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Survival of the Richest: How oligarchs block reform in Ukraine

By Blog Admin, on 30 April 2016

 

by Professor Andrew Wilson

This post originally appeared on the ECFR blog. Reproduced with kind permission of the Author.

The resignation of Ukrainian PM Arseniy Yatsenyuk and the elevation of Volodymyr Groisman demonstrates the failure of Kyiv’s reform process, and offers Europe an opportunity to push for deeper changes.

And while Ukraine suffers from many types of corruption, it is the penetration of its politics by the super-rich oligarchy that forms the main obstacle to reform.

Wealth is concentrated in few hands in Ukraine. Before the Euromaidan protests of 2013 the assets of Ukraine’s 50 richest individuals made up over 45 percent of GDP, almost five times as much as in the US. Politics in Ukraine is extraordinarily expensive, with campaign expenditures running at hundreds of millions of dollars. And oligarchical media ownership further strengthens the hold of the wealthy over Ukraine’s democracy.

The author highlights two key areas, the judiciary and Ukraine’s state-owned enterprises, where the nascent process of ‘de-oligarchisation’ has failed to take hold. Control over the courts means that there have been no high-profile leading figures from the Yanukovych era brought to trial. And Ukraine’s state-owned enterprises siphon off government funds to the pockets of oligarchs, providing further funds for them to control events in Kyiv.

The EU remains Ukraine’s only plausible ally and, as such, has the potential to wield a huge amount of influence over the reform process. Wilson highlights two main areas that European policy makers should focus on, both of which focus on decoupling the oligarchs from the political system, rather than attacking the oligarchy itself.

The first step should be to strengthen the pressure applied on the Ukrainian authorities from below, by local civil society. Engagement could take the form of encouraging the participation of Ukrainian NGOs in EU-Ukrainian government dialogue.

The EU and its member states should also pressure Ukraine’s leaders, who are perpetuating and in some cases directly benefiting from some of the worst practices of the Yanukovych regime. Abuses by oligarchs’ placemen in the state bureaucracy and others must be investigated.

 

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Note: This article gives the views of the author(s), and not the position of the SSEES Research blog, nor of the School of Slavonic and East European Studies, nor of UCL.

 

Bulgaria’s new coalition: A rainbow without colours

By Blog Admin, on 16 November 2014

Bulgaria’s newly formed coalition government seems to span left and right. However, in practice it offers a familiar mix of nationalism and neo-liberalism, argues James Dawson.

Bulgaria’s newly-formed coalition, comprised of the pro-European rightists of GERB and the Reformist Bloc, ex-President Parvanov’s ‘leftist’ ABV and the ultranationalist Patriotic Front might look like an unlikely alliance of ideologically incompatible parties – an apparent case of what the political scientist Thomas Carothers once termed ‘feckless pluralism’.

Certainly, this has been the angle taken by many commentators inside the country who puzzle at the ability of political actors routinely labelled ‘pro-European’, ‘right-wing’, ‘left-wing’ and ‘nationalist’ to work together. Yet such analyses rest on the flawed assumption that these labels reflect clearly articulated, meaningfully differentiated policy platforms helping citizens to identify with specific ideas.

In practice, this is a perfectly dull coalition consisting only of parties that are functionally both neo-liberal and nationalist, along with the now customary support of some shouting-at-the-TV-type xenophobes (though the role played by Ataka in the previous two governments will now be filled by the Patriotic Front).

If it is now difficult to discern one political platform from another, then it follows that many, probably most, votes are cast on the basis of non-programmatic appeals. Charismatic and clientelistic dynamics almost certainly explain why voter turnout remains quasi-respectable (over 50%) in a context of mass protest and disillusionment. Yet though ideas and policies may not decide the outcome of Bulgarian elections, they still matter: politicians must do something when given control of the state. The path of least resistance in Bulgaria has usually been to combine neo-liberalism and nationalism. It is unlikely that this government will buck the trend.

Neo-liberal ideas have never become a popular narrative across the country – most Bulgarians remain preoccupied with getting by and are not identifiable in terms of economic policy orientations. However, the arguments of the right have gradually assumed the position of a shared ‘common sense’ among influential urban demographics. In part, this can be explained by the preferences of the oligarchic networks that dominate media ownership.

However, the victory of neo-liberalism owes just as much to the actions of the Bulgarian Socialist Party, which has for over two decades used leftist rhetoric to mask its collusion in the enrichment of these same oligarchs, both through business-friendly policies (such as the famous 10% flat corporation tax) and old-style corruption. (more…)

Ukraine’s 2014: a belated 1989 or another failed 2004?

By Blog Admin, on 19 February 2014

Whatever their final outcome, the events in Ukraine seem likely to be of greater long-term import than the ‘Orange Revolution’ in 2004. But, asks Andrew Wilson,  a long-term what?

 Whatever their outcome, the events in Ukraine seem likely to be of greater long-term import than the ‘Orange Revolution’ in 2004. Ukrainians themselves are obviously debating their meaning and making comparisons with other momentous years in Ukrainian and general European history. But which year?

 This is not about geopolitics: this isn’t 1939, some replay of the Molotov-Ribbentrop Pact with two titans dividing up Eastern Europe. Russia thinks geopolitically, but the EU does not, and until fairly recently the US has been just a voice offstage. The whole point of the debacle at the Vilnius Summit was the clash between the completely different modus operandi of Russia and the EU.

 There hasn’t been a proper post-Vilnius post-mortem yet (you can’t have a post-mortem till you identify the body). A technical rethink of the EU’s Eastern Partnership policy is inevitable. But the whole point is that it is too technical. As I said to the NYT, the EU took a baguette to a knife fight. The Eastern Partnership is an ‘enlargement-lite’ policy at the very moment when Russia is committed to some heavy lifting. If there is a ‘struggle over Ukraine’, as so much of the media is determined to frame it, it is clearly a very unequal struggle. (more…)

Moldova: An unravelling success story?

By Blog Admin, on 5 June 2013

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Photo: Anna Woźniak via Flikr  CC BY-SA 2.0

Vlad Filat, until recently Liberal Democrat Prime Minister of Moldova, is locked in a power struggle with Vladimir Plahotniuc, the country’s one and only oligarch. This war of attrition threatens the Eastern Partnership’s ‘success story’ and with it Moldova’s reform project says Andrew Wilson.

Not every policy detail may have been perfect in Moldova since 2009, but at least the narrative seemed right. Eastern Europe’s only ruling Communist Party fell from government. The changeover was mythologised as the ‘Twitter Revolution’ – a precursor of the ‘Arab Spring’ and ‘Moscow Winter’ – although in fact it was a prosaic process of elections and parliamentary arithmetic. The Communists were replaced by the smooth-sounding Alliance for European Integration, which was soon getting rave reviews for its reform efforts from the EU. Tiny Moldova leapfrogged the other five states in the Eastern Partnership and seemed to be first in the queue to sign an Association and Deep and Comprehensive Free Trade Agreement at the Vilnius summit in November 2013.

 By 2013, however, reviews were getting more mixed. Since the beginning of the year, Moldova has plunged into the kind of political infighting reminiscent of Orange Ukraine at its worst. After a previous crisis over the presidency was solved in 2012, it had seemed the current parliament would sit out a full term until the next elections are due in 2014. Today, Moldova has to sort out three simultaneous problems: it has no stable government, new elections are threatened and it is limping toward the November summit. It might collapse over the finishing line or just before; it might have a sudden burst of energy in the finishing strait; or it might fail a last-minute dope test.

So what went wrong? In reality, the three-party Alliance for European Integration was badly designed at birth; more exactly, at its rebirth. The first incarnation of the AEI in 2009-2010 struggled with a minimal majority over the Communists. That majority was improved at new elections in November 2010, but the elections also gave Russia the chance to push hard for an alternative alliance between the Communists and the pivotal Democratic Party (which includes many ex-Communists). Vladimir Putin sent his right-hand man, Sergei Naryshkin, to Chisinau to seal the deal. He didn’t succeed but encouraged the Democrats to secure a high price for not defecting back to the Communists, with the signing of a secret agreement in December 2010, leaked in 2012, to partition not just ministries but also supposedly neutral state institutions and revenue streams among the AEI’s three component parties.  (more…)

Boris Berezovsky: An unwanted ‘wanted man’

By Blog Admin, on 25 March 2013

Boris Berezovsky

Photo: AJC1 via Flickr License CC BY-SA 2.0

Alena Ledeneva looks back on the career of the controversial Russian oligarch.

Boris Abramovich Berezovsky was born on 23 January 1946 and died on 23 March 2013.  Although hated by many Russians, Berezovsky was also one of the most politically important, exposed and most widely written about figures in Russia of the 1990s. For many he was a symbol of that era.

 Berezovsky’s rise to become one of Russia’s richest men has been chronicled in both journalistic and fictionalised accounts. Godfather of the Kremlin by Paul Klebnikov, the Forbes journalist murdered in Moscow in 2004, Bol’shaya paika (‘The Big Slice’) a novel by Yuli Dubov, Berezovsky’s business partner and friend – who like him received political asylum in the United Kingdom – are among the most interesting.  The film Oligarkh (Tycoon) also features a main character very like Berezovsky.

 After graduating in 1968, Berezovsky worked at various research institutes to become a senior fellow and a head of department at the Institute of Management of the Russian Academy of Sciences. His energy, creative spirit and talent for working through the Soviet system served him well and helped shape his success in the post-communist era.

 In 1989, Berezovsky and Samat Zhaboev organized a joint stock company LogoVaz, which specialised in selling and servicing cars. In four years Logovaz became one of the leading Russian private businesses with a turnover of US$250 million in 1993. Berezovsky became  the chairman of the LogoVaz Board in 1994.

Despite the dangers of Russia’s post-communist business environment – he survived an assassination attempt in June 1994 in which his driver died – Berezovsky moved on to acquire media and oil interests.  In January 1995 he participated in setting up the ORT television channel joining its board of directors and in September 1996 he was elected to board of the Siberian oil company Sibneft. Berezovsky’s financial schemes – of the kind I examine in more detail in How Russia Really Works  – were also the inspiration for a post-communist genre of literature often known as ‘economic thrillers’. (more…)

Ukraine’s double-edged elections

By Blog Admin, on 5 November 2012

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Photo: oscepa (Neil Simon) via Flikr  Creative Commons license

Ukraine’s ruling Party of Regions comfortably won flawed parliamentary elections on 28 October, but opposition groupings too polled well. The result leaves the EU with a dilemma. Andrew Wilson gives two cheers for Ukrainian democracy.

There aren’t many elections where all sides come out happy, but this arguably just happened in Ukraine this Sunday. The authorities were already happy a month or two before the elections, because they were confident of victory by fair means and (mainly) foul. So they could afford to ease off in the final weeks of the campaign. On the one hand, the ruling Party of Regions didn’t get many of the results it wanted – most notably failing to win a single seat in Kiev. In one suburban capital seat the far right Freedom party was able to declare victory over the acting millionairess mayor Halyna Hereha after a three-day struggle over the count. Other surprises included the victory for the candidate backed by the ‘semi-detached’ oligarch Viktor Pinchuk against a real regime insider in Dnipropetrovsk. The Party of Regions didn’t sweep the board in the territorial constituencies, where it once talked of winning 150 seats.

On the other hand, the Party of Regions still won 114 constituencies out of 225, making 187 out of 450 overall, with the 73 the party won in the PR vote. Most of the 44 ‘independents’ are expected to join their ranks, plus seven MPs from smaller parties. If Regions splits or corrupts the opposition, it’s potentially therefore not that far short of a two-thirds’ majority of 300 out of 450 seats.

The one area where the ruling party didn’t get what it wanted was the harsh initial judgement of the OSCE-ODIHR election monitoring mission.  In this respect President Yanukovych is like the Liverpool striker Luis Suárez. Having gained a reputation for diving, Suárez has started to complain that referees don’t give him the free kicks and/or penalties he actually deserves. But it’s his own fault – the men in black have adjusted to his past behaviour. The men and women from the OSCE are doing the same with Yanukovych. But this may make it more difficult to revive the EU-Ukraine agreements that are currently on hold.

The three prongs of the opposition ‘trident’ all did well, although this may not be such good news, as it decreases their incentive to cooperate. Most opinion polls put the ‘United Opposition’ Fatherland and UDAR (‘Punch’, because led by the boxer Vitaliy Klichko) neck and neck, but Fatherland ended up with 103 seats to UDAR’s forty.

Yuliya Tymoshenko was of course not allowed to stand, and it is impossible to judge the size of her sympathy vote, but it seems to have been a factor. Unless she gets out of prison, however, Arseniy Yatsenyuk, the leader of the Front for Change, the other main part of the not-particularly-united ‘United Opposition’ coalition, is now the assumed front runner to challenge Yanukovych in the 2015 presidential election – assuming it goes ahead. No doubt alongside Klichko, and both men are all too obviously already planning ahead. UDAR’s campaign this time seemed to peak too early. It was also unable to shake off the suspicion that it might ultimately ally with Regions. Nevertheless, UDAR did well because it is new. (more…)