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bne February 2021 Cover story I 37
to a senior Ukrainian politician speaking to bne IntelliNews off the record.
Even former President Petro Poroshenko, who took over after the 2014 Revolution of Dignity that was supposed to
restart reforms, was an oligarch.
He was the only oligarch to see his wealth increase in the first years after the revolution, while the others lost billions of dollars. Although Poroshenko promised to put all his businesses into trust, he never did. The Panama Papers leak showed
he lied and remained in control of his assets – including a chocolate factory in the Russian region of Lipetsk, although he eventually sold this – which was backed up by an investigation carried out by bne IntelliNews on his business empire.
More tellingly, despite actively lobbying Washington and the IMF for help
as a counter to Russian aggression,
true to his oligarch form, Poroshenko vociferously resisted the IMF’s attempts to impose anti-corruption legislation and institutions on Ukraine.
According to bne IntelliNews’ high- placed source, Poroshenko spent most of his time trying to place his own people to control the main sources of money flows in the administration.
What’s to be done about
those who are to blame?
And this is where Meier’s joke comes in: what can be done to break this system when the leaders of these countries have no interest at all in ending it?
The EU has real leverage over the countries that joined the union in 2003. The IMF has leverage over cash-strapped Ukraine too, although as the events of 2020 and before show, very little progress has been made there. But the international community has no leverage over the rest of the region and so change will have to come from within, forced on the governments by the emerging middle classes which are slowly becoming politicised. That could take generations, although the popular revolutions in Armenia and Belarus give cause for hope a shortcut is possible. Thanks to this penetration of politics
by the oligarchs the IMF and other
international financial institutions (IFIs) are fairly helpless in countering the influence of the oligarchs.
All they can do is insist on anti-corruption laws and institutions that are too easily circumnavigated by the oligarchs.
Even Poroshenko only caved in to the IMF demands to set up an anti-corruption court (ACC) when Ukraine was facing a financial crisis and when the IFI became the only sources of funds to stave off
an economic collapse. However, the
ACC has yet to jail anyone significant. When the National Anti-Corruption Bureau of Ukraine (NABU) indicted the first big fish in 2017, Roman Nasirov,
the head of the State Fiscal Service
of Ukraine and a close Poroshenko
ally for embezzling up to $50mn, not only did the courts fail to prosecute
him, but he was eventually re-instated and even ran for president in 2019.
Part of the problem is that the IMF’s own insistence on sticking to the letter of the law means it has to accept the decision of courts and elections even when it is obvious they have been perverted by oligarch bribes. However, the oligarchs only follow the letter of the law when it suits them and when they have bought
a decision that is in their interests.
Examples of this duplicity abound.
The most recent example is Ukraine’s Constitutional Court’s decision to strike down most of the anti-corruption laws.
The court is supposed to be the ultimate guarantor of the rule of law in Ukraine, but with five of the 15 judges themselves already under investigation for corruption it is patently obvious that the decision was bought by oligarchs looking to scupper the IMF deal and halt the anti-corruption drive.
Ironically the IMF had to accept the Constitutional Court’s decision, because it is the Constitutional Court, and rebuke Zelenskiy who attempted to sack the judges – for which he doesn't have the constitutional power.
Western commentators are also
caught in the paradox of the need
to follow the letter of the law versus the realities on the ground.
The arrest of US fund manager Michael Calvey on February 14 in 2019 caused a huge scandal and the international business community (and several
very senior Russian officials) called
on Putin to stop the case and let him go. Putin responded, correctly, that
as president he had no power to order the courts to do anything, whereas it is also perfectly obvious the courts will do exactly as they are told, if Putin asks.
The irony in this case is it was the international community that was asking that Putin ignore the rule of law, whereas Putin insisted on following
it. This contradiction in views comes up time and time again as each side flip-flops between insisting on the law or conceding to the realities
of the way things really work.
Anti-corruption blogger and opposition activist Alexei Navalny was due to return to Russia on January 17, but during the previous week a court
took his suspended sentence for an
old embezzlement case and turned
it into an actual jail-time sentence. Commentators widely saw the ruling as an attempt by the Kremlin to persuade Navalny to remain in exile, but it also shows the courts will do whatever the Kremlin tells them to – not that anyone will ever admit to that in public.
CE & Belarus
Even Central Europe is not immune
to the oligarch problem. Czech Prime Minister Andrej Babis is an oligarch and was caught directing EU structural funds to his own companies.
Hungarian Prime Minister Viktor Orban is not an oligarch, but his
close personal friends are and they have been making a fortune from state contracts in recent years. Lukashenko is an interesting case,
as while there are a few oligarchs in Belarus, men who are close to the president, as the country has yet to
go through mass privatisation their power and wealth is limited. They make their money from securing what
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