Ukraine billionaires pull the plug on their man Viktor Yanukovych

Oligarchs who thrived in Western markets not happy with being dragged into Moscow's orbit

PUBLISHED : Thursday, 12 December, 2013, 10:01pm
UPDATED : Friday, 13 December, 2013, 2:24am

In the battle for Ukraine's future, oligarchs are turning away from the government.

A newspaper owned by billionaire Viktor Pinchuk gave journalists a makeshift office to cover protesters trying to topple President Viktor Yanukovych.

Petro Poroshenko, Yanukovych's ex-economy minister and the head of Ukraine's largest chocolate maker, sided with demonstrators in a speech at Kiev's Independence Square.

Tycoon Dmitry Firtash's TV station Inter aired footage countering government claims that protesters incited violence that has left hundreds hurt.

Yanukovych, who has faced hundreds of thousands of angry voters after snubbing a European Union free-trade deal in favour of Russia, is now seeing support from the nation's richest executives slipping away.

Yanukovych is in office because of the oligarchs. If they abandon him, he’s toast

After boosting their fortunes and supporting Yanukovych's tenure, oligarchs now face credit- ratings downgrades and the loss of lucrative Western markets, where 19 Ukrainian companies, including Mironovskiy Hleboproduct, the largest poultry producer, are traded.

"Yanukovych is in office because the oligarchs wanted him there," Jan Techau, the director of the Brussels office of the Carnegie Endowment, said. "If they abandon him, he's toast."

Pro-EU demonstrators dug in yesterday as the United States warned of possible sanctions over Kiev's crackdown on the protests, urging authorities to show restraint. The demonstrators in Independence Square forced riot police to retreat following a pre-dawn raid on Wednesday on their protest camp in a blow to Yanukovych's authority.

Investors are anxious. The cost of insuring Ukrainian debt against non-payment for five years with credit-default swaps rose to almost a four-year high. Investors see the country as the world's least creditworthy after Argentina and Venezuela.

Nine years after the first revolution that set Ukraine on the path to deeper EU integration, foreign direct investment from the EU dropped by more than half to US$7 billion in the first three years of Yanukovych's term, from the US$15 billion invested in 2008 and 2009.

The country's oligarchs are looking to improve their profits with better access to the EU, the world's largest trade bloc, which bought US$20 billion of Ukrainian goods last year.

Under a Russian customs union that President Vladimir Putin is using to lure Yanukovych, Ukrainian oligarchs would be subject to more-powerful Russian rivals with greater influence in the Kremlin. Ukrainian firms have borne the brunt of unannounced trade bans and duties, gas shut-offs and other regulatory hurdles designed to keep Ukraine from closer ties the EU.

EU rules "will boost the rule of law and make the business environment more predictable" for Ukrainian business, said Ariel Cohen, a senior fellow for Russian and Eurasian studies at the Heritage Foundation, a policy institute in Washington. "For people who have acquired assets worth billions of dollars, this is about a provision of safety for them and their families."

Additional reporting by Reuters