FACES AND PLACES: Kuchma's garage sale (03/04/01)

FACES AND PLACES

by Myron B. Kuropas

Kuchma's garage sale

President Leonid Kuchma is having a garage sale. All Soviet-era enterprises and industries that Ukraine's oligarchs and government red-tape dispensers have not been able to pilfer thus far are on the auction bloc and going fast. And the winner is (drum roll, please): Russia! What a surprise.

We now know that Presidents Kuchma and Vladimir Putin discussed the production of intercontinental missiles at the same Dnipropetrovsk factory that our Leonid managed during Soviet times. Questioned about this development by a U.S. Embassy official, National Security and Defense Council Secretary Oleksander Marchuk was adamant. "It is absolutely not so," he thundered. Right.

And now we learn from The Economist that "Russian investors have snapped up a bunch of important industrial companies including the $70 million sale of 68 percent of the Zaporizhia aluminum smelter to the Russian car-maker Avtovaz." In addition, Alfa Group, a well-connected Russian holding company, has bought a 67 percent share of Ukraine's LiNOS oil refinery, and a television and radio station. Alfa Group also controls Novyi Kanal, a Ukrainian TV station, and Nashe FM, a radio station. Kyiv correspondent Charles Clover informs us that the Avtovaz purchase was fiercely opposed by Prime Minister Viktor Yuschenko who favored KrAZ, a Ukrainian firm. Unfortunately, KrAZ was not able to provide an adequate bank guarantee.

"Russian business began a serious push into Ukraine last year," reports Mr. Clover from Kyiv, "with the flagship privatization of the Mykolaiv alumina refinery by a subsidiary of Russian Aluminum, now the second largest aluminum group in the world. Last year Russian oil giant LukOil solidified control over the Odesa oil refinery with a large share purchase, and started a joint venture with the Oriana petrochemical plant, one of the largest in Ukraine."

Whereas Western investors "tend to run away screaming when confronted with Ukrainian factories and bureaucrats that plague them, Russian companies have the political clout, the experience and the access to cheap energy to make them work better - or at least less badly. Although the Ukrainian government has tried to block some of these deals, few fell in a position to quibble."

In the meantime, the West appears to be giving up on Ukraine, especially the banking sector. The Netherlands-based Rabobank liquidated its fully owned Kyiv International Bank last October. In February, France's Société Générale closed its doors. The combined profits of Ukraine's 153 commercial banks fell 97 percent last year, according to Vitaly Sych, a Kyiv Post staffer. As Western banks move out, Russian banks move in to offer financing for Russian investors. Russia's Alfa Group last year purchased 76 percent of the KyivInvestBank, now renamed Alfa Bank-Ukraine.

All of this is very legal and easy for the Russians because Mr. Kuchma has a special garage door for Russians only. Russia is determined to keep Ukraine within its sphere of influence - not by military might as in the past, but by economic power and political romancing. Mr. Kuchma's participation in eight presidential summits with Mr. Putin last year suggests that he is smitten by Moscow's siren song.

Things are so bad in Ukraine that the United States, which has provided Ukraine billions of dollars in economic aid, may soon impose trade sanctions. The U.S. may also block Ukraine's membership in the World Trade Organization. President Kuchma's inability to prevent, as promised, the rampant piracy of audio-video products is part of the reason.

Why is Mr. Kuchma storing more of his eggs in Moscow's basket? I believe there are three reasons. The first is that it's easier for him to deal with Russians than with Westerners. Westerners are more honest because corruption is limited by their nation's laws. In contrast, the old nomenklatura mind-set and network (you scratch my back, I'll scratch yours) is alive and well in Russia and the former USSR. Our Leonid speaks fluent Russian, but no English. It's easier for him to communicate, literally and culturally, with old buddies in the former Soviet Union. Their friendship is an alliance of greed.

A related reason for Mr. Kuchma's flirtation is that the opportunity for lining one's pockets are far greater when dealing with Russia (barter is the preferred method of exchange) than with the International Monetary Fund or the United States. The West demands a certain degree of accountability.

A final reason is that Mr. Kuchma knows that Western nations have grown weary of Ukraine's endless foot-dragging, bribe taking, un-kept promises, crooked government officials, parliamentary skullduggery and unprincipled corruption. The rapid decline of a free press, the Gongadze murder, Mr. Kuchma's ham-fisted response to demonstrations (in time-honored Soviet bombastic rhetorical style, he warned of "anarchists" and "fascists" and blamed Ukraine's "enemies" for his problems), as well as his ministerial musical-chairs response to governmental failure, are just some of the reasons Mr. Kuchma has squandered any moral capital he may have enjoyed when he first took office. Only Russia understands his woes and offers a "helping hand."

At a time when even Ukraine's great white hope, Viktor Yuschenko, appears to have been co-opted by the Kuchma cabal, it is refreshing to read the "open letter" recently circulated on the Internet by courageous young members of the intelligentsia and students from all regions of Ukraine. Among other things, the letter clearly declared: "We do not want to live in a nation where the corrupted leadership, along with the president, are remaking Ukraine into a police-state in order to preserve their present privileged positions; we do not want to live in a nation where the people are once again afraid to speak the truth and to believe in justice; where everything can be bought and sold, including judges and politicians, principles and positions, the voice of the electorate, as well as word and thoughts... and where dissidents are forced to leave the country or be relegated to a political, social and cultural wilderness; we do not wish to be, nor will we be, silenced. We have seen where silence and passivity have led in the past. The biggest crimes in history were committed during a time of public apathy."

Brave words, brave students. Pray for them. Pray also for a Ukraine without Kuchma.

Myron Kuropas' e-mail address is [email protected].

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