Ukraine's Oligarchs Still Entwine Business With Politics

The leading candidate in Sunday's presidential election is an oligarch. And the interim government is turning to other oligarchs to help restore calm in some crisis-plagued provinces.

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RENEE MONTAGNE, HOST:

Word of more violence in Ukraine today. At a Ukrainian military checkpoint in a region along the border with Russia, 11 Ukrainian troops were killed, according to the Associated Press. Pro-Russian separatists claimed responsibility for that attack.

STEVE INSKEEP, HOST:

This violence comes as Ukraine prepares to hold a presidential election on Sunday. The leading candidate is a billionaire business tycoon, the kind of person who's described in that part of the world as an oligarch. This may be no surprise because wealthy oligarchs have long wielded power over Ukraine's politics. The interim government in Kiev and its Western allies wish the oligarchs were not quite so powerful, but just now they're helpful. NPR's Soraya Sarhaddi Nelson reports.

SORAYA SARHADDI NELSON, BYLINE: Filmmaker Frank Capra was a master at showing what can happen when you mix money with backroom politics. Take the 1939 classic, "Mr. Smith Goes To Washington," in which business tycoon James Taylor chastises the governor of a state for not towing the line.

(SOUNDBITE OF FILM, "MR. SMITH GOES TO WASHINGTON")

EDWARD ARNOLD: (as Jim Taylor) Your political future? When I bought it for you, I gave it to you as a present and I can grab it back so fast it'll make your head swim.

NELSON: The fictional account bears a striking resemblance to how things have worked in Ukraine since the fall of the Soviet Union. At the time, Ukraine's leaders were unprepared for converting the country's vast assets to a free market and the economy soon went into a tailspin, says George Logush, who heads the Kyiv School of Economics.

GEORGE LOGUSH, KYIV SCHOOL OF ECONOMICS: At that point the oligarchs stepped in. They weren't oligarchs then. They were simply inventive, creative, relatively young people who thought, well, we could just buy up shares, then we could begin to run these companies. And it worked.

NELSON: Logush says then President Leonid Kuchma encouraged this to preserve Ukraine's heavy industry. But some of the companies were heavily dependent on government subsidies. Their owners became involved in Ukrainian politics or paid bribes to protect and grow their assets. Many analysts here say the relationship crippled small and medium-sized businesses that are vital to a healthy economy.

Then in February a popular uprising forced out Ukraine's latest pro-oligarchy president. Now the goal is to open the economy shackled to the demands of the oligarchs and join the freer markets of the West. Tomas Fiala is the Czech founder of Dragon Capital, a top investment firm in Ukraine. He says the new Kiev government offers the best chance yet to repair Ukraine's lopsided economy, but only if officials end their dependence on oligarchs.

TOMAS FIALA: This connection needs to be broken. The politicians have to work for the good of the country and not for the good of their sponsor who wants to get the quick payback on his investment into a particular party.

NELSON: Pavlo Sheremeta, who is the Western-educated interim minister for economic development and trade, agrees.

PAVLO SHEREMETA: I always supported the notion that business should be separated from the government as much as it is possible, especially as much as European Union demands it, if we want to be part of the European Union, and we do want to be part of the European Union. However, we're still in a very, very dangerous position at the moment. We just need any help and any - all the friends that we need. So unfortunately the territorial integrity of the country becomes the number one priority.

NELSON: Sheremeta says Ukrainian officials have good reason to worry, given Russia's annexation in March of Crimea and growing violence since then among pro-Russian separatists in Ukraine's east and south. So they've turned to powerful oligarchs with roots in those trouble spots for help, even though Ukrainian critics warn such alliances will once again make the government beholden to these wealthy power brokers.

Minister Sheremeta says the benefits outweigh the risk.

SHEREMETA: Well, I can tell you quite for sure that they are not asking anything from me. What do they ask from other people, I just don't know.

NELSON: Some Ukrainians accuse a few of the oligarchs of secretly backing the uprisings. One is the country's richest man, Rinat Akhmetov, who has business interests in turmoil-ridden Donetsk. He also has close ties to ousted president Viktor Yanukovych, who hails from that eastern province. Vandals recently painted on a tarp draped over a building he owns in downtown Kiev and wrote, Rinat, did you betray or sell Donbas?

They were referring to the eastern region where separatists have illegally declared independence. The graffiti was quickly covered with a giant Ukrainian flag, but the oligarch scored points with officials in Kiev last week went he sent his steel workers to help authorities regain control of government buildings seized by pro-Russian separatists in the southern port city of Mariupol.

On Tuesday he made a televised appeal to Donetsk residents to hold daily protests against the separatists. Fellow Ukrainian billionaire Serhi Tihipko says he agreed to Kiev's request that he become the governor of Donetsk because he cares about his country.

GOVERNOR SERHIY TARUTA: (Through interpreter) I believe now is the time when successful business managers with experience in resolving crisis situations are useful so my role here is quite important and has a major effect.

NELSON: Boris Filatov, a close friend and business partner of another oligarch says taking on a political role is also about protecting their assets. Filatov says the last thing they need is for more of Ukraine to be annexed by Russia or for pro-Russian enclaves to be carved out, as happened in neighboring Moldova.

DEPUTY GOVERNOR BORIS FILATOV: (Through interpreter) We understand that if we end up with something here like that, all of our businesses will be worth nothing. So to our critics, I say stop criticizing and start doing something.

NELSON: Filatov is the deputy governor to Igor Kolomoysky, who, in March, was appointed to the top post in Dnepropetrovsk. The blatant financial control the bearded billionaire wields over this south central province is something straight out of a Frank Capra movie. He owns the Dniproavia Avia Airlines, which is the carrier one takes to get from Kiev to his regional capital.

At the airport, the first bank arriving passengers see also belongs to Kolomoysky. Nearby, images of heavily armed and masked security men who work for the new governor are painted on the bank's vans to deter would-be robbers and Kolomoysky recently made a deal with the province's largest company to help it stay afloat during the current political turmoil.

Residents interviewed in this heavily Russian-speaking region say they love their new governor, who quashed an uprising of pro-Russian separatists shortly after he arrived. Some local officials say he did it by paying the protesters off, which his deputy vehemently denies. These days, hundreds of Ukrainian flags adorn balconies and cars in Dnepropetrovsk, including that of Ievgen Perevesev, a T-shirt vendor here.

IEVGEN PEREVESEV: Even people doesn't like oligarchs here, but in this situation, Kolomoysky looks like the real patriot and now in our city and in our region, it's very comfortable situation.

NELSON: In the main regional headquarters building, Deputy Governor Filatov says they've been able to keep the peace in the province by addressing the complaints of disgruntled groups, ranging from Communists to neo-Nazis. But the stocky motorcycle enthusiast who comes to work in jeans and a T-shirt and regularly lights up in his non-smoking office says his new job is taking its toll.

FILATOV: (Speaking foreign language)

NELSON: He says with a laugh, we could have a big stake in Ukraine's political future if we wanted it, but frankly I'm so tired, all I want is to return to my business enterprises and earn money. Soraya Sarhaddi Nelson, NPR News.

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