Kolomoisky arrest is 'key test' of Zelensky's anti-corruption campaign

The arrest of Ukrainian oligarch Ihor Kolomoisky on 2 September is seen as a definite break with the old ways of doing business. By arresting the man whose television station backed his presidential election campaign back in 2019, Zelensky presents himself as an anti-corruption crusador. Todd Prince, senior correspondent for RFE/RL, explains why Kolomoisky is 'numero uno' when it comes to protecting corrupt interests in Ukraine, and analyses the symbolic value of this high-profile case in the country's fight against corruption.

Screen Shot 09 19 23 at 10.26 AMTycoon Kolomoisky after arrest led to the court. The judge ruled that he will be held for two months in custody. Screenshot from YouTube CBCNews

by Todd Prince

For right or wrong, Ukrainian tycoon Ihor Kolomoisky has come to epitomize for many in Washington and Brussels the endemic corruption that has held Ukraine back economically and politically since its independence more than three decades ago.

The 60-year-old businessman, who is blacklisted by the United States, has over the years sent armed men to take over companies, threatened officials, cheated state-owned companies, and bought off parliamentarians to stall crucial Western-backed reforms, among other brazen acts. 'He is really numero uno in terms of doing active damage. He is the one protecting corrupt interests against the reform tide,' John Herbst, the former U.S. ambassador to Ukraine, told RFE/RL.

But Kolomoisky's Teflon-like ability to escape criminal consequences for decades may have come to an end on September 2, when he was arrested in Ukraine on suspicion of fraud and money laundering in relation to a state-owned company and handed a 60-day, pretrial detention.

The dramatic jailing of Kolomoisky, once the nation's third-richest man according to Forbes, is the latest in a series of high-profile arrests in Ukraine over the past year as President Volodymyr Zelensky tries to portray himself as an anti-corruption crusader.

While Ukrainian leaders have for decades promised to tackle corruption with little to show for all their talk, the issue has grown in urgency since Russia launched its full-scale invasion of Ukraine in February 2022. Ukrainian citizens, suffering from the deprivation of war, are showing little patience for graft.

Showcasing the fight against corruption

Meanwhile, some politicians in the West are trying to use Ukraine's reputation as endemically corrupt as an excuse to curtail crucial military aid. For both Ukrainians and their Western allies, no other arrest could send such a strong signal that Ukraine is determined to fight corruption than that of Kolomoisky. 'He is the most well-known name in Ukraine and abroad to showcase the fight against corruption,' Tetiana Shevchuk, a lawyer with the Anti-Corruption Action Center, a Kyiv-based NGO, told RFE/RL.

In an interview with Current Time - the Russian-language network run by RFE/RL in cooperation with VOA - Vladimir Fesenko, a Kyiv-based political analyst, said his arrest was 'a demonstration that there are no untouchables.' Ukraine is scheduled to hold elections in the spring of 2024 and, while the war could push it back indefinitely, the spate of corruption-related arrests will undoubtedly bolster Zelensky's ratings.

Kolomoisky's arrest is a demonstration that there are no untouchables

For those politicians in Washington who back aid to Ukraine, Kolomoisky's arrest is a 'wonderful talking point,' Herbst said. Congress is currently debating whether to approve President Joe Biden's $40 billion emergency spending bill, more than half of which will go toward crucial military and humanitarian aid for Ukraine as it tries to drive Russian forces out of its territory. A vocal minority of Republicans have balked at giving so much aid to Ukraine, often highlighting the country's notorious reputation for corruption despite notable improvements in anti-graft reform and investigations.

Who is Kolomoisky?

Kolomoisky is arguably the most notorious of the Ukrainian tycoons who emerged from the wreckage of the Soviet Union's collapse and snapped up former state assets at rock-bottom prices, sometimes deploying extralegal or violent methods.

A native of Dnipro, a major industrial city in southeastern Ukraine, Kolomoisky has owned banks, energy firms, metals companies, airlines, and one of the nation's most influential television channels. Over the years, as they consolidated their assets, many of the original tycoons tried to clean up their image, stepping back from bare-knuckle tactics. Kolomoisky, for the most part, did not, experts say.

Until Russia's 2022 invasion of Ukraine, those tycoons wielded immense power behind the scenes, using their wealth and media assets to win the loyalty of politicians, judges, and parliamentarians and push policies that benefited their companies. Kolomoisky's television station backed Zelensky's presidential election campaign in 2019 and is credited with helping the political novice win in a landslide against the incumbent, President Petro Poroshenko.

Kolomoisky's television station backed Zelensky's presidential election campaign in 2019 

It raised alarm at home and abroad that Zelensky might be beholden to Kolomoisky, especially after he tapped the tycoon's former lawyer as his chief of staff. Foreign executives working in Ukraine feared it represented 'a return to the old ways of doing business,' according to a 2019 U.S. Embassy cable. Zelensky continued to be dogged by suspicion even after he passed legislation hurting Kolomoisky's interests.

Increased pressure on Zelensky

The pressure on Zelensky to publicly distance himself from the notorious tycoon only grew after the FBI announced in August 2020 that it was investigating Kolomoisky for allegedly embezzling hundreds of millions of dollars from his Ukrainian bank and using the proceeds to purchase commercial real estate in the United States.

Seven months later, the U.S. State Department blacklisted Kolomoisky for corruption and undermining democracy at home, in what many experts viewed as a signal to Zelensky to bring him to heel. 'It was always toxic for Zelensky that the oligarch closest to him was being investigated by the United States,' Shevchuk said.

President Volodymyr Zelensky and other top officials meet with oligarch Ihor Kolomoisky on Sept. 10, 2019President Volodymyr Zelensky and other top officials meet with oligarch Ihor Kolomoisky on Sept. 10, 2019 (Photo: President's Office of Ukraine)

In 2021, Zelensky signed into law an 'anti-oligarch' bill that essentially gives tycoons a tough choice: either refrain from politics or sell your media assets. However, the bill was criticized by experts at home and abroad as a 'populist' measure that could be abused to target political opponents or their backers. The bill was part of a broader campaign that Zelensky called 'de-oligarchization,' or the curtailing of tycoons' power.

The Ukrainian government had to pursue Kolomoisky to demonstrate its reformist credentials to the U.S.

In a 2021 report, Andrew Wilson, a Ukraine expert at the European Council on Foreign Relations, said the 'key test' of Zelensky's campaign to rein in tycoons would be how he handled Kolomoisky. 'The Ukrainian government had to pursue [Kolomoisky] to demonstrate its reformist credentials to the U.S.,' he wrote at the time. As Zelensky pursued his campaign, Kolomoisky appeared to carry on as usual. Former U.S. Ambassador Herbst told RFE/RL that 'it was Kolomoisky who seemed to act as if he could do what he wants.'

The tycoon continued his fight to recover Privatbank, the nation's largest lender, which was taken over by the state in 2016 after the central bank said it was on the verge of bankruptcy. The West, which has given billions of dollars over the years in financial aid to Ukraine, vehemently opposed any move to return Privatbank to Kolomoisky.

New enemies

Kolomoisky was also making new enemies. According to Forbes' sources, Zelensky's administration was angered that Kolomoisky did not step up enough in the early phases of the 2022 war to help the government financially. The tycoon did play a large role in helping Ukraine defend its territories in 2014-15 when Russian fighters first tried seizing land.

Kolomoisky's ties to Zelensky have always been exaggerated

Five months after the start of Russia's 2022 invasion, rumors spread that Zelensky had revoked Kolomoisky's Ukrainian citizenship, though there has never been confirmation from either side. As Ukraine does not extradite its own citizens, such a move potentially opens the door to Kolomoisky's extradition to the United States should the FBI ever file criminal charges.

Analyst Fesenko said that Kolomoisky's ties to Zelensky had always been exaggerated. He didn't so much support Zelensky as he sought the ouster of his nemesis, Poroshenko, he said. In a clear reference to Kolomoisky's arrest, Zelensky thanked Ukrainian law enforcement for bringing cases to court 'that have been hindered for decades.'

Alarm bells

While Kolomoisky's arrest sends a strong message, there are still voices who doubt the sincerity of Zelensky's commitment to the anti-corruption cause. Western officials have long viewed the Ukrainian Prosecutor-General's Office, the security services (SBU), and the courts as mired in corruption and incapable of going after high-profile figures. No tycoons had ever been convicted by a Ukrainian court. In exchange for much-needed financial aid following Ukraine's 2014 revolution, the West required Kyiv to create independent anti-corruption bodies.

No tycoons had ever been convicted by a Ukrainian court

But rather than being seen as onboard with those initiatives, Zelensky set off alarm bells in the West with what appeared to be attempts to control these new, supposedly independent institutions. After failing to put his preferred choices at the helm of the anti-corruption bodies, two weeks ago, Zelensky proposed equating large-scale graft to treason. That would allow the SBU, which is overseen by the presidential administration, to take over cases from the anti-corruption bodies, experts said. The president's plan was met with pushback from activists and officials at home and abroad.

In a possible sign of Washington's concern about the proposed legislation of equating graft with treason, U.S. national-security adviser Jake Sullivan met at the White House on September 1 with the heads of the anti-corruption institutions to discuss 'safeguarding [their] autonomy.' The following day, Kolomoisky was detained by the SBU.

The Ukrainian anti-corruption investigative body NABU, which had been investigating Kolomoisky since 2019, announced on September 7 that Kolomoisky was a suspect in a case involving alleged embezzlement at Privatbank.

Not the type of personality who backs down

Fesenko said he expects to soon see more examples of this type of competition between the independent, anti-corruption institutions and the SBU over high-profile corruption cases. As for Kolomoisky's future, analysts are hesitant to predict what will happen next. Herbst said Kolomoisky is 'not the type of personality who backs down.' And Fesenko said the tycoon has the resources and the lawyers to drag out the case in Ukraine for a long time. 'The topic of Kolomoisky is not closed. I think this is just the beginning of this [television] series,' he said.

This article was originally published by Radio Free Europe/Radio Liberty

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