The Collapse of Ukraine’s Oligarchy in Ten Years of War

The Ukrainian economy is often perceived as heavily influenced by the oligarchs, afflicted with corruption, and reliant on an industrial infrastructure inherited from the USSR. To this list might be added deficiencies in public administration. 

Such a perception, though exaggerated, had some validity in early 2014. Coincident with Russia’s increasing incursions over the past decade, however, many of the problems listed are gradually diminishing. Most noticeable has been the irreversible decline in the influence of the post-Soviet oligarchy in critical economic sectors.

The Rise of the Oligarchs

The rise of oligarchy in Ukraine was significantly enabled and underpinned by post-Soviet privatization efforts, intended ideally to create a market for citizens to participate in ownership of goods formerly controlled by a central government. Often, however, the unfortunate result was the concentration of wealth in a few people’s hands as poor—and poorly informed—individuals quickly exchanged their vouchers for immediate cash.

One such privatization event in particular proved a linchpin for the coalescence of oligarchic power.

On April 9, 2004, then president of Ukraine Leonid Kuchma signed a law on the privatization of UkrRudProm, a conglomerate of several enterprises involved in raw material extraction for the steel industry. The terms of privatization were crafted in a manner that effectively limited the distribution of state assets to the entities associated with three prominent figures: Rinat Akhmetov, a key industrialist in the Donbas region; Ihor Kolomoisky, a leading businessman in Dnipropetrovsk, another major industrial hub; and Viktor Pinchuk, President Kuchma’s son-in-law, also hailing from Dnipropetrovsk. 

This was a landmark event for Ukraine as it perfectly illustrated the post-Soviet divvying up of large economic enterprises by oligarchs. The details of the arrangement were occluded, coming to light only a decade later in a series of lawsuits in London the partners brought against each other. 

Subsequently Dmytro Firtash entered this elite circle through his lucrative role in mediation in Russian gas sales to Ukraine. These four—Akhmetov, Kolomoisky, Pinchuk, and Firtash—constituted the small corps of the most influential oligarchs in Ukraine on the eve of the Russian aggression in 2014. 

At different times, smaller businessmen were sometimes included in the oligarchs’ club, such as pro-Russia Viktor Medvedchuk or former Ukrainian president Petro Poroshenko. These names were also associated with big business assets, large media holdings, and influential political projects—the “oligarchic triad.” Smaller players, however, either lacked economy-critical assets or were able to exert political influence only briefly.

The Decline of Oligarchy

Since 2014, Ukraine has been rapidly severing its economic ties with Russia, especially after losing control of the Crimean Peninsula and a large part of the Donbas, home to the region’s largest city, Donetsk. Ukraine also became much more dependent on Western loan financing, which was conditioned on specific legal changes, including new legislation to counter oligarchic parasitism. In addition, the state strengthened its institutions to safeguard against the use of large businesses for personal gain. All of this led to an at first gradual and then sudden decline in the influence of the oligarchs.

The first to fall was Dmytro Firtash, whose business was centered on Ukrainian-Russian gas intermediation and who held a significant part of his assets in Crimea. Since 2014, he has been stuck in Austria awaiting a decision on his extradition to the United States to face bribery charges. Since May 2023, he has been under investigation in Ukraine for embezzlement of public funds. Some of his gas assets are now government-controlled. 

The second to lose influence rapidly was Ihor Kolomoisky. First Kolomoisky lost control of his oil assets, which he shared with the state. Then in 2016, the largest bank in Ukraine, PrivatBank, which he controlled, was nationalized. Since 2021, Kolomoisky has been under U.S. sanctions for his involvement in corruption, and since September 2023 he has been in custody in Ukraine on suspicion of fraud. In addition, he has given up control of 1+1 Media for five years in response to Ukraine’s “anti-oligarchs” law.

In recent years, Viktor Pinchuk has gradually begun to distance himself from the toxic oligarchic group. He stopped participating in most political projects and has actively sought to sanitize his image in the West and at home through philanthropy, supporting educational and cultural activities, and nurturing friendships with prominent Western personalities such as Elton John and Bill Clinton.

The last of the four, Rinat Akhmetov, lost a significant portion of his assets in the occupied Donbas region in 2014 but remained the most influential oligarch by far until 2022. However, the occupation of Mariupol, another industrial giant in the east of Ukraine, in 2022 knocked out his metallurgical business, where much of his wealth was concentrated. The Russian campaign to destroy Ukraine’s energy sector in 2022–2023 significantly weakened his energy business. In the summer of 2022, as a result of the “anti-oligarchs” law, Akhmetov closed his media holding, which included Ukraine’s highest-rated TV channel. 

This effectively symbolized the end of the oligarch era in Ukraine.

New Economic Sectors Less Amenable to Oligarchic Control

Even before the full-scale invasion began, the assets, revenues, and staffs of the Ukrainian enterprises controlled by the more prominent oligarchs had been halved in the decade of 2011–2021. In addition to the loss of natural resources in Ukraine’s East to Russian control, the economy had pivoted to other sectors, seeing much faster growth in agricultural and IT businesses compared to the Soviet legacy sectors of industrial energy and metallurgical assets, which were primarily controlled by the oligarchy. 

Multimillionaires in new sectors of the economy no longer possess monopolies in the supply and distribution of critical resources essential for the entire country’s businesses, such as gas or electricity, or critical financial resources, such as the largest bank. This eliminates the possibility of easily converting their wealth into nationwide political influence. 

Despite the war, Ukraine has been making gradual progress in other weak areas of the transitional post-Soviet economy, such as combating corruption and improving public administration. But the downfall of the oligarchy in recent years, accelerated by the war, has become the most noticeable indicator of Ukraine’s economy transitioning to a new state with new challenges.

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.