UKRAINIAN POLICY SHIFT: THE MEANING BEHIND TOP PERSONNEL CHANGES AMID THE GOVERNMENT’S RESPONSE TO THE COVID-19 CRISIS
On 7 February 2020,
Prime Minister Olexiy Goncharuk delivers the state of affairs report to the
Rada. The report reflects the bleak overall situation in the country and the
absence of ideas as to how to get out of the economic and social crisis.
On 11 February, Office
of the President Chief of Staff (CoS) Andriy Bogdan is dismissed. А president’s
friend, film producer Andriy Yermak is appointed as new CoS.
On 4 March, the Rada
dismisses PM Goncharuk’s Cabinet of Ministers. Goncharuk is dismissed soon
thereafter by the President.
The Rada appointed Denis
Shmygal as the new PM. Shmygal is a short-term governor of Ivano-Frankivsk
region, and a top manager of DTEK Corporation, which is owned by a key
Ukrainian oligarch, Rinat Akhmetov.
These moves signify the start of major changes in the Ukrainian political
environment—a new way in which the country will be managed, and a new direction
in which the country will be moving (At
the time, this was not obvious).
Originally, President
Zelenskiy was supported by two groups, one led by oligarch Igor Kolomoyskiy,
and the other by oligarch Viktor Pinchuk. Under pressure from the West and, to
a degree, from public opinion, Mr. Zelenskiy chose to limit dependence on Mr.
Kolomoyskiy’s support. Mr. Pinchuk, who is closely connected to George Soros, offered
support mostly in the form of cadres/personnel drawn from Soros-funded NGOs. PM
Goncharuk’s Cabinet consisted almost exclusively of such individuals. Not
surprisingly, the dismissal of Mr. Goncharuk and his cabinet was not
well-received by globalists and United States Democrats. Meanwhile, President
Zelenskiy’s relationship with President Trump and US Republicans was
complicated from the outset, as President Trump’s impeachment case was constructed
around that relationship.
Thus, the above changes
to the Ukrainian government resulted in the following two outcomes for
President Zelenskiy:
1. A new crisis in the Rada, where a large
segment of the parliamentary majority faction, “Servant of the People,” is
controlled by Pinchuk/Soros-linked members.
2. A looming foreign policy crisis in his
relationships with Western powers.
President Zelenskiy had
no choice but to seek support from parliamentary faction “For the Future,”
which represents the interests of Mr. Kolomoyskiy, and also to assemble a new
faction called “Trust,” which consists of representatives of different
oligarchs, including an agricultural magnate from Poltava Andrey Verevskiy (Mr.
Kolomoyskiy is also represented in this faction). Otherwise, the President-controlled
segment of the “Servant of the People” faction would not have enough votes in
the Rada to pass any president-supported legislative initiatives.
While the looming “Western
front” crisis was stunted by 9 March “Black Monday” oil prices drop and the panic
brought on by the coronavirus pandemic, both still hit Ukraine painfully. The drop
in oil prices not only led to hryvna devaluation, but will surely continue to
exacerbate the already near desperate Ukrainian economic situation, especially considering
the fall in prices of major Ukrainian export commodities such as metal and
grain. Meanwhile, the quarantine and economic decline in Europe dealt by the
coronavirus has sent home several million Ukrainian guest workers who normally send
billions of euros in remittances to the Ukrainian economy. These workers, now
out of a job, must also now rely on an already overburdened Ukrainian system.
On 11 March, the Ukrainian
Cabinet of Ministers announced quarantine and closures of “non-essential”
venues and institutions. At this time, there was a single confirmed coronavirus
case in Ukraine.
On 16 March, President
Zelenskiy met with a group of oligarchs, including Rinat Akhmetov, Igor Kolomoyskiy
and one of the ten richest Ukrainians Aleksandr Yaroslavkiy, and asked for
monetary assistance. The oligarchs agreed.
Thus:
a.
The consensus of oligarchs has become the main pillar of the Ukrainian
government’s power.
b.
The role and the significance of Western support of the Ukrainian government have
declined.
On 17 March, the
Supreme Rada:
- Introduced new, more stringent
quarantine measures. (Such measures allow the oligarchs to protect their
assets and influence while destroying competition in business and social
spheres. The fact that Ukrainians who massively return from Europe are not
being quarantined suggests the quarantine’s political and economic versus
counter-epidemic purpose.
- Appointed a new General Prosecutor
(an Attorney General equivalent), Iryna Venediktova, a former short-term
Acting Head of the State Bureau of Investigations who had declared
readiness to prosecute ex-president Poroshenko and radical nationalists.
- Appointed a new Minister of Economy,
Igor Petrashko, a protégé of agricultural oligarch Oleg Bakhmatyuk.
- Immediately, the territory of
Ukraine was divided into “curatorships” among the leading oligarchs. For
example, President Zelenskiy appointed Rinat Akhmetov an official
“curator” of the Donetsk, Luhansk, Lviv and Ivano-Frankivsk regions, where
his major assets are located. Others received their territorial
“curatorships” respectively.
A country-wide state of
emergency was declared. Most Ukrainian regions had introduced regional
emergency-situation status before that.
A NEWLY-FOUND UKRAINIAN “SELF-SUFFICIENCY”
So what happened?
Ukrainian authorities have
changed their orientation from counting on Western support, which had been
their sole mindset since 2014, to a new paradigm of autarky, i.e. support through
Ukraine's own oligarchs. Such an orientation has not been in place since 2004. (On
a side note, this seems counter to the maidan objectives.)
Even though the
Ukrainian oligarchs’ businesses are closely connected with the West, there is
difference:
- Ukrainian oligarchy, as
distinguished from transnational capital, is absolutely anchored to
Ukraine. It has a vested interest in keeping Ukraine afloat.
- Ukrainian oligarchy’s managers - Mr. Akhmetov’s companies being a good example - are indeed top-notch, well-trained and competent, unlike the West-sponsored NGO alumni ministers of the Mr. Goncharuk’s cabinet.
- Ukrainian oligarchy has a vital
interest in restoring economic ties with Russia and finding a compromise on
the future of Donbass. Unconfirmed information suggests that Mr. Akhmetov
has already partially restored the management of his assets that had been
nationalized by LPR and DPR.
WILD CARDS AND
UNFINISHED BUSINESS
However, this policy
shift cannot be considered completed, as a number of issues remain unresolved:
a. Radical
nationalists’ influence on the Ukrainian political process. Ukrainian neo-Nazi
groups such as the Praviy Sektor, the Azov, the Natsionalniy Korpus, et al. are
numerous, well-organize, well-equipped, well-funded, and are capable of exerting
pressure on any political or civic leader, organization, and even government
agencies such as courts. Today, the majority of radical nationalists are under
the control of the Minister of Internal Affairs, Arsen Avakov. In order to
complete the shift, it is necessary to either remove or critically weaken Mr.
Avakov and dismiss the nationalist formations. At this time it is hardly
achievable, as the “oligarchy consensus” is satisfied with Mr. Avakov, and there
is no one to replace such a gifted manager and politician.
b. Talks with the IMF over
a new tranche of loans are ongoing. In this context, the IMF is recommending
that Ukraine open its agricultural land market, and, demanding the adoption of
a package of new banking laws. One of the key points of the latter is to forbid
the government of Ukraine to reimburse Mr. Kolomoyskiy the losses he incurred
when his Privatbank was nationalized at the insistence of the West.
Meeting this demand is likely to undermine the very existence of the “oligarchy
consensus,” along with President Zelenskiy’s credibility with its members. (A
new tranche/loan may not save the Ukrainian economy in any case. Any loan would
need to be accompanied by a rise in oil prices, which is questionable.
Therefore, the Ukrainian government may see no sense in fulfilling the IMF’s
demands.)
c. Strengthening of the
quarantine provided an optimal background for wider constitutional changes.
Already, there are more and more demands to expand presidential and governmental
powers.
CRITICAL RISKS
In the current
situation in Ukraine, there are (at least) two significant risk factors that Ukrainian
authorities either do not realize or simply ignore:
a. The Ukrainian
central government’s power is currently disrupted due to the discontinuation of
inter-regional transportation, along with a recent strengthening of regional authorities.
Regional governments, as an example, are themselves declaring local states of
emergency. Meanwhile, local governments are unhappy with Kiev due to the
redirection of local land tax revenue to the central government, which severely
impacted local budgets. Regional governments need funding from the central
government’s budget, while regional governments are still controlled by the
oligarchs. However, in the event that the central government cannot provide
funds, and oligarch-owned businesses grind to a halt, consequences on regional
levels could be dramatic. In such event, the forbidden topic of federalization
may re-emerge. The unacceptability of the very idea of federalization by new
Ukrainian elite had been one of the primary drivers behind the violent events
of 2014 that led to the current civil war in Eastern Ukraine. In the present
conditions, that may become one of unplanned outcomes.
b. Mr. Avakov, whose
power has significantly strengthened in recent months, may attempt a small coup
to become the Number One. His current calls for imposing a strict Italian-type quarantine,
with the closure of all manufacturing, etc., may imply just that. The
long-suffering Ukrainian population, which is also scared of the coronavirus,
may actually support the emergence of a strong-arm leader. On March 28, Mr.
Avakov publicly announced that he was not planning a coup d'état. What he meant by that, remains to be
seen.