Lab Report

The End of Ukraine’s Balancing Act

Ukraine has long faced a choice: Should it cast its lot with Russia or the European Union? 2013 is shaping up to be the year Kyiv finally decides. The first in our series of Lab Reports.

Photo by SERGEI SUPINSKY/AFP/Getty Images
Photo by SERGEI SUPINSKY/AFP/Getty Images

Ukraine has trod a precarious political tightrope since it emerged as an independent country from the rubble of the collapsed USSR in 1991. Balancing between Western Europe and Russia, successive Ukrainian presidents have conducted their high-wire act with varying degrees of political acumen and cynicism, playing off the European Union’s desire for a closer relationship against Moscow’s efforts to bind the country into some form of Russian-led bloc. Current Ukrainian President Viktor Yanukovych‘s performance has been increasingly wobbly since his election in 2010, and this year could well see the acrobatics end with a painful plunge. But the West cannot look on with passive bemusement. Ukraine, which boasts a population of 47 million, is Europe’s largest country by territory, and its eventual choice will determine Europe’s geopolitical complexion for decades hence. (The image above shows a man clad in a Yanukovych mask protesting the customs union.) 

It’s getting harder for Kyiv to play the old game. Last month Russia slapped a $7 billion penalty gas bill on Ukraine, continuing its recent tradition of using crippling gas prices to push the Ukrainians into entering a Kremlin-led Customs Union of Russia, Belarus, and Kazakhstan. At the same time, the clock is ticking on the completion of a historic association agreement with Brussels called "a Deep and Comprehensive Free Trade Agreement." The agreement is actually more far-reaching than its title suggests: Aside from stipulations on trade, it also entails a commitment to extensive reforms to harmonize Ukraine’s economy with the European Union’s as well as to establish democratic standards in the spheres of politics, human rights, and the rule of law. Passing those tests would represent Ukraine’s most significant step towards eventual E.U. membership. (Needless to say, membership in the Customs Union — which consists entirely of authoritarian states — entails rather different preconditions, making it well-nigh impossible for Ukraine to choose both options at once.) 

Many experts originally predicted that an array of internal and external pressures would stifle the young nation almost at birth. Internally there are significant linguistic, religious, cultural, and ethnic differences between the central and western parts of Ukraine and its eastern and southern portions. Western (not under Russian or Soviet rule until World War Two) and central Ukraine are home to most Ukrainian-speakers (as well as to Ukrainian Catholics and the adherents of an independent Ukrainian Orthodox Church), while the eastern and southern areas contain a majority of Russian-speakers and followers of an effusively pro-Moscow brand of the Orthodox Church. Although Russian-speaking does not equate to pro-Russian, most of Ukraine’s estimated 17 percent ethnic Russian population, which naturally leans towards Moscow, is concentrated in the east and south, giving it a disproportionate share of political leverage in those regions. 

Kyiv has also had to deal with the destabilizing role played by Moscow, which has never reconciled to the notion of an independent Ukraine. The Kremlin has exploited Ukraine’s complex composition to sow division. Moscow’s policies towards Kyiv are crafted to elicit obedience and control rather than neighborly cooperation. 

Despite all this, however, Ukrainian statehood has proven remarkably resilient. Ukraine’s first president, Leonid Kravchuk, was the former Soviet republic’s chief communist ideologue — and yet ended up being the man who presided over Ukraine’s embrace of sovereignty. During his 1991 election, he garnered the support of pro-democracy and independence groups as well as a floundering Communist Party desperately searching for a way to survive. Kravchuk’s rival for the presidency in 1994, Leonid Kuchma, exploited the regional differences to win the presidential election twice — the first time relying on support from the communist nostalgists and Russian-speakers of eastern Ukraine, and five years later scaring the pro-democracy and pro-western Ukrainian nationalist minded electorate of central and western Ukraine to vote for him to ensure that his communist chief rival did not win. Kuchma made it a routine election-year practice to stir up ethnic, religious, and linguistic issues. 

As Kuchma’s tenure was ending in 2004, he chose a political strongman, Viktor Yanukovych, as his successor. Yanukovych hailed from Donetsk, eastern Ukraine’s most important industrial center. Kuchma’s rule was characterized by rampant corruption, and he needed a successor that would not attempt to prosecute him or go after the billions of dollars worth of formerly state-owned assets acquired by the president and his associates. In Yanukovych, who twice served jail sentences for street robberies, he identified a person who could look after his interests. 

Yanukovych was the chief representative of the Donetsk clan, an alliance of local bigwigs in the coal-rich Donetsk region, or Donbas, that is home to Ukraine’s most lucrative industries. (It is Donbas that produces most of Ukraine’s steel, the country’s biggest export.) The Donetsk clan rose to ascendance after a series of bloody gang-wars involving dozens of murders of criminals, businessmen and politicians during the 1990s. Rinat Akhmetov, now Ukraine’s (and perhaps Europe’s) richest oligarch, emerged from the turmoil as the Donbas’s most powerful business and political force. Despite considerable efforts to clean up his image, he continues to be dogged by his past acquaintance with criminals, some of whom met with spectacular and violent ends. 

Akhmetov groomed Yanukovych for a job as governor of the region starting in 1997, which provided a launch pad for national office when President Kuchma tapped him for prime minister. Akhmetov provided the huge sums of cash to build the Party of Regions (PoR), which promoted the Donetsk clan’s business and political agenda, into a powerful force. Though Yanukovych was head of the PoR, most observers believe Akhmetov pulled all the strings and expected to control Yanukovych after victory in the autumn 2004 presidential elections. 

During the election campaign that year Yanukovych enjoyed the backing of the government machine and a craven press. However, he faced an unexpectedly strong challenge from a former national bank chief and prime minister, Viktor Yushchenko, who had a reputation for integrity and campaigned on an anti-corruption platform. Yushchenko promised to jail the politicians and murky businessmen who had spectacularly ripped off Ukraine. 

As predicted, the government did use widespread rigging and intimidation to produce a Yanukovych win but was not ready for the massive street demonstrations by outraged voters that followed. Crowds, sometimes swelling to an estimated million, occupied the center of the Ukrainian capital, Kyiv, for weeks, camping in tents during bitterly cold snowy weather. The protesters kept up the pressure for two months of peaceful and colorful demonstrations that became known as the Orange Revolution until Ukraine’s supreme court ordered a fresh run-off between Yanukovych and Yushchenko, which the latter won handily. 

Yushchenko, and his firebrand co-leader of the Orange Revolution, Yulia Tymoshenko, were hailed as heroes in Ukraine and feted by the United States, the European Union, and many world leaders. With so much good will directed at the country, Ukraine looked set to solidify its pro-E.U. path and combat the corruption that permeated every sector of the country. 

Ukrainians are still waiting. Yushchenko reneged on all his key promises and squandered Ukraine’s best chance to break out of Russia’s orbit and emerge as an important European player on the world stage. Nobody was prosecuted for the massive election fraud; none of the politicians and businessmen he had repeatedly accused of being criminals were brought to court. Yushchenko was envious of Tymoshenko’s high standing in opinion polls, and the administration which had begun amidst such high hopes degenerated into a vicious personal battle between Yushchenko and Tymoshenko, the person without whose support he would never have won. 

The president blocked Tymoshenko’s plans for the government to buy back state assets purchased at fraudulent auctions and sell them in transparent ones to recoup hundreds of billions of dollars in lost revenue. Tymoshenko only managed to apply her plans to one steel company that had been sold by Kuchma to his son-in-law and Akhmetov for $800 million in 2004. The firm fetched $4.8 billion the following year at an honest auction. 

Transparency International’s Corruption Perception index ranks Ukraine as the 144th most corrupt country out of 176 surveyed. Corruption is pervasive at every level of business, politics, and the government bureaucracy (including law enforcement and the judiciary). It has eaten away at the delicate strands of decency, integrity, and respect that bind together a healthy society, producing a cynical environment where corruption is almost accepted as an inevitable part of life. The top politicians and bureaucrats controlling ministries not only tolerate corruption but actually foster it. Ukrainian police are instructed to demand bribes. The tax authorities threaten to close down businesses unless they pay bribes. Government contractors have to pay kickbacks. Shares of the proceeds are funneled upwards to the highest echelons. 

Corruption blocks economic development as potential foreign investors are put off by the prospect of being cheated by Ukrainian businessmen who enjoy political backing and could make nonsense of contracts by bribing judges. 

At a speech in the western city of Lviv during 2006 parliamentary election campaigning, Tymoshenko said she believed it was simpler for dissidents to retain their integrity during the harsh authoritarianism of Soviet times than in the comparative freedom of modern Ukraine. She said: "I think it is much easier to go to jail for years for one’s principles than to refuse a suitcase containing a million dollars in cash." 

Yushchenko tried replacing Tymoshenko as prime minister with Yanukovych (a man he had called a criminal), although he was later forced to reappoint her. By the time presidential elections came due again in 2010, little had been achieved in the way of badly needed reforms or the fight against corruption. Yushchenko’s behavior repelled the vast majority of his former supporters, who rallied around Tymoshenko as the pro-democracy, pro-E.U. presidential candidate. Yushchenko dropped out after the first round of the elections after securing a humiliating five percent of the vote, but in a final display of pettiness he refused to support Tymoshenko in the second, decisive round, which she narrowly lost to Yanukovych (once again running as the pro-Moscow champion of the Donetsk clan). 

While Yushchenko has been treated courteously by the Yanukovych government, Tymoshenko and Yuriy Lutsenko, who was minister of the interior in her government, have been imprisoned after rigged trials condemned by Western countries as "selective justice." 

According to one theory, Tymoshenko was jailed because she was the only political figure with enough authority, experience, and charisma to unite and inspire the opposition against the new Yanukovych administration, and as such she had to be neutralized ahead of important 2012 parliamentary elections In January 2013, the Ukrainian government, defying U.S. and E.U. pleas to release Tymoshenko, instead announced she would be charged with involvement in the 1996 contract killing of a parliament member and prominent Donetsk clan chieftain. November 2013 is viewed as the deadline for signing the landmark E.U. agreement, but the announcement of murder charges weeks ahead of a crucial E.U.-Ukraine summit scheduled for February 25 seemed calculated to test the European Union’s patience and sparked fresh criticism of an increasingly isolated Yanukovych. 

Morale plummeted within the pro-democracy camp after the Yanukovych presidential victory in 2010. Despite Yushchenko’s failings, the five years of his presidency saw Ukrainians grow accustomed to the kind of political freedoms, including a free press, that the citizens of neighboring Russia and Belarus could only dream of. Yanukovych, by contrast, swiftly revealed his authoritarian side upon assuming the presidency. He quickly began reversing those democratic gains, prompting criticism from the United States, the European Union, and others. 

Freedom House, which monitors human rights and democracy standards worldwide, lowered Ukraine’s standing from "Free" before Yanukovych’s presidency to "Partly Free" after his assumption of power. Growing protests showed that a majority of Ukrainians were attracted to democratic institutions even if many of their leaders were not. 

In contrast to Yushchenko’s timid use of presidential power, Yanukovych steamrollered measures through the legislature with little regard for parliamentary procedure. Hoping to curry favor with Moscow, he ended Ukraine’s attempts to join NATO, prolonged the lease of Russia’s Black Sea Fleet bases in Crimea, and pushed through legislation intended to give Russian equal standing to the Ukrainian language in many areas. The language issue has reignited all of Ukraine’s divisive internal tension, producing a dramatic boost for nationalists in last October’s election not only in their traditional western areas of support but elsewhere in the country, including Kyiv. 

Yanukovych had hoped for generous concessions on Russian gas prices that would help him arrest Ukraine’s plunging economy. Instead he received a small temporary price drop — further evidence, if any were needed, that President Vladimir Putin is unwilling to dole out favors for free. Putin offered to slash gas prices by nearly 40 percent from $430 per 1,000 cubic meters — but only if Kyiv accedes to the Customs Union. It also soon became clear that Putin personally loathed the Ukrainian president. 

The Ukrainian economy is in a parlous state. The International Monetary Fund has suspended loans to Kyiv because Yanukovych refused to make the belt-tightening measures recommended by the IMF in the fear that they would lose him votes. However, Moscow’s intransigence about gas prices could yet propel Kyiv towards the E.U. choice. Ukraine was considering reopening negotiations with the IMF after receiving Moscow’s $7 billion gas bill in late January. 

The country’s poor economic performance stands in stark contrast to the staggering growth in the wealth of Yanukovych and his cronies. One of the president’s sons has purportedly become a billionaire since Yanukovych took office. The other big winner of the new president’s term has been, of course, Akhmetov himself, whose companies have been allowed to purchase valuable state assets, fabulously boosting his companies’ value and increasing his personal wealth to an estimated $18 billion or more in 2011. 

Ministers owing allegiance to Akhmetov now occupy the largest number of cabinet posts after ministers loyal to Yanukovych himself. Vitaliy Sych, editor of Ukraine’s most prestigious political magazine, Korrespondent,  said: "Any individuals who, in the previous government were even somewhat independent have been removed, and most of the posts are in the hands of those known in Ukraine as "the Family," meaning Yanukovych’s acolytes who are dependent solely on his support and have made fortunes in business because of him in the last two years." 

Durign the parliamentary elections last fall, Yanukovych’s PoR party used government control of most TV, poll rigging (as documented by observers, including the Organization for Security and Cooperation in Europe), and other underhanded tactics to gain a less-than-resounding majority over a disarrayed opposition weakened by the imprisonment of its most potent leader, Tymoshenko. 

Yet Yanukovych’s control over the new parliament is fragile, and the first rowdy session began with fistfights between PoR members and the opposition, which wholeheartedly supports the E.U. choice (as do a plurality of Ukrainians, according to polls). The momentous issue could well re-energize those in parliament and the country as a whole who want to advance democracy. 

Several members of Yanukovych’s previous government resigned because they want an E.U. agreement. They accused powerful members of his new government, including Prime Minister Mykola Azarov, of favoring the Moscow-sponsored Customs Union. Some pro-Brussels champions remain within the administration, and fierce debate could open fissures within Yanukovych’s party. 

Azarov leans towards the Customs Union mostly out of a feeling of kinship for Russia and the old Soviet Union. But others believe their rapidly and opaquely acquired fortunes would be safer within the ambit of a Customs Union, far from prying E.U. eyes. 

Vitaliy Sych, the Korrespondent editor, believes Yanukovych’s eventual choice could depend on personal considerations. Yanukovych, says Sych, previously believed that the European Union viewed Ukraine as so important that it would overlook the persecution of opposition politicians and his other anti-democratic transgressions. In fact, however, Brussels is warning that Ukraine must measure up to Western standards and adhere to the reform programs outlined in the agreement. "Yanukovych has burned so many bridges with the West, and no civilized group of nations, such as the European Union, can ignore all the businesses and property that Yanukovych has snatched for himself," says Sych. "Therefore, I’m afraid Yanukovych may think he and his wealth will stand a better chance of survival if Ukraine joins the Customs Union." 

"Akhmetov and other Ukrainian businessmen need to expand into the European Union and they need access to western capital," says U.S.-born Ukrainian analyst Ivan Lozowy. "They know that if Ukraine joins the Customs Union, they will be transformed from big fish in their own pond into minnows in a Russian sea, and their assets will become prey for Russian businesses." 

In true Ukrainian fashion, Yanukovych will probably try to sit on the fence as long as possible. But the moment of truth is fast approaching.

Askold Krushelnycky is a British journalist and the author of An Orange Revolution: A Personal Journey Through Ukrainian History.