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The Battle for Ukraine
Ukrainian Oligarch Says No to Secession

In a bit of bad news for Vladimir Putin, steel workers have apparently organized themselves into a force to be reckoned with in Ukraine’s east, seizing the city of Mariupol in Donetsk’s south and expelling its pro-Russian forces. Or at least that’s the reasonably upbeat framing for the story given by the the New York Times’s coverage:

Thousands of steelworkers fanned out on Thursday through the city of Mariupol, establishing control over the streets and banishing the pro-Kremlin militants who until recently had seemed to be consolidating their grip on power, dealing a setback to Russia and possibly reversing the momentum in eastern Ukraine.

But is this really people-power in action? It’s not quite so simple. The Reuters headline is closer to the mark as to what’s going on: “Fortune threatened, Ukraine’s richest man joins the fray“. Key passage:

Though largely symbolic, the scene showed the extent to which the crisis has come to threaten the interests of Ukraine’s richest man and the lengths he will go to protect them.

[Rinat] Akhmetov, whose fortune is estimated by Forbes magazine at $11.4 billion, has acquired almost feudal status in the industrial hub of Donetsk in the past 20 years – but the separatist rebellions there have altered the dynamics of power.

As pro-Russian rebels declaring independence seized public buildings across the steel and coal belt which is the basis of his colossal fortune, he issued repeated written statements in support of a united Ukraine. […]

The rebels’ ‘declaration’ of an independent Donetsk region on Monday, however, and their appeal for Russian annexation pose a major threat to Akhmetov’s holdings and his fortune.

As the Maidan was going on and Yanukovych was still clinging to power, we were on the lookout for which way the Ukraine’s powerful oligarchs would break. Eventually, realities on the street overwhelmed whatever political maneuvering was going on behind the scenes, as Yanukovych was hounded out of Kiev shortly after having signed an EU-brokered agreement with the opposition. The compromise outlined in the February agreement presumably would have been acceptable to most of the oligarchs. After all, the kind of instability that has been wracking Ukraine since Yanukovych’s ouster cannot be good for their bottom line. The status quo ante worked well enough for them: they could do business with both the EU and Russia.

As the head of Ukraine’s largest financial and industrial services firm, Akhmetov certainly does a fair bit of business with Russia. But as Reuters notes, his firm doesn’t do business only with Russia, and one of the primary sources of his wealth—Ukraine’s steel industry—has him exporting everywhere but Russia, which is itself a net steel exporter. His prospects would be greatly limited if the eastern Ukrainian provinces declared independence only to be recognized by Russia alone.

Additionally, the prospect of Western financial sanctions must be playing a role in Akhmetov’s calculations. His vast wealth would be threatened if he is seen as part of the pro-Russian camp and loses access to the Western financial system.

Akhmetov is hardly a darling of the Maidan, having been the key bankroller of Yanukovych and his Party of Regions. And he is himself no fan of Kiev, being a strong proponent of the devolution of power to the provinces. But with this move, we might be seeing the limits of separatism in Ukraine. If one of the world’s richest men stands to lose in a big way, Putin’s gambit to create a failed state directly to his west is much less likely to succeed.

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  • lukelea

    Off topic, but it is a little disquieting to see how a few “oligarchs” in the Ukraine, just as in Russia, somehow managed to amass the lion’s share of the capital wealth of these societies in just a few years after the collapse of communism, so that it is now, legally at least, “their” wealth.

    What does that mean? My suggestion: it means that it is not really “theirs” in any absolute sense; rather they are its managers only, which they manage for the benefit of the larger society (societies?) to which they belong. The capital itself is too sacred to own in any personal way: it is the accumulated crime and sacrifice of centuries, plus interest.

    • Andrew Allison

      I had no idea that you were a closet communist [/grin ]. Of course it’s obscene that the post-Soviet oligarchs managed to accumulate so much wealth, but when a power structure collapses, the assets ge to the ruthless. I submit that, to paraphrase a well-worn US cliche, their wealth will be pried from their cold dead hands and, as the post demonstrates, they have a lot of power at their disposal — in this case doing what the Ukraine government was incapable of. When you get right down to it, the difference between the Soviet and post-Soviet environments is that the oligarchs succeeded in monetizing the assets they stole from the people.

      • lukelea

        To clarify, Corlyss and Andrew, my point (part of it) is that those who can manage these capital assets most efficiently are the ones who end up controlling it, which is not a bad thing. They account for the “plus interest” part of capital, which is just as important as the crime and the sacrifice.

        That is what makes capitalism unique: it redeems the evil of the past by turning it into something good, or at least potentially good.

        But to make that potential actual requires good social policy. Wage subsidies (an improved version of the earned income tax credit) financed by a global graduated expenditure tax on the wealthy would bring about a more equitable distribution, not of income itself, which isn’t the most important thing, but of consumption, which is.

        • Andrew Allison

          Sorry, but I must disagree. My point was, and is, that when things are in a state of flux, the astute and/or ruthless always take the lion’s share, regardless of their ability to manage the assets which they have acquired (Capitalism at is worst). History (I think) tells us that capitalism constrained by social responsibility is thewinning strategy.
          I fear that I must also disagree with your prescription for social policy. I’m all in favor of a tax on consumption, as long as it is applied to everybody, not just “the wealthy” (I’m particularly incensed by the tax ACA imposes on the middle class). There are two ways to achieve this: sales tax or a value added tax, The latter has the benefit of actually representing value added, but the drawback (as illustrated by the countries which have adopted it) of being an all-too-easy way of increasing tax revenue. Wouldn’t a flat tax on income and a tax on consumption be a better approach.

    • Corlyss

      “What does that mean? My suggestion: it means that it is not really “theirs” in any absolute sense;”

      Are you serious? Can anyone off the street walk in and collect any of the $$$ in the oligarch’s pot. I bet not. Besides, whose more likely to do something significant for the society with the money in oligarchs hands outside the failed states all over the world? Certainly not “the people.”

  • Pete

    “If one of the world’s richest men stands to lose in a big way, Putin’s gambit to create a failed state directly to his west is much less likely to succeed.”

    A childish conclusion.

    One man can be blown away by a gust of wind.

    • Corlyss

      Some of the resident scholars’ posts here get sillier by the day.

    • Felix Keverich

      Just wait until Russia cuts off gas supply in June. These steelworkers will be instantly out of work…

  • Corlyss

    How many guns do the steel workers have?

  • tolar cav

    Oh… such a LIE….
    The real thing is…
    Thousands of steelworkers fanned out on Thursday through the city of Mariupol, establishing control over the streets and banishing the Pro-Ukranian militants…

    They are pro-russian…..

  • tolar cav
  • GeorgeWashington

    So is anybody with right mind and some functioning brain who still believes what US media says? Only if he/she is an idiot or just a natural hater LOL

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