ANALYSIS: Rifts emerge among Ukraine's ruling elite (02/08/04)

ANALYSIS

Rifts emerge among Ukraine's ruling elite

by Taras Kuzio
RFE/RL Newsline

Despite the Ukrainian Constitutional Court's December 30, 2003, decision clearing the way for President Leonid Kuchma to run in the October presidential elections, Mr. Kuchma is unlikely to contest that ballot. The most convincing explanation for the Constitutional Court's decision - on the grounds that he is in his first term under a new constitution - arguably lies in the executive branch's fear that the pro-presidential elite might split into rival factions in the course of the election campaign.

Socialist opposition leader Oleksander Moroz and Russian-speaking liberal Volodymyr Malynkovych expressed that argument in Ukrainska Pravda on January 2. Both men said they believe the threat of a Kuchma candidacy will serve to deter any pro-presidential groups from "jumping ship."

A second way of accomplishing that goal is to undo or prevent bridges being built between the more moderate opposition leader Viktor Yushchenko, who consistently leads in the polls, and eastern Ukrainian oligarchs. The standoff that emerged during Mr. Yushchenko's visit to Donetsk on October 31, 2003, was an attempt by the presidential administration, whose secret instructions to that effect were leaked to opposition media, to pit Mr. Yushchenko against the Donbas clan.

Presidential-administration chief and Social Democratic Party-United (SDPU) leader Viktor Medvedchuk is as opposed to Mr. Yushchenko becoming president as he is to Prime Minister Viktor Yanukovych, who heads the Donbas party of power, Party of Regions, becoming president. The real power behind the Donbas clan is Renat Ahkmetov, Ukraine's wealthiest oligarch, who is reported to have held secret meetings with Mr. Yushchenko.

The same holds true for Mr. Medvedchuk's attitude toward Viktor Pinchuk, the wealthiest oligarch in the Dnipropetrovsk clan's party of power, Labor Ukraine. Mr. Medvedchuk must tread more carefully with Mr. Pinchuk, however, as he is Kuchma's son-in-law.

The Donetsk and Dnipropetrovsk groups of oligarchs are striving to achieve respectability as capitalist entrepreneurs after reaching the conclusion that the "robber-baron" capitalism of the 1990s will end when the Kuchma era is over. Becoming "respectable" will provide insurance, they believe, against the likely redivision of assets among the elite after President Kuchma leaves office. Some members of the Ukrainian elite, therefore, understand that times are changing; Verkhovna Rada Chairman Volodymyr Lytvyn called in September 2003 for Messrs. Medvedchuk and Akhmetov to return their overseas assets to Ukraine.

This realization of the need to move with the times - which also took place in Russia in the transition from the ear of Boris Yeltsin to that of Vladimir Putin - is not shared by those oligarchs aligned with the SDPU, who prefer to continue to play by the old rules. Mr. Medvedchuk plays a similar role to Russia's former "gray cardinal" under President Yeltsin - Boris Berezovskyi. It is no coincidence that Mr. Medvedchuk and the SDPU have been at the forefront in constitutional changes since they see President Kuchma continuing in power as the best guarantee of their continued influence and power.

The oligarchs ready to change are not necessarily hostile to a Yushchenko victory, as he has ruled out reopening privatizations from the 1990s. If Mr. Yushchenko is elected president the SDPU will lose the most from any re-division of assets because of its unwillingness to play by the new rules and because of deep animosity between Messrs. Yushchenko and Medvedchuk and between the SDPU and Our Ukraine.

Oleksander Zinchenko, the former deputy head of the SDPU, holds views similar to those of Mr. Pinchuk. Both understand that the transition from oligarchy to gentrification requires a divorce of politics from economics. This is a step that Mr. Medvedchuk categorically rejects because he believes that economic power can be maintained only by remaining at the hub of politics. Only the Zinchenko-Pinchuk view is not threatened by a Yushchenko victory and leaves open the possibility of future progress toward Ukraine's democratization.

Tension among the pro-presidential elite is as severe as that between Mr. Medvedchuk and the opposition. On December 19, 2003, The New York Times published a full-page advertisement attacking Mr. Medvedchuk. Payment for the $125,000 advertisement came from the little-known Friends of Ukraine (FOU), who are clients of the Washington-based lobbying firm Barbour, Griffith and Rogers. The mid-December advertisement defended Russian businessman Konstantin Grigorishin, who refused in 2002 to transfer his assets in Ukrainian regional electricity suppliers to Mr. Medvedchuk. Mr. Grigorishin was subsequently arrested on seemingly trumped up charges, but was supported by Mr. Pinchuk, who intervened to get him released. Mr. Grigorishin is thought to be behind the creation of the FOU. The FOU is promising further advertisements during the course of the election campaign.

Messrs. Grigorishin and Pinchuk have lobbied President Kuchma on behalf of Unified Energy Systems (UES) Chairman Anatolii Chubais's business plans in Ukraine. Mr. Chubais, whose company controls half of Georgia's and 80 percent of Armenia's electricity sector, purchased majority shares in 10 of 27 regional electricity companies in Ukraine in December 2003. The move was backed by Messrs. Pinchuk and Grigorishin, but strongly opposed by Mr. Medvedchuk.

The "Young Turks" within the pro-presidential camp also are restless. In September 2003, the ministries of Foreign Affairs, Justice, and Economics and European Integration voiced opposition to Ukraine's admission to the CIS Single Economic Space. Justice Minister Oleksander Lavrynovych deliberately distanced himself from proposed constitutional reforms in late January, telling visiting Council of Europe rapporteurs that he had nothing to do with them. The West regards those changes, which Mr. Medvedchuk supports, with suspicion.

This month saw the resignations of both Economics and European Integration Minister Valerii Khoroshkovskyi and Inna Bohoslovska, who headed the State Committee for Regulatory Policy and Enterprise. Both are Pinchuk protégés; he funded their failed 2002 electoral bloc, the Winter Crop Generation. Mr. Khoroshkovskyi and Ms. Bohoslovska cited deep disagreements with First Vice Prime Minister and Finance Minister Mykola Azarov. The deputy head of the Party of Regions, Mr. Azarov is Ukraine's main lobbyist for participation in the CIS Single Economic Space.

Mr. Khoroshkovskyi is the son-in-law of National Democratic Party (NDP) leader Valerii Pustovoitenko and was a member of Mr. Pustovoitenko's 1997-1999 government. The NDP, Ukraine's first unsuccessful attempt at creating a party of power under that government, has just 14 deputies, the minimum required for a faction.

In late 2003 Mr. Pustovoitenko complained in numerous interviews that the presidential administration was pressuring the NDP because of a cooperation agreement that the party had signed with Our Ukraine in June. That same month the NDP protested at the removal of NDP member Vasyl Shevchuk from the post of environment minister. Rada Chairman Lytvyn came to the NDP's defense, expressing support for Mr. Pustovoitenko's claim that unnamed political forces were trying to remove the NDP from Parliament by forcibly co-opting its members.

By forcing through the controversial constitutional changes and pressuring the Constitutional Court to rule that Mr. Kuchma may run for a further presidential term, Medvedchuk has created tension not only with the opposition and within pro-presidential ranks, but also within his own SDPU. Mr. Zinchenko was expelled from the SDPU in September. National Deputy Volodymyr Nechyporuk resigned from the SDPU in December 2003, the same month that Mr. Zinchenko dropped his membership of the pro-presidential majority to protest the December 24, 2003, controversial parliamentary vote for constitutional changes. One hundred members have resigned from the Mukachiv branch of the SDPU, citing a standoff between the SDPU and Our Ukraine over who won mayoral elections last June. In the Crimea, too, the SDPU is severely divided; many of its branches have called on the SDPU leadership over the past two months to support Yushchenko in the 2004 elections.

Dr. Taras Kuzio is a resident fellow at the Center for Russian and East European Studies, University of Toronto.

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