The young pro-Western reformers who came into government with great fanfare alongside anti-establishment President Volodymyr Zelensky six months ago were dealt a serious blow in late September when Oleksandr Danilyuk, one of the most respected figures in the Zelensky administration, abruptly resigned as Secretary of the National Security and Defence Council after only five months on the job.
Though he was an early ally of Zelensky’s and a staunch supporter of the young president’s campaign promises to fight the country’s endemic corruption and bring peace to eastern Ukraine. Zelensky’s relationship with billionaire oligarch Igor Kolomoisky, however, and the presidential administration’s apparent willingness to allow for the nationalisation of Privat Bank, Ukraine’s largest commercial lender, to be reversed and returned to its original owner, Kolomoisky, was too much to bare for Danilyuk.
Danilyuk has long viewed Kolomoisky as his archenemy and one of the main enemies of Ukraine’s drive to move closer to Europe and rid itself of the entrenched post-Soviet robber baron class that has systematically stunted the country’s growth and funneled most of its wealth into their own personal bank accounts since the country emerged as an independent state following the Soviet Union’s 1991 collapse.
The sudden announcement that Danilyuk had resigned from his post came amid reports of heated disagreements with Zelensky’s influential chief of staff, Andrey Bogdan, one of Kolomoisky’s former attorneys and who served as the Deputy Minister of the Cabinet of Ministers under the pro-Russian former president, Viktor Yanukovych, who was ousted by the pro-democracy Euromaidan Revolution in 2014.
Danilyuk told the media on 3 October that Bogdan’s influence within the administration and the amount of power he’s personally consolidating as a means to pursue his own agenda was the last straw that led to his resignation.
“There were several factors that led to my resignation, but the last straw was the events surrounding PrivatBank. Events causing public outcry have occurred over the last few weeks. They concern searches at PrivatBank and an arson attack on a car and home of (former National Bank of Ukraine Governor) Valeria Gontareva. There has also been some progress in the courts. There was such a concentration of events that sent a very negative signal. And I, as a person who put my reputation at stake during the election campaign when I stated that I would do all to limit Kolomoisky’s influence in Ukraine, surely could not but react to it. It was not just a matter of reputation. It was also a matter of values,” Danilyuk said, adding about Bogdan, “I think that if we talk about a conflict of interest, then Bogdan should write not a funny resignation statement, but a real one, as I did. And that’s all. It would be the professional thing to do.”
A former finance minister under Zelensky’s predecessor, Petro Poroshenko, Danilyuk was also an investment manager and consultant for McKinsey & Co. Inc. His near-impeccable background in finance and staunch pro-market and reformist bona fides lent important credibility to candidate Zelensky and helped the young ex-entertainer make important headway with key Western partners and investors in the months before he took office.
With Danilyuk no longer on Zelensky’s team, there are now growing concerns that cooperation with the International Monetary Fund could potentially be blocked as most in the West will see the continued influence of Kolomoisky and the presence of a classic grey cardinal-like figure in Bogdan as a familiar replay of the now largely hated Poroshenko administration. In both cases, private-sector professionals and successful reformers quickly became disillusioned with the slow pace of change and the backlash from the corrupt political, law enforcement, and business establishment. Their inability to make progress, along with their subsequent resignations – including Danilyuk’s as finance minister in 2016 – fundamentally ruined Poroshenko’s credibility with his own people and with the West
The same scenario now threatens to repeat itself unless Zelensky radically changes course by cutting his ties to both Kolomoisky and Bogdan.
Zelensky’s Achilles heel
The growing firestorm around the Ukraine scandal in Washington has engulfed the Trump White House and left Kiev with few options. Zelensky needs whatever support he can get from pro-Western Ukrainian reformers and from foreign backers who are eager to do business with his administration so long as Zelensky can follow through on his promise to rid the country of the graft that has kept major direct foreign investment out since the early 1990s. But with President Donald J. Trump now trying to distance himself from his own personal contact with Zelensky, the latter finds himself in the position of trying to convince the West to back his initiative to end the five-year war with Russia and their local separatist allies in eastern Ukraine.
Zelensky had hoped he could count on the backing of both the United States and the European Union in helping to negotiate a favourable peace deal with Russian President Vladimir Putin. Ukraine’s strategy moving forward with Putin hinged on getting the West to apply pressure on the Kremlin to pull out its invasion forces from Ukraine, which would allow Kiev to disarm the pro-Russian separatists who remain in the field and to re-establish Ukrainian control over their respective portion of the Russia-Ukraine border.
Kiev’s plan, however, is in tatters now that US special envoy on Ukraine Kurt Volker, a staunch supporter of Ukraine and a man who was known to have the sort of diplomatic skills that could convince reluctant European leaders to back the Ukrainian government, has been forced to resign after being drawn into the unfolding impeachment proceedings against Trump.
With the Americans effectively sidelined by a domestic political scandal and the number of reformers in the Zelensky administration rapidly dwindling, Moscow is trying to force Ukraine into a peace deal based on the so-called Steinmeier formula. Named after Germany’s current president, Frank-Walter Steinmeier, it would grant sweeping autonomous powers to the eastern Donbass region, areas that are still held by militant pro-Russian separatists, after elections are held under Ukrainian legislation and the supervision of the OSCE. This would mean holding elections in territories still controlled by heavily armed Russian proxies.
Putin hopes to negate the public support Zelensky earned from the strong economic growth that Ukraine has experienced since the latter took office in April, and a successful prisoner exchange that Zelensky brokered with Russia during the summer, by forcing him into a peace deal that would be viewed by Ukraine’s population as nothing short of treasonous.
This would undercut Zelensky’s claim that he can deliver on two key issues that the Poroshenko administration failed to accomplish during its five-year term – economic stability and a successful end to the war. In Putin’s calculation, this will force Ukraine into making harsh concessions that might include formally dropping its hope of ever fully integrating with the West.