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Ukraine’s stability under threat after president fires pro-Kiev tycoon Ukraine’s stability under threat after president fires pro-Kiev tycoon
(about 9 hours later)
KIEV, Ukraine — In a major test of Ukraine’s fragile political stability, President Petro Poroshenko Wednesday dismissed a billionaire regional ally who had established his own power base near the front-lines of pro-Russian rebels. KIEV, Ukraine — Ukrainian President Petro Poroshenko dismissed one of the country’s most powerful oligarchs from a regional governorship Wednesday, after confrontations over interests in the energy sector sparked a public uproar, threatening the country’s fragile political peace.
The dismissal of Igor Kolomoisky, the governor of the Dnipropetrovsk region, was the latest reminder to Ukraine’s Western allies of the formidable challenges facing the shaky nation. Kolomoisky, one of Ukraine’s richest men, had been a staunch backer of Kiev, widely credited for using his vast resources to fend off challenges from pro-Russian rebels who have been fighting the government in the east of the country for nearly a year. Ihor Kolomoisky’s resignation as governor of the Dnepropetrovsk region, a position he held since shortly after the ouster of former president Viktor Yanukovych last year, seemed to quell fears that tensions would explode over the oligarch’s recent moves to protect his interests in two government-controlled energy companies by bringing in armed guards to their headquarters.
But in recent days, simmering tensions between the president and Kolomoisky exploded into view after the government moved to take control of two vital energy companies in which the governor owned a minority stake. Armed men, apparently loyal to Kolomoisky, occupied the headquarters of both companies in Kiev, preventing new leadership from entering the buildings. The events served as a reminder to Ukraine’s Western allies of the formidable challenges facing the shaky nation, especially as Kiev turns its attention from fighting a war along the front to tackling corruption at home.
The clash was a nightmare scenario for Ukraine’s Western allies, which were already cautious about channeling billions of dollars of economic support to a fragile nation that has been slow to take steps to fight corruption. The implications of Wednesday’s dismissal on stability were not immediately clear, although Kolomoisky’s allies took to Facebook with conciliatory messages suggesting that they would obey the president’s decision. Poroshenko’s response seemed clearly aimed at sending the message that those who cross Kiev can expect to be let go.
Dnipropetrovsk is one of Ukraine’s most important industrial regions, with a large population sympathetic to Russia. When pro-Russian separatists started seizing territory in eastern Ukraine last year, analysts considered the region vulnerable. Kolomoisky helped keep a tight lid on separatist sentiment, in part by funding a private army that has often been better-equipped than the Ukrainian military. “If Poroshenko didn’t resign him, it would mean that any oligarch can take any government assets and bring armed people to the capital, and that’s not good for the country,” said Mustafa Nayyem, a journalist and member of parliament who said Kolomoisky’s dismissal was “the only way to solve this problem” and should be the start of “a war against the oligarchs.”
The dismissal was announced on Poroshenko’s website, where his administration wrote that he had accepted Kolomoisky’s resignation after an early morning meeting between the two men. Kolomoisky, the co-founder of Ukraine’s largest commercial bank and one of the country’s richest individuals, was a staunch backer of Kiev and was widely credited for using his vast resources to fend off challenges from pro-­Russian rebels fighting the government in the east for nearly a year.
“The Dnipropetrovsk region should remain a bastion of Ukraine in the east, defending the peace and tranquility of the citizens,” Poroshenko said at the meeting. In a video of the encounter between the two men, both were grave and unsmiling. In principle, he doesn’t disagree with the idea that Poroshenko needs to show the public he has authority over the government — or even, generally speaking, the decision to let him go.
Kolomoisky did not immediately make any public statements, but one of his deputies sought to calm tensions on Wednesday. “I’m his employee, but I acted as an equal to him,” Kolomoisky said in an interview, describing his style as too “independent” to operate in a vertical-power system.
“Let's stop drinking Valerian and show the world that we can be civilized people for whom our country has higher ambitions,” Borys Filatov, a deputy governor of Dnipropetrovsk, wrote on Facebook. “Do not give cause for rejoicing to our enemies, both internal and external.” “I’m not good in that kind of scheme; I’m a foreign object in that system,” Kolomoisky continued. “If I were in his position, I would have kicked myself out in three months, because the person who is a superior cannot be an equal with a person who works for him.”
Kolomoisky had been appointed governor of Dnipropetrovsk last year in the wake of the February 2014 ouster of Ukraine’s Russian-friendly President Viktor Yanukovych. But Kolomoisky vehemently disagreed with how things got to the point of his resignation. He sees himself as a victim of political positioning that began shortly after last fall’s parliamentary elections, a hunt for publicity after the heat of the war, and a need to appease the masses in advance of coming local elections, slated for the fall.
Yanukovych was forced to flee after months of street protests in Kiev in which many citizens demanded an end to long-standing culture of corruption in Ukraine. Ever since the 1991 breakup of the Soviet Union, a small handful of Ukraine’s wealthiest business people had controlled political power in the country. But Ukraine’s new leadership has been slow to address those problems. Poroshenko, himself a billionaire candy tycoon, installed business allies in various government posts after his May election. “The best clients to make a sacrifice of for the electorate are the oligarchs," Kolomoisky said. “And since I’ve been the biggest trigger for the whole population, and the politicians cannot promote themselves based on the war, they decided to promote themselves based on me.”
The immediate conflict between the president and the governor burst into view on Thursday, after Poroshenko attempted to ouster a Kolomoisky ally who had run the UkrTransNafta energy transit company, which is majority-owned by the state. Kolomoisky sent masked, armed men into the headquarters to prevent new leadership from entering the building. Over the last few months, Kolomoisky and Ukrnafta, the company in which he controls a 43 percent stake, became the popular inspiration for a law lowering the legal threshold for management decisions from 60 percent to over 50 percent — thereby blocking a major minority shareholder’s ability to assert effective control over a company.
A similar situation repeated itself late Sunday at another state-controlled energy company, UkrNafta, where armed men allied with Kolomoisky began building a steel fence around the entrance. The majority threshold law passed last Thursday. On Thursday night, Kolomoisky arrived at the headquarters of government-owned oil transport company Ukrtransnafta, accompanied by a handful of armed security guards, to protest the decision to change the company CEO, a man with ties to Kolomoisky.
Kolomoisky had been able to use his minority stake in both companies to install allies as their managers. Ukraine’s parliament on Thursday passed legislation to allow the government to assert control and the president signed it on Wednesday. He ordered the governor of a neighboring region, Valentin Reznichenko, to take temporary control of Dnipropetrovsk. Kolomoisky said he was responding to a call for help from a friend who was getting nowhere with police, despite being illegally pressured to leave his post. But to the public, it looked like a disgruntled oligarch with armed guards entering a building of a company he didn’t control to protect a crony.
Ukraine has said that it needs more than $40 billion in aid to keep its economy from imploding. But the International Monetary Fund and other Western allies have sent only a fraction, in part because of worries that the money would be disappear if Ukraine fails to rein in corruption. A few days later, Kolomoisky dispatched a few dozen militarized security guards to surround the perimeter of the Ukrnafta building from public disturbances — which looked even worse.
Birnbaum reported from Moscow. “He hired these special forces to protect his corruption,” said Sergei Leshchenko, another journalist and member of parliament who accused Kolomoisky of sending soldiers from the ­Dnipro-1 battalion, which he controls, to guard the Ukrnafta building. Many government officials have since discredited the accusation; Kolomoisky and his supporters still seethe at what they consider a lie.
They also deny from accusations from Valentyn Nalivaychenko, head of the Ukrainian Security Service, that members of Kolomoisky’s government in Dnepropetrovsk aided local criminal gangs by providing them with false licenses and documentation.
Kolomoisky said he eventually decided the “public information bacchanalia” was too much.
“I thought the situation came too far, that the next step would be me accused of separatism,” he said, reminding that he was still a patriot. “I made this decision in order to calm down this situation, and to show the nation that I’m not holding this position if public opinion thinks I need to resign.”
What message this episode sends to other oligarchs is still unclear. Potential disagreements between Poroshenko — himself an oligarch — and other powerful billionaires such as Rinat Akhmetov and Dmytro Firtash, whom various politicians mentioned as individuals that might come into conflict with Kiev as parliament continues its anti-oligarch campaign, have not risen to such a fever pitch.
And there are concerns that Ukraine, reeling from a conflict in the east and a crippling economic crisis that has left the country all but dependent on Western aid, cannot risk rocking the boat by attacking oligarchs at this time — even if ultimately those are the problems its Western allies would like to see the country tackle.
“We heard all the arguments during the last year, that the situation in the country is unstable, that we should be tolerant and patient,” Nayyem said. “I don’t think this will destabilize things at all. It will be very bad for the government if they don’t take control of the situation.”
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Michael Birnbaum in Moscow and Natalie Gryvnyak in Kiev contributed to this report.