The War Has Reined In Ukraine’s Oligarchs, at Least for Now

For weeks, they fended off Russian assaults, holed up in a vast steel mill under barrages of missiles and mortars. And when the Ukrainian troops defending the Azovstal plant finally surrendered in May 2022, the mill had been reduced to rubble and twisted metal.

The fighting at Azovstal, in the besieged city of Mariupol, was a signature moment in the early months of Russia’s full-scale invasion of Ukraine.

It was also a major setback for Ukraine’s richest man, the plant’s owner.

With the destruction of Azovstal, the owner, Rinat Akhmetov, lost an industrial jewel accounting for one-fifth of Ukraine’s steel output — a multibillion-dollar loss that dealt a severe blow to his longtime grip on the Ukrainian economy.

Mr. Akhmetov’s case underlines how the war, by ravaging Ukrainian industry, has curbed the power of the country’s so-called oligarchs, tycoons who have long reigned over the economy and used their wealth to buy political influence, experts say.

In the war’s first year, the total wealth of the 20 richest Ukrainians shrank by more than $20 billion, according to Forbes magazine. Mr. Akhmetov took the biggest hit, losing more than $9 billion. He is one of only two billionaires left in Ukraine, down from 10 before the war, according to The New Voice of Ukraine newspaper.

Now, the Ukrainian authorities plan to use their wartime powers to try to make a clean break with the oligarchs. The aim is to reduce their influence over the economy and politics, and to prosecute those who engaged in corrupt practices, carrying through on policies that President Volodymyr Zelensky had promised to pursue before the invasion.

“They are weak, and it’s a unique opportunity to achieve justice in terms of how the country should be run,” Denys Maliuska, Ukraine’s justice minister, said in an interview.

Rinat Akhmetov in 2014. Credit…Thomas Trutschel

The Ukrainian authorities say that these efforts are about rebuilding a postwar country that is more democratic and prosperous, and that they also show that they are fighting corruption, a crucial step to secure support from Western allies.

The crackdown could eliminate influence buying, but it may also reduce pluralism in Ukrainian politics and sideline some of Mr. Zelensky’s opponents. Before the war, one of the highest-profile investigations of a businessman was against Mr. Zelensky’s chief political rival, former President Petro O. Poroshenko, who made a fortune in the candy business. Mr. Poroshenko has avoided criticism of Mr. Zelensky since the start of the war, instead portraying himself as a loyalist ready to fight for his country.

Some critics also say the wartime concentration of power around the government may give rise to a new oligarchy, and analysts say that oligarchs still retain significant levers of influence.

“Oligarchs have all the resources they need to get their influence back,” Mr. Maliuska said. “The risk is still present.”

Like other Ukrainian tycoons, Mr. Akhmetov made his fortune in the 1990s, when newly independent Ukraine transitioned to a market economy that saw lucrative state-owned assets privatized cheaply. He took over Soviet-era coal and steel plants and built a business empire that also included major stakes in agriculture and transportation.

Dmytro Goriunov, an economist at the Kyiv-based Center for Economic Strategy, said oligarchs had been a major obstacle to Ukraine’s economic development, hampering competition through monopolies. Before the war, they controlled more than 80 percent of industries like oil refining and coal mining, according to a study he cowrote.

Experts say Ukrainian oligarchs used their profits to influence politics and the judiciary, as well as to buy or launch television channels to shape public opinion.

Mr. Akhmetov once owned up to 11 channels and supported Viktor Yanukovych, the former pro-Russia president whom Ukrainians ousted in 2014.

Unlike in Russia — where oligarchs have largely fallen in line with the Kremlin under coercion or for self-interest — rivalries among Ukrainian tycoons and their support of a wide-range of politicians have given Ukraine’s media and political landscape greater variety.

Their large industrial and agricultural companies have also driven the economy, employing hundreds of thousands of people and attracting foreign investment.

But Daria Kaleniuk, the executive director of Ukraine’s Anti-Corruption Action Center, said the oligarchs’ stakes in business, politics and the news media had created a “vicious circle” where most levers of power were under their control, fueling corruption.

When Mr. Zelensky was elected president in 2019 — with the support of a magnate, Ihor Kolomoisky — he promised an all-out assault on the oligarchs. But his efforts, which included overhauling the judiciary and cracking down on corrupt public officials, “did not significantly decrease the influence of the oligarchs at that time,” Mr. Maliuska said.

Then came Russia’s invasion in February 2022.

As Moscow’s attacks focused on Ukraine’s east and south, the country’s industrial heartland, many of the oligarchs’ factories were decimated.

In Mariupol, Mr. Akhmetov’s two giant steelworks, including Azovstal, were destroyed. So was the country’s largest oil refinery, in central Ukraine, which was owned by Mr. Kolomoisky. Today, fierce fighting around the eastern city of Avdiivka has forced Europe’s largest coke plant, another of Mr. Akhmetov’s properties, to shut.

“My businesses have been affected the most by the war,” Mr. Akhmetov said in written responses to questions. His wind and thermal power plants have been “exposed to constant Russian missile and drone attacks,” and his steel and coke plants have been “severely damaged or temporarily occupied,” he said.

Mr. Akhmetov’s steel and mining group Metinvest lost nearly a third of its assets in the war’s first year, according to the Center for Economic Strategy. Mr. Kolomoisky’s oil assets shrank by two-thirds.

But it was perhaps the oligarchs’ political influence that was hardest hit.

In the early days of the war, as the country rallied behind its president, oligarchs had little choice but to put aside their political agendas and help with the war effort.

Then, Mr. Zelensky signed a decree merging all cable news into a single program intended to counter Russian disinformation and boost morale — depriving oligarchs with media arms of a crucial tool of influence. The program has been denounced as a way for the government to stifle criticism.

And by the summer of 2022, many tycoons had relinquished ownership of their media businesses to comply with a law passed before the war to curb their power. The law states that any person meeting three out of four criteria — participation in politics, significant media influence, ownership of a business monopoly or wealth of at least $70 million — will be designated an oligarch and barred from buying privatized state assets and funding political parties.

Mr. Akhmetov handed over the licenses for his television and print media to the state in July 2022. “I am not an oligarch in the legal sense of the word now,” he said.

As the war went on, Ukrainian authorities cast a wider net in their prosecution of oligarchs.

In September, the police arrested Mr. Kolomoisky on suspicion of fraud and money laundering, and he has since been held in custody. The authorities are also trying to extradite Kostyantin Zhevago, a Ukrainian oligarch, from France on fraud charges, and another one, Dmytro Firtash, for embezzlement. Mr. Akhmetov is not facing personal legal proceedings.

“For decades, it was unimaginable to have an oligarch in a pretrial detention center,” said Mr. Maliuska, the justice minister. “Now, this is a reality.”

Mr. Maliuska acknowledged that “the power of the state is bigger” during the war, facilitating efforts to break free from the oligarchs’ control over the economy. But he added that Ukraine’s current crackdown was also aimed at earning anti-corruption credentials that are key to securing much-needed Western assistance.

The European Union, for instance, agreed to open accession talks for Ukraine last month but has stressed the need to build “a credible track record of investigations, prosecutions and final court decisions in high-level corruption cases.”

It remains unclear how that will affect the powers of the oligarchs.

Mr. Goriunov, the economist, said Ukraine remained dependent on many of the oligarchs’ businesses. Mr. Akhmetov’s energy holding, DTEK, accounts for two-thirds of the country’s thermal coal production.

Mr. Akhmetov, in his written comments, said he intended to play a role in the country’s postwar reconstruction. “As the biggest Ukrainian investor, SCM will not sit on the sidelines,” he said, referring to his holding company.

Some in Ukraine also fear the oligarchs will be replaced by a new oligarchic system emerging from the wartime concentration of power around the government.

Valeria Gontareva, who was Ukraine’s central bank governor from 2014 to 2017, said she was concerned about the seizure of oligarchs’ assets during the war and how government officials might use them for personal gain.

In late 2022, Mr. Kolomoisky’s oil refinery and Mr. Zhevago’s company AvtoKrAZ, which makes heavy trucks, were nationalized in what the authorities said was a way to secure vital military supplies. But some actions, such as the seizure of Mr. Zhevago’s shares in mining plants, have been contentious and criticized as unjustified.

“It’s state capitalism,” Ms. Gontareva said. “Now the threat is not the old oligarchs, but the new ones who benefit from the war through the redistribution of assets and business segments.”

Ms. Kaleniuk, of the Anti-Corruption Action Center, concurred. “In the fight against dragons,” she said, “we have to be cautious not to become dragons ourselves.”