Publication: Prism Volume: 4 Issue: 5

Ukraine: Regional clans attempt the transition to party politics

By Oleg Varfolomeyev

Political parties have so far played only a small role in Ukrainian politics. Instead, politics have centered on personalities and hinged on personal connections and allegiances. A dominant role has been played by regional "clans" which fight among themselves behind the scenes for control over regional economies and for the top posts in the Kyiv establishment.

Now, on the eve of the parliamentary elections set for March 29, the transition toward a party system has begun. Many of the new parties that are springing up are founded on the regional clans. These clans are learning new tricks and showing signs of evolving into regionally-based parties. Because these fledgling parties are so firmly rooted in the regions, however, they may hinder the emergence of national parties founded on ideological lines (socialist/conservative, for example).

Regional clans have wielded significant political power since Soviet days, but they took on fresh importance when Ukraine became independent in 1991 and its economic ties with Russia were severed. Then the heavily industrialized country, whose metallurgical, machine-building and chemical enterprises used to serve the needs of the Soviet military machine, was forced to look for new sources of oil and gas and new markets for its products.

In this new situation, local private businessmen and directors of state enterprises found they understood one other better than the bureaucrats and politicians in Kyiv. Local ties worked best. In the absence of a national ideology that could have united a country divided along regional, linguistic and religious lines, regional elites learned to fend for themselves.

As new economic relationships sprang up, the interests of local elites often came into conflict with those of their neighbors and of the national economy as a whole. This reinforced the need for regional clans, vying for control over the economy and top political posts.

The two most powerful clans were those based in Donetsk and Dnipropetrovsk — highly industrialized regions with strong concentrations of capital and labor. The two regions, taken together, account for roughly 20 percent of Ukraine’s population, and some 40 percent of the country’s economic potential.

The Donetsk regional elite was the first to turn its economic clout into political power on a national scale. By manipulating the Donetsk miners into calling strikes, the clan secured an entree to the Kyiv establishment. In September 1993, Donetsk Mayor Yukhym Zvyahylsky, formerly director of the biggest coal mine in Donetsk, was appointed acting prime minister by President Leonid Kravchuk. Valentyn Landyk, director of one of the largest factories in Donetsk, became deputy prime minister. Igor Markulov, a young businessman from Donetsk who was reputed to be the "boss" of the Donetsk clan, served as Kravchuk’s economics adviser.

With the unexpected victory of Leonid Kuchma — the former director of the Pivdenmash missile plant in Dnipropetrovsk — in the 1994 presidential elections, the Donetsk clan found itself kicked out of Kyiv. Several months before Kuchma’s victory, Markulov mysteriously resigned and left the country. Landyk resigned in July 1994. Zvyahilsky fled to Israel in November of the same year amid mounting accusations of large-scale embezzlement. (He was suspected of selling aviation fuel abroad at bargain prices, and of engaging in illegal currency operations.) Zvyahylsky returned to Ukraine only in March 1997, and an investigation into his case is underway.

From 1994 to 1996, dozens of people from Dnipropetrovsk got top jobs in the central government in Kyiv. Volodymyr Horbulin, who had known Kuchma since the two men had worked together at Pivdenmash, became secretary of the Security and Defense Council. Former Dnipropetrovsk Oblast Prosecutor Hryhory Vorsinov became Prosecutor General. In the fall of 1995, Dnipropetrovsk Oblast Governor Pavlo Lazarenko was appointed deputy prime minister in charge of the fuel and energy complex. He was promoted to prime minister in May 1996.

Shortly after his new appointment, Lazarenko persuaded Kuchma to fire Volodymyr Shcherban, one of the leaders of the Donetsk clan, from his post as head of administration in Donetsk Oblast. Shcherban was accused of provoking the miners to strike in order to force the government to increase subsidies for the coal industry.

Another blow to the Donetsk clan was the gangland-style murder of its alleged boss, Yevhen Shcherban (no relation to Volodymyr) in November 1996. Yevhen Shcherban, a member of parliament, was rumored to have been one of the richest businessmen in Donetsk. He headed the Aton company, founded in the late 1980s by Markulov.

Meanwhile, Lazarenko was consolidating the Dnipropetrovsk group’s influence in Kiev. By late 1996, all of the ministers responsible for industry in his cabinet either had roots in Dnipropetrovsk or came from the allied elite in neighboring Zaporizhia.

In the fall of 1996, however, the Ukrainian parliament accused Lazarenko of unfairly distributing the lucrative wholesale natural gas market in favor of Dnipropetrovsk-based United Energy Systems. The company, known by its Ukrainian acronym YES, began as a cooperative and is now the largest private business in Ukraine. By 1997, it controlled almost half of Ukraine’s wholesale gas market, buying gas mostly from Russia’s Gazprom for barter. In Donetsk Oblast, YES had edged the local Industrial Union of Donbas, controlled by the two Shcherbans, out of the gas market. Shortly before his death, Yevhen Shcherban gave several interviews complaining of hostility between the Donetsk and Dnipropetrovsk elites and calling for local businessmen to be allowed to manage the economy of the Donbas region.

When the media stepped up their accusations that Lazarenko was lobbying for YES, Kuchma’s own image began to suffer, because he was closely associated with Lazarenko in the public mind. By the winter of 1996, it was clear that the alliance between Kuchma and Lazarenko would not last long. Kuchma’s closest adviser, Horbulin, called publicly for Lazarenko’s resignation. In February and March, Lazarenko’s cabinet was reshuffled, and several of his Dnipropetrovsk cronies were fired. The Prosecutor General’s Office initiated criminal investigations against some of them on corruption charges. One of them, former Agriculture Minister Anatoly Khorishko, attempted to commit suicide. The campaign culminated in the middle of 1997 with Lazarenko’s forced resignation as Prime Minister.

Next, Kuchma appointed Lazarenko’s long-time rival, Valery Pustovoitenko, as prime minister. Pustovoitenko also comes from Dnipropetrovsk, where he was mayor until his appointment to the government in 1993. Pustovoitenko’s party — the People’s Democratic Party (NDP) — is also known as the "party of power." It was created by politicians close to Kuchma in February-March 1996. It could be described the Ukrainian analogue to "Russia is Our Home," the pro-government party set up in Russia after the 1995 elections. The NDP, which calls itself a centrist party, does not represent any particular regional clan. It is the party of the present elite, and its purpose is to maintain that elite in power. Like most other nascent centrist parties, it has no particular ideology, but it does have deep pockets, well-defined interests, and well-known personalities supporting it.

Most of Ukraine’s other self-defined centrist parties have clear regional interests, and some of them call for economic and cultural autonomy for the regions. It would be legitimate to say that these parties have their roots in the efforts of the regional clans to adapt to the new rules of the political game. Such parties include the Liberal and Labor parties, Hromada, the Social-Liberal Union or SLON bloc, and Crimea’s Party of Regional Revival.

The Donetsk business elite is represented by the electoral alliance of the Liberal and Labor parties, called "Razom" (Together). The Liberal Party, founded several years ago by Markulov, has since January 1996 been headed by Volodymyr Shcherban. The Labor Party is led by Valentyn Landyk. This bloc has the highest percentage of businessmen on its electoral lists — over 30 percent — of all the thirty parties registered to participate in the elections. Most of these businessmen come from Donetsk Oblast.

Lazarenko and the former president of YES, Yulia Tymoshenko, joined the Hromada party last year to preserve their economic and political clout. (See Prism, February 6, 1997, "Yulia Tymoshenko: Ukraine’s First Woman Prime Minister?") They manipulate the media skillfully, and buy off the electorate with populist slogans and modest presents like raising pensions for the elderly in Dnipropetrovsk Oblast, where Lazarenko is governor, and giving the voters free subscriptions to newspapers believed to be controlled by Lazarenko.

SLON, based in the northeastern Kharkiv region, which has close historical and geographical ties with Russia, appeals to the Russophone electorate by calling for a referendum on the equal status of the Russian and Ukrainian languages. SLON’s leader, Volodymyr Hryniov, was an ally of Kuchma’s when they founded the Inter-Regional Bloc of Reforms Party together several years ago. Since Kuchma was elected president, however, their alliance has weakened.

All of these centrist parties are pragmatic and market-oriented, and there are virtually no ideological differences between them. Had they united in an electoral coalition, it would have been easier for them to pass the four percent electoral barrier and to exert influence on policy. But old rivalries and regional interests have prevented them from cooperating, and there is at present little sign that they are likely to cooperate productively in the near future.

Oleg Varfolomeyev works for an English-language business weekly in Kyiv.


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