Misha and the oligarchs

Grab from video footage showing Ukraine’s President Petro Poroshenko (left) granting Ukrainian citizenship to Georgia’s former President Mikheil Saakashvili (right) after announcing his appointment as governor of Odessa region in southwestern Ukraine. May 29, 2015.

People are speaking a lot – perhaps too much – about Mikheil Saakashvili these days, whether it is about his role in Georgia or in Ukraine. Some detest him, some adore him, but only few can stay impassionate observing his headline-grabbing exploits. Perhaps this happens, because his every victory makes us believe that politics is, after all, only about the willpower of an individual.

His recent showdown with Ukrainian President Petro Poroshenko and his government, saw Misha, as he is often called, deprived of his Ukrainian passport, crossing the Ukrainian border nevertheless, arrested in Kyiv, and freed by his supporters before being brought to jail, arrested again – by surprise – and jailed before being released upon Kyiv court’s decision.

Saakashvili says he is targeting the oligarchy that is kept in place by the current Ukrainian leadership. He recently drew a parallel between the tenures of Viktor Yanukovich, the Ukrainian President ousted after the bloody suppression led to the Maidan revolution in February 2014, and his arch-enemy Poroshenko. Saakashvili said if the damage done by Yanukovich to Ukraine can be compared with the effect of vodka on a man, the damage done by Poroshenko to that of beer. The effect of vodka is harsh and obvious, that of beer slow and insidious. Saakashvili says, while vodka may seem more destructive the short term, at the end of the day, both are equally damaging.

Misha knows a thing or two about oligarchs and about how difficult it is to challenge them. His homeland, Georgia had just two of them – Badri Patarkatsishvili and Bidzina Ivanishvili – and both emerged on top of the murky Moscow battle after the post-Soviet chaos.

Those two men have pushed Saakashvili towards his two major political crises. In November 2007, challenged openly by Patarkatsishvili, Misha crushed an opposition TV channel, declared the state of emergency and had to call snap presidential elections to manage the fallout. This clearly was a low point in the eyes of Georgia’s western supporters, who never forgave Misha the heavy handed handling of the media and the opposition. That was Misha’s first battle against oligarchy, which ended in a Pyrrhic victory.

The meteoric irruption of Bidzina Ivanishvili into the Georgian politics in October 2011 has succeeded in toppling Misha and his party from power – for a long time, and possibly forever barring him the way back into Georgian politics.

When I met Saakashvili in Odessa, while he was the governor of the oblast (region) between May 2015 and November 2016, I understood that what animated him was the belief that the Ukrainian leadership should curb the oligarchs’ powers as much and as soon as possible, since the oligarchs are one of the main tools that Moscow uses for keeping Ukraine under its claws. Saakashvili believes in this idea deeply, and pushes it forward with precision and consistency.

As often, Saakashvili seems obsessive and radical, dreaming up the schemes to overthrow the oligarchy, rather than devising the ways to tame it. But Misha’s choice of objective seems to be at least as much about his political thinking as it is about his personal “revolutionary” character.

Misha’s personal fate in Ukraine and the questions he raises cast a harsh light on the difficult process that is underway in the country. Because, after all, is it even possible to overthrow an oligarchy? And if yes, how?

Professor Jeffrey A. Winters, a specialist on oligarchy and elites at Northwestern University in Illinois, tells us: “It is rare that oligarchs have their political power reduced gradually through reforms. Parties and governments rely on the financial resources oligarchs have in great abundance. History demonstrates clearly that oligarchic power is most disrupted during major ruptures such as financial crises, wars, uprisings, and even revolutions.”

Ukraine is not ready for a revolution. The Maidan 2014 was less about parting the oligarchs with their wealth and more about limiting their illicit influence on politics. Most politicians and analysts agree now, that the only way forward is through reforms. But more and more Ukrainians and foreigners are also skeptical of the will of Ukraine’s authorities to carry out the reforms that are necessary for neutralizing the powerful oligarchy.

Indeed, President Poroshenko is himself a part of it. His wealth made around his chocolate empire, is estimated in the “Forbes list” at 1.3 billion dollars. “We have to admit that we failed to exclude the oligarchs from politics. Both after the 2004 and the 2014 Maidan, they were back after a year, often getting even more rich in the process than before. That is why I think the only solution lays in a long and difficult evolution, not in any revolution,” says political philosopher Mikhail Minakov, professor at the Kiev-Mohyla Academy.

Saakashvili’s recent offensive helped increase the feeling that Poroshenko’s regime is no more than just a new iteration of the Ukrainian oligarchy, which is now centered around the President. “There are many signs of that, and that is why Saakashvili could build legitimacy by fighting the Ukrainian clans. Mr. Poroshenko appears as mere chief of clans,” notices Minakov.

In a recent interview for the French daily Le Monde,  the Ukrainian minister of Finances Oleksandr Danylyuk, a liberal who is not part of the clan system, credited his government with some reforms, such as the ones on the reimbursement mechanism for the VAT or on new law on the tax police. But he noted, “the more we go forward in this fight against the system, the more we arrive closer to its heart, the more difficult [the fight] becomes. We are losing some battles, we win others.”

But Saakashvili is tired of winning only marginal battles, he is now fighting by mostly pointing at Mr. Poroshenko’s responsibility.

Sophie Lambroschini, a French researcher specializing in post-Soviet elites at Paris-Nanterre University and the Marc Bloch Center in Berlin thinks Misha is missing a nuance by “ignoring that Poroshenko is, on the one hand, cutting the influence of oligarchs and, on the other, making compromises with them.”

But she adds, “indeed, oligarchic influence remains significant. First of all, Ukraine is a semi-presidential regime where parliament remains a player. The Verkhovna Rada is one of the places where political and economic groups of influence intersect. While the Rada is composed of many fresh faces following the post-Maidan parliamentary elections that pushes for radical reforms, it is also a platform for many old regime politicians with a clientelistic mind-set.”

Former influential groups remain, those of Rinat Akhmetov, Ihor Kolomoisky, or Dmytro Firtash, as well as new powerful figures that have appeared in the post-Maidan political re-organization with control over significant economic assets. “While the executive power – President Poroshenko and the Cabinet of Ministers – dismantled some aspects of the Yanukovich clan system they did not topple the system that was built and maintained for over 25 years,” Lambroschini explains. 

One could say that rather than trying to destroy the oligarchs, Poroshenko has been trying to rein them in, trying to weaken and contain their power. One of the ways is to break up their economic empires, but some point out that this was often done also to the personal benefit of those loyal to the President.

The reforms undertaken in the energy sector for example cut down the monopolies of Akhmetov, Kolomoisky and Firtash in the power, oil products and natural gas distribution sectors. Even if Poroshenko was caught up in a scandal where one of his closest aides, Ihor Kononenko, was accused of attempting to gain personal control over some of these energy companies, nobody can say today that this key sector for the country’s economy is as before. Mr. Saakashvili does not take this into consideration.

There have been some successes over the oligarchy. One of the authorities’ most successful offensive was the nationalization of PrivatBank, Ukraine’s largest retail bank at the time and a cash cow for Kolomoisky’s Privat group. “By nationalizing PrivatBank a year ago, Poroshenko deprived Kolomoisky of his main source of influence and revenue. But it had to be done cautiously in order not to destabilize the national financial and banking system. In other fields, companies’ debts or other financial, legal or industrial issues make it extremely difficult to reform quickly. Another limitation is set by the war in Eastern Ukraine. The influence some Ukrainian oligarchs retain over economic flux, employment and social infrastructure in the regions bordering the conflict zone makes them a force to be reckoned with,” underlines Lambroschini.

The situation looks inextricable: Kyiv cannot take the risk to challenge all those oligarchs together without wrecking the economy (they employ hundreds of thousands of people), but compromising with them is extremely risky, if only because some remain a tool in Russia’s hands – as, for example Firtash who is curiously still in Ukraine’s political game even though he was used by Putin to create streams of cash through huge discounts on gas purchases to dominate Ukraine. 

Maidan, which still legitimizes the Ukrainian authorities, sees Poroshenko more and more as someone who betrayed the ideals of the “Revolution of Dignity”. Yet, the activists do not want a strongman like Putin to bring the Ukrainian oligarchy to heel, mindful of what Putin’s elimination of oligarchs has brought on.

“The problem is not only about the Russian influence on our oligarchs. They are not all pro-Russian, and most also have interest to work with the West. But few are ready to work in a rule of law environment,” asserts Mikhail Minakov.

Ukraine’s political authority is diffuse, so the only way to curb the oligarchs and the clans’ influence is to take a path of patient and often erratic reforms. But Mr. Saakashvili is not patient, sometimes for the good, sometimes for the bad.

“The key issue is whether policies make it easier or harder to convert [oligarchs’] wealth into political influence. For that, some measures are crucial such as the limitation on the campaign finance by them, the capture of media or the spending on lobbying legislators and officials in the bureaucracy,” stresses Professor Winters.

If the street (Maidan) cannot oblige the power to take these measures, foreign powers can help. That is what the unambiguous messages coming from the EU did recently by preventing the Rada from regaining partisan control over appointing the director of the National Anti-Corruption Bureau of Ukraine (NABU), a body that has proven its real independence for past months. There were no heroes in that move, and it stayed diplomatic and anonymous.

Perhaps such quiet grinding of the bureaucracy is indeed what will change Ukraine in the end. If not, Saakashvili is there to offer a willful alternative.

Régis Genté is a French journalist, working for le Figaro or Radio France Internationale, based in Tbilisi and covering the post-soviet region since 2002.