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Monday, 30 October 2017 07:33

New Geopolitics: The Ukrainian Factor. Part 3

Petro Kopka. COSA head of research programs

“Who says organisation, says oligarchy”
(German sociologist Robert Michels, the Iron Law of Oligarchy)

System analysis shows that modern Ukraine had inherited two major problems prevalent in the previous era, namely the lack of consistency in government and single-option influence of oligarchy, which have the most negative impact on the country’s internal and external state of affairs.

It is impossible to tell, however, which of these problems results from the other. They act differently in various circumstances, switching places depending on the situation, but they always go together thus producing a negative synergetic effect upon the state.

All the other troubles, including the infamous corruption, are merely consequences brought about by the constant interaction of these two problems.

In this article, we shall not endeavour to analyse the activity of every single Ukrainian oligarch. Instead, we shall examine the way oligarchy influences the Ukrainian state as a whole.

Oligarchy as a Ukrainian Phenomenon

Oligarchy is modern Ukraine’s calling card. Historically, most of the country’s riches including its most marketable assets changed hands in the process of “hijackisation a la Ukraine” and ended up in the pockets of several Ukrainian families who were later joined by a number of moonlighting Russian billionaires.

Ukrainian oligarchs first made themselves noticed in the late 1990s. It just so happened that oligarchy replaced the lawlessness rampant during the early years of Ukraine’s independence.

Generally, oligarchs are defined by three features: large business assets, political influence, and media resources.

Thus, we arrive at the classic definition of this social, political, and economic phenomenon: oligarchy is the rule of a small number of people or families who seized power. (According to Aristotle, oligarchy is a distortion of the aristocratic form of government).

According to Plato, timocracy is a form of oligarchy, in which power rests with a privileged minority distinguished by a high property qualification.

All these definitions freely apply to modern Ukraine. A small group of families showing all three signs of oligarchy is supported by a wider circle of people who are simply very rich and strive to become oligarchs themselves at any cost. In other words, the process of oligarchisation continues sucking in ever more human and material resources, like a black hole.

Although the situation in Ukraine does meet all the universal criteria, it still has a few unique features.

Firstly, enormous amounts of capital have been accumulated by an extremely small number of people. Ukrainian investment company Dragon Capital estimates that in 2016, the top ten richest Ukrainians have amassed 11 billion dollars in wealth, which is almost 13% of Ukraine’s gross domestic product of 2015. By comparison, the wealth of the richest citizens of Poland amounts to 3% of the nation’s GPD, despite the fact that Ukraine’s economy is currently three times smaller than that of its western neighbour.

Secondly, the richest Ukrainians focus on large industrial and agricultural enterprises. Half of them have commercial interest in the monopolised fuel and energy complex. Thus, the largest resources are confined to these narrow segments, while other important sectors of economy are ignored. Citing Poland as an example yet again, the interests of the richest Polish nationals are distributed among infrastructure, telecommunications, mass media, finance, etc. Moreover, none of them is a monopolist in any of these sectors.

Thirdly, never in the history of any Western democracy has been seen such a large-scale fusion of big capital and government resulting in unprecedented (apart from, perhaps, modern Russia and other non-democratic regimes) political corruption.

This leads to every single branch of government being controlled by individuals or groups either potentially or in actuality, to say nothing of courts, prosecution office, law enforcement and other government agencies, which are essentially on the payroll of oligarch clans and carry out their instructions.

The State as a Servant

Approximately since 1999, Ukraine has ceased to develop as a national political institution, gradually turning into an instrument used by the select few to protect and increase their wealth amassed in the process of privatisation gone wild or forcibly redistribute said wealth as it happened under Yanukovych.

Ukraine is getting used to living under classic oligarchy, which grows stronger in the absence of a mature civil society, elevating its social, political, and economic status and turning into a single-option form of government (according to Niccolò Machiavelli).

In the process, oligarchy is gradually distorting the underdeveloped and therefore unstable public sector of the Ukrainian society so that it would suit the needs of tycoons. Consequently, the state ignores all the important national projects and serves the petty personal interests of a bunch of oligarchs as well as physical persons and legal entities related to them.

Demonstrably, the adoption of the Constitution of Ukraine and introduction of the Ukrainian hryvnia in 1996 were the last successful national projects, whereas an attempt to build and put into service the Odesa-Brody oil pipeline, which would transport Caspian and Kazakh oil to Europe and disrupt the Russian monopoly on the Ukrainian market, never came to fruition.

Apart from Russia opposing a new oil pipeline in the European part of the former USSR, the project failed because its final stages coincided with a period of escalation in the conflict among oligarchs fighting for assets including those in the fuel and energy complex.

As a result, Ukraine’s development came to a halt, because oligarchs preferred (and still prefer) projects that do not go beyond their interests. This means that any innovations, which reflect the economic potential of other nations, are shunned in Ukraine. Thus, because of oligarchs, Ukraine remains a low-level economy, despite all the talk of reforms and modernisation that have been going on ever since Ukraine became an independent state.

Having completed the acquisition of formerly state-owned assets, the oligarchs were faced with the issue of developing and protecting their businesses. They employed the familiar and time-tested method of becoming government officials.

First, they did it themselves. We still remember the wealthiest oligarchs sitting under the dome in the Verkhovna Rada. They quickly grew bored of the whole thing, however, realising that parliament sessions were wasting their valuable time.

This ushered in a new stage in the political oligarchisation of Ukraine, when political organisations were created specifically to protect the interests of individual oligarchs or oligarch groups and make decisions that benefit them. These people realised having a few dozen deputies, judges or high-level bureaucrats on payroll was more efficient than trying to solve problems personally.

Thus, the oligarchs have optimised their business management system, while the Ukrainian society got an uninhibited political corruption for being too passive. As we currently observe, corruption in Ukraine has reached its peak. The oligarchs, meanwhile, have become so powerful and arrogant that they barely even notice the country is at war. Pecunia non olet?

To be continued...

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