Zelensky takes on Ukraine’s oligarchs in bid to court Biden

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Volodymyr Zelensky’s move last month to shut down three television channels that are linked to a multi-millionaire politician close to the Kremlin has raised hopes that the Ukrainian president is preparing for a wider crackdown on the country’s powerful oligarchs.

The pro-Moscow television stations were taken off-air for spreading Russian “disinformation”. The outlets were owned by an associate of Viktor Medvedchuk, an oligarch who boasts of having Russian president Vladimir Putin as a godfather to one of his daughters. Days after the broadcasters were shuttered, Medvechuk’s assets and an oil pipeline owned by another associate were frozen.

The swoop against Medvedchuk — who, according to international observers, controlled the TV channels by proxy through his influence over its owner Taras Kozak — was the most important policy shift since Zelensky won office in 2019, said formers advisers and analysts, and was intended in part to win favour with the Biden administration.

“It’s a huge gamble and a very courageous step . . . You are talking about very powerful people,” said Mikheil Saakashvili, the former Georgian president who is now an adviser to Zelensky. “The people expected Zelensky to deliver . . . If you want to change the rules of the game, you need to go after them.”

The Zelensky administration has hinted it is preparing for a broader crackdown.

“There will be more — believe me, there will be more . . . you will see more and more interesting [actions],” Oleksiy Danylov, the president’s national security chief, said on TV after the Medvedchuk sanctions were announced.

Zelensky, a former comedian, was elected on a promise to “break the system” of state capture by a handful of oligarchs, but until now proved reluctant to take them on.

Most notably, his government has failed to heed demands from the IMF to press criminal charges against Igor Kolomoisky, a metals and media tycoon, over his alleged involvement in one of Europe’s biggest banking frauds.

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PrivatBank, Ukraine’s largest lender then owned by Kolomoisky and a business partner, had to be nationalised in 2016 and recapitalised to the tune of 7 per cent of Ukrainian domestic output, after regulators found a $5.5bn hole in its accounts.

Kolomoisky and his TV channels supported Zelenksy’s election campaign and the billionaire commands the loyalty of dozens of MPs nominally attached to the president’s party.

However, last week Ukraine’s anti-corruption bureau charged three former senior executives at PrivatBank, raising expectations the authorities could next close in on Kolomoisky and his partners.

The actions are likely to score points with the new US administration. Kolomoisky is under investigation by the FBI for funnelling PrivatBank funds through commercial and industrial property. Medvedchuk, who is also the leader of Ukraine’s largest pro-Russian party, has been under US sanctions since 2014 for undermining Ukraine’s “security, territorial integrity, and democratic institutions”.

“Here the US pressure is very helpful . . . the vibes coming from Washington are that something that has been tolerated will not be tolerated any more,” added Saakashvili.

The TV channels linked to Medvechuk had battered Zelensky since he came to power in 2019, driving down his poll ratings.

Oleksander Danylyuk, a former finance minister who served briefly as Zelensky’s national security chief in 2019, said the president refrained early on from going after Medvedchuk “because he was afraid to spoil” attempts at forging peace with Russia.

“[But] a year and a half of Zelensky’s determined efforts to probe Russia for a solution to the war has yielded no tangible progress toward peace,” said Adrian Karatnycky, a senior fellow at the Atlantic Council.

“In attacking Medvedchuk and Russia’s fifth column, Zelensky is addressing both a clear and present danger to national security and implementing a quick, tangible remedy to this threat,” he added.

Medvedchuk’s party and MPs loyal to Kolomoisky have blocked reforms crucial to securing multi-billion-dollar support from the IMF, US and EU. The two groups joined forces last year to secure constitutional court rulings that threatened to neuter anti-corruption agencies and undo critical economic reforms.

“Zelensky realised that he was on verge of losing political power, that his control is all just an illusion, so he had to do something,” said Danylyuk.

The president is pushing parliament to approve a reform of the country’s unruly judicial system, where underpaid and corrupt judges are used by the rich and powerful to pursue their business and political interests.

But his party, which formally holds an outright ruling majority, has struggled to muster enough votes to support reforms.

“They are undermining the changes and IMF agreement that the president wants” and “haemorrhaging his political capital”, said a person familiar with Zelensky’s interactions with oligarchs.

“Zelensky was elected because he was viewed by voters as being a political outsider,” said Maria Zolkina, an analyst at the Kyiv-based Democratic Initiatives Foundation.

“Everything he is doing now is an attempt to return to his original image, upon which he can build his re-election campaign. To have a chance, he needs prominent cases to demonstrate he is battling the old guard,” she added.

Daria Kaleniuk, of the anti-corruption watchdog Antac, said the move against Medvedchuk was a “huge positive surprise”.

“However, I am not sure the president is ready to run a full-scale war against all oligarchs. To do that he needs to get rid of notorious people inside his team and reboot the judicial system,” she said, adding that vested interests within his administration were undermining such reforms.

Copyright The Financial Times Limited 2021. All rights reserved

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