Rule of Oligarchs Is Hazardous To Ukraine

Certainly, the word oligarch conjures up in many Ukrainians a vivid picture of something black and spider-like which thrusts its avid tentacles into Ukraine’s pale little body and sucks the monetary juices out of it (those more advanced politically associate this notion with specific people and political figures). But very few understand so far that today’s Ukrainian oligarchs, whoever they might be, are those who do real business in this country and know, like no one else, the real situation in and the economic potential of our state. The Day received a letter recently, in which the reader thanks the editors for publishing an interview with Hryhory Surkis whose image is closely associated with that arachnid thing. Interviews like this, writes Yuri Sanin from Kyiv, help “break mental stereotypes about this person. What we really see is a statesman- like thinking and patriotic individual who strives to live within the legal framework. This is good.”

Perhaps, the way out of the current situation in Ukraine is that society should begin a dialogue with the so-called oligarchs and come to know their aspirations, motives, and tactics. In any case, the tactic of nihilism and internal emigration will not make oligarchs bring their activities in line with the public interest. Nevertheless, The Day also gives the supporters of rigid anti-oligarch views an opportunity to express their arguments.

Many popular media, including The Day, have recently published some lengthy articles “in defense of oligarchs,” where they explain in detail the great benefit of the nation’s oligarchy for independent Ukraine — mainly because it “has something to lose.” The authors of those articles are oligarchs themselves (if the term oligarch irritates them, let us replace it by very rich Ukrainian {VRU}). And although this is a moot point and a considerable part of, say, the intelligentsia does not think so, the media do not publish well-reasoned opposite views (I leave out short notes of the down-with-the-bloodsuckers type). As a learned person, I would like to substantiate my anti-oligarchic opinion with, so to speak, a calculator in hand.

HARM NO. 1 IS ECONOMIC

As we know, the well-being and prosperity of any country is achieved by the production of not some concrete goods and services but of the SURPLUS VALUE. By what way? By any. One should only bear in mind that, for example, coal mining (in a good pit) provides only 1-2% of surplus value, thermal electricity production 2-4%, and steel- making 5-7%, while the production of a Pentium 600 accounts for as much as 1,500-2,000%. The US super-prosperity is based on high technologies (computers, the Internet, telecommunications, genetic engineering, etc.) rather than on coal or pig iron, precisely thanks to a huge surplus value produced by high tech as well as the high liquidity of their stock market.

Whatever the oligarchs say about the origin of their capital, its lion’s share has been obtained (and still continues to be obtained) by the supply (read: resale) of gas, oil products, electricity, metal, etc. (which do not exactly smack of high tech). Now let us imagine that a certain oligarch (pardon me, VRU) has purchased in Russia gas at $30 per 1000 cubic meters (paying cash) and resold it to Ukraine at $80 (suppose, by barter), and earned an average income of $50 million. A very interesting question arises whether this operation has brought the state of Ukraine even one percent of the surplus value it needs so badly? No way! If this were a shadow deal, that would be the end of it: good for the VRU and bad for Ukraine. But we have a different kind of VRUs now! “It is now the time of transparency,” they solemnly say. Fine, let’s be transparent: suppose our imaginary oligarch declares an income of $50 million and pays $15 million in taxes to the budget. So can we now erect a monument to him? Is Ukraine at last in the black? Alas, Ukraine is still in the red, because (here is the moment of truth), after selling the gas to Ukrainian enterprises at an overrated price, our imaginary oligarch has made their products unprofitable: this means all these enterprises will pay nothing to the budget and delay wages to their workers. Selling this gas to the public utilities, the oligarch makes the value of their services unbearable for most of the population, which requires the budget to pay a handsome amount as allowances, etc. In other words, if enterprises bought gas direct from Russia at $30 per 1000 cubic meters, without an intermediary oligarch, they would themselves pay $20 million in taxes, after selling their cost-efficient products; moreover, utility fees would become cheaper, budgetary allowances would go down by $5 million, and so we have a total $25 million! (Incidentally, here is the fatal error of Viktor Yushchenko as a banker in his monetary policy: the laundering of enterprises’ current assets is too heavy a payment for the hryvnia’s low inflation). But this gas deal (imaginary, of course) results not in budget revenues of $15 million but in a loss of $10 million (plus social problems). And whence is such a huge profit for our oligarch? He simply appropriated the surplus value of those enterprises to which he had sold his gas under a pattern suitable for him only. Oh, yes, Messrs. VRUs! As far as I know, Mikhail Lomonosov once noted, “What leaves one place will come into another.” Profits never come out of nothing. A profit emerges exclusively as a result of producing surplus value! And this tale has a moral: any money of YOURS in your pocket can ONLY be a part of the surplus value YOU produced. ANY OTHER money (which you think is yours) is somebody else’s surplus value you APPROPRIATED.

Real facts? Please open any newspaper! Our Enerhoatom producing electric power at 3-4 kopecks per kW and selling it on the energy market at 10-12 kopecks a kW, ended 1999 at a UAH 1.5-billion loss. A huge surplus value was undoubtedly produced in this case, and where did it go? “Passers-by and the police are looking for it...,” as a poet said. Or take the Mykolayiv Alumina Plant (MAP). How can it be an enterprise running up losses, given high world prices and high demand? Where has the large MAP surplus value gone? It lines the pockets of a certain mogul who foisted on it a sinister barter tolling offshore scheme of commodity and money flows. And Ukraine has hundreds of enterprise like this! And, accordingly, there are very few Very Rich Ukrainians.

HARM NO. 2 IS POLITICAL

In the past few months, Parliament has seen the emergence of several mysterious factions which, nevertheless, have a common sign: they are headed by the same VRUs. And there would be nothing worthy of condemnation in this if these factions had emerged in the way acceptable in the civilized world: a party being formed, which makes public its platform, participates in the regular parliamentary elections, and wins the required percent. Then take your seats in parliament please! But why on earth should one wait and fight for votes in the constituencies if a party faction can be put together in Parliament by the same tried and true barter tolling mechanism! I do not assert that these are bad parties, for they have quite decent slogans. I mean that Ukrainian democracy is in endangered by such barter type trail blazed by our VRUs to form parliamentary factions for their parties which GAINED NOT A SINGLE VOTE in the elections!

Yes, oligarchs (or VRUs) are clever and talented people, and I say this without any irony. And they justly consider themselves an elite. But their intelligence and talent are aimed not at the prosperity of Ukraine but only at the protection of their PERSONAL interests (which, however, coincide with those of the state in a number of cases). And, paraphrasing a well-known American formula in the Ukrainian vein, I have to add the particle no: What’s good for the oligarch IS NOT GOOD for Ukraine. (Incidentally, the other day none other but the oligarchs failed to vote in Parliament to eliminate concessions for the critical imports they control, and this deprived the 2000 budget of UAH 1.6-billion in revenue, including UAH 700 million for paying wage, salary, and pension arrears). Such an elite...

But Ukraine also has another kind of elite, the elite of intellectuals. We have not amassed huge capital in Ukraine only because we still cherish the idea of personal honor and we hate having anything to do with the shadow capital, semi-criminal fronts, bribes, and other beauties of your “business” the final goal of which is to take possession of someone else’s surplus value by executing conceptually brilliant but baneful for Ukraine commodity-and-money schemes. Yes, today we are completely isolated from power, we are deprived of the chance to air our thoughts in the press and on television: this requires big money that we do not have, for we earn poverty salaries. But we still tolerate it, we have already been in this fix, we had it the same under the CPSU dictatorship. But is our high moral standards, our personal honor, and our tacit resistance that became part of the rock that smashed the CPSU dictatorship.

Yes, now is the time of YOUR ELITE, but the time of OUR ELITE in Ukraine is sure to come. And then there will be a different Ukraine, one of intellectual upsurge and high technology, a great center of national and international culture.