Ukraine’s new president, old oligarchs

One of the main goals of the Euromaidan protests was breaking the hold of the oligarchs on the political and economic life of Ukraine. Ukraine” oligarchs are a very politically influential elite; they represent close to 100 individuals who control 85 percent of the country’s GDP. Many gained their fortunes through rushed privatizations or through murky public-private partnerships. For example, Dmytro Firtash, an oligarch from western Ukraine, has a substantial stake in RosUkrEnergo, a company that until 2009 served as the sole middleman between the Russian energy company Gazprom and Naftogaz Ukrainy, Ukraine’s state-owned energy company. Its sole purpose was to buy gas from the former to sell to the latter, while taking a cut of the profits.

Rinat Akhmetov, an eastern Ukrainian oligarch who became Ukraine’s richest man through his holdings in the mining and metal industries, recently threw his weight against the pro-Russian separatist movement. He facilitated the organization of workers at his factories and mines into policing units which successfully drove separatist forces out of Mariupol. While many supporters of the government in Kyiv welcomed this development, Akhmetov remained neutral in the conflict for as long as he could until the unrest in eastern Ukraine began to threaten his own business. Although the threat to Ukraine’s sovereignty and territorial integrity momentarily puts the Euromaidan movement and Ukraine’s oligarchs on the same side, the two groups are motivated by disparate interests which will have to be addressed as Ukraine rebuilds.

{mosads}Without the Ukrainian state to prop up their business, many oligarchs’ industries would suffer. These industries, such as the Ukrainian coal industry, use outmoded Soviet-era infrastructure and make money in large part due to state subsidies, which are kept in place by the oligarchs’ political influence. This contributes to a lack of economic development in Ukraine, as there is no motivation to improve infrastructure when state subsidies make up for the drop in productivity. In contrast, the coal industry just across the border in Russia has closed, unable to remain profitable without state subsidies.

The oligarchs’ political influence leads to a disconnect and a feeling of powerlessness between average people and the government. Political parties in Ukraine frequently bring up “culture war” issues, such as the legal status of the Russian language in Ukraine, to make political gain from Ukraine’s ethnic and linguistic splits. As a result, parties do not address the economic concerns that would otherwise unite voters on both sides of the cultural divide. The Euromaidan movement in large part rejected the traditional party system and the cultural discourse of the east-west split in Ukraine. Protesters, many of them Russophone, were largely focused on the perception that government and the political parties do not respond to the will of the people, that all parties represent the status quo and only differ in which group of elites they serve to enrich.

It may seem incongruous that such a movement culminated with the election of Petro Poroshenko to the presidency. Poroshenko, a billionaire who made his fortune in the confectionery industry, has been in politics since 1998. He was a key figure in the Orange Revolution of 2004 and served in several positions under former President Viktor Yushchenko. After serving in deposed President Viktor Yanukovych’s cabinet in 2012, he came out in favor of the Euromaidan protests, lending the support of Kanal 5, a media channel he owns.

While Poroshenko’s past in business and politics causes him to be viewed with skepticism, he has a better reputation than other economic elites. “Not too bad, as oligarchs go,” said Oleksandr, a Maidan self-defense fighter from Transcarpathia. Poroshenko has announced that he will give up his confectionery business upon assuming the presidency to avoid a conflict of interest (but he will be keeping his media channel). It remains to be seen whether he will be able to effect systemic change and break the cycle of special interests using state institutions for their own benefit at the expense of the Ukrainian people, but there are few others who can claim his intimate knowledge of the workings of both the government and the private sector in Ukraine. On top of that, he may not be enticed by business incentives; he is already a billionaire and does not need them.

Whatever course of action Poroshenko takes, he will be under close scrutiny from the Ukrainian people. There is already talk of a “third Maidan” if Poroshenko’s presidency is more of the same. While for now this is nothing more than talk, Ukrainians have learned over the past few months that they are capable of effecting real change, and they feel that Poroshenko owes them his new job. Mindful of the failure of the Orange Revolution, Ukrainians will not give the new government a free pass after they successfully overthrew the old one.

Fedynsky is a freelance journalist in Ukraine. He was a Fulbright student in Kyiv from 2012 to 2013.