Oligarch Who Bankrolled Ukraine’s New President Calls for Kiev to Default on IMF Debt

Ukraine’s new president Volodymyr Zelensky should follow Greece and reject the International Monetary Fund’s austerity programme or default on its external debt, according to his contentious oligarch supporter.

Igor Kolomoisky’s comments in an interview with the Financial Times will ring alarm bells with Kiev’s western backers even though Mr Zelensky has said he would stick to the terms of Ukraine’s $3.9bn bailout.

Concern among Ukrainians and western officials about Mr Kolomoisky’s influence over the novice president was heightened after the billionaire returned to Kiev this month after two years of self-imposed exile and his former personal lawyer was appointed Mr Zelensky’s chief of staff.

“In my opinion, we should treat our creditors the way Greece does,” Mr Kolomoisky said. “That’s an example for Ukraine.” In its stand-off with creditors in 2015, Athens became the first developed country to fail to repay an IMF loan, albeit temporarily.

Ukraine needs IMF loans, which come under a standby arrangement, to service its external debt that amounts to about 60 per cent of gross domestic product. With payments set to peak this and next year, Mr Kolomoisky also suggested Ukraine had nothing to fear if it defaulted.

“How many times has Argentina defaulted? [ . . .] So what, they restructured it. It’s fine.”

Mr Zelensky — a comedian who rose to fame on Mr Kolomoisky’s television channel playing a fictional president — won the presidency in a landslide last month despite his lack of political experience, shaky grasp of policy and widespread suspicions about his ties to the oligarch.

Dressed in a T-shirt and blazer and talking in street slang, Mr Kolomoisky, 57, is a throwback to the early days of the oligarch caste that has called the shots in Ukraine for two decades. He made his start in business by enlarging photographs on collective farms during perestroika, then made his first million trading goods in the 1990s before acquiring billions in assets through rough-and-tumble takeovers.

He said he had not seen Mr Zelensky for more than a year but had offered the comedian advice over the phone based on his own experience as governor of his home province of Dnipropetrovsk, where he led resistance to a Russian-backed uprising in 2014.

Mr Kolomoisky admitted that visitors had congratulated him on Mr Zelensky’s victory but he denied funding the candidate’s campaign. He said his assets were frozen and that his TV channel still owed the comedian’s production company $8m.

“He’s not my business partner and he’s not my former employee,” Mr Kolomoisky insisted. “He runs and owns shares in a company that has a long-term contract with my company.”

Mr Kolomoisky is trying to overturn a decision in 2016 to nationalise his bank, PrivatBank, after officials found a $5.5bn hole in its balance sheet. The IMF has warned that reversing the nationalisation would jeopardise Ukraine’s rescue programme agreed by Mr Zelensky’s predecessor Petro Poroshenko.

The oligarch said Mr Zelensky’s election victory showed Ukrainians wanted a break from the IMF-mandated austerity reforms and rampant corruption, which voters cited as their top reasons to vote for the comedian.

“If Zelensky listens to [the west] and doesn’t make his own appointments he’ll end up like Poroshenko. He’ll have the same poll numbers — 5, 10, or 15 instead of 73 per cent,” he said. “Ukrainians don’t care about Kolomoisky . . . Nobody’s interested in the west’s red line.”

Mr Kolomoisky said the US and EU should write off Ukraine’s external debt entirely as payment for the country’s suffering during its struggle with Russia.

“This is your game, your geopolitics,” he said. “You don’t care about Ukraine. You want to hurt Russia, and Ukraine is just an excuse.”

How Mr Zelensky handles the PrivatBank case is regarded as a crucial early test of his independence from his billionaire ally.

Mr Kolomoisky said the nationalisation of the bank sparked more than 500 different court cases around the world, about 100 of which he filed himself. He spent two years living in Switzerland and Israel as the legal battle spread overseas to London, where the oligarch and his partner Gennady Bogoliubov are subject to a high court order freezing assets worth $2.5bn, and to arbitration in Stockholm.

The two former owners also face a lawsuit from PrivatBank’s new management, filed in Delaware last week, for allegedly using the bank “as their own personal piggy bank” to launder funds into the US.

Mr Bogoliubov and Mr Kolomoisky deny the allegations of fraud, with the latter saying f the case was politically motivated. He notched up a victory last month when, just days before Mr Zelensky’s election win, a Ukrainian court ruled the nationalisation was illegal. Ukraine’s central bank is appealing against the verdict and says it will renationalise PrivatBank if Mr Kolomoisky is awarded control.

Mr Kolomoisky said he now wanted a definitive court ruling that the nationalisation was illegal, as well as compensation for $2bn in funds he claims Ukraine appropriated from him.

“I want the courts to issue a verdict: was it fair and just or not. Then, so that your financial community doesn’t worry there’ll be a financial catastrophe or default, I’m only interested in compensation. I don’t need the bank,” he said.

Concerns that Mr Zelensky might lean in favour of his supporter in the case were amplified this week when he named Andriy Bogdan, Mr Kolomoisky’s personal lawyer, as head of his presidential administration. Mr Bogdan, also an experienced political adviser, was one of several members of the oligarch’s entourage with links to Mr Zelensky’s campaign.

“He’s a highly professional lawyer, he’s got his legal spurs.” Mr Kolomoisky said. “He was an official, he knows how paper flows work, what you can and can’t sign. That’s important so that you don’t get hazed on day one and make yourself a target for all the mud throwers,” he said.

Mr Kolomoisky said he would always be associated with the president, whose success or failure would inevitably colour perceptions of him.

“If Zelensky’s plans work out, I’ll be a sympathetic character. Even if I don’t have anything to do with it. If Zelensky can’t do it [ . . .] Kolomoisky will be the devil incarnate. Even if I don’t lift a finger.”

Source: Financial Times