Yanukovych and Oligarchs: a Short or Long-Term Relationship?

• About Us
  • Contact Us
  • Support Jamestown
  • Senior Fellows
  • Board Members
  • Staff
  • Employment
  • Directions
  • Getman Paintings
• Programs
  • Eurasia Daily Monitor
  • Global Terrorism Analysis
  • China Brief
  • North Caucasus Analysis
  • Militant Leadership Monitor
  • Books
  • Recent Reports
  • Hot Issues
  • Most Popular
• Regions
  • Africa
  • The Caucasus
  • Central Asia
  • China and the Asia-Pacific
  • Europe
  • Latin America
  • Middle East
  • Russia
  • South Asia
  • Turkey
• Media
  • Events
  • Media Appearances
  • Press Releases
  • Experts / Authors
  • Contact Experts
  • Resources
  • Subscribe to RSS
• Archives
  • Global Terrorism Analysis
  • China Brief
  • North Caucasus Weekly
  • Fortnight in Review
  • Monitor
  • Prism
  • Russia and Eurasia Review
  • North Korea Review
• Support

Yanukovych and Oligarchs: a Short or Long-Term Relationship?

Ukrainian President Viktor Yanukovych.

Ukraine's October 31 local elections deepened Viktor Yanukovych's and the Party of Regions grip on power. With parliamentary elections scheduled for September 2012 Yanukovych is on the way to a rapid monopolization of power that has profound consequences for Ukrainian democracy.

After his election a decade ago in Russia, it took Vladimir Putin his entire first term in office to accomplish what Yanukovych has undertaken in less than a year. Yanukovych has taken five steps to remove obstacles to the monopolization of power. The first to go were parliament, which has become a rubber stamp institution, followed by television whose oligarch owners rushed to prove their loyalty to the new regime. The third, on October 1, was Ukraine's return to a presidential constitution and a month later the Party of Regions won a majority in local councils in a bitterly contested election.

These four steps were followed by a fifth, a coordinated attack on the main opposition force, the Fatherland (Batkivshchina) Party led by Yulia Tymoshenko. "October 31 will go down in history as the first day of an election without Yulia Tymoshenko," observed Ukrayinska Pravda (November 1). Registration of clone, fake lists of Fatherland candidates removed Batkivshchina from two key strongholds, Lviv and Kyiv, while an "anti-corruption" campaign unveiled financial irregularities in the 2007-2010 Tymoshenko government that harmed her image.

One social group that still remains independent is the oligarchs, but for how long? Will Yanukovych follow Putin in taking a sixth step and eliminate the oligarchs?

In a constitutional, legal environment where anything can be changed and retracted, including by the constitutional court, all decisions are at the whim of the president. Konrad Adenauer Stiftung's Ukraine Director, Nico Lange, wrote in Levyi Bereg (October 20) that legal instability will deter foreign investors as they would be unsure about the ability of Ukraine's notoriously corrupt courts to defend their assets. Additional problems exist, such as the high levels of public distrust and frequent acts of betrayal by elites of their declared principles and allies.

Akhmetov, who accumulated his business empire when Yanukovych was Donetsk governor in 1997-2002, has been sidelined from the presidential administration and Nikolai Azarov's government. Meanwhile, the influence of Firtash, the country's only Western Ukrainian oligarch, has grown in both institutions.

Rumors point to Oil and Energy Minister, Yuriy Boyko, as a potential replacement for Prime Minister Azarov who was always seen as a transitional figure (Ukrayinska Pravda, October 15). Deputy Prime Minister, Sergei Tigipko, is also touted as well as the head of the Presidential Administration, Serhiy Levochkin, a "reserve candidate" who would play a similar role to Viktor Yushchenko in 2000-2001 as the "Prime Minister-reformer" rescuing the president's international image (Serhiy Leshchenko in Ukrayinska Pravda, September 24, October 14). First Deputy Prime Minister, Andriy Kluyev, an Akhmetov loyalist, also has designs on the post.

Boyko and Firtash have long-standing ties to the energy sector together with Levochkin and Security Service Chairman, Valeriy Khoroshkovsky. Khoroshkovsky and Firtash played a strategic role in Yanukovych's election through their control of Inter, Ukraine's most popular television channel.

In addition to the marginalization of Akhmetov, other oligarchs who aligned with Viktor Yushchenko (Igor Kolomoysky) or Tymoshenko (Sergei Taruta, Vitaliy Haidiuk, and Konstantin Zhevago) have lost out. Kolomoysky, often depicted in terms of business practices as Ukraine's most odious oligarch, is in de facto exile in Geneva as he is seen as the first likely casualty of a Putin-style attack on the oligarchs.

That is, if Akhmetov is not first. According to sources who spoke to EDM, in a meeting last month between the oligarchs and Yanukovych, the president demanded a 3 percent tribute of their annual turnovers. When Akhmetov protested Yanukovych raised the fate of imprisoned Russian oligarch Mikhail Khodorokovsky. Akhmetov responded with the threat that presidents can always face the same fate as (assassinated US President John) "Kennedy" (EDM June 28).

The Ukrainian media analyzed the divisions within the Yanukovych camp between the so-called pro-Russian "gas lobby" and pro-European "pragmatists."  The former group is allegedly seeking to marginalize the "Donetski," two (Nestor Shufrych and Vladimir Sivkovych) who were removed from government posts and sent to the National Security and Defense Council (NRBO). The NRBO, still headed by Akhmetov loyalist, Raisa Bohatyriova, has become a "museum" where the "political enemies of Liovochkin" are sent to be preserved as "political mummies" (Ukrayinska Pravda, October 14). The NRBO's marginalization under Yushchenko has become complete under Yanukovych. Speculation of this type is however exaggerated and simplistic.

Gazprom aligned with Tymoshenko to remove RosUkrEnergo (RUE) and confiscate its gas supplies, severely denting "pro-Russian" views within Ukraine's "gas lobby." Meanwhile, Kluyev  has few "European" values judging by the 2004 presidential elections (when he ran Yanukovych's dirty tricks shadow campaign) and 2010 local elections (where he headed the Party of Regions campaign to obtain victory at all costs).

"Pragmatic" oligarchs have readily sold their assets (Industrial Union of Donbas, Zaporizhstal) to unnamed Russian investors. Russian Prime Minister, Vladimir Putin, chairs Vneshekonombank that purchased Ukraine's Prominvestbank last year.

Akhmetov sent a signal through his vote for parliament's establishment of an investigation commission into the RUE gas intermediary. The decision by the Stockholm Arbitration Court in June against the Tymoshenko government's confiscation of RUE gas ruled that Firtash/RUE should receive $3.7 billion plus $600 million in damages from Naftohaz Ukrainy, an amount that would infringe Ukraine's July agreement with the International Monetary Fund (IMF). Insiders told EDM that re-payment of the compensation could lead to conflict between Yanukovych and Firtash.

Both groups ("gas lobby" and "pragmatists") believe they can undermine democracy at home without harming Ukraine's chances of signing a Deep Free Trade Agreement within an Association Agreement with the EU. On this point they are being naïve –as confirmed by the lengthy negotiations over Turkey joining the EU.

Ukrayinska Pravda analyst (September 24) Leshchenko positively portrayed the divisions within the Party of Regions suggesting "Maybe these will halt the final destruction of democracy in our state." With Yanukovych having completed five stages in his political monopolization of Ukraine, the sixth –removal of oligarchs– could be his next target. The next two years will likely decide whether Ukraine becomes a Putin-style managed democracy without oligarchs or if the oligarchs fight back (EDM, September 22).

A first step for Western governments would be to interact with Akhmetov and Firtash to learn their strategies and plans for Ukraine, while they in turn very rarely give interviews to the media. Western policymakers are operating in the dark, as they do not know the views of the two main financiers who brought Yanukovych to power.

Email this article to a friend

Publications

Eurasia Daily Monitor

Global Terrorism Analysis

China Brief

North Caucasus Analysis

Militant Leadership Monitor

Donate To Jamestown

Click Here To Donate Now

Subscribe to our Publications

Upgrade your subscriptions

New From Jamestown

Breaking News:

The Battle for Yemen: Al-Qaeda and the Struggle for Stability

The Battle for Yemen is a rare and comprehensive volume that tackles the facets of instability that currently plague Yemen. It offers a wealth of analysis and keen observations from the experts of The...

Volatile Landscape: Iraq and its Insurgent Movements

By:Ramzy Mardini (ed.)

Violence in Iraq has declined since its civil war of 2005-2007 due to the implementation of the U.S. counterinsurgency strategy, Shi'a militia ceasefires, and the emergence of Iraq's Awakening Movemen...

Pakistan's Troubled Frontier

First demarcated in 1893 by British diplomat Sir Mortimer Durand, the northwest frontier was created when the "Durand Line" imposed an artificial border between the tribal Pashtun communities of moder...

Friends of Jamestown Program

The Jamestown Foundation is pleased to announce the creation of the Friends of Jamestown Program, an annual membership that offers complimentary copies of Jamestown books and reports, and signficant d...

Unmasking Terror Volume IV: A Global Review of Terrorist Activities

By:Andrew McGregor (Editor)

Unmasking Terror Volume IV: A Global Review of Terrorist Activities brings together over 50 experts on terrorism.

Towards a Curriculum for the Teaching of Jihadist Ideology

Towards a Curriculum for the Teaching of Jihadist Ideology aims to provide an introduction to the intellectual infrastructure of the jihadist phenomenon and the process of radicalization, and to furnish materials for a textbook...

Shrinking Ground: Russia's Decline in Global Arms Sales

Given the recent "reset" policy put in place by the Obama administration with regards to Russia policy, a closer look into the Kremlin's arm sales practices might prove critical for anyone attempting to decipher Moscow's foreign...

Changing of the Guard: Beijing Grooms Sixth-Generation Cadres for 2020s

"Changing of the Guard: Beijing Grooms Sixth-Generation Cadres for 2020s" details the major generational changes that will take place in the party-and-state leadership at the 18th Chinese Communist Party (CCP) Congress set for...

Saudi Arabian Oil Facilities: The Achilles Heel of the Western Economy

On February 24, 2006, the world's largest oil refinery, the Abqaiq oil facility in Saudi Arabia, fell victim to a major attack by al-Qaeda. The strategic attack on Saudi Arabia's largest oil refinery nearly succeeded in knocking...

Islamist Movements in the Horn of Africa

On December 9, 2009, the Jamestown Foundation organized a special panel on "Islamist Movements in the Horn of Africa" as part of its annual conference, the latter appropriately titled "The Changing Strategic...

The Al-Qaeda Organization in the Islamic Maghreb: Expansion in the Sahel and Challenges from Within Jihadist Circles

January 2010 marked the three-year anniversary of the merger between the Salafist Group for Preaching and Combat (or GSPC, as it is known by its French acronym) and al-Qaeda central.  The GSPC became the official wing of...

Terrorism Trends in South and Southeast Asia

While the Arab Middle East is political Islam's ideological and historical core, South Asia and Southeast Asia, concentrated in the Indonesian archipelago, make up the modern demographic core of the Muslim world. Advocates of...

Britain & the North West Frontier: Strategy, Tactics and Lessons

The tribal areas of Pakistan's North-West Frontier Province (NWFP) fully deserve President Barack Obama's description as "the most dangerous place in the world". This remote and inhospitable region is only nominally under...

The South China Sea Dispute: Increasing Stakes and Rising Tensions

Tensions are on the rise in the South China Sea. Longstanding sovereignty disputes over the profusion of atolls, shoals and reefs that dot the 1.2 million square miles of sea, allied to extensive overlapping claims to maritime...

Who's Who in the Somali Insurgency: A Reference Guide

The ongoing struggle for control of Somalia is one of the world's most complicated. With the country already effectively split into three parts, it may be too late to speak of a Somali nation. While the popular conception of this...

• Home
• Hot Issues
• About Us
• Programs
• Regions
• Media
• Archives
• Support
• 
  
• Privacy Policy
• Copyright 2010
• Site Map
• Search
• Contact Us