Plenty of symbolism can be found in smoke, fire and ash. The charred remains of a family home just outside Kyiv could contain a powerful warning to Ukrainian society, especially its reformers, some of whom fear they could be under renewed threat of harassment or politically-motivated violence.

“The house is completely burned out… I no longer have the strength to deal with all this,” Valeria Gontareva, former governor of the National Bank of Ukraine and owner of the home, told the Kyiv Post in a panicked 5 a. m. text message on Sept. 17. A visit to the house in the village of Gorenychi, 20 kilometers west of the Ukrainian capital, some hours later that day confirmed that only smoking ruins remained of Gontareva’s former home.

She said the arson attack was just the latest link in a chain of hostile acts against her, designed to terrorize and intimidate Ukrainian reformers. Many see the attack as a symptom of oligarchs flexing their muscles and showing that they have nothing to fear from President Volodymyr Zelensky.

Recent weeks have seen mounting suspicion about Zelensky’s rapprochement with multiple oligarchs. But the spotlight is on Ihor Kolomoisky, former co-owner of PrivatBank, who allegedly brought Ukraine’s largest lender to the brink of ruin with fraudulent insider lending. Under Gontareva, the state stepped in and nationalized the bank, bailing it out with $5.5 billion. Kolomoisky, who has fought to reclaim the bank ever since, is a former business partner of Zelensky and staunchly supported his bid for presidency. Zelensky consistently denied being in the oligarch’s pocket.

Yet on the same day as the arson attack, Prime Minister Oleksiy Honcharuk was quoted as saying that he would support a compromise with Kolomoisky over PrivatBank, a mere week after the oligarch met with him and Zelensky. Honcharuk quickly disavowed the quote.

All these events stoked fears about the future of PrivatBank, as well as the fate of Ukraine’s reforms and its entire economy.

Oligarch shadows

Forensic investigators, part of a police task force from Kyiv, were combing Gontareva’s incinerated home for clues when the Kyiv Post arrived. Security guards at the burned house said that CCTV showed at least one masked arsonist throwing an accelerant into the property, before igniting it with a flare or a homemade incendiary device.

Zelensky condemned the arson attack through his spokesperson and said the case should be solved, instructing the controversial Security Service of Ukraine, or SBU, to assist police. But Zelensky’s own ties to Kolomoisky, are ringing alarm bells among civil society, diplomats, investors and opposition lawmakers.

Kolomoisky has denied wrongdoing and not replied to multiple requests for comment from the Kyiv Post. In other interviews since the attack, Kolomoisky advanced a theory that Gontareva burned down the property herself to benefit a hypothetical asylum plea to the U.K., where she now lives, fearful of returning to Ukraine.

For the Zelensky administration, the ruins of Gontareva’s home could represent the biggest challenge so far for the new presidency.

Voters who brought Zelensky to power in a May landslide were encouraged by reformist rhetoric, promises of impartial justice and a libertarian agenda. As of last week, the president enjoyed a 71 percent approval rating, according to a Rating Group poll. However, there are fears that under his presidency Ukraine could face the prospect of a resurgent oligarchy, reprisals and politically motivated violence.

Despite having promised that Ukraine would become a country of law, Zelensky faces growing impatience and criticism for not confronting elites and oligarchs accused of crime and wrongdoing. Ex-President Leonid Kuchma, his son-in-law and billionaire oligarch Victor Pinchuk, the oligarchs Rinat Akhmetov and Dmytro Firtash, Interior Minister Arsen Avakov, Kharkiv Mayor Gennady Kernes, and Odesa Mayor Gennady Trukhanov have all entered the presidential orbit without consequence.

On Sept. 4, Radio Free Europe/Radio Liberty journalists filmed multiple officials and known oligarchs gathering for the birthday party of opposition lawmaker Hryhoriy Surkis. The guests included current SBU chief Ivan Bakanov and Zelensky adviser Serhii Shefir, along with several actors from Zelensky’s Kvartal 95. Also in attendance were Kolomoisky, pro-Russian member of parliament Viktor Medvedchuk, the wife of Dmytro Firtash and three former Ukrainian presidents.

“Zelensky is hanging out with the wrong people — sending the wrong messages,” writes Timothy Ash, a London-based economist and Ukraine analyst. “They are taking Ukraine back 20 years… Reformers living in fear. The decisions made now will shape the rest of the Zelensky presidency.”

Since before he was elected, Zelensky was hounded by accusations that he is under the influence of Kolomoisky. The accusations are backed by evidence. Andriy Bohdan, a former Kolomoisky lawyer, is his chief of staff. Three journalists who formerly worked for media owned by Kolomoisky are members of parliament, including Oleksandr Dubinsky, who now leads the commission that oversees board appointments at state-owned banks, such as PrivatBank.

Dubinsky conducted a social media campaign against Gontareva accusing her of attacking weakened banks to redistribute their assets. Reuters reported that he also got people to send thousands of negative emails about her to the London School of Economics, where she is a policy fellow.

PrivatBank compromise

Public suspicion about Kolomoisky’s influence on the government increased after a Financial Times’ article quoting Honcharuk as saying that he would support “any rhetoric” leading to a “compromise” with Kolomoisky over PrivatBank.

Honcharuk — who also faces scrutiny for allegedly being picked as prime minister by Andriy Bohdan — later said that his words were taken out of context.

“The Gov is not conducting any negotiations with anyone. We are carefully studying the Privatbank case (incl. negotiations with the bank’s former owners that were held by previous independent supervisory board),” he tweeted the same day.

However, Reuters later quoted Kolomoisky as saying that he believes the government wants a compromise. The billionaire labeled 35-year-old Honcharuk the first smart recent prime minister who “understands there must be a compromise.” Otherwise, Kolomoisky told Reuters, he “won’t leave them alone.”

The development raised eyebrows. Business associations and investment experts warned that if such a deal were made, Ukraine would lose any progress it has achieved toward economic improvement and reform. The American Chamber of Commerce and European Business Association wrote that a possible compromise with Kolomoisky on PrivatBank and the arson attack are “sending the wrong message to the investment community.”

The business community and financial experts broadly agreed that the International Monetary Fund and other Western creditors would not accept any deal with Kolomoisky over the fate of PrivatBank.

“The IMF and other partners of Ukraine are unlikely to tolerate other “compromises,” in our view,” wrote Concorde Capital economist Alexander Paraschiy.

“We expect the Ukrainian authorities to do the right thing, which is to go after the money which seems to have been stolen from the bank,” European Bank for Reconstruction and Development Vice President Alain Pilloux told reporters in Kyiv.

The IMF is currently in negotiations with Ukraine, and NBU deputy governor Kateryna Rozhkova has said that she expects a new program with the IMF to be signed before the end of the year.

The recent events have come with spectacularly bad timing. Having the IMF pull back would deprive Ukraine of billions in loans and deal a severe blow to both the economy and investor confidence.

Vitaliy Tytych, a member of judicial watchdog Public Integrity Council, said that in another country, a statement like Honcharuk’s would cause a stock market plummet and trigger financial investigations.

Experts speculating on the reason behind Honcharuk’s statement suggested that Zelensky’s own team does not yet have a clear and firm position on PrivatBank, while other observers have pointed a finger at Kolomoisky.

Legal battles

Kolomoisky and the NBU are locked in legal battle. Kolomoisky has filed hundreds of lawsuits related to PrivatBank, seeking to reclaim either the bank or its assets.

The nationalized bank is also suing Kolomoisky in London and Delaware, alleging that he and his business partner siphoned out billions through a Ponzi-like scheme and laundered the money in international companies. This alleged practice is what led to the bank requiring the $5.6 billion state bailout, which PrivatBank hopes to make Kolomoisky pay.

The billionaire’s business dealings appeared in the crosshairs of the U. S. Federal Bureau of Investigations, according to an April report by The Daily Beast.

Later in April, the NBU suffered a setback when the Kyiv District Administrative court ruled that the nationalization was illegal. Another blow came in May, when the Sixth Appellate Administrative Court of Kyiv rejected the NBU’s appeal. The NBU has vowed to apppeal in cassation.

Experts said that Kolomoisky is confident about winning court cases at home and that any victories in Ukrainian courts will give Kolomoisky’s lawyers a tool to use in the international cases.

The charred remains of the house of the former governor of the National Bank of Ukraine, Valeria Gontareva, are pictured on Sept. 17, 2019 in the village of Gorenychi, Kyiv Oblast. The arson attack on Gontareva’s house followed a previous incident in Kyiv in which her son’s car was set ablaze. (Volodymyr Petrov)

Harassment, reprisals

Gontareva sees the shadows of Kolomoisky and his supporters lurking in the smoke of her smoldering home.

She alleges that anti-reformist forces are waging a hybrid campaign of reprisals against her because of reforms she enacted at the NBU, including the 2016 nationalization of PrivatBank.

The nationalized bank’s bottom line has improved since that low point. PrivatBank reported a net profit of $1 billion for the first eight months of 2019, a threefold increase compared to the same period in 2018, according to board chairman Petr Krumphanzl.

And yet, Gontareva’s decision may be the reason behind the second arson attack against her family this month. Her son’s family car was torched in Kyiv on Sept. 5, while Gontareva was also hospitalized after being struck by a car in London on Aug. 25 and has suffered multiple injuries that will require surgeries before she can walk again.

Her unoccupied Kyiv apartment was also raided on Sept.12 by masked men armed with assault rifles, reportedly law enforcement. Around the same time, PrivatBank and the NBU have come under renewed political and judicial pressure that they say unfairly targets them. Experts warn that some of the country’s most important economic reforms, which Gontareva was instrumental in implementing, are threatened.

“This is no longer a series of incidents,” warned the NBU in a Sept. 17 statement. “It is TERROR. Its purpose is to intimidate reformers, past and present, to paralyze our activities, to make us silent.. It is a direct and undisguised threat to democracy and the reforms that depend on Ukraine’s future and the well-being of its citizens.”

On Sept. 18, Kolomoisky added insult to injury by announcing that he was also preparing to file libel lawsuits against Gontareva in Kyiv and London. She is already the focus of a criminal case into alleged abuse of power at the NBU. Gontareva says the lawsuit is another component of the politically-motivated campaign against her.

Western delegations and business representatives in Ukraine have had a vocal and negative reaction to recent events. The U. S. embassy and the EU delegation urged a thorough investigation of the arson and to bring to justice those who carried out the attack and those who ordered it.

Later on Sept. 18, U. S. Congresswoman Marcia Kaptur told reporters in Washington that Gontareva had been invited to the United States to address lawmakers in Congress: “We are watching these events very closely. We simply cannot accept that fear and crime, murder and destruction are the way to the future,” said Kaptur, as reported by Radio Svoboda.

Gontareva says she would accept the invitation to speak before U.S. lawmakers in Congress, but cannot travel at the moment because of her health condition — she is awaiting two serious operations.

In London, there are also growing concerns: “The attacks on Valeria Gontareva and her family are deeply disturbing,” said John Whittingdale, a U.K. member of parliament who chairs the parliamentary committee on Ukraine in Westminster. “It would be a tragedy if she, and others trying to bring about reform, are unable to carry on their work because they no longer feel safe in Ukraine.”

Former political allies have also rallied to the former NBU governor: “Any delay in investigating this terror campaign against Gontareva will have destructive consequences for the reputation of Ukraine…and its attractiveness to investors,” warned former President Petro Poroshenko, in a written statement sent to the Kyiv Post that also praised Gontareva for her work in reforming the Ukrainian banking sector.

Many enemies

There is no evidence that Kolomoisky was involved in the attacks against Gontareva. However, commentators said that threats and intimidation are certainly his style.

“Lawyers told me that Kolomoisky, until recently, had this peculiarity, where if he loses a court case, he personally calls up the presiding judge and begin cursing him out and threatening him,” said Ruslan Cherniy, the chief editor of Financial Club. “For Kolomoisky, threats are the usual practice.”

Political analyst Volodymyr Fesenko agreed and added that the oligarch likes to harass and pressure, often indirectly. For example, Dubinsky’s alleged campaign of trolling and harassment against Gontareva may have been on Kolomoisky’s behalf.

“I think that this is revenge,” said Fesenko.

However, Gontareva has made plenty of enemies. She presided over the shutdown of more than 80 banks that were deemed insolvent. Many of them were alleged to be money laundering pocket banks for their beneficiaries, who lost their fortunes when their institutions were closed.

“At least 10 businessmen have it out for her and would spend millions just to cause problems for her,” said Cherniy.

Whoever damaged Gontareva’s properties could have a shady motive and assume that suspicion would fall on Kolomoisky: “Do we overlook the fact that there is a war going on and there are external and internal forces interested in creating confusion, distrust, and disunity?” wrote the British-Ukrainian journalist and historian, Bohdan Nahaylo.

“Apart from factoring in the possible role of the Kremlin, the focus needs to be broadened to include the entire range of oligarchs and not simply keep the spotlight on Kolomoisky,” adds Nahaylo. “What have Akhmetov, Firtash, Poroshenko, Pinchuk, and others been up to while all the bad press has been largely reserved for Kolomoisky?”

Still, Gontareva has accused the oligarch of threatening her by saying he would bring her back in his private jet. Kolomoisky denied that this was a threat. When pressed, he quipped, “I said I would send a plane, not a car,” possibly referring to the car that struck her in London.

Analysts and observers also suggest that Kolomoisky may want to send the public a message, demonstrating that he is back, and he is still relevant and powerful: “The arson of the home of… Gontareva, as well as the other troubles that have fallen on her and her family in recent months, is simply an educational process,” writes the Ukrainain journalist and commentator Vitaly Portnikov.

“After only five years of relative freedom, the oligarchic clans are returning Ukrainian society back to its usual state of oligarchic slavery,” he added.

Oleksandr Dubinsky, a former employee of Ihor Kolomoisky’s TV channel, is now a member of parliament and leads a commission overseeing supervisory board appointments at state-owned banks like PrivatBank, which Kolomoisky is trying to recover. (Oleg Petrasiuk)

Future of reforms

With reprisals against Gontareva, the NBU warning of a terror campaign against reformers, plus PrivatBank claiming that it is being unfairly targeted and harassed by the judiciary, some lawmakers and experts say Zelensky must move decisively to prevent reforms from backsliding.

“It is inevitable that reform will require those with vested interests to be confronted and that they will resist,” said U.K. lawmaker Whittingdale. “That is when it is most important to take them on and press ahead. Zelensky has made a good start and the removal of parliamentary immunity was an essential first step. The test now will be his willingness to push through further reform, despite the opposition.”

Ivanna Klympush-Tsintsadze, Ukrainian vice prime minister between 2016 and August 2019, told the Kyiv Post that the attacks against Gontareva were designed to intimidate all reformers, including herself.

She noted that while the new parliamentary convocation appears to be made up mostly of reform-minded lawmakers, she is concerned about the way Zelensky appears to be consolidating power and is possibly influenced by oligarchs like Kolomoisky.

And all lawmakers, observers and experts who spoke with the Kyiv Post believe that any compromise or deal with Kolomoisky over the fate of PrivatBank is untenable.

“Ukrainian people paid approximately 150 billion hryvnia ($6 billion) from their pockets in order to save PrivatBank from bankruptcy,” said Svitlana Zalishchuk, a former lawmaker who is widely seen as a top reformer.

“There can be no compromises with oligarch Kolomoisky with regards to this issue. It is in Zelensky’s personal interest to find the people who are behind it (the Gontareva attacks) and to prosecute them. Otherwise his international reputation may suffer… It’s one of the biggest tests for the new president to show the oligarchs — all of them, including Kolomoisky — that there will be no president’s favorites. If Zelensky does this, he will start a new period in Ukrainian history.”

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