channel has also given airtime to opposition leaders.

The oligarchs are a sensitive topic for Ukrainians. One of the issues that fueled the current wave of protests is a general awareness of the oversized role played by tycoons in the country's political and economic life. (The photo above shows a recent protest outside Akhmetov's Kiev office.) Yanukovych has inspired public anger by enabling the rise of the so-called "Family," a group of high-ranking officials who gained office through their connections with Yanukovych's son Oleksandr. Oleksandr has a history of opaque business dealings that have won him a vast fortune estimated at half a billion dollars; he also controls Ukraine's much-criticized security forces. Last fall the Family also stirred controversy through its purchase of one of Ukraine's few remaining independent magazines,prompting the departure of dozens of journalists who accused the new owners of censoring coverage unfavorable to the government.

Indeed, Yanukovych's efforts to maximize his own political and economic power have aggravated the oligarchs as well. Pinchuk and another tycoon by the name of Igor Kolomoysky hail from the city of Dnipropetrovsk, where Yanukovych appointed one of his own loyalists to the key job of provincial governor in 2010. That slap in the face gave the city's tycoons an additional reason to back the opposition. Geneva-based Kolomoysky has since allowed his television channel, 1+1, to support the protesters despite intense pressure from government officials to do otherwise.

Yet most of the oligarchs have shied away from criticizing Yanukovych all too directly -- perhaps because they suspect that the president isn't willing to surrender power. The main exception is Petro Poroshenko, the so-called "chocolate king of Ukraine," whose core business has been hit particularly hard by recent Russian moves to pressure Ukraine economically into toeing the Kremlin line (including restrictions on Ukrainian chocolate imports). Poroshenko regularly speaks on one of the main opposition TV networks. He also frequently visits Western Europe to discuss means for resolving the crisis with senior EU officials, and makes no secret of his aspiration to be prime minister. According to the latest polls, he has the third-highest level of support in the country -- right after Yanukovych and opposition leader Vitaly Klitchko.

Yanukovych and the oligarchs are also highly sensitive to pressure from the outside. U.S. sources say that Western banks, worried by the recent turmoil, have recently refused to extend credit lines for some of the oligarchs. It's rumored that similar hesitations by some of Ahkmetov's Swiss banks may have persuaded him to order his parliamentarians to vote for the resignation of Yanukovych's cabinet and against a recent package of legislation aimed at suppressing the protests. In other cases, though, the oligarchs' forces have continued to vote with the government.

The U.S. use of targeted financial and visa sanctions has apparently unnerved the tycoons oligarchs who have indirectly controlled Ukrainian politics for decades, and who have funded Yanukovych's ruling party. Their families live in London and Vienna, enjoy the benefits of European values such as democracy and the rule of law, and enrich themselves using capital from European markets. In a perfect world, removing the oligarchs from politics altogether would seem to be the solution of many of Ukraine's problems -- but such a goal is simply unrealistic. The oligarchs are simply too deeply integrated into politics and society. The best hope, perhaps, is to use the oligarchs' experience of Western life to convince them of the advantages of furthering Ukrainian democracy. The future of a truly democratic Ukraine depends on it.




Feb 05 2014