Indispensable Oligarchs: Ukraine Turns to Business Leaders to Support Anti-Coronavirus Efforts

Ukraine’s top businessmen are answering President Volodymyr Zelenskyy’s call to assist and even lead the country’s efforts to deal with the novel coronavirus pandemic. Zelenskyy had summoned Ukraine’s wealthiest businessmen for an emergency meeting on March 16 in the presidential building to consider a coordinated response to the crisis. They responded with alacrity, and the effort is unfolding based on ideas exchanged at that meeting.

Three guiding ideas are clearly discernible. First, the “oligarchs” seem ready to help finance the state’s effort, in addition to undertaking their own initiatives, which could be more extensive than the state’s. Zelenskyy has asked for 12 billion–13 billion hryvnias (some $440 million–$470 million), it being understood that this would be a first-stage, short-term response to the pandemic. Second, Zelenskyy has assigned certain geographical areas of responsibility to the top business leaders, namely where their major business assets, company headquarters and social networks are based, and where their businesses are the main employers. And third, they are expected to organize anti-crisis centers on the level of Ukraine’s provinces, assigning professional managers from their companies to such centers, it being understood that private-sector personnel would act more effectively than the state’s.

Not all of Ukraine’s oblasts (province-level administrative units; hereafter provinces) have been delineated as areas of anti-crisis action for major business leaders as yet. Meanwhile, the country’s wealthiest industrialist, Rinat Akhmetov, is apparently counted upon to act in several provinces at the same time: Zaporyzhzhia province, the Kryvyy Rih-Pavlodar mining and industrial basin (western part of Dnipropetrovsk province), and even the Lviv and Ivano-Frankivsk provinces, on top of the Ukrainian-controlled parts of Donbas where Akhmetov has been delivering humanitarian assistance long before the COVID-19 coronavirus pandemic struck. Ihor Kolomoysky’s attitude, meanwhile, remains unclear. Asked by Zelenskyy to contribute, Kololoysky replied by complaining that his former Privat Bank assets are unavailable to him. (Interfax-Ukraine, March 19; Ukrainska Pravda, March 23, 30; Censor.net, March 26, 28; Liga.net, March 28; Ukrinform, March 30).

Viktor Pinchuk has volunteered for this assignment in his home province—Dnipropetrovsk. Pinchuk’s steel pipe-making and other metallurgical plants, comprising the Interpipe Group, are mainly located in the cities of Dnipro and Nikopol in this province. Ihor Kolomoysky is also based in Dnipro but does not seem enthusiastic to help the anti-coronavirus effort (see above).

Oleksandr Yaroslavsky has taken the lead in organizing an anti-crisis center in Kharkiv province, surpassing the state authorities. Yaroslavsky is the owner of Ukraine’s largest construction company (Development Construction Holding—DCH) and of the Kharkiv Tractor Plant (a national industrial flagship that he has overhauled). Yaroslavsky had initiated a joint project in Kharkiv with the Chinese entrepreneur, Jack Ma, prior to the coronavirus outbreak and has now received a consignment of anti-virus equipment from Ma for Kharkiv.

Yaroslavsky has joined forces with Kharkiv city’s long-time mayor, Hennady Kernes, not only in the anti-virus effort, but also politically, preparing for the October 2020 local elections (see above). Highly popular in Ukraine’s second-largest city, Kernes has enjoyed an informal, quasi-feudal immunity under three Ukrainian presidents. He plans to seek re-election with Yaroslavsky’s apparent support, notwithstanding Zelenskyy’s and the presidentially-appointed Kharkiv governor’s manifest hostility to Kernes (Glavnoye.ua, March 12; Censor.net, March 26).

Vadym Novinsky is assigned to support the anti-pandemic effort in Mykolayiv and Kherson provinces. Novinsky’s Smart Group holds a 25 percent stake in Metinvest, the vast holding of metallurgical plants and iron ore mines, 75 percent owned by Rinat Akhmetov. Most of these assets are located in Donbas, the Kryvyy area, and Zaporizhzhya. Separately from Metinvest, Novinsky owns the Smart Maritime Group of shipbuilding yards and ports in Mikolayiv (the Black Sea Shipbuilding Plant), Kherson, and Ochakiv.

Novinskyy had moved to Ukraine from Russia and acquired those Ukrainian assets long before acquiring citizenship in 2012. He was elected to the Ukrainian parliament from Sevastopol in a by-election in 2013 (this is one of the 27 now-vacant seats in the Verkhovna Rada), was elected again in 2014 on the list of the Akhmetov-backed Opposition Bloc, and again in 2019 from a single-mandate electoral district in the Ukrainian-controlled part of Donetsk province.

Andriy Stavnitser has led the anti-virus effort in Odesa province from the outset (Interfax-Ukraine, March 19; 112.ua, March 31). This proactive leadership contrasts with Mayor Gennady Trukhanov, whose low relevance in this crisis could influence the October elections (see above).

Stavnitser and his family members own the TransInvestService (TIS) group of companies, Ukraine’s leading port operator by volume of goods handled. TIS owns multiple terminals and piers for handling mineral ores, coal, fertilizer, containers and grain (the latter jointly with Cargill), mainly in the port of Pivdenny.

Meanwhile Ukrainian media have posted video-audio intercepts showing Denis Yermak, the brother of the Presidential Office chief Andriy Yermak, apparently discussing possible moves to undercut TransInvestService in favor of a foreign competitor (Ukrinform, Nashi Groshi, RBK Ukraine, Ukraiynska Pravda, March 30–April 2).

Andriy Verevskyi coordinates the private-sector response to the pandemic in the central regions of Poltava and Kirovohrad. Poltava-born Verevskyi is the main shareholder in the Kernel Group agroholding, Ukraine’s largest producer and exporter of sunflower oil. It is also Ukraine’s largest farming enterprise by area, with approximately 600,000 hectares of cultivated land.

Yuriy Kosiuk has accepted to lead the private-sector measures in Vinnytsia and Cherkassk provinces. Kosiuk, from the Cherkassk province, owns Myronivka Grain Produce, Ukraine’s largest producer and exporter of poultry meat. A vertically integrated company, it produces the necessary fodder on 370,000 hectares of farmland in the Vinnytsia, Cherkassk, and Kyiv provinces. Kosiuk was a pro bono advisor to President Petro Poroshenko in 2014-2019.

Ihor Palytsia has been designated to coordinate anti-crisis measures in his native Volyn province. Closely allied with Ihor Kolomoysky, Palytsia was CEO of the Ukrnafta and Neftekhimik Prykarpattia oil extraction and refining companies, both linked to Kolomoysky’s Privat Group. He was governor of Odesa province in 2014–2015, then led Kolomoysky’s project party, Ukrop, in Volyn’s 2015 provincial election, taking first place and the chairmanship of Volyn’s regional council until 2019. Palytsia’s role in both Odesa and Volyn was to expand Kolomoysky’s influence beyond the latter’s Dnipropetrovsk power base.

Elected to the Verkhovna Rada last year (2019) from Volyn in a single-mandate electoral district, Palytsia is one of about 20 or 30 pro-Kolomoysky members of this parliament. Some of them belong to the pro-presidential Servant of the People party while others, like Palytsia, have no party affiliation. Zelenskyy’s choice of Palytsia for this new Volyn assignment suggests that the president remains reluctant to make a clean break with Kolomoysky.

A precedent exists in Ukraine for the state to assign business magnates to take charge of particular areas of the country in a dire crisis. In the spring of 2014, then-acting president Oleksandr Turchynov appointed Kolomoysky, Palytsia (on Kolomoysyy’s recommendation), and the steel industrialist Serhiy Taruta (on Akhmetov’s recommendation) as governors of the Dnipropetrovsk, Odesa and Donetsk regions, respectively. Turchynov acted in agreement with the entire post-EuroMaidan leadership. Those three provinces faced imminent threats of attack and capture, and the Ukrainian state at that juncture lacked the means to stabilize the situation.

The current experiment with reliance on “oligarchs,” however, encompasses many more Ukrainian provinces, and it may not have reached its full final extent yet. It also differs on method, in that it can lead to the creation of parallel structures on the level of those provinces. Two anti-crisis centers and two lines of action—state and “oligarchic”—are to operate in a given province. By contrast, Turchynov had appointed those “oligarchic” figures to be state governors, with full official authority and personal responsibility.

Oft-expressed fears of “oligarchic state capture” in Ukraine and neighboring countries notwithstanding, Kyiv’s pact with the country’s business leaders seems widely accepted as a potential solution to a unique dire situation. Easing, perhaps, this acceptance in Ukraine are two recognizably Ukrainian characteristics of this solution. First, state weakness necessitates private initiatives and solutions at one level or another. From 2014 onward, volunteer movements at the grass-roots level compensated to some extent for state weakness. The business leaders’ response to the current crisis corresponds with a volunteer initiative at a different level. The other characteristic is its decentralization. In line with Ukraine’s traditions of dispersed power and intense localism (as well as state weakness), the central leadership seeks to resolve a national crisis by going directly to the lower level of provinces. And in so doing it finds that more effective power and more resources may be available locally, rather than at the center, as a basis for action. By the same token, economic power (“oligarchs” with their production assets) are also dispersed in the province, not concentrated in any national center.

Some Ukrainian commentators worry that the shock caused by the COVID-19 pandemic, the state’s ineffective response, and fear of more such calamities could generate yearnings for authoritarian government. But this does not seem possible in Ukrainian conditions. Centrifugal tendencies run deep, and the dangers stem not from these tendencies as such, but from loss of control over their dynamics. Which is what Russia aims to set in motion through a precedent-setting special status in eastern Donbas.