Ukraine’s top businessmen are answering President Volodymyr Zelenskyy’s call to assist and even lead the country’s efforts to deal with the novel coronavirus pandemic. Mr. Zelenskyy had summoned Ukraine’s wealthiest businessmen for an emergency meeting on March 16 in the presidential building to consider a coordinated response to the crisis. They responded with alacrity, and the effort is unfolding based on ideas exchanged at that meeting.
Three guiding ideas are clearly discernible. First, the oligarchs seem ready to help finance the state’s effort, in addition to undertaking their own initiatives, which could be more extensive than the state’s. Mr. Zelenskyy has asked for 12 billion-13 billion hrv (some $440 million-$470 million U.S.), it being understood that this would be a first-stage, short-term response to the pandemic. Second, Mr. Zelenskyy has assigned certain geographical areas of responsibility to the top business leaders, namely where their major business assets, company headquarters and social networks are based, and where their businesses are the main employers. And third, they are expected to organize anti-crisis centers on the level of Ukraine’s oblasts, assigning professional managers from their companies to such centers, it being understood that private-sector personnel would act more effectively than the state’s.
Not all of Ukraine’s oblasts have been delineated as areas of anti-crisis action for major business leaders as yet. Meanwhile, the country’s wealthiest industrialist, Rinat Akhmetov, is apparently counted upon to act in several oblasts at the same time: Zaporizhia Oblast, the Kryvyi Rih-Pavlodar mining and industrial basin (the western part of Dnipropetrovsk Oblast), and even the Lviv and Ivano-Frankivsk oblasts, on top of the Ukrainian-controlled parts of the Donbas where Mr. Akhmetov has been delivering humanitarian assistance long before the COVID-19 coronavirus pandemic struck. Ihor Kolomoisky’s attitude, meanwhile, remains unclear. Asked by President Zelenskyy to contribute, Mr. Kolomoisky replied by complaining that his former PrivatBank assets are unavailable to him. (Interfax-Ukraine, March 19; Ukrayinska Pravda, March 23, 30; Censor.net, March 26, 28; Liga.net, March 28; Ukrinform, March 30).
Viktor Pinchuk has volunteered for this assignment in his home oblast – Dnipropetrovsk. Mr. Pinchuk’s steel pipe-making and other metallurgical plants, comprising the Interpipe Group, are mainly located in the cities of Dnipro and Nikopol in this oblast. Mr. Kolomoisky is also based in Dnipro but does not seem enthusiastic to help the anti-coronavirus effort.
Oleksandr Yaroslavsky has taken the lead in organizing an anti-crisis center in Kharkiv Oblast, surpassing the state authorities. Mr. Yaroslavsky is the owner of Ukraine’s largest construction company, Development Construction Holding (DCH) and of the Kharkiv Tractor Plant, a national industrial flagship that he has overhauled. Mr. Yaroslavsky had initiated a joint project in Kharkiv with the Chinese entrepreneur, Jack Ma, prior to the coronavirus outbreak and has now received a consignment of anti-virus equipment from Mr. Ma for Kharkiv.
Mr. Yaroslavsky has joined forces with Kharkiv city’s long-time mayor, Hennady Kernes, not only in the anti-virus effort, but also politically, preparing for the October 2020 local elections. Highly popular in Ukraine’s second-largest city, Mr. Kernes has enjoyed an informal, quasi-feudal immunity under three Ukrainian presidents. He plans to seek re-election with Mr. Yaroslavsky’s apparent support, notwithstanding President Zelenskyy’s and the presidentially appointed Kharkiv governor’s manifest hostility to Mr. Kernes (Glavnoye.ua, March 12; Censor.net, March 26).
Vadym Novinsky is assigned to support the anti-pandemic effort in Mykolayiv and Kherson oblasts. Mr. Novinsky’s Smart Group holds a 25 percent stake in Metinvest, the vast holding of metallurgical plants and iron ore mines that is 75 percent owned by Mr. Akhmetov. Most of these assets are located in the Donbas, the Kryvyi Rih area and Zaporizhia. Separately from Metinvest, Mr. Novinsky owns the Smart Maritime Group of shipbuilding yards and ports in Mykolayiv (the Black Sea Shipbuilding Plant), Kherson and Ochakiv.
Mr. Novinsky had moved to Ukraine from Russia and acquired those Ukrainian assets long before acquiring citizenship in 2012. He was elected to the Ukrainian Parliament from Sevastopol in a by-election in 2013 (this is one of the 27 now-vacant seats in the Verkhovna Rada), was elected again in 2014 on the list of the Akhmetov-backed Opposition Bloc, and again in 2019 from a single-mandate electoral district in the Ukrainian-controlled part of Donetsk Oblast.
Andriy Stavnitser has led the anti-virus effort in Odesa Oblast from the outset (Interfax-Ukraine, March 19; 112.ua, March 31). This proactive leadership contrasts with that of Mayor Gennady Trukhanov, whose low relevance in this crisis could influence the October elections. Mr. Stavnitser and his family members own the TransInvestService (TIS) group of companies, Ukraine’s leading port operator by volume of goods handled. TIS owns multiple terminals and piers for handling mineral ores, coal, fertilizer, containers and grain (the latter jointly with Cargill), mainly in the port of Pivdenny.
Meanwhile Ukrainian media have posted video-audio intercepts showing Denis Yermak, the brother of the Presidential Office chief Andriy Yermak, apparently discussing possible moves to undercut TransInvestService in favor of a foreign competitor (Ukrinform, Nashi Groshi, RBK Ukraine, Ukrayinska Pravda, March 30-April 2).
Andriy Verevskyi coordinates the private-sector response to the pandemic in the central regions of Poltava and Kirovohrad. Poltava-born Mr. Verevskyi is the main shareholder in the Kernel Group agroholding, Ukraine’s largest producer and exporter of sunflower oil. It is also Ukraine’s largest farming enterprise by area, with approximately 600,000 hectares of cultivated land.
Yuriy Kosiuk has accepted to lead the private-sector measures in Vinnytsia and Cherkasy oblasts. Mr. Kosiuk, from the Cherkasy Oblast, owns Myronivka Grain Produce, Ukraine’s largest producer and exporter of poultry meat. A vertically integrated company, it produces the necessary fodder on 370,000 hectares of farmland in the Vinnytsia, Cherkasy and Kyiv oblasts. Mr. Kosiuk was a pro bono advisor to President Petro Poroshenko in 2014-2019.
Ihor Palytsia has been designated to coordinate anti-crisis measures in his native Volyn Oblast. Closely allied with Mr. Kolomoisky, Mr. Palytsia was CEO of the Ukrnafta and Neftekhimik Prykarpattia oil extraction and refining companies, both linked to Mr. Kolomoisky’s Privat Group. He was governor of Odesa Oblast in 2014-2015, then led Mr. Kolomoisky’s project party, Ukrop, in Volyn’s 2015 oblast election, taking first place and the chairmanship of Volyn’s Regional Council until 2019. Mr. Palytsia’s role in both Odesa and Volyn was to expand Mr. Kolomoisky’s influence beyond the latter’s Dnipropetrovsk power base.
Elected to the Verkhovna Rada last year (2019) from Volyn in a single-mandate electoral district, Mr. Palytsia is one of about 20 or 30 pro-Kolomoisky members of this parliament. Some of them belong to the pro-presidential Servant of the People party while others, like Mr. Palytsia, have no party affiliation. President Zelenskyy’s choice of Mr. Palytsia for this new Volyn assignment suggests that the president remains reluctant to make a clean break with Mr. Kolomoisky.
A precedent exists in Ukraine for the state to assign business magnates to take charge of particular areas of the country in a dire crisis. In the spring of 2014, then-acting president Oleksandr Turchynov appointed Mr. Kolomoisky, Mr. Palytsia (on Mr. Kolomoisky’s recommendation), and the steel industrialist Serhiy Taruta (on Mr. Akhmetov’s recommendation) as governors of the Dnipropetrovsk, Odesa and Donetsk oblasts, respectively. Mr. Turchynov acted in agreement with the entire post-Euro-Maidan leadership. Those three oblasts faced imminent threats of attack and capture, and the Ukrainian state at that juncture lacked the means to stabilize the situation.
The current experiment with reliance on oligarchs, however, encompasses many more Ukrainian oblasts, and it may not yet have reached its full final extent. It also differs in method, in that it can lead to the creation of parallel structures on the level of those oblasts. Two anti-crisis centers and two lines of action – state and oligarchic – are to operate in a given oblast. By contrast, Mr. Turchynov had appointed those oligarchic figures to be state governors, with full official authority and personal responsibility.
Oft-expressed fears of “oligarchic state capture” in Ukraine and neighboring countries notwithstanding, Kyiv’s pact with the country’s business leaders seems widely accepted as a potential solution to a unique dire situation. Easing, perhaps, this acceptance in Ukraine are two recognizably Ukrainian characteristics of this solution. First, state weakness necessitates private initiatives and solutions at one level or another. From 2014 onward, volunteer movements at the grass-roots level compensated to some extent for state weakness. The business leaders’ response to the current crisis corresponds with a volunteer initiative at a different level. The other characteristic is its decentralization. In line with Ukraine’s traditions of dispersed power and intense localism (as well as state weakness), the central leadership seeks to resolve a national crisis by going directly to the lower level of oblasts. And in so doing it finds that more effective power and more resources may be available locally, rather than at the center, as a basis for action. By the same token, economic power (oligarchs with their production assets) are also dispersed in the oblast, not concentrated in any national center.
Some Ukrainian commentators worry that the shock caused by the COVID-19 pandemic, the state’s ineffective response and fear of more such calamities could generate yearnings for authoritarian government. But this does not seem possible in Ukrainian conditions. Centrifugal tendencies run deep, and the dangers stem not from these tendencies as such, but from loss of control over their dynamics, which is what Russia aims to set in motion through a precedent-setting special status in the eastern Donbas.
The article above is reprinted from Eurasia Daily Monitor with permission from its publisher, the Jamestown Foundation, www.jamestown.org.