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| Europe | |
| Righting the Orange Revolution | |
| 2005-10-23 | |
For a moment last week, Viktor Yushchenko relived the glory of the Orange Revolution when he appeared in the Mansion House in London to receive an international relations award from Queen Elizabeth II. As the Ukrainian leader accepted the honour, a smile crossed his poison-ravaged face. His wife Katya stood nearby wiping tears of pride and happiness from her eyes. It all seemed a world away from Kiev and the harsh reality of post-revolution politics. Nearly a year after orange-clad demonstrators filled that cityâs Independence Square to support his bid for the presidency, Mr Yushchenko faces daunting challenges in consolidating his victory. Much has been done. But much remains to be done. There is no reversing last winterâs events when Mr Yushchenko forced Leonid Kuchma, the authoritarian former president, and Viktor Yanukovich, Mr Kuchmaâs Russian-backed would-be successor, to concede defeat. The fear that stalked Ukraine in the Kuchma era has evaporated, allowing Ukrainians to live in political freedom. Despite hostility from the Kremlin, which blamed the west for the Orange Revolution, Ukraine has rejuvenated ties with the US and the European Union. Ukraineâs example has also given hope to opposition parties challenging authoritarian rulers in Russia and elsewhere on former Soviet soil â including Azerbaijan, which holds parliamentary elections next month, and Kazakhstan, with presidential polls in December. In a recent FT interview, Mr Yushchenko said that after the Orange Revolution, âmillions of people began to think differently about freedom, about democracy, in the whole terrain of the former Soviet Unionâ. However, already some of the energy created in Ukraine by the popular revolt has been dissipated, notably in a split between the cautious Mr Yushchenko and Yulia Tymoshenko, his firebrand Orange Revolution ally. Allegations of corruption among some of the presidentâs closest allies â mostly businessmen who helped fund his campaign â have put Mr Yushchenko on the defensive. Trying to shore up his political base, the president has sought compromise with the survivors of the old regime, especially Kuchma-era Âbusiness oligarchs. Many young people who filled Independence Square a year ago feel disappointed. But for Mr Yushchenko the priority is the economy. He understands democracy can be secure only if it leads to less corruption, better government and higher Âliving standards. Just as they followed the Orange Revolution, people in other former Soviet states are keeping a close eye on the latest developments. For many, this is the real test of Ukraineâs new rulers. The same is true for the popular revolt in Georgia in 2003 and this yearâs upheaval in Kyrgyzstan. But Ukraine matters most because it is the largest and the most modern of the three. Mr Yushchenko is no radical reformer but a mild-mannered former central banker who served Mr Kuchma as prime minister before going into opposition. He is hampered by the compromise he struck to end last yearâs crisis. In return for giving up power peacefully, Mr Kuchma forced on his successor constitutional reforms that will transfer much of the presidentâs powers to parliament. The changes will mostly take effect in March, immediately after parliamentary elections. Mr Yushchenko admits opportunities to capitalise on the Orange Revolution have been wasted in the conflict with Ms Tymoshenko, who was finally sacked last month and replaced as prime minister by Yuri Yekhanurov, a technocrat loyal to the president. Mr Yushchenko and Ms Tymoshenko fell out over the handling of untransparent privatisations of the Kuchma era. At meetings with business leaders, he has promised to settle disputed privatisations through negotiations, not court action, with the exception of the Âegregious case of Kryvorizhstal, the flagship steel mill (see right). Much depends on the March elections. A move to full proportional representation means the competing parties will almost certainly have to form a coalition government. Ms Tymoshenkoâs supporters, and many of Mr Yushchenkoâs, hope the elections will force them to reunite. But Mr Yushchenko has been extending olive branches to his former enemy, Mr Yanukovich, and courting Volodymyr Lytvyn, the parliamentary speaker, who enjoys big business backing. Whatever happens, none of the combinations seems likely to produce a coherent team of liberal reformers. All this jockeying makes for lively democratic politics. But, as a result, Ukraine has been long on debate and short on practical progress. Economic growth has slowed from 12 per cent last year to just 2.8 per cent in the first nine months, investors hesitate, corruption remains rife and citizens have little confidence in public services. Even in foreign policy, where Mr Yushchenko has invested much effort improving ties with the international community, implementation is slow. Parliament has still to complete the modest legal changes required for joining the World Trade Organisation. Without membership, Ukraine cannot get the most out of its EU co-operation agreement. Without that, Kiev cannot realise its biggest ambition â a promise of eventual EU membership. The conflicts also open doors for renewed involvement from Russia. President Vladimir Putin, who saw the Orange Revolution as his countryâs biggest defeat since the collapse of the Soviet Union, has expressed quiet satisfaction at the arguments between Mr Yushchenko and Ms Tymoshenko. Meanwhile, Russiaâs hand is strengthened by rising energy prices. Its advantage has been tempered by its reliance on Ukraineâs pipelines to export oil and gas to the west. But Moscow is expanding other export routes. In Georgia, the situation is different. Far from reaching out to potential partners, Mikheil Saakashvili, the president, has consolidated power in an increasingly narrow circle of his close allies within his National Movement, which has a large majority in parliament. Mr Saakashviliâs team has made strides in making government more effective â a change from his predecessor, Eduard Shevardnadze, who brought Georgia to the brink of collapse. The economy is growing at a respectable pace of nearly 7 per cent this year. The separatist province of Adjara has been brought under control. Mr Saakashviliâs greatest success has been building warm ties with US President George W. Bush, who visited in May. The support helped Georgia secure Russian agreement to vacate two military bases. US support could play an even bigger role as Mr Saakashvili tries to negotiate with the Kremlin over two separatist ethnic enclaves, Abkhazia and South Ossetia, which have received protection from Russia since they split from Georgia. However, Mr Saakashviliâs brashness has irritated EU leaders. Corruption remains pervasive, foreign investors have shied away and some former Saakashvili supporters are afraid the country could be sliding back into authoritarianism. Among them is Salome Zourabichvili, a French ex-diplomat of Georgian descent, who was sacked last week as foreign minister. She told a rally not to lose faith in Georgiaâs Rose Revolution even though many of its leaders had âstrayed from the roadâ. In Kyrgyzstan, the revolt that forced former president Askar Akayev to flee the country in March has been followed by political turmoil. Despite Âwinning a landslide victory in presidential elections in July, Kurmanbek Bakiyev has failed to restore order, with three members of parliament killed since the spring. There is no sign of a re-run of the parliamentary elections that sparked the original protests against Mr Akayev. Even though the outcome of these three revolts is unclear, they have had a profound effect on the rest of the former Soviet Union. Opponents of authoritarian rulers from Belarus to central Asia have taken heart from the protesters, imitating their methods, slogans and colours. Mr Yushchenko says: âThere is a new way of doing things: the Orange Revolution way.â Authoritarian regimes have had to review their positions. Nurbulat Masanov, a political scientist in Kazakhstan, says: âThere is now a discussion about what to do. One way will be to promote popularity by offering what people want â political stability and economic modernisation.â An example is MolÂdova, Ukraineâs poor southern neighbour, where president Vladimir Voronin, a veteran communist, is weakening ties with Moscow and making overtures to the EU. There are other, more controversial, options, including resorting to nationalism or, in central Asia, Islamism. At the extreme, regimes can respond with violence, as happened this year in Uzbekistan where president Islam ÂKarimovâs forces massacred mostly peaceful demonstrators in the eastern city of Andijan. Mr Masanov says that, while this damaged Mr Karimovâs legitimacy in the west, it strengthened it within his own regime. In Russia, the Kremlinâs main concern is to preserve the dominance of the current elite after the 2008 presidential election. Given Russiansâ respect for authority, rapid economic growth and state control of television, the defeat of the Kremlinâs candidate seems unlikely. But officials worry because they failed to predict Mr Yanukovichâs defeat in Ukraine. Mr Putin, who is personally popular among voters, with support ratings of about 70 per cent, cannot stand for a third term unless the constitution is revised. So the search is on for a candidate who can secure genuine public support. Manipulation alone is not enough. Real appeal is required. Three other post-Soviet regimes face more immediate electoral tests â Azerbaijan, Kazakhstan and Belarus. Oil-rich Azerbaijan goes first on November 6 with parliamentary polls, in which the ruling party is defending an overwhelming majority. Ilham Aliyev, who took over as president in 2003 from his late father, Heydar Aliyev, a former KGB boss, is trying to assert his authority. Last week he made a pre-emptive strike. Two powerful insiders â Farhad Aliyev, the liberal economy minister, and Ali Insanov, the hardline health minister â were sacked, arrested and accused of plotting a coup. Most opposition parties there have joined forces in a bloc named Freedom. They wear orange in imitation of Ukraine and hold rallies in defiance of government bans and rough police tactics. Mr Aliyev, who faces presidential elections only in 2008, does not seem in imminent political danger and could grow stronger as the countryâs oil revenues are set to soar. But last weekâs arrests were a clear sign of growing dissent within the ruling elite, which might not be easily stifled. In Kazakhstan, president Nursultan Nazarbayev, who has held power since communist times, is expected to be voted back into office in the December poll. He has successfully combined authoritarian politics with sound economic policies. If fair Âelections were held, Mr Nazarbayev would almost certainly do well. But he is taking no chances, arresting Âopposition activists and raiding their homes and offices. In Belarus, dictatorial president AlekÂsander Lukashenko is also determined to retain power in the September 2006 election. Inspired partly by the Ukrainian example, the opposition recently chose a single presidential candidate â Alexander Milinkevich. But pressure from the secret police is relentless, with arrests of activists and independent journalists. None of this happens in a vacuum. Russia, in particular, watches its backyard carefully and is in a better position to intervene today, with its coffers flush with oil money, than it was a decade ago. In practice, it mostly supports incumbent rulers and sees opposition groups as pro-west. With its 2008 election on the horizon, it does not want more revolts setting precedents. The US has been increasingly outspoken in supporting democracy in the former Soviet Union, setting aside earlier concerns about upsetting allies in the war against terrorism, including Mr Putin. The EU, mindful of Russiaâs role as an energy supplier, has been less assertive. But the east European new member states are pulling the union deeper into the post-Soviet space. Having intervened successfully in last yearâs Ukrainian crisis, the EU is developing a louder pro-democratic voice, especially on its borders. Next month sees the start of EU-funded radio and internet news programmes for Belarus. Television follows next year. Russian, US and EU diplomats insist they are not doomed to clash over democracy in the region. But they clashed resoundingly in Ukraine and it seems likely they will clash again. Steel auction may be the first and last of its kind At 11am on Monday, bidding is due to start in Ukraineâs first televised privatisation auction. On offer, with a starting price of nearly $2bn but likely to sell for much more, is Kryvorizhstal, the countryâs biggest steel mill. Among the bidders are Mittal Steel, the worldâs biggest producer, and Luxembourg-based Arcelor, which has joined forces with Industrial Union of the Donbass, a Ukrainian company, in a 60-40 joint venture. There is also a dark horse in the race: Smart Group, a smaller Ukrainian steel company controlled by Vadim Novinsky, a Russian businessman. He has connections with Alisher Usmanov, a Russian steel baron, although other backers, Russian or Ukrainian, may be involved. If the auction succeeds, as expected, it will bring Ukraineâs government much-needed money and an even more necessary morale boost. It is about more than just selling a steel mill. President Viktor Yushchenko told the FT recently: âWe really want to hold a showcase tender, to convince business and Ukrainian citizens of the nationâs potential.â Attracting foreign investment has been harder than Mr Yushchenko anticipated. He came to power amid western support and enthusiasm from western companies, which have long coveted Ukraineâs market of 47m people. But investors have had to wait longer than they expected for Mr Yushchenko to deliver economic reform and assurance that the rule of law would prevail. They were disappointed with the disputes in the government of Yulia Tymoshenko, sacked as prime minister last month. Foreign direct investment in the first half of this year came to just over $700m, about the same as in 2004. Business people, including Russians, have higher hopes for the administration of Yuri Yekhanurov, who replaced Ms Tymoshenko. An advisory committee of foreign investors met the president last week and got the impression that he understood the mistakes of his first nine months in office. Jorge Zukoski, president of Kievâs American Chamber of Commerce, says: âFor the first time, we were dealing with a very cohesive team who were all talking from the same page.â Mr Yushchenkoâs goal is to show that everything has changed since June 2004, when Mr Kuchma arranged an auction of Kryvorizhstal with such restrictive conditions that only favoured oligarchs could bid. Viktor Pinchuk, Mr Kuchmaâs son-in-law, and two businessmen linked to Viktor Yanukovich, the then prime minister, bought Kryvorizhstal for just $800m. Mr Pinchuk and his partners say the new government illegally confiscated their shares and have vowed to challenge todayâs auction in any court that will give them a hearing. The auction comes just days after Raiffeisen International, the eastern European arm of the Austrian banking group, completed its $1.03bn acquisition of Aval, Ukraineâs second-biggest bank. Other European banking groups are in advanced talks with targets including Ukrsotsbank and Ukrsibbank, the third- and fourth-largest Ukrainian banks. After receiving only $9bn in FDI since independence in 1991, Mr Yushchenkoâs government appears likely to bring in several billion dollars more within a few months. But outside steel and banking, the investment picture has improved only a little from the Kuchma era. Investors face demands for bribes and some officials still serve the interests of particular businessmen. The auction is likely to be the first and last of its kind. Mr Yushchenko originally intended to recover and resell more companies but now pledges that privatisation disputes will be settled by negotiation with owners, not in the courts. Where necessary, the shareholders will be asked to pay extra. | |
| Posted by:lotp |