ANALYSIS
The clan from Donetsk
by Roman Kupchinsky
RFE/RL Poland, Belarus and Ukraine Report
CONCLUSION
In order to bring peace to the Donetsk region, President Leonid Kuchma appointed Viktor Yanukovych head of the Donetsk state administration in May 1997. Mr. Kuchma chose Mr. Yanukovych because he knew he was very close to Rynat Akhmetov, the real boss of Donetsk. With the death of Akhat Bragin, the Industrial Union of the Donbas was taken over by Vitalii Haiduk, the fuel and energy minister in Anatoliu Kinakh's and Mr. Yanukovych's cabinets.
In 1998, to further solidify his position as he was preparing for his re-election campaign President Kuchma came to Donetsk and, according to reliable sources, made the clan a very generous offer: if they stayed out of politics but supported him for re-election, he and the Kyiv government would not ask questions about how they made their money and what became of it. It was a gentlemanly offer and it was gladly accepted.
In 1999 Donetsk brought out the pro-Kuchma votes and dealt a devastating blow to the local Communist Party branch, considered by most to be the strongest political organization in the oblast. In the 2002 parliamentary elections, Donetsk repeated this feat and secured a majority of deputies for the pro-Kuchma For a United Ukraine bloc. It was the only oblast in Ukraine that gave them a majority.
The newly re-elected president told the Verkhovna Rada during his inaugural address that they would "see a new Leonid Kuchma," and as proof he nominated Viktor Yushchenko as prime minister. Mr. Yushchenko, considered by most to be a real reformer and pro-Western politician, was given a free hand to choose his Cabinet of Ministers. He then made Yulia Tymoshenko the vice prime minister for energy. When asked why he chose her, Mr. Yushchenko told the author of this article that she was the only one who understood all the intricacies of the energy sector in Ukraine.
Ms. Tymoshenko quickly went to work to try to bring some order to this sector, beginning with the gas traders and the leadership of Naftohaz Ukrainy, the state gas-trading company led by Ihor Bakai, a close friend and supporter of Mr. Kuchma.
At that time, Mr. Bakai was already suspected of siphoning off Russian gas from the pipeline going to Western Europe and then reselling this gas to Slovak, Polish and other gas traders. Mr. Bakai also owed millions of dollars to the gas companies Itera and Gazprom. At one point in his career, Mr. Bakai created a dummy corporation in Cyprus, named it Itera International, and sent money to it, claiming that he was repaying the real Itera in Moscow, but in reality he was putting this money into his own pocket. Mr. Bakai was forced to quit.
In November 2000, Ms. Tymoshenko went after the coal barons. Her immediate enemy in Kyiv became Serhii Tulub, the coal minister and a prominent member of the Donetsk clan. In the winter of 2000, Ms. Tymoshenko asked President Kuchma a number of times to remove Mr. Tulub, but the president refused to do so.
What Ms. Tymoshenko had done by going after the Donetsk coal barons was to stir up a hornet's nest. She was fired by President Kuchma in January 2001, and soon afterward the procurator general suddenly discovered that there had been grave irregularities at Unified Energy Systems of Ukraine when it was under Ms. Tymoshenko's leadership. Her husband was promptly arrested and thrown in jail, and a criminal case was opened against her. The government dropped the idea of trying to reform the Ukrainian coal industry.
Taking advantage of the Kuchma deal of 1998, the Industrial Union of the Donbas expanded. It presently consists of some 600 enterprises located in the three eastern oblasts of Ukraine: Donetsk, Dnipropetrovsk and Luhansk. Today, the union is considered by many to be the backbone of the Donetsk clan.
The main commodity in which the Industrial Union deals is coal, especially coking coal used in the metallurgical industry. According to the director of the ARC Co. of Donetsk, Ihor Humeniuk, his company and the Industrial Union control 75 percent of the coking coal mined in Ukraine. This coal supplies the giant Azovstal and Kryvorihstal steel works and keeps them under their control. As to the other companies under their control, the Industrial Union of the Donbas is still suspected of stripping their assets.
One of the secondary pillars of the Donetsk clan is the Zviahilskyi group. As was mentioned Yukhym Zviahilskyi returned to Ukraine from Israel alive and well, if somewhat poorer. He went back to being the director of the giant Zasiadko coal mine - the largest coal mine in the world - and soon went about setting up a semipolitical structure called the Donetsk Zemliachestvo, a type of fraternity of Donetsk-born men who were of some importance.
A partner in this group is the former mayor of Donetsk, Volodymyr Rybak. He is said to control the construction business in Donetsk. The Zviahilskyi group also controls the First Ukrainian International Bank (where Mr. Yushchenko's brother is a member of the board.)
The man whom most consider to be the head of the Donetsk clan is Rynat Akhmetov. A Tatar by nationality, he is also one of the founding members and an active sponsor of the Muslim Party of Ukraine. He is the founder of the Donetsk City Bank (DonGorBank) and has great influence over the activities of most major companies that form the Industrial Union of the Donbas. Mr. Akhmetov is the owner of 51 percent of the shares of the company Vizavi, one of the union's founding partners. He is considered to be close to Boris Kolesnikov, the deputy head of the Donetsk Oblast Council and director of the Kyiv-Konty company, and to Mr. Yanukovych, the new prime minister of Ukraine. He is said to be worth more than $1 billion.
By comparison, in a bold show of transparency, Mr. Yanukovych revealed his personal finances for 2001, declaring that his total income for the year was 21,363 hrv 35 kopecks ($ 4,272.60). This consisted of his salary (17,526.43 hrv) plus honoraria from his academic activity (2,548.92 hrv). He also received financial aid for the needy from the government in the sum of 1,288 hryvnyas. He does not own a car, a boat, or any property, and lives in a comfortable, yet not ostentatious, apartment measuring 108 square meters. He is just a regular civil servant.
Roman Kupchinsky is the author of RFE/RL Crime and Corruption Watch.
CONCLUSION
Copyright © The Ukrainian Weekly, January 19, 2003, No. 3, Vol. LXXI
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