US sanctions Ukrainian oligarch Kolomoisky over corruption

The US has imposed sanctions on Ukrainian oligarch Igor Kolomoisky over corruption allegations in a bid to help Ukraine’s president Volodymyr Zelensky root out the influence of powerful business clans in the war-stricken country.

Secretary of state Antony Blinken said on Friday that the US had placed visa bans on Kolomoisky, his wife Irina, and two of his children owing to the oligarch’s “involvement in significant corruption” while governor of eastern Ukraine’s Dnepr region from 2014 to 2015.

During those years — the height of Ukraine’s war against Russian-led separatists in its east — Kolomoisky “was involved in corrupt acts that undermined the rule of law and the Ukrainian public’s faith in their government’s democratic institutions and public processes”, Blinken said in a statement. The businessman notably used “his political influence and official power for his personal benefit,” Blinken added.

The US is also concerned about Kolomoisky’s alleged “current and ongoing efforts to undermine Ukraine’s democratic processes and institutions, which pose a serious threat to its future,” Blinken said.

Ukraine’s western backers have pushed Zelensky, a former comedian who rose to fame on Kolomoisky’s TV channels, to prosecute the oligarch over his involvement in the collapse of PrivatBank, Ukraine’s largest lender, in one of Europe’s largest ever banking frauds.

PrivatBank, formerly co-owned by Kolomoisky and his partner Gennady Bogoliubov, was nationalised in 2016 after regulators found a $5.5bn hole in its balance sheet. The FBI is investigating Kolomoisky for allegedly embezzling some of the funds siphoned from PrivatBank through commercial and industrial property in Ohio, Kentucky, and Texas.

Kolomoisky, who has denied all wrongdoing, did not immediately respond to a request for comment.

Kolomoisky has managed to play the political, economic, media and legal system to such great effect for three decades

“This exerts huge pressure on Zelensky on what to do next,” said Oleksandr Danilyuk, Zelensky’s former national security chief, who led the charge in nationalising PrivatBank under Ukraine’s previous government in 2016. “The message is for Zelenskiy to recuperate the $5.5 billion” that was lost to taxpayers in the bank’s collapse.

Confronting Kolomoisky is a tall order for the Ukraine president: the oligarch owns the TV channel where Zelensky made his name playing a fictional president and was a key backer of his rise to power in 2019. Dozens of MPs nominally attached to Zelensky’s party are loyal to Kolomoisky, while the president’s former top aide Andriy Bogdan previously represented the oligarch in legal cases stemming from PrivatBank’s collapse.

“Kolomoisky is I think the most powerful oligarch in Ukraine — he has managed to play the political, economic, media and legal system to such great effect for three decades,” Timothy Ash, senior emerging markets strategist at Bluebay Asset Management, wrote in a note. “Zelensky [ . . .] struggled to take him on until quite recently as he was unsure about his support at home and abroad. The US backing for Zelensky in this battle is now clear with the US actions.”

Last month, Ukraine’s anti-corruption bureau charged three former senior executives at PrivatBank, including its longtime chief executive, with embezzlement in the first criminal proceedings since its nationalisation.

Ukraine also shut down three television channels tied to pro-Moscow politician Viktor Medvedchuk, who leads Ukraine’s largest opposition party, in February, before seizing other assets and an oil pipeline linked to Medvedchuk.

The moves indicated Zelensky’s eagerness to win the favour of the Biden administration in the US, which has urged Ukraine to crack down on the powerful forces that have long controlled the country behind the scenes.

Though Zelensky won office in a landslide on a vow to “break the system,” he was unable to secure crucial multibillion-dollar support from the IMF, US, and EU after Kolomoisky’s MPs and Medvedchuk’s party blocked anti-corruption and economic reforms.

“Kolomoisky thinks he has full impunity — he’s a typical oligarch who controls media assets, buys and controls politicians, and holds huge sway in the courts and law enforcement,” Danilyuk said.