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Sunset of the oligarchs: Ukraine’s war-time nationalization of strategic enterprises rectifies past sins

fight against corruption ukraine nationalization enterprizes
Fight against corruption and nationalization of major enterprises in Ukraine/ Source: Canva collage by Euromaidan Press
Sunset of the oligarchs: Ukraine’s war-time nationalization of strategic enterprises rectifies past sins
Edited by: Michael Garrod, Kate Ryabchiy
Ukraine’s far-reaching move on 6 November to nationalize five strategic enterprises rectifies the errors of the 1990s when the early oligarchs privatized large Soviet enterprises without due process, thereby enriching a few later known as oligarchs. It is both a decisive and symbolic blow to Ukraine’s oligarchy, effectively reducing its political influence. Despite the move receiving little attention during the war, this would not have been possible without preceding work and reforms.

In Ukraine, reforms initiated in 2014 reduced the space for oligarchic schemes while strengthening state institutions. In 2016, the nationalization of the state’s largest bank, Privatbank, from the country’s notorious oligarch Ihor Kolomoiskyi became the first instance of severe punishment for money laundering. Since the establishment of the National Anti-Corruption Bureau (NABU) in 2015 and the High Anti-Corruption Court in 2019, punishment for large-scale corruption has become systemic.

The nationalization of five enterprises on 6 November 2022 targets the country’s most powerful oligarchs who have already started losing influence due to previous criminal proceedings:

kostiantyn zhevaho oligarch

Kostiantyn Zhevaho/ Source: Wikipedia

Kostiantyn Zhevaho, formerly one of the top five of Ukraine’s wealthiest, recently lost his Avtokraz company. It manufactured heavy vehicles, including those used by the military. He spent years abroad while on Interpol’s wanted list since 2019 at Ukraine’s request. He is accused of laundering $113 million through his bank, Finances, and Credit, which was declared insolvent by the state and liquidated.

kostiantyn hryhoryshyn russian ukrainian businessman billionaire

Kostiantyn Hryhoryshyn/ Source: (Photo: InA “Ukrainian photo”),

Kostiantyn Hryhoryshyn lost the Zaporizhtransfomator factory producing electricity transformers. It is only the latest blow to his energy empire.

ihor kolomoyskyi ukraine oligarch

Ihor Kolomoyskyi/ Source: First Western, photo: Minfin

Ihor Kolomoiskyi, the country’s best-known oligarch, sanctioned by the US, lost shares in two oil companies, Ukrtatnafta and Ukrnafta. Ukraine nationalized one of the biggest oil production companies, gas station networks, and Ukraine’s largest oil refinery in Kremenchuk.

This move is particularly significant given Kolomoiskyi’s reputation as an oligarch who supported Zelenskyy during the 2019 elections. In early September, NABU announced suspicions against the former head of Ukrnafta and seven other former employees. They are suspected of seizing the company’s assets and funds worth UAH 13.3 billion in 2015.

On 17 September 2022, NABU detectives came to Kolomoiskyi with a search warrant for this case.

viacheslav bohuslaev ukriane businessman arrested motor sich

Viacheslav Bohuslaiev/ Source: Wikipedia

Viacheslav Bohuslaiev lost influence over the Motor Sich factory manufacturing helicopter engines and was also arrested alongside the head of the company’s department of foreign economic activity, Oleh Dziuba. They were accused of collaborating with Russian invaders by supplying engines to Russia.

These are the biggest cases, decided in a single package.

Additionally, Ukraine is actively seizing property owned by Russian oligarchs in Ukraine. For example, the High Anti-Corruption Court of Ukraine (HACC) confiscated 17 real estate assets of Putin’s oligarch Vladimir Yevtushenkov.

Furthermore, on 22 November 2022, the Ukrainian security service conducted searches at VS Energy, a company owned by Russian oligarchs Yevgenii Giner, Mikhail Voevodin, and Aleksandr Babakov. The company owns several regional energy distributors in Ukraine and controls up to 10% of the Ukrainian energy market.

Shares of five strategic companies taken over by Ukraine Defense Ministry

According to the law “On the transfer of property under martial law,” the government is required to compensate the value of the enterprises nationalized during martial law for military needs. It must provide compensation or return the property in the course of one year after martial law ends.

However, given the numerous investigations and criminal proceedings against oligarchs, particularly the owner of the most important company Motor Sich, Viacheslav Bohuslaiev, it is unlikely that they will ever be compensated.

The end of post-Soviet oligarchs in Ukraine

The 1990s and early 2000s were the golden age for oligarchs in Ukraine. However, these times have passed and nowadays, the state of oligarchs in Ukraine is little different from that in other European countries.
When the USSR collapsed in 1991, shares of the largest state companies were distributed among their thousands of workers as part of the privatization campaign.

However, since the stock market was not yet formed, each individual share had little meaning for employees. They mostly sold their shares for symbolic prices or some manufactured goods to the post-Soviet managers of the companies or those who understood quickly the value of assets. In this way, Ukraine’s large state energy, metallurgical, and engineering enterprises ended up in the hands of a few dozen oligarchs.

Through owning also the country’s biggest TV channels and financing political parties, the oligarchs started wielding their influence on politics. However, the situation started changing in the 2000s, when the number of small and medium enterprises skyrocketed as the economy gradually became more liberalized and bureucracy was simplified. The introduction of the simplified tax system for small entrepreneurs (FOPs), and online registration of businesses with low taxes, which was gradually implemented after 1998, is one of the examples of this.

Also, gradual reforms of state institutions limited the possibilities of oligarchs to launder money. For example, the ProZorro state procurement system to buy goods and services for the state on the basis of transparent and free e-competition, introduced in 2016, ended the previous practice of inflated procurement prices and oligarchs lobbying their companies for state procurement.
Finally, the introduction of new anti-corruption institutions in 2015-2019, including the National Anti-Corruption Bureau and Special Anti-Corruption court, became the next decisive blow against oligarchic influence.

Russia’s 2022 full-scale war damaged many of the big enterprises of the Ukrainian oligarchs as well as empowered state institutions that started correcting the mistakes of the 1990s by taking some of the oligarchic property back.

Oligarchs today have generally turned to ordinary business owners. Their attempts to control politics were becoming increasingly inefficient after 2014 and finally almost impossible during the full-scale war. The cases of Rinat Akhmetov and Petro Poroshenko selling their TV channels in 2021 and 2022 are a particular demonstration of how the power of oligarchs comes to end in Ukraine.

The case of Motor Sich company is of particular importance. Not only had the state seized the company’s property, it also arrested its former owner and president, one of the oligarchs Viacheslav Bohuslaiev, accused of collaboration with Russians:

How Ukraine’s helicopter tsar helped arm the enemy

Read more:

Edited by: Michael Garrod, Kate Ryabchiy
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