Billionaires Boy’s Club                                                                

              by  Michael Hammerschlag                Business Ukraine   March 2010
Radio Report (MP3 audio) - KIEV:  Realplayer - 6:06min, Jan 17-18, 2010


KIEV:    She had a  grating pleading voice, enacts erratic populist policies, has made a hundred million in the shady gas business, was tied to imprisoned ex-PM Lazarenko; and closed schools to exploit a so-called epidemic that was milder than last year’s, costing the nation hundreds of millions.… but Yulia Tymoshenko was the best hope for Ukraine moving forward. She was the only person who had actually been doing the business of Ukraine, against virulent opposition from Yushchenko’s and Yanukovich’s blocks, from twisting Putin around her little finger in do-or-die gas negotiations (something no leader at loggerheads with the Kremlin has accomplished) to maintaining the IMF lifeline that has kept Ukraine afloat to purging corrupt gas middlemen. With Yanukovich’s victory, the difference is immediately obvious- his blue tents surrounding the Central Election Commission, where thousands of his supporters kept a vigil for days (reportedly for $50/day), were staffed by beefy ominous security guys, not the frail pensioners of the former Speaker Yatseniuk’s tents.


Yulia Tymoshenko was primarily done in by vicious backstabbing from President Yushchenko, no matter how damaging to the country, like raising pensions and wages just to scuttle the next tranche of the IMF loan, or recognizing controversial rebel Stepan Bandera as a  Hero of Ukraine  to enflame Russian-speakers, Jews, and Poles; who see him differently. The source of Yushchenko’s fervent hatred of her isn’t clear, but longtime Kiev editor Jim Davis explains it graphically, “I think he just couldn’t stand that she had bigger balls than he did.” She was the mover, the shaker, the fearless passionate speaker in the 2004 Orange Revolution that catapulted him into the Presidency. He was rewarded for his betrayal with a resounding 5.5%, reportedly the lowest any sitting President has ever received, and a ticket to a well-deserved obscurity. Ironically that feud convinced voters that Tymoshenko was ineffective and too much trouble… just as the source of it was banished. Yushchenko’s behavior was so suicidal that one has to wonder if his unsolved Dioxin poisoning caused brain damage, but then self-destructive adolescent behavior among politicians is the norm here.


Tigipko and Yatseniuk's contemptuous strategic fence-sitting in refusing to endorse either candidate hurt her too- Tigipko’s 3.2 million vote split evenly, 27% more of them or just 21% of the 4.4 million voting against all would have put Tymoshenko over the top. And of course, she was blamed for the catastrophic downturn here caused by the worldwide economic crisis- the collapse of steel, 40% of Ukraine’s exports. Maybe a million migrants to cities couldn’t vote because of the difficulty of changing registration or getting absentee ballots- landlords won’t attest to residency lest they have to pay taxes.


Tymoshenko’s negatives were so high that surprising quarters went for Yanukovich- Dima, a Russian-leaning agricultural economist, felt betrayed: “I spent 2 weeks in Maidan, I shouted, ‘Yushchenko, Orange Revolution, East and West together’, but Yushchenko and his team- they split Ukraine.”  Irina, the chief accountant for IBM Ukraine, rattled off a litany of Yulia’s failures from leaving ice on the streets, to not subsidizing cheap utilities, to changing VAT rules to deny reimbursement. “She is a hysterical person… who has stolen a lot of money.” The final difference of 888,000 votes, 3.47% was an insurmountable challenge to the braided PM, though, claiming fraud, she appealed to a friendly Administrative Appeals Court (which was invaded and occupied for a day weeks ago by Yanukovich’s  Party of Regions deputies). “Yanukovych is not our President,” she said in a TV address Feb 13th. On Feb 17th, that court suspended the election of Yanukovich, pending examination of her claims. But on Saturday  Feb 20th Tymoshenko herself reversed course and withdrew her challenge when the court rejected some of her claims, realizing the longer she dragged it out, the more she will be blamed for the continuing paralysis, especially by the West. Yanukovich was inaugurated Feb 25th. Surprisingly, 3rd place finisher (13%) in the 1st round- banker Sergiy Tigipko, was projected by exit polls to handily defeat- by a 11-16% margin- either Timoshenko or Yanukovich, if he had progressed to the runoff, though that doesn't square with first round results.


World leaders may be congratulating the victor, but they are shocked that Ukraine could take such a big step backward. Yanukovich’s commitment to democracy is negligible (“the price was too great”, he said); once his people have consolidated control, dissension and criticism may be quickly crushed. His members occupying the appeals court and the ballot printing office, and surrounding the Elections Commission with thousands of intimidating loyalists were signs- this time defeat was not an option (they certified the final results Feb14). Famously inarticulate, he was afraid to even debate the voluble and sharp-tongued PM, and left her an open TV stage for 2 hours.


This is the guy who almost sicced tanks on the Orange protesters in 2004, who crushed and imprisoned journalists who dared criticize his boss Kuchma, who spent 3½ years in prison for beating people unconscious. In the underground passageway to Pechersky Metro selling fruit, Galena, begging not to be photographed, said she had implored people at a polling place, “How can you even have a man like that- a 2 time convict, as a candidate,” when 3 goons came up to her and threatened her to shut up and keep moving, or she and her family would have problems. Maria, a nurse from Western Ukraine, said her friends who went to Donetsk to canvas for Tymoshenko were fired when they returned to their job in Kiev. It is striking that of 7 people questioned, 2 had already suffered repercussions from Yanukovich’s triumph.


Sadly this is what people want- order and stability, like Russia they have made the fateful decision to turn towards a strong man whose notions of order diverge radically from the West…  and Europe may turn away when they realize it- unlike Russia, Europe doesn’t need Ukraine. They urged Tymoshenko to accept the inevitable, hoping that Yanukovich will be more business-like and consistent. In reality, the strongest man in the race was Tymoshenko. 3000 election monitors say the result was fair, though one thing Yanukovich must have learned after being stripped of his 2004 “win” is not to cheat in front of election observers, and they admit vote-buying was widespread. But even free elections sometimes elect Taliban, and given 5 years of Yanukovich appointments, one wonders how long they will continue. Expect rejuvenated police and security personnel to start rousting people for documents, like in Russia, with its periodic racist crackdowns on “foreigners”, which has reportedly begun during March. His Party of Regions is already trying to reverse the visa-free regime for Europeans and WTO members that was one great accomplishment of Yushchenko’s reign.


Yanukovich’s reign began with some good moves: he made his first foreign trip to Brussels March 1st, not Moscow, and cancelled flaky tax changes on foreigners. Incredibly, after giving Kiev nothing but tough-love, the EU fell all over itself offering plums, bolting the barn door after the horse had fled, lest Ukraine be permanently wedded to Russia. The right to apply for EU membership, fast-tracking visa free travel for Ukraine (Romanians can travel freely, but Ukrainians must beg and grovel for visas?) were quickly passed, when such actions a month ago would probably have won Tymoshenko the election. They even had the nerve to kick Ukraine about the Bandara hero award, an internal matter quite remote from Europe’s legitimate concerns.


The End for Yulia, when it came, came blindingly fast. On March 2nd, her coalition collapsed- the Litvin Block and 21 of her BYuT delegates and orphaned Our Ukraine representatives defected to Yanukovich's Party of Regions March 3rd  to give them a majority -all gravitate to power and money here- and summarily end her reign as PM, as she ignominiously exited the Rada chamber. 


Helped by a new Yanukovich edict that permitted cherry-picking of individuals to reach a new coalition, a POR  majority was formed March 11th.   Though that violates the Constitution, that isn’t that unusual or egregious in Parliamentary horse-trading- everyone realized that stalemate was crippling the country. But what followed was:


Yanukovich immediately packed his Cabinet with the billionaire and millionaire bosses of the POR, without a single liberal face, tired retreads from the Kuchma era, many determined opponents of all Orange reforms. Russian-born Kuchma tax-hound crony Azarov for PM, Rosukrenergo pumper Lyovochkin head of Presidential administration, Akhmatov’s right hand man Borys Kolesnikov as Dep. PM, Firtash pal Yury Boyko Energy Minister; magnate Andriy Klyuev Dep. PM; most alarmingly ex-KGB Sivkovych in charge of law enforcement, billionaire Khoroshkovsky as head of SBU (who headed an “investigation” into Naftogas in service of his Rosukrenergo friends, just requested enhanced bugging authority, and is closing the SBU/KGB archives of past abuses), combative Shufrych Emergency Affairs Minister, and Donetsk native Mohilev Interior Minister (who immediately fired all district heads) to consolidate absolute control of all the so called power ministries. The web of partnerships, conflicts of interests, and outright corruption is so dense that this foul creation deserves it’s own name- an oligarchivment. While there is a theory that a very rich person is safe in government because they don’t have to steal (think Bloomberg), that sentiment isn’t applicable in Ukraine. Of course, the markets loved the stability, and rallied.


Many voters who voted for Yanukovich did so to break out of the endless battles that have paralyzed this country, but he may be mired in them too- since his majority in the Rada is soft, and his retread Cabinet’s agenda perhaps too radical. Litvin is already pushing back on the Russian as a second language proposal.

Most of Yanukovich’s policies would drag Ukraine back towards a command economy, and a dependency on Russia that it had agonizingly nearly shed: he wants to increase wages and pensions (needed in this poverty stricken country, but busting the budget), he talks of closer relations with Europe but wants a customs union with Russia, he wants to jointly operate Ukraine’s gas transit pipelines- giving up the one trump card Ukraine has over Russia, he talks of leaving the Russian Black Sea Fleet in Sevastopol, which dangerously compromises Ukraine’s territorial integrity, he wants a weak hryvna to boost (oligarch’s) exports, he may not raise natural gas prices from the artificial subsidized Soviet levels so people will continue to control overheated apartments with open windows, throwing precious heat and gas away (rather than just covering the serial radiators with a sheet of plastic)*, and monstrously inefficient industries waste energy on a Promethean level.


The danger isn’t just that Yanukovich will be too subservient to Russia or that crony corruption will rule, but that the real powers in the country- billionaires Rinat Akhmetov, Kolesnykov, the Klyuev brothers, Boyko, Azarov, et al bosses of the POR- once ensconced at the center of power, will permanently game the system to their advantage… and Ukrainians will pay for it for many years, as the interests of the rulers take precedent over the interests of the country.


Putin tamed his oligarchs by methods fair and foul, but here they have just inherited the keys to the kingdom.


*I had a small country house with a gas/steam furnace that wasted +85% of the gas- the flue went straight out of the house and it had to run full-blast continuously to actually heat the house.



Michael Hammerschlag  (  has spent 1½ years in Kiev, and 2½ in Russia. His articles have appeared in the  New York Times, International Herald Tribune, Seattle Times, Providence Journal, Columbia Journalism Review, Honolulu Advertiser, Capital Times, Media Channel, Scoop; and Moscow News, Tribune, Guardian, and Times.