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Wednesday, 2 April 2014

Is the current shutdown of the Ukrainian Privatbank on Crimea just a political or economic statement?! Or is it a concealed attempt to embezzle billions of accountholder’s money?

During the last month – after the annexation of Crimea by Russia – there has been a lot of high profile sabre rattling from all parties involved: Russia, the US, the EU, the NATO and of course the Ukraine itself. 

The increasingly aggressive language in the interactions between Russia and the US and the various military exercises of these parties, marked an alleged return to the Cold War; days when the former archenemies regularly poured scorn on each other and when the world at some occasions was at the brink of World War III.

Nevertheless, unless something dramatic happens, I expect that during the coming months the sabre rattling will peter out like a damp squib.

The world will return to a new status quo and Crimea will remain Russian. Ukraine and its western allies will lick their wounds about their ignorance with respect to Putin’s agenda in the past years and then they will return to ‘business as usual’.

However, there is an aspect that has been largely ignored by the main press: the economic implications of Russia’s annexation of Crimea for the inhabitants of this peninsula.

Yesterday, I was once more confronted with this insight, when BNR Newsradio presented an interview with a Dutch business man, Robin Dolstra.

The reason for this interview was that the largest Ukrainian commercial bank ‘Privatbank’ had shut down all bank branches and Automated Teller Machines (ATM’s) on the Crimean peninsula, as from 17 March. This action has left 2 million Crimean customers of Privatbank strapped for cash. 

Dolstra, who has been a long-term inhabitant of Crimea, spoke about the consequences of this situation for him personally and for the other Crimean inhabitants. Here are the most important snips of this interview (check out the aforementioned link for the original soundtrack of the interview):

“These days, many Crimean inhabitants – about two million – have no access to their salaries and savings money, as they had an account at Privatbank.

Privatbank is part of a very large conglomerate, with a lot of strings attached in Ukrainian business life. The owner [Ihor Kolomoiskiy – EL] is also owner of four football clubs, iron ore processing plants and a few  gas and oil plants.

Privatbank is the largest bank of Ukraine and the owner has taken a strong pro-Ukraine stance. He is the most influential inhabitant of Ukraine and the third richest.

On 15 March, this Ihor Kolomoiskiy closed all branch offices of Privatbank on Crimea. On the 16th, the referendum about association of Crimea with the Russian Federation was held and subsequently, on the 17th all ATM’s of Privatbank were shut down. Since the 18th of March, nobody can access his accounts anymore”.
Robin Dolstra himself is not in trouble yet: “I still get along fine, as I do have some cash money left.

Nevertheless, my company had to dismiss all personnel. We couldn’t afford to pay them anymore. And with me, a whole bunch of other companies had to do the same.

The most peculiar thing about this story is: when Ukrainian people, who really live on Crimea and have a residence permit, ask for asylum on the mainland of Ukraine, they will get a part of their money back… after two months. That is quite crazy, actually. Nevertheless, it is a bank which does business in twelve countries, among whom the United Kingdom, Germany, Italy and China

The Ukrainian branch of Russian press agency Interfax had earlier issued a statement on the 17th of March, with respect to the temporary (?) suspension of Privatbank on Crimea:

Ukraine's largest bank 'Privatbank', from Dnepropetrovsk, suspends its customer service in the Crimea, according to the financial branch of press agency "Interfax-Ukraine".

"Unfortunately, due to the fact that there is not enough available cash on the peninsula, all transactions on cards, accounts and deposits, which had been opened in Crimea, have been temporarily blocked. This applies to both physical and legal persons. Our Branches, ATMs and terminals on the Crimea peninsula are temporarily out of order. We hope that this situation will be resolved soon", according to a spokesman of Privatbank.

According to the press agency, Privat's ATM network in the Crimea will maintain a limit for receiving cash to the amount of 500 USD per night, as from March 18. 

As Robin Dolstra told BNR yesterday, this limit has effectively been 0 dollar during the past two weeks.

This is a very peculiar story indeed for two reasons:
  • First, when the 2 million Crimean people cannot access their bank accounts at Privatbank for a prolonged period of time, this might quickly lead to chaos, panic, looting and massive protests on Crimea;
    • That is unless Russia administers a substantial advance of at least a few hundred thousand Russian rubles to the Crimean inhabitants, in order to help them through the first months;
    • In the meantime, the country could try to find a definitive solution for the situation with Privatbank;
  • Second, an even more intriguing question is: What has happened with the billions and billions of Ukrainian Hryvnia’s, which were stashed on the Crimean accounts at Privatbank;
    • If you consider that the 2 million Crimean account holders could in average have an amount of money on their Privatbank accounts to the tune of $1000 - $1500 per capita, this means that at least $2 - $3 billion have seemingly vanished without a trace. And this $2 - $3 billion estimate of mine is probably a very conservative one;
    • Even if the money did not disappear, only a few inhabitants (i.e. the ones, who will ask for asylum on the Ukrainian mainland) will get their money back ‘in a couple of months’. What will happen with the rest of the money;
    • Personally, however, I don’t give a rat’s behind for the promise by the people of Privatbank, that the money will indeed be paid back in two months;
This situation with Privatbank is very worrisome for the inhabitants of Crimea (both Ukrainian and Russian) and it is one situation that could easily lead to massive unrest on Crimea. This is really in nobody’s interest, as it could spur further hostilities between Russia and Ukraine. 

Besides that, the whole situation with Privatbank smells like, feels like and looks like Russia in 1997, when the Russian Ruble crashed and massive sums of money were embezzled at Russian banks.

Here is a snippet of an older article, which I wrote about Sberbank:
However, this is not the only thing that is haunting this former Soviet statebank 'Sberbank'. In 1997, when the Russian ruble collapsed, countless Russians (among whom my wife) lost the lion share of their life savings, stashed at the Sberbank: sometimes for thousands of dollars per person in savings.

All these people received the crisp message from their local Sberbank: “We’re sorry, your money is gone! It has vanished! Next customer, please!” 

It will probably still take a few decades, before Sberbank loses this image of a bank which lost billions in embezzled money, as a consequencey of massive fraud and corruption. As it is like John Goldsmith stated in his wonderful book “Bullion”: “money does not vaporize, it just gets another owner”
I dare to say that we are looking at another situation of massive embezzlement of money. It is something that the western media and politicians should be keen about, due to the dire consequences that it could have for Crimea, the Ukraine and the rest of Europe, including Russia.


  1. You are right. It looks like we have lost all our money here in Crimea. :-(

  2. I'm very sorry to hear that, Alex. Like I said in the article: it happened to my wife in the nineties, that she lost a large amount of money, which was stashed at an official bank.

    My wife will probably never forget the emotionless face of the bank clerk, who told her that her money was gone (and that she could go to h*ll, as far as this bank clerk concerned).

    I hope that you are able to get all your money back and that the situation in Ukraine / Crimea stabilizes soon.
    However, I have worries about the situation there.

    Take care of yourself.

    Kindest regards,


  3. I am citizen of Ukraine and not leave in Crimea more then 2 years - but in past I made big mistake to open an account in that Gambling Machine Bank with famous name PrivatBank. I still can not understand -How is possible to steal more then billions dollars from habitant of Crimea just using some unacceptable explanation -due annexing of territory by Russia.........? We are still citizen of Ukraine - which reason not allow to withdraw our PERSONAL MONEY from other Ukraine territory ATM? Why that Privatbank not going to return deposits for customer? Who cover the owner of that Bank for discrimination people just for region of living? What about protection by Ukrainian Constitution -citizen property? Why civilized and developed country like EU and USA not do any efforts to stop stealing money from Privatbank client which has registration in Crimea region before?
    Angry PrivatBank client (and 790 000 customer with exactly same problem and opinion)!

    1. Thank you for this wonderful comment. As I already answered to the aforementioned Alex (first commenter), my wife has the same experience in the nineties.

      I can only hope for you that the situation in Crimea and the Ukraine stabilizes soon and that this case of the Privatbank can be thoroughly investigated. It is a disgrace that this bank took the life savings of so many people.