Ukraine at the Crossroads

Two events this month have painted these options in stark relief. The first was the symbolic vote on March 3 by Verkhovna Rada to join the CIS Parliamentary Assembly. The second was the admission of Poland, the Czech Republic and Hungary to NATO. Ukraine's choices are clear. However, the route it will ultimately choose is more ambiguous.

At its root, the debate over Ukraine's future course belies a profound struggle within the Ukrainian nation to identify its place in the world; a world which it only feebly comprehends and which poorly understands Ukraine. Ukraine's history of foreign domination, colonial servitude and divided rule has left deep scars on the national psyche. It has left the new state woefully unprepared to define its national ideals and objectives in a brave new world. The country's leadership, Ukraine's legacy from the Soviet Union, is more interested in pursuing and preserving selfish commercial/financial interests than it is in defining and securing Ukraine's strategic interests and in building a prosperous, democratic nation for the benefit of present and future generations. Lacking direction and poverty-stricken, Ukraine is sinking into a morass of creeping despotism.

THE EUPHORIA

It did not have to be this way. With the euphoria of independence, Ukraine anxiously sought ways to secure its new freedom against Russian hegemony. Accordingly, it embarked on a European-oriented nation-building exercise. Ukraine successfully laid out the framework for the development of vital democratic institutions - a balance of power between Parliament, President, and an independent judiciary, the provision for local self government, and constitutional guarantees of human rights and freedoms, property rights, and the like. Ukraine achieved membership in the Council of Europe (ahead of Russia); it solemnly promised to enact reforms to transform post-Soviet Ukrainian society in accordance with the democratic values, norms and standards of human rights required of Member States. Only three years ago, the passage of the Constitution of Ukraine was heralded by the Council of Europe as the embodiment of European constitutional progress.

On the economic front, Ukraine defeated hyperinflation, achieved a respectable degree of macroeconomic stabilization, successfully introduced a new currency, privatized most small and medium businesses and established a legislative framework for market development.

To facilitate this process, Verkhovna Rada not only passed laws on privatization and foreign investment, it has since 1993 delegated to the government and the President extraordinary powers to regulate the economy by decree.

DISAPPOINTMENT

The tragedy of these efforts is that, with few exceptions, Ukraine has only imitated real reform. The economy has shrunk every year since independence. Most of the private sector has fled to the shadow economy, hounded to the periphery of legal entrepreneurial activity by state over-regulation, unfair tax collection measures, and the blind corruption of officials. Millions of pensioners, teachers, doctors, and other state employees await payments which are more than a year overdue. Privatization and other reforms have stalled, foreign financial aid is in constant jeopardy of being suspended, and democracy is weaker than at any other time since independence. The government interferes with local and parliamentary election results and harasses the media with impunity. Ukraine is on the verge of being suspended from the Council of Europe for violations of human rights, electoral fraud, repression of the media, and interference with the independence of the judiciary.

Ukraine's nation-building efforts have not resulted in Polish-style economic vitality, but in stagnation and economic collapse. As the twenty-first century approaches, Ukraine is confronted by the specter of unrelenting misery for its people, debt default, currency collapse, the imperial embrace of Russia, and resurgence of the Communist-led Left. Popular attitudes toward democracy, reform, and the national ideal are characterized by cynicism, skepticism, and fatigue rather than by hope, faith, and contentment.

NOMENKLATURA AND
THE RISE OF OLIGARCHS

Where did Ukraine go wrong? What are its future perspectives?

The response to these questions goes to the heart of the Soviet legacy in Ukraine. A defining characteristic of post-Soviet society is the continued depth and breadth of power exercised by the state over every aspect of a citizen's life. The Soviet nomenklatura was able to retain power in Ukraine after independence in 1991. During the Soviet period, it wielded tremendous administrative control over the people's lives and activity. Today the nomenklatura continues to exercise a virtual monopoly on state power, its decisions immune from public scrutiny. With control by the Communist Party over its activities now only a faint memory, its actions are practically accountable to no one. As a result, the nomenklatura is now unfettered arbiter over the distribution and use of state property.

This phenomenon has bred rampant corruption in every branch of the civil service, degraded the development of democratic institutions, retarded the constitutional imperative of devolving authority to the regions, and stymied economic reform.

Over the past five years it has also fostered the emergence of another post-Soviet phenomenon: the oligarchs. As in Russia, the current structure of government is propped up by so-called clans of financiers and industrialists who enter into cozy and lucrative relationships with the nomenklatura to divide up the wealth and power of the state. They specialize in rigging privatization programs in order to cheaply acquire state assets. As respected economist Anders Бslund has noted, Ukraine has effectively become a closed joint stock company caught in the grip of its oligarchs.

The oligarchs were initially content to merely become obscenely rich. However, the allure of power proved too strong. With the parliamentary elections held last year, the oligarchs emerged from the shadows to run for seats in Parliament. They invested heavily in their campaigns, attracted by the immunity from prosecution their commercial activities would enjoy, the veneer of respectability they would gain, and above all, the direct power and influence they would wield not just over the distribution of state property, but the direction of the economy as well.

The result has been the effective criminalization of Verkhovna Rada. From an institution of democracy, the Ukrainian Parliament is being transformed into a shelter for the criminally inclined.

The oligarchs sitting in Parliament have united with the clans represented in the Presidential Administration to rally around the President's bid for a second term. Their support is dictated by calculated self-interest: President Kuchma has provided the conditions for the accumulation of their wealth and power; his possible defeat jeopardizes their holdings and influence.

The President, on his part, has sought to shift criticism for the lack of progress on reforms onto Verkhovna Rada, accusing it of blocking his reform efforts. The President tries to portray the situation as an epic power struggle between a reform-oriented President and Red revanche in Parliament.

This portrayal, developed largely for consumption by Western donors and financial institutions, is not credible. Far from being held back by Parliament in a radical reform effort, the President and the government have had a virtually free hand to conduct and direct economic reform by grants of extraordinary privileges. First as Prime Minister and then as President, Kuchma demanded from Verkhovna Rada, and was granted, extraordinary powers to enact economic reforms by decree. These were even enshrined in the transitional provisions of the Constitution for a period of three years. Thus, in one leadership capacity or another, Mr. Kuchma has held in his hands the essential levers of economic management in Ukraine for seven years.

The fact remains that this power has been squandered by a combination of cronyism and incompetence. To date, the President and his government have failed to put before Parliament any coherent or systemic reform strategy for its consideration.

SLAVIC UNION
AS A THREAT
TO INDEPENDENCE

The question thus arises: how much more can Ukraine afford to continue with policies of this nature without jeopardizing its independence? The President is becoming more desperate in the face of the decline in living standards. He is under pressure from the Council of Europe, Western donors, and international financial institutions to take hard decisions about substantive reforms.

Yet, in the prelude to presidential elections in October, President Kuchma increasingly adopts positions, which merely pander to popular prejudices, reaffirming Soviet-era themes and values, while espousing positions that require the least effort at reform. If implemented, they would bring Ukraine closer to Moscow than to Strasbourg or Brussels. They also ensure him and his allies maximum power and minimum accountability. In this context, advocating closer ties with Belarus and Russia would gain votes among the Communist constituency as well as preserve existing privileges.

The effect on Ukraine's economy of further integration with Belarus and Russia would be catastrophic; its impact on the Eurasian geopolitical theater, profound. It could easily occur as follows. In the near future, Ukraine could default on its debt obligations and face the type of financial meltdown which prostrated Russia. Ukraine would come under immense pressure from Russia to recreate, along with Belarus, a so-called "Slavic common market," which would in turn form the economic basis for reconstituting the Soviet Union in the form of a "Slavic Union". The partners would devise a closed ruble zone, reestablishing an economic curtain between their Slavic Union and the West. Moscow will be more than content to renew its place as the political center of such an arrangement and again begin to throw its weight around the Eurasian playing field, a role denied to it following the collapse of the Soviet Union.

Ukraine's hitherto tentative westward-leaning foreign policy would then collapse. As a result of weak and corrupt government, the current leadership in Ukraine is incapable of deciding between the competing tendencies of the Polish and Belarus models. Consequently, a number of voices claim to speak in the name of Ukrainian foreign policy. The President's foreign policy is ambiguous to say the least, that of the Speaker of Parliament is distinctly pan-Slavic, while the Foreign Ministry tries to take a pro-European integration line. Unclear as to what its own strategic security interest is, Ukraine has voluntarily, at least for the moment, become a political buffer between East and West. Its only coherent strategy is to play off the desire of the West to help secure Ukrainian independence against the West's interests in seeing real reforms which would entrench democracy in Ukraine.

Tempting as it would be under this scenario, it would be a grave mistake for the West to turn its back on Ukraine. A Russia reeling from economic collapse would soon look to Ukraine to provide it with goods and produce within a closed market. Russia would become more belligerent and Ukraine more xenophobic. A lager mentality would prevail within the Slavic Union, endangering Western security interests. Hence, the West must pursue separate strategies regarding Ukraine and Russia. With respect to Ukraine, however, such a strategy must be far more insightful and subtle than it has been to date.

SECURITY INTERESTS
AND STRATEGIES

On the one hand, the issue of Ukraine's place in the world is of significant importance to the West. As the Draft Report prepared for this annual meeting suggests, substantial security challenges await the West arising out of the weakness of post-Soviet states. Western countries must consequently try harder to bolster all of the states on Russia's fringes. Yet, it is patently obvious that Ukraine is unwilling and unable to fully safeguard its own security. It can only do so with the understanding and active assistance of the West.

The West can positively nudge Ukraine toward the Polish option. Promoting democratic values in countries like Ukraine and facilitating the construction of institutions of civil society remain in the long term interests of peace and security in Europe. By helping empower non-governmental organizations, civic associations, along with professional and business groups to demand greater accountability and services from their government, conditions will be set for an improvement in governance, especially at the local level. The infusion of western liberal values will, over time, break the government's stranglehold on power, and facilitate democratic and market reforms.

Further, the NATO Partnership for Peace Program serves to promote Ukrainian self-confidence in withstanding Russian territorial aspirations (especially vis-И-vis the Crimea) to foster among Ukrainians a sense of belonging to the European democratic political community, and to blunt the attraction of a Slavic Union. It also reinforces a message the West should consistently repeat to Russia: that Russian bullying of any of its neighbors will not be tolerated.

Ukrainian decision-makers, on their part, find engagement with NATO at this level convenient. The relationship poses little risk and allows Ukraine to keep its options open. The leadership fully realizes that NATO is not prepared to offer Ukraine partnership in the Atlantic alliance any time soon.

On the other hand, there are two ways in which the West is actually making the current situation worse. First, it is foolish to think that the West can buy reform by giving money or loans to the current regime in exchange for the performance of certain conditions. The recipient, the Ukrainian government, has no investment in the reform process and could ultimately reject it as having been externally mandated. There is thus no sustainability and predictability to the reform effort. Western donors and international financial institutions have allowed themselves to be cynically manipulated by Ukrainian officials and have nothing to show for their efforts but frustration. The current leadership leverages Ukraine's geopolitical importance to the West, safe in the knowledge that, despite flouted conditions, Ukraine will get most of what it has been promised. These are classic Soviet tactics, executed by skilled practitioners.

This raises a second issue. The West is now faced with a dilemma of its own making. Initially, donors believed the President's rhetoric that Ukraine was pursuing pro-Western policies and that the Ukrainian leadership was genuinely interested in economic reform. The West, particularly America, having made out President Kuchma to be a reformer, is now not sure what to do about him. Although it has seen through the rhetoric, the West feels it has no choice but to continue to back the existing regime, however reluctantly, in the face of the so-called Red revanche.

This position is as dangerous as it is wrong. Things are seldom what they seem in the former Soviet Union, and playing politics by betting on one politician is a fool's game. Politics in Ukraine is not a zero-sum game. Palatable alternatives from the Right and Left exist for Ukraine from among the current potential candidates for President and need to be objectively assessed by Western policy analysts.

FUTURE PROSPECTS
FOR REFORM

More profoundly, Western strategy toward Ukraine should focus on medium term interests, beyond the upcoming presidential race. Indeed, the election is only the first stage in determining Ukraine's future course. The real prize comes in three years, when the next parliamentary elections will be held. The West should set itself the goal of supporting the victory by democrats and reformers at that time.

Thus, it does not follow that a victory in October 1999 for President Kuchma constitutes a victory for the democratic process over the Communist hordes he would like the West to see in Parliament. In fact, it is best for the development of democracy in Ukraine that President Kuchma not be reelected. Another term will only perpetuate further social and economic stagnation along with instability. Based on the results of the President's policies to date, in a new term we can expect further expansion of the state's monopoly of power, further suppression of dissent, further criminalization of the Ukrainian economy through the influx of Russian capital, a continued poor investment climate for Western capital, the continued spread of corruption, and the continued degradation of the rule of law and democratic development. If he loses, like former President Kravchuk, he will go into opposition to a new President. A fresh team would come to power, breaking the grip of the existing oligarchs over the country.

Having cloaked himself in the garb of reform and democracy, President Kuchma will continue to profane both concepts in the eyes of the people. Inept and corrupt government policies inevitably give credibility and credence to Communists and others who crave a reconstituted Soviet Union. Just as President Kuchma needs the Communists to oppose him to have any chance for a second term, so too the Communists need a Kuchma victory to drive the economy further into the ground, further discredit the concepts of reform and democracy, and assure them a future majority in Parliament. In short, President Kuchma's reelection will ensure the ultimate victory of the very Red revanche he is ostensibly trying to keep at bay.

Ultimately, what distinguishes Ukraine from Belarus and Russia is the pivotal role Verkhovna Rada plays in determining Ukraine's future course. In 1991 Moscow envisaged a model of development for the states of the former Soviet Union based on a strong President and a weak Parliament. The result in Russia and Belarus has been a slide toward autarchy. Ukraine went a different route, building into its Constitution a reasonable balance and separation of authority between the executive, legislative, and judicial branches of power based on democratic principles.

Verkhovna Rada, like all of Ukraine's embryonic democratic institutions, is imperfect. It is not generally viewed as a catalyst for reform in Ukraine, yet all Ukraine's achievements in the twin processes of reform and democratic development are associated with Parliament. This supposedly leftist institution laid the constitutional foundation for democracy in Ukraine. It initially proclaimed sovereignty, then independence for Ukraine. It initiated the interim Constitutional Accord to diffuse tensions with the executive, then passed a very democratic Constitution, one which the President opposed.

 Parliament, therefore, is a key institution in Ukraine's democratic development. Under present circumstances, is a vital bulwark to Ukrainian national security against any unconstitutional expansion of executive power.

There is a need for a leadership change in Ukraine for Ukraine to reach its democratic potential and become a fully integrated member of the European family of nations. The West must maintain its engagement with and pressure on Ukraine over the short to medium term. This will buttress the forces in Ukraine interested in serious change. While a frustrating partner at present, Ukraine in a Slavic Union would be a destabilizing influence on the region and European security as a whole.

At the end of the day, I believe that if given a democratic choice, the people of Ukraine historically, culturally, and psychologically would affirm the same path Poland took. They will choose Europe. We need to ensure that Ukraine's leaders are as wise.

Text of a paper read at the Trilateral Commission Annual Meeting of March 13-15, 1999 in Washington, DC