Empty Title

I will not go into any of the political overtones of this decision, and the reason news of it made headlines the world over is different. The scandal involving a former premier is unprecedented because of the authorities' frankness. Eager to do away with a formidable political rival, they hung out the Ukrainian state machine's dirty linen for all the world to see. But first things first.

According to General Prosecutor Mykhailo Potebenko, criminal offenses committed by Pavlo Lazarenko started being recorded soon after Ukraine became independent. It was then that his first schemes of embezzling public property were conceived, quickly to evolve into standard procedure. Official sources have it that criminal proceedings vs. Pavlo Lazarenko were initiated September 14, 1998, and that the charges pressed were about the theft of public property in especially large amounts, unlawful opening and operation of foreign exchange bank accounts outside Ukraine, and abuse of office punishable as per Articles 86-1 and 165, Section 2, of the Criminal Code of Ukraine.

In fact, the evidence provided by the prosecution has long been noted by the state machine and described in the media. It also true, however, that the official documents do not reflect everything the media knows, just the facts that the investigating authorities could - and would - establish using documentary proof. Remarkably, practically all current political opponents of the President pointed out that the "Lazarenko case" is only "part of the Leonid Kuchma case," although the General Prosecutor's Office unraveled in the ex-Premier's business resumО certain very private operations involving not only his former partners in the presidential apparatus, but also certain landsmen. Perhaps as an exceptional coincidence, the prosecution makes no mention of Pavlo Lazarenko closest associates in the natural gas field, which, like any other big business in Ukraine, is impossible without working hand in glove with the central government.

Back in 1997, The Wall Street Journal Europe, relying on data provided by People's Deputy Yuliya Tymoshenko, exposed the source of multimillion profits stockpiled by the United Energy Systems of Ukraine. Business success came its way (Ms. Tymoshenko was then at the helm) in 1991. Starting with a mere 2 million ruble loan received from a state bank, through "friends," her company was importing hundreds of thousands of tons of Russian oil in 1994. And the same was true of UESU's gas business. Now a corporation, its know-how consisted in aptly using bankrupt Ukrainian enterprises as perhaps the only suppliers of the large diameter steel pipes and turbines needed by the Russian Federation, particularly by Gazprom. It was thanks to Gazprom and the Ukrainian Cabinet that UESU could get in with large Russian and Ukrainian enterprises, establishing what Ms. Tymoshenko would later call her "all-sector macro-financing system." In other words, UESU took possession of unique goods that were in a critically short supply at the time: an ability to regularly supply energy to the sectors heavily dependent on such supplies - primarily steel and cement for export. There is little doubt that without support from the top, first at the local (e.g., Pavlo Lazarenko) and then central level (ditto), the corporation would never have gotten whole industries and regions under its control, pocketing what foreign newspapers and magazines estimated at hundreds of millions of dollars (not the laughable three million dug up by the prosecution investigators). Regrettably, this linkage, obvious to whoever cares to know, is based on either gentleman's agreements or is upheld in full conformity to the law, meaning that there is no way to bring anyone to account.

Speaking of the law, the worldwide exposure of schemes using which a single office-holder could build a staggering fortune is unprecedented precisely because it is graphic evidence of how the Ukrainian state machine adheres to the principle business and the state growing one into the other throughout the country. From now on Ukraine's Western political and business partners will have no illusions about our domestic political and economic driving forces. To start with, no one should jump to conclusions about the repressive nature of Ukrainian legislation. Lazarenko's precedent is self-evident: in Ukraine the law goes to work only after a signal from on high. Secondly, laws meant to bar bureaucrats from having an interest in political and economic decision-making (called conflict of interest in the West - Ed.) stand no chance of ever being enacted. On the contrary, most recent bills passed under the motto of enhancing "state regulation" are nothing but instruments increasing the cost of pushing decisions through the top level of the bureaucratic machine.

Simon Kordonsky, a Russian economist, one of the authors of the administrative market concept, proposes to regard our daily theft at the public and private level not as simply a serious of accidental occurrences, but as a special form of "sociality" inherited from the Soviet period. This, he believes, suffices to cure one of all illusions about the so-called market reform.

"In order to live normally in our country," he writes, "one must have a state status (e.g., official registration of residence, passport, work-book, etc.) making it possible to steal where and whenever one can." Every populated area has it own respected oligarch, a man who learned to steal in amounts impressively large for the given locality. A structure of life, especially in the provinces (flat, dacha, cellar, garage) has formed in response to the arbitrary rule of the state, as an institution helping to take possession of things stolen from the state. An apartment is inhabited by factory or office workers. They work there because they are paid some money and because they can now and then steal something, which they can use in their dacha or garage or cellar. Official registration as residents of this urban apartment is necessary to receive all kinds of allowances and privileges. Smarter citizens adhere to the same lifestyle but at a different level. Joint ventures, apartment in capital cities, certain immovable property acquired somewhere in Europe, export-import transactions based on "friendly" contacts with customs inspectors, offshore bank accounts, subtle schemes of pumping money out of the state budget and transferring it to private bank accounts, and children enrolled in English schools. The rich, just like the needy, stick to a certain pattern in their daily life. A bureaucrat or sociologist venturing a closer look at the expense-income structure of any such well-to-do family will come up empty-handed. It takes living with this family or bringing in Interpol (as in the Lazarenko case).

Should the state begin to hit one element of this scheme, resources are immediately withdrawn and sent elsewhere. This life pattern resists the government-imposed market precisely the way it did Soviet power and the tsars. So long as there is enough to steal people will know how to make the best of it. Yet over the past decade the public stash (officially known as the state budget) has been depleted, reaching a critical point despite repeated injections by developed capitalist countries. Workers, peasants, office employees, and pensioners stopped receiving pay and allowances. Simultaneously the private stash was legalized, growing in size so it could no longer be controlled using traditional underworld methods. Besides, keeping the private stash filled is impossible without the public one.

This is probably why, muses Simon Kordonsky, newly minted bankers and industrialists became concerned about the state machine. Should it break down they would have nowhere and nobody to steal from. Thus, bankers et al. decide to go bureaucratic again. Workers, peasants, and office employees were also anxious, for the obvious reasons. Sustaining such politics boils down to strengthening the state machine, with the state status dominating the underworld one. "In this sense no politician would want to have all the privileges he already has knowing that the underworld status prevails over the state one. Every politician wants to preserve the habitual ratio, but only for himself, at the expense of all the others. That is why politicians need to expose others' theft just to keep their own stealing intact."

An original view, isn't it? Especially with regard to the scandal that began last week (and maybe others to follow).

By Iryna KLYMENKO, The Day