Return to “The Family”: Poroshenko Building Clan Rule

Instead of fighting oligarchs the new Ukrainian authorities are forcing them to make concessions and share profits. As an outcome, the system does not cleanse itself, only the reallocation of financial flows according to the interests of the President’s clan occurs instead.

The deoligarchization project that was announced in Spring 2015 turned out to be a fiasco. Now Petro Poroshenko is starting to behave like a typical Ukrainian president — he is building a clan that should become his financial basis with a political backbone that guarantees long-term access to political power and then a peaceful departure from the post.

The clan is led by several close allies of Poroshenko ensuring the steady influx of money. Primarily it is Ihor Kononenko, who distributes the ‘business areas’ and then asks for hit cut from the deals.

Centrenergo power generating company is a good example of this strategy. Serhiy Trehubenko, an MP from Poroshenko Bloc is responsible for coal supplies there. Privatization of Centrenergo is frustrated for a second year in a row despite the fact that Gaz de France expressed an interest. Even a public transparent contest to appoint the CEO of Centrenergo was blocked — Kononenko personally phoned each candidate asking not to protest publically.

Another of Kononenko’s schemes includes cashing the money out of the state-owned oblenergos via state-owned Energomerezha controlled by Kononenko’s cronies the Kriuchkovy brothers. A warrant notice was recently issued for one of the brothers, Dmytro. A day before that he arrived to the State Property Fund of Ukraine in his new Rolls-Royce to discuss the privatisation of the oblenergo. Dmytro Vovk, the head of the National Commission for State Regulation of Energy and Public Utilities mentioned in his interview that Kononenko tried influencing him and protecting the Kriuchkovy brothers calling them ‘good guys after all’.

Kononenko’s apprentice in building a mafia clan system is Oleksandr Hranovskyi, another MP from Poroshenko Bloc. Hranovskyi is responsible for the ‘right’ court decisions and for the ‘right’ decision making in the Office of the Prosecutor General and offices of the oblast and city prosecutors. In the SBU, the Kononenko-Hranovskyi group is represented by Pavlo Demchyna, the First Deputy Head of the SBU who is also ironically the Director of the Anti-Corruption Department.

The second pillar of the clan is Oleh Hladkovskyi — he is responsible for Ukraine’s defense contracts. Kostyantyn Zhevago, the owner of Kremenchuk-based AutoKrAZ trucks factory is indignant: his trucks are sold to more than 80 countries. However, they are not good enough for his native Ukraine, where all the defense contracts are taken by Cherkasy-based Bohdan, doing primitive semi knocked down assembly of Belorussian MAZes.

The third pillar of Poroshenko’s ‘family’ is the Head of the State Fiscal Service Roman Nasirov, whose name has become a symbol of old schemes at the Customs Service and non-transparent work of the tax system.

After Borys Lozhkin fell out of favor, Yuriy Lutsenko took the role of the key contact for the oligarchs. One of his first major contacts was Ihor Kolomoyskyi. They met during Lutsenko’s recent visit to Ivano-Frankivska Oblast. Poroshenko scared Kolomoyskyi with nationalization of PrivatBank, making reference to ‘the Americans’, who were demanding him to press on  with the nationalization, and offered Kolomoyskyi ‘to come to terms’. In his turn Kolomoyskyi started building defences, realising that his ‘dispossession of kulaks’ might become the new ‘national project’.

Kolomoyskyi’s main base is not Vidrodzhennya parliamentary group, which currently saves the coalition with their much needed votes, but Interior Minister Arsen Avakov, who is sending signals about the possible unrest of the well-armed and trained military units that used to be volunteer battalions at the beginning of the Donbas War should Poroshenko decide to be overpersistant with his ‘deoligarchization’.

Yet even political rivals can come to terms when the control of the country’s key honeypots appears on the horizon. Both Kononenko and Avakov are ‘curators’ of the Ministry of Infrastructure where the mission to eliminate corruption looks almost impossible.

A story that tells it all: the new team of the Ministry of Infrastructure invited Director of the state-owned Ukrainian Danube Shipping Company for a conversation about corruption and tried to terminate his employment. The guy asked to go to the toilet and called Avakov. So now it was the Infrastructure Minister’s turn to visit the Minister of Interior, who is also controlling the National Police.

Another story: the Director of Poltava Avtodor [ed: the state-owned enterprise responsible for maintaining public roads in Poltavska Oblast] was attending a job interview for some higher position. In front of TV cameras he tried proving his adequacy for the new position by saying: "Kononenko sent me".

While any Ukrainian economic miracle looks dubious until the next presidential elections, the party cash office is now fully replenished with laundered money. Poroshenko is very likely to use the ‘method of Kuchma’ for continuing to stay in power.

This method is based on arranging the second tour of the presidential elections in which the acting president should be opposed by the most cringeworthy opponent who also has the lowest chances to win. Therefore, people will have no choice other than voting for Poroshenko.

So far, instead of a true battle against corruption and oligarchs Poroshenko is creating conditions in which oligarchs are forced to make contributions and share the money. The system does not cleanse itself, the money flows are simply redistributed based on the interests of the President’s clan. The only way to stop this is to force the authorities to cleanse themselves by creating the new generation of the politicians and establishing a political culture of zero tolerance to corruption.

Introducing Yanukovych-like international sanctions against the corrupt officials of the new Ukraine can become an important argument in this war for transparency.

The original column was published in the Novoye Vremya magazine on July 22, 2016 and on nv.ua website.

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