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Privatbank, President of Ukraine Zelensky and oligarch Kolomoisky

The President of Ukraine, Vladimir Zelensky, looks at his May 20, 2019 Parliament Speech Ceremony.

GENYA SAVILOV | AFP | Getty Images

Ukrainian President Vladimir Zelensky is pressured into resolving a longstanding dispute over a nationalized bank and its former owner of an oligarch.

How to proceed may be a "deal breaker" on the question of whether Ukraine The international lender, the International Monetary Fund (IMF), provides the country with another necessary assistance program, experts say.

The dispute focuses on a bank called Privatbank, which was nationalized in 201

6. It was the largest commercial bank in the country but became state-owned after it was declared bankrupt. The government has supported nationalization – which is considered vital to protecting its 20 million customers and preserving Ukraine's already fragile financial stability.

Privatbank's stress test noted "unreasonable credit policies", and the Central Bank of Ukraine initially stated that 97% of its corporate loans went to "related parties" of its major shareholders – Igor Kolomoisky and Gennady Bogolyubov. An assessment that both challenges.

The IMF, which provided a $ 17.5 billion package to Ukraine in 2015, supported nationalization, but insisted earlier this year that "it is important for the authorities to continue their efforts to recover losses from former owners and related countries." of bank failures. "

In early 2018, the central bank published findings from an investigation into corporateroll advisory services by Kroll, stating that, prior to nationalization, Privatbank had been subjected to" large-scale and coordinated fraud over at least 10 years Kolomoisky and Bogolyubov again denied these allegations.

Disputes between former major shareholders and the government have been ongoing since 2016 with multiple legal battles (according to reports 600). There are attempts by the state to restore the head the murders of Kolomoisky and Bogolyubov, who themselves claim that nationalization was done on false grounds.

The chances that Privatbank could be returned to its former owners were heightened in April when a Ukrainian court ruled (in the last days of the presidency) ex-leader Petro Poroshenko) that nationalization is illegal

An IMF team is currently visiting Ukraine, but a spokesman told CNBC on Wednesday that the Fund "did not comment on speculation or rumors" about Privatbank's future. They added that "policies that would be necessary for the Fund to continue to support Ukraine will be discussed."

"The treatment of the Privatbank situation will serve as a bell tower for assessing Kolomoysky's influence on government policy and decisions. , does, as well as informs the IMF's position on continuing cooperation with Ukraine, "Otilia Dhand, senior vice president at Teneo Intelligence, said in a note on Wednesday.

" The fund is unlikely to approve compromises on the nationalization of the bank, which would put question nvestitsiyata government for 5.5 billion dollars in its recapitalization. However, it is unclear what the red line for the fund would be to give up talks with the government. "

Vladimir Zelensky's candidate for President of Ukraine during the concert program of Studio 95.

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Close observers of the new President of Ukraine are closely watching whether Zelensky can influenced by Kolomoisky, with whom he has business relationships, Zelensky is a former comedian and actor who stars in a hit television show called "The Servant of the People" (for an ordinary man who becomes president), produced by his own production company , but broadcast on 1 + 1 calf

Kolomoisky is widely regarded as one of Zelensky's main supporters, and his channel increases Zelensky's visibility and popularity before the April elections, which see him defeat Poroshenko.

However, Zelensky repeatedly said that he was not under the influence of Kolomoisky, stating before the election that "I am not a toy in the hands of Kolomoisky," Ukrainian Interfax news agency reported in March.

A servant of men or person?

Zelensky agitated for a manifesto to reform the country and defeat corruption, just like the television character he played. Whether he can keep that promise with the clear support of a powerful businessman who backed his application is now under control.

Kolomoisky felt comfortable enough under Zelensky's new administration to return to Ukraine after two years of self-exile abroad, although he denied he was now an adviser to the president.

Last week, the oligarch stated that he had met with the president on September 10 for the first time since taking office. Zelensky's press center reported on a Facebook page that the meeting was about doing business in Ukraine and the energy sector.

Kolomoiski told reporters on Friday during an energy summit that he had not discussed Privatbank's future with the president. But eyebrows raised when Kolomoisky signaled that the dispute could be better resolved under Zelensky's leadership. "We (the former owners of Privatbank) disagree with nationalization. This dispute is easier to resolve than under the previous president," he said, according to Reuters.

The Prime Minister of Ukraine Oleksiy Honcharuk added fuel to fuel to fuel fire when he told the Financial Times earlier this week that he was positive "about any rhetoric aimed at compromise." However, he later told Reuters that no negotiations were being held on Privatbank.

Women are passing the PrivatBank branch in Kiev, Ukraine, May 27, 2019.

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In response to this week's events, Timothy Ash, senior emerging market strategist at Bluebay Asset Management, said the question over Zelensky now is whether he is a "servant of people" or a "servant of personality." "

" Whether a man is really a reformer, or just in the pocket of another oligarch, will be determined by how he plays this one. Many warm words about hot topics for reform, such as land reform, will not account for anything if Zelensky supports Kolomoisky in repealing Privatbank's nationalization, "he says in an email note.

The tide certainly seems to be turning against the state, which Last week, one day after Zelensky met with Kolomoisky, police raided the bank's headquarters and seized the documents as part of a criminal investigation into whether some of its employees had exceeded their power.

Valer, meanwhile. Gontareva, who was governor of the central bank of Ukraine in 2016 and decided to nationalize Privatbank, says she is the victim of a harassment campaign because of nationalization.

Gontareva, who now lives in London and works as an academic, was injured when she was struck by a car in London in August, and then a car belonging to a family member in Ukraine was burned in September. Earlier this week, her home in Ukraine was burned in a suspected arson attack. Kolomoisky denied any involvement in the incidents.

IMF mission

Comments from Kolomoisky and Honcharuk come at an inconvenient time for Ukraine after media reports from Bloomberg and UNIAN, a Ukrainian agency, several days ago suggested the IMF could agree to a three-year credit line for Ukraine worth $ 5 billion.

The IMF did not respond to CNBC's questions about the new aid program, but reiterated that it underlined "the importance of creating an effective anti-corruption framework, a critical element of our commitment to Ukraine over the last few years. "

Any move to overturn a decision on Privatbank could jeopardize this assistance, warn strategists like Timothy Ash. He believes that" any hint of delaying Privatbank's nationalization is an interruption to the IMF deal – and rightly so.

But not everyone believes that Zelensky will be a boost.

"We wrote earlier that we were skeptical of the narrative that the oligarch" controls "Zelensky beyond the scenes … we continue to believe that such theories are probably overkill," Andrew Bishop, partner and global head of political research in Signum Global Advisors, told CNBC in an email Thursday

"First, we believe Zelensky has a real desire to reform his country. Second, presidents – even the newest of them – are inclined to develop some self-confidence once in

– Reuters and Fa the International Times contributed to this story.

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