Ukraine

  25 March 2015    Read: 590
 Ukraine
Ukraine’s president dismissed the billionaire governor of the Dnipropetrovsk region, escalating a clash that may complicate the government’s efforts to counter pro-Russian rebels and fix an economy devastated by war.

President Petro Poroshenko, himself the owner of a chocolate confectionery empire, signed a dismissal order for Igor Kolomoisky, Ukraine’s third richest man with a net worth of $1.36 billion estimated by Forbes. The order, in which the president officially accepted Kolomoisky’s resignation, came after the former governor’s security guards barricaded the headquarters of a state oil company last week.

The dispute with Kolomoisky, who has funded a group of volunteer troops fighting on the government’s side in Ukraine’s easternmost regions, opens a new challenge for an administration struggling to prevent a separatist advance and steer the economy away from default.

“Now I’m just a simple jobless Ukrainian,” Kolomoisky, 52, said Wednesday on Twitter.

Kolomoisky’s dismissal follows a call from Prime Minister Arseniy Yatsenyuk’s government that security services disarm. Last week, Kolomoisky’s guards seized control of oil company VAT Ukrnafta, in which he owns a minority share, after Poroshenko signed legislation that allowed state representatives at NAK Naftogaz Ukrainy, the company’s majority owner, to replace Kolomoisky’s management team.

‘Oligarch Anarchy’

“The official administration line is that this is part of the process of cleaning up oligarchic interests from the state administration/politics,” Tim Ash, chief emerging-markets economist for Standard Bank Plc in London, said by e-mail. “Let’s see whether Kolomoisky accepts this outcome.”

Yatsenyuk, whose government is trying to overhaul the economy under a $17.5 billion International Monetary Fund aid deal, vowed Monday to crack down on “total corruption and smuggling” and prevent an “oligarch-supported political crisis.” At the same time, the administration is locked in talks with bondholders in a bid to extract as much as $15.2 billion in savings by extending the maturity, cutting the principal, and reducing the coupons on its outstanding debt.

The clash with Kolomoisky follows efforts by Ukraine’s government to crack down on graft that has sunk the country to 142nd place out of 175 countries in Transparency International’s Corruptions Perception Index, the worst in Europe. Its efforts include forcing wealthy Ukrainians to pay taxes and cutting out middle-men in energy contracts tied to state-owned companies, Finance Minister Natalie Jaresko said last week.

Influence Struggle

Ukrainian police also detained the head of Ukraine’s Emergency Service, Sergiy Bochkovsky, on Wednesday during a televised cabinet meeting on suspicion of corruption. Bochkovsky was suspected of buying fuel at an artificially high price, said a representative of the Interior Ministry who did not identify himself.

“This step by the president should become the beginning of a crusade against the influence of all oligarchs on politics and their enrichment at the cost of state resources,” Mustafa Nayem, a pro-Poroshenko lawmaker, wrote in his blog.

Lawmaker Anton Gerashchenko said Kolomoisky had “acted heroically” in securing stability in Dnipropetrovsk, an industrial region just west of Ukraine’s conflict zone, even if it was time for him to go.

“People want Ukraine to go the European way, which means that professional politicians and managers should be in power, not Forbes-100 faces who only protect their influence over the state-owned part of the economy,” Geraschchenko said on Facebook.

Bonds Slide

The country’s bonds dropped for a third day after Moody’s Investors Service cut Ukraine’s credit rating to the second-lowest level, saying the likelihood of a default is almost certain. Ukraine’s dollar-denominated bond due in July 2017 fell to a record-low on closing basis, sliding 0.5 cents to 38.04 to the dollar.

Kolomoisky was named governor of the Dnipropetrovsk region a year ago, filling in a regional power void after the collapse of President Viktor Yanukovych’s regime. With another partner billionaire, Kolomoisky controls Privat group, a banking and industrial conglomerate, according to Forbes.

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