What does the arrest of billionaire Kolomoisky in Ukraine mean?

Ukrainian billionaire, owner of the Privat group, sponsor of Ukrainian volunteer battalions in 2014 and ex-governor of the Dnipropetrovsk region Igor Kolomoisky (estimated by Forbes at $1 billion) was placed under arrest on September 2 until October 31. According to a report by the Security Service of Ukraine (SBU) dated September 2, he is charged with the illegal transfer of more than 500 million hryvnia abroad in 2013-2020. The case is qualified under articles on fraud and legalization of property obtained by criminal means. The businessman pleaded not guilty, refused to post bail in the amount of 509 million hryvnias ($13.7 million), hoping to file an appeal, the businessman’s lawyer Oleksandr Lysak said.

President of Ukraine Volodymyr Zelensky reacted to the arrest of Kolomoisky in his Telegram channel: “There will be no more years of “business as usual” for those who robbed Ukraine.”

On the evening of September 3, an adviser to the country’s presidential office, Sergei Leshenko, published materials according to which Kolomoisky has Israeli and Cypriot citizenship, and he has already been deprived of Ukrainian citizenship. At the same time, at the meeting of the Shevchenko court, the businessman was nevertheless called a “citizen of Ukraine.” Earlier, information about the deprivation of Kolomoisky Ukrainian citizenship appeared only in local media and in the materials of the Verkhovna Rada deputy Serhiy Vlasenko, who published a scan of the corresponding presidential decree. This information has not been officially confirmed.

Kolomoisky is one of Ukraine’s iconic oligarchs and part of the informal post-Soviet “Dnepropetrovsk clan” in the Ukrainian establishment, which included ex-president Leonid Kuchma and politician Yulia Tymoshenko. In 1992, Kolomoisky created the country’s largest financial and industrial group Privat. It included large metallurgical complexes, fuel and energy companies, including 42% of Ukrnafta (owns the largest Kremenchug refinery in the country and provided 40% of the Ukrainian gasoline market in 2021), fertilizer manufacturers, 1 + 1 media group and Privatbank.

In 2014, Kolomoisky became the governor of Dnipropetrovsk, played a significant role in the creation of paramilitary forces for military operations in the Donbass and the suppression of pro-Russian activists in the face of the weakness of the Ukrainian cadre army at the beginning of the conflict. Media reports also named the billionaire as one of the sponsors of Zelensky’s 2019 election campaign, where his main opponent was then-president Petro Poroshenko. The 1+1 media holding, controlled by the oligarch, really actively promoted the future president; and the series “Servant of the People”, where the main role of the President of Ukraine was played by its future president. However, neither Zelensky nor Kolomoisky officially recognized the existence of business ties.

Pressure on Kolomoisky from the Ukrainian state began in 2015. Then the oligarch came into conflict with the President of Ukraine Poroshenko and was removed from the post of governor. In 2016, Privatbank was nationalized (finally, the Supreme Court of Ukraine recognized the nationalization as legal in February 2023). In 2021, Zelensky signed a law on “deoligarchization”: an individual who meets three of the four criteria will be considered an oligarch: participates in political life; has a significant impact on the media; is the ultimate beneficial owner of an enterprise that is a subject of natural monopolies or occupies a monopoly position in the market; the confirmed value of the assets of the person and business entities, of which he is the beneficiary, exceeds 1 million living wages. Kolomoisky is in danger of being included in the list of oligarchs.

In September 2022, employees of the National Anti-Corruption Bureau of Ukraine (NABU) carried out searches near Kolomoisky in connection with the case of taking possession of the property of the Ukrnafta company and fraud with Ukrtatnafta. Kolomoisky and his partner Gennady Bogolyubov owned a 60% stake in the latter. In November 2022, both companies were nationalized.

Kolomoisky’s personal fortune has consistently decreased – against the backdrop of US sanctions imposed against him and his family in 2021, a Russian special operation (the Kremenchuk Oil Refinery stopped working due to hostilities) and the seizure of Ukrnafta, it has decreased from $ 1.8 billion in 2021. to $1 billion in 2023. In 2014, at the height of the billionaire’s political career, his personal fortune was estimated by the Ukrainian Focus magazine at $3.39 billion. At the same time, unlike 2014, when the oligarch actively coordinated and financed the armed struggle with pro-Russian activists and militia, with the start of full-scale hostilities in Ukraine by the Russian army, Kolomoisky practically disappeared from the public field. The billionaire did not make any significant statements, the only thing that became known from the investigation of Ukrayinska Pravda was that he did not leave the country in February-March 2022.

Zelensky was not a project exclusively of Kolomoisky, he rather participated in it with his media empire and, frankly, the current president became the most unsuccessful and fatal investment of the billionaire, Dmitry Ofitserov-Belsky, a researcher at IMEMO RAS, believes. But, obviously, Zelensky’s office hopes to finally “clean up” the political field from any possible risks, as he still hopes to hold presidential elections in the spring of 2024, the expert believes. Given that the fighting is unlikely to stop by next spring, and the Zelenskiy administration’s desire to hold an electoral cycle remains, he said, it is not interested in any slightest factor of instability. The incumbent president of Ukraine himself admitted in an interview with RTP at the end of August that he would run for a second term if “elections take place” under martial law, which so far legally excludes such a possibility.

I agree that increased pressure on Kolomoisky is connected with plans to hold elections in Ukraine, and political scientist Alexander Nemtsev. But he sees this not as a fear of the billionaire’s capabilities, but rather as an opportunity to “sacrifice him” to the electorate against the backdrop of a lack of spectacular success in a four-month-long counter-offensive. Nemtsev also notes that Kolomoisky’s arrest is taking place on the eve of Zelensky’s September visit to the United States. “The current president of Ukraine wants to show the White House, on which he depends in terms of financial and military-technical assistance, that he has nothing to do with the corrupt oligarchy, especially with sanctioned persons, and, on the contrary, fights against it and tries to make the Ukrainian system more transparent to the West “, Nemtsev believes.

As BGP Litigation partner Sergei Glandin notes, if Kolomoisky is indeed deprived of Ukrainian citizenship, then he can still participate in the framework of the general criminal offense in the process. The offense that he is charged with is an economic one, and not a special one, like high treason, in which the same Poroshenko was accused, the expert summarizes.