By Taras Kuzio
Preparations for the Ukrainian parliamentary elections on 31 March are
being keenly followed not only in the West but also in Moscow. Russia is
keen to capitalize upon its success over the past two years in
reorientating Ukraine's multivector foreign policy eastward. The main
threat to the consolidation of this eastward orientation and Russia's
increasing influence in Ukraine is Viktor Yushchenko and his Our
In Ukraine, as in other postcommunist states, support for the pursuit of
reform, reviving national identity, and an orientation toward "Europe" are
closely tied together. The West is seeking to support this package of
policies by encouraging reform and free elections, as exemplified by U.S.
training of 25,000 local election commissions and $200,000 in support for
the regional media in Ukraine. In contrast, Russia's primary concern is to
reassert its influence within Ukraine, regardless of who is in power in
that country (as in Belarus).
During the last two years, Russophile oligarch clans and their media
outlets in Ukraine have increasingly given credence to a "Brzezinski
plan&quo! t; conspiracy that was first aired by Russian sources close to
President Vladimir Putin. The "Brzezinski plan" is supposedly an
elaborate plan concocted by a group of U.S. policymakers to overthrow
President Kuchma and replace him with Yushchenko in a "bloodless
revolution." An analogy is drawn with the overthrow of Slobodan
Milosovic in Serbia in October 2000. Yushchenko's alleged allies in this
plot are the two wings of the radical anti-Kuchma opposition, Yuliya
Tymoshenko, his former deputy prime minister, and Socialist leader
The "Brzezinski plan" was allegedly behind the "Kuchmagate" scandal
that broke in November 2000, when incriminating tapes illicitly made in
Kuchma's office were released, leading to Ukraine's largest opposition
demonstrations. The "Brzezinski plan" therefore played a classic
disinformation role in seeking to deflect attention from possible Russian
involvement in the scandal (in cahoots with a Ukrainian oligarch group)
by laying blame on the West. After Kuchma survived calls for his ouster
in 2000-2001, the conspiracy was quietly forgotten, but it was again
revived in November of last year by "Kievskiye Vedomosti," a
newspaper owned by the Social Democratic Party (United) (SDPU-O).
Controversial Kremlin strategist and Putin imagemakers Gleb Pavlovskii
and Merat Gelman, who are joint owners of the Fund for Effective
Politics (FEP), have given the maximum publicity to the "Brzezinski plan"
conspiracy. The FEP is seeking to continue other shadowy PR activities
in the Ukrainian elections together with the SDPU- O. Its main target is,
unsurprisingly, Yushchenko, who is the archenemy of SDPU-O leader
In a recent survey of attitudes to foreign policy by political parties!
undertaken by the Analytical Centers of Ukraine Network (http://www.i
ntellect.org.ua), only the SDPU-O, apart from the Communists,
supported Ukraine's membership of the Russia-Belarus Union. The
SDPU-O also recently raised the question of changing the 1989 Law On
Languages by adding Russian as a second "official language." This
Russophile populism did not prevent the SDPU-O from including the
"nationalist" and pro-NATO former President Leonid Kravchuk among
its top five candidates for the elections.
The SDPU-O is also the main backer of the extreme nationalist,
anti-Western, and pro-Kuchma Rukh for Unity (NRU-ye) splinter group
led by Bohdan Boyko, which was suspiciously created only three days
before the Kuchmagate scandal began. The NRU-ye and the
Progressive Socialists play the role of "radical opposition" parties on the
left and right controlled by the executive, in a similar manner to Vladimir
Zhirinovsky's Liberal Democratic Party of Russia. The NRU-ye
controls the Ternopil-based "Tryzub" paramilitaries led by Colonel
Yevhen Fil who orchestrated the violence at the March 9, 2001
demonstration in order to discredit the anti-Kuchma opposition.
The SDPU-o has also duplicated some of the shadowy PR activities that
the FEP earlier successfully used in Russia. This includes attempting to
blacken Yushchenko's character, which unlike that of the majority of
other politicians, remains beyond repute. The FEP has an agreement
with the SDPU-O to provide "campaign advice," and 10 of its associates
are working on this campaign. This has included creating a fake
Yushchenko website (http://www.yuschenko.com), an action that the
FEP also undertook in the 1999 Russian parliamentary elections against
Moscow Mayor Yurii Luzhkov and then-Foreign Minister Yevgenii
The FEP and its SDPU-O allies were very probably behind Ukraine's
second taping scandal, that of Yushchenko and Kyiv Mayor Oleksandr
Omelchenko in early January 2002. As Serhiy Sobolev, deputy head of
the Reform and Order pro-Yushchenko party said, this latest scandal "is
a fresh pointer to those who organized the tape scandal" in Kuchma's
office. This is apparently because of the similarity in advanced
technology used in both cases. Sobolev had in mind the suspicion -- first
voiced by "RFE/RL Newsline" in December -- that the SDPU-O (with
Russia) was behind the taping of Kuchma's office.
The latest tape was released by the newly organized civic group "For
Trustworthiness in Politics," which is closely linked to the SDPU-O and
the NRU-ye. It aimed to discredit Yushchenko by creating the
impression that he conspired with Omelchenko to remove Medvedchuk
as deputy speaker. The latest taping was condemned by the majority of
political parties and Omelchenko has taken the matter to court.
Omelchenko, whose son is a member of the Yushchenko bloc and is
himself a strong opponent of the SDPU-O, also accused Pavlovskii and
the FEP of underhand practice by "humiliating Ukrainian national
The Ukrainian elections are the scene of a fierce geopolitical competition
over the future direction of Ukraine, and yet the choices open to Ukraine
are only twofold. Either it can continue to muddle along and "rejoin
Europe together with Russia," the preferred option of Kuchma and the
oligarchs, which postpones integrating into Europe indefinitely and ties
Ukraine's fate to Russia's. Or it can revitalize its reform and
nation-building policies and integrate into Europe regardless of Russia,
the option promoted by Yushchenko and his allies.
Ukraine tops the list of the most investment attractive countries in 2001:
it returned 57.1% of profit to foreign investors. According to the JP
Morgan international investment bank, this indicator is last year's highest,
the BBC Ukrainian service reported on Tuesday referring to the Time
magazine. Ukraine is followed by Russia (55.8%), Nigeria (36.3%),
Ecuador (30. 5%), and Cote d'Ivoire (29. 5%). At the same time, the list
of the "losers" that failed to return profit on investments is topped by
Venezuela (5. 6%), Uruguay (4.6%), Egypt (3.3%), the! Dominican
Republic (2.4%), and Argentina (- 66.9%).
Parti eller valgforbund
|Fond "Svobody"||SOCIS og Fond for Demokratiske Initiativer||Ukraines Centrum for økonomiske og politiske studier|
|"For et samlet Ukraine"||6,2%||5%||4,9%|
|"Kvinder for fremtiden"||4,5%||5%||6,1%|
RFE/RL NewsLine 30 January 2002
By Taras Kuzio
Prime Minister Viktor Yushchenko entered Ukrainian politics on a national
scale when he moved from chairman of the National Bank to prime minister
in December 1999. During his government's 18-month tenure he oversaw
Ukraine's emergence from a decade-long slump and paid off wage and
pension arrears. A survey of different Ukrainian opinion polls conducted
between June 2001 and January 2002 showed that Yushchenko's popularity
ratings remained between 18-30 percent.
Western commentary has focused primarily on Yushchenko's personal
popularity and has ignored why this popularity has not been transformed into a
nationwide mass movement. In other words, why has Yushchenko not become
a Ukrainian equivalent of Democratic Party of Serbia (DSS) head Vojislav
Kostunica, who was able to mobilize both democratic and nationalist
anticommunist mass opposition to former President Slobodan Milosovic in
October 2000? Ukrainian President Leonid Kuchma is as unpopular as
Milosovic was, and yet the opposition newspaper "Vecherniye Vesti"
compared Ukraine unfavorably to Yugoslavia and asked, "What kind of
people would put up with discredited rulers? Are we worse than the Serbs?"
In Ukraine, the creation of a similar mass movement is made more difficult
because of the national question that prevents Yushchenko and his Our
Ukraine bloc from capturing the same levels of high support elsewhere in the
country that it already enjoys in western and central Ukraine. A
November-December 2000 International Foundation for Electoral Systems poll
found that approximately the same number of ethnic Russians and ethnic
Ukrainians suffered as a result of a decade of social change. Nevertheless,
only 26 percent of Russian respondents in the poll said they trusted
Yushchenko, compared with 45 percent of Ukrainians. This gap in attitudes
along ethnic lines was not reflected in attitudes toward President Kuchma, who
was trusted by 31 percent of Ukrainians and 22 percent of Russians (the poll
was conducted before the "Kuchmagate" scandal erupted in November 2000).
In the late Soviet era, the national democrats in Ukraine were strong enough
propel the country to independence, but not to take power. In the '90s they
were nonetheless able to prevent Ukraine from fully sliding into
authoritarianism, a regression that has been the norm in the remainder of the
Commonwealth of Independent States. The opposition movement that grew up
during the Kuchmagate scandal was based in the same regions as the
anti-Soviet, nationalist movement of the late Soviet era, namely western and
If the Ukraine Without Kuchma movement had been able to mobilize
countrywide support, as Kostunica did in Serbia, it is doubtful that Kuchma
would be still in power today. But, as in the late Soviet era, eastern and
southern Ukraine remained passive. As Russophile activists Mykhailo
Pogrebynsky and Vladimir Malynkowitch bemoaned in a roundtable convened
at the Russian newspaper "Nezavisimaya gazeta" in April 2001, civil society is
closely linked to national identity in Ukraine. Consequently, an active civil
society only exists in western and central Ukraine, while the east is passive.
Eastern and southern Ukrainians only become involved in politics in the run-up
to national elections when their more numerous votes in regions such as the
Donbas with its 10 million population are sought after by election blocs.
Because the national democrats were not able to take power in Ukraine they
were therefore unable to ensure that Ukraine undertook the "radical reform
and return to Europe" strategy adopted by the three Baltic states and
post-Milosovic Serbia. Instead, Ukraine has muddled along w! ith "third way"
and "multivector" policies favored by the former Soviet Ukrainian
The only way Ukraine can escape from these confused policies is through
creation of a broad reformist movement, such as Our Ukraine, that combines a
patriotic, anticorruption, and socioeconomic platform. For the first time since
the late Soviet era, the Communist Party and its leader Petro Symonenko have
been pushed into second place by Our Ukraine and Yushchenko. But, as in the
late Soviet era when they allied themselves with the "sovereign communists,"
national democrats have today been forced to compromise by forming a
tactical alliance with the centrists. The major difference between the late
Soviet era and today is that Our Ukraine has for the first time expanded the
reach of national democrats into eastern and southern Ukraine, the traditional
preserve of the Communist Party and the oligarchs.
The link between national identity and civil society that makes Ukraine
different from Yugoslavia is reflected in a January poll by the Ukrainian
Center for Economic and Political Research (UCEPS). Unsurprisingly, Our
Ukraine is strongest in western and central Ukraine, where it commands 51.9
and 20 percent support. These are the only two regions where Our Ukraine
has pushed the Communist Party into second place. In the north, east, and
south Our Ukraine's popularity drops to second place after the Communist
Party with 9.5, 7.9, and 11.6 percent respectively.
The two radical antipresidential Yuliya Tymoshenko and Oleksandr Moroz's
Socialist Party election blocs are more geographically restricted to western and
central Ukraine. The Yuliya Tymoshenko Bloc, although led by a party with its
origins in the eastern Ukrainian city of Dnipropetrovsk, is only popular in
western and central Ukraine, while the Socialists are confined to Ukrainophone
central Ukraine. Opposition newspapers, such as Tymoshenko's "Vecherniye
Vesti," are only able to obtain printing facilities in Western Ukraine.
Western and central Ukraine are the strongholds of the opposition movement
against Kuchma and the oligarchs. According to the UCEPS poll, seven blocs
would pass the 4 percent threshold for the 225 seats elected by proportional
voting. In western Ukraine only four of these seven would pass the threshold,
and of these Our Ukraine and the Yuliya Tymoshenko Bloc top the list. In
central Ukraine, seven blocs would pass the threshold, of which the top four
are national democratic or in the opposition camp (Our Ukraine, Yuliya
Tymoshenko Bloc, Kyiv Mayor Oleksandr Omelchenko's Unity, and the
Socialist Party bloc).
For a United Ukraine, the bloc favored by President Leonid Kuchma that
includes five "parties of power," would not pass the threshold in either western
or central Ukraine. In Kyiv, a city with a large number of state officials, For a
United Ukraine would only manage to scrape through with 4.3 percent.
National identity, reform, and civil society are closely linked in Ukraine,
are in other postcommunist states. Ukraine's regional and linguistic divisions
inhibit national integration and a civil society encompassing the entire country.
Meanwhile, the more pervasive Soviet legacy in eastern and southern Ukraine
has led to a passive population and a weak civil society. This, in turn, prevents
Yushchenko's Our Ukraine from becoming a mass movement throughout
Ukraine in the same manner as Kostunica's! DOS in Serbia. The popularity of
Yushchenko's Our Ukraine in Western and Central Ukraine reflects the
region's role as Ukraine's main engine for reform, a bastion of opposition to the
Communist Party and oligarchs, and preventing a further slide to
Kommentar: Viktor Jusjtjenkos valgforbund "Vores Ukraine" har
hele tiden kæmpet imod godkendelsen af Rzhavskyjs blok "For Jusjtjenko!",
fordi man er af den soleklare opfattelse, at denne alliance udelukkende
er stiftet med det formål at forvirre de potentielle Jusjtjenko-vælgere
og fratage "Vores Ukraine" flest mulige stemmer ved parlamentsvalget efter
samme opskrift som et andet valgforbund fx har opstillet en Oleksandr Moroz
som spidskandidat for at stjæle stemmer fra det oppositionelle SPU.
Processen har bølget frem og tilbage i nogen tid, indtil retten
i Kyivs Shevtjenko-distrikt forleden besluttede at pålægge
Valgkommissionen at suspendere registreringen af "For Jusjtjenko!". I forgårs
besluttede Højesteret, at Valgkommissionen skulle træffe en
endelig afgørelse i sagen inden midnat den 5. februar, hvilket også
skete i henhold til den officielle frist for godkendelse af partier og
Den centrale Valgkommissions beslutning om at afvise "For Jusjtjenko!"-blokken bekræfter, at de ukrainske myndigheder stiller sig forholdsvist positivt overfor "Vores Ukraine" og gerne vil hjælpe dem til en pæn valgsejr, som kan danne grundlag for et præsidenttro flertal i parlamentet. "Vores Ukraine" er et mindre onde for magthaverne end et stærkt KPU fro slet ikke at tale om SPU og "Fædrelandet". De kandidater fra "Vores Ukraine", som bliver betragtet som halv-oppositionelle har til gengæld oplevet, at man i deres valgkredse har opstillet en eller flere navnebrødre. Her er de tre-fire kandidater med efternavnet Stetskiv opstillet i samme valgkreds i Lviv som Taras Stetskiv vel nok det mest groteske eksempel. Og så har man Bojkos "Rukh for Enhed" som en terrier, der bider "Vores Ukraine" i haserne bl.a. ved at offentliggøre udskrifter af mobiltelefonsamtaler mellem Viktor Jusjtjenko og Oleksandr Omeltjenko, hvor de drøfter, hvordan de får fjernet Viktor Medvedtjuk fra posten som Radaens 1. viceformand.
One cannot say for sure that
without Ukraine Russia is not
going to be an empire, but with
Ukraine Russia automatically
becomes an empire...
Independent and secure
Ukraine turns Russia into a
democratic state, which could
have fruitful ties with the West...
Europeization of Russia is
incompatible with a force-based
Current trends in the
Ukraine-U.S. relationship give
serious grounds for concern
with the state of the "strategic
partnership'.... The amount of
between Ukraine and USA does
not fit the strategic partnership
Geopolitical interests of Russia,
the other strategic partner of
Ukraine, were a significant
factor that hindered the
development of strategic
partnership with the United
States. With USA and Russia as
its strategic partners, Ukraine
has found itself in a situation
when the level of its relations
with these partners is
determined by the degree of
geopolitical contention and
permanent controversy between
USA and Russia rather than by
the stand and intentions of
The Ukrainian leadership did
not voice its official support for
U.S.-led operation in
Afghanistan as resolutely as
Russia did. Although the
Ukrainian president decided to
allow the U.S. transport aircraft
to pass via the Ukrainian air
space en route to Afghanistan,
he took that decision after
relevant consultations with
President Putin of Russia.
The U.S. Administration real
ized there is no sense in
extending economic benefits to
Ukraine in exchange for
semblance of political changes
in the country. As a result
Ukraine has faced economic
sanctions on the part of the
To prove that the sanctions are
unfair, one may also recall that,
for instance, in Russia,
according to experts, CD piracy
is much bigger than in Ukraine,
but no one is saying about
sanctions against Russia so far.
It suggests that the U.S.
sanctions are to a large extent
Secretary Powell raised the
issue of the Gongadze case
investigation and downing of a
civil aircraft by an Ukrainian
missile as the examples, in
which it is critical to be open
and honest, to provide
maximum of information "so
that the public knows for sure
what has really happened".
The Secretary of State also
stressed the necessity to comply
with openness and
transparency, the rule of law
and, especially, to "fight
corruption" - something that
Ukrainian homebred oligarchs
would hardly be enthusiastic
The recent development of the
Ukraine-Russia relations gives
certain grounds to say that
being unable to develop
strategic partnership with USA
and Russia at the same time,
Ukraine will prefer the Russian
Federation. Evidently, such
reorientation will sooner or
later lead to discontinuance of
the strategic partnership
between Ukraine and USA,
which is not all-embracing
anyway, whereas the United
States will lose their strategic
interest in Ukraine in the
context of the Russian factor.
With a kind of eagerness for
integrating with Russia now
readily demonstrated by the
Ukrainian leadership, Ukraine
may become a rather tempting
gambling card to play in the big
geopolitical game between
Russia and USA.
CENTER FOR PEACE, CONVERSION AND
FOREIGN POLICY OF UKRAINE
POLICY PAPER # 1 (JANUARY 2002)
Indications of Crisis of Ukraine-U.S. "Stragetic Partnership"
January 21 marked 10th anniversary of the establishment of diplomatic
relations between Ukraine and the United States. The anniversary
almost coincided with imposition of U.S. trade sanctions on Ukrainian
imports. The sanctions were imposed as a result of the unwillingness
of the Ukrainian parliament to approve an unprecedented tough bill
regulating CD industry, which was lobbied by the United States. It is an
indication of crisis in the Ukraine-U.S. relationship.
Having declared its adherence to the European integration policy, the
Ukrainian leadership is certain that the success of this policy will
depend on whether the Russian Federation supports it. Unlike Ukraine,
other CEE countries regard their relations with namely the United
States as a key factor of their integration into the European and
Euro-Atlantic structures, such as the European Union and NATO. It is
not accidentally that the development of strategic partnership with the
United States is among major components of the European integration
policy of such countries as Poland and Romania. Prospects for joining
NATO and EU by the Czech Republic and Hungary have been and
are still determined by large amounts of American investments into their
economies. Naturally, there is a tough economic competition between
the United States and the European Union, which sometimes leads to
factual trade wars. But despite all contradictions and efforts of the EU
to become an independent geopolitical dominant in Europe, the United
States continues to be a major pillar of its political stability and security.
USA has played and continues to play its historic role in developing and
strengthening the European democracy, i.e. the political foundation on
which EU is based.
The political and economic influence of the United States on the EU
countries is enormous. To large extent, this influence is a result of the
U.S. spiritual and economic ties with Europe. The latter continues to be
first historic fatherland for 70% of the Americans. Europe ranks
second in the U.S. export-import transactions. It accounts for a b out
30% of the American exports.  The United States is also Europe's
major investor. Transatlantic investments of the United States are much
higher than those in the Pacific and Asian countries.
Due to such powerful influence, for CE countries, their strategic
partnership with the United States is a major guarantee of their
integration into the European community. Ukraine has declared its
relations with that most powerful country of the world at the level of
"strategic partnership". However, when Ukraine became independent,
its relationship with USA was not a simple one. As is well known, back
in July 1991, President George Bush urged Ukraine "not to divide the
Soviet Union, and not to prefer "separatism" for democracy".  At the
initial stage of the evolving Ukraine-U.S. relations the United States
played a role of a mediator between Ukraine and Russia in the field of
security. Ukraine failed to find a stable political basis for normalizing its
relations with Russia. Direction of the relations with Russia is a major
foreign policy problem of Ukraine's national security. Initially that
problem was in the field of division of the ex-USSR property, and then
it was shifted into the field of Russian neo-expansionist policies.
Without international guarantees of its security and being weaker than
Russia economically and militarily, Ukraine availed itself of the "nuclear
disarmament" factor as a means of its security. Such policy coincided
with the U.S. interests, which sought after removing a major obstacle to
full implementation of START-1 and START-2. To a great extent such
goal conditioned the U.S. initial view at Ukraine through the prism of
"nuclear weapons". Such approach was characterized by the U.S.
intent to solve the Ukrainian "nuclear problem" by means of pressure,
persuasion and assurances. When USA found it impossible to solve
the problem in this way, it reviewed its stand vis-a-vis Ukraine and
began to regard it not only as a nuclear weapon stockpile, but also as
country of great geopolitical significance in Europe.
The mediation policy became productive for the United States, as it
enabled it to achieve the main thing - to realize American interests
related to Ukrainian nuclear weapons. The U.S. mediation policy turned
out to be positive for Ukraine, too, as it promoted reaching the tripartite
statement between presidents of the United States, Ukraine and Russia.
This arrangement, in its pure form, is a linkage of Ukraine's nuclear
disarmament to conditions laid down by Ukraine as regards economic
assistance and security assurances, although not everyone in Ukraine
thinks that the arrangement has served the Ukrainian interests in the
best way. Certainly, the tripartite arrangement has not resolved all
problems, while its basic provisions are still to be implemented. But its
significance stems from the fact that it is a strategic structure to
address a broad range of issues that Ukraine may face.
The next stage of development of the Ukrainian-U.S. relations is the
current one. It started following Ukraine's denuclearization. A peculiar
feature of this stage is the U.S. shifting from the "Russia above all"
political concept to the "expansion of stability from the West to the
East" concept. At this stage, the United States and Ukraine have
shifted to relations of "strategic partnership". Such relations imply
broader security cooperation, in particular in defense area, and policy
coordination in enhancing the all-European security. U.S. military
personnel have provided significant consultative and technical assistance
to the Ukrainian military concerning development and
implementation of various aspects of the military reform in Ukraine.
Evidently, it is in the field of security that strategic interests of Ukraine
and USA coincide to the utmost extent. The strategic interests of
Ukraine vis-a-vis the United States have a global dimension, as they are
determined by the ability of the United States, as the only "superpower",
to have a global impact on world processes. Due to such impact, the
"strategic partnership" with the United States could play the role of a
rather strong foreign policy anchor that could enable Ukraine to resist
external threats to state sovereignty, territorial integrity and other
challenges to its national security. It is not by coincidence that 54% of
the polled experts indicated USA as a state on which Ukraine could
rely most of all in the case of imminent aggression. Most experts
(90%) think that cooperation with the United States is also critical for
realization of Ukraine's foreign policy interests. 
For the United States, Ukraine as a "strategic partner" is essential, first
of all, in the regional context. This context has two dimensions: the
European and the Russian one. In the European context, USA regards
independent and sovereign Ukraine as a significant stability and security
factor in Europe. As for the Russian context, Ukraine's implication for
USA was most clearly outlined by Zbigniew Brzezinski: "One cannot
say for sure that without Ukraine Russia is not going to be an empire,
but with Ukraine Russia automatically becomes an empire".
"Independent and secure Ukraine turns Russia into a post-imperial,
potentially democratic state, which could have fruitful ties with the
West... Democratization and Europeization of Russia is incompatible
with a force-based empire".
3. CURRENT DEVELOPMENT
Current trends in the Ukraine-U.S. relationship give serious grounds for
concern with the state of the "strategic partnership'.
Despite the high level of concurrence of security interests of both
countries, it is hardly possible to say that they fully coincide in other
spheres. U.S. investments in Ukraine, being the largest in their amount
as compared to other countries (18%), are still insignificant in absolute
figures ($ 511 million) and extremely immaterial to be able to raise a
strategic interest of USA in Ukraine. It was obviously because of these
figures that only 24% of the respondents said that USA regards
Ukraine as a strategic partner. The amount of export-import
transactions between Ukraine and USA does not fit the strategic
partnership either. In 2000, the United States accounted for 5.8% of the
Ukrainian exports and 2.5% of imports.
The lack of mutual strategic interests in the economic sphere created
vacuum within the strategic partnership between Ukraine and USA. In
fact, without economic foundation and internal factors such partnership
was mainly of a declarative nature on the part of both the United Sates
and Ukraine being based only on mutual foreign policy and security
interests. As the previous and current U.S. ambassadors to Ukraine,
Steven Pifer and Carlos Pascual, point out in their article in the
Washington Quarterly, "yet Ukraine never quite reached the anticipated
economic levels that its Central European neighbors achieved. In
hindsight, Ukraine and its relations with other nations suffered because
Ukraine did not achieve "necessary and sufficient" conditions for
Geopolitical interests of Russia, the other strategic partner of Ukraine,
were a significant factor that hindered the development of strategic
partnership with the United States. With USA and Russia as its
strategic partners, Ukraine has found itself in a situation when the level
of its relations with these partners is determined by the degree of
geopolitical contention and permanent controversy between USA and
Russia rather than by the stand and intentions of Ukraine. Namely
these contradicting interests of the United States and Russia reduce the
effectiveness of Ukraine's endeavors to minimum as regards
development of strategic partnership with these countries. Being devoid
of internal content, the strategic partnership with USA is doomed to
exist only at the level of declaration.
The year 2000 was a viability test for such level of relationship for
Ukraine. The U.S. stand in the Gongadze case and Melnychenko tapes
scandal stultified the strategic partnership. In 2001, Ukraine took a
stand different from the U.S. one in the conflict in Macedonia. Such
mechanism of realization of strategic partnership as the Kuchma-Gore
Commission ceased to exist. The Ukrainian leadership did not voice its
official support for U.S.-led operation in Afghanistan as resolutely as
Russia did. Although the Ukrainian president decided to allow the U.S.
transport aircraft to pass via the Ukrainian air space en route to
Afghanistan, he took that decision after relevant consultations with
President Putin of Russia.
The visit of Prime Minister Anatoliy Kihakh of Ukraine to Washington
in October 2001 demonstrated that relations of strategic partnership
between Ukraine and USA were nearly off the track and the United
States was loosing its strategic interest in Ukraine in the context of the
Russian factor (President Putin was on official visit to USA at the
time). The first visit of the Ukrainian high-ranking official to the United
States under the new U.S. Administration demonstrated weakness
rather than potency of Ukraine's position in relations with USA.
Although Kinakh was trying to reactivate the old-time rhetoric to the
effect that his visit "is a logical continuation of the dialogue and strategic
cooperation between the two countries", such declarations could not be
backed with concrete results in Ukrainian reforms and achievements.
The new Administration of George W.Bush has no more faith in the
assurances and declarations of Ukrainian officials about their
commitment to democratic values and European integration.
The U.S. Administration realized there is no sense in extending
economic benefits to Ukraine in exchange for semblance of political
changes in the country. As a result Ukraine has faced economic
sanctions on the part of the United States.
4. DECISION EXPERTISE
Economic sanctions against Ukrainian metal producers have already
resulted in cuts of the Ukrainian exports to USA by 31.6% during
January-June 2001. The next step of the United States has been
imposition of new sanctions against Ukrainian CD producers. The
previously announced U.S. trade sanctions against Ukraine took effect
on January 23. The sanctions are intended to compensate for US losses
from unauthorized copying and sale of audio and computer CDs in
Ukraine. The restrictions concern metal, footwear and other goods
exported from Ukraine, worth a total of 75 million USD, which now are
subject to higher dues. Ukrainian parliament on January 17 passed a
law regulating the production of CDs, thus meeting the U.S. demand,
but the sanctions were nevertheless imposed. According to A.Kinakh,
such sanctions against Ukrainian exporters would cost Ukraine "at least
$400 million a year in losses".
In response, the Ukrainian government banned any U.S. chicken
imports to the country because of chemicals used in America's chicken
industry that are banned in Ukraine. According to Ukrainian sources,
last year Ukraine imported 69,000 metric tons (76,060 U.S. tons) of
chicken, 90 percent from the United States.
It should be noted that the United States has never demanded from
underdeveloped countries to license CD production. To prove that the
sanctions are unfair, one may also recall that, for instance, in Russia,
according to experts, CD piracy is much bigger than in Ukraine, but no
one is saying about sanctions against Russia so far. It suggests that
the U.S. sanctions are to a large extent politically motivated. According
to the International Federation of Phonographic Industry (IFPI),
Ukraine is not even among the ten biggest CD piracy countries. The
latter include Russia, China and even certain European countries. But
no one is going to impose sanctions on them. According to experts of
the Ukrainian Razumkov Center for Economic and Political Studies,
there is a great suspicion that under the pretext of the "wrong" law the
United States attempts to introduce restrictions making it difficult for
Ukrainian producers to compete at world markets - both in CD industry
and metallurgy, chemical industry, textiles, etc.
Certainly, such trade war cannot be considered an indication of
strategic partnership, and the Ukrainian prime minister was eager to
remind his American counterparts about that. Deferment of the
sanctions by half a month or even a month can by no means be
considered a success of A.Kinakh's visit. The United States takes
practical steps only if they see specific results that correspond to U.S.
interests. This thesis, in particular, is proved by the fact, perhaps the
only positive one, that during the visit the parties signed an arrangement
under which the USAID is to extend a $125,000 grant to the Ukrainian
joint stock company Naftogaz Ukrayiny to make a feasibility study of
the Odessa-Brody pipeline operation.
The reason behind such cold pragmatism of the United States in its
relations with Ukraine is the fact that Ukraine has practically exhausted
the limit of political credibility on the part of its "strategic partner".
It was not unintentionally that during the visit A.Kinakh emphasized the
necessity of "raising trust to Ukraine as a state, a reliable partner that
can develop appropriate conditions for transparent competition"
Responding to that, Secretary Powell raised the issue of the Gongadze
case investigation and downing of a civil aircraft by an Ukrainian
missile as the examples, in which it is critical to be open and honest, to
provide maximum of information "so that the public knows for sure
what has really happened". The Secretary of State also stressed the
necessity to comply with openness and transparency, the rule of law
and, especially, to "fight corruption" - something that Ukrainian
homebred oligarchs would hardly be enthusiastic about. Therefore,
Kinakh's statement to the U.S. secretary of the Treasury about
Ukraine's intention to integrate into the European and global community
and to accede to WTO could hardly be apprehended by the Americans
The recent development of the Ukraine-U.S. and Ukraine-Russia
relations gives certain grounds to say that being unable to develop
strategic partnership with USA and Russia at the same time, Ukraine
will prefer the Russian Federation. Evidently, such reorientation will
sooner or later lead to discontinuance of the strategic partnership
between Ukraine and USA, which is not all-embracing anyway,
whereas the United States will lose their strategic interest in Ukraine in
the context of the Russian factor.
Russia has rather effectively availed itself of the September 11
developments. It expressed its resolute support of the West and
manifested its willingness to cooperate with the United States and
NATO in the struggle against Islamic terrorism. This brought about
reviewing the very format of the Russia-NATO relationship, so that
Russia could affect NATO's decision making. As V.Putin said, "the
Russia-NATO Permanent Council, the so-called PCC, has generally
been practical at the certain stage. Today, this body is obviously not
enough to change the quality of relations between Russia and NATO".
However, there is a question of whether Russia is going to avail itself
this situation as well as of certain "weakness" of the United States to
implement its geopolitical interests that are not directly related to
terrorism. For instance, would the United States, in exchange for
cooperation in fighting terrorism, compromise with Russia in such issues
as: renouncing modernization of the ABM system; acknowledging the
Chechen issue as exclusively the problem of international terrorism; and
acknowledging Russia as a leading geopolitical actor in the world
(second one to the United States). At least the Newsweek has said that
during his visit to the United States V.Putin "attempted to make
Russia a major player again" . As is well known, Ukraine is in the
epicenter of the U.S.-Russia rivalry. Therefore, the issues of
acknowledging Ukraine as a sphere of Russia's exclusive responsibility
and Russian vital interests may arise on the agenda. With a kind of
eagerness for integrating with Russia now readily demonstrated by the
Ukrainian leadership, Ukraine may become a rather tempting gambling
card to play in the big geopolitical game between Russia and USA.
6. POLICY RECOMMENDATIONS
For the United States, Ukraine is not a strategic partner in the same
sense as Ukraine considers the USA to be a strategic partner of
Ukraine. Ukraine is not a kind of a strategically critical country for the
United States, without which it could be unable to play its leading role in
the modern world. Nevertheless, in addressing specific critical issues,
the interests of Ukraine and the United States may and do coincide,
being of strategic nature. For instance, for Ukraine it is rather
advantageous and necessary to rely on the United States as the most
powerful country in the world that can and does have a comprehensive
direct and indirect impact on global processes. In this context, the
United States is a major factor and a guarantor of the process of
Ukraine's integration into the Euro-Atlantic community. In order that
USA really backs Ukraine in these intentions, a change of the "political
climate of bilateral relations" is required. Slogans alone to the effect that
Ukraine does not see any reasons for concern in view of the NATO
potential eastward enlargement are not enough any more.
Especially, against the background of the unprecedented steps being
made by Russia in its rapprochement with the United States and
Oleksandr Sushko & Volodymyr Poberezhny
Ukrainian Monitor is an information product of the Center for Peace,
Conversion and Foreign Policy of Ukraine that continues and develops
traditions of the Monitoring Foreign and Security Policy of Ukraine,
published in 1997-2001. The project aims to gather and analyze
information related to international aspects of Ukrainian political,
economic and social life, and to promote strengthening the European
political values and standards of analyzing in Ukraine.
The project is supported by the Friedrich Ebert Stiftung (Germany)
Regional Office in Ukraine, Belarus and Moldova
1.Statistical Abstract of the United States: Washington DC, 1993, pp.
2.In: Bodruk O.S. Struktury Voyennoyi Bezpeky: Natsionalny ta
Mizhnarodny Aspekty. - K.: NIPMB, 2001 - P.218.
3.Natsionalna Bezpeka i Oborona, #122000. P.43.
5.Z.Brzezinski. Peredchasne Partnerstvo Rosvytok Podiy v Krymu:
Materialy Mizhnarodnoyi Konferentsiyi. - K., 1994 - P.195.
6.The New York Times. - 1994 - June 29.
7.In: Nauka i Oborona, #122000, p.39.
8.Zovnishnya Torgivlya Ukrayiny Tovaramy za 9 Misyatsiv 2000 Roku. -
Derzhavny Komitet Statystyky Ukrayiny. Express-Report of November
9.Carlos Pascual and Steven Pifer. Ukraine's Bid for a Decisive Place in
History. The Washington Quarterly, Winter 2002. PP. 180-181.
10.Amerikanskaya Ugroza Zastavit Deputatov Pisat Zakony.
11.Ukrayina ne Boitsa Rashyreniya NATO. Mignews.com.ua 31.10.2001.
12.Torgovaya Voina Otkladyvayetsa. Mignews.com.ua 01.11.2001.
13.Kinakh Vernulsya Mignews.com.ua 01.11.2001.
14.Gutman R., Conant E., America's New Friend? Newsweek, November 19,
15.Ukrayina ne Boitsa Rashyreniya NATO. Mignews.com.ua 31.10.2001.
An indication of the size of
the emerging middle class
may be gleaned from the
growth of the mobile
EIU ViewsWire 29 Jan 2002
FROM THE ECONOMIST INTELLIGENCE UNIT
The economic upturn of the last two years in Ukraine has brought into
existence a definable, and growing, middle class with money to spend on
non-essential items. While average incomes have fallen slightly in dollar
terms, the spending power of this small group of the population is
increasing. It has stimulated markets in property and consumer goods that
scarcely existed until 2000, and created demand for consumer credit for
the first time.
Aleksandr Fedorshin, general director of GfK-USM, the market research
company, says: "The growth of the economy does not directly result in the
growth of income and spending power, but nevertheless it is clear that
the top end of the consumer market is growing." GfK-USM has
run a consumer confidence survey over the last six quarters, during which
indicators of confidence, and in particular of readiness to purchase costly
household items, have risen uninterruptedly.
Mr Fedorshin adds: "Three years ago no one in Ukraine knew what it
meant to have a debit or credit card: now there are hundreds of thousands
of them. Not only foreign companies' employees and office workers, but
even industrial workers, have their salaries paid into the bank, opening the
way for a great expansion of consumer credit in future."
Another sign of movement towards West European styles of consumer
spending is the sudden boom in hypermarkets, which are characterised not
only by large floor space and number of check-outs but also by the range
of choice, in particular of foreign brands.
There are now between 15 and 20 in Kiev, with more planned. The
German retail group REWE has invested US$9.4m into the development
of Western- style supermarkets, becoming the second-largest Western
investor in Ukraine after McDonalds (US), and opened several outlets
under the brand name Billa (Austria). The Metro group (Germany) opened
its first store in Kiev last month.
Additional spending remains the preserve of a small minority in Kiev and
still smaller minority in the five or six other major cities. Recent statistics
compiled by the National Institute for Strategic Research showed that
average wages (excluding "grey" earnings) fell from US$67.26 in
December 1995 to US$39.81 in December 1999 and rose only slightly to
US$42.05 in December 2000. Average earnings followed the same
pattern (US$28.98 i n 1995, US$24.89 in 1999 and US$26.69 in 2000),
while pensions continued to fall (US$26.28 in 1995, US$16.68 in 1999 and
US$13.40 in 2000).
* Consumer goods
An indication of the size of the emerging middle class may be gleaned
from the growth of the mobile telecommunications market. The number of
subscribers has more than doubled over the last year to an estimated 2m
(40% contract subscribers, 60% pre-paid).
Ihor Mykhailenko, public-relations manager of Kyivstar, which along with
UMC dominates the market, says: "Our prognosis is that the market can
double in size again in the coming year, providing the economic situation
continues to improve or at least remains stable. Once we get past a
market penetration level of 3% -- and it is now at an estimated 3.2% -- it
is pretty well assured that it can rise to 10%."
Mr Mykhailenko believes that mobile-phone usage is starting to spread
from the richest 5% of the population to the next 15%, who might be
considered middle class. "There is an element of conspicuous consumption
by this section of the population. They will save up to buy a mobile phone
not because they cannot be without it for work or business reasons, but
because it is a sign of status." Kyivstar's customer base has grown (year-
end figures) as follows: 1997 -- 500; 1998 -- 13,400; 1999 -- 50,000; 2000
-- 300,000; 2001 (projected) -- 1,150,000.
The combination of a rapidly expanding market and fierce competition for
customers has in recent months stimulated reductions in costs that
comprise a 30% saving to the average user: en! trance costs (ie price of
mobile phone and number) have been reduced, standard tariffs have been
reduced, and some companies have moved from charging per second from
the first second instead of the 30th.
Mr Fedorshin at GfK notes that this year there has been a boom in sales
of mobile phones, kitchen appliances and electrical goods, but that sales of
personal computers and furniture remain as yet low by comparison. He
believes that these markets will expand dramatically if economic
improvements continue. Another market yet to boom is that for new cars:
at present sales run at just 40,000 per year, mostly of Russian models.
Hennady Verbilenko, deputy general director of the local company
Unitrade, a leading computer retail outlet in Kiev, said that over the last
year (third quarter 2000 to third quarter 2001) sales of desktop computers
had increased by 80-90% and sales of portable computers by 70-80%,
although from a low base. "I am sure the growth of this market is
associated with the emergence of the Ukrainian middle class," he says.
"At present, we might say this is the preserve of the upper middle class:
people who send their children to paid-for schools expect computers to be
available at school and also try to provide computers at home."
* The property market
A boom in the construction of residential space, which began in 1998, is
perhaps the surest sign of the rise of the new middle class in Kiev. It is
estimated that 1msq metres of residential space will be built in the city this
year, about three- quarters of that in the outskirts, and one-quarter
comprising elite apartments in the centre. Prices range from US$350 per
sq metre in the outskirts to US$2,200 per sq metre in the centre of the
Anatoly Lakhno, general director of the estate agent Citycon, says: "Prices
are increasing because of rising construction costs (higher electricity,
transport and construction materials costs, and higher salaries), as well as
the general economic upturn and increased buying power of the
"Construction of residential space reached its lowest level (about 400,000
sq metres per year) in 1995, and grew slowly until 1998. Then a real
construction boom began. New construction companies appeared on the
market -- such as Kiyivmiskbud, Zhytlo-Invest, Zhytlobud,
Posnyakizhylstroy, TMM, Consol, Agropromservice-A, AKB Kyiv, HCM
and UkrAsiaBud (all Ukrainian) -- who accessed financing from future
owners for building projects. They work with Ukrainian banks who make
loans to the future owners of the apartments, using as collateral future
Sales are usually arranged by construction companies themselves without
any involvement of estate agents. Alongside the main market for new flats
a new market in modernised roof space, providing elite attics and
penthouses in central Kiev, is growing. This is the top end of the market,
serving the most well-off businessmen and managers.
As well as private credit schemes, a programme of loans to young families
(under age 30) over 30 years at an interest rate of 3% (compared to
commercial rates of around 30%) was introduced by the government. State
funds were available to extend the loans to only 2,500 of 40,000 applicants.
* Consumer credit
Another significant measure of the emergence of a middle class is the
growth of consumer credit. There are now an estimated 700,000 Ukrainians
who receive their wages directly into a bank account, and of these an
estimated 50,000 have in the last 18 months become consumer credit
customers. Banks including Aval, Privat, First Ukrainian and East
European Bank (all Ukraine) are operating schemes, and three or four
Western banks with subsidiaries in Ukraine are considering introducing
Igor Slobodsky, deputy chief executive officer of Bank Aval, one of the
leading Ukrainian banks, says that his institution has been a member of the
Visa system since 1996, but that only in the last year have a significant
number of customers applied for, or received, consumer credit through the
"After the 1998 crisis our first credit lines went not to consumers but
small traders -- the 'chelnoki' going to Turkey or Poland to buy consumer
goods and bringing them back for sale in Kiev," Mr Slobodsky says. "Then
we began to encourage customers to receive their salaries directly into
their bank accounts. After six months we would give them a debit card,
and after two years offer them credit facilities." The bank offered
discounts both on use of the debit cards and for frequency of use in an
attempt to get customers accustomed to the cards, which were almost
unknown three years ago.
Aval now participates with 14 insurance companies, in schemes to offer
consumer credit through retail outlets. It has just started a scheme with a
car salesroom to finance consumer credit for Western makes including
Opel (US) and Volvo (Sweden). Credit for up to three years for the
purchase of residential property is available from another scheme that it
runs with five construction companies in Kiev.
Unitrade has for the last year been operating a consumer credit scheme
typical of the type initiated by Aval and other banks. Mr Verbilenko of
Unitrade says that at first the company financed the scheme from its own
turnover, but then made arrangements with banks and insurance
companies whereby the banks supply the credit and insurers cover
non-payment risk. Under the scheme, the customer is required to provide
documentary proof of identity and income, and to pay 30% of the cost of
the item, typically a personal computer. The bank pays the remaining 70%
and collects payments, on which interest charged is 30% on hryvnya
contracts and 16% on dollar contracts.
Copyright (c) Dansk-Ukrainsk Selskab og Ivan Nester