EDITORIAL: Profoundly threatening (03/19/00)

EDITORIAL

Profoundly threatening

By all accounts, Viktor Yuschenko did yeoman's work and for years was excellent at his job as Ukraine's chief banker. By all accounts, he's really bright, really committed, incorruptible and, on top of that, a really good guy. When he was selected to be Ukraine's prime minister several months ago, U.S. administration officials were delighted - he promised reform, and accountability - and with the newly formed pro-reform majority in Ukraine's Parliament, headed by the pretty much indomitable Ivan Pliusch, the horizon looked bright: Ukraine would begin to pull out from under the weight of economic stagnation, financial corruption, political paralysis.

Nonetheless, soon after his appointment, allegations began to appear in the media that in 1996-1998, during his tenure as the head of the National Bank of Ukraine (NBU) International Monetary Fund (IMF) monies had been misused. After a few weeks, the accusations quieted down.

Then, boom! Late in the day on Tuesday, March 14, the IMF released a short four-page report, "Allegations about the use of Ukraine's international reserves." The actual report is medium-mild in its tone, briefly outlining examples of when and how the IMF believes that Ukraine inflated the amount of its foreign currency reserves in order to convince the IMF to lend the country more money. There are no accusations of personal enrichment.

Though the government of Ukraine has called the allegations "serious," Prime Minister Yuschenko also referred to earlier PricewaterhouseCoopers audits of bank operations that cleared the NBU. First Vice Prime Minister Yurii Yekhanurov noted that the audit "testifies that there was no breach on the Ukrainian side, but disinformation in different publications continues."

Indeed, the flurry of media activity prior to the release of the report and immediately after, as well as strong reactions from U.S. government officials and congressmen made it sound as though, suddenly, Prime Minister Yuschenko and the National Bank of Ukraine were Ali-Baba and the 40 Thieves.

From Boy Wonder to Bad Boy in a matter of weeks. What happened?

Bad timing, say those close to Capitol Hill. It's not Ukraine or Yuschenko as such. The corruption scandal last year with Russia was worse, much worse, but that was last year's news and that IMF scandal spawned investigations that continue.

Bad timing, add political insiders. This is an election year. The Clinton administration is doing everything to avoid accusations of being complacent in the face of financial wrongdoing in order to help Al Gore.

Bad timing, say those close to the IMF. Nothing personal, but the IMF is under immense pressure to clean up its act in wake of the Russia scandal. What may have been dismissed as "inappropriate" behavior before is now a "violation" and worse. Maybe he's a good guy that Yuschenko, but wrong place, wrong time.

As the new prime minister faces allegations in the West, he also is being assaulted at home. Here, however, it is personal. Ukraine's Communists, who hate the West in general and the IMF in particular, were pleased to have Mr. Yuschenko vacate the powerful banking position, and now are snipping at him from all sides. Furthermore, his reforms are profoundly threatening to the financial oligarchs and their clans - those who got rich on corruption. They, too, are on the offensive against Mr. Yuschenko, using the media they control to undermine his authority. And he is profoundly threatening to the powers in Moscow, who see his policies to lessen Ukraine's dependence on Russia as unacceptable.

In the end, the NBU transactions with IMF funds may not measure up to the implication of "corruption," but much political and economic activity in Ukraine did, and still does, beginning with the President Leonid Kuchma's inner circle. Unfortunately, this leaves limited sympathy in the West for the prime minister. A good guy - Mr. Yuschenko, nonetheless, is being sucked down in a nasty political undertow. And whose purposes does this serve?

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