Oligarchy

Hello, and welcome to Oligarchy. We are tracking how Covid-19 and the world’s response to it is affecting the super-rich — and what that means for power and politics.

GOOD NEWS

We have to take our good news where we can find it in these not-very-cheerful times. Although it’s bad that Hopewell Chin’ono, the Zimbabwean journalist arrested in July for inciting protests, had to attend a court hearing this week, at least he could go as a free man, having been released on bail earlier this month. (In July, I wrote in this newsletter about how he had exposed alleged corruption in the procurement of medical equipment by the president’s son.)

He told journalists that his spell in a cell had given him new insights into what he’d been writing about: There was no medicine for prisoners infected with Covid-19 in the prison hospital, who only received warm water to drink.

• “The only reason I got out is because of unrelenting international pressure,” he told the Financial Times. “All this comes down to one thing, refusal to stop corruption and looting of public funds.”

He was back in front of a magistrate this week, and his lawyers have demanded a trial date. In the meantime, he has restrictions on his use of social media, has had his passport confiscated, and still isn’t free to choose his lawyer. 

ROTTEN+

Ukraine’s National Anti-Corruption Bureau (NABU)  was created after the 2014 revolution, and is one of the few lasting achievements of the anti-corruption campaign pushed by many of the revolutionaries. It has often found its efforts stymied by other — unreformed — branches of the state, and the country’s ubiquitous oligarchs.

A Kyiv Post investigation has shown that the powerful interests blocking the anti-corruption organization’s efforts may be winning out — and costing the country hundreds of millions of dollars in the process. 

• “After being stalled by the previous administration, the Rotterdam+ investigation is being swept under the rug despite being one of the biggest corruption scandals in recent Ukrainian history. In late August, the Prosecutor’s Office ordered the investigation to be closed,” the article states.

Rotterdam+ is a pricing formula for energy supplies (the price of coal in Rotterdam “plus” a set amount for transport), which was invented after Russian-backed proxies overran the coal-producing regions of Eastern Ukraine, and the country began having to import much of its coal. It’s one of those superficially dull but actually incredibly important issues that no one noticed until it made Ukraine overpay hundreds of millions of dollars for its coal, because most of it didn’t actually have to come from Rotterdam so the government was paying for transport that didn’t happen.

According to the anti-corruption bureau, this was arranged corruptly, in a deliberate bid to overcharge the government. According to notoriously corrupt Ukrainian prosecutors, it was just one of those unfortunate things: you win some, you lose some (though, it’s uncanny how often the state budget seems to end up on the losing side of such transactions).

DTEK, the company which allegedly profited most from the scheme, published a lengthy rebuttal of the Kyiv Post’s story on its website, including the allegation that ex-President Petro Poroshenko and super-rich oligarch Rinat Akhmetov cooked up the scheme between them.

• “We categorically deny these claims. Rinat Akhmetov does not influence the management of DTEK. DTEK, in turn, conducts its activities in accordance with the requirements of the legislation and best practices of compliance and anti-corruption,” it said. 

Right now, thanks to the unprecedented levels of state spending to tackle Covid-19, there are so many questionable procurement contracts out there that investigators will never have time to look at even a fraction of them. And those contracts have piled on top of untold thousands of other dodgy deals which have enriched insiders, and impoverished the rest of us.

It’s particularly depressing therefore, if investigators do manage to get their teeth into what they think is a case of historic corruption, when it doesn’t even make it to court. Perhaps NABU messed up; perhaps there never was a Rotterdam+ scandal in the first place — we will presumably now never know. But we do know that investigators have lost three years that they could have been using to bring someone to justice, put them in jail, and take all their money away.

Is that enough miserable Ukrainian news for today? No, it isn’t. NABU is investigating how exactly a court in Kyiv came to order state-owned Privatbank to pay $350 million to half a dozen offshore companies.  

The state took over the bank in 2016, when it collapsed in one of the most spectacular financial catastrophes of the decade, leaving Ukrainian taxpayers at an almost $6 billion loss. 

This story has a long way to run and I suspect I’ll come back to it.

DIAMONDS IN THE SOLES OF THEIR SHOES

The Sotheby’s auction house in Hong Kong has a treat for you: “one of the rarest and most coveted wonders of nature: A Highly Important 102.39 carat D Colour Flawless Oval Diamond.” It’s perfectly colorless, totally pristine, and really big. Only eight stones of such dimensions have ever appeared at auction, according to the auction house.

• “Never before has the appreciation for world-class diamonds been so acute in the world and more and more people have come to understand that something billions of years old and of the size of a lollipop can store as much value as a Rembrandt self-portrait or a Basquiat,” said Gary Schuler, Worldwide Chairman of Jewelry at Sotheby’s.

There is no reserve price on the stone, but they are clearly expecting a lot of money, if those are his comparisons. A Rembrandt self-portrait sold in July for almost $19 million, a record price for the artist. A painting by Jean-Michel Basquiat meanwhile sold three years ago for $110.5 million.  

Why would anyone value a shiny pebble quite so much? There’s a suggestion in the Robb Report, one of the many lifestyle magazines to have got very excited about it, and the reason is not just because it’s beautiful.

• “It’s also one of the few high-value collectibles, other than watches, that is easily transportable and concealable, and that’s just the kind of collectible that those with the deepest pockets want to acquire when the world is in crisis,” the article said.

Translation: some of the world’s richest people are competing to buy a super-valuable pebble because they know they’ll be able to slip it into a pocket when the time comes to flee, and at least they won’t be completely bankrupted when everything they value goes up in flames. I think that counts as a sell signal for civilization.

WHAT I’M READING

I really appreciated this fantastic article in the New Statesman about the damage that tax dodging does, as seen through the eyes of a single businessman. Thanks to a tax loophole, an eccentric British record shop owner was forced out of business, while large offshore businesses moved to the Channel Islands and cleaned up.

It’s like a conflict between the inventive, generous, and delightful country that Britain would like to pretend that it is, and the financialized free-for-all that it is in reality. I highly recommend it. If you feel like he got treated shoddily, and it’s pretty hard not to feel that, there’s a crowdfunder to help pay his legal expenses.

See you next Wednesday,

Oliver