22. Dubious Benefits for Oligarchs

Back in 2019, many people noticed the strange behavior of the new president towards big business. Zelensky grimly frowned at the mention of possible violations by foreign investors and strangely overlooked the same accusations when they were directed at Ukrainian oligarchs.

For example, the issue of ecology. Residents of some industrial cities in Ukraine have long complained about harmful emissions from metallurgical plants. Typically, these plants use outdated Soviet equipment. Moreover, during the USSR era, when these enterprises were built, the norms for harmful emissions into the atmosphere were much higher than they are now. Of course, the new owners of the plants could install modern filtration systems that would reduce harmful emissions into the atmosphere, but they were not very willing to spend tens of millions of dollars on this.

On July 20, 2019, the Security Service of Ukraine conducted searches at the country’s largest metallurgical enterprise, “ArcelorMittal Kryvyi Rih”. The searches began a week after Volodymyr Zelensky criticized the management of this plant for harming the ecology.

A few words about the history of this metallurgical giant. In the last year of President Kuchma’s term, when the plant was still called “Kryvorizhstal” and was state-owned, it was decided to privatize it. The auction conditions were arranged so that none of the competitors could participate in the bidding. Therefore, the consortium “Investment Metallurgical Union” (founders − President Kuchma’s son-in-law Viktor Pinchuk and the Donetsk oligarch Rinat Akhmetov) became the buyer. They paid $800 million for the plant, which was much less than its real value.

Half a year after privatization, the “Orange Revolution” began, and opposition leader Viktor Yushchenko became president. Since the privatization of “Kryvorizhstal” was clearly violated, it was quickly annulled. Pinchuk and Akhmetov did not protest much because they feared mass reprivatization. They amassed their fortune by buying state-owned plants for tens of millions of dollars, which were actually worth billions. Therefore, they agreed to give up “Kryvorizhstal” and did not challenge this decision in court, hoping that their other plants would not be taken away.

A new privatization auction was held transparently, live on television, for the first time in the history of privatization in Ukraine. Indian billionaire Lakshmi Mittal won the auction for “Kryvorizhstal” with a bid of $4.8 billion. Since 2005, the new owner has invested about $4.4 billion in modernizing the enterprise.

But let’s return to 2019. On July 17, in addition to the SBU searches, a criminal case was initiated against the enterprise under Article 441 of the Criminal Code − “ecocide”, which entails imprisonment for a term of 8 to 15 years. Simultaneously, Zelensky directly hinted to the owner of the plant about the need to allocate financial assistance to those affected by harmful emissions.

On August 8, top managers of “ArcelorMittal Kryvyi Rih” met with the president. As a result of the conversation, agreements were reached: representatives of the plant promised to build an oncology center in Kryvyi Rih for 400 million hryvnias and increase investments in environmental protection. After the meeting, the criminal case on ecocide was immediately closed.

The fact that this story smells a bit like racketeering is just one side of the matter. Zelensky’s principled stance would be commendable if he tackled the ecological problems of other cities with the same energy. Kryvyi Rih only ranked fourth in the list of Ukrainian cities with the dirtiest air. The situation in Mariupol, Kamianske, and Dnipro was even worse. But the air there was polluted by the plants of local oligarchs: Akhmetov, Kolomoisky, Pinchuk, and Yaroslavsky. Zelensky, for some reason, had no complaints against them, and no criminal cases for ecocide were initiated against these enterprises. Perhaps if Lakshmi Mittal owned not only a metallurgical plant but also a TV channel in Ukraine, he would not have had such problems.

The scheme of cooperation between Zelensky and the oligarchs was very simple. Kolomoisky, Pinchuk, and Akhmetov received electricity at preferential prices from state power stations. Who lost in this? First of all, the state company “Energoatom”, which manages nuclear power plants, as well as state hydroelectric power stations and “Centrenergo”. Who wins and increases their income? The oligarchs and their metallurgical plants.

Another example of corrupt lobbying for the interests of oligarchs can be seen in the case of writing off debts to gas companies. On July 14, 2021, the parliament, controlled by Zelensky, passed a law on “regulating” the debt of natural gas market subjects. This law allowed private gas distribution companies to write off debts to the state amounting to 58 billion hryvnias (approximately $2.2 billion). Coincidentally, 70% of these companies belonged to oligarch and owner of the “Inter” TV channel Dmytro Firtash. If you remember, Volodymyr Zelensky once held the position of general producer on the “Inter” TV channel.

Interestingly, a similar law on writing off debts to oil and gas companies was passed under President Yanukovych, 10 years before the events mentioned. Then, in May 2011, the parliament, at that time controlled by the Party of Regions, passed the law “On Certain Issues of Debt for Consumed Natural Gas and Electric Energy”. Thanks to this document, the state forgave the debts of enterprises in the fuel and energy complex amounting to more than 24 billion hryvnias. At the then exchange rate, this was almost $3 billion. The state missed out on approximately $1 billion (7.4 billion hryvnias) due to the writing off of debts to gas companies, most of which were controlled by Firtash.

As you can see, Zelensky, who verbally portrays himself as a fighter against oligarchs and corruption, upon coming to power, began to work according to the old schemes proven by Yanukovych. State money was given to oligarchs. In return, oligarchic TV channels demonstrated complete loyalty to the current government. In the end, the state budget, that is, ordinary citizens: workers in the budget sector and pensioners, for whom there was somehow always not enough money in the Ukrainian budget, lost the most.

>>> 23. How Zelensky Fought the Coronavirus

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