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12 I Companies & Markets bne May 2023
have nothing to do with the president, but goes on to say: “there is corruption in Ukraine.”
“When you have problems, when you are vulnerable, there are people that will take advantage of that to take what they want,” says Kiryanova. “The system is very corrupt, and the corruption is unpunished. Under the cover of war you can do anything.”
Corruption remains a worry for Ukraine’s allies too. Last September Ukraine nearly ran out of money after Western donors were reluctant to transfer large amounts of cash to cover the government’s ballooning deficit, afraid it would be stolen. As a budget crisis loomed the donors relented and have committed to billions in macro support.
Aware of the problem, Zelenskiy has continued his anti- corruption campaign and especially focused on the oligarchs – another factor going into Smart Holdings’ problems. In February, Ihor Kolomoisky, another oligarch and a personal friend of Zelenskiy, saw his offices raided by law enforcement, and he has also been sanctioned.
“There is a law on oligarchs in Ukraine and Smart Holding`s founder legally is not “an oligarch”, though some media as well as SBU in its statement continue using this definition for PR purposes to underline their personal dislikes or damage his reputation” – says Kiryanova.
Transparent patriot
Kiryanova says she is working to resolve the problem and keep the company going for the sake of its 3,000 employees.
The company owns a shipyard in Kherson in the midst of the war zone, and another larger one in Chernomorsky. Neither has done any work since the start of the war, but the staff
are still being paid so families “can put food on the table.” Likewise, the holding has kept its shopping centers with supermarket chain running, despite the fact that several stores have been destroyed in rocket attacks and the business is running at break-even at best. “If we closed them then where would people be able to buy food?” one manager told bne IntelliNews.
The SBU has offered no evidence to support its claim that Novynskyi is aiding Russia. Indeed, Smart Holding has donated $40mn to Ukraine’s military and civilian as humanitarian aid and is actively suing Russia for the damages to its assets.
The group submitted six lawsuits to European Court of Human Rights in October on behalf of Smart Holding’s companies, where it hopes the court will rule that Russia is responsible for the loss of assets.
They include shopping centres in Berdyansk, Kremenchuk, Mariupol, Melitopol, Severodonetsk and Kramatorsk which were captured or destroyed by the aggressors. From the
www.bne.eu
24 stores the group owned by 2014, only 50,000 square metres out of a total of 350,000 are left. The rest has been destroyed.
In the biggest claim, Smart Holding is hoping the court will rule that Russia bears responsibility for the destruction of Azovstal and will order compensation.
Even if Smart Holding wins in court, Russia withdrew from the ECHR in May and will no longer recognise its rulings. Most of Novynskyi’s assets are in the east and south of Ukraine in the middle of the battlefields. Rather than aiding Russia, the war with Russia has cost Novynskyi billions of dollars that can probably never be recovered.
Novynskyi sanctioned
Novynskyi withdrew from business life and resigned from all his executive roles in 2013. Last year he gave up his ultimate ownership rights as well after transferring the control of all his shares to irrevocable trusts, controlled by a law firm in Cyprus, and has ceased to play any role in the business of the companies in the group.
“The shares were transferred to a trust before the sanctions,” says Kiryanova. “Now they are controlled by EU licensed lawyers based in Cyrus. However, the authorities say Novynskyi is acting in the interests of Russia.”
“The system is very corrupt, and the corruption is unpunished. Under the cover of war you can do anything”
Novynskyi is a deeply religious man and member of the UOC, which has come under attack by the Ukrainian government because it was nominally under the Moscow Patriarchy, although the UOC formally cut ties with Moscow in
February 2022.
This story is complicated, as under former president Petro Poroshenko a rival Orthodox Church of Ukraine (OCU) broke away from Moscow and crucially was granted a “Tomas” by the Patriarch of Constantinople in January 2019 – official recognition of its independence as an autocephalic Orthodox church, in what many saw as a political move.
Novynskyi remains true to the much larger UOC, which
has been worshiping in Kyiv for more than 1,000 years, when Vladimir first brought Christianity to Kyiv. Novynskyi was ordained a deacon of the UOC on April 7, 2020. Since the war began, the UOC has been subjected to regular smear campaigns in the media and frequent searches and investigations by the authorities.