Kiev Is Waking up to Just How Dangerous the Oligarch Kolomoisky Is
Detailed insight into Ukraine oligarch wars
Without undue fanfare (only the accolades well earned), allow me to introduce, by means of the excellent analysis below, one of the many new beginnings here, at Slavyangrad. In addition to our bread and butter—translations of first-hand accounts, interviews and analyses authored by the many authentic voices of Novorossiya, Russia and Ukraine—we will be starting to publish regular opinion pieces from a select group of writers. Gracchus Babeuf, one of Slavyangrad’s founders, is part of that group.
Babeuf wrote this article in the span of a few short days when Kolomoiskiy looked like he was about to make a stand against Poroshenko. The analysis was completed on March 25, 2015, and sent to me, but not published at the time—something for which only I am to blame. In some ways, however, it all worked out for the best, as we are now witnessing a renewed struggle for power between the Ukrainian oligarchs, exemplified by Poroshenko-led dismissal of Nalivaychenko, the former head of the Ukrainian State Security Service (“SBU”) and his prior attempts to do away with Yatsenyuk and even to assail the mostly unassailable Avakov, the head of the Ukrainian Ministry of the Interior.
The prescience of Babeuf’s analysis (which, I might add, disagreed with my own take on the subject matter, as I expected Kolomoiskiy actually to fight his resignation, with arms if necessary) will serve for many as an outline for an excellent roadmap to understanding the inside workings of the Junta authorities and the Ukrainian oligarchic circles in relation to their American overseers. An outline which I, for one, hope Gracchus Babeuf will continue to expand on in the future.
The Kiev Cauldron—Киевский Котел
Original Commentary and Analysis by Gracchus Babeuf, March 25, 2015
“What is this comic opera being played in Albania?” (Kemal Atatürk on President Zogu’s elevation to monarchic status)
When I began writing this, Kolomoiskiy was still governor of Dnepropetrovsk and had yet to back down in his confrontation with the Junta. It was my contention at the time that things were not as simple as waiting to see who the US would back in order to judge the outcome; that they were not necessarily minutely controlling the situation; that—to quote Iraq’s one time Information Minister, Muhammad Sa‛eed al-Sahhaf—“they don’t even control themselves!” Subsequent events certainly give the impression that a pronunciamiento from the US Ambassador is all it took to settle the issue. Nonetheless, I would still contend that the US is not needed in order to explain Kolomoiskiy’s apparent surrender (a rally is planned for this Saturday in Dnepropetrovsk which may indicate what, if any, moves he has left to make).
My reasoning for this is not that Frankenstein’s monster has eluded the control of his creator, as Ukraine slips deeper into chaos (chaos, precisely, is one of the forms that US control takes); nor is it that the US has other concerns, including domestic political ones, that distract her attention. It is simply that even openly avowed US support is no guarantee that they will not abandon you in favour of somebody that they may have explicitly rejected or reprimanded. The US is working through Ukrainian actors, many of whom have the wherewithal to pursue their own personal goals, which may at some point coincide with those of the US—whoever appears to them most capable of achieving those goals is who they will ultimately back, even if they do not publicly proclaim that support.
The public chiding of Kolomoiskiy by the US Ambassador may well have decided the outcome against him, but I would argue that it could also be seen as a simple observation that he was not going to succeed against the Junta. Recall that, a world away from Ukraine, Ngo Dinh Diem was once ‘their man’, and yet when the South Viet Nam Army eliminated him they effortlessly swung in behind the new power. More recently, Hosni Mubarak is living proof that public US backing in a crisis situation is neither a guarantee of success nor a guarantee that they have not also been hedging their bets and backing your rivals. So, in terms of the US Ambassador being the decisive factor here: je n’avais pas besoin de cette hypothèse-là. There are more fundamental reasons why (there is no other way of saying this, horrible as it sounds…) I was right to predict that Kolomoiskiy would lose and that he had made a huge miscalculation (I might add that there were probably others who said the same, but we all made our calculations and predictions independently of one another and wouldn’t necessarily agree on the reasons for the defeat). So, why did I think Kolomoiskiy was going to lose?
The governor of Dnepropetrovsk apparently had quite a formidable arsenal at his disposal—sole supplier of fuel to the Ukrainian Army; owner of a 15% stake in the Ukrainian state banking sector through PrivatBank holdings; undisputed chief of four of Ukraine’s richest regions; chief financier of the volunteer battalions. Evidently he had means of exercising leverage over the Junta in the key areas of the state’s ability to wage war and its ability to continue making payments of one kind or another and raising loans.
But let us start with Kolomoiskiy’s apparent military muscle. The volunteer battalions are a mirage. There is an argument that pulling them out of the ATO zone to reinforce his fiefdom in Odessa, Dnepropetrovsk, Kherson and Zaporozhie (for the purposes of abbreviation, let’s call this agglomeration the DOR—Dnepropetrovskaya Oligarkhnaya Respublika) would cause a lot of trouble for the Junta, who would be left to fight against NAF and a hostile population on their own. But we should be clear about what these battalions are actually up to in the ATO zone: one significant part of the answer is that they are busy enriching themselves through looting (“marauding” is the more piquant Russian rendering) and enriching Kolomoiskiy through the collection of ad hoc transit fees into and out of the zone—in effect, they are using the de facto line of control to establish internal smuggling within the recognised borders of Ukraine. If the battalions are removed from the ATO zone, Kolomoiskiy loses a sizeable source of patronage, and hence of loyalty. He also loses the ability to control, on the ground, supply into the combat zone (since it is necessary to know who to go to, where they are stationed at any given time, where and in what measure to exert muscle to secure local supply chains and agreements). He might also find that recruitment into the battalions begins to slow down, if not to dry up altogether.
There are reports that Kolomoiskiy has already withdrawn his ‘security forces’ from Odessa. This looks to me to be a major blunder (albeit he may have had no choice—Odessa is separated from the DOR by Nikolaev region, which remains outside of Kolomoiskiy’s direct control) for precisely the reasons outlined above. Odessa controls both the legal as well as the lucrative contraband trade with neighbouring Transnistria; control of the city gives you the potential to extract transit and sundry revenues (again, legal and otherwise) from her two ports (Odessa and Yuzhniy); it gives you access to oil processing facilities and control over one of the physical hubs of the pipeline network connecting Russia and the EU; crucially, control of the city and region would have prevented the DOR from becoming a landlocked territory. In these respects, withdrawal was a big indication that defeat was on the cards for Kolomoiskiy, and there seems little reason to think that withdrawing his troops from other fronts would not also be an index of defeat.
But what if these battalions marched on Kiev? They have already attempted, a number of times, to make a show of force there. On every occasion they have only demonstrated their weakness and incompetence: after the killing of Aleksandr Muzychko (Dmitry Yarosh’s erstwhile “sworn brother”), Praviy Sektor contingents surrounded the Rada, demanded the resignation of Avakov, took one (maybe two) pot-shots at the Rada building, then melted away within hours when it became clear that the Junta didn’t even acknowledge their presence let alone their demands; after the announcement that the Aydar Battalion was to be disbanded, its ‘soldiers’ flocked to Kiev and attempted to seize government buildings. Here you can see their laughable attempts to get through the front door of the Prosecutor General’s office, and to get past the front gate of (I think) the Defence Ministry.
There have already been incidents of firefights between the regular Army and the volunteer battalions—quite a prolonged encounter in either Shchastye or Stanitsa Luganskaya while the Debaltsevo cauldron was being eliminated. If Kolomoiskiy was to attempt to go it alone in a Dnepropetrovskaya Oligarkhnaya Respublika, the Ukrainian Army would very likely crush his military power (the volunteer battalions have no heavy weapons…) and it would crush it with not a small amount of joy in its heart (peremoga, at last!). With the SBU and Interior Ministry troops also ranged against Kolomoiskiy’s battalions, he would stand absolutely no chance.
Turning to his financial arsenal, what appears at first to be a commanding position looks, on closer inspection, to be almost a liability. A 15% stake in the holdings of the state banking system is what PrivatBank gives him in official terms. One should assume that in reality his stake is probably much higher—we can speculate 20%, perhaps even shading 25%. Paradoxically, the higher his stake, the more exposed his position. Suspending PrivatBank’s operations is a nuclear option which would cause as much damage to Kolomoiskiy as it would to his adversaries. If you are prepared to be incinerated yourself, then go ahead, push the big red button. But if you are only interested in ‘business as usual’ then there is no way you can activate this weapon. It allows of no going back. This leads us into the real crux of the issue: what stakes were really being played for?
On the other hand, it seems clear that the Junta is playing for complete victory. That is to say, they are aiming at the complete elimination of Kolomoiskiy (not necessarily in a physical sense). There can be little doubt that the campaign against him has been going on for some time now; in fact he has been subjected to a withering assault. Off-stage, in London, there is an ongoing court case, Pinchuk vs. Kolomoiskiy & Bogolyubov. The case was brought by Pinchuk who is demanding up to £2 billion in damages as well as the return of £90 million that he claims the two defendants embezzled from him during the purchase of the Krivorozhskiy Zhelezorudniy Kombinat mining company. The court has heard the defendants sensationally accused of political thuggery, shady business practices, extortion and murder. Recently a bill was introduced to the Rada calling for the nationalisation of Kolomoiskiy’s banks—an outright attack on the pearl in his crown. Along the way, there have been occasional, admittedly half-hearted, attempts to rein in the volunteer battalions.
One very recent news story revealed what was potentially a very serious attack on him (this is purely my own speculation) when Poroshenko pledged to help Moldova and Romania ‘resolve’ the Transnistria issue—i.e. to reincorporate it into the Moldovan state. Such an outcome would be a serious blow to the contraband trade into Transnistria which is controlled from Odessa, and which is undoubtedly a large factor in his relationships with that city’s renowned vori v zakone (воры в законе—“thieves-in-law”). This was followed closely by the situations at UkrNafta and UkrTransNafta, which resulted in Kolomoiskiy making his move in Kiev. In retrospect, the change of board or chairman now appears to have been a classic provocation aimed at smoking the dragon out of its lair. (Kolomoiskiy has, of course, been firing back in this struggle: but getting Yarosh to announce publicly that he had formed a parallel General Staff was beyond stupid; and suggesting to the Financial Times that heavy industries should be renationalized to undo the thievery of the 90s was simply bizarre).
In response, Kolomoiskiy seized the offices of UkrTransNafta and UkrNafta with armed force; fortified the building of the latter and barricaded his men inside; started issuing wild denunciations of the central authorities through his associates; attempted to split the President’s bloc of deputies in the Rada; made some half-baked and vague statements about the DPR and the LPR, whilst in the same breath denouncing “Russian saboteurs”; insinuated that he might be about to establish the DOR.
Secondly, the moves were almost all ill-conceived. Accusations of corruption, of betrayal, of working for the Russians are frankly ten-a-penny in the Rada, and his attempts to break up or to hive off a significant number of deputies from Poroshenko’s Rada bloc have been comical. The result: four whole deputies abandoning the President. One doubts they came cheap. The attack may well now be focussed on Yatsenyuk—there appears to be a cross party demand to dismiss him—but it is unlikely to get anywhere, and Avakov has bought some time in the public perception with the spectacular arrests on television of ministers during a cabinet meeting: “who says we don’t take the fight against corruption seriously round here?” Kolomoiskiy’s moves in the Rada have shown his own weakness rather than that of the central aurthority (incidentally, a public reprimand from the US Ambassador could very easily have turned into US backing if Kolomoiskiy had won enough deputies over: “after all, if it’s a democratic decision of the Ukrainian parliament to get rid of Poroshenko, who are we to quibble? Now, about those arms sales…”).
Seizing a building with his armed men may have won him the building but it achieved little else. The Junta is already fairly well versed in how to deal with armed groups in Kiev: let them have their day in town, let them make their noise, let them push a few people around, let them burn their tyres in front of the ministry; eventually they either get bored when nobody acknowledges their presence, or they run out of ideas as to what to do with the corner of the public square they have seized. The presence of an armed group in Kiev has long since ceased to be a direct challenge to the central authority. Avakov did, it is true, issue an ultimatum this time. But Kiev has reached the stage that its public pronouncements have no intrinsic value either way, and the fact that they might be disregarded or unfulfilled is no longer a revelation that the Emperor is indeed naked.
To compound this mistake, Kolomoiskiy deigned it necessary to appear on the scene in person. This was a blunder for two reasons: firstly, he ‘cauldronised’ himself deep within enemy territory, where he and his men were totally surrounded with no obvious supply line in. Had it come to blows at this juncture, he could well have found himself sharing a plot of earth next to Muzychko. Had he personally survived, and his troops survived a first attempt to dislodge them, the Junta could very easily have thrown a ring of steel round the city and prevented him from getting reinforcements in.
Secondly, he made himself personally very squarely responsible for the action, when sending one of his minions would have given him room to manoeuvre if the had action failed to pay off. This is in fact a more general problem with his position as governor of Denpropetrovsk—everything he does plays out in public, and his resignation from the post (if indeed it was on his initiative) is his first smart move in a long time. Working behind the scenes gives much more room to manoeuvre and to put forward straw men to do your dirty work.
Kolomoiskiy’s “thunder drive” into Kiev not only ‘cauldronised’ him, it also ‘Yanukoviched’ him. He was put in the position of an oligarch from the south-east surrounded in the capital by hostile forces, with a small number of loyal troops whom he simply could not allow to start shooting—which would have served no purpose. This time round, it was the government that occupied the position of the unarmed party. If Kolomoiskiy’s men had managed to brazen it out for a good few days, maybe even a couple of weeks, what would or could they have done if surrounded by hundreds of Euromaidan hipsters? He paralysed himself completely with this move. Kolomoiskiy has been soundly defeated in the Kiev cauldron.
There remains the question of where we go from here. Kolomoiskiy is still just about breathing. Saturday’s public rally could bring any number of developments. Perhaps Igor Valeryevich believes he can start a colour revolution within a colour revolution. It would not necessarily be the first, but it would certainly be the first to be attempted from outside the capital city, which from this vantage point looks to be lost to him. Given that one of the central aspects of the political technology of the colour revolution (a totally inadequate, if popular, formulation—what we are dealing with here is a civil coup) is control of the capital city, I do not fancy his chances. Equally, now that Kolomoiskiy has been shown to be a paper tiger, there is no reason why the people of the DOR won’t make his life at home more difficult.
The example of Aslan Abashidze springs to mind here: firmly ensconced in his fiefdom of Adjaria (the Adjaria Autonomous Republic, a majority Muslim area, in south-western Georgia), surrounded by his own people, with extensive familial ties that let him entrench his control of the economy, he presented a formidable obstacle to presidents of ‘independent’ Georgia, post-1991. Having first seen off the challenge of swivel-eyed, messianic, fascist lunatic (a technical political and ideological description…), Zviad Gamsakhurdia, and then survived throughout the Shevardnadze years (in large part thanks to the “Zviad-is-returning” phenomenon, and then to the chronic attempted-coup phenomenon), Aslan was all set for a titanic confrontation and struggle with Saakashvili, who began his planned reconquista with Adjaria. In the event, as Saakashvili’s civil coup convoy approached the borders of Adjaria, Aslan’s local power seemed simply to evaporate, and he fled without a fight. This is not necessarily a prediction of how I see things playing out for Igor Valeryevich, but it is certainly one very possible scenario, and I am increasingly beginning to see the conflict in Ukraine work itself out as some version of recent Georgian history.
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