This article originally appeared at Ukraina.ru

"The past few months in Ukraine have been jam packed with events: elections, vote counting, and controversy over how power would be divided among powerful interest groups," columnist Ivan Zatsarin writes.

Kolomoyskyi is attacking Poroshenko on different fronts

After all these exciting things passed, the country was left to grapple with an electricity shortage that reached 5,600 MW as of December 4.

But this kaleidoscope of events has distracted from the real story: the carving up of power in Ukraine.

The massive war between Poroshenko and Kolomoyskyi, which started this spring, likely won’t end before summer 2015 at the earliest.

In the recent parliamentary elections, Kolomoyskyi achieved a major victory by strengthening his influence in the Verkhovna Rada. According to Olyinyk (the oligarch’s ally from the same group as Filatov and Korban), “at least 200 MPs are in Kolomoyskyi’s pocket.”

Perhaps this is just boasting, but we definitely know of at least 30-35 henchmen. Moreover, the oligarch’s ally, Yatsenyuk, managed to hang on as prime minister, allowing them to team up more easily against Poroshenko.



From his stronger position, Kolomoyskyi has been able to land three serious blows on his opponent: He launched a media campaign codenamed "Maidan against Yarema", Ukraine’s prosecutor general. This is not to say that Yarema is the president’s protégé, but he did have the temerity to intervene in two schemes which caused pain for Ihor Kolomoyskyi: oil pumping from pipelines and Ukrnafta auctions where Kolomoyskyi sells himself oil at a cut-rate price.

At the start of the campaign, the offender was targeted through obedient media outlets, as is customary for Ukraine, but by late November, it escalated into street protests apparently coordinated by someone named Ivanov, a former employee of the Luhansk prosecutor’s office and a Russophobe blogger under the wing of Ukraine’s security service.

President of the National Bank of Ukraine (NBU), Valeriya Gontareva, became the second target. This spring, Privat Bank pulled off an elegant deal, having received refinancing from NBU to the tune of 11.6 billion hryvnias (approx. $1 billion under the exchange rate at the time), using property and assets in Crimea as a collateral (by that time lost by PrivatBank). Then the leadership at NBU changed, and this scheme to pump out free money came to an end. Perhaps the current head would like to keep it going, but she is also a Poroshenko ally.

The third blow was struck quite recently in Vinnytsia – Poroshenko’s power base, where he had influence with local and central authorities prior to his election as president. A group of nationalists broke through a police cordon and stormed the regional administration building, demanding the resignation of the region’s head and the firing of some deputies sitting on the regional council. The so-called Vinnytsia National Guard soldiers also came in for a lot of troubles.

By attacking Poroshenko on different fronts, Kolomoyskyi solves two problems at once: saving the shady schemes that his business empire currently relies on and snatching away some of Poroshenko’s power to protect these and other schemes going forward.



We have previously discussed Kolomoyskyi’s sources of income, which were entirely peaceful. But the war opened up new opportunities:

the above-mentioned refinancing (11.6 billion hryvnias);

a discount on Ukrainian oil that the oligarch managed to hold onto (3 billion hryvnias);

the difference between the list price and the real price for 606,000 tons of pipeline oil ($280 million);

the sale of oil produced by Ukrnafta to Privat Bank’s affiliated organizations at a discount (1.18 billion hryvnias);

supplying fuel to the Ukrainian army (0.545 billion hryvnias).

In total, as estimated by the Ukrainian media, his “official” income from various dubious activities amount to at least 20 billion hryvnias. And this is only what has been traced.

This is a significant amount of money, especially given Ukraine’s economic hardships, all the more so since the refinancing this spring was likely made in foreign currency (the changing exchange rate in the six months since has been equivalent to at least 4.5 billion hryvnias).

However, political analyst Dmitry Dzhangirov believes this is not sufficient:

"There is a tough fight between the president and the head of the Dnipropetrovsk Regional State Administration. There is an economic subtext. The Privat Bank and the Privat Group would go bankrupt without state support, corruption schemes, raiding and beneficial court rulings. Therefore, Kolomoyskyi needs to continue these schemes, from NBU refinancing of at least 10 billion hryvnias to tax evasion by certain structures."

Dzhangirov thinks that the Privat Group has so many problems that they can be solved only by exerting pressure on the government, the president and parliament. Actually, this is what he is doing now, which is made easier by the fact that Poroshenko is the only center of power in the country.

Some Ukrainian political analysts think that the confrontation between the president and the oligarch will begin the process of federalization in Ukraine. But that’s not true.

We know all about the tensions between Ukraine’s center and regions, and the issue here is feudalization, not federalization. The start of this process will be sped up by early elections to local councils, which, as directed by Poroshenko, will be held in spring 2015.

According to his plan, the end of the election cycle (presidential, parliamentary and local elections) will give him a vertical power structure through which to implement his policies. However, at the same time, these elections will boost Kolomoyskyi’s influence in critical regions.

Kolomoyskyi was the first Ukrainian oligarch to openly do battle with the authorities and withdraw his business empire from the jurisdiction of Ukraine. Ukrainian oligarchs always enjoyed close ties to the government, but they were based on a feudalistic arrangement in which an oligarch had to pay up at the end of a year to keep his businesses intact.

Taking advantage of the circumstances, particularly the government’s weakness, Kolomoyskyi violated this arrangement, and the spring election results should help his cause significantly.

Poroshenko has two options for returning Privat Bank’s taxes to the budget: to share power (central, not regional), or to finalize sales of state property to Kolomoyskyi. The appointment of the oligarch’s ally Filatov as head of the privatization oversight commission shows that the president has chosen the second option.