Pro-Russian militiants attack a branch of Ukrainian bank Privatbank in Donetsk last month

The blue shield and gold trident painted on the façade of an imposing building on the banks of the Dnipro river depict Ukraine’s national symbol, and are a reminder that the eastern city of Dnipropetrovsk has chosen its allegiance.

Capital of a province governed since March by the billionaire oligarch Igor Kolomoisky, the industrial city is now held up as a model of how to stem the tide of pro-Russian separatism threatening to tear apart Ukraine since the toppling of former president Viktor Yanukovich in February.

Mr Kolomoisky has employed a combination of incentives, negotiations and intimidation to confront the separatists. A sampling of that was in evidence just a few kilometres from the office bloc, on the road towards the region of Donetsk, where local activists have set up one of dozens of checkpoints they man around the clock – some armed with hunting rifles, others only with clubs.

“We help the police stop cars with Russian symbols and look for weapons inside,” says Zhenia, a 34-year-old volunteer.

Poorly paid and discredited, the police force disappeared in other parts of the east, facilitating the seizure of government buildings by separatists and aggravating the most alarming east-west crisis since the end of the cold war.

Zhenia insists he is motivated by patriotism – though bounties arranged by Mr Kolomoisky’s government also help. “You get $1,500 for the capture of a kalashnikov (rifle), and $10,000 if you catch a ‘terrorist’,” he explains.

A source close to the governor confirms the authenticity of a leaked audio recording of a telephone conversation in which he warned a pro-Russian separatist leader from Dnipropetrovsk that a $1m bounty was put on his head by the local Jewish community after one of their men was killed by separatists in Donetsk. The source says the warning was justified as necessary “psychological pressure” to counter the tactics of the separatists and the heavy Russian propaganda.

Controversial as his methods may be, Mr Kolomoisky, a prominent member of the country’s Jewish community, is now feted by pro-Ukrainians in the east. “What’s happening in Donetsk is a real mess but here Kolomoiksy stopped the separatists,” says 19-year-old Natalia, an architecture student in Dnipropetrovsk.

The governor’s allies are being posted to local government positions in other Russian-speaking regions while villages on the border with Donetsk are asking to be incorporated within the 3.2m population region of Dnepropetrovsk in hopes of keeping safe.

The oligarch, who co-owns Ukraine’s largest commercial bank and a portfolio of assets spanning from ferroalloy businesses in Dnipropetrovsk to ore mining, may be driven by the need to protect his own business interests. But those who know him say that he is also a passionate believer that Ukraine’s future lies with Europe, and that Russia’s influence must be checked.

At the governor’s office, Borys Filatov, a deputy, explains that after large pro-Russian protests led to clashes at government buildings earlier this year, officials identified a wide spectrum of pro-Russian groups – from communist to fascist – and sought to deal with each separately. A few hardcore pro-Russian activists were detained and later put on house arrest. Most others were appeased.

“The communists were upset that Lenin statues were being defaced and we addressed that. A group of ex-Soviet officers were concerned about the issue of how their version of second world war history was being challenged by Ukrainian nationalists; we gave them the opportunity to go to schools and give lectures to students,” Mr Filatov says.

On the security front, Mr Kolomoisky’s team set up a special police force known as “the Dnipro battalion”, which now operates beyond the borders of Dnipropetrovsk, as well as a “territorial self-defence group” comprised of ex military men. Established under the interior and defence ministries, their salaries are partly paid by local businessmen.

“The problem left over from the old regime is that most government salaries were low and so employees relied on kickbacks and corruption,” Mr Filatov says. “For the police to function properly they need to get paid adequately.”

For many residents of Dnipropetrovsk, Mr Kolomoisky’s activism and tough anti-Russian stance – he has blasted Vladimir Putin as a “schizophrenic of short stature” – came as a surprise.

Like other oligarchs who prefer to exert influence from the shadows, he had long shied away from open participation in politics and resided mostly in Geneva. But as Russia moved to annex Crimea in March, Kiev’s pro-western government turned to influential oligarchs to take up governor positions in their native regions in a desperate bid to consolidate control over the Russian-speaking east.

Mr Kolomoisky obliged. Analysts contrast his decisive approach with that of Rinat Akhmetov, the Donetsk oligarch whose hesitancy has been blamed for worsening unrest.

Dmitry Pogrebov, a businessman in Dnipropetrovsk, says Mr Kolomoisky met with representatives of large factories that sell most of their production to Russia and fretted about the loss of their most important market.

“He told them, ‘who’s to blame if you rely only on the Russian market?’ He said, ‘if that’s how you do business, then you should close down your business,’” Mr Pogrebov recalled.

Through Mr Kolomoisky, Dnipropetrovsk is perpetuating – if not reinforcing – the same perverse marriage of money and politics that has long undermined the Ukrainian state. Creating new security structures financed by business also raises questions of accountability and loyalty.

But east Ukrainians threatened by the separatists say that at a time when the state’s influence has eroded and civil society remains weak, oligarchs and businessmen have no choice but to fill the void. Mr Pogrebov said: “If the previous government sabotaged the police and law enforcement who will protect us if not us?”

This article has been altered to reflect the fact that Mr Kolomoisky’s assets do not include Australian businesses.

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Letter in response to this report:

A man who kept his word / From Mr Michael Garin

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