President assures Ukraine's businessmen: relations with the government will change

by Zenon Zawada
Kyiv Press Bureau

KYIV - "The Orange Revolution is over."

President Viktor Yushchenko offered these words as comfort to Ukraine's 30 most powerful businessmen, whom he invited to the Presidential Secretariat on October 14 for an unprecedented four-hour meeting.

"I give you a guarantee that I will do everything to convince you that relations with you will change radically during the next 12 months," Mr. Yushchenko said. "Nobody will persecute you or tire you out with inspections."

He assured those he once labeled criminals during the Orange Revolution that his government will cooperate with them and protect their property rights, according to news reports.

"Government is supposed to, first of all, correctly relate to business, respect ownership and learn to defend this ownership," Mr. Yushchenko told the businessmen, commonly referred to as oligarchs because they obtained their enterprises largely because of their government connections.

At the same time, he asked them to find mutual understanding in Ukraine's key strategic issues, including the Euro-integration process, and urged them to engage in charity to address social problems, build medical institutions and restore cultural and historical monuments.

President Yushchenko's meeting was closed to most media, with the exception of a few selected outlets, including the Ukrainian-language website Ukrayinska Pravda and the Russian-language newspaper Kommersant.

Among those in attendance were Rynat Akhmetov, with an estimated worth of more than $3.5 billion, and Ihor Kolomoyskyi, worth more than $2.2 billion, according to 2004 estimates published by Wprost, a weekly Polish magazine.

Both men spent numerous weeks abroad during Mr. Yushchenko's first months as president, as Ukrainian journalists and political experts had speculated that the administration was considering arresting both businessmen - an impossibility at this point.

In August, law enforcement officials searched Mr. Akhemtov's Donetsk offices for evidence in a tax evasion and abuse of power investigation.

Mr. Yushchenko's latest political maneuver was aimed at satisfying Ukraine's international and domestic investors, who were demanding economic stability in Ukraine, political experts said.

These investors particularly criticized the Yushchenko administration's aggressive reprivatization campaign in which the Ukrainian government began repossessing properties through the courts from businessmen who bought them at unrealistically low prices.

In defending his decision to stop all reprivatizations, Mr. Yushchenko has blamed the campaign on his former prime minister, Yulia Tymoshenko, who he said was not conducting the process fairly, either targeting businesses randomly or for her own personal benefit.

Economic advisors, such as Anders Aslund of the Carnegie Endowment for International Peace, also sharply criticized reprivatizations and urged President Yushchenko to forget past crimes and get on with rebuilding the Ukrainian economy.

Even foreign companies got snared in the reprivatization campaign, perhaps raising the most alarm among government officials and advisors.

New York-based IBE Trade had invested $180 million in the Azot chemical factory in Severodonetsk when a court ruled it was improperly privatized by former President Leonid Kuchma.

Mr. Yushchenko's October 14 meeting contradicts the speeches delivered during the Orange Revolution, in which he and Ms. Tymoshenko criticized oligarchs and vowed to bring to justice those who unfairly acquired properties.

"The man is in charge of a country which needed serious reforming," said Ivan Lozowy, president of the Kyiv-based Institute of Statehood and Democracy, which is exclusively financed by Ukrainian business donations.

"Instead, he got together the biggest criminals and started chatting with them in his own building. I'm sure they felt great. But the bandits were promised prisons, not the Presidential Secretariat," Mr. Lozowy added.

Not only did Mr. Yushchenko invite the businessmen, he also sought their advice in how his government could better accommodate them and suggested similar meetings every two months.

He also proposed creating a special commission of businessmen, enabling them to propose suggestions for Ukraine's strategic development. The Cabinet of Ministers would then consider launching such strategic projects, which the oligarchs would participate in and even finance.

Ukraine's top businessmen, particularly Mr. Akhmetov and Viktor Pinchuk, worth more than $2.5 billion, lack management skills or a desire to adopt Western economic and business standards, Mr. Lozowy said.

"These are not Ukraine's Bill Gates," Mr. Lozowy said. "These are Ukraine's Al Capones who have criminal arms to their corrupt empires. Their only goal is to milk dry the cash cows of this country and run them into the ground."

However, not all the businessmen have leeched off Ukraine, in Mr. Yushchenko's view.

He has lauded Donetsk businessman Serhii Taruta, who is estimated to be worth more than $2 billion, for his charity and support of cultural institutions.

For example, Mr. Taruta has sponsored Kyiv's Krayina Mriy ethnic festival, as well as the Museum of Trypillian Civilization.

Mr. Yushchenko is trying to build new alliances after his rift with Ms. Tymoshenko tore apart his Our Ukraine political coalition, said Oles Donii, chair of the Kyiv-based Center for Political Values Research, which is supported by Ukrainian citizens and is seeking international financing.

His first move was the memorandum with former nemesis Viktor Yanukovych, and the next step was the proposed amnesty for city and oblast deputies who falsified votes, Mr. Donii said.

"Step-by-step, Yushchenko has straightened out his political situation and now finds himself in not as bad a position as it looked a month and a half ago," he said.

As one accommodation to businessmen, President Yushchenko has asked the Cabinet of Ministers to write a law that would guarantee the rights to all properties privatized between the 1990s and 2004, said Ivan Vasiunnyk, the first assistant to Oleh Rybachuk, the Presidential Secretariat chair.

Such a bill would end the discussion over reprivatization and would become a welcoming signal for foreign and Ukrainian investors, Mr. Vasiunnyk said.

In another accommodation already extended to Ukrainian businessmen, Prime Minister Yurii Yekhanurov said he has given exceptional powers to a Council of Entrepreneurs led by National Deputy Ksenia Liapina of the Our Ukraine People's Union party. The council can veto any Cabinet decisions until November 15, he said.

As concessions to the government's new cooperation, Mr. Yekhanurov said some oligarchs were ready to make additional payments to compensate the government for the true worth of their investments.

In addressing them at the October 14 meeting, he said the prime minister has excluded the word "reprivatization" from his vocabulary and replaced it with "peaceful agreement."

"Are you afraid that we will take your property?" Mr. Yekhanurov reportedly said at the meeting. "But we are not saying that you stole. We are saying that privatization took place in the absence of fair competition. Let's get on a market basis and voluntarily pay off [what is still owed]."

Mr. Yushchenko told the businessmen that he would make relations between government and business transparent and clearly defined.

In return, he said he expected oligarchs to end corrupt business schemes, get out from under the shadow economy and behave properly during the March parliamentary elections.

Mr. Yushchenko appears to have taken a page out of Russian Federation President Vladimir Putin's playbook when calling the meeting of oligarchs, Mr. Lozowy said.

Mr. Putin has conducted such meetings on a regular basis, partly as a way of controlling the wealthy businessmen in his country, he said.

Mr. Yushchenko's accommodation of Ukraine's top businessmen may pose problems for his Our Ukraine coalition in the March elections, which will face the Yulia Tymoshenko Bloc as a serious contender, Mr. Lozowy noted.

"These people should be under serious investigation of their crimes rather than hobnobbing with the president," Mr. Lozowy said. "The fact that Yushchenko has stooped this low tells me that he is running out of ideas, if he had them in the first place, about running the country."

Copyright © The Ukrainian Weekly, October 23, 2005, No. 43, Vol. LXXIII

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