For months, good things have been happening in Ukraine. A new, young president, Volodymyr Zelensky, won a landslide victory in May after pledging sweeping change. Within weeks, his hastily formed party won the first overall majority in parliament elections since Ukraine’s independence in 1991. An energetic prime minister has embarked on ambitious reforms.
Yet in the past two weeks, worrying things started happening, too. Igor Kolomoisky, the billionaire oligarch suspected of helping bring Mr Zelensky to office but who has spent much of the past two years in exile, made a high-profile appearance in the Ukrainian capital. Then the prime minister suggested to this newspaper that Kiev was open to a settlement over PrivatBank, the lender Mr Kolomoisky co-owned until it was nationalised in 2016 with an alleged $5.5bn hole in its accounts. Kiev has been trying to recover billions through criminal charges against the oligarch. He claims the affair was a stitch-up by the previous government to grab his prized asset.
A deal to return the bank or drop claims against Mr Kolomoisky not only risks jeopardising future financing from the IMF and other western partners — which insisted PrivatBank be nationalised to protect financial stability. It could undermine the government’s other positive steps.
Western backers keen to see Ukraine finally throw off its kleptocratic model had largely given Mr Zelensky the benefit of the doubt, even though the TV comic came to prominence in shows on Mr Kolomoisky’s channel. They overlooked the president’s appointment of Andriy Bohdan — a lawyer for Mr Kolomoisky — as his chief of staff.
Investors were cheered as the 35-year-old prime minister the president appointed, Oleksiy Honcharuk, launched a vigorous programme to legalise sales of farmland, privatise state businesses, liberalise the labour market, counter corporate raiding and strengthen protection of property.
On September 10, however, a smiling Mr Kolomoisky was pictured in the president’s office with Mr Zelensky and Mr Bohdan. The billionaire held court at a Kiev conference organised by a rival oligarch. Then the prime minister let slip in an FT interview that Mr Zelensky wanted to "look for joint solutions" on PrivatBank, though he later claimed to be misconstrued.
Other worrying things began happening. Police raided PrivatBank’s headquarters and the home of Valeria Gontareva, the ex-central bank governor who led a clean-up of Ukraine’s banking sector in recent years including nationalising Mr Kolomoisky’s bank. Last Tuesday, Ms Gontareva’s dacha near Kiev was burnt down in an apparent arson attack. Mr Kolomoisky has vehemently insisted he is not behind the incidents. Whoever is responsible, they represent a return to the dark ways of Ukraine of 20 years ago — the precise opposite of the image the country wants to present.
Especially now Mr Zelensky has been pulled into an international furore over reports that US President Donald Trump asked him to investigate ex-US vice-president Joe Biden’s son, the last thing he needs is a major domestic scandal. Any settlement over PrivatBank should involve maximum recovery of assets from its ex-owners and be agreed with the IMF. Beyond that, the president faces a defining choice. Many Ukrainians feel his predecessor, the billionaire Petro Poroshenko, was unable to cast off his oligarch’s mantle in office and become a true reformist statesman. Mr Zelensky must decide if he wants to be a "servant of the people" — the name of his former TV show and of his party — or a servant of the oligarchs.