REDUCING MARKET DISTORTIONS FOR A MORE PROSPEROUS UKRAINE 17 International Airlines (UIA), which carries over 80 percent of domestic passengers and is the only airline on most domestic routes, though it also serves many international destinations. Two of the three largest players in the mining and steel markets are Metinvest and Interpipe Group, both of which are owned by oligarchs. The third, ArcelorMittal, is a former SOE that was successfully privatized in 2005 after an initial privatization attempt in 2004 was marred by a corruption scandal. Another oligarch controls a group of companies known as Ostchem, which supplies over 80 percent of the domestic market for several varieties of mineral fertilizer. Yet another oligarch owns Myronivsky Hliboproduct (MHP), the market leader in poultry production and sales. Business groups owned by Ukraine’s oli- garchs tend to operate across multiple markets and economic sectors, leading to signi昀椀cant multi- market contact among politically connected 昀椀rms and SOEs (Figure 16). FIGURE 16 Multimarket Contacts SOE Transportation Coal Real Estate Airlines and storage Steel Titanium Grain Ports Airports & Shipping Chemicals Meat Energy aerospace lines Iron ore Media Poultry Milk Fixed generation manufacturers Banking broadband Fertilizers Engineering Eggs Insurance Shipbuilding Sports Confectioneries Pharmaceuticals Oligarch Oligarch Oligarch Oligarch Oligarch Oligarch Other 1 2 3 4 5 6 Source: Author’s elaboration based on publicly available information. Note: The markets covered by this 昀椀gure include the main product markets with SOE and/or oligarch presence. Together, SOEs and politically connected 昀椀rms are the main players in all productivity- enabling sectors of the Ukrainian economy. SOEs operate alongside politically connected 昀椀rms in least 13 markets, including banking, transportation, mining and quarrying, energy, and agri business. The relationship between SOEs and politically connected 昀椀rms varies widely from market to market. For example, the energy-generation subsector includes at least one SOE and at least one 昀椀rm owned by each of the country’s four most powerful oligarchs. All of the country’s four biggest banks are now SOEs, after the largest, PrivatBank, was expropriated from an oligarch in 2016 due to alleged risky lending practices. In the oil and gas subsector, the government owns 51 percent of the joint stock company Ukrnaftaone, one of Naftogaz’s main production and re昀椀ning subsidiaries, while an oligarch is a minority