ANALYSIS: Lazarenko investigation continues (02/07/99)

ANALYSIS

Lazarenko investigation continues

by Lily Hyde
RFE/RL Newsline

Despite an ongoing investigation into former Ukrainian Prime Minister Pavlo Lazarenko, who is suspected of corruption, the political party he created has nominated him to run for president in the October elections. Mr. Lazarenko was an ally of President Leonid Kuchma until the latter fired him in July 1997. Since then, he has grown increasingly critical of Mr. Kuchma, who is expected to run for re-election in the fall.

At the January congress, Mr. Lazarenko won the backing of his Hromada Party by a vote of 258-1. The party also gave Mr. Lazarenko permission to negotiate a coalition deal with other opposition parties before the election.

Meanwhile, the corruption case against Mr. Lazarenko continues. It garnered international headlines early last month when Mr. Lazarenko was detained by Swiss police as he attempted to cross the border from France using a Panamanian passport issued to a "Mr. Lopez."

In early December he was charged with laundering $20 million but was released two weeks later when an unknown benefactor put up $3 million in bail. If convicted of money laundering under Swiss law, he faces up to five years in prison.

Swiss authorities confirmed earlier this month that they would also continue helping Ukraine with its inquiries about Mr. Lazarenko's Swiss bank accounts. Mr. Lazarenko is accused by the Ukrainian authorities of taking millions of dollars out of Ukraine and channeling them to his private Swiss accounts via Russia's United Energy Systems (UES). That company was granted exclusive contracts to distribute natural gas to one-third of Ukraine during Mr. Lazarenko's term in office, from June 1996 to July 1997. In 1996 UES made a profit totaling $1 billion, but paid less than $6,000 in taxes.

Ukraine's Procurator General Mykhailo Potebenko has repeatedly said his office has enough evidence to charge the former prime minister, but he has declined to release details while Mr. Lazarenko is protected by parliamentary immunity. The Verkhovna Rada is due to consider lifting his immunity next month. That debate is expected to be heated.

Mr. Lazarenko has denied any wrongdoing and claims the allegations against him - both in Switzerland and at home - are part of a plot to discredit him and his party before the election. Meanwhile, the investigators continue to spread their net still further. Police in the Netherlands confirmed earlier this month that, at Ukraine's request, they have made inquiries into a Dutch company involved in a cattle-for-metal deal. Under that deal, put together by Mr. Lazarenko's close ally and fellow Hromada Party member Mykola Agofonov in 1995, large amounts of money allegedly ended up in Mr. Lazarenko's accounts.

There is widespread speculation that some of Mr. Lazarenko's political opponents continue to profit from the very gas monopolies that Mr. Lazarenko allegedly exploited. There has also been speculation that if Mr. Lazarenko is formally indicted, he may seek to bring down with him many of his former allies still in government.

Many political analysts consider the investigation into Mr. Lazarenko, not as a concerted effort to expose corruption, but as a power struggle within the so-called Dnipropetrovsk "clan" that still dominates the government. President Leonid Kuchma, former boss of the Dnipropetrovsk rocket plant PivdenMash, has surrounded himself with colleagues from the eastern Ukrainian city.

In 1996, President Kuchma asked Mr. Lazarenko to leave his post as chairman of the Dnipropetrovsk Oblast and to become vice prime minister. Mr. Lazarenko remained in government until President Kuchma fired him. He then established his Hromada Party and built it up into a significant political force with more than 40 seats in the Parliament. Its political platform barely differs from that of the National Democratic Party, the group most closely allied with Mr. Kuchma.

At his Kyiv press conference last month, Mr. Lazarenko insisted that he has not broken any Swiss laws. But he acknowledged he was a participant in a "dirty war" in which each side had overstepped a pre-determined line.

According to Viacheslav Pikhovshek, an analyst at Kyiv's Independent Center for Political Research, "this means that there was a deal" between Mr. Lazarenko and those still in power. He says the parties to the deal "agreed that they would not break specific rules - and these rules have nothing in common with the law."

So far, however, nothing has been proven in a court of law. Therefore, it is difficult for an observer to draw conclusions about the Lazarenko affair. But two things are clear: the investigation is adding to the perception that corruption plays a large role in business dealings in Ukraine, a perception widely seen as a key factor in frightening off foreign investors. And, it is adding to the cynicism with which many ordinary Ukrainians view their country's political leaders.

Lily Hyde is a Kyiv-based contributor to RFE/RL.

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