Ukraine’s political engagement with the West began in earnest in January 1994 with the signing of a deal brokered by the United States, according to which Ukraine gave up the nuclear weapons it had inherited from the USSR—potentially the world’s third-largest nuclear arsenal. In the Budapest Memorandum signed in December of that year, the United States, Russia, and Great Britain provided security assurances to Ukraine, which joined the Treaty on the Non-proliferation of Nuclear Weapons as a nonnuclear state. While many in Kyiv questioned the prudence of giving up nuclear weapons (the invasion of Ukraine by Russia, one of the Budapest Memorandum guarantors of Ukraine’s sovereignty and territorial integrity, would strengthen their case in 2014), there were significant benefits to be gained at the time. Ukraine ended its de facto international isolation as a country previously refusing to join the Nuclear Non-proliferation Treaty and became the third-largest recipient of US foreign aid, after Israel and Egypt.
In June 1994, the Ukrainian government signed a cooperation agreement with the European Union (EU), the first such agreement that the EU had offered a post-Soviet state. In the same year, Ukraine became the first country among the members and associate members of the Commonwealth of Independent States to enter into the Partnership for Peace agreement with the North Atlantic Treaty Organization (NATO). The Western military alliance, which had come into existence in 1949 at the start of the Cold War to defend western Europe from the Soviet Union, was now reinventing itself. NATO began building institutional bridges with former adversaries in eastern Europe, including Russia, which signed the agreement a few months after Ukraine. In 1997, Ukraine deepened its cooperation with the alliance by signing the Charter on Distinctive Partnership and opening a NATO information center in Kyiv. In 1998, the cooperation agreement signed four years earlier with the European Union became functional. Things looked promising. Major obstacles, however, stood in the way of Ukraine’s becoming a European nation as envisioned by its intellectuals. Most of them were within Ukraine itself.
Like many post-Soviet countries, during its first years of independence Ukraine underwent a major political crisis caused by economic decline and social dislocation and focused on relations between the presidency and parliament, both institutions having been created in the political turmoil of the last years of the Soviet Union. Russia resolved the conflict in September 1993 when President Yeltsin ordered tanks to fire on the Russian parliament building and the Russian authorities arrested Russia’s vice president and the head of parliament, both accused of instigating a coup against the president. Yeltsin’s advisers rewrote the constitution to limit the power of parliament, turning it into something more of a rubber stamp than an active agent in the Russian political scene. Ukraine resolved the emerging conflict between the president and parliament with a compromise. President Kravchuk agreed to call early presidential elections, which he lost, and in the summer of 1994 he peacefully transferred power to his successor, Leonid Kuchma, the former prime minister and erstwhile rocket designer heading Europe’s largest missile factory.
Throughout the tumultuous 1990s, Ukraine not only managed its first transfer of power between two rivals for the presidency but also maintained competitive politics and created legal foundations for a viable democracy. In 1996, President Kuchma rewrote the Soviet-era constitution, but he did so together with parliament, which secured a major role for itself in the Ukrainian political process. One of the main reasons for Ukraine’s success as a democracy was its regional diversity—a legacy of both distant and more recent history that translated into political, economic, and cultural differences articulated in parliament and settled by negotiation in the political arena. The industrialized east became a stronghold of the revived Communist Party. Western Ukraine, formerly ruled by Austria and Poland, sent deputies to parliament who populated the ranks of the national democratic Rukh, led by former Gulag prisoner Viacheslav Chornovil. But whoever gained a majority in parliament acquired it as a result of a coalition agreement and had to deal with an opposition that was not easy to satisfy or co-opt. No political grouping was strong enough to destroy or sideline another. At the time, Ukraine’s democracy was often called democracy by default. That turned out to be a good thing. In the post-Soviet space, democracies created purely by design did not last long.
As often happens with former colonial administrators, a strong inferiority complex afflicted the Kyiv elites vis-à-vis their Russian counterparts, and they initially followed models developed in Russia to deal with their own political, social, and cultural challenges. It took them a while to realize that the Russian models did not work in Ukraine. Ukraine was different. Nowhere was this clearer than in the Ukrainian religious scene. By 1992, the Ukrainian Orthodox Church, which accounted for 60 percent of all Orthodox communities in the former Soviet Union, had split four ways: there were Greek Catholics who had emerged from the underground, Orthodox who remained under Moscow’s jurisdiction, adherents of an independent Ukrainian Orthodox Kyiv Patriarchate, and, finally, the Autocephalous (self-ruling) Ukrainian Orthodox Church, which had its roots in the 1920s and also did not recognize the authority of Moscow. President Kravchuk’s efforts to turn the Kyiv Patriarchate into a de facto state church, as Russia had done with the Moscow Patriarchate, failed. So did President Kuchma’s attempts to do the same with the Ukrainian branch of the Orthodox Church of the Moscow Patriarchate.
The Ukrainian scene remained as pluralistic at the turn of the twenty-first century as it had been after the declaration of independence. If anything, it became even more diverse. Eventually, all political forces had to accept the reality that Russian political solutions generally did not work in Ukraine. President Kuchma explained why in a book published in 2004, close to the end of his second term in office. The title was telling indeed: Ukraine Is Not Russia.
The major challenge to the democratic nature of the Ukrainian political process was the catastrophic economic decline that followed the declaration of independence and was often blamed on it, making not only the Leonid Brezhnev era but also the period of Mikhail Gorbachev’s reforms look like a paradise lost. In six years, between 1991 and 1997, Ukrainian industrial production fell by 48 percent, while the gross domestic product (GDP) lost a staggering 60 percent. The biggest loss (23 percent of the previous year’s GDP) occurred in 1994, the year of presidential elections and the signing of the first cooperation agreement with the European Union. These were figures comparable to but more significant than American economic losses during the Great Depression, when industrial production fell by 45 percent and GDP by 30 percent.
The 1990s brought terrible hardship to Ukraine. By the end of the decade, close to half of Ukrainians claimed that they had barely enough money to buy food, while those who were leading relatively comfortable lives amounted to barely 2 or 3 percent of the population. This translated into higher mortality rates and lower birth rates. The former overtook the latter for the first time in 1991. Ten years later, when the government of independent Ukraine conducted its first census, it found 48.4 million Ukrainians in the country, 3 million fewer than the 51.4 million counted in the last Soviet census of 1989.
Once again, Ukraine became a source of emigration. Many left for a few months or even years to make the kind of money they could not make at home. They headed mainly to Russia, with its oil and gas wealth, and the countries of east-central Europe and the European Union. Others left forever. Ukrainian Jews led the way. Many of them had not been allowed to leave the Soviet Union in the 1980s, becoming “refuseniks” whom the Soviet authorities denied exit visas and turned into second-class citizens by firing them from the universities and barring them from government jobs. Now they could leave and did so in astonishing numbers. Between 1989 and 2006, more than 1.5 million Soviet Jews left their countries of residence, including a good many Jews of Ukraine. Whereas the Ukrainian population as a whole fell by roughly 5 percent between 1989 and 2001, the Jewish population fell by a staggering 78 percent, decreasing f
rom 487,300 to 105,500. Among those who left were the families of the cofounders of Paypal (Max Levchin) and WhatsApp (Jan Koum). But not only Jews wanted to leave. Many of the emigrants were Ukrainians, Russians, and members of other ethnic groups. Ukraine also became a transit point for illegal immigrants from the rest of the commonwealth and countries such as Afghanistan and Pakistan.
The reasons for the steep economic decline were numerous. The collapse of the Soviet economy not only disrupted economic ties between different republics but also spelled the end to procurement for the ex-Soviet military. Ukraine, home to a highly developed military-industrial complex, suffered disproportionately in this regard. Unlike Russia, Ukraine had no oil and gas revenues to soften the blow. Moreover, the Ukrainian metallurgical complex—the industrial sector that survived the crash and provided most of the funds for the Ukrainian budget—depended entirely on Russian natural gas supplies and had to pay ever increasing prices for that precious commodity. But by far the most important reason for the economic decline was the Ukrainian government’s delaying of badly needed economic reforms and continuing to subsidize money-losing state enterprises by issuing credits and printing more money. Runaway inflation, which reached a staggering 2,500 percent in 1992, set the seal on the rapid economic decline.
During the first years of independence, the government was reluctant to give up ownership and thus control over Soviet-era industrial and agricultural enterprises that required more and more state subsidies. Once it finally decided to do so, it faced opposition in parliament, largely from the “red directors” who managed the large enterprises. In 1995, parliament exempted 6,300 state-owned enterprises from privatization. By that time, fewer than one-third of industrial enterprises had been transferred to private ownership. The first stage of privatization was carried out with vouchers issued to the entire population of the country. It benefited largely the “red directors,” who now had assets but few resources for investment. But privatization without investment and restructuring could not revive the Ukrainian economy. By 1999, when close to 85 percent of all enterprises were privately owned, they accounted for less than 65 percent of all industrial output. Half the industrial enterprises in the country were in deficit. Large and small enterprises ended up in the hands of Soviet-era managers and people close to the government. They maintained monopolies, restrained competition, and deepened the economic crisis.
Ukraine needed new owners and a new class of managers to revive its economy. The country got both in a group of young, ambitious, and ruthless businessmen who had no roots in the old planned economy of Soviet times and had made their way up from the economic chaos of the perestroika years and mafia wars of the 1990s. Known in Ukraine, as in Russia, as oligarchs, they emerged as the main beneficiaries of the second stage of privatization, which amounted to the sale of government assets at a fraction of their actual value. The oligarchs made their fortunes by being innovative and opportunistic, but also by ingratiating, bribing, and shooting their way into the offices of the “red directors.” With the military-industrial complex in steep decline, the Ukrainian metallurgical industry became the richest prize in the 1990s and early 2000s. At that time, more than half the country’s industrial output came from four eastern oblasts—Dnipropetrovsk, Zaporizhia, Donetsk, and Luhansk—that were rich in iron ore and coal and produced Ukraine’s primary export product: steel.
The new “men of steel” included the leader of the Donetsk group, Rinat Akhmetov, who in the early 1990s took over leadership of a company called Lux, known to the Ukrainian authorities for its criminal origins and connections. In the Dnipropetrovsk region, two local businessmen divided major metallurgical assets: Viktor Pinchuk, who married into President Kuchma’s family, and Igor Kolomoisky, who established one of the first major private banks in Ukraine. Others also shared the loot of post-Soviet Ukrainian privatization. Still, the corrupt and often criminal nature of the privatization process aside, the “oligarchization” of the Ukrainian economy coincided with the end of economic decline. Ukraine began the new millennium with a rapid economic recovery, and, for better or worse, the oligarchs were important figures in that new success story.
Most of the privatization of Ukrainian industry took place on the watch of President Leonid Kuchma between 1994 and 2004. Kuchma, who had been a “red director” himself, presided over the process that ultimately benefited the oligarchs, gaining him their economic and political support. Kuchma won his second term in 1999 by presenting himself as the only candidate capable of defeating the communists, who were exploiting economic decline and hardship to attempt a revival, and by splitting the national democratic bloc: his main opponent on the “right,” Rukh leader Viacheslav Chornovil, died under suspicious circumstances in a car crash a few months before the elections. During his second term in office, which began in 1999, Kuchma emerged as the supreme arbiter of relations between the new oligarchic clans in economics and politics. He also tried to consolidate his personal power and marginalize parliament. It did not work as planned: Ukraine, indeed, was not Russia.
President Kuchma’s downfall began in the autumn of 2000 with the release by opposition leader Oleksandr Moroz, head of the Socialist Party of Ukraine, of tape recordings made secretly in Kuchma’s office by one of his bodyguards. The tapes documented Kuchma’s dealings with local officials involved in privatization schemes, his bribe taking, and his efforts to suppress opposition media. One journalist whose name was mentioned on the tapes was Heorhii Gongadze, the thirty-one-year-old founder of the web newspaper Ukraïns’ka pravda (Ukrainian Truth). Kuchma wanted him detained and sent to Chechnia, where insurgents were fighting the Russian army. In September 2000, Gongadze’s corpse was found beheaded in a forest near Kyiv. Kuchma’s complicity in the murder was never proved in court, but those who listened to the released tapes had no doubt that the president himself had ordered the minister of the interior to threaten and kidnap the journalist.
Kuchmagate, as the tape scandal became known in Ukraine, was a turning point in Ukrainian politics. It ended the rise of authoritarian tendencies in the presidential office. The scandal exposed the corrupt side of the policies of the president, who had been credited during his first term with solving the dispute over the Black Sea Fleet, securing the Crimea, convincing Russia to recognize Ukraine’s borders, turning his country toward the West, and launching the long-delayed privatization. Now it turned out that the president was also a crook, perhaps even a murderer. The opposition, which included former national democrats, socialists, and even communists, launched a political campaign under the slogan “Ukraine without Kuchma.” Citizens responded positively to calls for a clampdown on political and economic corruption. The emerging middle class that was replacing the Soviet-era intelligentsia, which the economic collapse had wiped out, was fed up with official corruption, the suppression of political activity, and restrictions on freedom of speech. Ukraine wanted change.
Kuchma managed to survive the immediate fallout from the tape scandal but was unable to stop the rise of political activism. A new generation, coming not from outside the political establishment, as in Soviet times, but from within, led opposition to his regime. Those who wanted to end government corruption, improve relations with the West tarnished by Kuchmagate, and launch a program of integration with the European Union found their leader in handsome forty-seven-year-old former prime minister Viktor Yushchenko, who had no ties with the political and economic clans of eastern Ukraine and came from the rural northeast.
Viktor Yushchenko had presided over the beginning of economic recovery. During his short stay in the prime minister’s office, from December 1999 to May 2001, Yushchenko, together with his deputy prime minister, Yulia Tymoshenko, closed loopholes that allowed the oligarchs to avoid taxation. He lowered taxes on medium and small business, bringing a good part of the Ukrainian economy out of the shadows and increasing state revenues. This in turn allowed Yushchenko’s government to pay wage and pension arrears. O
n Yushchenko’s watch, Ukraine’s GDP stopped falling and showed solid 6 percent growth in 2000, which also saw industrial production increase by 12 percent. The trend would continue for most of the decade. Dismissed from his position in the middle of Kuchmagate, Yushchenko soon emerged as the leader of the Our Ukraine Party, which got almost a quarter of the popular vote in the parliamentary elections of 2002.
Whereas pro-reform Ukraine pinned its hopes on Yushchenko, the former governor of Donetsk oblast and Kuchma’s last prime minister, Viktor Yanukovych, championed President Kuchma’s oligarchic regime. He was also the choice of the Russian president, Vladimir Putin, who took over from Yeltsin in 2000 and was eager to have an ally, if not a client, in Kyiv. In 2004, Yushchenko and Yanukovych faced each other in the most strongly contested presidential elections Ukraine had seen since independence. In early September 2004, Yushchenko, who was leading the race, fell suddenly and violently ill. With the diagnosis unclear and his life in danger, his aides brought him to a clinic in Vienna, where the doctors came to a shocking conclusion. The Our Ukraine presidential candidate had been poisoned, and the poison was of a particular kind—a dioxin of a strain produced in a handful of countries, including Russia and excluding Ukraine. The correct diagnosis saved Yushchenko’s life. With his face disfigured by the poison and a reliance on heavy medication to deal with the excruciating pain, Yushchenko returned to the election trail, gaining more support.
The Gates of Europe Page 41