For whom is Poroshenko fighting?

Photographer: Sergei Supinsky / Getty Images

Ukraine's Oligarchs Joust, Putin Laughs

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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As if its festering conflict with Russia and war-torn economy weren't enough, Ukraine is facing a growing self-inflicted problem: a showdown between the government in Kiev and an influential billionaire with his own private army.

Sadly, this is not a righteous fight on either side.

The standoff -- which started last week -- entered a new phase today when President Petro Poroshenko fired the billionaire, Igor Kolomoisky, as governor of the economically and politically important Dnipropetrovsk region. The dismissal, ostensibly requested by Kolomoisky, comes as the two have been vying for control of state-owned oil pipeline monopoly Ukrtransnafta and oil and gas producer Ukrnafta -- a battle in which Kolomoisky has reportedly threatened to send troops to Kiev and actually deployed camouflage-clad fighters at an Ukrtransnafta office.

The Ukraine Standoff

Initially unsure how to react, given Kolomoisky's stature as a leading opponent of the pro-Russian insurgency who sponsored volunteer battalions, Poroshenko went on the offensive. "No governor will have his own armed forces!" he tweeted on Monday. The head of Ukraine's domestic intelligence service deemed Kolomoisky's fighters an illegal armed unit and accused two of his deputies of hampering an investigation into a major smuggling ring. One of the deputies, Gennady Korban, spoke out against the government in response: "Thieves are sitting in Kiev today, and it's time for these thieves to go." 

Kolomoisky has backed off, at least for now. Both the deputies resigned, and a pro-Kolomoisky rally in Dnipropetrovsk, originally scheduled for today, has been postponed until next Saturday, with the newly-appointed governor invited to take part. Pro-Poroshenko observers presented the developments as a victory for the government, which sees regaining control of state-owned companies as a crucial goal. But it might have as much to do with both sides' desire to see Ukraine secure financial support from the West. Geoffrey Pyatt, the U.S. ambassador in Kiev, met with Kolomoisky during the stand-off and said in a radio interview afterward that the Dnipropetrovsk governor realized "the law of the jungle" no longer applied, and that state companies needed to be run as the law required.

Nothing in Ukraine is clear-cut, though. The government itself may be furthering powerful private interests at Kolomoisky's expense. The chief executive it appointed to run Ukrtransnafta is a former employee of Igor Yeremeev, a legislator who owns a gas station network that competes with Kolomoisky's. Poroshenko signed a bill allowing state-controlled companies to ignore the opinion of its minority shareholders, making Kolomoisky's 43 percent stake in Ukrnafta largely worthless. The new Dnipropetrovsk governor, Valentin Reznichenko -- like Kolomoisky, a pillar of the city's powerful Jewish community -- is a former business partner of Boris Lozhkin, the multimillionaire publisher now serving as Poroshenko's chief of staff.

Kolomoiskiy still has ample means to fight Poroshenko. He owns Privatbank, the backbone of the country's financial infrastructure. He is also hugely popular in Dnipropetrovsk, where he is seen as a savior from the Russian invasion. The government has so far failed to deliver on its promises of more autonomy for the regions, and Kolomoisky's team is already making that its battle cry.  "I don't rule out a stake on early elections, depending on what target is chosen -- the parliament or the president," Mustafa Nayyem, a legislator with Poroshenko's electoral bloc, wrote on Facebook.

This could all play into the hands of Russian President Vladimir Putin, who wants Ukraine to turn into a weak federal state that is neither welcome in Western alliances nor capable of joining them. That said, Kolomoisky hates Putin and would rather suffer setbacks in an independent Ukraine than see it come under Kremlin influence. Moscow propaganda outlets hit a wall when they started calling Kolomoisky's allies in hopes of obtaining anti-Kiev comments. Borys Filatov, a pro-Kolomoisky legislator, proudly posted his response to a Moscow TV journalist on Facebook: "Even if we finally split with Poroshenko, I am not going to talk to invaders, liars and warmongers."

Patriotic as its oligarchs may be, Ukraine will not benefit as they part ways in search of power and economic gain. It remains a strife-riven no-man's land in the middle of Europe, struggling to define itself in terms others will understand, and getting bogged down in complexity entirely its own.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Mark Whitehouse at mwhitehouse1@bloomberg.net