Autumn of the oligarch: what will happen to Kolomoisky’s business in Ukraine

Over the weekend, security forces raided the house of Igor Kolomoisky, where they conducted a search and informed him of suspicion of committing fraudulent actions, as well as legalizing property through criminal means. On Saturday, September 2, the court decided to place the oligarch in custody. “Apostrophe” looked into how this situation would affect the business of the scandalous and once all-powerful oligarch and why the decision to arrest him was made right now.

On September 2, the Shevchenkovsky District Court of Kyiv arrested oligarch Igor Kolomoisky for two months, who is suspected of fraud and legalization of property obtained by criminal means.

On the morning of the same day, Kolomoisky’s house was searched by employees of the Security Service of Ukraine (SBU), the Bureau of Economic Security (BEB) and the Office of the Prosecutor General. It was during the search that the oligarch was informed of suspicion of committing crimes under the two specified articles of the Criminal Code. At the same time, he received a summons to court to select a preventive measure for him.

The Shevchenko District Court of the capital decided to take Igor Kolomoisky into custody with the right to post bail in the amount of 509 million hryvnia. However, the businessman’s defense said that they would wait for the full decision of the court, and no bail would be paid for him. At the same time, an appeal is being prepared against the court decision.

It is difficult to say now whether Kolomoisky will remain in pre-trial detention for the full 60 days. A refusal to pay bail may indicate the confidence of his defense that it will be able to judicially cancel the arrest - after all, to do this, sometimes it is enough to find even purely technical violations committed when considering the issue of choosing a preventive measure.

On the other hand, it is quite possible that there are simply no legal means to post collateral, since Kolomoisky traditionally keeps his assets in a pre-bankruptcy state.

Oligarch and president

Igor Kolomoisky was for many years one of the richest and most influential people in Ukraine. He gained fame as one of the most odious oligarchs in Ukraine thanks to numerous scandals, schemes, and aggressive attempts to interfere in the political life of the country, which, by the way, he did not particularly hide. His business interests extended to banking, metallurgy, chemical industry, energy, and media.

Kolomoisky received a special status after the victory of Vladimir Zelensky in the presidential elections in 2019, since it was believed that it was he, thanks to media support, who helped the young and politically inexperienced showman rise to the top of the political Olympus. During the first years of his presidency, Zelensky found it extremely difficult to distance himself from his “patron.” However, the current president took several decisive steps that were supposed to show that the oligarch is not untouchable. Thus, Zelensky took a principled position in the conflict around PrivatBank, which was nationalized in 2016 (when Petro Poroshenko was the president of Ukraine), making it clear that the country’s largest financial institution would not be returned to Kolomoisky.

You can also recall that at the beginning of this year, security forces conducted searches in the house of Igor Kolomoisky as part of an investigation into fraud in the Ukrnafta and Ukrtatnafta companies, which until recently were controlled by the businessman. However, this story has not yet received any public development.

Oligarch loses money

Igor Kolomoisky has always been famous for the fact that he managed to take control of companies in which he was not the main shareholder, and sometimes controlled the activities of state-owned enterprises, using his economic and political influence (in fairness, we note that other Ukrainian oligarchs do this too).

The most famous example is Ukrnafta, the largest oil producing company in Ukraine. The controlling stake in it belonged to the state, but Kolomoisky, being a minority shareholder, successfully exercised control over it through management loyal to him.

However, in November 2022, due to the martial law regime in the country, Ukrnafta was nationalized.

The same fate befell Ukrtatnafta, in which Kolomoisky was the majority shareholder. The company's main asset is the Kremenchug oil refinery, which was destroyed by rocket attacks shortly after the large-scale Russian invasion began. The refinery was also accompanied by an extensive network of gas stations.

The loss of energy assets hit the oligarch hard. Overall, because of the war, he lost about half of his fortune - if before the invasion it was estimated at $1.9 billion, then at the end of 2022 it was only $850 million. Thus, if these estimates are correct, Igor Kolomoisky has ceased to be a billionaire, at least in dollar terms.

However, he still remains the owner of a significant amount of business assets.

Firstly, there are about a thousand gas stations operating under various brands, but under the control of the Privat group. The business of these gas stations today is not as profitable as it used to be, when oil was produced by Ukrnafta, controlled by Kolomoisky, after which it was processed by Ukrtatnafta, controlled by Kolomoisky, and only then the fuel produced at the refinery was sold at gas stations controlled by Kolomoisky. However, fuel sales continue, and post-war prospects appear to be quite good.

In addition, Igor Kolomoisky owns the Nikopol and Zaporozhye ferroalloy plants, one of the world's largest enterprises in this industry. The oligarch also controls the Marganets and Pokrovsky mining and processing plants, which supply raw materials to his ferroalloy plants. Because of the war, Kolomoisky’s metallurgical enterprises are mostly idle, and he himself is losing profits.

The situation at DneprAzot, which he controls, which produces mineral fertilizers, also remains difficult. There is information that production activities are not currently carried out on it.

And things are very bad with Ukraine International Airlines (UIA). The damage from the war was superimposed on problems associated with corporate disputes between shareholders Igor Kolomoisky and Aron Mayberg, as a result of which the company is not functioning today and is incurring large losses.

And finally, the oligarch’s business empire includes media assets, primarily the 1+1 TV channel. The channel’s earnings also fell during the war, but in the future everything may improve, and income and, most importantly, influence on public opinion in the country will be restored to pre-war levels.

The oligarch loses control

However, today the key question is: do Igor Kolomoisky’s business, as well as he himself, have these same prospects in connection with the arrest?

“I think that the arrest itself should not in any way affect his business,” investment banker and financial analyst Sergei Fursa told Apostrophe. - The question is whether it will be followed by any actions, for example, nationalization. “In addition, it is unclear how long Kolomoisky will remain in jail.”

Also, according to him, it cannot be ruled out that the oligarch will be deprived of influence over the assets under his control in a variety of ways, including informal ones. The fact that most of Igor Kolomoisky’s assets are not in the best financial condition was stated above. However, what he has left is of quite a certain value.

“In order to arrest a person of this level, there definitely must be a team. And the people who “closed him” will obviously take certain steps in terms of his business - so that where Kolomoisky had influence, he does not have this influence,” said the head of the analytical department of the ANTS network in a conversation with Apostrophe. Ilya Neskhodovsky.

At the same time, he refrained from making predictions about which enterprises the oligarch will lose control over as a result of the charges brought against him and his arrest: “Everything will depend on how the participants in this process will act; this could be a redistribution of spheres of influence.”

President without an oligarch

The arrest of Igor Kolomoisky, among other things, may have one important reason: Vladimir Zelensky needs to show an effective fight against corruption. The day before, information appeared that in September Zelensky is expected at the annual meeting of world leaders at the UN headquarters in New York. He is also due to take part in a UN Security Council meeting on Ukraine, scheduled for September 20. This was announced by Albania's permanent representative to the UN, Ferit Hoxha - his country will chair the Security Council at this time.

On our own behalf, we would suggest that during this visit the Ukrainian president will hold a number of personal meetings with leaders of other countries, including US President Joseph Biden. Obviously, the arrest of Igor Kolomoisky will become a weighty argument in the course of such communication, given that the American Themis also has questions for him.

“The United States will obviously like this situation, because there are also pending cases against Kolomoisky,” says Ilya Neskhodovsky. “However, the fight against corruption, the fight against oligarchs is not the arrest of one of them. This is, first of all, a question of the effectiveness of the work of anti-corruption and law enforcement agencies, the independence of the Antimonopoly Committee and other departments. That is, this is not a separate legal action, but an effective institution that ensures the law in the country. And then it really is a fight against the oligarchs, when they cannot influence the authorities, receiving preferences from the state for this.”