Four wars of Kolomoisky. How the oligarch returns his influence

by Roman Romaniuk, Dmytro Dienkov, Sevgil Musaieva, Mykola Topalov published in Ukrainska Pravda on December 4, 2019

The end of 2016 turned out to be one of the most difficult times for the oligarch Igor Kolomoisky during his time in the highest Ukrainian business league.

On December 18, the Cabinet of Ministers of Ukraine made the decision on the nationalization of the largest bank in the country, Privatbank.

“Then we knew that we were taking away Kolomoisky’s favourite toy. And we predicted that he would take revenge. But at that time it was the only right decision”, told former high-rank official, who participated in negotiations.

However, problems of Kolomoisky only started to gain momentum after the nationalization. One year later, the British court arrested oligarch’s assets. Due to court proceedings and conflicts with the previous government, Kolomoisky did not come to Ukraine for more than a year and settled in Israel for a long time.

The prospect of return loomed on the horizon with the approach of presidential elections in 2019. Igor Kolomoisky openly agitated for Yuliya Tymoshenko. He also provided media support to Volodymyr Zelenskyi. The TV channel 1+1, which is controlled by him, broadcasted programs almost 24 hours a day with the participation of actor and comedian. That’s why Zelenskyi’s opponents called him the oligarch’s doll. The candidate himself denied it.

However, Kolomoisky returned to Ukraine without even waiting for the official inauguration of the newly elected President.

Incredible influence on political and economic processes in the country was attributed to the oligarch during last few months. Ukrainska Pravda decided to find out if this is actually true. And came to unexpected conclusions.

Cleveland is a small, unremarkable American city with a population of 300,000 people. It is unlikely that any of its residents realizes that one of the largest owners of real estate there until recently has been Ukrainian oligarch Igor Kolomoisky.

During several years the company Optima Ventures, controlled by former shareholders of Privat, became the largest commercial real estate owner in Cleveland. It controlled more than 2.6 million square meters of downtown real estate.

We got to know about oligarch’s American assets from the lawsuit of Privatbank which had been filed to the Delaware Court of Chancery in May 2019. According to the lawsuit, real estate and steel plants were purchased for the money withdrawn from Privatbank, and the total amount of money laundered in a decade is about 470 billion USD.

The lawsuit states that money was laundered with the help of number of fictitious firms and branch of Privatbank in Cyprus. After that, money was transferred to the United States, where American partners purchased real estate and assets in different states.

According to The Daily Beast, the Federal Bureau of Investigation is also investigating money laundering in the US against the oligarch.

Sources of Ukrainska Pravda in American political circles say that his American partners who have directly purchased real estate are subjects of the investigation besides Kolomoisky.

Officially, the US does not comment on the case against the oligarch. “As the ambassador, I cannot comment on the investigation. Maybe it is ongoing, maybe not”, said William Taylor, the head of the US Embassy in Ukraine in the interview to Ukrainska Pravda.

However, according to UP, the oligarch is now most concerned about the FBI’s investigation.

This forced him one time to move from Switzerland to Israel to avoid unwanted possible incidents regarding detention and questionings in the United States.

However, Ukrainian oligarch had no rest even on the Promised Land. Israel does not extradite its citizens to other countries, and Kolomoisky has the Israeli passport. Only if it is not about the United States and money laundering.

Combination of these two phrases can lead to extradition and subsequently to prison. So, the only place where Kolomoisky could not be reached by the States was Ukraine.

During the time of Poroshenko’s presidency, Igor Valeriyovych did not visit Kyiv. However, as soon as the fifth President lost his power, Kolomoisky returned to Ukraine, his last safe land. But in order to gain a foothold here, he had to run several survival wars at once.

WAR No.1. For political influence

There was one joke at the headquarters of Petro Poroshenko on the eve of the presidential elections. It was allegedly about the conversation between the technologist Igor Hryniv and the oligarch Kolomoisky in early December 2018.

Then, at the time of the great fall of Poroshenko’s rating, Igor Valeriyovych told Igor Oleksiyovych that the technologist work for Poroshenko was in vain.

“My boy and my girl will be there in the second round anyway”, Kolomoisky allegedly said to Hryniv, referring to Yuliya Tymoshenko and Volodymyr Zelenskyi.

But Poroshenko’s technologist promised the oligarch that “their boys” would meet in the “final” competition. And he got it. Since the second half of December 2018Tomos plus “Army! Language! Faith!” brought Petro Oleksiyovych to the second stage of the presidential race. But only there.

There was another joke at the end of the presidential campaign. Pinchuk was already in power during Kuchma’s presidency, Akhmetov was in power during Yanukovych’s and Poroshenko’s presidency. Now, it is time for Kolomoisky.

After the victory of Zelenskyi, who was actively supported by resources of Igor Valeriyovych, it seemed that this “joke” could become the reality.

There were more and more grounds to speak about the new President’s dependence on Kolomoisky every day. And this is not just about debts of Kolomoisky’s media holding to “Kvartal”.

Kolomoisky’s attorney, Andriy Bogdan became the head of the Administration of Zelenskyi. He used to represent the oligarch’s interests in courts regarding PrivatBank.

Such people as Timur Mindich, who is an authorized person of Kolomoisky, became member of Zelenskyi’s entourage. The first assistant to Zelenskyi Sergiy Shefir still “agrees with him “Kvartal” issues”.

When the newly elected President announced early parliamentary elections, the publication of the list of “Servants of the People” showed that Ze!team consisted mostly of Be!team.

Kolomoisky’s people were incorporated starting from top ten of the list of “Servants of the People”, following by-elections in districts.

Campaigns and headquarters in the region were coordinated by people from the party UKROP party,etc. The coordination of candidates in districts was entrusted to the business partner of Kolomoisky Igor Palytsia, who also has longtime friendly relationship with Zelenskyi.

Kolomoisky’s parliamentary strategy was promoted in three directions. Namely: Be!team in the “Servants of the People”, support of Tymoshenko, and own majoritarians. It should have given him tremendous influence in the new parliament.

But the oligarch has not achieved the desired triumph in all three directions.

The list of the small faction that Tymoshenko has led to the Verkhovna Rada looks like more than catalog of the oligarchic groups, where people of Akhmetov, Pinchuk, Lyovochkin and others are represented. And it does not give special influence over the situation.

Palytsia barely got to the Verkhovna Rada himself and managed to gather the MP’s group “For the future” there. But this is not his group. He cannot give orders to Members of Parliament. Everyone should be persuaded.

“Palytsia doesn’t have a holding company. He has a cooperative. Everyone works for his own interest. We separately agree on specific votes with each of them”, said the source of UP in the faction “Servants of the People”.

It will be quite difficult for the group “For the Future” to protect interests of Kolomoisky even if such need appears. It cannot protect its own members. It was clearly demonstrated during voting for the permission to detain Yaroslav Dubnevych, who is part of the Palytsia’s group.

By the way, the same voting showed maximum of Privat in the party “Servants of the People”. According to UP, several sources in the leadership of the party “Servants of the People” are convinced that 24 Members of Parliament who were present but ignored voting regarding the arrest of Dubnevych and are the maximum capacity of Be!team in the party “Servants of the People”. And that number is now decreasing.

Globally, Kolomoisky’s influence in the Rada is conducted through three trusted coordinators. Namely: Igor Palytsia, Oleksandr Dubinsky, who coordinates “his” majoritarians, and Oleksandr Tkachenko, on whom the group of Kyiv majoritarians is focused.

But recently Tkachenko, who for many years was Kolomoisky’s loyal soldier and the head of his 1+1 holding, began drifting away from the oligarch.

There is an interesting process going on behind scenes of the faction “Servants of the People”. There is quite a large group of Members of Parliament with the name “Group 719” (according to the room number in Rixos in Truskavets, where Members of Parliament gathered). The group unites the conditional liberal-democratic wing of the “Servants of the People”.

One of the initiators of the creation of this group was Oleksandr Tkachenko.

“Tkachenko is tired of playing in Kolomoisky’s games. One thing when he was the manager of 1+1, then he did what the owner asked. But now he is the politician and wants to play his game. And some members of 1+1 follow Tkachenko as well”, one of members of the Group 719 tells UP.

“In fact, there is maybe a dozen, or maybe a little more of Kolomoisky’s faithful bayonets in the party “Servants of the People”, who toe the mark,” he adds.

And there are even less noticeable trifles, such as dismissal the “private” prosecutor Konstantyn Kulyk from the PGO. By a strange coincidence all enemies of Kolomoisky were subjects of Kulyk’s investigations. However, according to Ukrainska Pravda, Kolomoisky tries to find a job for Kulyk at the SBU now.

The same way the key former “asset” of the oligarch within the new government, his lawyer Bohdan, gradually becomes not a bridge between the oligarch and the President, but a wall between them.

Thus, he can still call the head of SBI and ask them “not to touch “Privat” while the IMF is still in Ukraine”. However Bohdan himself openly says that there is not and will not be any perspectives for the former owners to return the bank.

“We have different views on the events happening in the Parliament, for instance. Sometimes our views coincide. However, in any case, not Kolomoisky determines the politics of Ukraine, but Volodymyr Zelenskyi,” Bohdan stated during his interview with UP.

Also, the sources of Ukrainska Pravda tell that oligarch has a plan to change disloyal Bohdan for Serhiy Shefir, who is currently the first assistant to the president Zelensky.

Summing up the written above, the picture looks more like gloomy “The Scream” of Edvard Munch than “Be!triumph”.

In this situation, no “Dark Knight” will help. It requires stronger and more powerful ally. Only one has left in the world and it is Russia. Only the logic of political protection from the USA could have created Kolomoisky’s statements about Putin’s tanks at the Polish border.

The political fate of Petro Poroshenko has shown that the worse situation Igor Kolomoisky is in, the stronger he fights back.

“Everyone wants to escape from Kolomoisky. But he is not the one someone can escape,” admits one of Zelenskyi’s team members.

Igor Valeriyovych has a lot of aces up his sleeves. The main one is his media exposure. Indeed, he really does not need to do anything to create huge problems for the new government.

WAR No.2. Kolomoisky against the IMF

For instance, recently Kolomoisky advocated for the integration of Ukraine with Russia and breaking relations with the IMF in scandalous interview with The New York Times.

He begins to make that dream a reality little by little.

“Kolomoisky creates chaos in all issues somehow related to the IMF and others. The IMF is one of the key enemies for him, which does not let him play his own game. Destroying the program and creating chaos in the country is something he is currently working on,” one of the top officials in the Cabinet of Ministers shares his impression of oligarchs actions with UP.

“He creates the image of his personal influence. It looks very persuasive. If Kolomoisky can show that he is the main here, Zelenskyi will face problems especially in his work with the IMF. Well, it is impossible to influence Kolomoisky,” one of the leading financial top managers in Ukraine summed it up, he refused to work in new government.

Kolomoisky’s fight with respectful international creditors has many forms. Before and during the adoption of draft law introducing land market the businessman supported the rallies of the opponents of the reform.

In particular, according to Economic Pravda, he funded the association “All-Ukrainian Agrarian Council” (AUC), which organized the rally under the slogan “Say “no to sale of Ukraine”, that took place in 13 regions. In the day of law adoption, the participants of the protest organized by the AUC brought to the Parliament a dead pig in coffin and funeral wreaths.

Even the President, while talking to the MPs before the voting, stressed that  Kolomoisky is related to the protests against the introduction of land market.

The other direction, which is attacked by the oligarch, is the economic block of the Cabinet of Ministers and ministers whose work is favoured by the international creditors. Most of them are in constant contact with the IMF.

“We see that they [Kolomoisky and his team – UP] try to discredit some ministers. They call Mylovanov either “moron” or “astronaut”, they say Markarova is “in charge of Ponzi schemes” on governmental bonds to give foreigners the land. This is nonsense,the source in the National Bank emphasizes.

However, the IMF has more important issues in its Ukrainian agenda, namely preservation of independence and stability of the National Bank and, of course, the issue of Privatbank.

The IMF is against the drastic change of the management of the regulator and expects guarantees from the Ukrainian side that Privatbank WILL NOT BE returned to the former owner.

Therefore, the National Bank is the main object of Kolomoisky’s attacks. It is attacked from several directions.

The first direction is the pressure by everyday mass rallies in front of the NBU that is taking place for three weeks and have started after NABU has detained the former NBU employees in the case of Bakhmatiuk’s Bank.

The participants of protest “Let’s stop corruption in the NBU” demand dismissal of the head of Board Yakiv Smoliy and his first deputy Kateryna Rozhkova. The number of protesters changes every day varying between few dozens to one thousand and more. Recently, they even tried to break into the building of central bank.

The NBU officially accused Kolomoisky of organizing the protests the day before.

The head of National Bank Yakiv Smoliy told that they already provided the law enforcement authorities with the evidence that those protests were not spontaneous.

The protests moved to the houses of the NBU management. The day before, the deputy head of the National Bank Kateryna Rozhkova stated that unknown persons came to her home with за плакатами і гучномовцем and left only after the call to police. The same previously happened in the village where the head of the National Bank Yakiv Smoliy lived.

The second direction is pressure on the head office of Privatbank. For instance, there were protests in September in front of the head office of the bank in Dnipro. They were organized by Nikopol Ferroalloy Plant (NFP), owned by Igor Kolomoisky. This episode also applies to the NBU.

Protests in front of the head office of Privatbank in Dnipro

Recently, Kolomoisky’s plant bought the lease of a parking lot in front of the head office of Privatbank at the auction. However, in few days Communal Enterprise Miskautopark cancelled results of it.

The third direction is the activity of Members of Parliament of the so-called “Kolomoisky’s group”, which criticizes the NBU’s actions. One of main participants in this group is former journalist and Member of Parliament of the party “Servants of the People” Oleksandr Dubinsky, who even spoke in support of protesters in front of the National Bank.

During his short tenure in the Parliament, Dubinsky initiated the creation of two temporary investigative commissions for investigation of the NBU activities.

Dubinsky at the protest in front of the NBU

The first one had to investigate the work of the management of the National Bank and Deposit Guarantee Fund in 2014-2019 regarding “artificial bankruptcy of commercial banks”. However, the draft decree was recently dismissed.

The aim of the second commission, which was initiated by Dubinsky in cooperation with out-a-faction MP Andriy Derkach a month ago, was to investigate “international corruption with participation of top officials of the NBU and Ministry of Finance.” It concerned the work of former head of NBU Valeriya Hontareva and former Minister of Finance Natalia Yaresko as well as other episodes.

The fourth direction is attacks of Supervisory board of Privatbank, which has been approved by the National Bank. According to  Finbalance, on November 25, Pechersk District Court of Kyiv started the proceedings following the lawsuit of Privatbank trade union to nine members of the Supervisory board of Privatbank.

Plaintiff demands to void their contracts.

According to the source in the NBU, the trade union has been established by the Privatbank employees who are loyal to former owners.

“It is hard to fire them because of loopholes in the Labour Code, thus they use their positions to attack from the inside,” he says.

The head of Supervisory board is Sharon Easky, former counsellor of US Treasury and expert-consultant of the IMF.

Not obvious direction. Besides mentioned events, there is high interest to the NBU by the law enforcement authorities. According to information of UP, there more than dozen criminal proceedings considering the National Bank.

Part of these proceedings considers the NBU decisions on insolvency of some banks. Some other proceedings consider “abuse of office” by employees and former employees of central bank, for instance the case of “Bakhmatiuk’s bank” case.

Currently, the NBU is in focus of attention of almost all law enforcement agencies, SBI, NABU, PGO, National Police, and even SBU.

However, there is no connection with Kolomoisky. But the NBU management, according to EP information, connects such a sudden law enforcement activities, particularly with the oligarch.

Personal grievances. History of relations between Kolomoisky and the former head of the National Bank Valeria Hontareva deserves separate attention. The oligarch does not hide personal dislike to the latter. In his interviews, he often smears her.

Recently, Hontareva encountered several strange and sad incidents. Firstly, she has been hit by a car in London where she currently lives. Then, the car of her daughter-in-law was arsoned, later her house burnt in Kyiv. Hontareva hinted that Kolomoisky might be involved in this.

Oligarch believes that the former head of the NBU initiated those events herself to get political asylum in the UK and avoid investigation in Ukraine.

The oligarch also often mentions Kateryna Rozhkova, who worked as deputy to Hontareva before and during the privatization of Privatbank.

WAR No.3. Last chance to return Privatbank

On the one hand, the situation with regard to Privatbank for Kolomoisky is the opportunity to settle of scores with all high-ranking officials involved in the nationalization of the bank, including the leadership of the NBU.

On the other hand, this is another battle-front with the IMF. The “dances” around nationalization and any scandals regarding Privatbank remove Ukraine from cooperation with the Fund, and that plays into hands of Kolomoisky.

“International Monetary Fund knows that Privatbank will be returned (to me) soon,” he stated in his comment to Kyiv Post. This statement was made on the last day of work of the IMF mission in Ukraine.

There are currently two key events that will determine the future of the bank.

The first one is the court hearing of the Sixth Appellate Administrative Court which will take place on December 19. At that day the court will consider the appeal of the state to the decision to void the nationalization of Privatbank.

In the case of Ukraine’s failure, the other court proceeding will be unblocked in the Kyiv Economic Court. It concerns the lawsuit of Kolomoisky and Bogoliubov which may help them to return the shares of Privatbank.

The essence of the case in Kyiv Economic Court. Kolomoisky and Bogoliubov (the latter via company Triantal Investments) demand to void the share purchase agreement of Privatbank shares by the Ministry of Finance in 2016.  Prior to nationalization, Kolomoisky held 41,7% of shares, and Triantal held 16,6% of shares.

The lose of the state in this case practically paves the way for Kolomoisky to returning the bank under his control. The latter was bailed with UAH 155 billion of taxpayers’ money three years ago. Following this, he can neutralize the cases in foreign courts, which he is currently loosing.

As EP already informed, the judge suspended the consideration of the case until the decision of the administrative court. That is why the court hearing of December 19 is so important.

However, the NBU has one ace, which is the second key event. The Parliament may adopt the law that will forbid the former owners to return their banks. This document is already being prepared.

According to the top official of the Cabinet of Ministers, the draft will be ready, but they will not have enough time to register it in the Parliament by the end of the year. It is yet unknown who will be the initiator of the law.

This draft law is a guarantee for the IMF and the Cabinet of Ministers has already agreed it with the creditor.

“The Fund understands that the reform of law enforcement and judiciary has not happened. Therefore, such a solution is optimal,” emphasized the source from the government.

According to him, Ukrainian legislation has many loopholes. Such a draft law will help to forget about all problems and “the burden the country received after the crisis”.

WAR No.4. For Centrenergo and petroleum products market

During Kyiv International Economic Forum one of the foreign journalists asked Prime Minister Oleksiy Honcharuk what he planned to do against the influence of oligarchs, particularly Kolomoisky’s influence.

“I don’t think that Kolomoisky returns anywhere,” the Prime Minister tried to assure.

Just in a few minutes, he had to justify the Kolomoisky’s influence over state company “Centrenergo”.

Centrenergo. According to UP information, Kolomoisky managed to receive influence over the asset in summer 2019, when the supervisory board appointed Volodymyr Petrenko as the acting CEO of the company. Later Kolomoisky confirmed that “he could understand the people” working at the management of the company.

“Own” management of the Centrenergo has immediately influenced the success of the oligarch. Today, the company buys coal from Nafta Force, which is a pocket company of Privat group.

On the beginning of November, Ukrtatnafta, which is controlled by Privat group, won the big tender on supply of 2 thousand tons of oil fuel to Centerenergo. Also, according to Kolomoisky, his companies are the biggest consumers of the generated electricity.

So no wonder that Kolomoisky is against the privatization of the company, which was named as a top priority by Honcharuk. It is yet unclear how the government plans to resolve this issue.

“Still there are a lot of groups of influence in our energy sector, they control this or that parts of the system. This government actually started to work in the early fall. Task # 1 is to prepare the country for the heating season. This is not the best, to put it mildly, time to fight monopolies,” Honcharuk answered when asked how he was going to reduce Kolomoisky’s influence on the state-owned company

Oil products and refinery. After the change of government, Kolomoisky’s position on the oil market has strengthened, though it is difficult to say that these things are interconnected. There is no direct evidence of the oligarch’s influence on the incumbent president or his “energy” team.

One way or another, after the election of the competitors of Privat, started to face problems.

Without exaggeration, the main event of the year in the market was the stopping of the Prykarpatzahidtrans oil pipeline, through which up to 40% of diesel was supplied to Ukraine. Among people, it is called “Medvedchuk’s pipe”.

The stop of the pipeline was a blow to Peter Belz’s Wexler group. He is one of the most powerful players on the market and a direct competitor to the oligarch. It was Wexler who was the largest importer of pipeline diesel. Thus, for the first four months of 2019, the company pumped through the pipe 270 thousand tons of diesel from a total volume of 645 thousand tons.

The stoppage of import through the Prykarpatzakhidtrans pipeline happened after the introduction of the special duty of 3.75% since August 1 (from October 1 it was 4%), which was pushed by MP Andriy Herus. A month later, importers claimed that the duty seemed to “kill the economy” of such supplies, and refused to pump the resource in this direction.

Herus himself has repeatedly argued that Kolomoisky had nothing to do with the imposition of duties. On the contrary, the oligarch seemingly opposed this initiative, since his companies were buying up to 10 thousand tons of cheap Russian diesel on a monthly basis, which is quite a modest amount in the market.

Privat tried to use a pipeline stop to increase processing at its Kremenchuk refinery, but as of now, that attempt was unsuccessful. However, one can clearly trace the benefits of the oligarch in the ports.

Firstly, the pipeline stop allowed Privat to substantially increase imports of diesel by sea and to become one of the five largest importers by October. Prior to that, offshore supplies could not compete with cheap pipeline diesel from Russia.

Secondly, the Dnipropetrovsk Group controls the largest oil refining facilities in Odessa and the Black Sea, which has full advantage of. According to the A-95 Consulting Group, if in August-October 2018, 11 thousand tons of diesel was imported under the control of Privat in Odessa, then for the same period this year it was 120 thousand tons.
At the same time, problems began to emerge at other transshipments outside the control of Kolomoisky’s group. The oil-refining complexes in Kherson, Mykolayiv and Pivdennyi stopped their work after elections for various reasons.

Oligarch’s companies began to submit documents to tenders regarding the largest diesel fuel consumers in Ukraine in summer, including Ukrzaliznytsya and the Ministry of Defense. The first victories in the bidding were not long in coming. On August 3, Ukrzaliznytsya signed first contract for the supply of diesel fuel with Privat.

Today, Kolomoisky companies continue to try their hand at fuel tenders of the Ministry of Defense, Ukrzaliznytsia and the National Police. And they often win. The oligarch could not dream of such in exile during Poroshenko’s time.

At the time of publishing this material, Kolomoisky did not respond to questions sent to him by journalists of Ukrainska Pravda.

The only place where Kolomoisky could not be reached by the United States was Ukraine

At the end of 2016, one of the authors of this text was witness of the conversation between two high-ranking officials who discussed privatization of Privatbank, which had just ended.

One of them was glad and said that they had finally managed to “pulled out Kolomoisky’s bad tooth, and that would significantly weaken him”.

The other source reacted to these phrases calmly and warned. It is very difficult to get rid of Kolomoisky. He does not forgive enemies. And they shouldn’t “put him out of commission so easy”.

In the end, it happened so. The victory of Zelenskyi has rewarded the oligarch such chance. Today, he tries to extract everything he can of this situation. Somewhere he does it more effectively, somewhere less effectively.

In any case, since then he has greatly improved his positions. And now he controls separate state enterprises, “protects” Ukraine from the IMF, returns Privatbank and arranges mini-crises to get rid of enemies.

“One is not given power. One should always take power”, according to the sources of UP, Kolomoisky commented to one of his friends the influence on Centrenergo in such way.

The oligarch seems to continue using this approach further.

“It’s not just the case of Privat here. It will be like this now: if it has died, then it has died. There will be no return. If the owner thinks that they have done unfair actions and he has lost, then he will go and argue in the court that he should receive compensation”, he emphasized.

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