Ukraine Fears the Rise of New Oligarchs

KIEV, Ukraine -- At first sight, the Bentley dealership, which joins other luxury car showrooms displaying Porsches and BMWs, suggests that times are good for Ukraine's super rich, yet scratch the surface and it becomes clear that the fortunes have changed for some of them.

Following the Orange Revolution, which led to Viktor Yushchenko taking power, it seems life has become harder for Ukraine's exclusive club of oligarchs.

Many of them had supported the blue coloured campaign of the pro-government candidate Viktor Yanukovych. Now they have to face the music.

"To start with they thought it was just a bad joke," says deputy prime minister Oleg Rybachuk. "They underestimated how things would change."

Severed links

It was the controversial privatizations of state enterprises in the 1990s that led to many leading Ukrainians making vast fortunes.

These groups of business people, which are based in the industrial East and in Kiev, contain some of the wealthiest and most influential people in the country, including former President Leonid Kuchma and many of Ukraine's oligarchs.

During his 10-year rule, Mr Kuchma was accused of cronyism and presiding over one of the most corrupt countries in Europe.

"The old system was all corrupted," says Mr Rybachuk. "Business and politics were interconnected. People would just walk around with kilos of cash and they used to believe they could do what they liked."

New auction

For many of the business elite, the link to the top political office was severed when Victor Yushchenko was elected president in December.

His government vowed to crack down on corruption and has been reviewing many of the privatisation deals.

"We have a sense that the power of the oligarchs has been reduced, in terms of privileged access, influence on public policy, and non transparency in business," says the World Bank's Ukraine director Paul Bermingham.

Earlier this month, two of the country's most successful oligarchs lost one of their most prized assets - the Ukrainian steel giant Kryvorizhstal.

Viktor Pinchuk, the son-in-law of the former president, and Ukraine's richest man Rinat Akhmetov bought it from the state for $800m last year. Analysts believe it could be worth up to $3bn.

Following a series of court cases, Kryvorizhstal is now owned by the government again and is to be put up for re-auction, despite protestations from Mr Pinchuk and Mr Akhmetov that this is illegal.

No Yukos here

Some investors fear that Ukraine may follow Russia in jailing oligarch opponents like Mikhail Khodorkovsky who headed the Yukos oil company and was convicted on tax and fraud charges.

A number of officials linked to the opposition are being investigated by the police about a variety of alleged offences.

And President Yushchenko has made loud pledges to continue to his campaign to target those who turned Ukraine into a "criminal nation".

Untainted tycoons

But not all Ukraine's tycoons are connected with the previous administration.

Some of the current cabinet ministers, including Prime Minister Yulia Tymoshenko, are also considered to have been oligarchs in the past.

It is not clear what they own now since a declaration of their business interests has not been made public.

The pace of economic reform has been slow since Mr Yushchenko became president and there is concern that some of the power of the oligarchs will just be transferred to others.

"We could see a new type of oligarch emerging with links to the government," predicts Mr Pinchuk.

For many of those who took part in the Orange Revolution, many of them ordinary Ukrainians living in poverty, this would be failure, since a key demand of the protestors was for a European style economy not controlled by oligarchs of any colour.

Source: BBC News