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Countdown: Last Chance for Ukraine

Countdown: Last Chance for Ukraine

by
Michael Hammerschlag | Kyiv
November 26,
2013

Ukraine has reached the crunch
time in their fence-sitting act between East and West:
whether they will join the Russian Eurasian Customs
Union or sign the EU Partnership Association
Agreement (AA) and Free Trade Agreement (DCFTA)
in Lithuania on Nov 28. Both alliances say the other is
incompatible. For years now Pres. Victor Yanukovich’s
government has given signs that they wanted and intended to
sign the PA, as a majority of the people wanted. But the rub
has been the still-incredible jailing of former opponent
Yulia Tymoshenko in 2011 over some trumped up charge,
essentially doing her job in signing an admittedly lousy gas deal with Russia (since re-ratified
by this government several times). Yanukovich hated
the demagogic braided gas princess and former Orange
Revolution firebrand with a passion, as unpopular former
Pres. Yuschenko did; in fact his pathological feud caused
her 3½ % loss to Yanukovich in the 2010 Pres. Election (Yuschenko got only
5.5%).

The choice is stark: whether Ukraine will be locked
in a neo-Soviet ghetto of dependency and corruption for the
next several decades, or join the Western world in greater
transparency, freedom, and rule of law.Customs Union
member Belarus has essentially disappeared as an independent
country- they rely on Russia for every bit of energy,
resources, and have even sold them their pipelines; while
Kazakhstan has chafed under tariff restrictions and imperial
pressures that have gained them little. EU AA leaning
Armenia, after the leader was recently summoned to the
Kremlin to hear Putin’s threats, collapsed and joined the
Customs Union- they also rely on cheap Russian energy and
troops. The Customs Union isn’t an association of
equals, but one of vassals.

The road West wouldn’t be
easy: Russia regards Ukraine as an integral part- as it’s
heartland, and it’s revenge could be near-psychotic: to
pressure their little brother they are threatening
yet another gas shutoff (the 4th), and already are
embargoing chocolate and numerous other products – $50 mil a
month of railroad wagons aren’t being shipped North, and
trailers of goods have been sitting on the border for 2
months: Russia could strangle the Ukrainian economy. But
Ukrainians could sell their products to the 350 million
people of the EU without tariffs, reap the freedom of world
travel, rather than the undergo the current expensive and
lengthy EU visa process; and escape the clammy embrace of
their longtime fraternal ruler (300 years), who killed 5-7
million in the genocidal Stalinist famine of 1932-33, as
well as million s in purges and Gulags.

Sadly,
what seemed like a done-deal has collapsed- the Government
said Thursday they wouldn’t sign it. Shock and dismay across
the country and globe greeted the government’s reversal. For
the last week, all signs were bad. They simply can’t release
Yulia- the Presidents own Party of Regions chief
Yefremov said he had no intention of voting for any of the 6
bills to send her to Germany for medical treatment,
Yanukovich reported told EU enlargement head Stefan Fule Nov
20 that he wasn’t going to sign the PA, he had jetted off to
the Moscow for a semi-secret meeting with Putin to hear his
carrots and sticks Nov. 9 as PM Azarov suddenly claimed
requiring Tymoshenko’s release was unjustified and
complained, “nobody.. will offer compensation for the loss
of this (Russian) market”, they arrested Tymoshenko’s lawyer
Vlasenko Nov 8 for an alleged assault that happened in
2008… they’d already stripped his Parliamentary seat
and immunity, and the Rada (Parliament) passed a bill to
prevent popular boxer/ party leader Vitaliy Klitchko (a
German resident) from running for President in 2015. “Either
Yanukovich is losing control of his own Party, or it’s a
cynical very nuanced Machiavellian play,’ said longtime Kyiv
editor Jim Davis. It was always possible this was a
carefully choreographed scheme- wait for the very last
minute, release Tymoshenko, and in the relief, no one will
notice that 2 other preconditions were ignored.

They also
haven’t circumscribed the unlimited power of the prosecutor
(maybe 1% are found innocent in trials here, and
juries barely exist- “persuadable” judges only), they
haven’t reformed the breathlessly corrupt court or election
systems but instead appointed close Yanukovich cronies to
run both, they refuse to raise hugely subsidized Soviet
level natural gas prices demanded by the IMF for desperately
needed loans (people control the central over-heating by
always keeping windows open), public support for the
EU path has faded to 45% vs only 14% for the Customs Union
(another says 58% for**), theEuropean
Bank for Reconstruction + Development head canceled a
Nov 5 trip to Kyiv to sign an anti-corruption agreement
(Ukraine ranks 144 out of 175 countries, behind Russia,
Pakistan, and Nigeria byTransparency Int.).
The ex-con* President’s unknown dentist son
3½ years ago Alexander… is now a half-billionaire, and
they are known as The Family.

The thinking was even
the 10 big oligarchs who rule this country as their personal
plaything didn’t want to suffer under the Russian yoke- the
110 Russian billionaires are richer and more ruthless, and
Putin has not been gentle with them. “Maybe not”, said one
connected insider- adjusting to greater transparency is
traumatic; even many companies’ ownership here is completely
secret. “Many industrialists …ask ‘why should I vote for
this (EU)’. We have 77% of our machine building output going
to Russia,” said Yefremov. Azarov claimed there
already was a 25% drop in Ukraine’s exports from the
Russian embargo.

Ukraine is an impressively corrupt nation
– the reconstruction of Kyiv’s Olympic Stadium cost an
estimated $700 million, over 5 times what a Hamburg stadium
did new… that in a country where wages are 12 times
lower and materials probably 3-5 times lower. Even then
some workers from the villages who labored a year at 11 hour
shifts for $19 were cheated out of $5000. Such is the
venality of Ukrainian bosses. Like Dick Cheney in Iraq, Dep.
Prime Minster Kolesnikov awarded himself the task of
building all the Euro 2012 soccer facilities – Tymoshenko
had him jailed for a month in 2005, her current woes may be
related. In business dealings, jobs, apartment rentals.. one
is more likely to be cheated than not: every arrangement is
subject to endless renegotiation, and paying wages monthly
makes it easy- after 1 month workers are invested, and often
last 3 before quitting in disgust. College students often
have to pay for grades or degrees- even exposure of
professors’ extortion carries little risk. Yanukovich’s
endless broken promises and false hopes are a graphic
example.

The most amazing example are the raider
attacks (only in FSU) where 40-130 thugs with wooden or
iron bars invade a business, beat and throw out the
employees, and take it over, armed with the decision of some
corrupt regional judge that they are the owners. It
even happened to the $1.2 billion Ilyich Steel Co., the
holder of the foundational documents simply sold them for
$30,000. That was reversed after the whole city of Mykolaev
screamed bloody murder. 2 malls in downtown Kyiv suffered
the same fate- inc. one directly under Maidan (Independence
Sq). An enormous percentage of government money disappears
into various pockets; a huge difficulty in getting anything
done here is government or oligarch squabbling about who
gets to steal what. A government inspector of verifying
business compliance seemed in a perfect position to pad his
pay: “No, Michael,” he said morosely, “only my bosses are
allowed to steal.”

The thought was meeting EU standards
would moderate Ukrainian rapacious tendencies, but there has
been little evidence of that- the changes they demanded have
been passed in a flurry of last minute bills that few think
will be taken too seriously. For already unpopular
Yanukovich, the failure of the ballyhooedAssociation
Agreement could be fatal in the 2015 election, but he
may have calculated that the economic devastation of a full
Russian embargo was worse. Polls show all 3 contenders:
heavyweight boxing champion Vitaliy Klitschko, Tymoshenko,
and former Rada Speaker Arseny Yatseniuk, beating
Yanukovich, though only Klitschko has a real shot-
Yanukovich has packed the courts, regions, and election
boards with his loyalists. Klitschko is one of the few
people in this country untarred by corruption- he has his
own fortune- and with the Rada banning of non-residents as
Presidential candidates.. he finally formally declared
himself running. Tymoshenko is probably destroyed as a
political force, and Yatseniuk relatively
uncharismatic.

Demonstrations broke out in a dozen cities
on August 21, including Kyiv’s Maidan (Independence) Sq. on
the 9th anniversary of the Orange Revolution that overturned
Yanukovich’s first corrupt victory. On Sunday the 24th they
had perhaps 70,000 people in European Sq., the largest
demonstration since 2004, and are keeping a continuous
vigil, though the weather has turned bitter- below freezing
after 6 weeks of mild temperatures. The government, seeking
to not alienate more, has been magnanimous, setting up
warming tents and directing police to not being too
aggressive. Still, pitched battles have broken out between
the security army and protesters trying to block the Cabinet
of Ministers. Unlike 2004 however, there are no other
independent bodies left in power that could force the
signing of the AA.

Amazingly, for this total
betrayal and stunning reversal, the Yanukovich government
got nothing solid from Russia: Azarov claimed they would
renegotiate Gazprom’s sky-high gas price- Putin immediately
shot that down: “Gazprom and Ukraine have a contract until
2019”, then brutally raised the pressure and ante for
complete capitulation, claiming the total debt to
Russia in loans, gas, etc was $30 billion. “We will
work with Ukraine- not at a loss, but… further in the
energy and financial sector.” Without joining the Customs
Union, the huge aid needed is dubious, and once entered
into, Ukraine’s independence and sovereignty will
quickly disappear.

Exhausted by the endless dithering, the
EU has still been penurious, offering only $610 million
according to Yanukovich, for significant Euro-adjustment
expenses when Ukraine would also face brutal reprisals from
Russia and stiff competition from Euro producers when
tariffs come down (though it’s lower cost products offer
some protection). Azarov complained, (financially) “We did
not get support during the hardest period.” Fule disputed
that: “We are talking about billions of dollars.. the
Association is a measure to .. strengthen financial
assistance.”

But if Ukraine gets to pay Belarus’s gas
price (~$170/1000 CuM) in the Customs Union, they
would immediately save $2½ billion a year and Belarus is
currently subsidized by ~$10 billion a year. Cheap Russian
loans can stem the debt crisis Ukraine faces without IMF
help, but will increase their abject dependence. Had this
government really cared about the $4 billion/year it
hemorrhages to Russia for gas, they could have built an
Black Sea LNG terminal within a year 5 years ago and bought
Algerian gas for 30% of what Russia is robbing them for-
$415/1000 CuM, almost the highest price in the world (US
prices have been as low as $80)- saving Ukraine $10 billion
and preserving its sovereignty. Ukraine’s Naftogas pays only
$53/1000 cum for domestic gas, allowing middleman to make
billions off the spread, and subsidizing expensive Russian
gas- this is what the IMF was demanding they raise, not
direct home prices.

It is tempting to think Ukrainians
deserve their fate- they knew whom they were choosing in Feb
2010 in a supposedly honest election, an Eastern
Russian-leaning machine poll who had stolen the 2004
election (before it was reversed by the Orange Revolution),
beholden to the industrial oligarchs and promising an era of
unabashed kleptocracy. But the vicious feud between
Yuschenko and Tymoshenko had so exhausted the populace that
they wanted anyone else. The day Yanukovich was declared the
official victor, 2 of 6 interviewees for a radio report, Tymoshenko supporters, had
already suffered repercussions.

On the other hand,
with a cheap modern reliable transportation, communication,
utility, and food system, Ukraine was rated the best
poor country in the world (under
$3946/yr income: GNI per capita). Unlimited talking, SMS’s,
Internet on 3 different mobile phone networks costs only
$6/month total; unlimited 10 Mb/s Internet- $6/month. The
famous black earth is the most fertile on the planet-
and could be the most productive. This is a country with
spectacular potential- what’s holding it back are the
criminality of its rulers, the passivity of the people, and
the sour fog of Soviet Slavic corruption that covers the
landscape like a choking blanket. The hope, the prayer, the
expectation… was that EU Association would finally blow
that away and bring in some fresh air.

Even Eastern
Russian-speakers wanted to join the EU, but time was almost
gone anyway for Ukraine’s hopes of joining the world’s
biggest trading block at $16 trillion- the EU mission
returned to Brussels Nov 13 with a presumably bleak
assessment, but the EU Foreign Affairs Committee postponed
the Nov 18 vote whether to proceed with their offer at
Vilnius and extended their rapporteurs’ mission until
Nov. 28th. Stefan Fule came to put a full-court press on the
recalcitrant Ukrainians, and foreign policy ministers of
Germany, Sweden, and Austria (where Yanukovich went Nov. 21)
pleaded with him to release Yulia… all to no
avail.

President Yanokovich’s concerns are only short
term- avoiding the economic devastation of a full scale
Russian embargo that would endanger his reelection in 15
months, and enriching family and friends- when you jail your
predecessor and greatest rival over nothing, losing
power is not an option. The outrage over reneging on the
AA, however, may be a greater threat. His Euro
sympathies were always suspect- they didn’t jibe with his
origin, personality, and tendencies. In a letter from
prison, Tymoshenko sagely warned that dumping the EU for
Russia would condemn Mr Yanukovich “to live all your life
according to its diktats”.
,
Although the EU is
concerned about Russian bullying and the prospects of
another huge border state under their thumb, this whole
eastern enlargement is being largely pushed by Poland and
the Baltics. However, the EU leadership will change soon-
delaying even a few months could be fatal. If this
long-planned signing failed, Lithuania’s President warned,
“The pause in relations may take a very long period of
time.” There are many members more concerned with the
economic health of current members, and worried about the
influx of 15 mil immigrants from Ukraine. If 1/3 of Poland
has permanently decamped to Europe because they can make
double or triple the wages, what happens when Ukrainians can
make 10-13 times more. Azarov blithely and blindly
made coy suggestions that negotiations could continue in the
Spring, and Yanukovich plans to attend the EU meeting he
torpedoed, where “he will be welcomed” says EU reps.

It is
likely that the 15 year torturous negotiation is over and
Ukraine is now sealed in the neo-Soviet ghetto; it depends
if they join the Customs Union or stay somewhat independent,
but for backward, corrupt Ukraine – independence is no
prize, either. Yanukovich called for trilateral talks with
Europe and Russia, but Europe is exhausted and disgusted.
Now little Moldova, poorest country in Europe, probably
can’t resist the Russian bear-hug either- their wine goes
primarily to Russia (though their EU minister said, “There
is no intention…of hesitation.”) Putin was
outrageously dishonest in victory: he said Moscow was “not
opposed” to Ukraine signing the EU deal. “We are not against
Ukraine’s sovereign choice.”, and incredibly accused the
EU of “blackmail” in fomenting the demonstrations
breaking out across Ukraine.

It is a tragedy for Ukraine,
and a huge failure for the West, for yet another country to
fall back into the pit of the slowly reconstituting Russian
Empire, particularly one so cruelly treated over
history.

*Yanukovich spent 3 1/2 years in 2
prison stretches for assault and robbery. One victim was
beaten unconscious.
** Another Deutsche
Welle poll Nov 18 has it 58% for eventual EU
membership, 31% against; breaking at 51 years old:
older, they are against it, younger, they are for it-
diverging
proportionally.

Michael Hammerschlag’s articles (HAMMERNEWS.com) have
appeared in NYT, IHT, Seattle Times, Providence Journal,
Columbia Journalism Review, Hawaii Advertiser, Capital
Times, MediaChannel; Moscow News, Tribune, Times, and
Guardian, Novaya Gazeta; Kyiv Post Weekly, Politics in
Ukraine, and Business Ukraine. He’s spent 8 years over the
last 22 in Russia
Ukraine.

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