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13 May 2014

How the Ukraine Crisis Arose – and Why?

"A conspicuous consumer item for those who wield power in Russia is a private airplane. The oligarchs and state bureaucrats don’t care about the technical characteristics or its safety. Indeed, they care about only two of its characteristics: the prestige the plane confers and the fact that it can provide them with a quick getaway should the need arise."

Both Ukraine and Russia share the heritage of communism, which is the destruction of individual moral judgement. This may seem like a very mundane and obvious observation, even a rather irrelevant one, but this fact is the key to understanding what has happened in Ukraine and the Russian reaction to it.

After the fall of the Soviet Union, the countries that once formed the Soviet Union underwent a dramatic transformation. From being state-run economies in which the means of production were in the hands of the state, they became societies characterised by a form of private ownership. Unfortunately, however, the transition was flawed. It took place without the benefit of law. The result was that the greediest, most corrupt and most cunning individuals rose to the top. The moral revolution that was needed following the fall of communism never occurred. People had been told for years that the only thing that really mattered was the judgement of the party and so many felt no inclination to make moral judgements on their own. In the resulting moral confusion both Ukraine and Russia failed to establish the rule of law.
 
In both Russia and Ukraine, greed became the principal driver of behaviour. Leaders in the post-Soviet world could think of no higher purpose for which power ought to be exercised than their own material well-being and they stole without restraint. Yanukovych became one of the richest people in the world by abusing the institutions of the state to redistribute in his own interest the properties that had been distributed (also unfairly as it happens) in Ukraine’s first wave of privatisation. The difference was that if the previous privatisation had produced a slew of oligarchs, phase two was an attempt to concentrate enormous wealth in the hands of Yanukovych’s personal cronies and the members of his family.
 
The leader in this effort was Yanukovych’s son Alexander, a dentist with no previous business experience, who in three years became a billionaire. When Yanukovych was asked how this was possible, he said that his son was very talented. In fact, the secret to his talent was very clear. The administrative apparatus of the country was used against anyone who refused to sell his business at a dictated price.
Both Ukraine and Russia share the heritage of communism, which is the destruction of individual moral judgement. This may seem like a very mundane and obvious observation, even a rather irrelevant one, but this fact is the key to understanding what has happened in Ukraine and the Russian reaction to it.

After the fall of the Soviet Union, the countries that once formed the Soviet Union underwent a dramatic transformation. From being state-run economies in which the means of production were in the hands of the state, they became societies characterised by a form of private ownership. Unfortunately, however, the transition was flawed. It took place without the benefit of law. The result was that the greediest, most corrupt and most cunning individuals rose to the top. The moral revolution that was needed following the fall of communism never occurred. People had been told for years that the only thing that really mattered was the judgement of the party and so many felt no inclination to make moral judgements on their own. In the resulting moral confusion both Ukraine and Russia failed to establish the rule of law.
 
In both Russia and Ukraine, greed became the principal driver of behaviour. Leaders in the post-Soviet world could think of no higher purpose for which power ought to be exercised than their own material well-being and they stole without restraint. Yanukovych became one of the richest people in the world by abusing the institutions of the state to redistribute in his own interest the properties that had been distributed (also unfairly as it happens) in Ukraine’s first wave of privatisation. The difference was that if the previous privatisation had produced a slew of oligarchs, phase two was an attempt to concentrate enormous wealth in the hands of Yanukovych’s personal cronies and the members of his family.
 
The leader in this effort was Yanukovych’s son Alexander, a dentist with no previous business experience, who in three years became a billionaire. When Yanukovych was asked how this was possible, he said that his son was very talented. In fact, the secret to his talent was very clear. The administrative apparatus of the country was used against anyone who refused to sell his business at a dictated price.
The usual scenario was for representatives of Yanukovych or his son to offer to buy an attractive business at a price far below what it was worth. If the offer was refused, the next step was to use force. The first move was to send in inspectors – fire inspectors, sanitation inspectors, the police, tax inspectors – to find violations, both real and imaginary, and impose fines so draconian that it was impossible to continue long in business. And if that wasn’t enough, the victim could be arrested on trumped-up charges. The depredations of Alexander Yanukovych were such that many people started taking over businesses by saying that they represented him when in fact they didn’t even know him. The brand was sufficiently powerful that people were afraid to risk a confrontation. Soon, the biggest oligarchs in Ukraine were Yanukovych, the members of his family, and those like Rinat Akhmetov who were already oligarchs and friendly to Yanukovych. Akhmetov, for example, was Yanukovych’s early sponsor and patron.
 
No average citizen could be secure in these circumstances. The conditions necessary for this rapid concentration of wealth by those who exercised political power meant that there could be no reliable legal mechanisms to protect individual rights, including property rights. In Ukraine several dramatic episodes illustrated what this meant. In separate cases, two women were abducted, raped and savagely beaten. One of them died. These events occurred in provincial areas outside of Kiev but became well known. In one instance, the perpetrators were local police; in the other, children of the local elite. What the cases illustrated for everyone, however, was that the authorities were free to do anything they wanted; there was no protection against them. This helped create the tinder of widespread discontent that preceded the recent revolution. What was the spark?
 
It had been widely expected that Ukraine would sign an affiliation agreement with the European Union. Yanukovych and the members of his entourage gave repeated indications that this path would be pursued. Suddenly on 30 November of last year, however, it was announced that there would be no association agreement. There was not even an indication that Ukraine intended to try to negotiate new terms. The impression was created that Yanukovych had decided that his previous commitments were in no way binding. He could change his mind for whatever reason he liked, and the opinion of the nation was of no importance.
 
That night a small number of demonstrators in the Maidan Nezalezhnosti (Independence Square) were savagely attacked by the police and took refuge in the Mikhailovsky Cathedral. (The last time that the Cathedral offered refuge in a similar manner was when the Mongols attacked Kiev.) But the demonstrators were not in the Maidan to protest anything. They had gathered to support what they thought would be the Ukrainian decision to associate with the European Union. What set the protests in motion was the combination of disappointment over the rejection of the association agreement and the unprovoked beating of the young students. The underlying cause, however, was years of insecurity felt by ordinary citizens in a society designed for the rich and in which there were no protections for anyone else.
 
The same type of regime exists in Russia. The appropriation of private businesses began in earnest in Russia in 2003 after the arrest of Mikhail Khodorkovsky. When officials at all levels witnessed how easy it was to take over the biggest, most successful, and most western-oriented oil company in Russia by administrative means and abuse of the legal process, the practice of “raiding” began to be employed all over the country and at all levels. Nothing done by Yanukovych was in any way strange, or different, or incompatible with what was being done in Russia.
 
At the same time, the Russian authorities understand perfectly well – and far better than western observers – that the example of Ukraine could be contagious. What existed in Ukraine was longstanding resentment over the lawlessness and the greed of the authorities plus a specific situation that galvanised people – i.e. the refusal to sign the EU association agreement. In Russia, there was the same climate of resentment. The falsification of the December 2011 parliamentary elections brought 100,000 people out into the streets. Those demonstrations eventually fizzled out. At present, there is no specific issue in Russia around which people can rally and no act of brutality capable of serving as a spark for protests. But both of these can be supplied. Indeed, the nature of these lawless systems is such that they will be supplied, and the Russian authorities know it.
 
This is why the Russians have reacted to the Ukrainian situation as they have. One response is the suppression of freespeech. Let me mention my own case in this regard. The Russians had long bragged that no US correspondent had been expelled from Russia since the fall of the Soviet Union. It was even a point of pride that Russia was sufficiently self-confident that even the most odious correspondents were nonetheless tolerated. I was not often mentioned by name. But some persons close to the Russian authorities made a point of saying that the fact that I received visas was proof of the Russian authorities’ commitment to democracy. With the intensification of the situation in Ukraine, however, the cost benefit analysis changed, and I was more than they were prepared to tolerate.
 
But I wasn’t the only case. There has been a crackdown on TV Rain, the Internet television station which is watched by the intelligentsiya, and the firing of the chief editor at Ekho Moskvy (which is actually quite important, and will have long- range implications). There were mass arrests when demonstrators protested the sentences in the Bolotny Case where people were arrested and charged for their participation in a demonstration protesting Putin’s third term. And now, as we see, there is an attempt to rally support for the regime by appealing to Russian chauvinism through the seizure of Crimea and the threats against Ukraine. This is also a warning to the Russian people that any attempt to free themselves from their own ruling criminal oligarchy will have negative results.
 
The referendum in which Crimeans voted to join Russia should not be taken seriously. Only under the impact of this emergency situation, including the takeover of the parliament by unidentified troops, have most people, including ethnic Russians, voted to join Russia. And what is equally important: the elections in Russia itself are falsified. There is no reason to believe that this referendum result was democratic, honest or legitimate. At the same time, many people, including some usually perceptive observers, argue that the annexation of Crimea is a done deal and the seizure is irreversible even though the borders of Ukraine have been recognised by Russia in numerous international undertakings. This is not the case.
 
Is this true? Or can something be done about this situation?

Others will deal with the military and strategic measures that Washington and other NATO governments should or will now consider. But there are non-military actions by the West that could have an important impact in compelling Putin and Russia to reconsider their actions. They are based upon a simple insight: all such regimes are extremely fragile despite appearances to the contrary. The Russian regime is much more fragile than people understand. Those who run it keep their assets in the West, their families in the West, their mistresses in the West. They hold foreign passports. A conspicuous consumer item for those who wield power in Russia is a private airplane. The oligarchs and state bureaucrats don’t care about the technical characteristics or its safety. Indeed, they care about only two of its characteristics: the prestige the plane confers and the fact that it can provide them with a quick getaway should the need arise. Many members of the Russian ruling group have in the back of their minds where they will go if things get as hot for them as they got for Yanukovych.
 
So the West has considerable leverage if it wants to impose economic and financial sanctions. Almost all the money that has poured into the West from Russian sources is the result of criminal activity. Simply enforcing the money laundering laws, extending the Magnitsky list, and making it clear by denying visas that the Russian authorities are going to have to live with the consequences of their own lawlessness might be enough to pressure the Russian authorities to call a halt to their aggression. The Ukraine crisis is an effort on the part of Russia to protect a criminal oligarchic regime in two countries. Some argue that we should leave things as they are because the alternative is instability; but the status quo has its own dangers, and we are witnessing a vivid demonstration of that fact.



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