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Ukrainian Government Crisis - Kiev Swirls in Oligarch-led Intrigues

Oligarchs Akhmetov and Kolomoisky in power bids as they seek to cut deals with Poroshenko

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The government crisis in Ukraine is taking ever weirder forms.

The first is an attempted power-play by Ukraine’s eastern oligarchs led by Rinat Akhmetov.  

They were Yanukovych’s backers and the sponsors of his Party of the Regions, which before the Maidan coup was by a substantial distance Ukraine’s biggest party and its governing party.

The Maidan coup led to the loss of the eastern oligarchs’ political base.  Yanukovych fled, the Party of the Regions disintegrated and two of the east’s most populous regions, which had accounted for a heavy proportion of the Party of the Regions’s electorate base - Crimea and Donbass - either seceded from Ukraine or are in revolt against it.

For Akhmetov especially the loss of the Donbass is a major personal blow.  Most of the industries he controlled and much of his wealth comes from there.

 Since the coup the eastern oligarchs have reformed into the so-called Opposition Bloc, which has 43 deputies in the Rada - Ukraine’s parliament.  Though that still leaves it Ukraine’s third largest party, it is a shadow of the force the Party of the Regions once was.

The disintegration of the government’s coalition caused by the all too obvious collapse of support for Prime Minister Yatsenyuk and his party has however encouraged Akhmetov and his allies to pitch for power again.

They have made an offer to President Poroshenko to “deliver” Donbass back to Ukraine almost certain in return for a place in a new governing coalition (see the details of their offer in an article in The Financial Times attached below).

What this proposal appears to amount to is that once this coalition is formed they will help Poroshenko pass through the Rada a law in compliance with the provisions of Minsk II.  This will allow elections to be held in the two People’s Republics.  The eastern oligarchs will then use their influence in Donbass to make sure pro-Ukrainian parties (ie. their own Opposition Bloc) win the elections there.  Once that happens they will return Donbass to Ukraine in return for some watered down form of autonomy.

Media reports show that all the usual suspects amongst the eastern oligarchs - Boyko - the nominal leader of the Opposition Bloc - Medvedchuk - a friend of Putin’s who is claimed to be the godfather of one of his children - and Akhmetov himself - support the scheme.

There is also inevitable speculation that the Kremlin or at least certain Kremlin officials support it as well.

The scheme does bear a strong resemblance to an earlier scheme supposedly hatched by Akhmetov and Putin’s spin-doctor Vladislav Surkov in July 2014 to deliver Donbass to Kiev.  One of the reasons for Strelkov’s withdrawal to Donetsk from Slavyansk was supposedly that he wanted to abort this earlier scheme.

Whether there are people in the Kremlin who support the latest version of this scheme is questionable.  It is difficult for one thing to see how it can work.

Akhmetov and his cronies almost certainly exaggerate the influence they still have in Donbass.  The two People’s Republics have both made clear they want no part in this scheme and Akhmetov himself is apparently under threat of arrest if he ever visits their territories.

What however all but guarantees the failure of the scheme is the impossibility of Poroshenko delivering his part of it.  Any idea of his forming a coalition with the remnants of the Party of the Regions would provoke furious opposition from the rest of the Maidan movement and would probably result in the collapse of his parliamentary faction.  There were would be angry cries of betrayal and it is difficult to see how even mass bribery of deputies - were it ever attempted - would suffice to give a Poroshenko - Akhmetov coalition control of the Rada.

Poroshenko’s position is simply too precarious for him to risk such an outcome even if he was tempted to give Akhmetov’s offer a try, which he probably isn’t.

Poroshenko has instead looked elsewhere for allies.  He has recently announced a fresh pact with a completely different oligarch - Igor Kolomoisky - who he fell out with a year ago - and who has pledged the support of the deputies he controls to Poroshenko in a new coalition.

Both Akhmetov and Kolomoisky had previously ordered their deputies to abstain from the vote of no confidence that had been tabled against Yatsenyuk - thereby enabling Yatsenyuk to survive.

It is has since been reported that Akhmetov and Kolomoisky gave this order following telephone calls from US Vice President Biden lobbying on Yatsenyuk’s behalf.

Whilst the US undoubtedly was backing Yatsenyuk it now looks increasingly as if Akhmetov and Kolomoisky were manoeuvring to remind Poroshenko that without their support he is stuck with Yatsenyuk. 

If so then the pact Poroshenko has just forged with Kolomoisky in effect buys him off and seals Yatsenyuk's fate.

Regardless of what is the eventual outcome to these intrigues what they show is that for all the brave talk of a “Revolution of Dignity” Ukraine’s politics remain as dysfunctional as ever.

All three of the key figures involved - Poroshenko, Akhmetov and Kolomoisky - are oligarchs.  So to a lesser degree are the secondary characters, men like Medvedchuk and Boyko.  

Akhmetov and Kolomoisky are not even nominally leaders of political parties, and neither man sits in the Rada as an elected deputy or has held elected office.  Moreover in addition to his Ukrainian citizenship Kolomoisky - contrary to Ukrainian law - is a citizen of Israel and Cyprus as well as Ukraine and lives mainly in Switzerland.

What these individuals have in common is that they have succeeded over several decades in concentrating Ukraine’s wealth in their own hands.  Today they bargain over the country’s future like businessmen cutting deals with each other.

First published by The Financial Times

A glimmer of hope that the deadlocked Minsk II peace agreement could yet prevent a frozen conflict in the Donbas is emerging in Kiev.

Ukraine previously blocked a proposal to hold municipal elections under Ukrainian law in separatist-held territory before the end of June at a summit of the ‘Normandy Four’ signatories to the Minsk Agreement in Paris on March 3. This meant that, should the separatist authorities proceed with planned elections under their own laws in late April, the conflict would effectively be frozen. Equally, Kiev threatened to hold a referendum on the question of granting the Donbas autonomy which, if opinion polls are correct, would likely be lost, also freezing the conflict.

However, with Kiev lacking an effective governing coalition and facing snap parliamentary elections, Yuri Boyko, leader of the Opposition Bloc political party, said on March 12 that he was in negotiations with President Petro Poroshenko over the implementation of Minsk II. He said it was his aim to hold municipal elections under Ukrainian law followed by the reintegration of these territories into Ukraine proper.

In what appeared to be choreographed announcements, later in the day Ukraine’s richest tycoon and major Opposition Bloc donor, Rinat Akhmetov, said he would “do anything to stop the war” in the context of Minsk II.

Both Boyko and Akhmetov referred to a speculative article about the stalled Minsk process published in the authoritative political magazine, Mirror Weekly. That article referred to what has become known as the Medvedchuk plan, after Viktor Medvedchuk a pro-Russian but anti-separatist Ukrainian politician who was President Leonid Kuchma’s head of presidential administration and whose daughter is President Vladimir Putin’s goddaughter.

This plan involves the political and commercial elite, which governed the Donbas from the mid-1990s until President Viktor Yanukovich was forced from office during the Euromaidan uprising in 2014, returning to the region to oversee elections and its reintegration into Ukraine proper.

It was speculated that Akhmetov, who hails from Donetsk city where he owns significant assets, could become the leader of the Donetsk Peoples’ Republic (DNR) and Boyko, whose wealth was derived from trading Russian gas, could be appointed leader of the neighbouring Lugansk Peoples’ Republic (LNR). While Akhmetov might be considered as ultimately loyal to Kiev, Boyko it was suggested is trusted by Moscow. It was even hinted that the US government might tacitly endorse such a scenario.

If the flurry of speculation and press releases was intended to test public opinion then the proposal met with little enthusiasm and even indifference. Few of the Euromaidan revolutionaries in parliament, the bureaucracy, the armed forces and in civil society took seriously the proposal which they regarded as an unthinkable betrayal. After all if Kiev was willing to entertain such a scenario what exactly was the war with its 10,000 casualties all about? Nevertheless, Mustafa Nayyem, the opposition journalist turned pro-presidential MP who announced EuroMaidan to the world in November 2013, considered the proposal credible.

The DNR’s militias have been protecting Akhmetov’s assets in the region throughout the two-year conflict. But Moscow’s proxies flatly rejected the proposal, claiming a new well-armed elite had taken over the region and that Akhmetov would be in danger if he attempted to return home. Igor Plotnitsky, the anti-oligarchic leader of the the LNR threatened to arrest Boyko given the opportunity.

It was not immediately clear whether the flurry of speculation over the weekend was born out of the Opposition Bloc’s and Akhmetov’s fear of losing whatever influence and assets they have left in the Donbas or whether it was a calculated disclosure of a plan that has been the subject of conjecture in political circles for many months. Equally, the detail associated with the plan, not least the relationship between rebel and government controlled territory in the Donbas, remained to be clarified.

Nevertheless, the Medvedchuk plan should be treated with the utmost seriousness, however slim the chances of success might be, because it offers the best hope and last chance to reunify Ukraine and give the country an opportunity to develop and prosper. With Poroshenko trying to form a new government to postpone elections, the Opposition Bloc and Akhmetov seemed to be offering him a means not only to unblock Minsk II but also political support to resolve the ongoing political crisis.

However, were Poroshenko to accept the Opposition Bloc’s and Akhmetov’s support in the name of serving the greater national interest, thereby sacrificing support among his existing powerbase, he would shatter the post-Euromaidan political landscape.

However, ultimately, and not withstanding its recalcitrant proxies in the Donbas, Moscow would determine whether the Medvedchuk plan has a future or not. It remains to be seen whether Russia would make a positive gesture, such as releasing the imprisoned former Ukrainian pilot Nadiya Savchenko, to explore the possibilities of the Medvedchuk plan further. The ball is now in Moscow’s court.

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