Publication: Prism Volume: 3 Issue: 19

Ukraine: With his combination of economic innovation and political democracy, Pavlo Lazarenko deserves close attention

By Volodymyr Zviglyanich

Former Ukrainian prime minister Pavlo Lazarenko, who lost his job in June 1997, was in the U.S. at the end of October as the guest of the Ukrainian National Information Service (UNIS), an independent non-governmental organization. He came to tell American and Ukrainian audiences (through the medium of the Ukrainian Service of the Voice of America) about the real state of affairs in Ukraine and, to reveal his own political plans as an opponent of the existing government of Ukrainian President Leonid Kuchma. He met with a number of influential American congressmen and politicians, including Henry Kissinger, though it is doubtful whether he got their support for his plans.

Lazarenko is perhaps the most controversial figure in Ukrainian politics in the post-Soviet period. Until he was appointed premier, virtually nothing was known about Lazarenko other than that he had been the director of a collective farm in Dnipropetrovsk Oblast and chairman of the Dnipropetrovsk Oblast Soviet of Peoples’ Deputies. Unlike Ukraine’s other premiers — Vitold Fokin and Vitaly Masol (former functionaries of Ukraine’s Gosplan), Leonid Kuchma (one time director of the world’s largest strategic missile plant, Yuzhmash), Efim Zvyahilsky (former director of the world’s largest mine, the Zasyadko mine in Donetsk), and Yevhen Marchuk (former head of the Ukrainian KGB) — Lazarenko had not been a member of the Soviet party and economic nomenklatura.

This helps explain several features in his psychological portrait. Lazarenko was never bound by the corporate ethic, which prescribed specific norms of conduct for high-ranking members of the Soviet nomenklatura even after they left office. In particular, they were expected to refrain from criticizing those who remained in power. After his resignation from the post of premier, for example, Kuchma retreated into the shadows. Marchuk, who was in turn sacked by Kuchma, did not utter a word of criticism of his former boss.

Lazarenko is probably the first Ukrainian politician in the post-Soviet era to break this unwritten tradition. During his visit to Washington, he declared his open and uncompromising opposition to the Kuchma regime.

Lazarenko is the only one of Ukraine’s eight post-Soviet premiers who has been a businessman and experienced all the delights of the emerging market in Ukraine. Lazarenko made his money by supplying Russian gas to Ukraine. His fortune is estimated at $400 million. The other potential challengers for the presidency in Ukraine — parliamentary speaker Oleksandr Moroz, and Yevhen Marchuk — have no active ties with business.

Lazarenko is, moreover, a provincial from Dnipropetrovsk, brought to Kyiv by Kuchma to occupy the post of premier. In exchange, Kuchma counted on receiving Lazarenko’s personal loyalty, reinforced by the ties of the traditional Ukrainian "zemlyachestvo" (a group of people from the same region). But Kuchma overlooked two factors.

The first is age: at 44, Lazarenko is the youngest of Ukraine’s rapidly-growing non-nomenklatura political elite. Lazarenko showed "adolescent" stubbornness, and was not afraid to break ties with Kuchma openly.

The second is the fact that, as a provincial, Lazarenko showed the extraordinary sensitivity to any infringement upon democracy, individual rights and human dignity which is characteristic of people from a peasant community. Especially when such infringements are the work of someone, such as Kuchma, who himself formerly belonged to that community or zemlyachestvo.

Lazarenko is no better and no worse than the other figures in Ukraine’s contemporary political elite. He is simply different: a provincial with a heightened sense of dignity, an entrepreneurial bent and ability to take risks, and a strong ambition to return to the top leadership. In the person of Lazarenko, Ukraine’s post-Soviet, non-nomenklatura entrepreneurial elite is making a serious bid for power.

"There is no Democracy in Ukraine…"

Addressing members of the Ukrainian community in Washington, Lazarenko accused Kuchma of destroying democracy in Ukraine. The day before, in an interview on the Voice of America, Lazarenko said that democracy in Ukraine was of a "conditional" character.

He cited the following facts:

* Kuchma has ordered the telephones of top officials to be tapped. When visiting their offices, according to Lazarenko, the first thing that you see is a finger pressed to the lips and a proposal that you write on paper rather than speaking.

* Kuchma has forbidden former political leaders now opposed to him from appearing on television. Neither Marchuk nor Lazarenko has access to the electronic media. Only a handful of Ukrainian newspapers dare to have dealings with him, Lazarenko said, and, even then, they avoid criticizing Kuchma directly.

* Quite recently, Kuchma gave permission for a team of correspondents from Russia’s ORT TV company to film at Lazarenko’s government dacha, tightly guarded by the Ukrainian Security Service, in a fashionable area of Kyiv. Lazarenko thinks Kuchma wanted to incite popular indignation at the sight of the luxurious dacha and to create the impression that it belonged to Lazarenko. In fact, Lazarenko said, the dacha was given to him when he became prime minister and he moved out of it immediately after his dismissal last summer.

* Kuchma ordered staff at the Ukrainian embassy in Washington to monitor Lazarenko’s contacts and movements in the U.S. Embassy press secretary Natalya Zarudna, who was present at the meeting, interrupted Lazarenko in the middle of his speech, and asked him to name those from the embassy who were involved. Lazarenko replied that he did not hold public discussions, and that at least five representatives of the diaspora had complained about getting calls from the embassy in connection with his visit.

Lazarenko’s Political Platform

Shortly before his visit to the U.S., Lazarenko was elected leader of the centrist party "Hromada" (Unity). According to its program, the party is in open opposition to the Kuchma regime, but supports the legislature. Lazarenko does not agree with Kuchma’s assessment of the decision of the Ukrainian parliament to increase the monthly minimum pension from 49 to 70.9 hryvnyas (from $24 to $34) as "populism, bordering on psychosis." (1) According to Lazarenko, Kuchma froze pensions, in spite of inflation, and did not allow local governments to raise pensions on their own. As chairman of the Dnipropetrovsk Oblast Council, Lazarenko plans to increase the pensions of 1,100,000 elderly people living in the region to 98 hryvnyas, starting on December 1.

The Hromada party has branches in every oblast and finds its main support in Ukraine’s growing middle class, small and medium businessmen, and intellectuals. The party is confident that it will overcome the 4-percent hurdle set by Ukraine’s new parliamentary election law.

Lazarenko will decide on the basis of the results of these elections whether or not to run for president. The main problem he and his party will face is how to win votes from the Communists in eastern Ukraine. Although Lazarenko was upbeat about this, he predicted overall victory for the leftists in the forthcoming parliamentary elections.

Lazarenko’s Economic Platform

The main points of Hromada’s economic platform are as follows:

* Protectionism for domestic industry. Pointing out that 90 percent of the consumer goods presently sold in Ukraine are imported, Hromada calls for government policies that will develop domestic production.

* Reliance on medium-sized business. In Ukraine, 44 percent of economic potential is represented by enterprises of the military-industrial complex, which are not working today. They should be revived, Lazarenko argues, by means of tax breaks and state support.

* 60 percent of the Ukrainian economy is "underground," according to Lazarenko, and 42 percent of the GDP is produced by large enterprises which pay no taxes. An urgent reform of tax legislation is needed, and the level and amount of taxes must be reduced. Otherwise, economic decline will continue.

* A reduction in income taxes. Total income taxes are currently at 54 percent. Therefore, Lazarenko says, taxpayers show five hryvnyas to the taxman and pay 150 "under the table." Personal income taxes should not exceed 26-27 percent, while enterprises should not pay more than 34 percent.

Accusations of Corruption

Lazarenko probably has a big lead over all past and future Ukrainian premiers in the number of times he has been accused of corruption. He admits his own share of the blame for the catastrophic state of the Ukrainian economy. He did not succeed in implementing tax reform, halting the impoverishment of the population, or preventing the accumulation of wealth in the hands of state officials. At the same time, Lazarenko denies that he personally has been guilty of corruption. He attributes the many articles in the press accusing him of corruption to a smear campaign waged by those who suffered from the excise duties which he introduced on alcohol and tobacco. "Yes, they accuse me of corruption," Lazarenko says. "But not a single criminal case has been filed against me, although I invited them to do so. Consequently, I am innocent."

Assessment of Kuchma’s Regime

According to Lazarenko, Kuchma is in virtual isolation. To a significant degree, he has lost control over the economic situation, which continues to deteriorate. Neither Kuchma nor Prime Minister Valery Pustovoitenko has any new economic ideas. Although the present cabinet is made up of people loyal to Kuchma, Lazarenko predicts that it will soon be replaced, since it will not be able to resolve the country’s economic crisis.

In order to distract people’s attention from the failures of his own political course, Kuchma has resorted to replacing premiers and cabinets. Recently, Lazarenko charges, Kuchma began to wage a campaign against market vendors, demanding that they conduct all their transactions through cash registers. But they have no such machines and, even if they do, they cannot be used in Ukraine’s existing marketplaces, most of which do not have electrical outlets into which the cash registers could be plugged.

Lazarenko considers the pension law recently passed by parliament, over Kuchma’s veto, to be the "litmus test" of the Kuchma regime. The legislation proposes to raise pensions by cutting spending on the bloated state apparatus. If Kuchma refuses to sign it into law, it will prove that his economic policy is detrimental to the Ukrainian population, Lazarenko argues.


Ukrainian voters will go to the polls in 1999 to elect a new president. They will choose between four clearly distinguished tendencies and leaders:

* The "social justice" tendency, represented by a bloc of left-wing parties and their leader, Oleksandr Moroz. In the best case, this tendency could turn into a Ukrainian version of "Eurocommunism," which has never been implemented in practice. In the worst case, it could turn into a weakened version of neo-Bolshevik radicalism, based on principles of "confiscate and distribute."

* The tendency of bureaucratic capitalism, represented by the Popular-Democratic Party (or the "party of power"), created by Kuchma and oriented toward "stabilizing" the existing regime, which threatens to lead to a further decline in the economy.

* The "Chilean variant," under which a "strong" leader (Yevhen Marchuk) will implement an authoritarian version of economic reforms, while limiting democratic freedoms and carrying out a strict state policy with regard to private enterprise.

* Non-nomenklatura "entrepreneurial" capitalism, based on medium-sized business and supported by intellectuals linked with the economy. Under Pavlo Lazarenko’s leadership, this tendency could grow into a Ukrainian version of British "Labourism," with strong modernizing motifs.

With its combination of economic innovation and political democracy, the tendency represented by Lazarenko deserves detailed analysis and attention.


1. Vystup Presydenta Ukrainy L. D. Kuchmy, The World Service of Radio Ukraine, October 22, 1997

Translated by Mark Eckert

Volodymyr Zviglyanich is a senior research fellow of the Ukrainian Academy of Sciences’ Institute of Sociology, a research associate at George Washington University, and a Senior Fellow of the Jamestown Foundation.


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