Publication: Monitor Volume: 7 Issue: 226

With two recent appointments in the Ukrainian Cabinet of Ministers, the Donetsk regional group has suddenly, but not unexpectedly, significantly boosted its influence in the corridors of power. On November 20, President Leonid Kuchma appointed Vitaly Hayduk as fuel and energy minister, replacing Stanyslav Stashevsky. On December 7, another man from Donetsk, Ihor Yushko, was appointed state secretary to the Finance Ministry.

The Donetsk group, an informal union of Donetsk officials and top managers, controls key enterprises, media and banks in the Donbass (which encompasses the Donetsk and Luhansk regions)–home to one in five Ukrainians and about one-third of Ukraine’s heavy industry. This group built its wealth on trade in cheap steel and state-subsidized coal produced in the area. In the mid-1990s, when the Donetsk clan organized mass miners’ strikes demanding more subsidies for the coal industry and political power, the group was literally beheaded. Some of its informal leaders, reportedly tied to organized crime, were killed (most of the murders still unsolved), and then Donetsk Governor Volodymyr Shcherban, who had presidential ambitions, was dismissed. Since then, the group has kept a low political profile, but has built up its economic muscle. Early this year, the Donetsk group won against then Deputy Premier Yulia Tymoshenko, who tried to reform the coal industry and break what she defined as murky schemes feeding coal barons. Tymoshenko was dismissed from her post.

Hayduk is a co-founder of the biggest company in Donetsk, the Industrial Union of Donbass, which controls key steelworks and the Khartsyzsk Pipe Plant–the main supplier of pipes for Russian Gazprom. He served as Donetsk deputy governor before his stint as first deputy fuel and energy minister from January 2000-March 2001. Since his dismissal from the government, Hayduk has served as political coordinator of the For United Ukraine electoral bloc, representing the Party of Regions (UPR) in it. Ukraine’s Donetsk region is the UPR stronghold.

Hayduk is returning to the government as head of a ministry supervising an industry that Tymoshenko failed to purge of its notorious corruption. Hayduk did not conceal that he was one of the Donetsk group’s unofficial leaders. He also made it clear that he would not hurry with reforms. “I do not think this is the right moment for reforms,” he said on the day of his appointment. “We must stabilize the situation and guarantee that this country should live through the winter normally.” With this appointment, both the ownership of Donetsk mines and their state supervision will be controlled by the Donetsk group.

Yushko is another key member of the Donetsk group. He heads the UPR youth wing. Until his election to the Rada in 1998, Yushko chaired the Donetsk-based First Ukrainian International Bank–the financial pillar of the Donetsk group. In the Rada, he worked as first deputy head of the committee for finance and banking. Among his duties now are organizing the Finance Ministry’ work, supervising the ministry’s staff, and serving as liaison between the parliament and the president. As a state secretary, Yushko will remain in this post even if Prime Minister Anatoly Kinakh’s cabinet falls.

By appointing Hayduk and Yushko, Kuchma boosted the position of the Donetsk group and the For United Ukraine bloc vis-a-vis the United Social Democrats (USDP) of Viktor Medvedchuk and Hryhory Surkis. To all appearances, For United Ukraine (with UPR as its Donetsk branch) and the USDP will be the main competitors for administrative resources and the centrist vote in the elections. This is apparently an element in Kuchma’s divide-and-rule strategy: The Donetsk group should balance the USDP, whose clout has grown out of proportion in Kyiv since the last elections. By supporting the Donetsk group and the UPR, Kuchma also weakens the Communists, who have been traditionally strong in the Donbass region (Ukrainska Pravda, Inter TV, November 20; Den, November 21; New Channel, December 7; see the Monitor, March 28, June 6).