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By John Helmer, Moscow

Victor Pinchuk is either the greatest of patriots among the oligarchs of eastern Ukraine for having promoted an alliance with the European Union and the US presidential campaign of Hillary Clinton. Or else he’s made a colossal miscalculation, sacrificing his Interpipe steel combine for no market benefit, not even relief for debts of more than $1.3 billion.

He’s not the only eastern Ukrainian oligarch to suffer from the transition government’s agreements with Brussels and Washington last month. The European Union’s Ukrainian trade assistance programme, released on March 11, refused to extend benefits to the major mining and metals businesses to the east of Kiev; for the details, click here. Likewise, the programme of the International Monetary Fund (IMF) which followed on March 27, has introduced devaluation of the hryvnia, gas and electricity price increases to “full cost recovery”, a hike in state rail tariffs, and a stop to rigged state procurement for steel products: these measures all inflate the cost line of the oligarch balance-sheets at the same time as closure of the Russian market and lack of alternative markets have already depressed their revenue line.

Hryvnia earnings will fail to grow as fast as revalued dollar and Euro-denominated debts, so covenant and loan defaults will multiply, say analysts at European banks with exposure to the Ukrainian oligarchs’ debts. Audits promised by the IMF of the oligarch-owned banks – Bank Credit Dnepr (Pinchuk), PrivatBank (Igor Kolomoisky), First Ukrainian International Bank (Rinat Akhmetov) – are expected to put additional pressure on their owners to stump up the cash to recapitalize them.

The capacity of this trio, and other eastern Ukrainian oligarchs, to keep their businesses solvent is now held hostage by the terms of the Geneva agreement of April 17. If neither Pravy Sektor nor the pro-Russian groups agree to lay down their arms, halt drive-by and sniper killings, and restore municipal and regional authority; if no presidential election can be conducted in a month’s time for the voters of the region – if at last Russian forces are deployed to re-establish law and order because the Kiev regime cannot, then Pinchuk, Kolomoisky, Akhmetov and the others are likely, according to Ukrainian sources, to lose the power to keep their assets and incomes.

akhmetov“The eastern oligarchs,” says a US source close to their businesses, “can’t gain influence with Kiev and the US Government unless they crack down on the locals. If they do, they will be Russian targets. They can’t advance. They can’t retreat. They can only disappear from the reckoning that’s coming. It’s already happened to Pinchuk. It’s going to happen to Akhmetov [right], then Kolomoisky.”

This too is the private assessment of European bankers to whom they owe money. According to a Luxembourg source, “most likely there are no hedges to manage currency risk, so when the US dollar debt is translated into hryvnia, debt will jump, causing an extraordinary loss for the P&L [profit and loss line]. The big question is whether external auditors will permit revaluation of the assets, thus compensating for the jump in debt.”

The writing is also on the Kremlin wall, as President Vladimir Putin made obvious in his April 17 television presentation. The warning he mentioned twice. “Instead of starting a dialogue with these people, Kiev appointed new governors – oligarchs and billionaires – to these regions. People are suspicious of oligarchs as it is. They believe that they earned their riches by exploiting people and embezzling public property, and these oligarchs have been appointed to head their regions. This only added to the public discontent. People chose their own leaders, but what did the new government do to them? They were thrown into prison….”

kolomoiskyKolomoisky (right), the acting governor of Dniepropetrovsk region appointed by Kiev on March 2, has claimed he is paying out of his own pocket to put fuel in Ukrainian armoured vehicles advancing on Slavyansk, Kramatorsk, and other towns. He has also advertised cash bounties for the capture or killing of pro-Russian targets in Dniepropetrovsk. He attacked Putin verbally in his first press conference as governor. Putin retaliated against the Russian operations of PrivatBank.

Pinchuk took cover. The Ukrainian press has reported that Pinchuk was offered the post of governor of the Zaporozhia region, bordering Dniepropetrovsk to the south, Donetsk to the west. He reportedly refused: “becoming governor in a region which I have no knowledge of and where people don’t know me would not be useful I believe.” According to Pinchuk’s philanthropic foundation, he ought to have been well-known in Zaporozhia, at least among expectant mothers, because he has donated funds to equip a maternity hospital.

According to a spokesman for Pinchuk, Financial Times reporter Roman Olearchyk, Akhmetov is “double-dealing”. “People close to [Akhmetov] claim any crackdown on separatism is the government’s responsibility. They add that many people imagine Mr Akhmetov wields more influence than he really does.” Pinchuk, according to another Financial Times reporter, “has had a good revolution… The unrest has given the oligarchs a further opportunity to shake off once-shady reputations and present themselves as concerned business leaders and reputable partners for investors from European and US markets. The most vocal voice coming from the oligarchs throughout the protests, in condemning the authorities’ brutality, was that of metals magnate Pinchuk.”

ua_mapPinchuk’s Interpipe is based at Dniepropetrovsk. Between October and December of 2013, the enterprise defaulted on its international loans, as well as its Eurobond agreements. Since March of 2013, Pinchuk has been suing Kolomoisky and Gennady Bogolyubov in the UK High Court for an iron-ore mine at Krivoi Rog, near Dnieptropetrovsk; the mine is now owned by Akhmetov. That case can be followed here.

London sources say they are expecting Kolomoisky to ask the court to order Pinchuk to deposit funds in court custody as security for costs, in case he loses. A challenge to Pinchuk’s recent appointment of the law firm Hogan Lovells is also expected by the sources on grounds similar to those which led to a court ruling on January 31, obliging Pinchuk’s lawyers, White & Case, to resign for conflict of interest. If the court rules against Pinchuk again, the combination represents a likely cost to Pinchuk of more than £40 million, and may oblige him to withdraw for lack of the means to continue litigating.

Pinchuk’s investment in politically influential friendships – Bill and Hillary Clinton in New York and Washington, Tony Blair in London, and ex-president Alexander Kwasniewski in Warsaw – has attracted negative media publicity in those cities. Hillary Clinton is vulnerable to unanswered questions about the money she, her husband and daughter Chelsea have taken from Pinchuk. The upshot is that in the present situation in Kiev, these Pinchuk friends have been reluctant to make public endorsements for him.

The problem for the Clintons, as well as for Blair, is that once the government of President Victor Yanukovich was ousted on the night of February 21, replaced by US and UK-endorsed political figures, Pinchuk’s usefulness as a promoter of the new premier, Arseny Yatseniuk, was at an end. On the other hand, Pinchuk’s ties to former President Leonid Kuchma, his father-in-law, have become an even greater embarrassment and risk for the Clinton campaign for president.


In Poland, according to a Warsaw source and to published reports, without financing from Pinchuk, Amicus Europae ( “Friend of Europe” in low Church Latin), the foundation Kwasniewski set up after he left office would not have been able operate. This Polish television report claims that in 2006 892,822 zlotys (about $300,000) was donated by Pinchuk to Kwasniewski to promote the Ukraine’s attachment to the EU. This is confirmed by a financial report of the Pinchuk Foundation for 2006. In 2007, according to the Pinchuk Foundation, it donated another $400,000. In 2008 the sum was $300,000. One million dollars, altogether.

Since then Amicus Europae has disappeared from Pinchuk’s donation lists, but not Kwasniewski. Since 2010 he has been the chairman of the board for Pinchuk’s Yalta European Strategy (YES). In that role, according to the YES website, Kwasniewski has been voted “Top Lobbyist for Ukraine in the World.”

Kwasniewski (centre) was also responsible for lobbying Pinchuk (right) to the current Polish Prime Minister Donald Tusk (left).


On a visit to Kiev on March 27 sponsored by YES, Kwasniewski said: “we met with leaders of the government; parliament and political camps to explore how YES can best support Ukraine in these extraordinary times.” If Kwasniewski was lobbying for Pinchuk’s interests, a noticeable outcome has yet to materialize.

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