Left Behind: Ukraine's Uncertain Transformation

By Aslund, Anders | The National Interest, Fall 2003 | Go to article overview

Left Behind: Ukraine's Uncertain Transformation


Aslund, Anders, The National Interest


Ukraine has never been so close to an oligarchic system of power. We are witnessing the first stage of a coup d'etat that started inside the walls of parliament.

--Ukranian opposition leader Viktor Yushchenko, December 18, 2002

THESE DRAMATIC words reflect a developing political crisis in what is arguably the most delicately situated major country in Europe today. On the one hand, the oligarchic regime is becoming ever more authoritarian and President Leonid Kuchma ever more unpopular, with an approval rating hovering around 7 percent. On the other hand, political opposition and civil society have gathered strength, and new forces may soon come to power. The natural showdown is the next presidential election, scheduled for November 2004, but the preparations for that showdown will determine the outcome.

The West, and the United States in particular, cannot be indifferent to Ukraine's fate. It is the nexus between an expanding European Union, the Eurasian colossus of the Russian Federation and the northern Middle East. A stable and prosperous Ukraine facilitates interaction among its neighbors; a weak Ukraine creates a power vacuum that encourages rivalries. In a host of areas, Ukraine as a state could become a major contributor to global instability, from organized crime to WMD proliferation. (1) This is why safeguarding the future of Ukraine is critical.

Right now, however, everything appears to be up for grabs. Semi-democratic Ukraine could become a dictatorship or a fuller democracy. Though a market economy of sorts exists, and the country has seen three years of strong economic growth, this progress is not guaranteed: it could easily break down into a corrupt oligarchy. Western-oriented reformers argue that Ukraine must make its "European choice", but Ukrainian nationalists fear their country's independence will be subverted by a revitalized Russia. Pessimists fear that President Kuchma and the oligarchs are transforming Ukraine into another Belarus--that rogue, Soviet-style theme park that, as the last dictatorship in Europe, is as outmoded as it is outclassed by everything around it. Who will win? A decade hence, what will Ukraine be like? Perhaps the country's post-Soviet history can give us a place to begin in answering this question.

A Late Economic Transformation

DURING ITS first years of independence, Ukraine was preoccupied with nation-building, and little thought was devoted to economic policy. This was reflected in the election in December 1991 of Ukraine's first president, Leonid Kravchuk, formerly the Second Secretary of the Communist Party of Ukraine, who quickly changed his stripes when the old regime died. Though the jovial Kravchuk appeared a plausible nation-builder and mediator between the nationalist west and the Russified eastern part of the country, his economic philosophy could best be summarized as neglect. While a small number of operators made fortunes from the post-Soviet economic transition, general prosperity proved elusive, with a devastating rate of hyperinflation reaching more than 10,000 percent in 1993. The resulting economic free-fall provoked coal miners to strike and forced Kravchuk to call early elections. To his great surprise, he lost to Leonid Kuchma, the ultimate "red director"--the former manager of Ukraine's biggest armaments factory, who was viewed as a technocrat.

Kuchma undertook substantial economic reforms during his first year in power, leading to financial stabilization, but soon lost interest in marketization and privatization. As the interests of the old state managers dominated, economic decline continued, impoverishing the nation and forcing many to seek some measure of support from the growing underground economy. A handful of businessmen became billionaires by importing natural gas from Russia and foisting the bill on the government. In November 1999, Kuchma was re-elected thanks to a credible communist threat and heavy financing from the newly minted, billionaire oligarchs, who appeared to have bought the state. …

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