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May 21, 2021, Ukraine: Demonstrators hold smoke bombs outside the Appeal Court of Kyiv.
For many commentators, the indictment of the Israeli-Cypriot businessman, until recently considered one of the most influential in the country, was symbolic. It could signal the end of impunity for the wealthy elites who have reigned undivided over Ukraine's political and economic life since 1991.
"The era of the oligarchs is over", declared the Minister of Justice, Denys Maliouska, triumphantly on social networks just a few minutes after the announcement of Kolomoisky’s indictment.
A former governor of the Dnipro region and co-founder of Privatbank, the country's largest banking institution, Kolomoïsky is one of a small circle of businessmen and "red directors": the descendants of the Soviet managerial class who, after the collapse of the USSR, took advantage of successive waves of privatisation to appropriate Ukraine's vast industrial and mining wealth.
With political instability and endemic corruption, the country's new strongmen built up huge empires, buying the loyalty or silence of the police and magistrates, all while pulling the levers of power.
October 12, 2021, Kiev: Protest in the entrance of the Rada Parliament against the oligarchs' influence in the policy of Ukraine.
Celestino Arce Lavin/ZUMA
In 2008, as Ukraine sank into a major economic crisis, the fortunes of the oligarchs reached new heights: the combined wealth of the 50 richest people in Ukraine was equivalent to 85% of the country's GDP. At the same time, a large majority of the population was feeling the full brunt of the devaluation of the hryvnia, the Ukrainian currency.
When Viktor Yanukovych and the Party of Regions came to power in 2010, the plundering of the state by the oligarchs attained its peak. The corruption and nepotism that characterised Yanukovych's presidency contributed to his downfall during the Maidan revolution in 2014.
The reforms initiated by his successor, chocolate magnate Petro Poroshenko, were not enough to neutralise the influence of the oligarchs on the country's political life.
But the Russian invasion in February 2022 and the destruction it wrought reshuffled the cards. According to Forbes Ukraine, the country's 100 richest people in 2021 derived most of their income from metallurgy (17%), energy (15%), and real estate (12%), the sectors hardest hit by the war.
In less than a year, the oligarchs have suffered colossal losses. According to a study published at the end of 2022 by the Centre for Economic Strategy, an independent research institute, the wealth of Ukraine's leading business tycoons has fallen by $4.5 billion since the start of the invasion. The cause: the destruction of energy, industrial, and transport infrastructures, as well as the systematic confiscation by the Russian authorities of companies, commercial assets, and agricultural products in the occupied territories.
Rinat Akhmetov, the richest man in Ukraine and a native of Donetsk, is one of the biggest losers among the oligarchs: many of his assets are located in the Donbass, the region in the east of the country where the war has been raging since 2014 and where most of the fighting is now concentrated.
Billionaire Ihor Kolomoyskyi in front of PrivatBank HQ in Dnipropetrovsk.
The Azovstal and Ilyich metallurgical plants in Mariupol, operated by Metinvest, a subsidiary of Akhmetov's holding company System Capital Management, were destroyed during the siege of the city, and then captured by the Russian army. The Avdiivka coke plant, the largest in Europe, had to cease operations after being damaged by Russian strikes, while the facilities of the DTEK Energy group, also owned by Akhmetov, are said to have been bombed 27 times since the start of the invasion.
In June 2022, the businessman lodged a complaint against Russia with the European Court of Human Rights, claiming $10 billion in compensation for his Mariupol plants.
Ihor Kolomoïsky is said to have lost more than $400 million following the destruction in April 2022 of the Krementchuk oil refinery, the country's largest. The loss also translated to a radical reduction in his political influence.
Petro Poroshenko has not been spared either: according to Forbes, his fortune fell from $1.6 billion to $700 million following the Russian invasion.
This financial loss suffered by the oligarchs is only one of the factors
"This loss of economic capital and the destruction of local power systems led to a reconfiguration of the oligarchic system", explains Anastasia Fomitchova, a doctoral student in political science and member of the Ukrainian Studies Chair at the University of Ottawa.
The financial loss suffered by the oligarchs, while spectacular, is only one of the factors behind the decline in their political influence. According to Fomitchova, the introduction of martial law also deprived the economic elites of their traditional channels of influence within the political class, radically transforming the way the institutions functioned.
“Since February 2022, the political agenda has been dictated by the needs of the war and European integration," she says. “The reforms that are passed are validated upstream by the presidential party, which holds the majority, and parliamentary debates are limited".
In her opinion, the change in the legislative process has hampered the strategies of the oligarchs, who would earlier use MPs sympathetic to their cause to propose bills favourable to their private interests.
Kiev, Ukraine - December 17, 2021: Viktor Medvedchuk attends a hearing against the Pecherskyi District Court's decision to place him under house arrest.
TASS/ZUMA
No one has suffered more from this reconfiguration of the Ukrainian political landscape than Viktor Medvedchuk, long considered one of the country's most influential oligarchs. On the eve of the invasion, this man close to Vladimir Putin was accused of high treason for having participated in the illegal extraction of natural gas in the Black Sea with Russia. He was then placed under house arrest.
However, four days after the start of the invasion, Medvedchuk escaped, only to be apprehended as he tried to flee the country. His opposition party Platform For Life was banned by decree of the Ukrainian president in March 2022.
Pressure from Ukraine's western partners led to the adoption of major de-oligarchisation and anti-corruption measures, sine qua non conditions for the country to join the European Union, and has also proved decisive in circumscribing the influence of the oligarchs.
"Thanks to pressure from the allied countries, the Ukrainian government was forced to take measures against corruption, even though some of them were rather uncomfortable", confirms Yaroslav Yurchishin, MP for the Holos (Voice) party and former Executive Director of Transparency International Ukraine.
An anti-oligarch law adopted in 2021 requires oligarchs to make a full declaration of their income and prohibits them from taking part in the privatisation of major companies and financing political parties. This last clause alone constitutes a veritable revolution, even though President Volodymyr Zelensky had benefited from the support of Kolomoïsky during his own presidential campaign.
It will take years to fully neutralize corruption.
"Before the war, the decisions taken by the government benefited the oligarchs. But the war changed all that," says Mark Savchuk, Chairman of the Supervisory Board of the National Anti-Corruption Bureau. “Now that Zelensky has arrogated more power to himself and no longer needs to make compromises with them, he is finally carrying out the necessary reforms".
Adds Fomitchova: "The government's determination to tackle the oligarchs, [together with] pressure from civil society and Western partners will lead to the introduction of effective institutional mechanisms to combat the connections between the economic and political spheres."
Yurchishin is more cautious. The leader believes that it will take "years" to fully neutralize corruption and the disproportionate influence of the oligarchs on political life. "We need a global approach that includes an effective anti-monopoly policy, greater transparency in public procurement and a strengthening of media pluralism," he says.
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