by For weeks, they fended off Russian attacks, hiding in a huge steel factory under missile and mortar bombardment. And when 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 turning point in the first months of the full-scale Russian invasion of Ukraine.
It was also a big setback for Ukraine’s richest man, the owner of the plant.
With the destruction of Azovstal, owner Rinat Akhmetov lost an industrial gem that accounted for a fifth of Ukraine’s steel production, a multibillion-dollar loss that dealt a severe blow to his long-standing control over the Ukrainian economy.
Akhmetov’s case underscores how the war, by devastating 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 first year of the war, the total wealth of the 20 richest Ukrainians fell by more than $20 billion. according to Forbes magazine. Akhmetov suffered 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, Ukrainian authorities plan to use their wartime powers to try to make a clean break with the oligarchs. The goal is to reduce their influence over the economy and politics, and prosecute those who participated in corrupt practices, carrying out the policies that President Volodymyr Zelensky had promised to implement before the invasion.
“They are weak and it is a unique opportunity to achieve justice in terms of how the country should be governed,” Denys Maliuska, Ukraine’s justice minister, said in an interview.
Ukrainian officials say these efforts aim to rebuild a post-war country that is more democratic and prosperous, and also demonstrate that they are fighting corruption, a crucial step in securing support from Western allies.
The crackdown could eliminate influence buying, but it could also reduce pluralism in Ukrainian politics and sideline some of Zelensky’s opponents. Before the war, one of the most high-profile investigations by a businessman was against Zelensky’s main political rival, former President Petro O. Poroshenko, who made a fortune in the candy business. Poroshenko has avoided criticizing Zelensky since the start of the war, presenting himself instead as a loyalist willing to fight for his country.
Some critics also say the concentration of power around the government in times of war can give rise to a new oligarchy, and analysts say the oligarchs still retain important levers of influence.
“The oligarchs have all the resources they need to regain their influence,” Maliuska said. “The risk is still present.”
Like other Ukrainian tycoons, Akhmetov made his fortune in the 1990s, when newly independent Ukraine transitioned to a market economy that saw lucrative state assets privatized on the cheap. He took over Soviet-era coal and steel plants and built a business empire that also included major holdings 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 such as oil refining and coal mining. according to a study he co-wrote.
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.
Akhmetov once owned up to 11 channels and supported Viktor Yanukovych, the former pro-Russian president whom Ukrainians overthrew in 2014.
Unlike in Russia (where oligarchs have largely aligned themselves with the Kremlin under coercion or self-interest), rivalries among Ukrainian tycoons and their support for a wide range of politicians have given greater variety to the political and media landscape. from Ukraine.
Its large industrial and agricultural enterprises have also boosted the economy, employing hundreds of thousands of people and attracting foreign investment.
But Daria Kaleniuk, executive director of Ukraine’s Anti-Corruption Action Center, said the oligarchs’ interests in business, politics and the media had created a “vicious circle” in which most of the levers of power were under their control, fueling corruption.
When Zelensky was elected president in 2019, with the support of a tycoon, Ihor Kolomoisky, he promised an all-out attack on the oligarchs. But his efforts, which included reforming the judiciary and cracking down on corrupt public officials, “did not significantly diminish the influence of the oligarchs at the time,” Maliuska said.
Then came the Russian invasion in February 2022.
As Moscow’s attacks focused on eastern and southern Ukraine, the country’s industrial heartland, many of the oligarchs’ factories were decimated.
In Mariupol, Akhmetov’s two giant steel mills, 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 town of Avdiivka has forced the closure of Europe’s largest coke plant, another of Akhmetov’s properties.
“My businesses have been the most affected by the war,” Akhmetov said in written responses to questions. Its wind and thermal power plants have been “exposed to constant Russian missile and drone attacks,” and its steel and coke plants have been “severely damaged or temporarily occupied,” he said.
Metinvest, Akhmetov’s steel and mining group, lost almost a third of its assets in the first year of the war, according to the Center for Economic Strategy. Kolomoisky’s oil assets were reduced by two-thirds.
But perhaps it was the political influence of the oligarchs that was most affected.
In the early days of the war, as the country rallied behind its president, the oligarchs had no choice but to put aside their political agendas and help with the war effort.
So, Mr. Zelensky signed a decree merging all cable news into a single program aimed at countering Russian disinformation and boosting morale, depriving oligarchs with media arms of a crucial tool of influence. The program has been denounced as a way for the government to suppress 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 limit their power. The law states that anyone who meets three of four criteria (participation in politics, significant influence in the media, ownership of a business monopoly or wealth of at least $70 million) will be designated an oligarch and prohibited from purchasing privatized state assets and finance political parties. .
Akhmetov handed over the licenses for his television and print media to the state in July 2022. “Now I am not an oligarch in the legal sense of the word,” he said.
As the war progressed, Ukrainian authorities cast their net in prosecuting the oligarchs.
In September, police arrested Mr. Kolomoisky on suspicion of fraud and money laundering, and he has been detained since. Authorities are also trying to extradite from France Kostyantin Zhevago, a Ukrainian oligarch, accused of fraud, and another, Dmytro Firtash, for embezzlement. Mr. Akhmetov does not face any personal legal proceedings.
“For decades, it was unimaginable to have an oligarch in a pretrial detention center,” said Maliuska, the justice minister. “Now this is a reality.”
Maliuska recognized that “the power of the state is greater” during war, which facilitated efforts to free itself from oligarchs’ control over the economy. But she added that Ukraine’s current crackdown was also aimed at gaining anti-corruption credentials that are key to securing much-needed Western assistance.
The European Union, for example, agreed to start accession talks for Ukraine last month, but has stressed the need to build “a credible track record of investigations, prosecutions and final judicial decisions in high-level corruption cases.”
It is unclear how that will affect the powers of the oligarchs.
Economist Goriunov said Ukraine remained dependent on many of the oligarchs’ businesses. Akhmetov’s energy holding company, DTEK, accounts for two-thirds of the country’s thermal coal production.
Akhmetov, in his written comments, said he intended to play a role in the country’s post-war reconstruction. “As the largest Ukrainian investor, SCM will not be left out,” he said, referring to his holding company.
Some in Ukraine also fear that the oligarchs will be replaced by a new oligarchic system arising from the concentration of power around the government in times of war.
Valeria Gontareva, who was governor of Ukraine’s central bank from 2014 to 2017, said she was concerned about the seizure of oligarchs’ assets during the war and how government officials could use them for personal gain.
In late 2022, the Kolomoisky oil refinery and Zhevago’s AvtoKrAZ company, which makes heavy trucks, were nationalized in what authorities said was a way to secure vital military supplies. But some actions, such as confiscation of Mr. Zhevago’s shares in mining plantshave been controversial and criticized as unjustified.
“It is state capitalism,” Gontareva said. “Now the threat is not the old oligarchs, but the new ones who benefit from the war by redistributing assets and business segments.”
Ms. Kaleniuk of the Anti-Corruption Action Center agreed. “In fighting dragons,” she said, “we must be careful not to become dragons ourselves.”
