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Mar 12, 2014 | 13:42 GMT

5 mins read

Ukraine's Oligarchs Will Play a Decisive Role

Ukraine's Oligarchs Will Play a Decisive Role
(Alexander Khudoteply/AFP/Getty Images)
Summary
Ukraine's independence from the Soviet Union was followed by the privatization of state-owned assets, giving birth to a powerful class of business leaders known as oligarchs. Since the country's founding, they have played a crucial role in the political system — there are close ties between Ukraine's oligarchs and the evolution of the country's political crisis. This was most recently illustrated in Donetsk on March 9, when Ukrainian presidential hopeful Vitali Klitschko met with Rinat Akhmetov, the country's richest man, to discuss the ongoing situation.
 
The oligarchs function as a bridge between the Western-leaning interim government and Russia's interests in the country, especially in the Ukrainian east. They will play a key role in negotiations over Ukraine's political future and will prove pivotal in shaping any Ukrainian administration's relationship with Russia. 
 
Similar to Russia, the rapid transition to capitalism in Ukraine allowed politically connected individuals to amass tremendous wealth as they acquired and monopolized assets spanning the country's metals, chemicals and energy distribution industries, among others. But Russia has a long tradition of centralized power, and as the Kremlin regained its strength, Moscow subsumed or eliminated these wealthy individuals. Kiev wields no such political might. Ukraine's oligarchs were never fully subordinated by the government; their power only grew.
 
The result is a political system in Ukraine that continues to depend highly on the patronage and support of oligarchs. All major political parties and candidates for powerful posts in parliament and the executive office have their respective oligarch backers. For instance, figures such as Akhmetov, who holds a dominant position in the country's steel and coal production, and Dmitri Firtash, a major player in the power and chemicals industry, have been leading financiers of former Ukrainian President Viktor Yanukovich's Party of Regions. Other oligarchs, such as Igor Kolomoisky, a banking and industrial magnate, have kept out of direct politics, forging short-term situational alliances with various politicians.

The Oligarchs' Main Allegiance

The fidelity of the oligarchs has proved to be fluid. They are most concerned about preserving their lucrative business interests rather than pursuing an ideological or political line. Oligarchs have shifted their support of specific candidates. In some cases, such as Akhmetov, they have backed rival parties to make sure they would not be targeted in the event of a political upheaval. Any trend that compromises oligarch interests — for example the emergence of a rival oligarch clan from within Yanukovich's family — can be politically dangerous. 
 

Ukraine Split

 
The latest crisis in Ukraine has produced just such a shift, and the reaction of the oligarchs has once again revealed their important role in the country. The oligarchs have quickly distanced themselves from Yanukovich and now support the new government in Kiev. Though this government has gone after Yanukovich and his inner circle, authorities have been extremely careful not to target the oligarchs who previously supported his party. They know such a move could create backlash among key political power brokers, and their legitimacy depends on maintaining at least a pragmatic relationship with the oligarchs. Prime Minister Arseniy Yatsenyuk and other members of the interim government have reached out to figures including Akhmetov and Firtash, assuring them that their businesses will not be targeted. Kiev has even appointed key oligarchs such as Kolomoisky and industrialist Sergei Taruta as governors in the eastern regions of Dnipropetrovsk and Donetsk, respectively. 

The Key to National Cohesion

With presidential elections set for May 25 and parliamentary elections likely to be held later in the year, Ukraine's current administration will need the continued support of the oligarchs. More immediately, with Crimea on the verge of leaving Ukraine, the new government's urgent challenge is to keep mainland Ukraine together. Eastern Ukraine is crucial to this — the region is a stronghold for pro-Russia sentiment and the main site of opposition, after Crimea, to the Western-backed and Western-leaning government.
 
The oligarchs are key to keeping control over eastern Ukraine, not only because Ukraine's industrial production is concentrated in the east — thus anchoring a shaky economy — but also because many of the oligarchs have a stronger and more manageable relationship with Russia than the current government, which Moscow sees as illegitimate. Many of these business leaders hail from the industrial east. They have business ties to Russia and decades of experience dealing with Russian authorities — experience that figures such as Klitschko and Yatsenyuk lack.
 
So far, the new government has been able to maintain the support of the country's most important oligarchs. In general, the oligarchs want Ukraine to stay united. They do not support partition or federalization, because this would compromise their business interests across the country. But this support is not guaranteed over the long term. There have been recent complaints about the new government, for example over the arrest of former Kharkiv Gov. Mikhail Dobkin. Akhmetov came out in Dobkin's defense, saying the government should not be going after internal rivals right now, but rather focusing on concerns over Russia. This can be seen as a warning to the new administration: The oligarchs' loyalty to the current regime is conditional and should not be taken for granted.
 
Ultimately, the biggest threat to the oligarchs is not the current government, over which they have substantial leverage, but Russia. The oligarchs stand to lose a great deal if Russia intervenes in eastern Ukraine. If Russia takes over eastern territories, it could threaten the oligarchs' very control over their assets. Therefore they have an interest in bridging the gap between Russia and Kiev, but it is Moscow they fear more. The oligarchs have substantial power to shape the Ukrainian government's decision-making as it moves forward. Their business interests and the territorial integrity of the country are at stake. 

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