The following article was published nearly 7 years ago when [then] PM Yulia Tymoshenko came under criticism from a right wing US think tank while at the same time Ukraine was under economic pressure from the Kremlin and their rising fuel price demands..
Terry E. Hallman
Monday, 23 May, 2005
On May 18, a mischievous and disingenuous article critical of Ukraine Prime Minister Yulia Tymoshenko’s new government appeared in Washington Post 1, an august, respected US newspaper that once had the temerity to publish investigative reports that brought down US President Richard M. Nixon in one of the darkest chapters in US history. The May 18 article was inappropriately titled “Betrayal of a Revolution”, written by Anders Aslund, director of the Russian and Eurasian Program at the Carnegie Endowment for International Peace.
The primary thrust of the article was to condemn review of corrupt privatization deals under Ukraine’s former, pre-revolutionary regime. According to Mr. Aslund, who enjoys a respectable bully pulpit due to his job title, most of the ills in new Ukraine’s economy are directed related to Prime Minister Tymoshenko’s management. He states, as an article of faith but without any corroborating evidence to demonstrate cause and effect versus mere correlation, that “economic growth is screeching to a halt as a result.” Peppering his criticism are words like “populist”, “socialist”, and “state capitalism” – suggesting, again as articles of faith and nothing more, that these are necessarily bad things that can only contribute to economic problems. Increasing pensions and salaries, to move workers and retirees a little further out of poverty-level income, were condemned as budget busters that Ukraine’s new government cannot afford – despite the fact that not doing so essentially guarantees perpetuation of graft and corruption. Elimination of graft and corruption, and raising the overall standard of living for ALL Ukrainians rather than a few insanely greedy oligarch clans, was the main underlying and implied reason for the Orange Revolution – at least from hundreds of people, activists and otherwise, I talked with on the ground during and after the Revolution. Further, as director for any sort of peace institute, Mr. Aslund is obliged to review the connection between poverty and peace. Peace does not and cannot exist for people in poverty, unless they are harshly suppressed by government or other forces. Poverty is a horrible existence and lifestyle, and is bound to breed violence, not peace.
Therefore, it is appropriate to question, how, precisely, fulfilling the very things that the revolution was about constitutes “betrayal of a revolution.” Betrayal would be to NOT take those actions.
Mr. Aslund comes across as an economic hit man. 2 I recently became a bit concerned about his grasp and representation of simple factual evidence in reading another article from him in Kyiv Post, “Aslund discusses Ukraine’s economy.” 3 Therein, he states at the start that “the Orange Revolution was not about economics…It was all about freedom, democracy, against corruption and for a Western choice, a European choice.” It’s only a matter of opinion, at best, as to whether the revolution was about economics: the whole point of freedom and democracy, as far as I could see and hear, assumed economic improvement as a result of freedom and democracy. If everyone in Ukraine had a nice home, a nice car, plenty of food, good income, good health care, there would have been no need for revolution – nor would there likely have been one. Too many people were being crushed by the old regime, their voices and opinions were rarely if ever listened to by an utterly corrupt government, and the only conceivable solution was freedom and democracy as an essential first step to change things. The “Western choice” was not about idealistic ideology, it was very pragmatic looking to superior economic standards common across Europe and the West. To say the revolution was not about economics is patently absurd.
Then, this question from KP: “A lot of people believe that capping gas prices is the wrong move for anybody who advocates market values. What do you think about that?” Aslund: “This is a small problem, but it’s not wrong.[PM Tymoshenko] is discussing a series of reforms and she is discussing cost, which is not what you should be discussing when you are discussing the oil price. You should discuss when you look at what’s happened to the world market price. World market prices are skyrocketing. Ukraine today has a petrol price which is about the same as in the US. In the US, there is no tax whatsoever on petrol. In Ukraine, there are significant taxes on petrol. And for Ukraine to have a vastly lower price is extraordinary, and to complain in this situation that Ukraine is subject to market monopoly manipulation just doesn’t make sense.”
In the Washington Post article, Aslund stated “The predominantly Russian oil companies have increased their prices as world market prices have risen. Tymoshenko has imposed strict price controls on gasoline and forced the remaining state oil companies to deliver it at prices below market levels. Not surprisingly, oil supplies have declined, and gasoline shortages have erupted.” This, despite him saying only three weeks earlier that Tymoshenko’s price controls are “not wrong.” Was he mistaken then, or is he mistaken now?
Further, the US does, indeed, tax petrol, and have done so for decades with the Federal Excise Tax on petrol. His statement to the contrary is simply wrong.
Regarding world oil market prices and Russian monopoly manipulation within Ukraine, “Russian crude oil is currently being sold to Ukraine at $340 per ton, compared to $318 for the same quality of Russian oil on other European markets. Moreover, Russian refiners have increased product prices on the Ukrainian market by approximately 30% since April.” 4
Meaning, of course, that despite fluctuations up AND down in world oil prices, Russia is especially targeting Ukraine with higher prices, and therefore costs, and is clearly manipulating Ukraine’s market. Worse, TNK-BP, a 49% British-owned oil company and one the dominant Russian oil companies in Ukraine, is engaging in these practices which can only be aimed at weakening and attempting to undermine Ukraine’s new democratic government. To be clear: a major Western oil company is intentionally trying to help undermine democratic government in Ukraine.
Tymoshenko is now on an economic hit list, and to a lesser extent President Yushchenko because he is playing the role of meek apologist for his Prime Minister, a woman who has the guts and spine to stand up, speak out, and do the right or wrong thing depending apparently on mood and time of month for critics like Aslund. The real, underlying reason for her attempted damnation, and to a lesser extent Yushchenko’s as long as he continues to apologize for Tymoshenko, gets straight to exactly what Aslund is complaining about in the more recent Washington Post piece. That is, Ukraine’s democratic government has the audacity to review and consider corrupt privatization deals, which robbed Ukrainian citizens time and again of any real financial benefit from companies that they, as state citizens, financed, bought, and paid for to start with. Tymoshenko’s greatest “crime”, for which she is now being castigated by economic hit men, is that she sees no crime in retaining control and therefore profits from lucrative state enterprises to benefit common Ukrainian people instead of private buyers who care nothing whatsoever for Ukraine or Ukrainians. Aslund counters with name-calling: “state capitalism”, “populist”, and worst of all at least in US vernacular, “socialist.” “Socialist” is a bad word in US politics, but not so bad in Europe – where Ukraine is heading, not to the US. He used those words in a US publication knowing very well the nasty impact they would have. This, in a country where at least one in six people live in poverty, and probably closer to one in four – if honest poverty statistics ever come to the fore. Moreover, it is a bit difficult to separate notions and condemnations of “state capitalism” from the US experience while companies like Halliburton are looting the US treasury, war profiteers are making out like bandits, all on a pack of lies for US going into Iraq to enable said profiteers to do exactly what they’re doing now at a cost to US taxpayers of more than one billion dollars per week. This is state capitalism in its blackest, most cynical form – with increasing poverty, tens of thousands of civilian deaths, while any shred of human decency is almost entirely removed from profiteering in an illegal and utterly fraudulent war in Iraq. 5
Such things should not matter excessively to Ukraine, except for getting out of the war in Iraq; withdrawal is underway now. I’ve said before, and say again, there is no crime or sin in a country using its own assets for the broadest benefit possible of all of its citizens. Citizens are the rightful owners. Condemnations to the contrary are fundamentally dishonest, by Mr. Aslund and anyone else. Mr. Aslund made no case whatsoever for any sort of cause and effect between what Ukraine’s new government is doing and how that affects the economy. Turning the corner against corruption to an honest, democratic government is bound to be a difficult transitional period. Not turning the corner, and letting sleeping dogs sleep in the way of corrupt assignations of huge state assets to criminals, is far worse. At the least, Tymoshenko is honestly trying, and if Yushchenko maintains his support and doesn’t leave her hanging, she will likely get it done. In the meantime, destructive noises from men with fancy, prestigious job titles should be taken for what they’re worth – nothing – and Ukraine should not cave in.
Finally, it is no accident that noise and criticism of Tymoshenko is building during the run-up to Yushchenko’s meeting with World Bank in mid-June – now headed up by one of the worst chickenhawks in the Bush cabal, Paul Wolfowitz. What will be discussed is US$1.5 billion in loans to Ukraine for 2005 for – poverty relief. What economic hit men will surely try to do is persuade Ukraine to give up lucrative state assets to private buyers – and thus lose most of that revenue base – in exchange for the “privilege” of borrowing billions of dollars and going into debt to Western governments, particularly the US. That’s the deal, and that is what and all is going on with most of this noise against Ukrainian Prime Minister Yulia Tymoshenko at this point in time. God forbid that she have the courage to do the right things for Ukraine. It is simply not done in many countries, including the US, which will likely be one of the main sources of vitriol against her in coming weeks and months unless her government relents on strong, progressive social policy and gives in to demands to give up lucrative state enterprises.
Someone is surely interested in the “betrayal of a revolution.” But, there is no credible evidence that it is Yulia Tymoshenko and her government, whereas there are more than enough grounds for suspicion towards outside troublemakers and profiteers, from both sides of the world.
1 Anders Aslund, Betrayal of a Revolution, Washington Post, http://www.washingtonpost.com/wp-dyn/content/article/2005/05/17/AR2005051701326.html
2 Sean Gonsalves, Economic Hit Men Endanger Security, http://www.commondreams.org/views05/0517-31.htm
3 Kyiv Post print edition, page 6, April 28, 2005.
4 Interfax-Ukraine, May 11, from Vladimir Socor, Ukraine Moving to Reduce Russian Monopoly on Oil Market, Eurasia Daily Monitor, May 18 2005, http://jamestown.org/edm/article.php?article_id=2369761
5 See in particular accounts of British Member of Parliament George Galloway’s dissembly of US government policy in Iraq:
The article is followed by a comment which describes the formation of TNK-BP, responding to a suggestion that we should boycott BP
I’d say that BP is complicit with Moscow’s (read: Kremlin’s) desire to undermine Ukraine’s new democratic government. I warned in one of my first posts here — my first post, I think — in early January that Russia is not finished with Ukraine. It isn’t just my opinion, and doesn’t take a genius to figure that out.
BP (British Petroleum) is, in my view, caught on the horns of a dilemma, although I do believe that BP is in position to ameliorate and ease considerably the economic war now undertaken by the Kremlin against Ukraine. It will be useful to review a bit of history here.
In 1999, in Tyumen Oblast, Russia, two main companies were producing crude oil. Those companies were Tyumen Oil (TNK), wholly Russian-owned, and Chernogorneft, in which BP held interest via ten percent ownership of Chernogorneft’s parent company Sidanko. Chernogorneft hit what from most accounts appeared to be a temporary and very minor cash-flow problem. TNK insiders close to local government managed to convert that problem into a court decision declaring Chernogorneft bankrupt — and therefore open to public auction. The auction was rigged such that only TNK’s paperwork was deemed satisfactory by the same court, and all other bidders were disqualified. TNK got Chernogorneft for a fraction of its market value, and for the lowest bid.
TNK took over Chernogorneft, stripping it clean of its previous owners, including BP. TNK assured Russian courts and government — Putin just coming to the fore at the time due to his assault on Chechnya — that they could make the new operation much more productive and profitable. The reason: a US Export-Import bank loan was ready and waiting to provide funding to ramp up production in the Chernogorneft/Sidanko oil fields. The loan would enable purchase of equipment needed to make that happen, from a US oil company, Halliburton, whose president was Dick Cheney. Cheney engineered the Ex-Im loan to enable TNK to develop property stolen from BP and other Sidanko shareholders.
The deal was so filthy that US Secretary of State Madeline Albright picked up on the furor, especially from BP, and blocked the Ex-Im loan to TNK. Cheney countered by lobbying his former colleagues on Capitol Hill in Washington, DC, to get enough votes to override Albright’s veto. In spring of 2000, against US administration’s wishes, the Ex-Im loan went through and the deal was done. TNK got the loan, developed stolen property with US money, and BP and other previous shareholders were out.
Except BP has very deep pockets, and fought furiously to recover its position. The case was at the time considered the test case for the future of business investment in all of Russia. Eventually, TNK and BP came to terms. BP agreed to (and did) invest more than six billion dollars into TNK in exchange for 49% ownership. Thus, TNK-BP.
Then, the arrest of Yukos oil’s president Mikhail Khodorkovsky in late 2003 for tax evasion caught everyone off guard. Oil and energy companies in Russia quickly came to understand that they must please the Kremlin, particularly Putin, to survive.
Now, the Kremlin has its sights set on Kyiv, to punish Ukraine for not electing Kremlin’s man Yanukovich. This is a different motivation than what the US side has up its sleeve, which is the same as it ever was: profiteering without conscience or ethics. Dick Cheney now sits at the helm in the US White House, directing Bush on what to do at almost every turn.
Ukraine’s new government is caught in a classic pincer move, where two forces intersect to slice apart a target at the intersection, unless the target capitulates to one side or the other. Moscow wants Ukraine’s new government out, as soon as possible, and will upset Ukrainians any way possible to turn them against their new government. Hence the oil price attack. Western interests want to buy Ukraine’s fattest assets, hence the condemnation by Western economic hit men against Ukraine’s new government due to Tymoshenko’s mere mention that some former state assets might be recovered from illegal deals and retained thereafter under state control for benefit of Ukrainian citizens. That is the sin for which she is being pilloried by some very influential Western interests.
Kryvorizhstal, by the way, is not the only company at issue here. It has simply become a prime example with considerable media exposure, with relatively large profits at stake. Yushchenko, as I understand, is preparing a full listing including 28 other companies up for privatization review. He and Tymoshenko are at odds over the number of deals that should be reviewed, and what to do with them if courts find the original private acquisitions (privatizations) to have been illegal. Yushchenko seems inclined to re-privatize them, whereas Tymoshenko is clearly inclined toward state ownership of at least some of them. This is no different than exactly what the US White House has said (but apparently never really meant) about Iraqi oil being the property of Iraqi citizens, with profits to be used for their benefit. Bush has said that throughout the Iraq War. Thus the US side in principle at least officially condones state-owned assets and enterprise for the benefit of any given state’s (nation’s) citizens. It’s on the record, hundreds of times, and is grounds enough to press the US side to back off pressuring re-sale of Ukraine’s former state enterprises, should they come once again under state control. “Others” will apply that pressure, which is what is visible now via such as Aslund’s comments.
Nevertheless, BP is in position to at least try and step up, do the right thing, and guarantee steady production at fair, non-punitive, prices in Ukraine. Doing so, however, would likely bring the wrath of the Kremlin immediately, and BP could end up being Yukos-ized, hammered to death and losing their huge investment. But, they chose to go to bed with the devil, and he doesn’t release his concubines easily, if at all. At the same time, Kremlin torpedoing BP would risk sending a death knell across Russia for foreign investment. Interesting potential stand-off, but BP can prevail and do the right thing if they insist, I believe. That, however, is very unusual in the course of conventional Western capitalism.
At the least, all things considered, boycotting BP might raise and publicize some very interesting issues and challenges — and I think such publicity might put Ukraine’s new government in a stronger position of moral authority, for whatever that might be worth versus the likes of current chiefs in Moscow and Washington when they don’t get what they want.
Terry E. Hallman was founder and director of People-Centered Economic Development