1 – Ukraine. Survival of the richest
BSSB.BE ecfr.eu 26.04.2016
Ukraine has done little to implement the extensive anti-corruption reforms that the country desperately needs – and the new government offers little hope of a fresh start.
- The biggest obstacle to reform is the close ties between the oligarchy and the corrupt political class. Kyiv should focus on cutting these links, rather than dismantling the oligarchy itself.
- The oligarchy is kept in power by a series of vicious circles: the need for vast sums of money to win elections, the network of political appointees funnelling cash into campaigns, and the placing of allies in government.
- Europe is in a strong position to help break these circles, especially as Ukraine lacks alternative allies. Europe should make clear that it will back Kyiv if the oligarchs work to destabilise the government, or even turn to Russia.
- The EU should coordinate more closely with local activists, take a tougher line with the leadership, and push for reform to the justice system and party finance. It faces a difficult balancing act after the Netherlands vote, but shutting down the hope of closer ties with the EU would disempower pro-reform forces.
The appointment of Volodymyr Groisman as Ukraine’s youngest-ever prime minister does not mark the end of the current political crisis, but only its midpoint. His predecessor, Arseniy Yatsenyuk, steered through some important reforms when the country was facing imminent military defeat or economic default, but had become a symbol of under-achievement – the face of the old order creeping gradually back to its previous dominance.
It is unlikely that his successor will do any better, and he could do a lot worse. Europe should make use of its leverage to push the new government not to roll back reforms, and caution it against nationalist or other diversionary rhetoric that seeks to mask inaction.
Ukraine’s leaders talk about reform, but increasingly aim only for stability. The government has claimed that it cannot afford a “big bang” approach – tackling corruption head-on through a radical reform programme – but, as leading MP Serhiy Leshchenko remarked in September 2015, “the evolutionary approach isn’t working”.
1 The assessment of Mikheil Saakashvili – the former president of Georgia, now serving, controversially, as governor of the Ukrainian province of Odesa – is that “limited reforms were bound to fail if the entire system didn’t change as well. Isolated reforms would be nullified by a pervasive and overwhelming culture of power abuse”
2 Tokenistic or isolated reforms don’t work. Ukraine needs a real “kamikaze government” (Yatsenyuk’s term for doing the right thing at all costs, rather than bending to win short-term popularity) – not one that simply uses the term for PR purposes. A patchwork coalition Part of the reason for this slow progress is that there is no single group or ideology guiding Ukraine’s embryonic reform process.
Compared to Georgia, which imposed relatively successful anti-corruption reforms in the 2000s under Saakashvili, Ukraine lacks a substantial reformist elite. Ukraine is in any case bigger and more diverse, and reform cannot simply be imposed from the top down – the presidency has been much weaker since the constitution of 2004 was restored after the February 2014 revolution.
3 But the various groups did not necessarily interconnect or reinforce one another. This also meant that there was 1 Brian Bonner, “Poroshenko–Yatsenyuk going way of Yushchenko–Tymoshenko in corruption fight”, the Kyiv Post, 13 September 2015, little in terms of reserve strength; there was no backbone to rely on when the going got tough.
(However, this type of patchwork process may be better than the Russian model of change by trauma, where events like the arrest and imprisonment of oligarch Mikhail Khodorkovsky in 2003 are used to reshape the political economy, but this remains to be proven.)
The main forces driving Ukraine’s reforms unfortunately have little to do with the concerted will of the Ukrainian authorities. They are driven, in the first place, by sheer economic necessity and the consequent dependence on Western financial assistance. But the collapsing economy bottomed out in late 2015, and Ukraine has been able to scrape along even after the International Monetary Fund (IMF) began delaying loan disbursements after August of that year.
A second factor is what locals call the “sandwich” – the combination of international pressure with domestic lobbying by a vigorous civil society and an NGO sector, which work together to push the authorities to act.
The oligarchy as an obstacle to reform Ukraine suffers from many types of corruption, but the inter-penetration of the corrupt political class and super-rich oligarchy is the main obstacle to reform. The oligarchy’s power comes first of all from the sheer concentration of wealth in its hands. Just before the Euromaidan protests began, in November 2013, it was calculated that the assets of Ukraine’s 50 richest individuals made up over 45 percent of GDP, compared to less than 20 percent in Russia and less than 10 percent in the US.17 An imperfect would-be democracy like Ukraine, where many institutions are little more than a façade for the “deep state”, is arguably the perfect arena for oligarchic influence; even more so than many autocracies in the region.
The government rated a dismal -19.5, Russia -10.7, and the president -2.3; “oligarchs” were near the bottom of the list at -44. The “countries of the West”, meanwhile, were rated at +9.1.18 It is increasingly recognised in Ukraine that even reforms to the security sector – such as the push to create a proper army instead of relying on militias – require dealing with the oligarchy, and the war in the east is no longer accepted as an excuse for inaction.
- When asked to identify “the main factors that have led to the current socio-economic crisis in Ukraine”, 72.1 percent cited “the corruption of power and the embezzlement of public funds by power-holders” and 54.4 percent “the oligarchisation of the economy, the appropriation of profits by oligarchs and the export of funds abroad”;
- while only 30.3 percent blamed “military events in the Donbas”. Ukraine has invented a word – “de-oligarchisation” – though as yet it is more rhetoric than reality. On the ground, little has been done to challenge the power of the oligarchy at its source. As a result, Ukraine’s new leaders have been accused not just of tolerating the oligarchic system, but of participating in it.
Ukraine deserves credit for carrying out many reforms since 2014 that have been little noticed in the West, but it has yet to tackle the inner workings of the deep state. The oligarchy remains intact, and there has been no real change in those named on the “rich lists” popular in the Ukrainian media.
According to a key figure in the presidential administration: “Economic and fiscal emergency is the main factor driving our reforms”, not a long-term structural plan.19 To be fair, Ukraine has done some of the not-so-easy work. Macroeconomic stabilisation is within sight, and the economy may recover in 2016, if Russia allows it to.
But there has been little real systemic change. According to a leading reformist member of parliament: “The oligarchic system is the great iceberg in Ukrainian politics. Warmer waters have maybe melted it by 30 percent, but it is still dangerous.”20 And if the economy does recover, the pressure to change will ease off.
The dangers of this slow progress are political as well as economic. Russia is banking on more than just the occupied areas of the Donbas to expand its channels of influence with- 18 “Reforms in Ukraine: Public Opinion” (in Ukrainian), Democratic Initiatives, September 2015, available at http://dif.org.ua/ua/publications/press-relizy/reformi-vukselennja.htm (hereafter, “Reforms in Ukraine: Public Opinion”). 19 Author’s interview with Rostyslav Pavlenko, deputy head of the presidential administration, 9 September 2015. 20 Author’s interview with Leshchenko. in Ukraine; the public mood is febrile, and many oligarchs could easily be co-opted by Russia if the mood changed.
Geopolitics Nations Crisis
- eurasiareview.com – Is Moldova a twin of Ukraine? – The political crisis in Moldova goes back to 2005 when the country had become a part of the Associations Agreement with the European Union. According to Iuri Vitneanschi, a city council member, “the Moldavian people were brainwashed by the pro-European propaganda while the government announced a pro-European political course for the country”. However, the reality the reality proved to be different from promising slogans.
- voltairenet.org/ – Multipolar world with media hegemony? – States struggling against imperialism are probably not sufficiently aware of the importance of having non-aligned media. Yet, obviously, Russia Today, Press TV, Telesur and Al Mayadeen are better at defending freedom than other weapons. For these are indeed weapons we are talking about. The first magic tool that the US uses for world domination is the dollar. The word “magic” is not just hyperbole; the dollar is indeed a magical creation since the Federal Reserve can create unlimited amounts in its computers, and the world sees these dollars as having an effective value, with an ulterior motive: petrodollars.
- stratfor.com/analysis/ – Who will get Moldova. A Roulette Wheel – Like Ukraine, Moldova is both weak and divided. Unlike Ukraine, Moldova does not have traditional or ethnic ties to Russia; it is ethnically and linguistically Romanian. This, along with Moldova’s small size and strategic location, is a main factor in the weakness of the state and its ability to balance between external power