Publication: Prism Volume: 4 Issue: 3

Will Yulia Tymoshenko be Ukraine’s first woman prime minister?

By Oleg Varfolomeyev

Ukraine, a country until recently governed exclusively by men, now has a female premier, albeit only a "shadow" one.

Yulia Tymoshenko, one of the leaders of the Hromada party headed by former premier Pavlo Lazarenko, announced last November that she would form Hromada‘s shadow cabinet. Hromada is staunchly opposed to President Leonid Kuchma, and Tymoshenko has repeatedly called for Kuchma’s impeachment or, failing that, early elections. Now Hromada has its sights set on winning the elections for the Ukrainian parliament, the Verkhovna Rada, scheduled for March 29. Hromada has refused to enter into electoral coalitions with any other of the 29 parties and blocs registered to participate in the elections.

All this may seem rather presumptuous for a party which had kept a low profile since it was registered in 1993. In fact, Hromada has a good chance if not of winning the coming elections outright, then at least of securing a substantial number of seats in the legislature. The party’s stock went up sharply last August, when Tymoshenko unexpectedly announced that she was joining it. With Tymoshenko came big money.

Yulia Tymoshenko, 37, is a native of Dnipropetrovsk, hometown of Soviet president Leonid Brezhnev and of Ukrainian president Leonid Kuchma. Tymoshenko heads Ukraine’s largest private company, United Energy Systems (YES, in its Ukrainian acronym). YES’s turnover in 1996 equaled $10 billion, and its profits $4 billion. Much of that was linked to the sale of Russian natural gas in Ukraine. Ukraine is the world’s third leading consumer of natural gas. It imports 80 percent of the gas it uses, and most of that comes from Russia. Dealing with gas imports is the most profitable business in this country. Until last summer, YES is estimated directly or indirectly to have controlled almost a half of the domestic wholesale gas market and, in consequence, around one-fifth of the Ukrainian economy. Up until last summer, too, the company was able to rely on the political patronage of Lazarenko.

YES‘s history dates back to 1989 when Yulia Tymoshenko, an economics graduate from Dnipropetrovsk State University, set up a family cooperative in Dnipropetrovsk. The business was started with only $5,000, and initially offered such services as sewing and hairdressing. In 1991, Tymoshenko switched focus and set up the Ukrainian Petrol Company. This sold gasoline to farmers in Dnipropetrovsk Oblast. At that time, Ukraine was in an energy crisis, and farmers were experiencing severe shortages of gas.

It was probably at about this time that Tymoshenko and Lazarenko, then head of the agricultural department of the Dnipropetrovsk Oblast administration, forged their business and political ties. Lazarenko does not deny that he helped Tymoshenko get her business off the ground. (1) And neither of them denies that they have known each other for a long time, though both deny that YES finances Hromada’s electoral campaign.

In 1995, Tymoshenko reorganized Ukrainian Petrol into United Energy Systems of Ukraine. In the fall of that year, Lazarenko was appointed Deputy Premier for Energy in Yevhen Marchuk’s cabinet. In that capacity, Lazarenko was given the difficult task of negotiating gas supplies with Russia and Turkmenistan. Lazarenko divided the Ukrainian gas market along territorial lines. The upshot was the YES secured the lion’s share of the market and a dominant position in Dnipropetrovsk and Donetsk Oblasts, where most of Ukraine’s steel mills, machine-building plants and chemical factories are concentrated. In 1996, for the first time since independence, Ukraine reported no debts to Russia’s Gazprom. Tymoshenko claims this was thanks to her company’s involvement and to the territorial division of the market introduced by Lazarenko.

Meanwhile, YES was actively expanding into other sectors of the economy. By early 1997 it controlled several banks, had stakes in dozens of enterprises in metallurgy and machine-building, was part-owner of Ukraine’s third largest airline and its second largest airport in Dnipropetrovsk, participated in the development of Turkish and Bolivian gas pipelines, and controlled several local and national newspapers. (2)

YES‘s problems began soon after Lazarenko succeeded Marchuk as premier in May 1997. A group of deputies of the Verkhovna Rada set up a commission to look into allegations that Lazarenko’s reform of the gas market had been biased in favor of YES. In September 1996, they threatened to begin proceedings to dismiss Lazarenko. When Hryhory Vorsinov, the Prosecutor General at the time, investigated these allegations, he found that no laws had been violated. At that time, however, rumors began to circulate about policy differences between Kuchma and Lazarenko. The media predicted that Lazarenko would soon lose his job.

Tymoshenko had already taken precautions against hard times. To defend her business and her clout, she went into politics herself. In December 1996, she was elected to parliament from a constituency in Kirovograd Oblast. To comply with the law, she resigned as president of YES. Formally, her father-in-law, Hennady Tymoshenko, now heads the company. In reality, Yulia Tymoshenko remains in change.

Meanwhile, Tymoshenko’s activities and business connections with Lazarenko had begun to attract international media attention. On April 9, 1997, the New York Times reported that Lazarenko owned a share in YES which, the paper claimed, earned the prime minister $200 million a year. The government rejected the report as "bare-faced libel" but, at the beginning of June, a group of Verkhovna Rada deputies accused YES of misappropriating $3 billion in humanitarian and technical aid. YES denied the accusations.

In July last year, Lazarenko was forced to resign. This was a blow to Tymoshenko and her company. One sign of the company’s loss of influence came when the Ukrainian government suspended a non-commercial competition for a 26 percent stake in Khartsyzsk Piping Plant in Donetsk Oblast, which YES had won. Khartsyzsk Piping, which manufactures large-diameter pipes for transporting Gazprom’s gas from Russia to Europe, was to have been a major source of profits and would have played a key role in YES‘s efforts to force its rivals out of the gas market. Under Ukraine’s new premier, Valeriy Pustovoitenko, YES was edged out of the wholesale gas market and lost valuable tax privileges.

Pustovoitenko’s administration dispatched an army of auditors and inspectors to Dnipropetrovsk, Lazarenko’s and Tymoshenko’s stronghold. This hamstrung YES‘s activities. Observers said the new government was using the same tactics against Lazarenko that he had used against his own political opponents in the past.

The government accused YES of monopolizing the gas market and "barterizing" the economy. At the end of September 1997, the State Anti-Monopoly Committee brought several charges of dumping against YES before the General Prosecutor’s office. In late November, the Prosecutor General asked parliament to lift Tymoshenko’s parliamentary immunity and to allow criminal charges to be filed against her. Tymoshenko was accused of attempting to smuggle $26,000 from Ukraine to Moscow in 1995. When Lazarenko came to her defense, the Prosecutor General launched criminal proceedings against Lazarenko himself, accusing him of embezzling 5 million hryvnyas ($2.7 million) from state coffers to restore his dacha outside Kyiv. And on January 15 this year, the Prosecutor General’s press service reported that it would launch criminal proceedings against Lazarenko. Like Tymoshenko, however, Lazarenko enjoys parliamentary immunity, and there is so far no sign that parliament is likely to lift it.

Tymoshenko and Lazarenko have used the media they control to counter-attack and wage a smear campaign against the government in general and President Kuchma in particular. Tymoshenko has called for early presidential elections, to be held not in 1999, as scheduled, but in the fall of 1998. The Ukrainian press calls this "the war of compromising information (kompromat)."

Lazarenko and Tymoshenko have a lot at stake. If they lose in this year’s parliamentary elections, they may lose everything, including their personal freedom. The latest opinion polls show Hromada lagging behind the Communists, the bloc of Socialists and Agrarians, the right-wing Rukh, and the pro-presidential People’s Democratic Party (NDP). But while Hromada currently commands only four percent in the polls, is far ahead of the twenty-plus other parties. That should allow Hromada to pass the four percent threshold that, according to Ukraine’s new electoral law, a party or block must overcome in order to win representation in the legislature. Whether that will be enough to permit Tymoshenko to become emerge from the shadows as Ukraine’s first woman prime minister is another matter.


1. Halytski kontrakty, No. 49, 1997

2. Wall Street Journal, April 4, 1997

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


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