Ukraine at the Crossroads:
Perspectives on Independence, Democracy, and Reform

Two events this month have painted these options in stark relief The first was the symbolic vote on March 3 by the Verkhovna Rada of Ukraine, the Parliament, to join the Parliamentary Assembly of the CIS. 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. Directionless 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-sized businesses and established a legislative framework for market development.

To facilitate this process, the 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.

The 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 overregulation, 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 edge 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 nationbuilding 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 the resurgence of the Communist left. The people’s attitude towards democracy, reform, and the national ideal are characterized by cynicism, skepticism, and fatigue rather than by hope, faith, and contentment.

The Nomenklatura and the Rise of the Oligarchs: Where Did Ukraine Go Wrong? What Are the Perspectives for the Future?
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 upon independence in 1991. During Soviet times, it wielded tremendous administrative control over the lives and activities of the people.

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 distant memory, its actions are practically accountable to no one. As a result, the nomenklatura is now the unfettered arbiter of 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 decentralizing authority to the regions, and stymied economic reform in Ukraine.

Over the past five years it has also fostered the emergence of another postSoviet phenomenon: the “oligarchs.” As in Russia, the current structure of government is propped up by “clans” of financiers and industrialists who enter into cozy and lucrative relationships with the nomenklatura to carve up the wealth and power of the state. They specialize in rigging privatization programs in order to cheaply acquire state assets. As the respected economist Anders Åslund has noted, Ukraine has effectively become a closed joint stock company caught in the grip of the 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 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 the 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 President’s 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, for his part, has sought to deflect criticism for the lack of progress on reforms onto the 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 the “Red Revanche” in Parliament.

This characterization, 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 in conducting and directing economic reform through the grant of extraordinary privileges. First as Prime Minister and then as President, Kuchma demanded from the 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 consideration.

The Threat to Independence—The “Slavic Union”
The question therefore 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 regarding substantive reforms.

Yet, in the lead up to presidential elections in October, President Kuchma is increasingly adopting populist positions. These reaffirm Soviet era themes and values, and espouse positions which require the least effort at reform. Implemented, they would bring Ukraine closer to Moscow than they would to Strasbourg or Brussels. They also ensure him and his allies maximum power with minimum accountability. In this context, advocating closer ties with Belarus and Russia would secure votes among Communist constituents, 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 geopolity, profound. It could easily occur in the following way. 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.” This will form the economic basis for the reconstitution of the Soviet Union in the form of a “Slavic Union.” The partners would devise a closed “ruble zone,” reestablishing an economic curtain between the “Slavic Union” and the West. Moscow will be more than content to renew its place as the political center of such an arrangement. Russia will 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 will 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-Slavist, while the Foreign Ministry tries to take a pro-European integration line. Unclear as to its own strategic security interest, 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 laager mentality would prevail within a “Slavic Union,” endangering Western security interests. Therefore, 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, significant security challenges await the West arising out of the weakness of postSoviet states. Western countries must therefore 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 variant. 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 nongovernmental organizations, civic associations and professional and business groups to demand greater accountability and services from their government, conditions will be set for 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-à-vis Crimea), to foster among Ukrainians a sense of belonging to the European democratic polity, 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, for 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 existing situation worse. First, it is foolish to think that the West can “buy” reform by giving money or credits to the current regime in exchange for the performance of certain conditions. The recipient, the Ukrainian government, has no ownership of the reform process, and can ultimately reject it as having been externally mandated. There is therefore 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 the 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 lottery. 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. These 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 the determination of 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 objective to support a victory by democrat-reformers at that time.

Therefore, 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 re-elected. Another mandate will only perpetuate further social and economic stagnation, and 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 will come to power breaking the grip of the existing oligarchs over the country.

Having clothed 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 “Red Revanche” he is ostensibly trying to keep at bay.

Ultimately, what distinguishes Ukraine from Belarus and Russia is the pivotal role the Verkhovna Rada plays in determining Ukraine’s future course. In 1991 Moscow envisioned 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 autarky. 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.

The 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 of Ukraine’s achievements in the twin processes of reform and democratic development are associated with Parliament. This “leftist” institution laid the constitutional foundation for democracy in Ukraine. It initially proclaimed sovereignty, then independence for Ukraine. It initiated an 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 Ukrainian democratic development. In the present circumstances, it is a vital bulwark to Ukraine’s national security against any unconstitutional expansion of executive power.

Conclusion
There is a need for a leadership change in Ukraine for Ukraine to realize its democratic potential and to 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 left to 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.