Less than two years ago, Volodymyr Zelenskyy was elected as Ukraine’s sixth president with an overwhelming mandate to transform the country. First and foremost, this meant ending almost thirty years of oligarch domination that had left Ukraine mired in poverty and corruption. President Zelenskyy is now making good on his election promises and combating oligarch influence in ways that eluded his predecessors.
The rise of Ukraine’s oligarch class dates back to the early 1990s, when a select few were able to acquire enormous wealth during the privatizations that followed the collapse of the USSR. This small group of billionaires then used their personal fortunes to build media empires and establish networks of influence extending deep into Ukraine’s political structures, judiciary, and state organs. They have remained in this dominant position ever since.
Ukraine’s oligarchic system has proven highly resilient, outliving numerous governments and coming through the turbulence of two separate post-Soviet revolutions more or less intact. Each successive drive to change the system has resulted in innovative new ways to maintain the unfair advantages and artificial monopolies that form the foundation stones of the oligarchic economic system. The overwhelming might of the oligarchs has kept Ukraine trapped in an obsolete and dysfunctional past while preventing the country from reaching its true potential.
This was the political environment inherited by Volodymyr Zelenskyy in spring 2019. As a successful businessman in his own right who had emerged from the regions to establish himself in the oligarch-dominated Ukrainian media industry, Zelenskyy was personally familiar with the realities of the situation. His status as a political outsider, along with his track record for accurately portraying the problems created by Ukraine’s oligarchs, were key factors behind his landslide election victory. In recent months, Zelenskyy’s team has initiated a number of steps that indicate a readiness to reduce oligarch influence.
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One of the biggest scandals to rock Ukraine in early 2021 was closely associated with oligarch Dmitry Firtash. The controversy revolved around sharp rises in gas tariffs for Ukrainian households. These price increases were connected to recently launched gas market reforms and sparked protests across the country. As the dominant figure in the domestic gas market responsible for supplies to around 88% of all residential users, Firtash stood to make a fortune from higher tariffs.
It was clear that the attempt to create a residential gas market had been poorly executed, with Ukrainian households unable to easily switch suppliers. Instead, millions found themselves hostage to price hikes. Once again, we were reminded of why so many Ukrainians remain deeply skeptical about the ability of reforms to transform their lives for the better.
In response to the gas price crisis, the Zelenskyy administration opted to temporarily resume state regulation of energy market prices. Meanwhile, communication initiatives were launched to better inform the Ukrainian public on how to switch from one gas supplier to another. Within one week, regional gas companies were complaining about massive outflows of customers in excess of 10,000 per day. In order to win back these clients, the current gas suppliers controlled by oligarch interests must compete with new market entrants.
This is just one example of the Zelenskyy administration’s commitment to dismantling the schemes and structures that perpetuate oligarchic control over the Ukrainian economy. President Zelenskyy is all too aware that many Ukrainians have seen little material benefit from the numerous reforms initiated since 2014. He knows that in order to live up to his billing as a transformative figure in Ukrainian history, he must demonstrate the political will to conduct genuine reforms that undermine the dominance of the oligarchs.
Eurasia Center events
Nothing illustrates President Zelenskyy’s will to counter oligarch influence quite as clearly as the series of recent measures adopted in relation to Viktor Medvedchuk. Ever since the 1990s, Medvedchuk has been a hugely influential figure in the worlds of Ukrainian business and politics. A personal friend of Vladimir Putin who counts the Russian president as godfather to his daughter, Medvedchuk has openly promoted the Kremlin agenda in Ukraine for years.
Despite the outbreak of hostilities between Russia and Ukraine in 2014, Medvedchuk was able to continue operating with the same sense of almost complete impunity enjoyed by his fellow Ukrainian oligarchs. This finally changed in February 2021 when the National Security and Defense Council ruled to ban three pro-Kremlin Ukrainian TV channels linked to Medvedchuk. The decision to ban these channels was a difficult one given Ukraine’s commitment to democratic values and freedom of expression. However, the national security implications were simply too serious to allow the situation to continue.
In the weeks following the TV channel bans, Ukraine also imposed a range of personal sanctions against Medvedchuk and his wife. The message was crystal clear. Not only was Zelenskyy refusing to cut deals with Medvedchuk in the manner of previous Ukrainian presidents, but he was also sending an unambiguous signal to Russia that Ukraine finally had a strong leader who would bite back if attacked.
Meanwhile, Ukrainian officials announced in late February that three former top managers at the country’s biggest bank, Privatbank, are now suspects in a USD 5.5 billion fraud case at the heart of Ukraine’s oligarch politics. One of these suspects was detained while attempting to leave the country. The news generated considerable international attention and was widely seen as an indication that the high profile investigation may finally be gaining momentum.
“The case is a litmus test of President Volodymyr Zelenskyy’s willingness to crack down on corruption that has dogged the ex-Soviet republic since the fall of communism. Privatbank’s previous owners, tycoons Igor Kolomoisky and Gennady Bogolyubov, are fighting legal efforts by the government to recoup bailout cash in several jurisdictions,” noted Bloomberg. The Privatbank case has long served as a symbol of oligarch impunity. Progress towards justice would be seen as a major breakthrough for Ukraine.
As events in recent weeks have shown, President Zelenskyy is prepared to challenge the power of Ukraine’s oligarchs everywhere from the energy and banking sectors to politics and the media. Previous Ukrainian leaders have said much about deoligarchization but done little. Zelenskyy aims to let his actions speak for themselves.
Iuliia Mendel is the Spokesperson for President of Ukraine Volodymyr Zelenskyy.
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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.
The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.