Why did Serhii TARUTA gather oligarchs?

The third meeting of Ukrainian oligarchs, slated for last Friday at the Hyatt, never happened. It should have been a discussion (and eventual approval, in case of consensus) of a memorandum of new principles and obligations of doing business in Ukraine. The Day spoke with MP and former head of the Donetsk Oblast State Administration Serhii TARUTA about the causes of the failure and the standpoint of big business in what concerns the change of the rules.

Why did you initiate the meeting of oligarchs?

“I have nothing more to lose, I see my mission in uniting them all. At present, businesses are trying their best to survive, that is why they do not make enough effort to consolidate properly. As a result, there are numerous dispersed business structures like ULIE (the Ukrainian League of Industrialists and Entrepreneurs) or the Federation of Employers, which are trying to independently produce recommendations for government. But they only reflect the interests of a part of businesses. Owners want to rescue their businesses on their own. But if we do not join forces in taking care of the country, we are all doomed to bankruptcy, first economic, then social, and finally, political.”

What kind of memorandum was to have been signed by the members of this “club”?

“On the one hand, on the principles of conduct for business, on the other, on its responsibilities, which need to persuade society and the outer world in the realness of transformations in Ukraine. Also, it is a step which would not allow the country’s leaders to keep shifting the blame for their inefficient leadership on oligarchs. There is no more mass influence on the part of oligarchs, nothing more than the remains of what used to be.”

What kind of responsibilities do you mean?

“What is big business being accused of today?

“FIRSTLY, of shaping its own political projects. Medium-sized and small business should give them up because these projects do not have any positive effect. At the same time, it is necessary to help civil society to develop democratic parties and support them as a rank-and-file member or a sponsor. Sadly, we do not have this yet.

“SECONDLY, of pumping money out of the country and of working in the shadow. But big business has stopped doing this, because working with Western banks means having much tougher control on the part of creditors than on the part of Ukrainian regulators. This is why task number two is a hundred percent reinvestment of incomes in Ukraine until the stabilization of economy.

“In my opinion, we need to create a Fund for Economic Development or Economic Stabilization, which would include renowned experts, develop a program of economic reforms, agree it with civil society, and then insist on the implementation of this package of reforms by the government.

“Unfortunately, until now Ukraine’s economic structure has shown its total incapability. Thus, a new model must be prepared, based on rational ideas rather than on theoretical conceptions of grant-users who pretend to be working to get funding from abroad, but whose programs end up in the bin. Meanwhile, the West believes it is helping Ukraine extensively, but the efficiency of this help does not exceed five percent.”

Who has to shape this new “political platform”?

“A part of young MPs in the current parliament and representatives of civil society. Maybe some entrepreneurs will be willing to give up business and take up politics. This, too, will be welcome. New faces need to appear. In Kharkiv, for instance, a new party gained the majority in the elections on the oblast and raion level under the majoritarian system. It means that the population is fed up with the old. Changes must be evolutionary, and each one who feels such an urge must help, yet not from the standpoint of priority law but on the level of a majoritarian vote.”

What is big business’ role in the renovation of the country?

“Medium-sized and big businesses must assume the responsibility for the country’s future, just as it happened in the US. We see that almost a million best experts in various spheres have already left Ukraine in pursue of a better lot. Who stays? Retirees. And who is going to feed the country? Unfortunately, government will not think about it. This is why we have a fundamental problem: in the next four years Ukraine needs to borrow more than 100 billion. Who is going to lend it? No one. The only way to help is create new jobs in the country.”

How do oligarchs respond to your initiative?

“On average, in a normal way. I would like them to be more active, though.”

Who supports you?

“In private conversations, virtually each one. I am not talking to Kolomoisky and Poroshenko.”

Why? Because of ideological differences?

“I did invite them to meet. Poroshenko is doing fine as it is, he is in ‘a warm bath.’ Why change anything? He is the only one whose assets have grown in value, while the rest have seen their drop. Nevertheless, last time I invited him to the Hyatt. And I will again, of course, when we organize a new meeting.

“Why must oligarchs agree? In order to let society, the West, and other businesses see that they too are prepared to play on the level field and without monopolies (economic, political, and media). Nowadays, each big business owner faces a hard choice between their civil stand and business interests. While making a decision, oligarchs must realize that business is pointless if the country falls apart or goes bankrupt.”

No money without patriotism?

“Now all the oligarchs must think about increasing the capitalization of Ukraine. I tell them, ‘You must act on principles of economic pragmatism which shows that we must cooperate to create a different model of the country’s economic development. Only then can you rescue your businesses, and they will be worth something. If not, you will sink.’ Now Ukraine is sinking like The Titanic, and the new ship is not ready yet.”

Why don’t you negotiate with Ihor Kolomoisky?

“He, too, must show some initiative. But the thing is that he has long been trying to use his preventions while the others gave them up. For instance, the fight for Ukrnafta shows that he is not really interested in change. He has sent no messages on his part, and I am not involved in extensive communication with him. That is why I did not invite him. Should he be willing to join, I am certainly ‘for.’ We must forget past wrongs and mutual resentments and think about our country’s future. If we all do not unite for the sake of the future, Ukraine will not survive.”

Maybe it is worth taking the first step and inviting him?

“I will certainly send him an invitation.”

You said that Kolomoisky did not want to change the rules of the game.

“I meant that he is not yet prepared. He is the one who tried to cash in, and who possibly did, on his administrative powers rather than his business influence.”

But at the meeting of the special commission on privatization Kolomoisky was the first of all oligarchs to suggest revising the privatization of the 2000s and compensating in case of revealed violations. Doesn’t this mean changing the rules?

“No, this standpoint was absolutely non-constructive. This suggestion was aimed at one person only, Rinat Akhmetov. Changing the rules does not presuppose personal sanctions. We must think about working along new principles. If violations did take place, it is up to prosecution to look into it. Business should not interfere: everyone has his own skeleton in the cupboard. In this case, everyone should get their own skeleton out. Kolomoisky, too, is not impeccable. There have probably been few privatizations without violations in this country, if any. That is why I certainly would not raise this topic now. Re-privatization or nationalization is the worst signal you can send investors. They will not go into the intricacy of the process. Instead, they will just dismiss us as unreliable, and then we are as good as dead.”

But it was not about re-privatization, he meant the British know-how: compensations if property was sold at a low price. Restoring property to the state is an extreme case.

“And how should the value of the sold property be calculated? Today these assets are worthless. In terms of the 2008 capitalization, it would be necessary to pay a compensation to the public budget. But based on today’s figures, it is the state that has to pay the owners.”

In what way do you suggest to circumvent this issue in the history of our business?

“It is necessary to create the right basic rules of the game, so that effective owners might appear who will take care of the future, preserve jobs, and ensure Ukraine’s growth. Today government must create incentives for them. At present, Ukraine resembles an old Lada, made in 1972 or 1975: fuel-thirsty, ugly, dangerous, and expensive to maintain. Seventy percent of Ukraine’s productive assets are depreciated.

“Where there is a will, there is a way, and it is quite possible to hold absolutely transparent and sensible tenders. Yulia Tymoshenko sold Kryvorizhstal through a transparent and public procedure. Set clear-cut rules and sensible investment terms, and start the privatization. When I purchased enterprises in Poland and Hungary, the cost of that property made up for 28 percent of the price; the rest was investor’s and welfare obligations.”

Does Akhmetov support the idea of these meetings?

“He does.”

Why then he was not present at the most recent one? Is he coming to the next one?

“I hope so.”

Why did last Friday’s meeting misfire?

“For technical reasons: not all participants were able to come to Ukraine.”