February 27, 2014 6:41 pm

Ukraine: On the edge

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The new leadership has limited time to reform the economy and curb corruption
A pair of boots sit on top of a barricade at Independence Square, the epicenter of the country's current unrest, in Kiev, Ukraine,, Thursday, Feb. 27, 2014. Ukraine put its police on high alert after dozens of armed pro-Russia men stormed and seized local government buildings in Ukraine's Crimea region early Thursday and raised a Russian flag over a barricade. (AP Photo/Emilio Morenatti)©AP

A pair of boots sit on top of a barricade at Independence Square, the epicenter of the country's current unrest, in Kiev, Ukraine,, Thursday, Feb. 27, 2014

On a wall in the office of Eduard Stavytsky is a space where a portrait of Viktor Yanukovich once hung. Mr Stavytsky, who until Thursday was Ukraine’s energy minister, took it down last Saturday afternoon when the president was ousted in a momentous vote by parliament.

Mr Stavytsky’s window looks out on to Kiev’s main square. For three months he watched as Mr Yanukovich’s failure to sign an integration agreement with the EU in favour of rebuilding ties with Russia triggered peaceful protests that turned into an insurrection. After snipers fired on protesters last week, killing dozens, it became a revolution. In the ministry lobby stands a makeshift memorial to an employee who joined the demonstrators and died in the clashes.

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“I saw it developing each day but I couldn’t imagine how it would end,” says Mr Stavytsky, looking at thousands of protesters still milling around the square. “We’re witnessing a revolutionary wave. But if the people on the streets don’t get what they want tomorrow – and they won’t due to our difficult economic situation – what will they do with the politicians next?”

Kiev today carries strong echoes of the anti-communist revolutions across central and eastern Europe a quarter of a century ago: a toppled, Moscow-backed, authoritarian leader; a government barely functioning; an economy severely weakened by corruption and mismanagement; and state coffers that are almost empty.

Its situation is not as dire as in central Europe in 1989. Ukraine has not had communism since the Soviet Union collapsed 23 years ago. A market economy, although flawed, is in place. Ukrainians are freer and wealthier. But a mishandled and stalled transition means it must in some ways start from scratch.

The question now is whether Ukraine’s future can look more like that of neighbouring Poland. There, successful economic reforms and EU membership have produced an income per capita almost four times that of Ukraine, from a similar base when communism collapsed. Or could tensions between the country’s pro-European, Ukrainian-speaking west and Russian-leaning, Russian-speaking east and south lead to a split or even conflict? The biggest flashpoint is Crimea, where pro-Russian separatists have clashed with supporters of Kiev’s new leadership this week.

Unlike post-communist central Europe in 1989, Ukraine faces not a weakened Russia with a collapsing economy, resigned to letting its overextended empire go. Instead, a resurgent Russia under President Vladimir Putin is determined to reassert influence over a fraternal Slavic neighbour, which it sees as the ancient cradle of its civilisation. Intense Russian trade pressure last year persuaded Mr Yanukovich to back off from signing the EU deal and accept a $15bn bailout from Moscow. The Ukrainian president’s overthrow came as a shock.

“This is a huge blow to Mr Putin,” says Yevgeny Kiselev, a Russian who for years was a leading television presenter in Moscow before falling out with the Putin regime. He has found a new niche as a top TV host in Ukraine. “Probably the only thing cheering him up is that he had developed a tremendous dislike of [Mr Yanukovich]. It’s the biggest foreign policy defeat in his 15 years as president and prime minister.”

Russia has responded this week with an intense diplomatic, media and psychological onslaught. It has portrayed Kiev’s new leadership as fascists and terrorists. It has pledged to defend Russian citizens and interests in Ukraine, especially in Crimea, putting 150,000 troops on high alert.

Talk to almost anyone connected with Ukraine’s new leadership and the message is the same. To withstand Russian pressure, stabilise its finances and build a modern economy, it needs huge financial help. Poland has been leading calls for the west to provide a new Marshall Plan.

Arseny Yatseniuk, a protest leader confirmed as the new prime minister, warned that Ukraine’s coffers were “robbed and empty”. “I do not promise better living today or tomorrow. Our immediate aim is to stabilise [things],” he told parliament. “There is no other way out for us than to take extremely unpopular decisions.”

The immediate task is to hold to­gether a country that was carved up between the Austro-Hungarian empire in the west and the Russian empire in the east. There has been relief in Kiev this week that east-west tensions have so far been muted.

Western Ukraine supplied vital manpower, finances and organisation to the Kiev protests and supports the new leadership. In Lviv, the west’s leading city, there has been a giddy sense of victory. The traditional Ukrainian greeting of “Good day” has been largely supplanted by a cry of “Glory to Ukraine!” with the response “To the heroes, glory!” The slogans originated with nationalist partisans who briefly allied themselves with the Nazis and fought the Soviets during the second world war.

That detail has not gone unnoticed in eastern Ukraine. Donetsk, the second-biggest city in the east and Mr Yanukovich’s power base, was calm this week and there was little sympathy for the president. But close to the surface are pro-Russian sentiments and suspicions of the new Kiev government.

Among a few dozen pro-Russian demonstrators around the local Lenin statue, Anya, an economist, waved a Donetsk regional flag adorned with a two-headed Russian eagle. “I want a better life and I think I can have one if we join Russia,” she says. “What happened in Kiev was a coup engineered by the US and Europe.”

Alexander Azarenko, 65, wearing a pro-Russian orange and black ribbon, agreed that the takeover was an “anti-democratic coup. I don’t want the fascists to come here from Kiev”.

But Crimea is the focus of mounting domestic and international concern. Transferred from Russia to Ukraine by Soviet leader Nikita Khrushchev in 1954, the peninsula is still the home base of Russia’s Black Sea fleet at the leased port of Sevastopol. Russian flags were this week hoisted over Sevastopol’s parliament, and the Crimean parliament in Simferopol. On Thursday morning, scores of armed men demanding “unification with Russia” seized the regional parliament and government buildings.

. . .

Security officials in Kiev say Russia has countless officers of its FSB security service in Crimea and many see the hand of Russian agents behind recent events.

Mr Kiselev says Russia would do everything possible to destabilise Crimea to create problems for Kiev. But he did not think Moscow would attempt to provoke Crimean secession from Ukraine or would intervene militarily. By Thursday, he was no longer so sure. “I’m still hoping there won’t be military intervention,” he says. “But of course this is a war of nerves right now.”

However, outside Crimea, whose citizens tend to give issues such as language rights higher priority, there is much more that unites Ukrainians than divides them. In the east and west, polls show issues such as language, federalism or relations with Russia and the EU are low on their list of concerns. “The most pressing issues that citizens want government to address are corruption, living standards, unemployment, pensions, healthcare and education reform – issues which affect people’s lives daily,” says Iryna Bekeshkina, head of Kiev’s Democratic Initiatives Foundation, a polling group and think-tank.

If the government could make progress on those issues, it could start to win over both east and west. Yet it faces still more pressing concerns. The first is stabilising state finances, with foreign exchange reserves down to barely two months of import cover, and the national currency, the hryvnia, hitting a record low this week.

With further disbursements unlikely from Russia’s $15bn bailout promised in December, beyond $3bn already received, analysts say western support will be crucial. Unless it is delivered rapidly, further deterioration of the economy could quickly affect the new government’s popularity ahead of presidential elections set for May 25.

“The politicians taking the positions of prime minister and finance minister should be very clear this is actually a kind of kamikaze [role],” says Olexiy Haran, a political scientist and member of the protests’ co-ordinating council.

Longer-term, there is broad agreement on the top priorities: to strengthen the rule of law and media freedom, curb graft, reduce the hold of a few billionaire oligarchs over politics and the economy and help small businesses.

That means avoiding a repeat of the mistakes made after Ukraine’s Orange revolution in 2004, which also overturned Mr Yanukovich. Viktor Yushchenko and Yulia Tymoshenko, the Orange co-leaders, descended almost immediately into feuding that stymied reforms.

“Corruption is the Ukrainian cancer, and it is almost killing the country,” says Pavlo Sheremeta, the new economy minister. “As with cancer, serious surgery is needed. That amounts to separating very clearly the oligarchic groups and politics.”

Yet Ukraine has one potential advantage today that it lacked after the Orange uprising: closer integration with the EU could provide an anchor for reforms.

Kiev’s new government is anxious to revive progress towards the political association and free trade deal with Brussels to which Mr Yanukovich turned his back. That would give the EU and Ukraine largely tariff-free access to each other’s markets but require Kiev to adopt large chunks of EU legislation and regulations that could greatly boost the rule of law and improve the business climate.

“The long-term danger is that politicians will resurrect the corrupt system,” says Oleh Rybachuk, a former head of Ukraine’s presidential administration. “It’s vitally important not just to sign the [EU deal] but to start implementing it.”

Mr Rybachuk wants the EU to grant Ukraine a “membership perspective” – explicit recognition that Ukraine might one day join the bloc if it meets the criteria. EU members have been reluctant to grant such a perspective.

Another potential advantage is the strength of civil society, which it demonstrated both in 2004 and again in the latest protests. Thousands of protesters remain in Kiev’s main square, holding a vigil outside parliament and keeping the new government on a short leash.

Some analysts warn that could be a double-edged sword, tempting the government towards populism and making it difficult to implement unpopular measures. But Ihor Smeshko, who as head of Ukraine’s SBU security service helped avoid violent clashes during the Orange revolution, says civic society has matured far beyond the political system.

Politicians must now catch up. “Civic society is 10-15 years ahead of our politicians,” he says. “The Orange revolution was organised by politicians. This one was set up by the people themselves.”


Crimea: The secession question

As hundreds of pro-Russia protesters massed outside Crimea’s parliament on Thursday, two ethnic Russian men paused to look up, writes Courtney Weaver. The Ukrainian flag flying there a day earlier had been replaced by a Russian one. “Look,” one of the men sighed. “What a wonderful feeling.”

While Kiev’s leaders begin a power transition in the capital, they face a hostile climate in Crimea, where pro-Russian activists have drummed up widespread opposition to the new national government and posed the question of secession.

For almost a week, Kiev’s Crimean opponents have organised grassroots actions to rival those in the capital’s central Maidan (square), recruiting hundreds of local men into self-organised militias. In Sevastopol, home to Russia’s Black Sea naval base, thousands of ethnic Russians kicked out the Kiev-appointed city administrator over the weekend and replaced him with Alexei Chaliy, a local businessman with Russian citizenship.

The local anger has been fuelled by the deaths of six Crimean riot police in Kiev street clashes last week. “We saw the police when they came back on the buses and not one of them had had weapons. They stood like braised meat. The provocateurs on Maidan killed our boys, they shot them,” says Nadezhda Nimchinova, a Simferopol teacher.

Other ethnic Russians repeat claims that the Kiev protest leaders are “fascists” and “bandits”, citing the role the Ukrainian nationalist group Svoboda and fringe rightwing groups played in the protests. Gennady Basov, leader of Sevastopol’s Russian Block party, alleges the new Kiev leaders will soon make it illegal to speak Russian altogether, although Kiev’s leaders have signalled no such plans.

According to Ukraine’s Democratic Initiatives Foundation, fewer than half of Crimean residents support the peninsula uniting under Russian control. The rest prefer either greater autonomy for the region or remaining united with Ukraine under the new leadership in Kiev.

However, in recent days, the pro-Russian Crimeans have had the loudest voice at well attended protests where hundreds in the crowd wave Russian flags and chant “Russia! Russia!” The Ukrainian opposition may have secured Kiev but the resistance in Crimea poses a serious threat to its ability to hold the country together.

Additional reporting by Jan Cienski

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