No Coincidence in Discounts for Friendship
Viktor Yushchenko, Ukraine’s most popular politician, left his post as premier half a year ago. In the spring, when his popularity was at its peak, the issue was on everyone’s mind and many insisted that he could be blamed only by those with personal or oligarch-financed grudges. I had none. Instead I had specific information showing precisely how he had come to be what he was and how much every Ukrainian citizen had been forced to pay for it. This information cannot be shrugged off. Whatever they say about his popularity, I have my own opinion; I am convinced that he is a person I can no longer trust and will not trust anytime in the future. Let me tell you why.
I have before me an official document, Cabinet Directive No 133-r, dated April 7, 2001, signed by Viktor Yushchenko, “On a System of Measures to Provide Favorable Conditions for the Development of the Electrical Energy Sector.” It has a most direct bearing on every Ukrainian citizen. Its first two clauses ought to be printed in capital letters and duplicated as posters for pickets in front of the Our Ukraine headquarters.
By issuing the said directive, the cabinet regularized the relationships among citizens as electricity consumers, distribution and generating companies, and the state. The first clause confirms that the distribution companies have a right to cut off supplies to all consumers failing to make timely payments. The second one prohibits the ministries and other executive authorities at all levels to interfere in the performance of these companies, precisely in terms of cutting off electricity supplies. Meaning that schools, hospitals, blocks of flats, all power consumers are made equally without rights before commercial structures which, after privatization, are entitled to apply the so- called regulated tariff that regulates rates upward. This is further set forth in clause 13 of the ill-famed cabinet directive, along with a list of oblenerho regional distribution companies with restructured debts.
Kyiv’s streets were meanwhile scenes of a mass campaign in support of Viktor Yushchenko who said time and again that Ukraine is thriving, punctually paying off its credits and generously receiving them. At the same time, documents were signed in his office, confirming his tireless care for the so-called little guy.
Of course, he was not the one to start increasing electricity rates. His predecessors had not just twiddled their thumbs. Pavlo Lazarenko, for example, had acted very inconspicuously when signing a cabinet resolution changing the central heating payment accrual method without changing the method of fuel consumption calculation. What they did was to simply include all living quarters and nonresidential premises into the area to be paid for, thus warranting an almost 30% increase in the gas, fuel oil, and other fuel consumption rate, although that amount of fuel could not have been actually consumed. This legal fraud was the starting point of all subsequent habitually quiet and totally unjustified utility hikes. Yuliya Tymoshenko was Lazarenko’s right hand at the time.
One often wonders what could attract those two politicians to each other? Personal proclivities? Friendship? Not at all. And there was no coincidence in their climbing the political Olympus together.
The thing is that the raising of electricity rates, directed from above, resulted in an artificial increase in the flow of money directed toward the energy resources. This, in turn, caused uncontrollable energy to turn into hard cash, which was badly needed and behind which there was no product. Energy supply patterns became a means of strategically influencing the country’s financial system. Their architects were instantly given leading posts and were now in a position to influence governmental and financial resources. The people most directly involved in the implementation of those patterns became partners and comrades-in-arms in serving their own interests. The tandem of the head of the National Bank and the manager of Ukraine’s largest and most influential gas company was the natural result of their cooperation. As the money flow in the energy sector increasingly influenced the economy, compared to the neat budget flow, the two political figures were gaining scope and momentum.
The head of the National Bank administered credit resources, directing here and there (to one bank or another), while the manager of the gas company — or of any other energy company — paid for them, using barter or offset deals, receiving maxim incomes from such transactions.
After Viktor Yushchenko became premier, straightening out the movement of inventory holdings was no longer interesting but quite burdensome, since almost one-third of state revenues came from the energy sector. And so effective money flow patterns became the main implement to solve all problems.
Whom did Yushchenko entrust with the monopolistic regulation of these flows of money? The only person he trusted and whose talent in drawing charts explaining he never doubted. The gas queen had in her hands all national energy controls while the premier proceeded to score points in world financial circles precisely because he abided by IMF instructions concerning both electricity rates and oblenerho privatization.
Ukraine started to get loans, but the system was now working for itself, production developing only at the expense of folding up the domestic market and real decline in living standards. As the result, people stopped paying their electric bills, and the Yushchenko cabinet fell into a trap of its own making. Then it decided to make the so-called incorrigible municipal deadbeats responsible. It was during the year of the Yushchenko-Tymoshenko tandem that a wave of lawsuits rolled over Ukraine, with the state as plaintiff, refusing to acknowledge any responsibility for pay arrears, growing unemployment, and people’s real incomes not covering one-third of the minimum basket of goods.
After signing this resolution, Viktor Yushchenko did more than take the lead in instituting commercial relations between the people and the state. His signature legalized the principle of the citizen’s unilateral liability for all consequences of ineffective economic development. He never bothered to considere how ethical and timely his decision was. Many scientists, power engineering experts, and economists are convinced that a state owning more than half of all the means of production and natural resources, and which meddles in business without practically any legal restrictions, had no right to institute such a relationship. It would do better to show responsibility for the sanitary standards of water, heating, and food consumption by instituting a set of rights and providing actual opportunities for the people to earn and pay for those standards — and do so without making people’s lives any harder. As it was the citizens received no such rights or responsibilities. Nor do they have any now.
Could it be that Mr. Yushchenko did not realize any of this? If posed this question, I am afraid he would start gesticulating and talking about reform and oligarchs. I wish I could believe him, but I cannot, because I also have a reference book of volunteer organizations, concerning the so-called analytical centers of Europe. On page 226, in the chapter dedicated to Ukraine, it refers to the International Advanced Research Center and lists the managers. Apart from Viktor Yushchenko (then head of the NBU), it has the names of Tihipko (then vice premier), Havrylyshyn (then chairman of the board of overseers), Shumylo (then deputy minister of the economy), and Бslund (Carnegie Foundation leading expert). In 1997 alone, the organization’s annual budget was $1,200,000. Page 252 lists the board of the Ukrainian Reform Relief Fund, led by Viktor Pynzenyk (this organization was more prudent and kept its budget undisclosed). Both structures were financed by practically the same sources, including the World Bank, Know-How Foundation, and private contributions. Thus, the Yushchenko-Pynzenyk tandem also has deep roots. No coincidence here, either.
At first I was surprised by the US indifferent silence toward Viktor Yushchenko being simultaneously a top official and member of the board of an NGO. Under the US law holding two such posts is inadmissible, primarily for reasons of ethics. As it was, America seemed to completely ignore its own democratic and ethic principles. Illogical? No, it was perfectly logical, considering that organization’s specialty: advanced research of the Ukrainian economy and risk assessment. The board members knew everything there was to know about Ukraine’s financial status, economic potential, and sociopolitical situation; they also took part in the research programs and submitted their findings to the interested foundations as progress reports, along with access to this and other information, being scrupulously paid for it. $1.2 million a year and two tandems of reformers: Yushchenko-Tymoshenko and Yushchenko-Pynzenyk. Ukrainian pensioners joke about Tymoshenko’s insistent unity appeals to Viktor Yushchenko, saying they should act under the slogan “If we are together, everybody will pay for electricity and heating, those who can with money and those who cannot with their lives.”
I am in far from a jocular mood. First, I feel truly sorry for Yuliya Tymoshenko. Viktor Yushchenko is not likely to unite with her. There is no reason anymore. Secondly, I understand why the Americans care so much about our former premier. They are fond of disciplined and obedient people. When he was premier Ukraine paid every IMF bill, emptying the taxpayer’s pocket of its last coin. Polish debts were written off, and we had to pay in advance. Under the circumstances the US financiers’ enthusiastic support of Yushchenko is quite understandable. Of course, debts must be repaid, but not at any cost, not at the cost of dragging to court people having to choose between paying an electricity bill and buying food for their children. And so I look at the documents on my desk and cannot trust this man any longer. I imagine that he honored Ukraine’s commitments to the IMF better and more punctually than the obligations toward his own people. He will continue to act this way because there is a vast distance between the IMF and the little guy in Ukraine.
