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Behind the scenes in Ukraine, the country’s oligarchs are jockeying for position

The Ukrainian crisis has to be understood as more than just a standoff between an authoritarian Russia and an expansionist EU - the country's own top dogs have their own agendas.
Left, supporters of the ‘People’s Republic of Donetsk’, a group of pro-Russian separatists in the eastern Ukrainian city of Donetsk earlier this month. Alexander Khudoteply / AFP / May 2014
Left, supporters of the ‘People’s Republic of Donetsk’, a group of pro-Russian separatists in the eastern Ukrainian city of Donetsk earlier this month. Alexander Khudoteply / AFP / May 2014

On Sunday, Ukraine is due to hold the most important elections of its post-communist history. They may be its last as a united and independent state. At the heart of the crisis lie two interconnected struggles: the exploitation of Ukraine’s desire for self-determination by an opportunistic West against a Russia hell-bent on maintaining its security and sphere of interest, and a nationalist challenge to the sanctity of Cold War-era borders. Yet amid this instability, the small group of oligarchs that have long controlled the Ukrainian economy – and its politics – is poised to once again come out on top.

The present crisis has seen the resurrection of an age-old foreign policy conflict between Russia’s desire to preserve the status quo and the American desire to reshape it. Over the past 20 years, despite an apparent promise given by the American president George H W Bush to Mikhail Gorbachev in 1989, Nato has crept deeper and deeper into former Soviet territory.

As a result, Russia has felt “humiliated and encircled”, Britain’s former ambassador to Moscow Sir Anthony Brenton said recently in a London speech. Russia’s president Vladimir Putin has made clear that even the possibility of future Nato troops on the territory of Ukraine, its closest neighbour and a country with which it shares a thousand-year history, is unacceptable. In the words of Brenton: “Ukraine, for Russia, is an existential issue.” What Russia sees as geopolitical justice – no western expansion into its traditional backyard – trumped Ukrainians’ legitimate desire to strike their own path to development and seek closer ties with the European Union.

Yet the US and EU were equally not above exploiting the crisis for their own strategic gains. “Winning” Ukraine would reduce Russia’s ability to control the gas flowing into western Europe and open up Ukraine’s markets and unreformed economy to European businesses.

In the fall of 2013, American and European statesmen and diplomats worked overtime to woo Ukraine into the EU’s orbit. Victoria Nuland, the US assistant secretary of state for European and Eurasian affairs, even reportedly gave snacks to protesters camped out Independence Square. But talk is cheap (as are cookies): when push came to shove and Russian tanks crossed into Crimea, neither the EU nor its US partners appeared willing to make the necessary sacrifices to defend their Ukrainian friends.

It felt like déjà vu. In Hungary in 1956, the US also tried to capitalise on an anti-Stalinist backlash to lure the country away from the Soviet bloc. Supportive rhetoric from the Voice of America emboldened the rebels with the prospect of diplomatic (and potentially military) support. However, when Russian troops invaded to prop up pro-Soviet forces, the US refused to risk nuclear war for the sake of saving the ragtag Hungarian revolutionaries. The uprising was violently suppressed and Hungary remained within the Soviet orbit for three more decades.

The stark choice given to Ukraine – between staying with Russia or embracing the West – “defrosted” an unresolved nationalist conflict central to the country’s modern statehood: a gaping historical, religious and ideological rift between eastern and western Ukraine. The mainly Catholic west of Ukraine, its most pro-EU and anti-Russian area, was forcibly integrated into the otherwise Orthodox and largely Russian-speaking Soviet republic of Ukraine only at the end of the Second World War. Previously, the territory had been in the Polish and Lithuanian spheres of influence. During the war, many people from this part of the country, known as Galicia, allied with the Nazis in order to avoid a merger with Russia. After the war, thousands faced repression for this “collaboration” and the wounds run deep. Eastern Ukraine, on the other hand, has been a central part of the Russian empire for centuries. It is considered by many Russians to be the cradle of Russian civilisation and the Orthodox Church.

Like the arbitrary colonial-era dividing lines of many African and Middle Eastern countries, the modern entity known as Ukraine was born by historical accident as the consequence of post-war Great Power politics. Soviet political imperatives further muddied the waters: the Soviet premier Nikita Khrushchev arbitrarily redrew the borders and “gave” Crimea, a traditionally Russian province, to the Ukrainian Republic in 1954. It was a symbolic gesture made at a time when the borders between Soviet republics were nominal and invisible. After the fall of the USSR, it suddenly became an international dividing line between two sovereign but historically interwoven states. So although the referendums for independence in several Eastern regions have been largely shams, they do reflect a widespread anxiety that a pro-western government would lead to the capture of the whole country by an unrepresentative neo-Galician clique.

Yet these tribal differences between East and West, however strongly felt, have become the idiom with which the conflict has been most clearly expressed, rather than its cause. As with all nationalist movements, the emotive rhetoric frequently masks much more pragmatic considerations. Like Russia, Ukraine is in thrall to a small group of oligarchs who control its economy and political processes; the bulk of the country’s industries are located in the east and remain highly dependent both on Russia as well as a steady stream of state subsidies. They helped install Viktor Yanukovich into power not because he was pro-Russian, but because he was from the East and represented their interests.

Many of these oligarchs are anxious that closer ties with the EU may entail the arrival of greater European competition and a fall in state subsidies. On the other hand, they have been equally reluctant to throw in their lot with separatists who want Eastern Ukraine absorbed into Russia. If that happens, they would be forced to give up much of their current unfettered power to Vladimir Putin and face predatory attacks from Russia’s own oligarchs who are eager to expand their holdings into Ukraine.

As a result, Ukraine’s key billionaires, such as Rinat Akhmetov, Dmitry Firtash and Victor Pinchuk, have been walking a tightrope by lobbying for a middle ground between Ukraine remaining a unitary state and splitting up into two: more powers should be devolved to the regions, for example, in the form of federalism. This would allow them to consolidate their personal fiefdoms without falling prey to Russia, and also to appease nationalists who would like to limit western Ukrainian influence over the east.

Perhaps ironically, given the highly publicised role of people power in the Ukrainian crisis, the man expected to win the presidential election, Petro Poroshenko, is just such an oligarch. The owner of the country’s largest chocolate factory, he once bankrolled Yanukovich’s pro-western rival Victor Yuschenko but has now come out in support of giving more autonomy to the eastern regions and normalising relations with Russia.

The West could also take this opportunity to seek compromise. History has shown that Russia is willing to respect the sovereignty of countries with markedly different internal politics, as long as they pledge military neutrality and respect its geopolitical interests. After the end of the Second World War, the Soviet Union agreed to relinquish its occupation of Austria and allow it to remain pro-western and capitalist in exchange for the country remaining outside of Nato. A similar arrangement successfully held for Finland, which despite ideological differences and a history of invasion peacefully shared a border with the USSR for a half century without interference. There is no reason to think that a similar case of “Finlandisation” would not work equally well for Ukraine, Russia and the West.

In the meantime, however, the present conflict is still “approaching to a point of no return”, in the words of the UN assistant secretary general for human rights, Ivan Simonovic. Although Russia appears to also favour federalism rather than outright secession and has urged its separatist allies towards dialogue with Kiev, it may already be too late to rein in their maximalist demands. Given the gravity of the situation, the pragmatic and cautious – if corrupt – hand of big business may be the only thing that can keep the country from violent splintering and civil war in the short term.

Ultimately, Ukraine’s path to true democracy depends not on the false choice between Russia and the West, but on breaking the stranglehold of the oligarchs over its politics, economy and society. Alas, while the elections could be a crucial step away from the brink, Poroshenko’s predicted victory would represent just the latest in a long line of promising popular revolts to have become co-opted by oligarchic interests. As the old Soviet saying goes, “we hoped for the best, but things turned out as usual”.

Vadim Nikitin is a regular contributor to The National.

thereview@thenational.ae

Updated: May 22, 2014 04:00 AM

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