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Oligarchs Give Ukraine's President Crucial Support In EU Drive

EU President Herman Van Rompuy (center) and European Commission President Jose Manuel Barroso (right) welcome Ukrainian President Viktor Yanukovych ahead of an EU-Ukraine Summit in Brussels earlier this year.
EU President Herman Van Rompuy (center) and European Commission President Jose Manuel Barroso (right) welcome Ukrainian President Viktor Yanukovych ahead of an EU-Ukraine Summit in Brussels earlier this year.
As Ukrainian President Viktor Yanukovych forges ahead with his bid to bring his divided country closer to the European Union, he is getting support from a surprising source -- many of the country's leading oligarchs.

According to Borys Kolesnykov, a lawmaker from Yanukovych's Party of Regions and one of the 50 richest Ukrainians according to "Forbes" magazine, support for EU integration is almost universal among the country's economic elite.

"There can't be any groups that don't support European integration..." he says. "The stronger the competition is, the more quickly Ukrainian enterprises will develop [and] if there hadn't been the Kyiv Dynamo [soccer team] in the 1990s, then [Donetsk] Shaktar wouldn't have been so good. Competition stimulates quality."

Kyiv is expected to sign an Association Agreement and a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU in the coming months despite heavy pressure from Moscow for it to join the Moscow-led Customs Union of Belarus, Kazakhstan, and Russia instead. Ironically, that pressure -- coming largely in the form of trade embargoes and other economic moves -- is playing a key role in pushing the oligarchs away from Moscow.

Renat Akhmetov, Ukraine's richest and most powerful oligarch, told RFE/RL's Ukrainian Service that "the situation on the border" is making people in the business elite think.

"This situation on the border will make Ukraine, Ukrainian business, and every Ukrainian stronger," he said. "From this we must gain experience and look at ourselves -- what we have done correctly and what we have done incorrectly. If we analyze correctly, this will only make us stronger in the future."

Winds Of Change

The economic winds in Ukraine have been shifting westward, slowly but steadily, for several years now, according to U.S. economist Judy Shelton.

"The drivers of economic growth are certainly changing as countries modernize and develop," she says. "But I would just point out that, right now, Ukraine exports to Russia about 12.3 billion euros worth of goods. They export more to the European Union -- about 12.9 billion euros worth. Those are last year's figures. And, as far as Russia being their energy supplier [is concerned] and that suggesting some kind of natural alliance, that has not really been a happy experience for these countries."

With these extensive and growing business connections to the EU, Ukraine's oligarchs need to legitimize their position and secure themselves after the country's 2015 presidential election, former Ukrainian President Viktor Yushchenko told RFE/RL.

Yushchenko says it is a fortunate coincidence that the private interests of the oligarchs coincide with the interests of the country.

"The European policy doesn't only bring economic advantages to the clans," he says. "The policy also brings them recognition. Or, to repeat that non-Ukrainian word, legitimacy. And, in my view, that is the key point now. It doesn't mean they will suddenly become Europeans and embrace a European identity. It is a matter of pressure -- including social pressure. But the main driving force is their corporate and private interests, which luckily in this case correspond to Ukraine's national interests."

To be sure, Ukraine's oligarchs have benefited in the past from the country's Soviet-style, opaque politics. But analysts now say they are ready to sacrifice some of that to EU regulation in order to be able to use their established economic might to stave off domestic competition -- and competition from Russia's politically connected oligarchs.

That does not mean, however, that Kyiv's European-integration policy is assured or that Russia does not continue to lobby powerfully for the Customs Union. Thomas de Waal, a Caucasus analyst with the Carnegie Endowment for International Peace in Washington, says Armenian President Serzh Sarkisian's recent announcement that his country will join the Customs Union will bolster Moscow's efforts to pressure Ukraine.

"Armenia is only of medium importance, shall we say, to Russia," he says. "A much bigger prize -- in fact, the kind of central element for Russia in this Customs Union project -- is the participation of Ukraine. This is sending a message. This is obviously doing a deal with Armenia, but it's also sending a strong message to Ukraine that 'You're next, and we will do everything in our power to persuade you to join the Customs Union.'"

Opponents Forced Undeground

And Moscow has powerful levers. Despite growing Ukrainian exports to Europe, key industries such as steel, chemicals, and agriculture still export predominantly to the former Soviet Union, including the Customs Union countries.

The head of the aviation firm Motor Sich told Interfax recently during a visit to Moscow that for "technology enterprises" signing the EU Association Agreement means "instant death."

ALSO READ: Armenia's Choice Stirs Competition Between Moscow, EU

The owners and managers of many aging, noncompetitive plants also see their best interests in close relations with Moscow. Likewise, the Ukrainian Communist Party opposes European integration, as do some deputies within Yanukovych's Party of Regions.

The former head of Ukraine's SBU state security agency, Valentyn Nalyvaichenko, told RFE/RL that the Ukrainian-Russian interparliamentary group is the most popular assignment among Ukrainian lawmakers, although he quickly adds that "not all" deputies in the group are working against Ukraine's national interests.

Ukrainian political analyst Volodymyr Fesenko says these deputies for now seem to have been forced underground by Yanukovych and the pro-European lobby.

"They will support the official position, but when they are whispering in the smoking areas, they will say that it would be better for us to deal with Russia," he says. "There is such a lobby, but it is hidden. It is for now neutralized because people are simply afraid to go against Yanukovych."

On September 5, lawmakers duly passed the first package of reforms demanded by the EU accords.

Written in Prague by Robert Coalson on the basis of reporting from Kyiv and Donetsk by RFE/RL Ukrainian Service correspondents Yevhen Solonin, Dmytro Shurkhalo, Iryna Shtogrin, and Yelena Povolyayeva; with contributions from RFE/RL correspondents Charles Recknagel and Richard Solash

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