Why Ukraine’s Steel Tycoon Closed His Media Empire

Last year’s oligarch law allowed the country’s wealthiest man to discard an unprofitable business without hurting his reputation.

Why Ukraine’s Steel Tycoon Closed His Media Empire

Last year’s oligarch law allowed the country’s wealthiest man to discard an unprofitable business without hurting his reputation.

On July 11 Ukraine's wealthiest man, Rinat Akhmatov, announced he would exit his media business. The media holding includes Ukraina and Ukraina 24 TV channels, which before the full-scale war were among the most-watched channels in the country. By doing so, Akhmetov seeks to escape being officially classified as an oligarch in Ukraine.
On July 11 Ukraine's wealthiest man, Rinat Akhmatov, announced he would exit his media business. The media holding includes Ukraina and Ukraina 24 TV channels, which before the full-scale war were among the most-watched channels in the country. By doing so, Akhmetov seeks to escape being officially classified as an oligarch in Ukraine.

When Rinat Akhmetov announced his decision to relinquish control over his media assets, the billionaire businessman clearly indicated that his decision was driven by the entry into force of a law to curb oligarchs’ influence on the country’s economy and politics.

“I was not, I am not and I will never be an oligarch,” Rinat Akhmetov said in a July 11 statement. He no longer meets the legal definition of an oligarch set out in the law, releasing him from the restrictions that come with it.

Experts, however, warn that the law falls far short of the measures needed to tackle Ukraine’s wider problems of corruption, and argue that Akhmetov’s decision may have been spurred more by economic considerations.

As of July 22, Media Group Ukraine stopped its production, according to the specialised portal Media Detector, bringing to a halt one of the country’s largest media holdings. It controlled 11 TV channels, including the leading Ukraine 24, and publications like Vogue Ukraine, making it a high-profile business venture as well as a tool of political influence for a key figure of Ukraine’s post-Soviet life.

An ethnic Tatar born in Donetsk, the 55-year-old billionaire built a business empire in metallurgy and energy before branching out into agribusiness, retail, telecommunications and the media. The 2004 Orange revolution and the domino effect of the Maidan movement in 2014 hit him hard as the industrial heartland of Donbas fell into Russian proxies’ hands, but Akhmetov remained Ukraine’s wealthiest man. Russia’s full-scale invasion further eroded his riches, which, according to Forbes Ukraine, hover around 7.6 billion US dollars  

Akhmetov’s decision came as a surprise to the company’s 4,000 employees, some of whom had been discussing the expansion of the media group into neighbouring Poland the day before, a source told IWPR on condition of anonymity.

Initiated by President Volodymyr Zelensky as part of his pledge to eradicate corruption, the anti-oligarch bill was signed into law on November 5, 2021. The bill defines an oligarch as having any three of the following criteria: participating in political life; having an impact on the media; being the beneficiary of a monopoly; and having assets worth over one million times the legally defined subsistence minimum in Ukraine, which is about 65 million dollars at the current market rate. 

With his business partner, lawmaker Vadym Novynskyi, giving up his parliamentary status on July 6, and his decision to leave the media, Akhmetov can no longer be considered an oligarch, justice minister Denys Maliuska stated in a public discussion on July 13.

Whether that will tackle the fundamental problem is unclear. 

“I have always been very sceptical about this law, as it simply personifies the problem instead of a systemic struggle with a disease like ‘oligarchy’,” said Sergey Fursa, an economic expert who works for Ukraine Dragon Capital, one of the country’s largest investment companies. “It must be combated through the rule of law and antitrust legislation.”

“PURELY ECONOMIC SOLUTION”

Deeper analysis suggests that the steel tycoon may have had more reasons to get rid of his media holdings. To start with, they were consistently unprofitable. Although valued at 200 million dollars, according to Ukrainian Forbes, Akhmetov's consolidated media loss last year was about 34 million dollars.

“Every year, Akhmetov invests more than a billion hryvnias [over 33 million dollars] in his media group. Last year it was 1.2 billion hryvnias, two years ago it was 7.2 billion hryvnias, this year it was several hundred million hryvnias. And he gets absolutely nothing from it”, said Eugene Dubogryz, an analyst at the CASE Ukraine think tank who has worked as media business consultant in the past. 

Moreover, TV channels have lost influence since the full-scale Russian invasion on February 24th. In a bid to limit disinformation, the National Security and Defence Council of Ukraine united Ukraine’s current affairs broadcasters into one United News channel,  giving each a few hours of airtime per day. TV channels that focused on children, sports, regional affairs and music were excluded from this arrangement, as were several that had been critical of the government and lost their broadcasting licences.

Although part of United News, that arrangement reduced Akhmetov’s ability to promote any political interests through his media companies. 

“There is no influence on decision-making, on members of parliament, on preferences and subsidies. This influence is very limited and is not worth the money [Akhmetov] invested,” Dubogryz noted. 

Moreover, it is unclear how many people are watching United News. An estimated 7.7 million Ukrainians, roughly 18 per cent of the population, have left the country since February 24, according to the ministry of internal affairs. Although some of them have since returned, millions have changed their place of residence. All this makes traditional measurement methods impossible.

In addition, Akhmetov's business was badly affected by the war, since many of his enterprises were located in badly affected areas in the east of the country. In Mariupol alone, Akhmetov lost two large metallurgical plants, agribusiness and port facilities. 

“In my opinion, this was a purely economic decision, which is wrapped in such a political wrapper with talk of politics, oligarchs and insults to the president,” Dubogryz concluded. 

THOUSANDS LEFT WITHOUT WORK

The announcement hit the media group’s employees.

“Everyone is in a stupor and does not know what to do next,” one employee told IWPR on condition of anonymity.

“Some employees were cut earlier, because of the war. Last year, some TV programmes ended and contracts were terminated. But it was always a few people, all of whom received compensation. Until February 24, Media Group Ukraine was socially responsible and all salaries were paid officially, no cash in envelopes. But after Russia’s invasion of Ukraine and the creation of United News, cuts increased,” the employee concluded.

Thousands of media employees will find themselves without a job in a market that is already suffering due to war and lack of funds. The advertising market of Ukraine decreased by 70 per cent after the escalation of the war in February, according to the official figures.

In a recent online meeting, employees were promised to be paid from three to 12 monthly salaries, depending on the length of their employment. On July 15, System Capital Management, the holding that manages Akhmetov’ business empire, officially confirmed “unprecedented severance pay”.  

TRANSFORMATION OF THE MEDIA MARKET OF UKRAINE

Akhmetov may have been the first to leave the media business, but others may follow. The next one to stop broadcasting became Live TV channel, which was associated with 39-year old Kyiv developer Vadym Stolar. The MP, elected with the now banned pro-Kremlin Opposition Platform-For Life faction, sold his media venture in late July. 

“During the war and for some time thereafter, the media will remain unprofitable, at least in the form in which they existed before February 24,” Mykhaylo Demkiv, financial analyst of investment company ICU, told IWPR. “Obviously, we are expecting a period of restructuring, cutting off those projects that were completely unprofitable and had unacceptably inflated budgets.”

 Akhmetov has not yet waived content property rights and copyrights, which could allow Media Group Ukraine to return, although in some other format.

 Either way, the reduction in the number of TV channels will not help the development of democracy. 

“I am not glad that Akhmetov has left the media business, because the more the state is involved in the media business, the worse it is,” Fursa noted, referring to the continued existence of state and municipal TV channels with no editorial independence. For Fursa, the example of Russia’s independent channel NTV, which was swallowed by the state-controlled gas giant Gazprom and its critical voice silenced, is a warning.

“On the one hand, the influence of oligarchs on the media is very bad,” he said. “On the other hand, it creates pluralism in the media, which allows us to avoid authoritarianism.”

This publication was prepared under the “Ukraine Voices Project" implemented with the financial support of the UK's Foreign, Commonwealth, and Development Office (FCDO).

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