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4 No.23 APRIL 12, 2018

4 No.23 APRIL 12, 2018 TOPIC OF THE DAY WWW.DAY.KIEV.UA By Ivan KAPSAMUN, Alla DUBROVYK-ROKHOVA, The Day Obviously, Ukraine is a rich country, but its resources must not be squandered endlessly, when the country is not being modernized. We decided to put this idea into the theme of a roundtable with experts at The Day’s editorial office. The problem is that Ukraine has already approached a certain Rubicon today in the economy, in the dynamics of migration from this country, in the degradation of the political system, and in the number of diplomatic defeats. In other words, the continuing rule of the country by a group of oligarchs, who only care about their own interests and guided by their own rules, poses a threat to the very existence of the state. The next year, 2019, is a year of the presidential and parliamentary elections. And oligarchs are already preparing their scenarios that involve political projects, the mass media, hyped-up leaders, financial resources, etc. And what should we, society, get ready for? Our guests are political scientist Viktor NEBO- ZHENKO; Oleksandr SOLONTAI, expert at the Institute of Political Education; political consultant Taras ZAHORODNII; and Anatolii AMELIN, cofounder of the Ukrainian Institute of the Future. First of all, we requested the analysts to answer the basic question: “Is the oligarchic scenario over? What next?” ● “THE SYSTEM WILL BE DISMANTLED WHEN A PARTY TOTALLY INDEPENDENT OF OLIGARCHS ENTERS PARLIAMENT” Oleksandr SOLONTAI: “In my opinion, the oligarchic agenda has not yet been exhausted. The system is alive and kicking. We are constantly saying it’s necessary to break the system because it is a demand of society. But, as a matter of fact, there has been not a single serious attempt to break it. We can, for example, recall the times of Viktor Yushchenko, when one of his first steps was to begin a dialog with oligarchs, not to mention how many oligarchs stood behind his victory. Moreover, we have an oligarch, Petro Poroshenko, who became president. And, naturally, he will not be eliminating himself and other oligarchs. All his statements about deoligarchization are mere words. “Oligarchs have long been posing a threat, and not only to the state. We have begun to lose our territory in the past few years, and before that, we had been losing millions of the population, and this tendency continues. It became clear from the 1990s onwards that public administration ‘in the manual mode,’ absence of civil society control, and participation of the grassroots in the government resulted in Ukraine dying out at a rapid rate. When we went through the first crisis of privatization, the formation of property, and the collapse of the USSR, we, instead of becoming a nation of small and medium entrepreneurs, became a nation of the clan oligarchic system. The fact that this country has lost some of its borders has not stopped them. “On the other hand, not only oligarchs, but also some groups of owners have formed since the 1990s. Their number is so far not critical enough to radically influence the state, but they are sufficiently active to be noticed. They are owners of private businesses and implements – from craftsmen to farmers. These people are seeking a job abroad and own here cars, buildings, plots of land, retail outlets, and office centers. A simple example is IT people – they own what was made in the conditions of Ukraine and is not linked with oligarchs. Moreover, we have medium-scale business which was not created in classical oligarchic ways. We also have businesses that are part of the European and global structure. But they are all too few to upstage the oligarchy. MARCH 29, 2018 The Day’s experts on four variants of developments “This is also not enough for a non-oligarch-sponsored political force to appear in parliament. I set it like a goal to myself, answering the question ‘What next?’ before the oligarchic system is dismantled. For it looks like the whole Ukrainian government is divided into ‘pieces’ belonging to Poroshenko, Akhmetov, Kolomoiskyi, Pinchuk, et al. In other words all of these pieces belong to concrete oligarchs, not to societal groups. So, we will be able to speak seriously about removing the oligarchic system only when a political force totally independent of the oligarchs and adhering to the principle of classical politics – serving the interests of a large number of people, not of one, two, or three persons – appears in parliament. I think it will be possible to begin changing this system in 2019, the year of presidential and parliamentary elections.” For such a party to enter parliament, there should be concrete mechanisms. Who is supposed to create these mechanisms, when our parliament is oligarchic now? O.S.: “Citizens. They must unite – those who aware that oligarchic policies are destroying the country, sucking the financial lifeblood out of it. Such citizens should unite into a party. This is the subject of my research. Incidentally, I do not think that changing the election law is an obligatory condition for this kind of party to enter parliament. The condition is the number of people who will unite on the basis of supporting this force in parliament. “What can hinder success in the future? The attitude of Ukrainians – they think politics is unfair and wrong and, hence, do not go into it. The second obstacle is the fact that those who could be society leaders go to serve oligarchs. The third danger is economic impoverishment, when Ukrainians are so poor that they find it hard to donate 200-300 hryvnias, a small amount, in the conditions of total mistrust. “I think these risks are more dangerous than the electoral system. Under any electoral system, one can win or see total rigging and substitution of the elections with money auctions… Replacing the current first-past-the-postproportional system with one based on open lists will not, unfortunately, solve the problem of buying votes. But, of course, I would only welcome if there were not two different ballots, but one.” ● “FOR THE FIRST TIME IN 26 YEARS, THERE IS NO LONGER SUCH A POWERFUL WAY OF HUMILIATING UKRAINE AS AN OLIGARCHIC CONSENSUS” Viktor NEBOZHENKO: “We are all saying there is a clear growth of intolerance to the oligarchic form of governance. But what also matters is the opposite – oligarchs do not know today what to do. This is the first time I can see a strong depolitization of oligarchs. I thought for some reason that Pinchuk, Akhmetov, Firtash, and others are good politicians, but in reality they are not – not even geopoliticians. Their geopolitics boils down to guarding their property and having a good time. They do not feel geopolitics and, accordingly, the country. “Who are the enemies of oligarchs in addition to the honest Ukrainian people? It is, above all, multinational companies. They do the same as the oligarchs, but they just apply different methods of transferring money abroad. But this amounts to a conflict. Another rival of the oligarchs is the Ukrainian bureaucracy. They have also got tired in the past 20 years of the following fact: as soon as one of them becomes a minister or a deputy minister, an oligarch’s ‘envoy’ knocks on their door. One more thing: the oligarchs have come across what they did not expect – Russian aggression. And a war, especially a war of defense and liberation, requires the qualities they do not have. So, they were taken aback. “When we are speaking about what we can do with oligarchs, we must begin with the courage of a politician who has become – by chance or owing to natural circumstances – the leader of the country. The first thing he must do is to make oligarchs and Ukrainian society strike a deal that sets certain rules: you steal no more, and we touch you no more. Otherwise, there will be an appeal to the international community. The West is also dissatisfied with Ukrainian oligarchs who think they are the hub of the Photo by Artem SLIPACHUK, The Day “Is the oligarchic scenario over? What next?” universe. They think the ‘frozen 1990s’ are still around, which is very bad. “In reality, for the first time in 26 years, there is no longer such a powerful way of humiliating Ukraine as an oligarchic consensus. The questions of who should represent the oligarchs, which way Ukraine must go, and what is to be done during a world crisis remain open. It all began when one politician-oligarch arranged with another oligarch that he would seize power at the expense of the rest of oligarchs in Ukraine. In other words, it all began with the ‘Vienna conspiracy’ of 2014. And now they do not trust each other, they do not even have a place to meet and make a deal. “They themselves created another problem which arose during the crisis of the oligarchic regime. As is known, the source of oligarchy is not only proximity to the government, but also corrupt ties. It turns out that the main enemy of Ukraine is not authoritarianism and diminution of democracy but total corruption. Here I do not believe in moral decisions – we are not the Czech Republic or even Poland, where the Polish church participated in supporting the moral-political spirit. We don’t have these mechanisms, but they will come. Note that only one major oligarch, Kolomoiskyi, made a statement. He took a political step after the Euromaidan. The other ones did not support him. This is why there is no oligarchic consensus, but oligarchy still exists. It cannot reincarnate itself because the country itself is weak.” ● “2019 MAY BE A RUBICON” Anatolii AMELIN: “The classical theories of oligarchy assume that the oligarch is not just a businessman but a mixture, a fusion of the government with business. There was a Rubicon in 2014, when the oligarchic class felt uneasy about the likelihood of serious changes in conditions and new rules of the game. But there was no entity that could guarantee these new rules. The Constitution defines the president as guarantor, but our president is the same oligarch – only in better conditions. The development rate of Roshen stores several times exceeds that of the Ukrainian economy as a whole. So, there was really a demand for common rules in 2014, there was a Hyatt conference, as you remember, but the oligarchs failed to come to an agreement. “Why do oligarchs invest in the media and politics? Because the media is an instrument for influencing politics, while politics is an instrument for protecting oneself and one’s business, as well as an opportunity to cash in. The absence of common rules forces oligarchs to go into politics to protect themselves because this country has no other systems of rules and protection. Oligarchy exists today, and we are not on a Rubicon. We are in an active transformational phase. 2019 may be a Rubicon because peak payments of the foreign debt fall on that year. But there are no resources for payments, which creates a great likelihood of default, which in turn entails impoverishment of the populace, devaluation of the national currency, social protests, etc. Should the economy overcome this Rubicon successfully, this will present a chance for Ukraine. If not, we may face a new revolutionary cycle, which can result in not so much the loss of statehood as in changes in its forms. It is only possible to cross the Rubicon successfully if there are rules and guarantees of obeying them, if there is a guarantor himself.” ● “THE STRUGGLE AGAINST OLIGARCHS MUST NOT TURN INTO A STRUGGLE AGAINST NATIONAL CAPITAL” Taras ZAHORODNII: “The state is running short of resources for oligarchs who are thirsty enough to support the system that has existed on the vestiges of the Soviet past. Rent is falling, and their attempts to preserve this system, which ensures the profits they customarily make, no longer succeed. So the dilemma is: either you begin to play by different rules or you just disappear. The main sign of a coming crisis is that the populace begins to flee the country. And the resources of the Soviet infrastructure are running out. “On the other hand, we must remember that the struggle against oligarchs must not turn into a struggle against national capital. The common cliche is that Ukrainian oligarchs are bad but foreign business is transparent. But as soon as the question of taxing the flight capital was raised, it turned out that the most outspoken opponents of this tax were foreign companies. Therefore, no matter what attitude we take to our oligarchs, they at least maintain some infrastructure that produces something, whereas foreign companies in fact offer us a raw-material way. “We are all aware that 50 percent of the Ukrainian economy is in the gray zone. So we need, so to speak, a confidential deal – you return the money, and we leave you alone; you reinvest the money, and we introduce the same rules of the game for all. One of the options can be the example of Kazakhstan which has introduced a dual system of jurisprudence by inviting British judges who will handle all economic cases. I think there could be a compromise here. I know that nobody trusts anybody because everybody is accustomed to using the state machine in his own interests and every country has a judiciary of its own. So, it is worthwhile to reach a compromise – to bring Britons here, who will be our arbiters. Kazakhstan chose not to restructure its system of law radically. They said: business is above all for us, and disputes will be heard in this court.” V.N.: “If the updated judicial system of Kazakhstan works at last, I would not ‘deal’ with Ukraine today, if I were Putin.” T.Z.: “The main problem in Ukraine is not taxes or corruption but unstable ownership rights. Why do oligarchs transfer their assets abroad? Because they know: if ownership rights are unstable, your property can just be taken away. And Kazakhstan took a big step to establish stable property rights, and I am sure this system will work – of course if Nazarbayev supports it.”

WWW.DAY.KIEV.UA TOPIC OF THE DAY No.23 APRIL 12, 2018 5 ● “SURVIVAL AND WELL- PROVIDED-FOR OLD AGE WILL BE THE MOTIVATION” You have repeatedly mentioned the required common rules and guarantors. When do you think such rules will be drawn up and such a guarantor will emerge in this country? A.A.: “Rules is one of the elements of coexistence in society. According to Maslow’s hierarchy of needs, one must, first of all, secure safety to himself. This means one must find out who will be responsible for safety. If we want to live normally, we should also distribute personal occupations. But there should be rules to regulate all this, otherwise there will be violations. If we agree on common rules, we will also agree on sanctions and arbiters. Which of those we call oligarchs wields the greatest clout today? The president and, after him – Akhmetov. Accordingly, if one of the two people comes out as guarantor and confirms that he will be able to sacrifice something and is prepared to obey the defined rules, it will be the first in a series of steps. For the people we call oligarchs represent political systems, media, and finances which may be the next stage of implementation. Does Akhmetov trust Poroshenko? Does Poroshenko trust Akhmetov? Do others trust them? I don’t know. It is the question of their communication. But the motivation will be survival and well-provided-for old age.” V.N.: “There is a sociological explanation of why there are no rules. The question is not in trust but in a serious politico-economic reason. The world has known for 100 years how to switch from capitalism to socialism. We have gone through this theoretically and practically. But no one knew for sure how to switch from socialism to capitalism, for there are no theoretical grounds. Since 1991 or, maybe, earlier, we have seen a permanent accumulation of capitals, which never turns into capitalization. It is a circular redistribution of power and property. “I recently met a young businessman. He goes into politics because he wants to keep his money intact. The point is that, in the past 20 years, all businesspeople have been doing one thing only – using power and property in order to tear a chunk away from someone else. Rules cannot work by definition in a country were primitive accumulation of capital is going on. Nobody expected the president of Ukraine to increase his fortune from 600 million to 3 billion dollars in a poverty-stricken country in wartime. And he can do nothing about it.” T.Z.: “I beg to disagree. We should not search for ideal people. Who turned out to be the savior of the nation in Britain? A walking anti-advertisement of wellness, a chronic alcoholic, a vicious man. And there was a decent Chamberlain who drove one of the world’s great powers into a deadlock. “Making use of vices always produces more results. It is like in American politics – they don’t look for saints, they make use of vices. They know that corruption will always exist. Corruption is exploited in the system of lobbyism: you will earn this money, and we will give it to you, albeit in a different system. “This why I would proceed from this. Oligarchs are also human, they are also sometimes tired of wars, and it is sometimes difficult to them. Next, vanity. Like in the film Devil’s Advocate: ‘Vanity is my most valuable sin.’ Look, friends, how long can you play on things like these? You in fact bought in the 1990s a business that really cost nothing. Whatever you say now that these businesses cost billions, it is wrong. How much did a steel mill cost if it had 100-milionworth debts and had no product markets? It was in fact the value of the scrap that could be derived from it. They became billionaires because they somehow managed to put together the economy. They also had raw-material markets, and Kuchma, no matter how hard we used to spit on him, made a gas deal with Russia for 10 years. Under the contract valid until 2009, Russia was forced to sell us gas at a price of 50 dollars. For Kuchma cared about the economy. Besides, agrarians were subject to discount rate compensation. Kuchma really brought forth the middle class in Ukraine.” And oligarchonomics, too. T.Z.: “No, wait. It is he who brought forth the middle class.” O.S.: “He stopped the growth of the middle class when it was born. The middle class began to be born in Ukraine in the late 1980s: cooperatives, housing construction, ‘traders’ with baggage carts… Remember? By 1994, we had had the emerging middle class, we had banking credits, and we had the first millions of job-seeker who brought in money.” T.Z.: “We had an inflation of almost 1,000 percent.” O.S.: “But we had property, and, instead of legalizing it, Kuchma legalized racket, encouraged ‘Kravchenko’s eagles,’ merged the underworld with the criminal system, and nipped the middle class in the bud. I can show it stage-wise: introducing the provisions that slowed down the development of farmership, blocking the bills aimed at promoting development…” T.Z.: “Do you remember the Verkhovna Rada of that period? Kuchma was just liberal in comparison with communist MPs.” O.S.: Yes, in comparison with the communists. But there were not only communists in the country.” T.Z.: “The single tax was introduced in 1998 not just by a Cabinet decision or a parliamentary law, but by a presidential decree.” ● “THE WEST IS INVESTING RESOURCES IN UKRAINE, AND THEY ARE INTERESTED IN THE SUCCESS OF THIS CONSTRUCTION” But we should take into account the conditions in which this tax was being introduced. We spoke to eyewitnesses of those events. Kuchma was told: a social revolt was imminent, and you should give something to people to enlist their support. This social revolt was brewing because the instruments of legal earning were destroyed… But Kuchma is not on our agenda now. We have discussed various political scenarios of developments in Ukraine with the participation of domestic players. But there is also a third player which we did not mention – the foreign factor: Russia and the West. O.S.: “As for the Russian external factor, Russia is interested in Ukraine remaining oligarchic. It is much easier to work with Ukraine through oligarchs. “As for the West, it understands that Ukraine cannot hold out under this oligarchic system. This is why they insist on anticorruption reforms. Hence is a rift between the East and the West. It directly depends on Poroshenko’s choice where we will go. In my opinion, he is not standing even the slightest chance to become president for the next term. The only way for him to remain in power is to follow Kuchma’s path – to begin to kill the people who represent a different Ukraine. But I don’t think Poroshenko will opt for this step.” There is also the 1999 scenario, when Kuchma created a danger in the shape of Symonenko’s “Red threat.” This time it may be Boiko… Is a revanche of the pro-Russian forces possible? O.S.: “It can’t be Boiko. If Poroshenko deliberately ‘hypes somebody up,’ he will be still farther from the second round. And the basis for a revanche of the pro-Russian forces is enormous. But Poroshenko himself is not interested in this scenario.” V.N.: “It is clear that foreign political players are actively working with Ukraine, and we cannot hinder it. The West is investing resources in Ukraine, and they are interested in the success of this construction. If something goes wrong, they replace the team leader, workers, do an audit and other things. Ukraine being a very important object of international struggle, they will be increasing pressure all the time – maybe, even tactlessly. But what can they do if we ourselves cannot deliver the goods? Secondly, they will be ‘mopping up,’ pardon this Putinist term, the local elite. There will be replacements by all means. The point is not in us. We have just found ourselves in the epicenter of major events, and this does not depend on us.” T.Z.: “We are already in the Western orbit. It became clear when the Pentagon’s chief appeared at a military parade on Independence Square. It is a very telling sign. When the chief of the Pentagon, the world’s strongest military organization, is present at the military parade, this means that even if they have hard time with us, they will eventually achieve their goal. “Many people say that the Budapest Memorandum is not being observed, but I must say that the Anglo- Saxons are fulfilling it – of course, not as fast as we would like them to do. But we are not in NATO. There is no Article 5 on military attack. But, in financial terms… Who is training our army? Only the Anglo-Saxons – Britons, Americans, and then Canadians. Plus the Lithuanians because they are a bit scared.” A.A.: “When we studied the ‘Asian economic tigers,’ we were trying to single out the key factors that allowed them to achieve this level. “Factor No. 1: an outside threat that mobilizes the elite. These countries were on the boundary of the liberal and Soviet worlds. What did the USSR do with its vassal countries? It filled them with weapons and ideology. What did the Anglo-Saxons do? They filled their client states with money and technologies. “Factor No. 2: authoritarian rule. No reforms and transformations are carried out under democracy. An authoritarian leader has instruments of rapid changes. But this also involves high responsibility and risk. If the authoritarian leader is good, it is Lee Kuang Yew; if it is bad, we receive North Korea. “And here comes the No. 3 factor: control over the authoritarian leader on the part of the Anglo-Saxon world. I will remind you that these countries were on the boundary of the conflicting worlds. “Factor No. 4: money of the Anglo-Saxon world. The economy the ‘Asian tigers’ built is also a powerful factor that protects them. In other words, they have their own resources for protection and the motivated people who are ready to fight against the Red world. “As for the interests of Europe, I can say that Europe is more interested in Russian than in Ukraine. “But the Ukrainians themselves have already gown up. People have leaned to distinguish between the Kremlin’s provocations and the provocations of some paid-for people. This is what differentiates us from Russians. That’s why I don’t believe in a Moscowstaged domestic conflict. I can believe in a domestic conflict provoked by the behavior of current politicians. The result will be a concord. “The results of the future elections will also be telling. All my clients engaged in business and investments and I are taking a shot pause because the vector of investments and development depends on the elected politician, on the forces that will wield power, on the guarantees and rules we will receive.” Next is the red line An expert says what Washington may do in retaliation for chemical attack in Eastern Ghouta By Natalia PUSHKARUK, The Day After at least 70 people had died in a chemical attack in the Syrian district of Eastern Ghouta, particularly in the town of Douma, on April 7, the UN Security Council held an emergency session in New York on April 9. The US ambassador to this organization, Nikki Haley, said Washington would retaliate to the suspected chemical attack by Syrian President Bashar al-Assad’s regime on its own citizens and added that Russia’s hands are “covered in the blood of Syrian children.” “History will record this as the moment when the Security Council either discharged its duty or demonstrated its utter and complete failure to protect the people of Syria. Either way, the United States will respond,” CNN quotes her as saying. Haley proposed putting to a vote a draft resolution on investigating chemical attacks in Syria. At the same time, Russia’s permanent representative in the UN, Vasily Nebenzya, said that this document contains some “unacceptable elements,” the fact of a chemical attack is unconfirmed, and the incident was staged, DW reports. Meanwhile, this incident triggered a harsh reaction of US President Donald Trump who condemned the “heinous attack on innocent Syrians with banned chemical weapons.” “We are meeting with our military…, and we’ll be making some major decisions over the next 24 to 48 hours. We are very concerned that a thing like that can happen. This is about humanity, and it can’t be allowed to happen. If it’s Russia, if it’s Syria, if it’s Iran, if it’s all of them together, we’ll figure it out, and we’ll know the answers quite soon. So we’re looking at that very, very strongly,” Trump said on April 9. When journalists asked him if Russian President Vladimir Putin bears responsibility for this, the White House chief said: “He may. And if he does, it’s going to be very tough.” Asked if US military action is off the table, he said that “nothing is off the table.” ● “THE U.S. IS PREPARED TO BUILD UP PRESSURE ON ASSAD” The Day requested Oleksandr BOHOMOLOV, president of the Center for Middle Eastern Studies, to say what steps Washington can be expected to take against President Bashar al-Assad’s regime in retaliation for the suspected chemical attack. “As Trump has announced, a military option is being considered. The president said they have a lot of military variants of retaliation. I would expect the same action as it was last time – a US strike on Shayrat Airbase after a chemical attack on Khan Sheikhoun. But, in principle, the situation has changed, and we can expect some more decisive action. I think the US, as well as its allies, is prepared to build up pressure on Assad and his allies, Russia and Iran. “Consequences are the main thing, for a military operation is by itself the means, not the goal. And the goal is to change the situation in Syria. The Assad regime and its allies are systematically using weapons of mass destruction. This must be put an end to. This troika – Russia, Syria, and Iran – must understand that what comes next is a real red line, not the purely rhetorical red line that existed during the presidency of Obama in the US. “As for the US-proposed resolution on the mechanism of investigating chemical attacks in Syria, I think there will be a search for ways of action. Russia has vetoed over ten resolutions in all this period of time. In the past few years, Russia has made the UN Security Council unviable in respect of some key issues. Of course, UN mechanisms make it possible to bypass the Security Council. History know instances when the US and West European countries acted in a different way. “And as for how to stop the Assad regime and Putin, who backs it, they must see that there is a line. Unfortunately, many chances have been missed before – first of all, due to an excessively peaceful attitude of the President Obama administration. The consequences of this policy are also part of the current problem. It was far easier to solve it before. Now it is more difficult, while there is a more pressing need to do something. If pressure tends to build up for some time, the solution may be found.”

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