Tuesday, 4 March 2014

Oligarchs uniting

They managed to chase Viktor Yanukovych from power, and from Ukraine, but otherwise the list of successes has been short for the new government in Kiev. Crimea is out of their control, a general Russian invasion of Ukraine remains a possibility, and the Ukrainian economy is, as before, on life support. Nevertheless, in one important region the government might be optimistic - and that surprisingly is the region of eastern Ukraine, otherwise perceived as Yanukovych's bulwark.

Following the Russian takeover of Crimea much has been written about how eastern Ukraine might be next to fall under Muscovite sway. Not only would Ukraine then lose control of another substantial part of its territory, but it would lose its most heavily populated areas, which also remains the economic powerhouse of Ukraine together with Kiev. No matter that Russian troops have not entered eastern Ukraine as they have Crimea; no matter Dnipropetrovsk, Donetsk and Kharkiv have nowhere near the same symbolic resonance for Russians as Sevastopol does - the danger of another Russian incursion seemed obvious. Not least after recent unrest when the government building was seized by pro-Russian demonstrators on Monday, two days after fighting had broken out in Kharkiv.

Yet those seeking to preserve a united Ukraine under control from Kiev (albeit perhaps under a different government) have two advantages: An increasing number of people seem to be demonstrating in this region in favour of national unity. And three of the richest men in Ukraine, all based in the east, have openly joined the case for Ukrainian unity under Kievan command.

Rinat Akhmetov has been the richest man in Ukraine for a number of years, building his fortune in the mining business around the city of Donetsk. Akhmetov has managed to prosper under varying regimes in Ukraine yet he did previously count Yanukovych as an ally. Now, however, he has made clear that his company, the SCM Group, counting 300,000 employees and stretching across Ukraine, will peacefully maintain the territorial integrity of Ukraine. Akhmetov has denounced the use of force from the outside. And he has allegedly named current Prime Minister Arseniy Yatsenyuk as the right man for Ukraine, while rapidly distancing himself from any previous business connections with Yanukovych.

Donetsk now has a new governor, as well, installed cleverly by the new government in the shape of Serhiy Taruta. Taruta is another billionaire, again within heavy industries such as steel and coal and thus the employer of a sizeable local workforce. Like Akhmetov, Taruta could swiftly have created regional unrest by damaging the local economy through unpaid wages and industrial shutdowns - that is, if Taruta wanted to help create a cause for invasion by the Russian military. But Taruta has done nothing of the sort. Instead, he has also appealed for the preservation of Ukrainian territorial integrity, and for the prevention of a destructive conflict and its loss of lives.

Akhmetov and Taruta have not suddenly become Ukrainian patriots. They never showed particularly sympathy for the Orange Revolution in 2004; although it is perhaps fair to say that they would have resisted the use of violence against demonstrators then, as well. More importantly, they would have resisted increased subservience to Russia. Or, as another Ukrainian billionaire - Dmytro Firtash - has put it: business circles in Ukraine must all help to defuse the risk of further escalation of violence because nobody benefits from that - particularly not Ukrainian business.

Akhmetov, Taruta and Firtash may have worked well enough with Russian elites in the past, but they and their Ukrainian fellow oligarchs will increasingly have a much better chance of doing business in the EU. Particularly in the heavy industries Russia remains dominated by domestic companies, while the EU can seek cheaper Ukrainian materials. Conversely, while Akhmetov et al might have plenty of assets secured in Western Europe their fortunes will be hit by a collapse of the Ukrainian economy - a collapse increasingly likely if the Russo-Ukrainian-Western standoff continues. Ukrainian oligarchs may well accept a Russian takeover of Crimea. The economic gains from the peninsula is limited, particularly for anyone not already dominating the local tourist and related industries there. On the other hand, Eastern Ukraine is the core region for most Ukrainian oligarchs, who have little use for noisy and sometimes violent demonstrators, who may or may not be paid by the Kremlin, but who certainly seem to have little plan for Eastern Ukraine beyond creating instability.

On Tuesday it appears that demonstrators gathered in Donetsk to call for the removal of Taruta as governor. While Taruta should certainly be expected to stand for election in the not-to-far future, it is to be hoped that he, and other wealthy industrialists, stay strong in the region for now. Indeed, if peace could be secured here due to the effort of oligarchs we may even witness a rather welcome new experience for the post-Soviet region: oligarchs uniting their country instead of dividing it.

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