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Oligarchs and Tyrants
The Sad Status Quo in Ukraine

The Wall Street Journal ran a must-read piece of reporting and analysis over the weekend about Ukraine, focusing on the person of one Ihor Kolomoisky, the banking tycoon appointed as Governor of the Dnipropetrovsk region earlier this year. Kolomoisky is reportedly spending as much as $10 million a month to field a well-equipped fighting force a third the size of Ukraine’s own army, with his banking businesses looking to profit handsomely with European integration. His tactics are bare-knuckled, but effective: Dnipropetrovsk had some pro-Russian activism earlier this year, but it quickly dissipated.

Viktor Marchenko led meetings of his local chapter of Union of Soviet Officers, clamoring for a return to Soviet borders, until some unidentified men punched him in the head at one event, he said. He blamed Mr. Kolomoisky, who is Jewish, and said “there will be consequences” for the Jewish community one day. The tycoon didn’t discuss the incident in the interview.

Oleg Tsarev, a local pro-Russia parliament member, also led some meetings, but left Ukraine after he was beaten by a mob in Kiev. After decamping to Moscow he received a phone call from Mr. Kolomoisky, a recording of which was posted on the Internet.

In a conversation laced with invective, Mr. Kolomoisky told him that a Jewish soldier from the Dnipro Battalion had been killed in fighting and that members of the Jewish community had put a reward of a million dollars on Tsarev’s head. “They will be looking for you everywhere,” Mr. Kolomoisky said. “Don’t go anywhere.”

It’s clear from this piece that the Ukrainian state remains both pathetically weak and resistant to reform. When communism fell throughout the old Soviet/Warsaw Pact area, there was a tendency for the communist managers of enterprises to “privatize” everything they could get their hands on—to convert what had been state property under the old system to their own personal property in the new. This is a lot like what used to happen in feudal Europe when there was a weak king or a war between claimants to the throne: the feudal nobles would fortify their castles and throw over their allegiance to the central power.

In the Warsaw Pact and ex-Soviet countries that moved toward the EU and NATO, the gradual imposition of European law led to a process of state building. This has gone farther in some places than in others—Bulgaria, Romania and some of the ex-Yugoslav republics have made less progress than some others—but states have been built that, with corruption here and there, generally speaking work pretty well. But the farther east you go, the more another model was adopted: a single powerful person ends up establishing himself as the center of a new state. Some of the dictatorships in Central Asia are like this, and Putin has adopted a more advanced form of this in Moscow. Instead of oligarchs, there are autocrats or near-autocrats. Again, think feudal Europe, with a powerful ruler crushing the nobles and establishing firm central control.

Ukraine finds itself somewhere in the middle. There has not been a successful Western-oriented state-building process that creates the kind of institutions and political parties that a modern capitalist society needs. But at the same time, no single oligarch or strongman has broken the power of the rest, establishing himself as the Putin of Kiev.

As we’ve noted earlier in this space, the oligarchs of Ukraine have tried to play East against West—they don’t want either a Putinist state or a Western-style state; they want to keep building their fortunes and amassing their personal power inside Ukraine.

This has horrible consequences for the country as a whole. Governance is weak, no real Western-style economy can develop, and ordinary people are at the mercy of rapacious oligarchs and the sometimes brutal gangs of thugs they employ. As a consequence, Ukraine has remained weak and poorly organized even as Putin has moved to rebuild Russian power.

The Journal article helps us see what has happened since the invasion. The oligarchs have been frightened by Putin and don’t want to fall under his control. (In Putin’s Russia, oligarchs only stay rich as long as Putin okays it, and there are plenty of signs that if Putin takes over more of Ukraine he will divide the assets of its current oligarchs among his hungry followers in Moscow.) Thus the oligarch who serves as President is parcelling out governorships to oligarchs who are ready to work against a Russian takeover, but who still aren’t interested in forming a powerful state on the Western model that would impose the rule of law on the powerful billionaires who run what is left of Ukraine.

On the one hand, this has helped stabilize the situation. In self-defense, some of the oligarchs are working effectively to crush pro-Russian forces. But the cost is high: the current Ukrainian revolution, like the last two, seems to have failed to establish the basis of a modern state in the country. That’s going to make establishing the rule of law, much less the kind of economic reforms and institutions that could enable Ukraine to follow Poland and others extremely difficult if not impossible.

For the west to “win” in Ukraine, it’s going to have to win against three very powerful forces: Putin’s Russia, the oligarchs who have run Ukraine since 1990 and who still run it today, and the historical inertia, pessimism, and cynicism that are the legacies of Ukraine’s ruinous 20th-century history. There is little sign yet that either the EU or the U.S. has the wisdom, resources, ruthlessness, and long-term commitment to overcome these forces.

Ironically, what Putin wants and the oligarchs want is probably similar now: enough Western support for rump Ukraine so it doesn’t fall completely under Russia’s control, but stopping well short of forcing major, deep reform on Ukraine. Putin can live with this because he has got Crimea and a lot of economic and political influence—and because the West will keep funneling enough cash to Russia to pay Ukraine’s gas bill. Ukraine’s oligarchs will once again have used West and East against each other to maintain a precarious independence. And Western leaders can tell themselves that they’ve achieved a glorious victory because they’ve kept Putin out of Kiev.

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  • Pete

    Good posting.

    And it prompts yet again the thought, “What is the U.S. doing with that s**thole of a country?”

  • Andrew Allison

    A fine piece of reporting in the WSJ shows us just how completely out of touch with reality is ZB!.

  • Natalie

    There is one reason and one reason only why Ukraine has so many problems that are unlikely to be resolved soon, and that reason is corruption. The entire system is corrupt: bribery is rampant, and there’s no political will to enact real reform that would modernize the country.

    That’s why I get frustrated with Westerners when they condemn Yanukovych. Yes, he was corrupt, but do you really not think Tymoshenko, Yushchenko, Poroshenko, Yatsenyuk, and others are, too? Sure, Yanukovych had that ridiculous residence—but have you seen where Tymoshenko lives? Have you seen Yatsenyuk’s mansion? Yatsenyuk is forty years old, yet he has more money than most of us reading this website will ever have in our entire lives.

    Sorry for the longish rant, but I just get really frustrated sometimes when people act like these revolutions in Ukraine are a wonderful thing.

    • Xiangyang

      those westerners ignorance is deliberate. It is their propaganda Campaign to support thier own Point. Their revealing PARTIAL truth is just one type of lie equals to fabrication. If you see this through, you will not be frustrated.
      if they are sincere of what they say, they are just naive and stupid, then they dont’ deserve your frustration. 🙂

  • lukelea

    “a single powerful person ends up establishing himself as the center of a new state.”

    If he can gradually establish the rule of law he might create the basis for a transition to a Western-style democracy. First things first.

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