15:10 21.09.2021

Author VADYM HRYB

De-Oligarchization, Ukrainian Style: What Is Really Happening?

9 min read
De-Oligarchization, Ukrainian Style: What Is Really Happening?

Vadym Hryb, Chairman of the Board of Directors and founder of the TEKT Investment Company, Ph.D. in Economics

 

I watched Shuster’s show about the Oligarchs and felt like few people understood what was happening. Well, it might also be the case that I am the one who doesn’t understand. But still, I decided to speak out on this issue. When I worked for the Security Service of Ukraine (SSU), I inspected oligarchs on a systematic basis, chairing a working group. To understand what was really happening, I was provided with contacts and access to information in all ministries and departments where oligarchs’ interests laid in one way or another. According to the results of the study, we made a report on the main oligarchs who had been using illegal preferences through their political influence and placement of personnel. Getting away from the specifics, the conclusions were unambiguous: it was necessary to change the Law on the Antimonopoly Committee in order to neutralize the monopoly in the industries and create equal conditions for all, remove lobbying preferences while paying attention to the personnel policy as well as implementing a number of other measures... This is all very general, although we have reached the details for each “object.”

Let’s change the topic a bit. When I met with Kwaśniewski, the President of Poland, and asked him about the help from the West, he simply said that when they destroyed the local (Polish) oligarchs, transnational companies entered the country and began to dictate their requirements and impose their rules of the game. Who to appoint as a minister, what the priorities for development were, what loans and how much should be taken, and much more. And Kwaśniewski said that was a big problem because domestic capital was destroyed and the country became completely dependent on the USA and its partners. There is a theory of the so-called “financial vacuum cleaner” when a foreign investor invests money in assets and then withdraws all profits to its country because it is not interested in the development of the investee country where it acquired assets as a whole.

Another digression, but an American once told me that they understood democracy as free capital input and output. And that is what they fight for in every country. As soon as this issue is resolved, transnational companies immediately enter the country and buy up the economy. And don’t forget the rule of law, for investments must be protected!

So if you try to analyze the situation not from the point of tactics but from the point of strategy, you will see quite a natural scenario emerge. The only reason why I distinguish between tactics and strategy is that it is easy to find supporters of tactical decisions in our society and very few people who are able to see something more behind them.

Let’s forgo the question of how the revolution went, especially since society was ready for it. But then, one of the first laws adopted was the law on lustration which, as they say now about the oligarchs, labeled citizens and deprived them of certain rights and freedoms without charge or trial. There was mass euphoria at first; we won, and the winner is always right. Then we faced the fact that corrupt officials were replaced by other ones in the era of Poroshenko. Then another generation in authorities changed, and Zelenskyi’s team came. They expelled Poroshenko’s people, and all the old personnel had been under lustration. And who could be nominated for public offices? Only the young and inexperienced, and mostly those who were close or spoke beautifully about the need for reforms.  We are getting a big group of people, popularly called “Sorosyata” (“Soros minions”), who in principle are right talking about the need for reforms, but, having no experience in public administration and being full of the Western understanding of reforms, have turned out to be very weak managers and have no idea how to implement Western standards in our reality. 

Further, since domestic capital represented by oligarchs really interfered with or leveled all the efforts to reform both the economy and the creation of democratic institutions on the part of the authorities, it was necessary to combat it. A task was set to completely destroy the oligarchy as a class, as voiced by Zelenskyi.

But inconsistencies started to emerge: what to do with the oligarchs’ assets and how to make them into regular businessmen? 

On Shuster’s show, Danilov answered that question saying that it was necessary to return to the origins of capital creation, i.e., to revise privatization. If you remember the main problem of privatization, it is that almost always the competitions were made for a specific buyer who agreed with the authorities. Truly, Danilov said that they did not understand yet what to do with the assets that had already been resold. But there is such an idea, and they are working on this scenario at Motor Sich. The shares of the company are arrested, and the SSU is trying to dig up materials to cancel privatization. It is difficult to say how it will go, but if you take a look at Arakhamia’s speech, they do not care, “I see the goal, I see no obstacles.” The Venice Commission and the Venetian plaster are basically the same thing for them.

And what will happen next if they succeed in canceling the results of privatization? Re-privatization, of course! I would like to emphasize that the main efforts are put not into creating new rules of the game for business through antitrust legislation but into a scheme of taking assets from oligarchs in principle. And apparently, this is exactly what our foreign donors and patrons advise. Why? Surely because then the path to taking our economy will be free. Over the years, the oligarchs structured the business, received the necessary licenses and permits, and, in fact, made certain areas of business attractive for investment. What happens next is clear: transnational companies enter the country, the budget receives a bunch of money that can be spent on the roads and the social sphere, and everything will definitely be fine for some time. But then the financial vacuum cleaner starts working, and we will get into economic slavery. A lot is already being done in this regard when huge credit lines are approved for different projects that will not give a return on investments. 

I also wanted to dwell on oligarchs and mass media. It is no secret that most channels are subsidized! And oligarchs entertain themselves with TV channels and football clubs because it is a hallmark of success. TV channels work around the clock creating various content because they have to compete for the viewer. And this means additional costs. Of course, shows like Savik Shuster’s are in part higher rated, but they are aimed at a very narrow segment which gives them the opportunity to earn money without investing in a large infrastructure. What will happen when TV channels are taken away from oligarchs? 

There are two answers here: either they will be bought out by someone who can effectively manage this business and force competitors out (in other words, many channels will have to close), or sold out to well-known global brands that are also multinational companies. At the first stage, everything will be fine again, at least for Zelensky, since he will solve the problem that Poroshenko has puzzled over for a long time trying to seize a number of channels for himself. Zelenskyi will simply create conditions for their extinction. Society will definitely lose in social terms since only channels that broadcast nothing but shows with politicians and celebrities will remain. But in strategic terms, if foreign holdings enter the media space, we, as Ukrainians, will lose even more, since there will also be a mechanism for washing our brains out. And what can we put against that?

The Nord Stream situation, among other things, has taught us that we must rely mainly on our own strength and that the help from the West is always opportunistic.

Therefore, when making decisions, it is always necessary to calculate the possible consequences. As far as I am concerned, this has always been done by the National Security and Defense Council (NSDC), i.e., analytics and forecasting were their main task. And Zelenskyi has turned this body into some kind of an incomprehensible management structure that can serve as a cover-up, giving orders to everyone, with other people always being responsible for their implementation.

Now, turning back to our oligarchs, of course, I would like them to remain just major businessmen who earn a profit and invest in the Ukrainian economy. Although I do understand the harm they have caused to our economic interests, and to be honest, I would put many of them in prison for economic crimes and for helping the aggressor to occupy our territories at a certain time.

If we do not take into account criminal prosecution and confiscation of assets, the only legal way is antitrust legislation, which is designed to establish equal rules of the game for everyone. But it seems to me that the existing government does very little in this direction and, moreover, it does not believe in this whole story. So in my opinion, the main task of the government is to replace ten major oligarchs with hundreds of large domestic businessmen. This way we may have a chance for the future. I would like the basic sectors of the economy to belong primarily to domestic capital, not to our overseas friends, although they provide us with some modern standards. But it is a question of strategy, not tactics! And unfortunately, I understand the strategy of our overseas partners more than our own.

 

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