Shadow Integration

I find troubling the materials on the offensive of Russian capital, of which most of the postcommunist world except Ukraine is understandably worried. Ukraine’s desire for admission to the Western club leads it to unceasingly proclaim its European choice, while its instinct to continue to do things the way it long has prevents it from playing by the West’s rules. According to those rules ownership means control, but a foreign investor seeking to actually take part in running an enterprise he thinks he bought can soon find himself summarily written off the list of stockholders with his original purchase price in devalued hryvnias returned. This drives out Western investment and preserves an economic model incapable of integration with the West but quite compatible with Russia’s. Perhaps this is why I recently heard that for every dollar of direct foreign investment from the West there are five from Russia (not all in cash, of course). In short, Russia is taking control of the commanding heights of the Ukrainian economy. This process can be called shadow integration, a perfect companion to the shadow economy and this country’s opaque shadow politics.

Why should Russian big business find Ukraine such a good place to make money when Western investors risk having the rug pulled out from under them? For one thing, both countries function in a similar way: today’s oligarchs are those who could use backstage influence or other assets to turn political clout into money and climb their way up using economic, political-administrative, and, if needed, criminal means. Nor are they strangers: as Viktor Pinchuk pointed out, “All the capital of wealthy people in Ukraine was made in Russian gas.” This means that Russian heavyweight and Ukrainian middleweight oligarchs have long been connected and do things about the same way. Of course, it makes sense for Russian energy giants to want Ukrainian refineries, but when Russia’s AutoVAZ acquires such a plum as Zaporizhzhia Aluminum one can only hope that the new owner will do as well as it once did for its former director, Boris Berezovsky.

What the West wants from Ukraine is also clear: as US Defense Secretary Rumsfeld put it, “a stable and prosperous Ukraine oriented toward the West, Europe, and NATO structures.” It is not getting this and knows it all too well.