Reanimation package of reforms > News > Analytics > To Europe without the oligarchs: what does the de-oligarchization reform entail and how could it benefit Ukraine

To Europe without the oligarchs: what does the de-oligarchization reform entail and how could it benefit Ukraine

How does the de-oligarchization reform proceed in Ukraine, and does the adopted anti-oligarchic legislation bring us closer to meeting the EU requirements?

Ukraine is approaching the date of negotiations on the start of accession to the EU in the spring of 2023. To launchthis process, Ukraine must fulfill the seven recommendations of the European Commission, received due to obtaining the status of a candidate to the EU. One of them is de-oligarchization.

According to the plan, a successful fight against people who have a monopoly in several businesses and, at the same time, retain a decisive influence on Ukrainian politics will give an opportunity to provide real competition and help strengthen the country’s economic growth.

Moreover, de-oligarchization reform will make it possible to reduce corruption risks.

In such conditions, the primary beneficiary of de-oligarchization becomes the society itself and each Ukrainian because the chances for economic competition and growth increase, and there is less lobbying of the interests of large companies in politics. In practice, the success of this reform depends on the quality of the Law that forms its basis and sets the framework for the entire process of de-oligarchizaion.

In September 2021, the Parliament approved the Law “On Prevention of Threats to National Security Associated with the Excessive Influence of Persons Who Have Significant Economic and Political Weight in Public Life (Oligarchs),” better known as the Anti-Oligarch Law.

The document entered into force in May 2022, although the Government admits that it has not yet fully entered into force because this requires the conclusions of the Venice Commission regarding the extent to which the adopted document meets the requirements of the European Commission.

Without this conclusion, Ukraine will not complete its “homework” for joining the EU.

LIGA.net, in partnership with the Reanimation Package of Reforms Coalition, analyzed how exactly the Law should work and why its media component is no less important than others.

The framework of de-oligarchization

So, what does the Law which forms the basis of the process that should knock the levers of influence over the country’s politics and economy out of the hands of the oligarchs provide?

First, it defines who an oligarch is. This is a person who meets three of the following four characteristics:

So, according to these indicators, the list of oligarchs includes Rinat Akhmetov, Dmytro Firtash, Viktor Pinchuk, Vadym Novinskyi, Ihor Kolomoiskyi, Gennadiy Bogolyubov, Petro Poroshenko, Konstantin Zhevago, Yuriy Kosyuk, and the Gerega spouses. In July 2022, the National Security and Defence Council listed 86 Ukrainians who could be checked for compliance with the mentioned criteria.

Secondly, the Law stipulates that public figures, such as the President, the MPs, the leadership of the National Bank of Ukraine, the Central Election Commission, the National Security and Defence Council, heads of local state administrations, judges of the CCU, heads of law enforcement agencies, etc., must submit a special declaration after any contact with the oligarch (physical meeting, telephone conversation, online call).

Thirdly, a register of oligarchs should appear on the NSDC website, and oligarchs will also have to submit a declaration.

And finally, several prohibitions are imposed on oligarchs, in particular, a ban on supporting political parties with money or in any other way, buying objects of extensive privatization, financing political agitation, and political rallies.

According to the plan, the process of de-oligarchization will last ten years. However, the war is already making corrections, and there are questions about the Law itself.

Nuances of de-oligarchization

Opposing the oligarchic regime is complex and multi-level, says Ihor Burakovskyi, co-chairman of the RPR Coalition Board and chairman of the board of The Institute for Economic Research and Policy Consulting.

Combating the oligarchy, which has been one of the country’s most prominent political and economic problems for a while, must move in parallel with the education of the appropriate political culture. Laws should limit their influence, and education on political culture should prevent corruption risks. That is why the implementation should stretch over ten years.

“The oligarchs live in a regime called ‘state capture.’ They get rich thanks to the fact that they shape politics — particularly economics — and influence institutions,” says Burakovskiy.

We should remember that they are not a mafia in the usual sense, which the Italian or US authorities have been fighting for decades. Those whom we used to call oligarchs are prominent businessmen, employers, and taxpayers. Therefore, the task is to institutionalize the communication rules between them and the authorities.

According to Burakovskiy, the state should focus on making the Antimonopoly Committee work as a strong and politically independent body that should not only respond to violations but also be able to actively prevent excessive concentration of power in certain hands. Excessive concentration is then turned to political influence. This especially applies to the energy sector and large enterprises.

Another essential component is the transparency of the financing of political parties, not only during elections but also in general.

There are several problems in the implementation of the Law. And the first is that there is no register of the oligarchs. They exist in political life, but no one can officially include them in this list, and it follows that they are absent in the legal field. According to the acting head of the Security Service of Ukraine, Vasyl Malyuk, such a register already exists, but it’s still undergoing certification.

There are also questions about the norm for reporting contacts with oligarchs. “The Law stipulates that relations between oligarchs and civil servants must be regulated. The latter must report that they met with oligarch X, what was discussed with them, who called whom, etc. There is no regulatory act that would regulate this. And what will happen to the civil servant who lied about his relationship with the oligarch,” says Burakovskiy.

Another issue is the war, which de-oligarized the country to some extent.

In the summer, the country’s richest man, Rinat Akhmetov, lost 64% of his fortune. And not only him.

“The Law provides for four main criteria; if a person meets three criteria, he is already an oligarch. And now, whether the term “oligarch” can be applied to Akhmetov or Petro Poroshenko is a question. Because of the war, many assets have been lost, supply chains have been broken, businesses have closed. Partial de-oligarchization took place. So, the question of applying two of the four criteria arises ,” adds Burakovskiy.

Moreover, Poroshenko and Akhmetov have already disposed of their media assets, which is also one of the components that fall under the definition of an oligarch. In the summer, the Minister of Justice Denys Malyuska said that Akhmetov no longer falls under the definition of an oligarch because he meets only two of the four criteria.

The issue of influence on the media is key in de-oligarchization. To regulate it, the Parliament adopted another law – the so-called Media Law.

Media Law

One of the main levers of oligarchs’ influence on Ukrainian politics remains in the access to mass media. “Pocket” channels and online resources have repeatedly become weapons in the political struggle.

Bringing the Ukrainian media space in line with European norms is the goal of the Media Law, 2693-d. On December 29, President Zelenskyi signed it. It will enter into force in three months.

The new Media Law (as well as the supplementary Law on advertising) should bring Ukrainian legislation into line with the EU directive on audiovisual services; implement the launch of new and eliminate old mechanisms, such as registration of information agencies; create a media co-regulation mechanism.

Ihor Rozkladai, deputy director of the Center for Democracy and Rule of Law, admits that Ukrainian realities differ from what the EU demands. It goes from different configurations of legislation to the difficulties associated with the fact that most Ukrainian media are not profitable.

And therefore, they can be created only for someone’s interests.

The Ukrainian consumer is just getting used to paying for content, but does not expect tectonic changes soon because the war and the economic problems it caused will prevent this. And the media itself was on the verge of survival.

“One of the ways is appropriate financing of the Suspilne with the condition that it orders content from the market that meets all quality conditions. The situation with the media is unfortunate: disappearing of advertising, constant shelling, etc. I think implementations of some provisions of the Law should be postponed for several years because it will be impossible to fulfill them now,” says Rozhkladai.

The Law will only work after a while, and a one-time victory over the oligarchic mass media will not happen either, adds Rozkladai, one of the co-authors of the Law. In his opinion, this will not be enough because, over the past three years, media consumption in the Ukrainian market has changed a lot: as in the whole world, Ukrainians are less and less interested in traditional media, such as radio and television, and more and more interested in bloggers, Telegram channels, etc.

“The Law is adequate because regulatory tools that did not exist before appear. And this is a culture change. Co-regulation, embedded in the Law, allows owners to be involved in developing media policies. The state participates and establishes rules, which is the meaning of co-regulation. We won’t create it immediately, but the first step will be made,” Rozkladai says.

Vadym Miskyi, program director of the NGO “Detector Media,” considers the adoption of the Law to be positive, and not “a step on the throat of the press.”

However, there are still three problems with the Law.

First, this is the issue of the state TV channel Rada. Back in the 1990s, when Ukraine joined the Council of Europe, it undertook to get rid of state-owned media, i.e., those it controls editorially. In particular, Suspilne is no longer under editorial control, while the Rada channel remained outside the reform. This status is formalized in the new Media Law.

“This is a legislative problem. Sooner or later, we will receive a reaction from the EU. This distances us from European standards of independence of the media sphere,” Miskyi assures.

Secondly, the Law failed to include media regulation during elections. And although the European directive did not have a straightforward task to regulate the election period somehow, it was rather an attempt to solve internal Ukrainian problems.

“The situation requires settlement because the influence of the media owners on the editorial policies that becomes especially prominent during the elections, the possibility of bribing the media and influencing public opinion are the problems that Ukraine faces in every election campaign,” says Miskyi.

The third problem is that the adopted Media Law is insufficient to implement the recommendation regarding the requirements for starting negotiations on EU membership.

The document states that it is necessary to implement the European directive on audiovisual services. The Media Law already regulates the lion’s share of this. But not all. Issues of the advertising market were excluded from the Law.

“We have two laws – a Media Law and Law on Advertising. But in Europe, one directive regulates both. The advertising legislation must be updated, it will not be a difficult process, but it must be passed. It will take several months. And then we will fully implement the European directive.” – concludes Miskyi.

To the EU without oligarchs

The fight against oligarchs is not a task that can be solved in one day. That is why implementing the Anti-oligarchic Law should occur within ten years, making it impossible for the oligarchs to return to power and restore their regime.

This is the cornerstone of Ukraine’s future accession to the EU. But in the long term, de-oligarchization will give Ukraine more than just a checkmark on completing “homework,” provided the process is carried out in a high-quality manner.

It will provide independent media, a wider field for competition, a reduction in the level of corruption, and more significant economic growth. Therefore, every Ukrainian is interested in successful de-oligarchization. But can Anti-oligarchic and Media Laws ensure this and meet the requirements of the European Commission? We will find an answer to this question soon. At the beginning of 2023, the representative of the European Commission, Ana Pisonero, reported that the EC is finalizing the preparation of an analytical report on the compliance of Ukrainian legislation with EU legislation. The report will summarize the extent to which Ukraine has fulfilled the EC conditions. Including the fight against oligarchs.

Read more about Ukraine’s implementation of the European Commission’s recommendations in the analysis of the RPR Coalition.

The publication was prepared by LIGA in partnership with the Coalition Reanimation Package of Reforms with the financial support of the United States Agency for International Development (USAID) within the framework of the project “Responsible and Accountable Politics in Ukraine” (U-RAP), which the National Democratic Institute implements. The opinions expressed in the publication are those of the authors and do not necessarily reflect the views of USAID.

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