Dispute between Poroshenko and billionaire governor threaten Ukraine alliance

Published Tue, Mar 24 2015 3:13 AM EDTUpdated Tue, Mar 24 2015 3:25 AM EDT

The New York Times

Andrew E. Kramer and David M. Herszenhorn

A dispute between President Petro O. Poroshenko of Ukraine and the billionaire governor of one of the country's regions over control of two state-owned energy companies widened Monday, confronting the new Ukrainian government with its most serious internal crisis since coming to power last year.

Until the dispute burst into the open last week, the governor, Igor V. Kolomoisky, had been among the Kiev government's staunchest allies. Militias financed privately by him have played a crucial role in stopping pro-Russian separatists waging war in the east from advancing into the heart of Ukraine.

That alliance, however, appeared to be in jeopardy as Mr. Poroshenko and Mr. Kolomoisky clashed in recent days over the future of the two companies, UkrTransNafta and Ukrnafta, and as the president announced that he would take steps to incorporate militias like those controlled by Mr. Kolomoisky into Ukraine's regular military.

The enmity comes as Mr. Poroshenko remains under tremendous pressure to demonstrate stability in spite of the continuing war and a collapsing economy that is being bailed out with tens of billions of dollars in international financing.

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Mykola Lazarenko | Ukrainian Presidential Press Service | Reuters

As the animosity rose on Monday, Mr. Poroshenko ordered the Ukrainian state security service to arrest armed men, believed to be loyal to Mr. Kolomoisky, who have occupied the offices of UkrTransNafta and its parent company, Ukrnafta, in Kiev, the capital, since late last week.

Some prominent lawmakers called for Mr. Kolomoisky to be dismissed from his post as governor of Dnipropetrovsk, while at least four members of Parliament announced that they were quitting Mr. Poroshenko's party, apparently out of loyalty to Mr. Kolomoisky.

At the heart of the dispute is a law passed by the Ukrainian Parliament last week that reduced Mr. Kolomoisky's power as a minority shareholder in the companies and permitted a management change that he had previously blocked.

Late Thursday night, masked men with guns swept into the offices of UkrTransNafta, apparently in support of the dismissed chief executive, Oleksandr Lazorko, an ally of Mr. Kolomoisky, who has refused to leave.

Mr. Kolomoisky emerged from the building soon after, to say his men had just thwarted an attempt by "Russian saboteurs" to take control of UkrTransNafta. Confronted by journalists about his unusual presence there at such a late hour, Mr. Kolomoisky cursed at them in a ferocious diatribe that was captured on video, as was the raid itself.

The government says there was no attempted sabotage.

Mr. Kolomoisky's ability as a minority shareholder to control management decisions is an example of the murky dealings between the government and the country's richest business titans that have hobbled the Ukrainian economy for years.

More alarmingly, however, the dispute has emphasized the potential threat that private militias pose to the fragile new government.

Highlighting that risk, Mr. Kolomoisky in his remarks to reporters noted that on his command, 2,000 armed men could be brought to Kiev within hours. Still, the commander of Mr. Kolomoisky's main paramilitary group, Dnepro-1, denied any involvement.

By Monday, no armed men were visible outside, though the group loyal to Mr. Kolomoisky apparently still occupied the building. Valentin Nalivaichenko, the director of the security service, told reporters on Monday that his agency would help the police arrest the men occupying the building.

"We confirm that the police and journalists have noticed illegal actions by people with weapons" in the capital, Mr. Nalivaichenko said. "We have a strict order from the president that every person in UkrNafta be disarmed."

In another sign of mounting tensions, Mr. Nalivaichenko said his agency had also questioned two subordinates of Mr. Kolomoisky in the Dnipropetrovsk governor's office, about their possible roles in the murder of one Ukrainian security agent and in the kidnapping of another.

Dnipropetrovsk is widely considered Ukraine's most important industrial region, and its capital of the same name, located about 300 miles southeast of Kiev, is the country's fourth-largest city. Mr. Kolomoisky was one of several oligarchs, considered too rich to bribe, who were appointed to leadership positions in a bid to stabilize Ukraine.

In a statement posted on his website Monday in response to the standoff, Mr. Poroshenko said the volunteer battalions should be "vertically integrated" into Ukraine's regular army, which the government has been struggling to rebuild.

Mr. Kolomoisky, widely known as a pugilistic character even as he is admired for his patriotism, has shown no signs of backing down. In an interview on the 1+1 television station, which he owns, Mr. Kolomoisky said he had spoken to Mr. Poroshenko and they had agreed "that this is not the way this should happen."

Critics of Mr. Kolomoisky, however, said his actions showed his first allegiance was to his own wealth. Mustafa Nayem, a young member of Parliament from Mr. Poroshenko's party, urged the president and Prime Minister Arseniy P. Yatsenyuk to oust Mr. Kolomoisky.

"Igor Kolomoisky has no right to wear the title of a public servant," Mr. Nayem wrote in a blog post. "And the president and prime minister have all the levers to correct the error."

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