by Anna Reid
Privatisation is progressing at a snail’s pace. Though small businesses — shops, cafés, hairdressers and the like — are out of the government’s hands, most were given over to existing cooperatives, which carry on running them as badly as before. Central Kiev has lots of shiny new supermarkets full of overpriced Twinings tea and Bahlsen biscuits, but in the suburbs and the provinces shops are as drab as ever, brusquely promising ‘Milk’ or ‘Fruit and Vegetables’ on the outside, and offering nothing but giant jars of murky brown pickles within. Few big firms have been privatised at all. Every six months or so, the government announces an impressive target of so many thousand companies to be auctioned by the end of the year. Amidst much fanfare, a few semi-bankrupt factories are indeed sold off. Parliament then votes to take ‘strategic’ firms — meaning anything from steel-mills to bakeries — off the list. The industrial ministries put absurdly high reserve prices on the remainder, and the government’s target is quietly shelved. Ukrainians are convinced — often rightly — that the whole process is simply a means whereby politicians and their friends rob the state.
Farming, potentially Ukraine’s economic mainstay, is as backward as ever. Over 80 per cent of agricultural land is still owned by the state or by collectives, and so inefficiently farmed that it produces only half the country’s agricultural output. The rest comes from small private plots, planted, hoed and harvested by hand. Go-ahead farmers are stymied by state-owned monopolies on the sale of seed and fertiliser, and on storage and processing facilities. ‘The worst,’ a depressed EU consultant told me, ‘are the local ministry people. They just want their cut, and give absolutely nothing in return.’ Like everywhere else in the ex-Soviet Union, land privatisation is political anathema. Aleksandr Moroz, leader of the Socialist Party and a former speaker of parliament, speaks for the left when he calls it ‘an evil idea.’ Collective workers themselves fear — with good reason — that it would simply mean their bosses scooping the farm.
Stagnation in the state sector would matter less if a new private sector were growing to replace it. In Poland, where privatisation is still not complete, small start-up firms got the economy growing soon after inflation had been brought to heel. In Ukraine, it is not happening. To blame is the sheer red tape involved in running a legal private business. A survey by the World Bank’s Kiev office lists the problems: Byzantine licensing requirements, a constantly changing tax code, complicated restrictions on exports and foreign exchange. One small knitwear manufacturer found it had to get fourteen different permits to legally export a sock.1
The regulations stay because they allow the extraction of bribes. In March 1996, according to another World Bank survey, registering a business cost $175, a fire certificate $40, an export licence $125, a phone line $900 in a smart district of Kiev, $200 or $300 in a suburb.2 A Spaniard’s account of the shenanigans involved in exporting a shipload of sunflower seed, delivered over a seven-dollar beer in one of Kiev’s fast-multiplying ex-pat bars, is typical:
I got my first licence back in November, and lost it when the law changed. I got a second licence — and lost it; a third — and lost it again. Now I’m on my fourth. For all this Fve had to get signatures from twenty-five different people. I’m paying one high-up guy’s son a salary, and next week somebody else’s kids are going on holiday to Spain, out of my pocket.
On top of officials, there is the mafia to be paid off. A basic requirement for anyone going into business in Ukraine is an ‘umbrella’ — an agreement with one or another local gang whereby it takes a percentage of profits in exchange for ‘protection.’ Even big Western firms are not immune. Coca-Cola posted men in fatigues in its reception area after armed men walked in demanding a ‘partnership agreement;’ the American lawyers Baker & McKenzie paid $2,500 a month to a ‘security firm.’
The result, not surprisingly, is that Ukraine has attracted little foreign investment — far less than the Czech Republic or Hungary, both a fifth of its size. The only Western firms with the stomach for doing business in the country tend either to be big multinationals prepared for years of losses, or plucky little one-man-bands. Both regularly get ripped off by their Ukrainian partners. The head of the first venture-capital fund into Ukraine says that ‘companies keep three sets of books — one for the taxman, one for the Western investor and one for themselves.’ Going to the court is futile: ‘You choose your lawyer not for his legal skills, but because he knows the judge.’
For all this, Ukraine really is potentially a rich country. Politicians may burble about the necessity for ‘gradualism’ or a mythical ‘Ukrainian way,’ but there is no technical reason why it should not have gone about reform as swiftly as Poland or the Baltics. With the arguments on how to make the transition to a market economy long over, Ukraine should in theory be benefiting from others’ experience. ‘Whatever they need to learn from Europe,’ says Roman Szporluk, head of Ukrainian studies at Harvard, ‘they can learn from Warsaw and Cracow. But they have a kind of amnesia, a blank spot.’ If and when Ukraine does see the light, its economy could pick up fast. Western investors would be only too happy to put money into the country if it showed signs of repeating Poland’s success, and black-marketeers tell pollsters that they would turn legal if the tax and licensing systems allowed them to do so without going bust.
But before they get economic reforms, Ukrainians have to vote in a reformer. In the 1998 parliamentary elections the most popular free-market party got a miserable 3 per cent of the vote, a pattern that was repeated when Kuchma won his second term eighteen months later. Support for the left, in contrast, is growing, with the result that in 1999 a Communist Party candidate made it through to the presidential run-off for the first time since independence. Ukrainians are now convinced that ‘reform,’ rather than the lack of it, is to blame for their falling living standards and crumbling public services. It will take a brave, charismatic politician — or perhaps, in the worst case, a brief, mind-concentrating return to central planning — to change their minds.
Sorting out its economy is something Ukraine has to do for itself. What it cannot alter is its geography. With a bearish Russia to its east, and an expanding NATO and European Union to its west, Ukraine remains, as ever, a disputed borderland between rival powers. Ukrainians try to view their position as a blessing. They talk about being a ‘crossroads,’ a ‘doorway,’ a ‘lever,’ a ‘bridge.’ But in this part of the world, bridges tend to get marched over or blown up. As long as Russia and the West simmer with mutual distrust, to maintain its independence Ukraine has to pull off a fine diplomatic balancing act between the two.
For two years after independence, Ukraine’s relations with the West were mired in mutual misunderstanding. Ukrainians resented the blandishments poured on Yeltsin’s new democratic Russia, and had not forgotten Bush’s insulting ‘Chicken Kiev’ speech of August 1991, when he warned against ‘suicidal nationalism based on ethnic hatred.’ The West, for its part, had difficulty taking Ukraine seriously at all. Russophile Sovietologists widely predicted, to Ukrainians’ fury, that the country was bound to rejoin Russia before long. It was a tradition — chippiness on the Ukrainian side, ignorant dismissiveness on the West’s — that dated back to the Paris peace talks of 1919, when Margolin deplored the crowds of ‘urbane and polished’ Russian and Polish exiles who undermined Allied support for the Ukrainian government in Galicia.
Relations worsened when the nuclear powers demanded that Ukraine sign up to the START-1 arms reduction treaty, committing it to surrendering the Soviet-inherited nuclear missiles stationed on its soil. Nationalists smelt a plot to neuter their fragile new state: ‘If nuclear weapons are such a bad thing,’ a Rukh activist asked me, ‘why don’t you give up yours too?’ Utterly failing to appreciate the strength of Western feeling on the issue, Kravchuk allowed his country to turn into a virtual pariah-state before capitulating, in a ‘Tripartite Agreement’ with Russia and America, in January 1994. Under the agreement, Ukraine agreed to ship its warheads to Russia
for dismantlement, in exchange for nuclear fuel for its power stations and a Russian promise to respect ‘existing borders.’
With the Tripartite Agreement, Ukraine’s diplomatic standing improved dramatically. Seeing Moscow’s White House wrecked by shell-fire, Zhirinovsky triumphant in Russia’s parliamentary elections, and civil war raging in Yugoslavia, America belatedly realised that Ukraine was too important to be left out in the cold. Keeping Russia democratic meant keeping Ukraine independent, and keeping Ukraine independent meant doing something about its economy. In 1994 Ukraine became the fourth-biggest recipient of American aid after Israel, Egypt and Russia itself. The following spring the IMF backed Kuchma’s reform programme, and twisted Russia’s arm into rescheduling Ukraine’s fuel debts, by making a deal an unspoken condition of Russia receiving its own IMF loan. In October 1994 Kuchma was given the full-scale red-carpet treatment on a trip to Washington, and returned the compliment five months later when Clinton made a flattering three-day state visit to Kiev.
Despite campaign promises of closer relations with Russia, Kuchma met the West’s overtures with enthusiasm. During his first term as president, Ukraine became a member of the Council of Europe (a 41-country-strong organisation that theoretically guarantees members respect for democracy, human rights and rule of law) and acquired observer status in the Western European Union, the EU’s embryonic defence arm. Though a tentative request to be considered for associate EU membership got nowhere, a ‘Partnership and Co-operation Agreement’ with the EU, forged in 1998, gave Ukraine limited trading privileges and regular high-level diplomatic contact. During NATO’s bombardment of Serbia in the spring of 1999, Kiev grumbled but refrained from outright condemnation, and Ukrainian troops served with the NATO-led force in Kosovo and as UN peacekeepers in Bosnia. Ukraine is still capable of dreadful diplomatic gaucheries: EU relations have been soured by its perverse refusal to close down Chernobyl, and the government once chose the day before a meeting on a new multimillion‘dollar aid package to send police to occupy the Kiev offices of the World Bank. But for the time being, Ukraine’s age-old tightrope-walk has acquired a definite westward tilt.
Much as Kuchma cosies up to Washington and Berlin, however, Ukraine’s future chiefly hangs, as always, on what happens in Moscow. If the West has had a hard time coming to terms with Ukrainian independence, Russia has hardly begun. ‘Russians have still not accepted, deep in their hearts, that Ukraine is a legitimate phenomenon,’ says Szporluk. ‘Whether your name is Zhirinovsky, Yavlinsky or Gaidar, somewhere in your mind you think that Ukraine is a fake, a phony.’ So far, Russian grouchiness at Ukrainian independence has not translated into action. The Yeltsin government agreed to respect Ukraine’s borders, rescheduled — albeit under pressure from America — Ukraine’s fuel debts, and refrained from stirring up trouble in Crimea. Ordinary Russians put all foreign-policy issues at the bottom of their list of concerns in polls, well after crime and jobs.
Poor and demoralised, Russia currently lacks the will and resources for adventures abroad. Even re-integration of Belarus (which would be popular with most Belarussians, but involve giving their politicians a say in Russian affairs and an expensive bail-out of the Belarussian currency) has made little headway. The big, unanswerable question is whether, if Russia regains wealth and self-confidence, it will try to rebuild its old empire, or come to terms with its loss as Britain and France did fifty years ago. Most doyens of Western opinion are optimistic. Richard Pipes, the hawkish Harvard history professor who served on Reagan’s National Security Council and spent a career denouncing Russian polity through the ages, thinks the national psyche profoundly changed by the loss of the Cold War. ‘There’s a Turgenev story,’ he says. ‘A man is lying on the grass in the sun. A milkmaid comes along and gives him bread, milk. He thinks to himself — “Why do we need Constantinople?” Russia is the same about places like Crimea now.’3 Tim Colton, another Harvard academic and an expert on the Russian army, thinks progress will be bumpy, but broadly in the right direction: ‘Ukraine is a pretty secondary issue in Russia now. Governments will alternate between the common-sense approach and taking swipes just for the fun of it.’4
If the optimists are wrong, there are plenty of ways Russia could try to force Ukraine back into the fold. Nobody expects tanks to roll into Kiev as they have into Grozny, but Russia could stir up secessionism amongst ethnic Russians in Crimea and the Donbass, as it did in Moldova, Georgia and Tadzhikistan. Once an alternative westward pipeline through Belarus is completed, it could also cut off Ukraine’s oil and gas supplies — both moves to which Ukraine remains vulnerable until it has sorted out its economy. Russia is already pressuring Ukraine to join more closely in CIS institutions, and squabbles over Sevastopol meant repeated postponement of a Friendship Treaty reconfirming mutual borders, finally signed in May 1997.
Ukrainians feared that the catalyst for renewed Russian aggression might be the eastward expansion of NATO. In Simon Hemans’ words, ‘They see themselves as non-aligned, but worry that it’ll be hard to stay that way if the West is playing the expand-the-alignment game. They’re scared that when the Central Europeans are taken into NATO Russia will – not lash out, but loom all over them. And the West will allow it, because it doesn’t really care if Ukraine stays in the Russian half of Europe.’ So far, that has not happened, but though Ukraine participates in joint exercises with NATO troops under America’s Partnership for Peace programme, and won consultation rights, similar to Russia’s, at the Madrid summit of 1997, there is no serious talk as yet of Ukraine applying to join NATO itself. Any such move would be guaranteed to lash Russia into a bearish fury, and American public opinion is quite unprepared to extend security guarantees to the Ukrainian-Russian border. Even if Kuchma were to ask for inclusion, it is far from certain that he could take his country with him. Poised precariously between Russian-ness and European-ness, Ukrainians simply do not see themselves as part of the West in the same way that Poles, Czechs, Baits and Hungarians do. Senior politicians talk in private about applying for NATO membership one day, but not until Russia’s own relations with the West are far friendlier.
What kind of place will Ukraine be in ten years’ time? At worst, it will be a fragile, poverty-stricken buffer-state in a new divide between an introverted West and an aggressive, unstable Russia. At best, it will be a rich, heavyweight democracy in a continent-wide partnership of friendly like-minded states. Given the two countries’ halting progress so far, the latter looks — cross fingers — rather likelier than the former. The West’s role should be to slap down any renewed Russian pretensions to empire, and to keep on prodding Ukraine, with a mixture of sticks and carrots, towards economic reform.
Forecasting is a mug’s game. But without a doubt, Ukrainians now have their best chance ever of building a free and prosperous state of their own. If they succeed Ukraina will become a misnomer, for they will cease to inhabit a country ‘on the edge,’ a borderland to other nations.
In his novella Taras Bulba, Gogol has his Cossack hero ride off into the steppe with his two sons to fight the Poles:
The day was grey and overcast; against this grey the grass stood out a vivid green; the singing and chirping of the birds sounded somehow discordant. After riding some distance they looked behind them: the village appeared to have been swallowed up by the ground until all that could be seen were the two chimneys of their modest cottage and the tops of the trees . . . At last all that remained, sticking up against the sky, was the tall, solitary pole over the well, with a wagon-wheel fastened to the top; and then the flat plain across which they rode rose up like a hill to obscure all else from view.5
The steppe has long been put to the plough, and Bulba never existed. But Bulba’s dream of an independent Ukraine was real, and has come true. Gogol’s story ends in tragedy. One son is captured and broken on the wheel in Warsaw; the other turns traitor, and is killed by his own father. Bulba himself is burned at the stake. This time, the Ukrainians’ journey looks like it wi
ll have a happier ending. After a thousand years of one of the bloodiest histories in the world, they surely deserve it.
NOTES
CHAPTER ONE ♦ The New Jerusalem: Kiev
1 The Russian Primary Chronicle Laurentian Text, trans, and ed. Samuel Cross and Olgerd Sherbowitz-Wetzor, Cambridge, Mass., 1953, p. 59.
2 Robert Byron, First Russia, then Tibet, London, 1985, p. 121.
3 Michael Hamm, Kiev: a Portrait 1800–1917, Princeton, 1993, p. 15.
4 Primary Chronicle, p. 93.
5 Ibid., p. 94.
6 Ibid., p. 97.
7 Ibid., p. 111.
8 Ibid., p. 111.
9 Ibid., p. 116.
10 Volodymyr Sichynskyi, Ukraine in Foreign Comments and Descriptions from the VIth to the XXth Century, New York, 1953, p. 37.
11 George Vernadsky and Michael Karpovich, A History of Russia: Vol. 2 Kiev an Russia, Newhaven, 1948, p. 83.
12 The Song of Igor’s Campaign: an epic of the twelfth century, trans. Vladimir Nabokov, London, 1961, p. 45.
13 Hamm, Kiev, p. 5.
14 Ibid., p. 18.
15 Michael Hrushevsky, The Traditional Scheme of "Russian" History and the Problem of the Rational Organization of the History of the East Slavs’, pub. 1903 and reprinted in English in Slavistica: Proceedings of the Institute of Slavistics of the Ukrainian Free Academy of Sciences No. 55, Winnipeg, 1966, pp. 8–9.
16 Vernadsky, History of Russia, p. 309.
17 Richard Pipes, Russia Under the Old Regime, London, 1974, p. 75.
18 The Travels of Macarius: Extracts from the Diary of the Travels of Macarius, Patriarch of Antioch, written in Arabic by his son Paul Archdeacon of Aleppo; in the years of their journeying 1652–1660, London, 1936, p. 20.
19 Ibid., pp. 20–21.
20 Ibid., p. 91.