Ukraine is going broke, but Poroshenko is not.


Eugenio Cipolla

in L’AntiDiplomatico May 28, 2015

June 2, 2015

Translated from Italian by Tom Winter

While the country is essentially in default, Poroshenko’s income went up by a factor of seven: the man who wants to get Ukraine into the EU has earned a bit under 17 million Euros (compared to two million in 2013)

Last week when the Ukrainian Rada passed a law that will allow Poroshenko to call a moratorium on repaying foreign debt, many expressed surprise. This despite the fact that Kiev is notoriously in a financial/economic state much akin to default. There is little or nothing left in the state’s treasury. A few days back the pro-russian hackergroup “Cyber-Berkut” got past the firewall of Ukraine’s ministry of finance, and published delicate documents on the state of the country’s purse.

The situation is serious, not to say dramatic. Already in the next weeks Kiev could get the first tranche of assistance from the EU (about 600 million of the total 1.8 billion loan) and meanwhile tomorrow it will land one billion in bonds guaranteed by the United States. This small puff of oxygen which won’t be enough to make the country solvent. The war in Donbass is costing between five and seven million dollars every day, and most of the coal energy industry, which contributed about 20% of the GDP, is still under the control of the pro-russians.

Yet amidst all this, in a picture that looks bleaker every hour, every day, the president Petro Poroshenko increased his personal income last year. “This,” according to the BBC which published an interesting investigation yesterday “all took place amidst the general economic decline, caused by the conflict in Donbass and the serious difficulties encountered by Poroshenko’s companies in Russia and in the Crimea.” The issuer of the UK has compared the tax returns of 2013 and 2014 of the Ukrainian president, advancing more than a hypothesis about the reasons for this sudden enrichment. 

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Though Poroshenko declared an income of 51 million UAH ($2 million), for 2013, in the past year he gained nearly 369 million (just under $17 million), from the sale of securities, interest on deposits and from stock dividends. “The comparison with the absolute income – BBC writes in its online edition – is not quite correct, however, because the hrvnia, unlike most of the world currencies, continued to fall for the past year, stabilizing only recently. However this can not explain the Ukrainian president’s sharp rise in revenues.”

Interviewed by the BBC, the press service of Poroshenko said that the President donates his entire salary to charity. Whether this is true or not, this aspect might have adverse effects on his already waning approval. Before the election, in fact, the owner of Roshen, the eighteenth confectioner in the world, had promised to sell his companies. He has not done this yet, a fact which could suggest to Ukrainians that he, and his personal interests, have benefited from his position.

“Poroshenko is, and remains one of the biggest tycoons in the country, and he risks being perceived as such, as a president who favors the tycoons,” says Victor Nebozhenko, political analyst and director of the sociological service Ukrainian Barometer. “The eonomy has fallen because of the war, the well-being of the people has diminished, and his condition has gone up? This could have serious political consequences,” the analyst summed up.

The version of the men closest to Poroshenko is obviously the opposite. “The president is not involved in the affairs of his companies, instead, he is trying to sell everything, especially the main business, that is, Roshen. However there are many difficulties: investors do not want to come here because of the market conditions,” Boris Lozhin, presidential admin chief, said last month, speaking to reporters. In fact a few months ago an offer for Roshen came from Nestle, the French giant that already owns Svitoch in Ukraine, another historic brand of the Ukrainian confectionery industry. But their one billion dollar offer displeased Poroshenko, who initially had asked for three. So the deal is stalled and is no longer in discussions.

And so there is no more talk of his media-commercial empire. Empire because Poroshenko is not just in chocolate, but has major shares in several food companies, auto companies, investment banks, insurance companies and companies which produce glass and starch. Not to mention the property of “Kanal 5”, one of the most watched television stations in the country, and other regional TV stations in Kiev, Odessa and Drohobys.

“When I was trying to sell my concerns in Russia,” said Poroshenko a few weeks back in a BBC interview, “my goods were seized by the Russian government. They didn’t give me the chance. They confiscated my property, trying to put pressure on me.” 

Meanwhile as he tries to sell his companies, they continue to produce. Just in Kiev, Roshen has increased its revenues nine times over, and this, writes the BBC, “can be seen with the naked eye, because the number of Roshen candy stores has increased in the streets of the capital.”  Specifically, Poroshenko’s confectionery company has opened 20 stores in the first four months of 2015, including 14 in the capital. And on a parallel track, many media have reported, the financial capacity of the International Invest Bank in Kiev, owned by his father Alexei and his partner Igor Kononenko is gaining ground. In short, not bad for someone who says he has no interest in his companies.

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