Publication: Russia and Eurasia Review Volume: 1 Issue: 13

By Oleg Varfolomeyev

Ukrainian President Leonid Kuchma has reshuffled his government. Accused by Washington of having sold early-warning radars to Iraq, haunted by the tape scandal, snubbed by Western leaders at the NATO summit in Prague, and weakened by opposition attacks at home, Kuchma desperately needs strong people at hand if he is to stay in power at least until the 2004 presidential election. Replacing Premier Anatoly Kinakh’s cabinet with Viktor Yanukovych’s regional team was prompted by this need for a tough and loyal government. This may also turn out to be a trial run for a possible Kuchma successor.

Kinakh, dismissed on November 16, had served as prime minister since May 2001. Unlike many of his predecessors, he was neither a mafia boss in disguise nor a latent revolutionary. He neither worked miracles nor committed blunders, and his loyalty to Kuchma was unquestionable. But Kinakh had one irreparable drawback: He was not closely linked to any major group or clan. Ukraine’s ruling elite, despite being unanimously pro-Kuchma, is not homogenous: It consists of numerous regional and business groupings competing for presidential favors. There was no strong group to protect Kinakh–the chairman of the small Party of Industrialists and Entrepreneurs–in an emergency, and Kuchma has never concealed that Kinakh was only a temporary premier, acceptable to a ruling elite unable to agree on a stronger candidate after the dismissal of charismatic Prime Minister Viktor Yushchenko in April 2001.

And now, with his own fate at stake, Kuchma did not hesitate to replace a weak Kinakh “for failure to cope with social problems” (the official explanation) with Yanukovych, who is backed by a powerful grouping.

Donetsk Region Governor Yanukovych, nominated by Kuchma on November 16 and approved by 234 votes in the 450-seat parliament on November 21, has pledged to resolve social problems and battle poverty. In his speech to parliament before the vote, Yanukovych also promised to combat corruption, boost market reforms, and, like most of Kuchma’s premiers before him, vowed to pursue European integration.

Yanukovych, 52, is a self-made man. An orphan brought up in the small mining town of Yenakiyeve, Yanukovych was an unruly youth, twice jailed as a juvenile delinquent. He started off as an electrician. By the age of 30, he was already a polytechnic graduate and a local council deputy. Later on, he became a transport company manager. In 1996 he became deputy governor of the Donetsk region. In 1997, Kuchma appointed him governor.

In the March 2002 parliamentary elections, having secured full control over the region’s media, police and finance, Yanukovych ensured the victory of the pro-Kuchma bloc “For a United Ukraine” in his region. Donetsk was the only one of Ukraine’s twenty-five regions carried by this bloc. The sizeable population of Donetsk helped the bloc secure third place in the nationwide race. This bloc served as the basis for the feeble pro-presidential majority in parliament announced in early October, a majority that has unanimously endorsed Yanukovych as prime minister.

Yanukovych has come to the cabinet without any action plan or new economic ideas. But he has come with a team of old Donetsk cronies. Its managerial strength remains to be proved, but its political and economic clout is probably at its peak. Yanukovych is a man of the Donetsk clan–a group of like-minded bureaucrats and businessmen cemented by old ties and a strong regional affiliation who have almost full control over the regional economy. The clan, believed to be the richest in Ukraine, has built its wealth exploiting the region’s state-subsidized coal resources and heavy industry. Home to 10 percent of Ukraine’s population, Donetsk produces close to 25 percent of the national GDP. The Donetsk group controls two factions in parliament–Regions of Ukraine and European Choice.

Yanukovych will not be the first man from the region in Kuchma’s team. Former Donetsk banker Ihor Yushko served as finance minister, and Donetsk energy tycoon Vitaly Hayduk served as fuel and energy minister under Kinakh. In Yanukovych’s cabinet, Hayduk has been promoted to deputy prime minister for fuel and energy; and another Donetsk man, Mykola Azarov, who has headed the State Tax Administration since 1996, will serve simultaneously as first deputy prime minister and finance minister.

So far, the performance of both has been far from brilliant. Under Hayduk, who pledged when he was appointed minister in November 2001 to conduct no radical reforms in the fuel industry, Ukraine lived through the worst series of mining disasters in its history, and both mining wage arrears and industrial consumers’ debts for energy kept accumulating. Under Azarov, Ukraine has built a clumsy taxation system, which is stifling the development of private business, while tax inspectors are widely used to intimidate political opponents. These top promotions are purely political, aimed at concentrating most executive power in the team loyal to Kuchma.

But this does not mean that all power in the country will be vested in the Donetsk group. Yanukovych and his people are called to balance off another strong group, that of Viktor Medvedchuk and Hryhory Surkis. This group has been entrenched in another important center of power in Kyiv–the presidential office–since the appointment of Medvedchuk as head of Kuchma’s office in June this year. The authority of the presidential office head is not clearly defined in legal terms, but this has not prevented Medvedchuk and his subordinates from tackling a wide variety of issues, ranging from dispersing street protests and instructing the media what to report about them, to officially refuting radar sales to Iraq and negotiating a probe with the UN into Washington’s accusations against Kyiv.

Kuchma trusts Medvedchuk. But he has apparently learnt from the bitter experience of the 1996-97 government led by the Dnipropetrovsk Region clan under Prime Minister Pavlo Lazarenko (who is awaiting trial for corruption in a Californian jail) that it is dangerous to give too much power to one group, no matter how loyal it appears. Ever since then, Kuchma has been balancing clans off against each other, playing on the contradictions between Donetsk, Kyiv, Dnipropetrovsk and other less influential groups.

These contradictions are set to sharpen as Ukraine moves closer to a presidential race. So far, the governing elite has failed to come up with a single viable successor to Kuchma, who is obliged per the constitution to step down in 2004. Both Viktor Medvedchuk and Viktor Yanukovych have repeatedly denied presidential ambitions in public, but this does not necessarily mean that they are not harboring them in private. For the moment, in the upcoming 2004 race the two Viktors seem the strongest representatives of the ruling elite–associated by many in the West with Soviet roots and corruption–who could compete with a third Viktor–Viktor Yushchenko, a representative of new managerial elite, who is supported by nationalists.

Yet, while Medvedchuk has been in Kuchma’s team for quite some time, Yanukovych has yet to prove his worth, and must make the transition from a regional boss to a national leader. He is hardly known to the public outside the Donetsk region, and has yet to learn to govern an entire country. But the example of Putin has demonstrated that obscurity may be an advantage in a post-Soviet society.

In Donetsk, high hopes are pinned on Yanukovych. On two previous occasions, the Donetsk clan failed to conquer Kyiv: in 1994, when acting Prime Minister Yukhym Zvyahylsky, a former mining manager from Donetsk, flew to Israel amid accusations of corruption; and in 1996, when then Donetsk Governor Volodymyr Shcherban, who dared to say that the next president would come from Donetsk, lost the struggle for power to Lazarenko. Yanukovych represents the third effort by the Donetsk elite to convert its economic wealth into political power.

Oleg Varfolomeyev is an editor with BBC Monitoring in Kyiv.