Graham Stack in Dnipropetrovsk -

Ukrainian President Petro Poroshenko has fired Ihor Kolomoisky, the powerful governor of the Dnipropetrovsk region, on March 25,  amid a rapid escalation of tensions that threatens to undermine Ukraine's already fragile government. 

Kolomoisky, up till now a crucial ally of Poroshenko in containing the armed conflict in East Ukraine, is also the crisis-ridden country's most powerful oligarch, running a business empire comprising banks, aviation, media, metallurgy and energy, headquartered in the south-eastern Dnipropetrovsk region.

The firing marks the first major rift in the coalition of pro-Western forces that took power in February 2014 following the ousting of former president Viktor Yanukovych by opposition protests.

Poroshenko fired Kolomoisky in the early hours of March 25, five minutes after signing into law a bill effectively depriving Kolomoisky of backdoor control over the state oil company Ukrnafta. The bill closes a corporate governance loophole that gave Kolomoisky control over the company's finances, despite the state holding 50% plus one share. Kolomoisky-linked media reported that he had resigned and that Poroshenko had accepted his resignation.

Growing challenge

Kolomoisky had tried to resist Kyiv's moves to reassert control over key state assets by deploying armed personnel at the headquarters of Ukrtransnafta and Ukrnafta during March 19-22. The rifle-toting men were reportedly fighters from an irregular battalion of volunteers the billionaire has financed to combat pro-Russian separatists in East Ukraine. Other sources said that the men in fatigues were from a private security company.

Kolomoisky's allies are now threatening to go into political opposition to his fellow tycoon Poroshenko, demanding decentralisation of power in Ukraine.

They have called for a Maidan-style popular gathering on the evening of March 25 in Dnipropetrovsk. Other reports speak of plans for a demonstration to be held on March 28 in support of Ukrainian unity and Kolomoisky's “patriotic team”.

“Today it is not time for Maidan but for elections,” Sviatoslav Oleinik, Dnipropetrovsk deputy governor, wrote on Facebook. “But I invite everyone to the demonstration for unity,” he blogged.

"It was not we who organised the Illovaisk pocket," Oleinik said in another post, referring to the defeat of Ukrainian army units by Russian-backed forces in the Donetsk region in August 2014. Criticism of Poroshenko's conduct of the military operations in East Ukraine is likely to play a major role in any Kolomoisky-backed opposition to the president, according to analysts.

The head of Ukraine's SBU security service Valentin Nalivaichenko warned Kolomoisky on TV in the evening of March 24 against “playing out any show” in Dnipropetrovsk, saying that state security organs would stop this. “Separatists won't come to help you,” he said. 

The industrial hub of Dnipropetrovsk borders the Donetsk region, a large part of which is controlled by Russian-backed separatists. 

Next man up

Kolomoisk is credited with turning Dnipropetrovsk into a bulwark against separatism, following his surprise appointment as governor after the ousting of Viktor Yanukovych.

“He made sure things didn't turn out here as they did in Donetsk,” Sergei Vinikul, an insurance salesman, hurrying to work on March 25 in Dnipropetrovsk, told bne IntelliNews. Despite the implications of the Poroshenko-Kolomoisky rift, daily life continued as normal in the city. Hours after Kolomoisky's sacking was announced, comings and goings of black jeeps with tinted windows at the regional administration building suggested top-level activity behind the scenes.

Pavel Melnik, a fatigues-clad volunteer supporting the Kolomoisky-financed Dnipro batallion, called the local leader's firing a “catastrophe” as he turned up for duty at the building. "He is a strong leader, a charismatic, good person who fully backs Ukraine's freedom from Russia. And he wasn't fired – he resigned,” Melnik said.

“The state has proved that it is the state,” blogged Serhiy Fursa, an analyst at Dragon Capital. “Otherwise we would have turned into a collection of feudal barons.”

However, Poroshenko's choice of successor to Kolomoisky shows that personal and business networks still play a crucial role in stitching Ukraine together: Poroshenko said he would appoint a personal ally and former business partner, Valentyn Reznichenko, currently governor of the south-eastern Zaporizhzhya region, to head Dnipropetrovsk.

Reznichenko is a longstanding business partner of Boris Lozhkin, head of Poroshenko's presidential administration. Reznichenko and Lozhkin built up leading print media publisher Ukraine Media Holding before selling it in 2013 to Serhiy Kurchenko, a frontman for officials in the administration of Yanukovych, for at least €160mn.

Poroshenko partnered Lozhkin and Reznichenko in print media until 2013, when Lozhkin bought him out in the run-up to the Kurchenko acquisition.