Chrystia Freeland is the federal member of parliament for Toronto Centre and the author of Plutocrats: the Rise of the New Global Super-Rich and the Fall of Everyone Else.

Ukraine’s crisis has had us reaching for our Sam Huntington or our Henry Kissinger. We have tended to understand the conflict either as the latest chapter in the clash of civilizations, or as an exercise in realpolitik.

But the most consequential driver of the struggle is economic, and a particular economic event at that—the wild east privatization in the former Soviet Union in the 1990s. In both Ukraine and Russia, the legacy of that period was kleptocracy. The turbulent events of the past six months have been driven by two big and divergent reactions to that kleptocracy.


It started with the Maidan revolution last fall, and the decision of millions of Ukrainians to overthrow their kleptocratic regime. Astonishingly, they succeeded. But their victory was a threat to the kleptocracy next door, prompting Vladimir Putin’s annexation of Crimea and his continued effort to destabilize and delegitimize the shaky new Ukrainian authorities.

The irony is that in order to preserve their state in the face of this Russian aggression, Ukrainians are turning to the only powerful figures left after 20 years of kleptocracy—their oligarchs. If eastern Ukraine successfully resists the Russian-inspired and -funded separatist movement, it will only be because the regional oligarchs have decided to back Kyiv. And Kyiv itself will be ruled by Petro Poroshenko, a confectionary magnate known as the “chocolate king,” who will be inaugurated on Saturday after being elected as president with support from across the country.

The big question for Ukrainians—and for the Western states that have stood with Kyiv—is whether Ukraine’s oligarchs will now be willing to set aside their narrow self-interests and devote themselves to state-building.

Many of the precedents are not encouraging. Victor Yanukovych, the ousted president, used his reign chiefly to amass a fortune for himself and his family. Yulia Tymoshenko, a presidential candidate and former prime minister, was an energy oligarch before she went into politics. Ukrainians respect her for opposing Yanukovych—and for serving more than two years in prison as a result. But, largely because of suspected economic self-dealing in the gas trade with Russia, she is distrusted by many, earning just 12 percent of the vote in the presidential election.

And, of course, there is Putin himself. The Kremlin chief owes his political ascent to Russian public outrage at the rise of the oligarchs during the Yeltsin era, and he began his presidency by cracking down on them. But rather than replacing Yeltsin’s pluralistic oligarchy with the rule of law, Putin created his own, authoritarian version of kleptocracy—just as his Ukrainian protégé, Yanukovych, was trying to do.

But there is reason for hope, too. Kakha Bendukidze was one of Russia’s junior oligarchs during the Yeltsin era. In the late nineties, however, he went home to Georgia and became one of his native country’s leading economic reformers. He is now advising the Ukrainian government. Mikhail Khodorkovsky was the arch-oligarch of the Yeltsin era, and Putin made an example of him by expropriating his company and sending him to prison. He was released a few months ago, and is becoming a leading voice for democratic reform in the former Soviet Union. When he travelled to Kyiv in March to address the Maidan—a movement whose raison d’être was to liberate Ukraine from its kleptocracy—Khodorkovsky received a hero’s welcome.

Poroshenko himself put political values ahead of business interests by joining the Maidan early on, when its victory was far from certain. That not only jeopardized his Ukrainian business interests—Yanukovych, after all, was still in charge—it also prompted the Kremlin to retaliate against his considerable sales and production inside Russia. That risky choice is why Poroshenko won.

Another precedent is our own history. Western capitalist democracy emerged because, at critical turning points, our own plutocrats, whether they were the feudal lords of the Magna Carta or the American robber barons of the interwar years, decided that a rule-of-law state was better for them—and everyone else—than rule by one autocrat, or by an angry rabble.

As it happens, that was actually the theory behind post-Soviet privatization. Russian and Ukrainian reformers, and their Western backers, didn’t set out to create kleptocracies. They knew the transfer of wealth would inevitably be messy and unfair. But their assumption was that once private property had been created, the new owners would manage the assets better than the Soviet state had done, and that they would eventually become a powerful political force in support of democracy and the rule of law.

Anatoly Chubais, the architect of privatization in Russia, described how he thought things would work out to his friend and colleague, Sergei Kovalyev, a former dissident and leading liberal politician in the 1990s. “They steal and steal and steal,” Chubais told Kovalyev. “They are stealing absolutely everything and it is impossible to stop them. But let them steal and take their property. They will then become owners and decent administrators of this property.”

It didn’t quite work out that way. Even after they got rich, most of Russia’s oligarchs judged that continuing to manipulate the rules of the game in their own favor was a more lucrative strategy than fighting for a level playing field and effective state institutions. Their greed paved the way for Putin, who replaced Yeltsin’s chaotic and competitive oligarchy with a top-down kleptocracy.

Yanukovych wanted to follow suit. His effort to establish full-blown Putinism impoverished and humiliated ordinary Ukrainians. It also threatened many Ukrainian tycoons, who were all too aware of how Putin had exiled, imprisoned and expropriated many of the Yeltsin-era super-rich. The oligarchs’ consequent ambivalence about Yanukovych is one reason the Maidan was able to triumph over Ukraine’s would-be strongman: After government snipers shot and killed dozens of protesters, even his elite support melted away.

In the fairytale version of Ukraine’s uprising, an unsullied democrat—a Nelson Mandela or a Vaclav Havel—would be waiting in the wings to take over the post-revolutionary state. But Ukraine doesn’t have any dissident heroes handy, partly because the Maidan was explicitly about a self-organized civil society taking action and consciously rejected political parties and charismatic, individual leadership.

Butwith an irredentist Russia on the move, Ukraine needs new leaders now. Thanks to the messy history of the past two decades, the people most likely to have the money, institutional support, networks and even the managerial skills to step up to that challenge immediately are the oligarchs.

Nowhere is that clearer than on the border between the eastern regions of Dnipropetrovsk and Donetsk, an unmarked and previously barely noticed demarcation that has become the front line in the fight for Ukraine. In late May, I travelled to both cities.

The governor of Dnipropetrovsk oblast, or administrative unit, is Igor Kolomoysky, a small, burly, jolly and bearded mathematician whose economic empire ranges from co-ownership of Ukraine’s largest commercial bank to media to metals and mining. Kolomoysky has been active in the Jewish community, but before the Maidan he was not otherwise particularly involved in national politics.

When Yanukovych fled, he left behind a state apparatus that was either deeply corrupt, or just melted away. Kolomoysky agreed to serve as governor of his home region. He describes himself as a “Jewish banderite,” a joking allusion to the term “banderites” that the Kremlin uses to label today’s Ukrainian leadership as right-wing extremists. The bookshelf in his reception foyer displays two volumes by Taras Shevchenko, the 19th century Ukrainian serf-turned-poet and national hero, and a Russian translation of Barack Obama’s “Dreams From My Father”. The emblem of the Crimean Tatars, a beleaguered ethnic minority of around 250,000 people in Crimea who have been strongly opposed to the Russian takeover, is on display next to his desk.

Under Kolomoysky’s leadership, Dnipropetrovsk is well-organized and well-defended. During Yanukovych’s presidency, the Ukrainian government’s coercive branches were systematically staffed with Russian agents, some of them actually citizens of Russia, and, like the rest of the state, riddled with corruption.

In Dnipropetrovsk, Kolomoysky replaced the regional government leadership—one of his deputies jokes, “we are a government of millionaires.” He recruited thousands into a new police force and national guard. He and local business leaders have topped up government salaries, particularly for the police and national guardsmen. He offered a $10,000 bounty for turning in “little green men,” as Ukrainians call the Russian irregulars who took over Crimea and have been pushing into the east and south.

On election day, Dnipropetrovsk, a Russian-speaking city a few miles from the town where Leonid Brezhnev was born and educated and a key center of the Soviet military-industrial complex, was aflutter with blue and yellow Ukrainian flags—on cars, on apartment balconies, on backpacks, braided in women’s hair—and I saw dozens of billboards inviting men to enlist in the national guard.

To prevent the election from taking place, separatists in neighboring Donetsk stole and destroyed ballot papers and threatened the lives and families of election commissioners. But, working with local business leaders, Dnipropetrovsk established new government structures in four districts along its border with Donetsk, and voting took place normally there. Kolomoysky flew in ballots on a charter plane whose manifest said it was coming from Turkey—some Russian informants work at Ukrainian air traffic control, Dnipropetrovsk officials believe, and they feared the government airplane that was meant to deliver the forms to Donetsk would be shot down. As a further disguise, the ballots were loaded into half a dozen hearses and thus distributed around the districts.

The city of Donetsk is 250 kilometres east of the city of Dnipropetrovsk and the two oblasts border one another, but that three-hour drive has become the distance between war and peace. When I visited Donetsk the day before the presidential vote, government authority had vanished and the only men with guns were irregulars wearing the orange and black ribbons of the separatist forces.

The city was outwardly calm—grandmothers accompanying children to tennis lessons at the Victoria Hotel’s courts, newlyweds taking pictures outside the spectacular soccer stadium built for the 2012 Eurocup, foreign correspondents popping in to local yoga classes during their downtime. But it was clear the separatists were the city’s only coercive authority. They were strong enough to prevent any elections in the regional capital and had begun looting, which they called “tax collection.” The fighting that broke out the day after the ballot already felt inevitable.

Kolomoysky faulted Rinat Akhmetov, one of Ukraine’s richest men, whose home base is Donetsk, for the lawlessness. A week earlier, Akhmetov had sided openly with independent Ukraine, bringing out his steelworkers in nearby Mariupol to prevent a separatist takeover. I saw a billboard in central Donetsk that read “A happy Donbass in a United Ukraine — Rinat Akhmetov.” (Donbass is the region encompassing Donetsk and Luhansk oblasts, the easternmost parts of Ukraine.)

But Kolomoysky worried Akhmetov had stepped in too late. “It was up to the oligarchs to take charge and rebuild the state,” he told me in his office in Dnipropetrovsk, where the first floor had been turned into a live election broadcast center. “We had the most at stake.”

One economic threat is Russia. Poroshenko’s considerable Russian assets are already in jeopardy. Kolomoysky, who publicly described Putin as “a short schizophrenic” after the invasion of Crimea, and was subsequently criticized by name by the Russian leader, is particularly vulnerable. But Kolomoysky also fears a popular revolt against capitalism and capitalists.

“The Maidan was a revolution against kleptocracy. We oligarchs need to show that we can make Ukraine work or we will lose everything,” he said. The Donbass separatists, he believes, posed an even greater threat: “They have already started talking about ‘taxing’ Akhmetov and nationalizing local business. They want it to be 1991 all over again.”

This is exactly what the post-Soviet economic reformers back in the early 1990s hoped would happen—businessmen, motivated by their own stake in market democracy, defending it.

Ukrainians today are extraordinarily idealistic—they believe in what they call their “dignity revolution,” and many of them are even prepared to die for it. But they are not naive. After 23 years of trying to build a post-Soviet state, and their very recent experience, with the 2004 Orange Revolution, of a democratic uprising that ended with a whimpering return to kleptocracy, they worry that today’s nation-building oligarchs could be tomorrow’s corrupt authoritarians.

That’s one reason the rag-tag encampments on the Maidan have yet to be dismantled. With their whiff of mob rule, they make the West nervous. But many Ukrainians see this permanent protest as an essential reminder to their new government that the revolution was about changing the system, not putting new people in charge of the old one.

With our hunger for simple, personalized narratives, we in the West were uncomfortable with the Maidan’s lack of a heroic leader or a clear political program (that was one reason so many bought into the Kremlin-peddled specter of a far-right takeover). But that was actually the point.

Mustafa Nayyem, the Muslim Afghan refugee journalist whose Facebook post triggered the protests, told me the Ukrainians who spontaneously gathered to form the Maidan had one condition when, a couple of days later, opposition politicians came to join them: no party symbols or slogans. Hromadske TV, or Community TV, was created in the wake of the Maidan and Nayyem is now a senior editor. An interviewer there told me proudly, “We have no politicians here” (I offered to leave).

The point isn’t that Ukrainians believe they can have a new state without politicians–Poroshenko’s electoral mandate is stronger than that of any previous Ukrainian president. But they realize Ukraine won’t be saved by a single charismatic figure.

The Maidan toppled a kleptocracy. Its job now will be to keep the new oligarchs in charge honest. This second act will surely be harder than the first.