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Are nation’s oligarchs a necessary evil in the quest for stability?

by Harriet Salem and Ludmila Makarova

The Observer

After losing control of Crimea, the embattled new Ukrainian government in Kiev has turned to the nation’s oligarchs in a bid to calm secessionist sentiment in the pro-Russian east. But the appointment of oligarchs to positions of political power has not been welcomed in all quarters, and certainly not by the protesters who hoped last month’s ousting of President Viktor Yanukovych heralded a new era.

Following days of unrest, including pro-Russia rallies and the storming of the parliament building in Donetsk by Moscow’s supporters, the region now seems to be slowly calming down. Pro-Russia squatters have now been removed from the administration building, and on the orders of the newly appointed regional governor and Ukraine’s 16th-richest man, Serhiy Taruta, the pro-Kremlin activists’ leader, Pavel Gubarev, has been arrested.

In a further sign that the environment in the east is stabilizing, boxing heavyweight turned politician Vitali Klitschko was scheduled to visit Donetsk on Sunday.

“People here respect power, the oligarchs are wealthy, well known and well respected. They are seen as guarantors of stability,” said local journalist Denis Tkachenko.

But for those active in Kiev’s Maidan, or Independence Square, protests, putting businessmen into positions of power may not have been what they dreamed of.

“This is the most controversial step of the new government — it is a risky gamble,” said Serhiy Leshchenko, deputy chief editor of Ukrainian newspaper Pravda, and an investigative journalist who has spent decades analyzing Ukraine’s business and political elite.

Political analysts say the vulnerable fledgling government, under attack from Moscow, may have had no other option open to it.

“Those who think there was an alternative are not being realistic. Now the Party of the Regions [the pro-Russian party led by Yanukovych] has effectively gone, the oligarchs are the only actors with potential to stabilize this region,” said Adam Swain, economic geographer at England’s University of Nottingham and a field researcher in Donetsk for more than 20 years.

Many of Ukraine’s oligarchs, an elite club of around a dozen billionaires, amassed their wealth following the collapse of the Soviet Union. Rich in natural resources, Ukraine’s east became a battleground for influence as a new generation of entrepreneurs vied for ownership of lucrative factories and coal and steel mines.

A lot has changed since then. The oligarchs’ investments have bolstered the region’s economy substantially.

“Donetsk today is almost unrecognizable to the place I first visited in the ’90s,” said Swain. “The infrastructure and standard of living have improved immensely. The oligarchs have won respect here for their role in this.”

And while the oligarchs may have benefited from the political chaos in Ukraine over the last two decades, they now have a vested interest in ensuring stability. Swain says: “It’s not the same situation as the ’90s. They want a more ordered system. Smoothly operating structures governed by a fixed set of rules help them to protect their wealth.”

Tkachenko agrees: “It’s a smart move to bring in the oligarchs — their business interests are here and they will fight to protect the region because of this.”

Although most of Ukraine’s business elite have strong ties with Moscow, if the east of the country were to fall under the influence of the Kremlin then Ukraine’s billionaires would quickly be overrun by their wealthier and better connected Russian counterparts.

“The Ukrainian oligarchs have no political influence over Putin,” said Leshchenko. “If the east were to secede, their businesses would be snatched. They would become the small businessmen of a Russian province.”

But perhaps no one is more admired in Ukraine’s east than the country’s No. 1 oligarch, Rinat Akhmetov. Worth an estimated $15.4 billion, according to Forbes, Akhmetov has not become politically involved, although he has entered the debate about the country’s future. He is the owner of one of Ukraine’s top two football clubs, Shakhtar Donetsk, and the biggest player in the Donbas region mining industry. In 2011 he paid a whopping $227.4 million for a penthouse at One Hyde Park in central London.

While he has been vocal in his support for a unified Ukraine, the tycoon has said he will not take any active role in government for the time being. But with presidential elections around the corner, and a parliamentary election to follow shortly after, that may change.

Akhmetov has said: “The future of our country has been put under threat. The use of force and lawless actions from outside are unacceptable. I believe that the crisis must only have a peaceful solution. I call upon all fellow citizens to unite for the sake of the unity and integrity of Ukraine.”

One question on everyone’s lips is what, if anything, do Ukraine’s businessmen want in return for their support? Akhmetov does not want a repeat of the situation that followed the Orange Revolution.

“This should be about finding ways to cooperate with business leaders not to overhaul the system in a damaging way,” says a source close to the tycoon.

Following Ukraine’s last revolution in 2004, the government led by Yulia Tymoshenko, herself an oligarch who amassed wealth from dealing in natural resources in the early 2000s, oversaw a controversial reprivatization drive that stung some of Ukraine’s most influential businessmen.

Speaking at a recent forum in Kiev, Arseniy Yatsenyuk, the bespectacled leader of the Fatherland party and Ukraine’s interim prime minister, made clear that he would not support the reprivatization agenda advocated by some Maidan politicians.

  • zer0_0zor0

    The country seems to be divided along too many fault lines, and has been independent for a mere 20 odd years since the 14th century according to some sources.

    What are the arguments for keeping it together as opposed to an amicable Czech Slovakia split?

    It seems somewhat shortsighted to think that “oligarchs” and their money are going to smooth over the differences, even if people forget about the differences while there is a sound economy and they have soccer teams to cheer.

    The religious differences–Catholic in the west versus Orthodox (and Muslim?) in the east–seems to be getting too little attention. It would be nice to see those gaps bridged, but it hasn’t played out that way thus far.

    And there is also the NATO factor to consider. Do the folks in the eastern part of the country want to join NATO?