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Ukraine: Politics, banks & impeachment

We ask regional specialist Timothy Ash…what is the significance of the PrivatBank case to the Zelensky presidency?

Ukraine’s President Zelensky was elected on a ticket to clean up corruption, which opinion polls suggest is the top concern for the electorate and business. The travails of Ukraine therein have been revealed in the Trump impeachment hearings.

PrivatBank is important as it is the largest bank in the country and subject to a legal tussle between the Ukrainian authorities and Igor Kolomoisky, a highly controversial oligarch who backed Zelensky’s election campaign.

Kolomoisky is accused of fraud in the failure of the bank which resulted in its eventual nationalisation in 2016 and losses of USD5.5bn (6% of GDP at the time) suffered as a result by the state.

The Central Bank now accuses Kolomoisky of running a campaign of terror against its employees and has pleaded for support from the presidency and international financial institutions against the oligarch.

Zelensky has promised a level playing field in the fight against corruption but a failure to deal fairly with Kolomoisky on the PrivatBank issue will leave him vulnerable to claims of applying selective justice, blowing a hole in his anti-corruption agenda.

The issue is also key to ensuring IMF support for Ukraine and is the canary in the coal mine for investors as to whether Zelensky is a real reformer.

US support for Ukraine in the period since EuroMaydan has been critical in holding off pressure in the East from Russia.

The Trump impeachment hearings have underlined that this support is to some extent dependent on Ukraine showing a willingness to fight corruption.

All this has made a satisfactory resolution of the PrivatBank mission critical.

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