Ukrainian Oligarch Signals Compromise With Kiev

3 MINS READMar 30, 2015 | 17:45 GMT
Ukrainians take part in a March 28 Dnipropetrovsk rally organized by powerful oligarch and former regional governor Igor Kolomoisky and his allies to show unity between regional and central authorities.
Ukrainians take part in a March 28 Dnipropetrovsk rally organized by powerful oligarch and former regional governor Igor Kolomoisky and his allies to show unity between regional and central authorities.

On March 28, three days after Igor Kolomoisky, the former governor of Dnipropetrovsk region, was forced out of his post, his political team organized a rally in the regional capital. A few thousand people gathered and listened as Ukrainian bands performed. Members of Kolomoisky's staff gave speeches emphasizing their achievements while in office and the need for preserving Ukraine's unity. But one key Dnipropetrovsk leader was conspicuously absent: Kolomoisky himself.

Reports indicate the former governor is in Switzerland, though no official explanation for his decision to travel has been issued. Kolomoisky's choice not to attend a rally designed to highlight his achievements signals that — at least in the near term — the oligarch will not directly challenge President Petro Poroshenko. Nevertheless, Kolomoisky's influence in key sectors of Ukraine's economy and several major political parties guarantees that he will continue to play a role in Ukraine's politics — a role he could eventually use to compete with the country's oligarchs and shape policymaking.

Poroshenko dismissed Kolomoisky from the governorship March 25 after Kolomoisky sent armed men to the offices of two Ukrainian energy companies, UkrTransNafta and Ukrnafta, to publicly assert his influence over how the companies are managed. The incident was heightened by the fact that, despite Poroshenko's orders to disarm the gunmen, Ukrainian security forces did not confront Kolomoisky's men. Poroshenko's decision to accept Kolomoisky's resignation was a show of resolve, signaling his willingness to confront Ukraine's other oligarchs as well, at least politically.

Nevertheless, following his dismissal, Kolomoisky appeared at a news conference that was a public show of unity between him, Poroshenko and the new governor of Dnipropetrovsk. Poroshenko referred to Kolomoisky as a "patriot," suggesting that the government will not seek to further discredit him or undermine his economic influence. Poroshenko's choice for the new governor — Valentyn Reznichenko — also shows signs of compromise with the oligarchs. Reznichenko is a close ally of Boris Lozhkin, the head of Poroshenko's presidential administration. Though Lozhkin is close to Poroshenko's camp, he has worked closely with a range of oligarchs in the past, demonstrating his ability to forge compromises and navigate diverse oligarchic interests. The appointment of a new governor is a setback for Kolomoisky, but the choice of Reznichenko may be a signal that Poroshenko and his allies do not want to completely undermine Kolomoisky's influence in the region. 

In spite of his recent removal from office, Kolomoisky's political alliances are still intact. Since his rise in the 1990s, Kolomoisky has worked to build relationships among different political groups while never building up his own popular political base. At the March 28 Dnipropetrovsk rally, an array of leaders appeared in support of the oligarch. Besides Kolomoisky's own staff, the head of Ukraine's Radical Party, Oleh Lyashko, appeared in a video broadcast to the crowd. Anton Gerashchenko, a member of parliament from Prime Minister Arseniy Yatsenyuk's People's Front party, was also at the rally. Kolomoisky has close allies in nearly all the pro-Western political parties in parliament, as well as in leadership positions in strategic regions such as Kharkiv and Odessa.

On top of this political network, Kolomoisky remains in control of key economic, energy and media interests. Together with his partners, Kolomoisky controls the largest commercial bank in Ukraine, PrivatBank, as well as assets in the energy and metals sectors. Like most of Ukraine's major oligarchs, Kolomoisky owns his own TV station, called "1+1," as well as other media holdings that allow him and his team to communicate their ideas to a national audience on a daily basis.

Kolomoisky's decision to stay away from the rally in Dnipropetrovsk indicates that he does not want to publicly challenge Poroshenko in the short term. Poroshenko's choice to appear in public with Kolomoisky and praise him as an ally signals that the president is not planning additional moves to weaken Kolomoisky, at least not right now. The two leaders may have even come to an unofficial understanding. Nevertheless, the loss of the governorship of Dnipropetrovsk is a setback for Kolomoisky. He and his allies have now lost direct influence over regional decision-making and are likely forfeiting control of some of the region's patronage networks. Kolomoisky will now turn his attention to protecting his business empire and political interests. In time, however, he may opt to create his own political movement or support a pro-Western movement rivaling Poroshenko's party. Nevertheless, Kolomoisky will continue supporting Ukraine's pro-Western course and, at least in the near term, maintain his support for the current coalition government.

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