At the center of the growing conflict in Ukraine is one of the largest integrated mining and steel production facilities in the world — ArcelorMittal Kryviy Rih. It is a manufacturing colossus that is desperately coveted by two of the most powerful oligarchs in the world — Vladimir Putin and Ihor Kolomoisky.
For Russia’s President Putin, a violent conflict in Ukraine holds the promise of intense personal redemption. It is a “once-in-a-lifetime” opportunity to reclaim a lost economic treasure, strengthen national pride, and reassert Russia’s geopolitical power on the world stage. For Kolomoisky — one of Ukraine’s most influential oligarchs — the nationalization of ArcelorMittal Kryviy Rih offers a simple Machiavellian opportunity; there is immense personal profit and power to be realized through the clandestine control of government authority.
For the ArcelorMittal Group, the international conglomerate caught in the middle of this epic turf war, the ensuing power struggle has threatened to undermine their business and ruin their reputation. Recent tax hikes and compliance investigations by the Ukrainian SBU — a counter-intelligence agency, not a bureaucratic revenue service like the IRS — signify a growing effort by Kolomoisky to soften up ArcelorMittal for a government takeover.
The freezing of ArcelorMittal’s Ukrainian bank accounts for tax avoidance last month is a clear warning. Kolomoisky may be planing to seize ArcelorMittal using the legal remedy of government expropriation. If actualized, using trumped up charges, this would be a multi-billion dollar theft.
Nationalization of ArcelorMittal by the Ukrainian government has long been a concern of shareholders, especially during the Presidency of Viktor Yanukovych (2010–2014), but now the company now faces an even greater concern, the threat of violence.
Putin is likely to view Kolomoisky’s efforts to take control of ArcelorMittal Kryviy Rih as a bold effort to deny Russia any chance of reclaiming the former Soviet metallurgical complex. Will it be the accelerant that ignites the long smoldering conflict in eastern Ukraine?
Putin’s overwhelming response delivers an unmistakable answer. Many heads of state, geopolitical analysts, and peace loving citizens around the world are deeply concerned. Both men possess large private militias and exert extensive control over their country’s military branches. Engagement would be disastrous for ArcelorMittal and all Ukrainian citizens.
Since taking over the formerly nationalized mining and steel production facility in 2005, ArcelorMittal has poured $4.4 billion (USD) into modernizing the old Soviet plant. It is a significant investment that international shareholders would be loath to relinquish, especially in light of the $4.8 billion bid price. Putin is also, no doubt, well aware of the value of ArcelorMittal Kryviy Rih on many levels.
So too, is United States President Joe Biden. He quickly recognized the need to protect ArcelorMittal from predatory corruption when he sanctioned Kolomoisky just two months into his Presidency. That said, the irony of Biden’s belated legal remedy has not been lost upon critics of his earlier efforts to fight corruption in Ukraine; Hunter Biden, President Biden’s son, was a highly paid board member of Burisma Holdings Limited for five years, a company ultimately controlled by Kolomoisky.
President Biden should have taken into account the significant reputational risk and clear cut conflict of interest created by his son’s tenure at Burisma. One cannot fight corruption with corruption.
As to be expected, the younger Biden was forced to step away from the company at the completion of his five year term to mitigate a growing political scandal that questioned his father’s anti-corruption efforts in Ukraine. The recent sharpening of the bitter economic struggle between Kolomoisky and Putin begets a similar criticism, especially in light of Biden’s professed dedication to rooting out corruption in Ukraine. How did Kolomoisky, who is widely regarded as the most corrupt and evil man in Ukraine, rise to a shadowy cabinet level position within the administration of Ukrainian President Volodymyr Zelensky?
The answer to that puzzling question lies in a popular Ukrainian television series — Servant of the People. It featured Zelensky, a popular comedian, playing the role of high school history teacher who unexpectedly finds himself called to be the next President of Ukraine after he posts a profanity-laced video denouncing corruption in the government. The wildly successful political satire was aired over Kolomoisky’s television network, 1+1 Media Group, and took direct aim at the current administration headed by Petro Poroshnko.
In a classic case of life imitating art, Zelensky later went on to become the real life President of Ukraine in April, 2019. Despite persistent allegations of Kolomoisky’s political influence, Zelensky denies the accusations and claims that his former business partner was never promised any preferential treatment during his campaign to be President.
Since his election, Zelensky has struggled to hit the right combination of gravitas and charisma that defines a true statesman. To this writer he resembles Leonard Zelig, Woody Allen’s chameleon-esque character in the 1983 mockumentary “Zelig”. In one moment he is Ukraine’s President, another moment a comedian and television star, and in yet another iteration he is a secretive business partner and political front man for a corrupt oligarch. Today, however, he is simply a nondescript enigma with an ill-defined role in the gravest geopolitical tug of war since WWII.
Bankrolled and directed by Kolomoisky, scolded by Biden, and bullied by Putin, Zelensky is well out of his league. His efforts to maintain an air of existential control throughout one of the biggest geopolitical crisis in decades is admirable, but his lack of political experience has many observers wishing that he wasn’t a self-described “ordinary human being” deceptively painted into a corner by Kolomoisky and his own blind ambition. If shots are fired, the Ukrainian people stand to suffer immeasurably.