The Baltimore Sun
By Will Englund
Sun Foreign Staff
April 29, 2001

At the same time, Russian investors have been snapping up one major Ukrainian company after another - seven in the past several months - in privatisation deals that could be described as murky at best.

This year, the Zaporizhe aluminum plant was sold off to Avtovaz, a Russian company, for $69 million, even though a Ukrainian group had offered $101 million. Yushchenko pushed for the higher offer, but Kuchma steered the sale into Russian hands. Viktor Pinchuk, a suave member of parliament who controls a television and industrial empire and is the common-law husband of Kuchma's daughter, had lobbied for the winners.

The Russians, said Pavlo Movchan, an opposition member of parliament, have become Kuchma's guarantor.

Over a glass of grapefruit juice in the serene surroundings of the Grand Club, across the street from parliament, Pinchuk argued that Ukraine has no reason to fear Russia, which he said is "an incredibly strategic country for us."

To the contrary, he said, it is Western organizations that are pursuing a "planned action" to disrupt Ukraine. He offered no evidence to support this contention, but he said there are "proofs" to back him up.

Turning against U.S.

Ukraine's press, which is almost entirely controlled by either the government or such tycoons as Pinchuk, has been vilifying the United States recently - where once America could hardly do any wrong.

The attacks raise the specter of an America dictating every move to subservient Ukraine, although, if anything, Western involvement in Ukraine is falling off. Western businesses have been shut out of all major privatization deals. "

"The coming of Western investors would have meant investments in these industries," said Sergii Rakhmanin, of the independent weekly newspaper Zerkalo Nedeli. "The coming of Russian investors is likely to mean the stripping of assets."

What Yushchenko accomplished in his 16 months as prime minister was this: He restructured the foreign debt, paid down the domestic debt, eliminated arrears in wages and pensions, oversaw the first solid growth of Ukraine's economy since independence a decade ago, pushed hard for transparent finances in the energy sector and reined in tax breaks for favored companies.

"Pinchuk elaborated on that theme. Yushchenko's whole problem, Pinchuk said, was that he tried to run the government without consulting the oligarchs, who had backed Kuchma. Yushchenko, he said, seemed unable to tell the difference between "criminal oligarchic gangs" and decent businessmen who had been forced to make up the rules as they went along in Ukraine's transition to capitalism.

"Who are the oligarchs?" Pinchuk asked. "I'm called an oligarch. I'm an industrialist, I own many enterprises. Really, I consider myself a reformer. I need democracy, I need transparency to prosper."

But Yushchenko, he complained, talked about the oligarchs as if they were all criminals. Is it any wonder they turned on him? With Yushchenko's mistakes to learn from, Pinchuk said, economic and democratic reform can now move ahead even faster.

Movchan, who is the founder of a Ukrainian nationalist party, disagreed. "What is in store for us?" he asked. "Inflation. We'll have to pay back debts that Yushchenko renegotiated. Salaries will be delayed again. The foreign debt will grow. The domestic debt will grow. All this will weaken the president. Then we'll hear the slogan, 'Russia is our only savior.' And then they'll say our salvation is in a referendum for a new union with Russia." "

Opportunity for Russia

Markian Bilynskyj, director of field operations for the U.S.-Ukraine Foundation, expects that parliament will be unable to agree on any replacement for Yushchenko, which will likely mean an acting prime minister (or prime ministers) of diminished authority, and political trouble.

"And any upheaval or political crisis is a good opportunity for the Russians to get involved," said Mikola Tomenko, director of the Institute of Politics. "I think their basic goal - and this is something they've been proclaiming ever since Putin came to power - is the economic privatization of Ukraine" - that is, in Moscow's favor.

"This will mean the end of our independence," Lutsenko said. The corrupt and arbitrary bureaucracy, largely a holdover from the Soviet era, goes along on inertia, Bilynskyj said, leaving Ukraine with "a semblance of an authoritarian regime." It's a regime that by its nature tends to drive away Western engagement, and, without much direction otherwise, finds Russia to be a compatible fit.

Some of Kuchma's critics believe that Ukraine is in danger of being turned into a genuinely authoritarian country at Moscow's behest, but Bilynskyj thinks the Russians are subtler than that. "Russia," he said, "would like to see a prosperous, formally independent Ukraine - but a Ukraine that defers to Russia."

Copyright © 2001, The Baltimore Sun

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