Prime Minister Goncharuk Versus Oligarch Kolomoisky

The speech of the Prime Minister of Ukraine Aleksey Goncharuk at the investment summit in London could’ve gone unnoticed – it’s impossible to ride a scooter there [riding scooters is one of Goncharuk’s hobbies – ed], and the young talent has nothing more to attract attention to him – if Goncharuk had not made a loud statement: that the president and the government are united in their unwillingness to return “Privatbank” to Kolomoisky.

Igor Kolomoisky immediately reacted. Not personally. It’s just that a lot of Ukrainian journalists wondered: is the Prime Minister doing the right thing when at an investment summit, trying to attract the attention of investors towards Ukraine, claims that the authorities of the country have no intention to comply with the court decision and return to the bank to its owner, the nationalisation of which was declared illegal? Kolomoisky is very committed to the spirit and letter of the law if the law is on his side.

But I think that Ukrainian society is so worried about “Privatbank” for nothing. Kolomoisky initially, after his return to Ukraine from forced emigration, claimed that he didn’t need “Privatbank”. And you can believe it. After all, by returning the bank, the state should remove from it the billions invested in the process of rehabilitation. Therefore, Kolomoisky repeatedly hinted that he could be satisfied with “compensation” of $2-3 billion and leave the bank to the state.

The problem rests with the IMF‘s position. The Fund does not want to hear anything not only about Kolomoisky returning “Privatbank” to his control, but also about “compensation”. And until this issue is resolved, it refuses to give Ukraine money. And the Fund doesn’t care about statements like Goncharuk’s vows in London. It wants the state’s refusal to comply with Kolomoisky’s demands to be formalised by a separate law. I do not know whether the emissaries of the Fund were invited to resolve the issue with the help of a government decree and they refused, or Kiev has not yet understood that such an option is possible.

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I understand that the adoption of a law seems more reliable for the Fund, because the government decree can be declared null and void tomorrow. But in fact, Kolomoisky will always find the right number of deputies to submit to the Constitutional Court, which will undoubtedly rule on the unconstitutional nature of such a law (and if the judges are correctly stimulated, they will do so very quickly).

In general, the Fund needs guarantees, and the government is so far only ready to make a promise. But it seems that the whole story with “Privatbank” is only needed to distract the attention of the respected public from the main theme of confrontation. In addition to the story with “Privatbank”, in which the involvement of the IMF was provoked by Kolomoisky personally with his statements (and he knows how to sit quietly when necessary), the Fund demands from the Ukrainian government to remove from the law currently considered by the Rada about lifting the moratorium on the sale of agricultural land, the provision prohibiting their sale to foreigners (and even to the Ukrainian enterprises with foreign participation) in the first four years after the moratorium is lifted.

Here it’s not about $2-3 billion that can still be milked out of “Privatbank” (and even then – only if there is a a lot of luck), but about $5-10 billion (and with the talents of Kolomoisky, perhaps twice as much) that can be pumped out of Ukrainian agricultural holding companies and their foreign partners for the land that Kolomoisky will firstly buy up (while it will be still forbidden for them [foreigners -ed] to buy it), and then will sell it to them too. And this is the best case scenario, because in the worst case scenario Kolomoisky will take advantage of the opportunity to put the entire agricultural business of Ukraine in his pocket. The fact that he hasn’t done it yet doesn’t matter. He was not involved in aviation either until a certain moment, and then he became involved, and in a such way that soon only the aircraft of his companies (those ones that at that time still would not be bankrupt) will fly above Ukraine.

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Kolomoisky does not need the whole country to eat “Kolomoisky’s rolls”, even international trade in agricultural products is of interest to him only to some extent. He just needs to squeeze agricultural holding companies dry, even at the cost of eliminating agriculture in Ukraine, as such. The most important thing is that the revenues of this latter more or less profitable business in Ukraine should be diverted to Kolomoisky’s pocket.

While the IMF is lobbying the interests of foreign companies (which, by the way, definitely will do no worse to Ukraine than Kolomoisky will do) and refuses to lend to Ukraine until the issue is resolved. And IMF loans are needed both by the government, which has nothing to pay off even the interest on debts, not to mention for the repayment of the body of debt, and by Kolomoisky – dividing out IMF loans has long been the main source of income for Ukrainian oligarchs close to power. Since 2014 a dozen and a half billion hryvnia of such loans has been “lost”, which the IMF also persistently demands to find.

As we can see, the main stumbling block between the IMF and Ukraine (or Kolomoisky) is the question of who will be the main beneficiary from the sale of land, as well as who will share out the next tranches of IMF loans. In these cases, we are talking about real tens of billions of dollars.

The government, made up of boys and girls raised on Soros grants, is on the side of the IMF. The president, obedient to Kolomoisky’s will, starts to hesitate, since without the IMF money the country is unable to survive 2020 (it will be difficult for it even with money). Kolomoisky needs to demonstrate his ability to compromise, to move the ball onto the court of the opponent.

The story with “Privatbank” is an ideal solution to the problem. At first, the conflict around a bank not particularly needed by Kolomoisky is inflated to the heavens. The IMF takes a principled position on this issue. Then Kolomoisky concedes. The bank remains owned by the state. In exchange, the Fund is expected to make concessions on the sale of land to foreigners. The Ukrainian government will have a powerful argument in this case. Firstly, the step is already difficult, the population is against it, no one before them decided to sell land, destabilisation is possible, the government may even fall and then the question of selling the land again will be postponed for an indefinite time (perhaps forever). Secondly, the restriction of foreigners’ access to Ukrainian land will be in effect for only four years. They may even promise the IMF to shorten this period by a year or two (it costs nothing then to renew it again).

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All this will be told to the IMF and it will be asked to concede in the land issue, citing as example their constructive work to preserve “Privatbank” in state property. Kolomoisky believes that the Fund should agree. To abandon Ukraine while it can still be milked is not in the spirit of the Fund. It will save its face by solving the “principled” issue of “Privatbank”. And the moratorium on the sale of land will finally be lifted, and that “foreigners” will have to tolerate waiting and will even have to shell out are the costs of production, moreover – invisible to anyone.

If the IMF will open lending, tensions between Kolomoisky and the president will be largely removed, and it will be more difficult for the government to opine the oligarch on the land issue (especially since the relevant law will already be adopted). And Kolomoisky can return later to the payment of compensation for “Privatbank” that remained in the state ownership contrary to the court decision. He won’t miss out this penny either.


Rostislav Ishchenko

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