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Lure of TV fantasy could derail vital reforms for Ukrainian presidency

In an unexpected plot twist worthy of the TV show in which he stars, Volodymyr Zelenskiy, a comedian who’s become the unlikely frontrunner in Ukraine’s presidential race, has been implicated in a scam through which he purportedly pocketed $41 million from PrivatBank. Coming just as Zelenskiy— who only months ago was dismissed as a “clown” with little chance of winning— is pulling ahead in the polls, the allegations may go some way to tarnishing the squeaky-clean image of his onscreen persona.

PrivatBank has already been the subject of a scandal stretching back over a decade. Prior to its enforced nationalization in December 2016, the bank’s two previous main shareholders stand accused of having saddled it with over $5.5 billion worth of debt by using it as their personal ATM – a charge which is now being levelled at Zelenskiy as well. Whether or not these particular claims are accurate, they have shone a renewed spotlight on how dire a Zelenskiy victory could prove for Ukraine’s economy.

PrivatBank: from scandal to scandal

As the biggest bank in Ukraine, PrivatBank handles 20% of Ukrainian banking assets and 50% of payments. The bank’s name, however, is now synonymous with the investigation it came under in 2016, when it emerged that the bank had been acting “as a vacuum cleaner for the local population’s savings”, parceling them out to a network of shell companies.

What’s more, a significant chunk of Privat’s loan payments (later revealed by an independent audit to be as much as 97%) had gone to companies tied to its two main shareholders, Ihor Kolomoisky and Gennadiy Boholyubov. According to the latest allegations, $41 million was funneled through various offshore havens before finally arriving in accounts controlled by Zelenskiy and four other members of his Kvartal 95 Studio.

With the bank—and the Ukrainian economy—dangerously destabilized after it had been drained of $5.5 billion through this fraudulent scheme, Kiev was forced to nationalize Privat. Kolomoisky has since been prosecuted by the state almost 150 times; 20 of those rulings landed in favor of the National Bank of Ukraine (NBU) and resulted in Hr 1.2 billion of Kolomoisky’s property being appropriated. $2.6 billion of Kolomoisky’s and Boholyubov’s assets were also temporarily frozen, while the Ukrainian government is still attempting to recoup the $6 billion it has been forced to inject into PrivatBank to keep it afloat.

Challenging reforms

The state’s acquisition of PrivatBank was a prerequisite of maintaining the financial support of the International Monetary Fund (IMF). The IMF’s loans have been integral to bolstering Ukraine’s economy—which in the wake of the Maidan saw inflation peak at 43%—but have come with conditions, namely that the country shore up its financial health.

Poroshenko’s administration has overseen major reforms which have helped keep the country afloat and which factored into the IMF’s decision to grant Ukraine a further $3.9 billion in December 2018. The economy is now showing 3% year-on-year growth, while a thinktank has reported that reforms in the fields of banking, gas, procurement and taxation have recouped a cumulative $6 billion in annual revenues.

As necessary as these reforms are, they have also entailed painful sacrifice for Ukrainian citizens, to whom the long-term benefits of a stabilized hryvnia and a reduced budget deficit are not yet obvious. As a result, many Ukrainians are seeking a fresh face, even if that means accepting a candidate with little to no political experience. Into this void has stepped Zelenskiy, whose graduation from the TV screen to the presidential stage is uncannily reminiscent of the storyline of his own series.

Stranger than fiction

Zelenskiy has found widespread fame and adulation for his role in hit series Servant of the People as Vasyl Holoborodko, a humble high-school teacher who unexpectedly becomes the President of Ukraine after his foul-mouthed tirade against the status quo is secretly filmed by one of his students and goes viral. However, even before the news of his involvement in the PrivatBank scandal suggested that Zelenskiy is more the servant of his own greed than of the people, questions were raised over whether the comedian is as incorruptible as Holoborodko.

In particular, Zelenskiy’s ties with Kolomoisky—his shows air on Kolomoisky’s 1+1 channel, and he has been accused of being the controversial billionaire’s “puppet”—have fueled fears that his victory would result in PrivatBank being returned to the exiled oligarch. Such an outcome would certainly prompt the IMF to withdraw its all-important funding and result in a disastrous economic collapse for the country.

Even if Zelenskiy’s protestations that he would not denationalize PrivatBank in the event of a win are true, his suitability for the presidency remains debatable. It’s troubling that he himself appears aware that his policy positions are deliberately vague at best and incoherent at worst, since he is reportedly shying away from interviews for fear of betraying his inadequacy for the national hotseat before the vote on March 31st. His fears are not unfounded, as he already demonstrated his ignorance of politics by asking a journalist what NATO means in practical terms and indicating he would only support Ukrainian accession to the EU if the country was invited to do so – an impossible scenario under current legislation.

A populist catastrophe

Against the backdrop of a population crying out for reform but simultaneously baulking at the economic hardships which those selfsame reforms entail, it’s easy to see why Zelenskiy’s populist platform could appear an attractive panacea to many Ukrainians.

But while Ukrainians may love the character he portrays onscreen, the consequences of a Zelenskiy electoral victory would certainly deviate from his show’s storyline considerably. With zero political experience, a portfolio of ambiguous policies and a dubious moral character to boot, the instability caused by Zelenskiy’s election would damage vital relations with the IMF and jeopardize the progress which his predecessor has painstakingly made over his five-year term.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.

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