Why Ukraine’s richest oligarch gave up his media empire

NV estimated Akhmetov’s net worth to be around $11.5 billion in 2021. His investment company SCM abruptly announced getting rid of its media arm on July 11. The media holding has been enabling Akhmetov to exert political influence in Ukraine for many years.

“Reluctantly, I made the decision; Media Group Ukraine (MGU) will release all of its broadcasting and print media licenses to the state later this week,” said Akhmetov.

MGU’s online media is also slated for a shutdown.

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The unexpected move came as a surprise to Ukraine’s politicians, media market players, and even SCM employees.

According to Akhmetov, he is merely complying with the recently adopted “anti-oligarch” law. The businessman added that the Russian full-scale invasion has prevented him from selling his media branch off in the six-months timeframe, provided by the law.

Few political and media experts, however, were convinced this was the sole reason behind Akhmetov exiting the mass media market.

A political surprise

President Volodymyr Zelenskyy’s administration was quick to comment on the development. Presidential advisor Mykhailo Podolyak hailed the law in question as “a clean slate” in public-private sector relations, lauding Akhmetov for leading “by example.”

Yevheniia Kravchuk, who heads the press office of Zelenskyy’s Servant of the People party, and sits on the parliamentary Committee on Humanitarian and Information Policy, told NV that SCM’s announcement surprised her. Nevertheless, there is some logic to the move, Kravchuk said – seeing as Akhmetov’s business partner Vadym Novynskyi recently chose to step down as MP, in order to avoid the oligarch designation. One of the criteria for “qualifying” as an oligarch under the new law is “political influence,” after all.

“Akhmetov decided to shut down his media,” said Kravchuk.

“It further indicates that this was never a business to him, but an instrument of political influence instead, which could now land him into the corresponding (oligarch) registry.”

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Getting officially branded an oligarch could damage Akhmetov’s relationships with foreign investors: he would be known as a “politically exposed person” – a somewhat toxic label.

Kravchuk noted that Akhmetov is only transferring broadcasting licenses to the state – as opposed to his tangible media assets or nearly 4,000 MGU employees. These licenses will now be auctioned off by corresponding agencies, according to the MP.

Other major media moguls like Victor Pinchuk (Starlight Media) and Ihor Kolomoisky (1+1 Media) will also have to find a way to comply with the law. Kravchuk said it’s unclear if they will approach it the same way SCM did.

Kolomoyskyi is probably less concerned with reputational damage from getting into the “oligarch registry,” as he has already been targeted with U.S. sanctions. Pinchuk, on his turn, could try to argue he falls short of being an oligarch by the three other criteria.

NV contacted Kolomoisky, Pinchuk, and former President Petro Poroshenko, but they all declined to comment on their potential exposure to the anti-oligarch law.

Mykola Knyazhytsky, the media coordinator for Poroshenko’s European Solidarity political party, supposes that most Ukrainians will notice Akhmetov’s TV channels winding down when they lose access to soccer broadcasts.

“Who would fork out ludicrous (soccer broadcast license) fees? Nobody,” said Knyazhytsky.

“Zelenskyy will get the blame.”

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Knyazhytsky added that Akhmetov could be looking to shift the blame to the president, hoping to make the public resent the anti-oligarch law.

“Not Zelenskyy, but (Russian dictator Vladimir) Putin turned out to be the true bane of (Ukrainian) oligarchs, as their businesses were destroyed by (Russian) artillery and missiles,” he said.

SCM described the law, enacted last September with the votes of 279 out of 450 MPs, as “discriminatory.”

The company will not resume its media operations while the law remains on the books, according to SCM spokesperson Natalya Yemchenko.

“We consider (the law to be) discriminatory – something we’ve been saying the whole time – and therefore are abandoning the media business,” Yemchenko said in a Facebook post.

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She added that SCM will not “bargain” about complying with “discriminatory” norms of the law.

A multitude of reasons

Political scientist Anatoliy Oksytyuk suggested that a whole range of reasons prompted Akhmetov’s decisions, with the war being chief among them.

“Today’s agenda is wholly different: there is no political competition in the parliament, as it’s curtailed by martial law,” Oktysyuk told NV.

He added that the media landscape also remains absolutely neutral and uncritical of various political forces during the war, as opportunities for parliamentary lobbying are all but gone.

“What else is there to do, when the parliament has become a strictly technical institution?” Oktysyuk said.

“No longer it is the central debate platform in the country, where any number of issues could be raised. That’s why I think him getting rid of these (broadcasting) licenses was a purely pragmatic move.”

In addition to trying to avoid the “oligarch registry,” Akhmetov was also constrained in how much he could spend to support his unprofitable media division, noted Oktysyuk.

“Being placed into the registry wouldn’t have been a huge deal, if he (Akhmetov) didn’t have assets abroad – like Kolomoisky, for example,” said Oktysyuk.

“(Kolomoisky) doesn’t mind being an oligarch, he will probably boast about it instead.”

In contrast, Akhmetov owns assets in the UK and Switzerland; his companies are publicly traded on overseas stock markets.

“His (Akhmetov’s) son also owns many assets abroad; it would have made things more difficult,” Oktysyuk added.

While de-oligarchization is clearly an important reason for Akhmetov giving up his media empire, there could also be a “deep corporate conflict” between him and Zelenskyy’s administration.

“I can see something else driving this,” said Oktysyuk.

“Perhaps, (the administration) asked Akhmetov to do something – maybe finance some project.”

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Another political scientist Volodymyr Fesenko maintains de-oligarchization was the prime motive for SCM’s divestment. In an interview with NV, Fesenko suggested that Akhmetov might have expected the war to put Zelenskyy’s “anti-oligarch” agenda on hold.

“But then the EU publicly supported anti-oligarch policies in Ukraine, when the country was made an EU member candidate,” said Fesenko.

“(Akhmetov) realized it’s not going away; Zelenskyy won’t relent. He would have to deal with it, and getting placed into the registry is best avoided, due to various reasons.”

More pragmatic, financial reasons also played a role, according to Fesenko. Akhmetov lost a number of his major industrial assets due to the war – including several huge metal production facilities in Mariupol – reducing his ability to bankroll SCM’s mass media division.

“It’s perfectly rational to avoid political risks of clashing with Zelenskyy during the war and afterwards,” Fesenko concluded.

“His (Akhmetov’s) current priority is to preserve and restore what remains of his core business, distancing himself from the whole oligarchical theme. Soccer remains his personal obsession, and he’s unlikely to abandon that.”

Akhmetov’s greatest strengths and weakness

Media analyst Otar Dovzhenko told NV that few experts in the field have bought SCM’s official explanation for forfeiting broadcasting licenses.

“I’m inclined to believe that Akhmetov simply no longer has a need to finance an expensive and unwieldy media empire, which can’t benefit him anymore – outside of an occasional positive PR news segment,” Dovzhenko said.

“It’s likely he intends to move some of his media business abroad, as Ukraine will not be able to regulate foreign media. But it’s nothing but speculation and assumptions for now. However, several online channels, domiciled abroad – like oll.tv and Xtra.tv – remain operational, as they are beyond the scope of the anti-oligarch law.”

Akhmetov’s MGU is pivoting to Poland, where millions of Ukrainians now live, the company announced on July 11. The announcement was quickly walked back and the corresponding message was removed.

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SCM’s media assets include 10 broadcast and satellite TV channels (including Ukraine, Ukraine 24, and several soccer-themed channels), numerous online portals, and print media. According to Akhmetov, SMC invested over $1.5 billion in its media arm.

Dovzhenko noted that Akhmetov’s media business was unambiguously lossmaking, with investment in it dwarfing its revenue.

MGU’s 2021 financials indicate the company had an income of $15.84 million, with losses exceeding $31 million. An intended audit, conducted by PSP Audit in 2021, indicated that MGU’s liabilities exceeded its assets by $264 million.

Experts estimate that MGU had to be sustained with $100-150 million of annual investments.

“The point of any major oligarchic TV channel is not to generate profit (Akhmetov has his metal-producing business for that), but to exert political influence,” said Dovzhenko.

“Akhmetov used mass media to influence politics and elections, get his people into office (admittedly, not all that often in recent years), and extract subsidies from the government.”

Media influence was probably a key point of contention between Akhmetov and Zelenskyy’s administration in 2021, according to the expert. The anti-oligarch law grew out of that struggle.

“We could say that media ended up being Akhmetov’s strength and bane, at the same time,” Dovzhenko concludes.

Head of Detektor Media, Natalia Lihachova told NV that much about the whole ordeal remains unclear. Experts are unsure if Akhmetov genuinely intends to abandon the market entirely, as MGU only forfeited its licenses, but no actual assets.

“Yemchenko already said they will not get rid (of their media assets), meaning they’re not going sell those off,” said Lihachova.

“We can’t be sure if SMC will keep its media presence via online broadcasting, for example. Nevertheless, the footprint of Akhmetov’s (media group) will be significantly reduced.”

Lihachova is now concerned with preserving the plurality of opinions across Ukraine’s media landscape.

“As much as we deride oligarchic competition, it’s still better than a complete government monopoly on television and media in general,” she added.

“War justifies existing state control of media, at least of television. But will the government be tempted to maintain control after the war?”

It’s “very likely” the state apparatus will be tempted with just that, Lihachova suggested.

“Akhmetov exiting the media market increases this risk,” she said.

“One of the main opponents of the government, besides Poroshenko, has left the field now.”

While the extent of Akhmetov’s motives may remain unclear, his TV channels stopped producing on July 12, pivoting to simply rebroadcasting the ad-hoc wartime national TV news feed.

Sources in MGU told NV the company will announce it’s terminating its journalists and anchors, in the coming days. One employee said while his colleagues wait for “further clarification” from their management, the crews continue to write and produce TV segments.