Europe

Ukraine wrestles with oligarch power

President Petro Poroshenko talking with the Governor of Dnipropetrovsk region Igor Kolomoisky Image copyright AFP
Image caption Two billionaire politicians - President Poroshenko (left) and sacked governor Kolomoisky

Ukrainian President Petro Poroshenko's decision to sack a powerful regional governor may be a decisive moment in Kiev's battle to rein in the country's so-called "oligarchs".

Ihor Kolomoisky, governor of the strategic industrial region of Dnipropetrovsk, is one of the country's richest and most powerful men.

The president's move against him could herald the beginning of a period of bitter infighting and instability.

The result of this conflict could prove as crucial to Ukraine's future as the outcome of the war with Moscow-backed insurgents and Russian soldiers in the country's east.

Mr Poroshenko seems to want to send a strong signal that his government is getting serious about pursuing reform and battling corruption.

First came the firing of Mr Kolomoisky - presumably over his sending armed men to settle a dispute at the state oil firm Ukrnafta and oil transport firm Ukrtransnafta.

Dramatic arrests

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Media captionUkrainian TV showed a policeman putting handcuffs on Serhiy Bochkovsky

Then there was the very public arrest later in the day of two top officials - Emergencies Minister Serhiy Bochkovsky and his first deputy Vasyl Stoyetsky - on suspicion of corruption.

These two arrests were obviously carried out for maximum impact and visibility - at a cabinet meeting, on live television.

The image of Mr Bochkovsky and Mr Stoyetsky being led away in handcuffs, while other members of the government looked on, will now become part of the government's crime-fighting show reel.

For many Ukrainians, this is welcome news. Tackling corruption and reducing the oligarchs' power - if not removing them entirely - is widely seen as essential if the goals of last year's revolution are to be realised, and if Ukraine is to become, as they put it, a "normal" country.

But the risks are high, and many doubt the government and Mr Poroshenko's seriousness, despite all the headline-grabbing actions.

If this effort collapses, then some fear Ukraine itself risks becoming a failed state, with men like Mr Kolomoisky emerging as rulers of their individual fiefdoms, complete with their own private armies.

As a result, Mr Poroshenko has had to tread a fine line in dealing with Ukraine's tycoons. On the one hand, he desperately needs their support as powerbrokers. But, on the other, if they get too influential the country itself is threatened.

Tightrope walk

Image copyright Reuters
Image caption Mr Kolomoisky is seen as symbolising insider deals and mutual favours in business

The events surrounding Mr Kolomoisky's dismissal underline the president's dilemma.

Mr Kolomoisky, who Forbes magazine estimates to be worth $1.8bn (£1.2bn), is head of the Privat Group, a massive conglomerate involved in media, metals, food processing and oil trading. He also owns Ukraine's largest bank - called Privat.

The enormously wealthy and influential oligarch has financed armed volunteers to fight pro-Russian separatists in the east.

Many, especially in his home province, view him as a hero and a patriot, and credit him with preventing the Russian-backed insurgency from spreading to Dnipropetrovsk. They point out that other oligarchs were unable, or unwilling, to do this in Donetsk and Luhansk.

In many cases the volunteers have taken over the bulk of the fighting and suffered the worst of the violence.

"We know what he is - he's an oligarch," said Dmitry, a businessman from Dnipropetrovsk visiting Kiev, who asked not to use his last name. "But he's kept everything quiet for us. We like Kolomoisky."

But he is accused by many of using his position to increase his wealth and influence - and it now seems he is willing to go to great lengths to protect his prerogatives.

The details are still murky around what actually happened last week at the offices of Ukrnafta and Ukrtransnafta. But one thing seems clear: Mr Kolomoisky has access to armed groups whom he is willing to mobilise at a moment's notice.

This seems to be a red line for Mr Poroshenko. After warning against any governor possessing a "pocket army" he summoned the billionaire and sacked him.

Image copyright AFP/Getty Images
Image caption In 2014, pro-Russia separatists attacked the bank run by Mr Kolomoisky

Start of a campaign?

However, the question remains: Will this be enough to cow Mr Kolomoisky, or any other oligarch for that matter?

Or is this just the first shot in a long battle? He still has access to tremendous wealth and resources, and may at some point push back harder if he feels his core interests are under threat.

What is more, critics say, Mr Kolomoisky represents an entire system of doing business, characterised by insider deals, kickbacks and mutual back-scratching.

It is a system that employs millions of Ukrainians, and that many duplicate in their own dealings. Many argue that Mr Poroshenko, a billionaire himself, is very much a part of that system.

Indeed, some observers are asking if Mr Kolomoisky's use of armed men to solve his business disputes is simply part of a turf war between oligarchs.

There are also fears that if the oligarchs don't resolve their differences, and accept a new way of doing things, there might not be a Ukraine from which they could profit for much longer.

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