Take Away and Divide

Among the latest important developments is not only the sharp decline in the “Ukrainian” dollar’s rate, but also two other outwardly less newsworthy events. Ukraine’s richest citizen Rinat Akhmetov, president of SKM Co. and Shakhtar Soccer Club, left this country and is said to be in Moscow, maybe in Spain. Viktor Pinchuk, PM, co-owner of the Interpipe Corporation, son-in-law of ex-President Leonid Kuchma, is reported by Moscow’s Vedomosti to have offered his stock to Russian steel companies in return for $1,000,000,000. This newspaper report appears to be corroborated by some of the potential buyers. However, no one seems eager to buy Ukrainian property at this price. A Russian banker pointed out that buying assets in Ukraine is rather risky. Reprivatization, plummeting dollar rate, lowering import duties — all this looks like a policy aimed at destroying domestic financial and industrial groups. Money has no geography, meaning that our FIGs will be replaced by transnational ones.

Interpipe’s CEO Ihor Yaroslavtsev said earlier that he saw risks facing the company “due to the political situation in Ukraine,” adding that the biggest risk was not being sure about the scope and duration of the reprivatization process, considering that the latter had already caused serious complications for large businesses on the foreign market: “The notorious ‘revolutionary expedience’ in lieu of legal approaches and principles of the supremacy of law may become a dangerous tool when solving business matters in Ukraine... Using it (this tool — Auth.) will have a negative effect on the domestic investment climate and threaten business in Ukraine in general... We believe that the current ambiguous situation is a temporary aspect resulting from the formation of a new political system; we believe that the political leadership will not allow rash decisions in regard to business, considering that they can bring about irreversible [disastrous] consequences in the Ukrainian economy.”

This author must admit that he has never met a single oligarch, including Mr. Pinchuk, and has no intention of defending their interests. The more so that they will surely survive financially. The point is that these individuals are big-time employers and that the well-being of many other able-bodied citizens — including those in their employ and those sustained by the central budget — depends on these individuals’ business status. Moreover, the Russian example (e.g., destruction of YUKOS and indictment of Khodorkovsky) shows that the domestic investment climate depends on the attitude of the state toward big business. The absence of the latter causes depression in industry, collapse of the infrastructure, and a hopeless lagging of the information technologies that currently determine the visage of all the advanced countries.

“The enormous growth of industry and the remarkably rapid concentration of production in ever-larger enterprises are one of the most characteristic features of capitalism.” Thus begins the book Imperialism, the Highest Stage of Capitalism written by Vladimir Lenin who was a good researcher of capitalism and its hapless gravedigger. Russia currently teems with bureaucrats manning “funeral homes” meant for businesses, as evidenced by the YUKOS case. Is Ukraine following in Russia’s footsteps?

With all outward distinctions in the development of Ukraine and Russia, and accordingly, in the development of capitalism, one can easily discern signs of Lenin’s light steps and Dzerzhinsky’s heavy hand in the process of evolution in Ukraine. There are no obvious victims as yet, but certain trends in statements made by the political leadership are easily identifiable. The fact that the cruelty ratio fluctuates from the take-away-and-distribute to pay-the-rest-and-keep marks is simply evidence that the roles in the play are still to be adjusted. The trouble is that the powers that be in Russia and Ukraine equally loathe those who have somehow succeeded in accumulating wealth and climbing to a level where they can join transnational capital.

Big business has passed several stages in its development in Ukraine. Researchers note that our financial and industrial groups kept in the “shadow” at first, at a time of economic crisis and weak political system. They emerged based on “traders” (e.g., inequivalent trade in energy resources and scrap metal) and in banking capital (financial speculations), and acquired the characteristics of corrupt clans. Nevertheless, FIGs objectively helped reproduce technological ties and accumulate national investment resources. At the second stage, with state control being enhanced and taxation and financial spheres put in a better order, there appeared stimuli for the legalization of FIGs. The third stage began sometime in 2002 when the process of “civilization” began. It was caused, among other things, by the need to attract foreign inland investment and have FIGs access the world market. (By the way, the Ukrainian population felt consolidate probably on only two occasions: first during the Tuzla crisis and the second time when Poland unjustly denied privatization of its metallurgical combine by the ISD Corporation. Should such golden geese be slaughtered? What’s good for General Electric is good for America. Remember?)

Apparently we still have to learn the importance of big business for Ukraine. Seeing a domestic capitalist, the first thing on our mind is, look at him, he’s stolen so much and is still at large. The most amazing thing is that this attitude is cultivated, in Russia as well as Ukraine, by people posing as liberals. Result: money outflow to offshore zones.

It’s probably illegal to know how much money is on someone else’s bank account, The Day was told by a noted foreign expert on market freedoms, but it’s perfectly lawful to monitor in- and out-transactions falling under the international category, because such transactions are subject to international legislations. He recalled the Lazarenko case as a disheartening example. This expert believes that money suddenly leaving this country is at a great risk. The more so that people involved are well known on both sides of the Ukrainian border and are under constant surveillance. Is it expedient to force this social group to emigrate from a country living under capitalism, considering their importance for that country? Who will benefit from this?

Judging from the course events are taking, international and particularly European corporations expect to fill the niches on the Ukrainian market, vacated as a result of the intended nationalization campaign (a pertinent bill is already in parliament), and thus take part in the privatization process. Is this good for Ukraine? Should foreign entities wishing to buy strategic property be allowed to have precedence over the domestic ones (the latter being, of course less free with their funds)? The privatization of Ukrainian oil refineries and, most importantly, the resultant permanent crises on the Ukrainian market offer an unequivocal answer to this question. Our President says the geography and origin of money mean nothing to him. Being an experienced financier, he ought to know the following characteristic of the money flow: where money is concentrated decisions are made and these decisions are carried out where there is no money. Apparently we want to become rank-and-file executors.