Article pp.119-141 du Vol.2 n°1 (2010)

(1)

The Consolidation of Ukrainian Business Clans

³ Par Viatcheslav Avioutskii

EDC-OCRE , Paris

Abstract

The Ukrainian business clans make up an informal governance system managing the relationship between politics and business. The clans are “embedded” into a complex network of informal relations permitting the conversion of capitals. The special characteristic of Ukraine is that the business clans were initially “embedded” into regional politics where they shaped the policy-making process. I will analyse the involvement of the business clans into politics of five regions (Dniepropetrovsk, Donetsk, Odessa, Poltava, and Volyn) and in Kiev (at the local level) and will propose different patterns of interaction adapted to each of these regions. © 2010 Lavoisier SAS. All rights reserved

Keywords: clans, business clans, informal politics, business / politics interaction, Ukraine, transition

Résumé

La consolidation des clans d’affaires ukrainiens. Les clans d’affaires ukrainiens constituent un système de gouvernance informel régissant les interactions entre la politique et les affaires. Ils sont « encastrés » dans un complexe réseau de relations informelles permettant la conversion de capitaux. La particularité de l’Ukraine consiste en ce que ces clans d’affaires ont été initialement

« encastrés » dans les politiques régionales où ils ont façonné les rivalités du pouvoir. L’article analyse l’intervention des clans d’affaires dans la politique dans cinq régions (Dniepropetrovsk, Donetsk, Odessa, Poltava et Volyn) et à Kiev (au niveau municipal) et propose différents modèles d’interaction adaptés à chacune de ces régions. © 2010 Lavoisier SAS. All rights reserved

Mots clés : clans, clans d’affaires, politiques informelles, interaction affaires – politique, Ukraine, transition

The networks of business clans can be viewed as an informal governance system, managing interactions between business and politics in Ukraine. The resource-based theory :HUQHUIHOW5XPHOWGHÀQHVÀQDQFLDOFDSLWDODVWKHUHVRXUFHVKHOGE\DÀUP

(2)

/LNHÀQDQFLDOFDSLWDOWKHSROLWLFDOFDSLWDORIEXVLQHVVSHRSOHFRXOGEHYLHZHGDVDKLJKO\

YDOXDEOHUHVRXUFHQHFHVVDU\IRULQÁXHQFLQJSROLF\PDNLQJSURFHVVHV$FFRUGLQJWR'DIW DQG%DUQH\'DIW%DUQH\ÀUPUHVRXUFHVLQFOXGH´DOORIWKHDVVHWVFDSDELOLWLHV RUJDQL]DWLRQDOSURFHVVHVÀUPDWWULEXWHVLQIRUPDWLRQNQRZOHGJHHWFFRQWUROOHGE\DÀUP WKDWHQDEOHWKHÀUPWRFRQFHLYHRIDQGLPSOHPHQWVWUDWHJLHVWKDWZLOOLPSURYHLWVHIÀFLHQF\

and effectiveness”. In order to perpetuate their business, business people inscribe their tran- VDFWLRQVZLWKSROLF\PDNHUVLQWRVRFLDOQHWZRUNVIUHTXHQWO\FDOOHG´FKDQQHOVIRULQÁXHQFHµ 7KLVSURFHVVLVOLNHO\WREHDQDO\]HGWKURXJK´HPEHGGHGQHVVWKHRU\µ:LOOLDPVRQ Ouchi 1980) stipulating that through these kinds of transactions, business people play the UROHRILQIRUPDOEURNHUVFRQVWDQWO\H[FKDQJLQJSRZHUE\WUDQVIRUPLQJÀQDQFLDOFDSLWDOLQWR SROLWLFDOFDSLWDODQGYLFHYHUVD$QGHUVVRQ%ODQNHQEXUJ+ROP-RKDQVRQ7KLVSDUDOOHO and hidden governance is one of the main features of Ukrainian politics and economics.

8NUDLQLDQEXVLQHVVJURXSVJHQHUDOO\FDOOHGLQ&,6´ÀQDQFLDODQGLQGXVWULDOJURXSVµQHHG WRDFWEH\RQGWKHWUDGLWLRQDOREMHFWLYHVRI:HVWHUQÀUPVVXFKDVLPSURYLQJSHUIRUPDQFH FRPSHWLQJIRUPDUNHWVKDUHVORRNLQJIRUSURÀWHWF,QIDFW8NUDLQLDQEXVLQHVVSHRSOH KDYHWREXLOGDVWDEOHDQGORQJWHUPUHODWLRQVKLSZLWKSROLWLFDOSRZHULQRUGHUWRLQÁXHQFH SROLF\PDNLQJSURFHVVHV8QOLNH´OLEHUDOFDSLWDOLVPµWKLVPRGHOKDVEHHQGHÀQHGDV´FODQ FDSLWDOLVPµ.RVDOVRU´QHWZRUNFDSLWDOLVPµ%RLVRW&KLOG2OHLQLN

Embedded in social networks, business clans are organized into an informal structure WKDW´GLVWULEXWHVµSRZHUWKURXJKULYDOULHVFRRSHUDWLRQDQGQHJRWLDWLRQV7KLVVWUXFWXUH FRXOGEHYLHZHGDVD´FRPPRGLW\H[FKDQJHµZKLFKHQDEOHVWKHH[FKDQJHRIVWUDWHJLF UHVRXUFHVEHWZHHQFODQV3DSSL.RQLJ´FKDQQHOVIRULQÁXHQFHµWKURXJKZKLFK SROLF\PDNLQJSURFHVVLVLQÁXHQFHGRUDQLQIRUPDO´GLVFXVVLRQIRUXPµWKHJRDORI ZKLFKLVWRÀQGORQJWHUPVROXWLRQVIRUFULVHVDQGFRQÁLFWVDQGRSSRVLQJEXVLQHVVFODQV 7KHDLPRIWKLVSDSHULVWRPRGHOWKHSURFHVVRIWKHWUDQVIRUPDWLRQRIÀQDQFLDOFDSLWDO LQWRSROLWLFDOFDSLWDOWKURXJK8NUDLQLDQLQÁXHQFHQHWZRUNV7KLVWUDQVIRUPDWLRQLVJHQHUDOO\

EHLQJPDGHWKURXJKVXFKGHYLDQWSUDFWLFHVDVFRUUXSWLRQXQGXHLQÁXHQFHSHGGOLQJDQGWKH funding of political parties. This last form is particularly important to understanding transitional societies. The funding of political parties is a relatively long-term activity (at least, it generally lasts for the same period in which a legislative body functions). This relationship may become formal if parties’ funders are elected MPs, mayors or appointed to high ranked administrative posts. The objective of business people involved in politics is to reduce the risks related to a KLJKO\YRODWLOHEXVLQHVVHQYLURQPHQWWKDWLVLQÁXHQFHGE\DFKDQJHDEOHSROLWLFDOIUDPHZRUN One of the main features of the Ukrainian party system is a well-entrenched regionalism, expressed in two ways. First, there are many regional political parties or blocs (for example,

´/D]DUHQNR%ORFµLQ'QLSURSHWURYVN´2XU2GHVVDµLQ2GHVVDDQG´&KHUQRYHWVN\%ORFµ DQG´.OLFKNR%ORFµLQ.LHY6HFRQGO\VRPH8NUDLQLDQSROLWLFDOSDUWLHVWKDWDUHQRWSUHVHQW in the Rada (SPU, Vitrienko Bloc, Viche) have made up deputies’ groups in legislative bodies on regional (Oblasna Rada) and municipal (Miska Rada) levels.

6LQFHWKHODWHVSULYDWHEXVLQHVVJURXSVKDYHFRQVLGHUDEO\LQFUHDVHGWKHLULQÁXHQFH RQWKH8NUDLQLDQHFRQRP\DQGSROLWLFV3XJOLVL5$FFRUGLQJWR$VOXQGWKHVHJURXSV EHFDPHVKLIWLQJIRUFHVGXULQJWKH2UDQJH5HYROXWLRQLQ%LJEXVLQHVVJURXSVVXF- ceeded in concentrating highly valuable assets by manipulating the results of privatization.

They control most Ukrainian private-run assets, along with two other types of big owners:

the state and foreign investors. The six largest business groups make up almost 18% of the

(3)

8NUDLQLDQ*'3¹)XUWKHUPRUHWKHZHDOWKRIWKHULFKHVW8NUDLQLDQEXVLQHVVSHRSOHLV greater than the Ukrainian annual budget.

Strategies of Ukrainian business groups could be analyzed through interaction with PDLQVWUHDPSDUWLHVDQGE\HVWDEOLVKLQJD´FKDQQHOIRULQÁXHQFHµOLQNLQJWKH´IXQGHUµ EXVLQHVVSHUVRQFDOOHG´ROLJDUFKµZLWKWKH´WDUJHWµSROLF\PDNHU7KLV´FKDQQHOIRU LQÁXHQFHµHQDEOHVWKHWUDQVIRUPDWLRQRIÀQDQFLDOFDSLWDOLQWRSROLWLFDOFDSLWDOFDSDEOHRI LQÁXHQFLQJSROLF\PDNLQJSURFHVVHV,WFRXOGEHVXSSRVHGWKDWWKHPRGHOVRIHPEHGGHGQHVV DUH´VKDSHGµE\WKHUHVRXUFHVZLHOGHGE\EXVLQHVVSHRSOH

7REHJLQZLWKWKHVL]HRIDVVHWVDQGWKHWXUQRYHUFRXOGVRPHKRZGHÀQHWKHDPRXQWRI WKH´FRQWULEXWLRQµWKHIXQGHULVFDSDEOHRISURYLGLQJWRWKH´WDUJHWµ$VDUXOHELJEXVLQHVV JURXSVIXQGPDLQVWUHDPSDUWLHV3DUW\RI5HJLRQV1816²2XU8NUDLQH²3RSXODU$XWR 'HIHQVH%ORF%<X7²<XOLD7\PRVKQNR%ORFZKLFKDUHJHQHUDOO\SUHVHQWLQWKHRada. Some regional business groups of lesser size are associated with big groups in funding mainstream parties, but they are involved mainly in regional politics, interacting with regional legislative ERGLHV2WKHUUHJLRQDOEXVLQHVVJURXSVKDYHHVWDEOLVKHG´FKDQQHOVIRULQÁXHQFHµZLWKUHJLR- nalist parties or with parties that are not present in the Rada. The relationship of these small EXVLQHVVJURXSVFRXOGEHYLHZHGDVDNLQGRI´SDWURQDJHµRQEHKDOIRIPDLQVWUHDPSDUWLHV

Secondly, besides the funding of electoral campaigns and of organizational party structures, WKHIXQGHUPLJKWH[FKDQJHKLVRZQSROLWLFDOFDSLWDOE\LQÁXHQFLQJWKHHOHFWRUDOEHKDYLRURI KLVZRUNHUVDQGORFDODXWKRULWLHV/DUJHFRPSDQLHVVXFKDV6&0,6'´,QWHUSLSHµ´3ULYDWµ DQG´)LQDQFHVDQG&UHGLWµHPSOR\KXQGUHGVRIWKRXVDQGVRIZRUNHUVLQWKHLUJLDQWSODQWVDUH frequently major employers in many towns and are also the main taxpayers to local budgets.

,WLVFOHDUWKDWWKHFDVKÁRZLQH[FKDQJHIRUSROLWLFDOLQÁXHQFHRQSROLF\PDNLQJLVQRWWKH RQO\W\SHRIWUDQVDFWLRQIRUZKLFKWKH´FKDQQHOIRULQÁXHQFHµKDVEHHQVHW7KHIXQGHUDQG his target are able to exchange political capital as well, making the relationship between them LQWHUDFWLYH6XEVHTXHQWO\PRVWEXVLQHVVSHRSOHRZQHUVRIPDMRULQGXVWULDODQGÀQDQFLDO DVVHWVDUHYLHZHGDVSROLWLFLDQVZLWKLQÁXHQFHDWUHJLRQDODQGHYHQQDWLRQDOOHYHOV

)LQDOO\WKHPRGHOLQJRIWKH´FKDQQHOIRULQÁXHQFHµGHSHQGVRQWKHQDWXUHRIVXSSRUWWKH IXQGHULVVHHNLQJ´SURWHFWLRQµRIKLVEXVLQHVVRQWKHQDWLRQDOOHYHOREWDLQLQJRIH[SRUWDWLRQ quotas; hidden support in privatizations, subsidies for the branch encompassing his business;

a recapitalization by the state of his bank; the harassment of his competitors; obtaining of DEXLOGLQJSORW«7KHQDWXUHRIVXSSRUWSURYLGHGE\WKHIXQGHUDOVRGHÀQHVWKHVWUXFWXUH RIWKH´FKDQQHOIRULQÁXHQFHµELODWHUDOFKDQQHORUPXOWLODWHUDOQHWZRUNDQGWKH´WDUJHWµ (law enforcement agencies, Rada, municipal council, minister, deputy-minister, member RI3UHVLGHQWLDO6WDII3ULYDWL]DWLRQ2IÀFH

This article seeks to study the embeddedness of business clans in relationships centered RQLQÁXHQFHDQGSRZHUQHWZRUNVRSHUDWLQJERWKUHJLRQDOO\DQGEH\RQGWRWKHFHQWUDOSRZHU 7KHVHLQÁXHQFHQHWZRUNVFRXOGEHHLWKHUIRUPDOHOHFWLYHRUQRPLQDWLYHSRVWZLWKYLVLEOHWLHV WRDQLQVWLWXWLRQDOL]HGSROLWLFDOIRUFHWKURXJKDIÀOLDWLRQZLWKDQHOHFWRUDOEORFSROLWLFDOSDUW\RU DGHSXW\·VJURXSLQDOHJLVODWLYHERG\RULQIRUPDOLQZKLFKDEXVLQHVVPDQUHPDLQVRIÀFLDOO\

1 SCM of R. Akhmetov - 6.20% of the GDP; “Privat” of I. Kolomoisky and of G. Bogolyubov - 3.27% ; ISD (Industrial Union of Donbass) of S. Taruta, V. Gayduk and O. Mkrtchan - 2.5% ; “Finances and Credit” of K. Zhevago - 2.4% ; “EastOne - Interpipe” of V. Pinchuk - 2.01% ; DCH d’A. Yarosla^vsky - 0.8%. Kontrakty, 20.06.2008, http://kontrakty.ua/content/view/3945/39/

2 TOP-50 samykh bogatykh ukraintsev, Korrespondent.net, http://files.korrespondent.net/projects/top50

(4)

RXWVLGHRIWKHSROLF\PDNLQJSURFHVVEXWLVHVWDEOLVKHGLQD´FKDQQHOIRULQÁXHQFHµZKLFKLV DFWLYHDQGRSHUDWLRQDOZLWKDSROLWLFDOIRUFHRUDFHQWUHRISRZHU$QH[DPSOHRIDIRUPDOLQÁX- HQFHQHWZRUNLVWKHVHWRIQHWZRUNVRSHUDWHGE\5$NKPHWRYFHQWHUHGRQWKH3DUW\RI5HJLRQV IRXQGHGE\DJURXSRI'RQHWVNEXVLQHVVPHQ$OOWKHPHPEHUVRIWKLVJURXSDUHHLWKHUGHSHQGHQW RQ$NKPHWRYRUOLQNHGWRKLP$QH[DPSOHRIDQLQIRUPDOQHWZRUNLV´FKDQQHOVIRULQÁXHQFHµ HVWDEOLVKHGE\,.RORPR\VN\ZLWK´RUDQJHµSROLWLFDOIRUFHV%<X7DQG´2XU8NUDLQHµ+LV networks also include some deputy-ministers, regional governors and high-ranked civil servants.

,QWKHFDVHRILQIRUPDOQHWZRUNVEXVLQHVVPHQFRXOGEHUHSUHVHQWHGE\´WKHLUµPHQLQOHJLVODWLYH bodies and administrative structures. These representatives generally execute the will of their

´FKLHIµ.RORPR\VN\.KPHOQLWVN\7KLVNLQGRIUHSUHVHQWDWLRQFDQDOVREHIRXQGLQIRUPDO QHWZRUNV)RUH[DPSOH5DLVD%RJDW\UHYDLVUHSUHVHQWLQJWKHLQWHUHVWVRI5$NKPHWRYLQWKH SNBOU. In this case, the tie is institutionalized, because Bogatyreva is a member of the PR.

,QIRUPDOQHWZRUNVDUHJHQHUDOO\PRUHÁH[LEOHWKDQIRUPDOQHWZRUNV7KHWUDQVDFWLRQVDUH XQLWDU\DQGDUHEHLQJQHJRWLDWHGFRQVWDQWO\7KHFDVKÁRZLVQRWSHUPDQHQWEXWLVOLQNHGWR ZHOOGHÀQHGHYHQWVHOHFWLRQFDPSDLJQVSDUW\FRQIHUHQFHSXQFWXDOIXQGLQJRIDUHJLRQDOSDUW\

branch). The support, provided by the target is also negotiated on every occasion. The relationship WKDWOLQNV,.RORPRLVN\DQG<X7\PRVKHQNRUHOLHVRQWKLVNLQGRIQRQVWRSQHJRWLDWLRQ%RWKDUH LQGHSHQGHQWRIHDFKRWKHULQDQ\FDVHPRUHLQGHSHQGHQWWKDQ9<DQXNRYLFKDQG5$NKPHWRY :HFDQVXSSRVHWKDWWKHUHVRXUFHVFRQWUROOHGE\WKHIXQGHUÀQDQFLDOSROLWLFDODQGVRFLDO FDSLWDOGHÀQHWKHUHODWLRQVKLSZLWKWKH´WDUJHWµDQGWKHEHKDYLRUDOFRGHRIWKH´FKDQQHOIRU LQÁXHQFHµ:HKDYHFKRVHQVHYHUDO8NUDLQLDQREODVWV'RQHWVN'QLSURSHWURYVN2GHVVD Poltava, and Volyn) and the city of Kiev, for which the political mappings are quite different.

We propose to study strategies of political embeddedness of Ukrainian businessmen by PRGHOLQJWKHLULQÁXHQFHQHWZRUNV

1. Dnipropetrovsk Oblast

Political elites of this oblast are well-known because of the very active role played in the interaction with and control of the central political power in Ukraine (so-called .XFKPDFODQDQGLQWKH8665VRFDOOHG%UH]KQHY·V'QLSURSHWURYVNFODQ)URPD historical point of view, the rise of both clans can be explained by the transformation of strategic industrial capital — the control of which was highly important in the context of a militarized Soviet political environment (military industrial complex) — into political capital (the control of the central power).

Both clans represented in the power regional structures were principally composed of directors of giant industrial plants who were very active in the pursuit of power and strong because of a long-term solidarity among their members. These groups relied on a strategic UHVRXUFHWKDWHQDEOHGWKHPWRLPSRVHWKHLUUHSUHVHQWDWLYHLQWKHFDSLWDO$IWHU/.XFKPD was elected, his clan split into several competing and hostile groups seeking to control UHVRXUFHVWKURXJKWKHSULYDWL]DWLRQSURFHVVDQGWKHFRQWURORIWUDGHÁRZVRLOJDV

3 There were “PrivatBank” group, Tymoshenko group, Derkach group, Presidential group, Pinchuk group in the yearly 2000. “Dnipropetrovsky klan”, Octobre 2001, Ukraina.ru, http://www.ukraine.ru/catalog/

groups/dnepropetr.html

(5)

Two powerful clans rose from this rough and intense competition: the

´3ULYDWµJURXS,JRU.RORPRLVN\EQ⁴ DQG*HQQDG\%RJRO\XERYEQZKLFK includes some mining and ferroalloys SODQWVWKHEDQN´3ULYDW%DQNµDQGPDQ\

other assets in different branches; and

´,QWHUSLSHµ9LNWRU3LQFKXN86EQ which includes several giant steel and SLSHSODQWVWKHEDQN´.UHGLW'QHSUµD PHGLDJURXSDQGDLUFRPSDQ\´$HURVYLWµ EDVHGLQ%RULVSLO$LUSRUW7KHYDOXHRI assets controlled by Pinchuk is estimated DW86EQ$FFRUGLQJWRWKHÀVFDODGPL- QLVWUDWLRQWKHFRQWULEXWLRQRI´3ULYDWµWR WKHEXGJHWRIWKHREODVWLVZKLOH WKDWRI´,QWHUSLSHµLV7ZRRXWVLGH groups are present in the region: SCM of 5$NKPHWRYDQG,6''RQHWVN ([SHUWVEHOLHYHWKDWWKHGRPLQD- WLRQRI'RQHWVNDQGWKH35OLQNHGEXVLQHVV is even larger, evaluating their part to be WRRIWKHUHJLRQDOHFRQRP\

7KHVHWZR'QLSURSHWURYVNFODQVVXSSRUWHGWZRFRPSHWLQJSROLWLFDOIRUFHVERWKRULJLQDWLQJ IURPWKLVUHJLRQ´,QWHUSLSHµHVWDEOLVKHGDFORVHWLHZLWKWKH3UHVLGHQW/.XFKPD93LQFKXN PDUULHGKLVGDXJKWHU´3ULYDWµFRRSHUDWHGZLWKWKH/D]DUHQNR²7\PRVKHQNRJURXSZKLFK FRQWUROOHGWKHJRYHUQPHQWIRUDSHULRGRIWLPHLQWKHV%RWK´,QWHUSLSHµDQG´3ULYDWµHVWD- EOLVKHG´FKDQQHOVIRULQÁXHQFHµHQDEOLQJWKHPWRWDNHKROGRIVRPHVWUDWHJLFLQGXVWULDODVVHWV :KHQ/D]DUHQNRDQG7\PRVKHQNRZHUHHYLFWHGE\/.XFKPDIURPWKHJRYHUQPHQW´3ULYDWµ FKRVHWRVXSSRUW<XOLD7\PRVKHQNRZKRZDVFRQVLGHUHGPRUHSURPLVLQJ

'XULQJWKHRUDQJHUHYROXWLRQ´3ULYDWµVXSSRUWHGWKH´RUDQJHµVLGHZKLOH´,QWHUSLSHµ ZDVZLWK/.XFKPDDQG9<DQXNRYLFK,QZKLOH<X7LPRFKHQNRZDVWKHKHDG RIWKHJRYHUQPHQW´3ULYDWµVXFFHHGHGLQVWUHQJWKHQLQJLWVSRVLWLRQE\VWRSSLQJWKH H[SDQVLRQRIWKH'RQHWVNFODQ:KHQ7\PRVKHQNROHIWWKHJRYHUQPHQW,.RORPRLVN\

VWDUWHGVKDULQJKLVVXSSRUWZLWK%<X7⁸DQG´2XU8NUDLQHµ7KHFKLHIRIWKH3UHVLGHQWLDO

4 All the figures related to the estimated fortunes of Ukrainian business people stem from the sources of 2008, the only available source estimating the fortunes of most regional business people of Ukraine.

Kommentarii, http://www.comments.com.ua/?art=1210594596

5 This group has been recently restructured into a holding “EstOne”

6 Levy Bereg, 18-24.04.2008, http://www.new-most.info/stories/2704/2710.htm

7V. Pavlenko, “Zakat dnepropetrovskogo klana”, Oligarh.net, 12.07.2004, http://www.oligarh.net/?/

actually/3437/print/

8 It seems that “Privat” would have two MPs, within the BYuT parliamentary group, Andrey Portnov and Valery Pisarenko.

Source: Dnipropetrovska Oblasna Rada, http://oblrada.dp.ua/

Source: Miska Rada Dnipropetrovska, http://dniprorada.gov.ua/

(6)

Staff, V. Baloga, originating from the Carpatian Bukovina, then established a close LQIRUPDOWLHZLWK´3ULYDWµ

7KLVUHODWLRQVKLSHQDEOHGWKHLPSODQWDWLRQRI´3ULYDWµLQZHVWHUQ8NUDLQHWKURXJKVXSSRUW RIDKLJKO\VWUDWHJLFSURMHFWLQZKLFKWKHGLUHFWLRQRIWKHRLOSLSH´2GHVVD%URG\µZDVUHYHUVHG VXSSO\LQJ$]HULRLOVKLSSHGWKURXJK*HRUJLDDQGWKH%ODFN6HD3RODQGDQGRWKHU(DVW(XURSHDQ FRXQWULHV$WWKHVDPHWLPH,.RORPRLVN\ZDQWHGWRSURYLGHRLOWRWZRUHÀQHULHVWKDWKHKDG purchased in western Ukraine and had practically shut down because of a lack of Russian oil. From a Ukrainian point of view, this project should reduce the dependence in hydro-carbons supplies IURP5XVVLD7KHFRPPLWPHQWRI´3ULYDWµWRWKLVSURMHFWUHLQIRUFHGLWVOLQNVZLWK9<XVKFKHQNR :KHQ<X7\PRVKHQNRZDVDSSRLQWHG3ULPH0LQLVWHULQVKHRSSRVHG9<XVKFKHQNR DQGVWDUWHGFULWLFL]LQJ´3ULYDW·VµFORVHWLHVZLWK9%DORJDZKROHIWKLVSRVWRIFKLHIRI 3UHVLGHQWLDOVWDIILQDQGIRXQGHGKLVRZQSDUW\´8QLWHG&HQWHUµ'XULQJWKLVSHULRG the center of power moved slowly from the President to the Prime Minister. Thus, I.

.RORPRLVN\UHHVWDEOLVKHGKLVIXOOUHODWLRQVKLSZLWK<X7\PRVKHQNR%RWKVHHPHGWRQHHG HDFKRWKHU´3ULYDWµZDVVHHNLQJWKHVXSSRUWRIWKH3ULPH0LQLVWHULQSULYDWL]DWLRQVLPSRVHG E\WKH,0)2EOHQHUJRV8NU7HOHFRP2GHVVD&KHPLFDO6HD3RUW3ODQWLQ<X]KQ\ZKLOH WKH%<X7QHHGHGIXQGLQJIRUWKHSUHVLGHQWLDOFDPSDLJQRQEHKDOIRI,.RORPRLVN\

7KHGHIHDWRIKLVPDLQSURWHFWRULVRODWHG93LQFKXNIURPWKHZLQQLQJ´RUDQJHµSROLWLFDO SDUWLHVDQGIURPWKH35ZKLFKFRQVLGHUHG.XFKPDDWUDLWRU0RUHRYHU5$NKPHWRYZDVFRP- SHWLQJZLWK´,QWHUSLSHµEHFDXVHERWKJURXSVKDGEHHQSURGXFLQJSLSHVPDLQO\IRUWKH5XVVLDQ PDUNHW6XEVHTXHQWO\3LQFKXNKDVUHOLHGRQKLVWLHVZLWKVRPHLQÁXHQWLDOPHPEHUVRIWKHVWDWH administration, promoted by L. Kuchma in the 1990s. They have been replacing at a very slow SDFHDQGWKHVHKLJKUDQNLQJFLYLOVHUYDQWVHQDEOHG´,QWHUSLSHµWRWDFNOHWKHDWWDFNODXQFKHGE\

´3ULYDWµRQ1LNRSRO)HUURDOOR\V3ODQWFRRZQHGE\ERWK'QLSURSHWURYVNJURXSV7KLVUHVRXUFH FRXOGEHGHÀQHGDVD´UHWURLQÁXHQFHµZKLFKZDVKHOSIXOIRURWKHU.XFKPD´SURWpJpVµVXFK DV.KDUNLYEXVLQHVVPDQ$<DURVODYVN\3LQFKXNWULHGWRPDNHDWLPLGFRPHEDFNLQWRSROLWLFV E\IXQGLQJWKHUHODWLYHO\PDUJLQDOSDUW\´9LFKHµZKLFKIDLOHGWRJDLQDFFHVVWRWKH5DGDLQWKH HOHFWLRQV´5HWURLQÁXHQFHµFRXOGEHGHÀQHGDVWKHLQÁXHQFHKHOGE\DIRUPHU3UHVLGHQW RQSROLF\PDNLQJWKURXJKDQLQIRUPDOSRZHUQHWZRUNHVWDEOLVKHGZKHQKHZDVLQRIÀFH

%RWK'QLSURSHWURYVNFODQVFKRVHVWUDWHJLFPDLQO\H[SRUWLQJEUDQFKHV´3ULYDWµ²IHU- URDOOR\V´,QWHUSLSHµ²ODUJHVL]HSLSHV+RZHYHUERWKJURXSVGLGQ·WVXFFHHGLQJDWKHULQJ XQGHUWKHLUFRQWURODOO8NUDLQLDQDVVHWVRIWKHVHEUDQFKHV,QSURGXFLQJSLSHV´,QWHUSLSHµ is competing with SCM, which owns Khartyzsk Pipes Plant. In producing ferroalloys, both groups are competing with each other over the control of Nikopol Ferroalloys Plant.

)URPDVWUDWHJLFSRLQWRIYLHZ´3ULYDWµWHQGVWRUHPDLQDXWRQRPRXVLQWKHÀQDQFLQJ RILWVRZQLQGXVWULDODVVHWV,.RORPRLVN\UHIXVHGWRVHOO´3ULYDW%DQNµLQVSLWHRILQVLVWHQW proposals from foreign investors; while V. Pinchuk seems to have left banking by selling his

´8NU6RWV%DQNµWKHUHPDLQLQJ´.UHGLW'QHSUµLVQG8NUDLQLDQEDQN´,QWHUSLSHµKDV EHFRPHPDLQO\DQLQGXVWULDOJURXSZKLOH´3ULYDWµLVVWLOODÀQDQFLDOLQGXVWULDOJURXS%DQNLQJ LVVWLOORQHRIWKHFRUHDFWLYLWLHVRI´3ULYDWµEHFDXVH´3ULYDW%DQNµLVWKHODUJHVW8NUDLQLDQ bank. It has been internationalizing its assets by opening branches in Russia, Georgia and /DWYLD0RUHRYHU´3ULYDWµFRQWUROVDQLPSRUWDQWSDUWRI8NUDLQLDQRLOUHÀQHU\SODQWVDQGLV YHU\DFWLYHLQWUDQVSRUWDWLRQDJULFXOWXUHDQGWKHVHDSRUWVVHFWRU$WWKHVDPHWLPH´3ULYDWµ has been accumulating ferroalloys plants around the world in order to create an international FRQJORPHUDWH,QGHHGWKH.RORPRLVN\·VJURXSFRQWUROVRIWKHJOREDOIHUURDOOR\V·SUR-

(7)

GXFWLRQ,QDGGLWLRQWRLWV8NUDLQLDQSODQWVLWRZQVIHUURDOOR\DVVHWVLQ$XVWUDOLD5RPDQLD 3RODQG*HRUJLD86$DQG*KDQD´3ULYDWµVROGLWVVWHHODQGFRNHDVVHWVWRWKH5XVVLDQJLDQW VWHHOPDNHUFRPSDQ\´(YUD]µOLVWHGLQ/RQGRQDQGEHFDPHLWVPLQRULW\VKDUHKROGHU +DYLQJLQWHUQDWLRQDOL]HGPRUHWKDQRILWVDVVHWV´3ULYDWµKDVGLYHUVLÀHGLWVULVNVDQG VXFFHHGHGLQPLQLPL]LQJWKHLPSDFWRIWKHZRUOGÀQDQFLDOFULVLVRQLWVDFWLYLWLHV

7KHVWDELOLW\RI´3ULYDWµFDQEHDWWULEXWHGWRLWVSHUPDQHQWDGDSWDWLRQWRDYRODWLOHSROL- WLFDOFRQWH[WDQGWRLWVORQJWHUPWLHVZLWK´RUDQJHµSDUWLHVWKDWKDYHGRPLQDWHG8NUDLQLDQ politics for the last several years. In fact, beyond funding these political parties, this group is also viewed as being capable of barring the expansion of Russian business groups into Ukraine’s economy and internal politics.

7KHPRGHORIHPEHGGHGQHVVRI´3ULYDWµDQG´,QWHUSLSHµVLQFHKDVUHOLHGRQLQIRUPDO LQÁXHQFHQHWZRUNVZLWKRXWYLVLEOHWLHVWRDGHÀQLWHSROLWLFDOIRUFH7KHOHDGHUVRIWKHVHJURXSV do not have formal posts in administration and do not belong to legislative bodies. In the case RI´3ULYDWµWKLVPRGHOLVEDVHGRQFRQVWDQWQHJRWLDWLRQDQGRQDQH[FKDQJHRIFDSLWDO7KLV ÁH[LELOLW\LVGXHWRDFHUWDLQSROLWLFDOSOXUDOLVPRIWKHREODVWZKHUHGRPLQDQWEXVLQHVVJURXSV and political parties do not exist.

2. Donetsk Oblast

8QOLNH'QLSURSHWURYVNREODVW'RQHWVNREODVWLVGRPLQDWHGPDLQO\E\RQHSROLWFDOIRUFH 3DUW\RI5HJLRQVDQGE\RQHEXVLQHVVJURXS6&06&0LVRZQHGE\5$NKPHWRY 86EQRIVKDUHVDQGKLVZLIH

(8)

/LNH´3ULYDWµ6&0FRQWUROVWKHDOODVSHFWVRIVWHHOPDNLQJPLQLQJFRNHDQGPHWDO- OXUJ\7KHJURXSDOVRLQFOXGHVEDQNV´'RQJRUEDQNµ´VW,QWHUQDWLRQDO8NUDLQLDQ%DQNµ VHDSRUWDFWLYLWLHVPDFKLQHU\EXLOGLQJSODQWVDQGHOHFWULFLW\JHQHUDWLQJIDFLOLWLHV'7(.

Other activities include beer-making, wireless telephones, media, real estate, agriculture, transportation and involvement in the pharmaceutical industry. SCM is the largest Ukrainian EXVLQHVVJURXSZLWKGLYHUVLÀHGDFWLYLWLHV7KURXJKLQIRUPDOQHWZRUNLQJDQGPLQRULW\

VKDUHKROGLQJV$NKPHWRYFRQWUROVPRVWPLGGOHVL]HGDVVHWVVLWXDWHGLQWKHREODVW(YHQLI KLVJURXSLVJHQHUDOO\FRQVLGHUHGWREH'RQHWVNEDVHG6&0LQFOXGHVPDQ\DVVHWVLQWKH 'QLSURSHWURYVN/XKDQVNDQG=DSRUL]KLDREODVWVLQ.LHYLQ&ULPHDDQGWKURXJKPLQRULW\

shareholding, in some Western-Ukrainian oblasts.

0RVW'RQHWVNEXVLQHVVPHQDUHOLQNHGWR$NKPHWRYWKURXJKWKHLUEXVLQHVVHV)XUWKHUPRUH VRPHRIWKHPDUHGHSHQGHQWRQKLP$OORWKHUFODQVFDQEHGLYLGHGLQWRWZRPDLQJURXSV DXWRQRPRXVEXVLQHVVFODQVRUVRFDOOHG´WUDYHOOLQJFRPSDQLRQVµWDNLQJSDUWLQWKHSROLWLFDO SURMHFW´3DUW\RI5HJLRQVµDQGLQGHSHQGHQWEXVLQHVVFODQVRU´GLVVLGHQWVµVXSSRUWLQJRWKHU SDUWLHV638´RUDQJHµSDUWLHV7KH´WUDYHOOLQJFRPSDQLRQVµLQFOXGHVWKH(QHUJRJURXS RI9LNWRU1XVHQNLVPZKLFKKDVEHHQLQD´VORZLQJGRZQµSKDVHWKHJRYHUQRU9 /RJYLQHQNRPWKHIRUPHU$WWRUQH\*HQHUDO*9DVLOLHYDQGKLVEURWKHU$9DVLOLHY PWKHEURWKHUV$QGUH\DQG6HUJH\.O\X\HYP8NUSRGVKLSQLNWKHEURWKHUV 9DOHQWLQDQG9ODGLPLU/DQG\NP´1RUGµDQGWKHFODQRI1LNROD\<DQNRYVN\

P´6WLUROµ:LWKWKHH[FHSWLRQRI´(QHUJRµDOORWKHUEXVLQHVVJURXSVDUHQRWGLUHFW competitors of SCM, dealing rather in bearings (Klyuyev brothers), fertilizers and polymers

´6WLUROµRI<DQNRYVN\UHIULJHUDWRUVDQGUHIULJHUDWLRQPDFKLQHU\´1RUGµRI/DQG\N 7KH´GLVVLGHQWµFDWHJRU\FRPSULVHVWKH ,6'JURXSDQG9ODGLPLU%R\NREQ (Steel Plant of Mariupol named after Ilich – 00.,,6',QGXVWULDO8QLRQRI'RQEDVV LVFRQWUROOHGE\67DUXWDEQ9*D\GXN EQDQG20NUWFKDQP6LQFH ,6'KDVVXSSRUWHGWKH´RUDQJHµIRUFHV while V. Boyko is viewed as a main funder of the SPU and a former SPU MP.

7KHRSSRVLWLRQRI,6'DQG9%R\NRWRWKH Party of Regions stems from the strong com- SHWLWLRQRIWKHVHWZREXVLQHVVJURXSVZLWK6&0$OOWKUHHEXVLQHVVJURXSVDUHVWHHOPDNHUV +LVWRULFDOO\6&0ZDVIRXQGHGDVDUHVXOWRIWKHVSOLWWLQJRI,6'DPRQJLWVIRXQGHUV7DUXWD DQG*D\GXNIURPRQHVLGHDQGWKHLUEDQNHU'RQJRUEDQN$NKPHWRY:KHQLQWKH\HDUO\

VWKHSURMHFW´3DUW\RI5HJLRQVµZDVODXQFKHGE\9<DQXNRYLFKDQG5$NKPHWRY,6' KDYLQJEHHQDVVRFLDWHGZLWK/.XFKPDEHJDQWRVXSSRUWWKH´RUDQJHµRSSRVLWLRQEHFDXVH RI6&0·VDWWHPSWVWRHYLFW,6',QDVLPLODUFRQWH[W9%R\NRZKRZDVIDFLQJQRQVWRS DWWDFNVIURP00.,RQEHKDOIRIWKH$NKPHWRYFODQEHJDQIXQGLQJWKH6387UDGLWLRQDOO\

WKHVHDSRUWDQGLQGXVWULDOFLW\RI0DULXSROKDVRSSRVHG'RQHWVNZLWKLQWKHREODVW

8QOLNHWKHKLGGHQDQGLQYLVLEOH´FKDQQHOVIRULQÁXHQFHµRI,.RORPR\VN\WKHLQYROYH- PHQWRI5$NKPHWRYLQSROLWLFVLVGLUHFWDQGIRUPDO7KH35ZDVIRXQGHGLQRUGHUWRDFKLHYH DZHOOGHÀQHGREMHFWLYH3ULPH0LQLVWHU9LNWRU<DQXNRYLFK·VYLFWRU\LQWKHSUHVLGHQWLDO

Source: Donetska Oblasna Rada, http://sovet.donbass.

com/m1/ru/

(9)

election. The PR is the largest Ukrainian party, based on a stable regional electorate (South and East of the country). Nevertheless, the PR has been transforming into a nation-wide party, with increasing representation in regional legislative ERGLHVLQZHVWHUQ8NUDLQLDQREODVWV=DNDUSDWWLD

&KHUQLYWVL=K\WRP\U7HUQRSRO9LQQ\WVLD 6LQFH5$NKPHWRYKDVEHHQD35 03+HLVEHOLHYHGWRFRQWURODOPRVWDKDOIRI the members of the PR group in the Rada (a KDOIRI03VRURIWKHWRWDOQXPEHU RIWKH03V+LVLQÁXHQFHLQSROLF\PDNLQJ is so overwhelming that even his opponents are bound to appoint his representatives to high-ranking posts in the state administration.

For example, R. Bogatyreva, who is close to 5$NKPHWRYZDVDSSRLQWHGFKLHIRI61%28 E\9<XVKFKHQNR7KLVLVFRQVLGHUHGDNLQG of a parallel government in Ukraine. The QRPLQDOOHDGHURIWKH359<DQXNRYLFKLV in fact supported by only a very small circle of party members.

7KH35ODUJHO\GRPLQDWHVWKHUHJLRQDODQGPXQLFLSDOOHJLVODWLYHERGLHVLQ'RQHWVN REODVWRIVHDWVLQWKH5HJLRQDO&RXQFLOLQWKH'RQHWVN0XQLFLSDO&RXQFLO LQWKH0DULXSRO0XQLFLSDO&RXQFLOLQWKH0DNH\HYND0XQLFLSDO&RXQFLO LQWKH.UDPDWRUVN0XQLFLSDO&RXQFLO7KHUHDUHDOWHUQDWLYHSROLWLFDOIRUFHVRQO\LQ .UDPDWRUVN%<X7²DQGLQ0DULXSRO638²$OOWKHRWKHUIRUFHVDUHJHQHUDOO\

political allies of the PR, which succeeded in appointing its representatives to all the elec- tive or nominative posts (governor, mayors, president of the Regional Council etc.). The 35KDVPRQRSROL]HGWKHHQWLUHSROLF\PDNLQJSURFHVVZLWKLQWKHREODVWDQGLQÁXHQFHVWKH national policy-making processes. This dominance is due to the peculiar features of SCM assets. SCM is one of the main Ukrainian exporters and taxpayers to the national budget.

'RQHWVNREODVWLVWKHVRXUFHRIRIDOO8NUDLQLDQH[SRUWV

0RUHRYHUPRVW6&0SODQWVRUVRFDOOHG´WRZQVWUXFWXULQJµHQWHUSULVHVDUHDPRQJ WKHPDLQHPSOR\HUVRIFHUWDLQWRZQVIRUH[DPSOH'RQHWVN0DNH\HYND<HQDNL\HYR Kramatorsk). They usually have dozens of thousands of employees, who strengthen the embeddedness of the group in the oblast. SCM is the only big employer in such towns RIWKH'RQHWVNREODVWDV.XUDNKRYR=XJUHVDQG.LURYVNR\HEXWDOVRLQRWKHUUHJLRQV 3DYORJUDG7HUQRYNDDQG3HUVKRWUDYHQVNRIWKH'QLSURSHWURYVN2EODVWDQG6VKFKDVWLH of the Luhansk Oblast).⁹ When SCM is the main taxpayer to the municipal budget, it KHDYLO\LQÁXHQFHVWKHEHKDYLRXURIWKHORFDODXWKRULWLHVDVLVWKHFDVHLQ.UDPDWRUVN ZKHUH1.0=SODQWRI6&0LVVLWXDWHG

9 Pavlogradskie Novosti, 11 juillet 2007, http://pavlonews.info/news/categ_2/14315.html Source: Miska Rada Donetska, http://www.donetsk.

org.ua/

Source: Miska Rada Mariupolia, www.marsovet.org.ua/

(10)

There is a tie between the number of workers in a plant, the proportion of these workers within the whole labor force of the city, and the voting results in the municipal elections.

This is particularly visible in the case of MMKI (Mariupol), controlled by V. Boyko, who IXQVWKH6387KLVJLDQWSODQWKDVZRUNHUVUHSUHVHQWLQJRIWKHZKROHODERU IRUFHRIWKHFLW\RI0DULXSRO7KH638KROGVRIVHDWVLQWKH0DULXSROPXQLFLSDO FRXQFLO7KHUHVXOWVRIYRWLQJDUHVWURQJO\LQÁXHQFHGE\6&0WKH35DQGWKHLUDOOLHV7KH relationship between the chiefs of SCM, the directors of plants, the local high- ranking civil servants, and the population could be viewed as patronage. The PR promotes state social responsibility, a very popular issue among the people of the highly industrialized regions of the Eastern Ukraine.

,6'GRHVQRWKDYHDODUJHHOHFWRUDOEDVHEHFDXVHWKH´RUDQJHµ%<X7LVRQO\SUHVHQW LQWKH.UDPDWRUVNPXQLFLSDOFRXQFLOZKHUHWZR,6'SODQWVDUHVLWXDWHG*HQHUDOO\

VSHDNLQJ,6'QRZKDVPRUHDVVHWVRXWVLGHRI'RQHWVNREODVW$OFKHYVNRIWKH/XKDQVN 2EODVWDQG'QHSURG]HU]KLQVNRIWKH'QLSURSHWURYVN2EODVWWKDQZLWKLQLW$QRWKHUH[SOD- QDWLRQIRUWKLVODFNRIDQHOHFWRUDOEDVHLVWKHIDFWWKDWWKHWLHZLWKWKH´RUDQJHµIRUFHVLV TXLWHFRPSOLFDWHGDQGKHVLWDQW)RUH[DPSOHLQ,6'IXQGHGDQHZHFRORJLVWSDUW\(NR ZKLFKIDLOHGWRJHWLQWRWKHRadaEXWWKLVSDUW\LVSUHVHQWLQWKH$OFKHYVNPXQLFLSDO FRXQFLO$IWHUWKLVIDLOXUH9*D\GXNVHHPVWRKDYHEHFRPHFORVHUWRWKH%<X79*D\GXN FRXOGEHYLHZHGDVWKHPDLQOREE\LVWIRUWKHJURXSLQ.LHY,QKHZDVDQ(QHUJ\

PLQLVWHUDQGDYLFHPLQLVWHULQWKHWLPHRI/.XFKPD(QKHZDVDSSRLQWHGE\9

<XVKFKHQNRWRWKHSRVWRIWKHKHDGRIWKH61%28,QKHZDVDSSRLQWHGWRKHDGWKH JURXSRIFRXQVHORUVWRWKH8NUDLQLDQJRYHUQPHQWE\<X7\PRVKHQNR3UREDEO\EHFDXVH

(11)

RIWKHFRQVWDQWSUHVVXUHRI6&0,6'SXUFKDVHGPDQ\DVVHWVDEURDGLQ+XQJDU\3RODQG ,WDO\8]EHNLVWDQ1LJHULD5XVVLDDQGWKH8$((YHQLI,6'LVVWLOOFRQVLGHUHGD'RQHWVN based group, it has externalized its assets within Ukraine and abroad.

SCM represents a model regional political embeddedness. This model is based on direct control of a political party and on open involvement in policy-making. This involvement is effected through strong pressure, resulting from the monopolistic position of the PR in WKHREODVWDQGLWVVWURQJSROLWLFDOLQÁXHQFHLQQDWLRQDOSROLWLFV$NKPHWRY·VJURXSLVOHVV LQWHUQDWLRQDOL]HGWKDQ´3ULYDWµRU´,6'µ6&0KDVJRWVRPHPLQRUVWHHOPDNLQJDVVHWVLQ the UK, Italy and Bulgaria, and some hotels in Turkey). SCM avoids purchasing assets in 5XVVLDEHFDXVHRISRWHQWLDOFRQÁLFWLQ8NUDLQLDQ5XVVLDQUHODWLRQV7KHUHIRUHWKH'RQHWVN group has kept expanding its base within Ukraine (purchase of Ukrainian steel-making DVVHWVRIWKHJURXS´6PDUWµRI91RYLQVN\

3. Odessa Oblast

8QOLNHWKHÀUVWWZRREODVWVDQDO\]HGSROLWLFVDQGEXVLQHVVDUHPXFKPRUHIUDJPHQWHG in the Odessa region. Eight political forces are present in the regional council, sharing between 4% and 41% of seats. The Odessa municipal council is controlled by two parties:

WKH35DQG´2XU2GHVVDµEORFKHDGHGE\WKHPD\RURI2GHVVD(*XUYLWV RQHRIWKHOHDGHUVRIWKH´2XU8NUDLQHµ7KHFKDLURIWKHUHJLRQDOFRXQFLOLVFRQWUROOHGE\

WKH35ZKLOHWKH´2XU8NUDLQHµFRQWUROVWKHFLW\RI2GHVVD

Several business groups are active LQWKHREODVWWKHJURXS´3ULPRUL\Hµ RI/HRQLG.OLPRY03RIWKH 35,PHNVEDQN)&´&KHUQRPRUHWVµ construction); the family of Kruk, DVVRFLDWHGZLWK%<X7VHDSRUWDFWL- YLWLHVLQ2GHVVDDQG´<X]KQ\µWKH JURXS´3DQNRPµDVVRFLDWHGZLWK WKH´18µLWVRZQHULVDQH[03RI WKH´18µDQGWKHFKLHIRIWKHUHJLR- QDOEUDQFKRIWKHEORF´1816µ the Grinevetsky brothers, associa- WHGZLWKWKH´/LWYLQ%ORFµ6HUJH\

*ULQHYHWVN\LVD03RIWKH´/%µ Valery Grinevetsky owns a wheat stevedoring company in the Odessa Seaport), who are close to the brother of V. Litvin, Petr Litvin, the chief of WKH8NUDLQLDQ$UP\LQWKH6RXWKHUQ 'LVWULFWEDVHGLQ2GHVVD

,QFRPSDULVRQZLWK'RQHWVNDQG 'QLSURSHWURYVNWKHUHDUHQRVLJQLÀ- cant industrial assets in Odessa oblast,

Source: Odesska Oblasna Rada, www.oblrada.odessa.gov.ua/

Source: Miska Rada Odesy, http://www.odessa.ua/ua/council/

(12)

H[FHSWIRUWKH´2GHVVD6HDSRUW&KHPLFDO3ODQWµ´<X]KQ\µZKLFKLVJRLQJWREHSULYD- WL]HG7KUHHVHDSRUWV2GHVVD,OLFKHYVNDQG´<X]KQ\µDUHLWVPDLQVWUDWHJLFUHVRXUFH 7KXVRXWVLGHUVDQGORFDOEXVLQHVVJURXSVDUHÀJKWLQJIRUFRQWURORIWKHVHVHDSRUWV0RUH WKDQDKDOIRIWKH8NUDLQLDQVHDIUHLJKWWUDIÀFSDVVHVWKURXJKWKHVHWKUHHVHDSRUWV2GHVVD

´<X]KQ\µDQG,OLFKHYVN7KHSRUWVDUHRZQHGE\WKHVWDWH and are real motors for the private sector of the oblast, which is dominated by transit and shipping activities. Control of the seaport has become the central stake of local politics.

7ZRW\SHVRIFRQÁLFWVWRRNSODFHLQWKHREODVW·VVHDSRUWVFRQÁLFWVRSSRVLQJSULYDWH RSHUDWRUVDQGWKHVHDSRUWFKLHIDQGFRQÁLFWVRSSRVLQJIRUPHUDQGFXUUHQWVHDSRUW FKLHIVZLWKWKHDFWLYHSDUWLFLSDWLRQRIWKH7UDQVSRUW0LQLVWU\6LQFHDVXFFHVVLRQRI VXFKFRQÁLFWVKDVEHHQXQIROGLQJLQWKHSRUW´<X]KQ\µ7KHNH\SOD\HUVLQWKHVHFRQÁLFWV KDYHEHHQWKHFKLHIRIWKHSRUW<XUL.UXNZKRVHIDWKHULVD%<X703DQGRQHRIWKH ODUJHVW8NUDLQLDQSULYDWHRSHUDWRUVZRUNLQJLQWKHSRUW´7UDQVLQYHVWVHUYLFHµ7KLVÀUP LVRZQHGSDUWO\E\$OH[H\)HGRU\FKHYD5XVVLDQEXVLQHVVPDQHVWDEOLVKHGLQ0RQDFR Under a very strong pressure on behalf of the Kruk clan, supported by the Prime-Minister

<X7\PRVKHQNR´7UDQVLQYHVVHUYLFHµUHOLHGRQWKH35PRUHSUHFLVHO\RQWKH.O\X\HY FODQRI´8NUSRGVKLSQLNµZKLFKFRQWUROOHGWKHVWDWHDJHQF\´8NUPRUSRUWµWKDWRYHUVHHV VHDSRUWDFWLYLWLHVIRUWKHJRYHUQPHQW$WWKHVDPHWLPHWKLVSULYDWHRSHUDWRUHVWDEOLVKHG FORVHWLHVZLWKWKH2GHVVDPD\RU(*XUYLWVRIÀFLDOO\RQHRIWKHOHDGHUVRI´2XU8NUDLQHµ EXWLQIDFWUHSUHVHQWLQJDQDXWRQRPRXVSROLWLFDOIRUFHDOOLHGWRWKHSDUW\RI<XVKFKHQNR

$QRWKHUNH\SOD\HU´3ULYDWµZKLFKLVDVVRFLDWHGZLWKWKH´RUDQJHµSDUWLHVDQGKDVEHHQ FRQVWUXFWLQJDWHUPLQDOLQWKH´<X]KQ\µSRUWKDVEHHQLQGLUHFWO\LPSOLFDWHGLQWKLVFRQÁLFW

(13)

7KLVVFHQDULRFDQEHYLHZHGDVDQH[DPSOHRIW\SLFDOEXVLQHVVFRQÁLFWVLQWKLVREODVW EDVHGRQWKHFRQWURORIWUDQVLWUHVRXUFHV/DFNLQJWKHLURZQ´KHDY\µLQGXVWULDOUHVRXUFHV local business groups are mobilizing outside regional political forces, which are in fact VXEJURXSVDQGVXEFODQVFRQQHFWHGWRPDLQVWUHDPSROLWLFDOSDUWLHV´3ULYDWµDQG.UXNV VXEFODQVLQWKH%<X7*XUYLWV·VVXEFODQLQ´2XU8NUDLQHµ.O\X\HY·VVXEFODQLQWKH PR). Some local key players avoid connection with only one clan, exploiting the clans’

oppositions within political parties and between them.

$QRWKHUSROLWLFDOHOHPHQWRI2GHVVDEXVLQHVVFODQSROLWLFVLVWREHORQJWRGLIIHUHQW and sometimes antagonistic political parties at the same time. For example, the brothers

$OH[H\DQG%RULV0X]DORYPZKRRZQDUHJLRQDOUHWDLOHU´7DYULD9µEHORQJWR WZRGLIIHUHQWSDUWLHV$0X]DORYLVDQ´2XU2GHVVDµ´2XU8NUDLQHµPHPEHURIWKH Regional Council, while B. Muzalov is a SPU member of the same council and the chief RIWKHUHJLRQDOEUDQFKRIWKLVSDUW\$QRWKHUH[DPSOHLVWKDWRIWKHEURWKHUV*ULQHYHWVN\

6*ULQHYHWVN\LVD´/LWYLQ%ORFµ03ZKLOHKLVEURWKHU9DOHU\KDVEHHQOLQNHGWRWKH3DUW\

RI*UHHQVDVVRFLDWHGZLWKWKH.UXNFODQ%<X77KLVODWWHUUHODWLRQVKLSPLJKWKDYHEHHQ VLJQLÀFDQWZKHQ9*ULQHYHWVN\ZDVDXWKRUL]HGWREXLOGDWHUPLQDOLQWKH´<X]KQ\µSRUW controlled by the Kruk family.

$QRWKHUIHDWXUHRIUHJLRQDOFODQSROLWLFVLVWKHFRQVWDQWDQGLQFUHDVLQJLQYROYHPHQWRIWKH Ukrainian Ministry of Transport, which has traditionally monitored and managed the seaports.

In fact, the seaports have always been quite autonomous despite the fact that they are owned E\WKHVWDWHWRZKLFKWKH\DUHRIÀFLDOO\DFFRXQWDEOH7ZRIRUPHU7UDQVSRUW0LQLVWHUV1LNROD\

5XGNRYVN\638DQG-RVHSK9LQVN\IRUPHU63803SDVVHGWR%<X7

²EHFDPHLQYROYHGLQWKHVHFRQÁLFWV-9LQVN\DOVRDFWHGWKURXJKKLVWZRGHSXWLHV, Urbansky and V. Rabotnev, who had their own private interests in the sea-transport business DQGLQWKHVHDSRUWV)RUH[DPSOHLQ9LQVN\ÀUHGWKHFKLHIRI´<X]KQ\µSRUW*HQQDG\

9DVVLOLHYVXSSRUWHGE\WKH.O\X\HYVXEFODQRIWKH35DQGDSSRLQWHGLQVWHDGKLVSURWpJp

<X.UXNZKRLVDVVRFLDWHGZLWK%<X7/DWHU9LQVN\DQGKLVWZRGHSXWLHV8UEDQVN\DQG 5DERWQHYVXSSRUWHGWKH.UXNFODQDJDLQVWWKHSULYDWHRSHUDWRURIWKH´<X]KQ\µSRUW,Q-XQH 9LQVN\8UEDQVN\DQG5DERWQHYZHUHÀUHGE\<X7\PRVKHQNR

The model of Odessa oblast is based on the direct involvement of the secondary business clans, linked to mainstream parties, in regional politics. Furthermore, the local clans tend WREHORQJVLPXOWDQHRXVO\WRGLIIHUHQWSDUWLHVEXLOGLQJ´EULGJHVµEHWZHHQWKHPDLQSROLWLFDO IRUFHV7KHORFDOEXVLQHVVFODQVUHO\RQWKHFRQWURORIWUDQVLWÁRZVDQGQRWRQWKHRZQLQJ of industrial assets.

4. Volyn Oblast

Since 1991, the intellectual and business elites of western Ukrainian have been shaping Ukrainian ideology, thus providing cultural and symbolic capital to the Ukrainian ruling teams. Representatives of the Ukrainian West are viewed as wardens of national values and have been incorporated into the government and the presidential staff. One recent example LV9LNWRU%DORJDRULJLQDOO\IURP%XNRYLQDZKRZDVDSSRLQWHGE\9<XVKFKHQNRWRWKH SRVWRIWKHKHDGRI3UHVLGHQWLDOVWDII,Q²EHIRUHKHZDVÀUHGKLVLQÁXHQFHRQ national policy-making was extremely strong.

(14)

Volyn oblast is an example of a typical western Ukrainian region. The

´RUDQJHµSDUWLHVKDYHEHHQGRPLQDQW LQWKH5HJLRQDO&RXQFLO%<X7² RIVHDWV´2XU8NUDLQHµ²DQG in the municipal council of Lutsk

%<X7 ² ´2XU 8NUDLQHµ ² 7KHPRVWLQÁXHQWLDOUHJLRQDO EXVLQHVVFODQVDUHWKH´&RQWLQLXPµ JURXSRI,<HUHPH\HYP/LWYLQ

%ORF´3ULYDWµDVVRFLDWHGZLWK9

%DORJD´2XU8NUDLQHµWKHQ´8QLWHG

&HQWHUµWKHJURXS´8NUSURPLQYHVWµRI33RURVKHQNR´2XU8NUDLQHµWKH%<X7JURXS VWUXFWXUHGDURXQGWKHSUHVLGHQWRIWKH5HJLRQDO&RXQFLO$QDWRO\*ULWV\XNLQFOXGLQJ9

*DYULOLVKLQRI´=DNKLGLQNRPEDQNµDQG$6YLULGDPRI´9RO\QKROGLQJµ The peculiar feature of this oblast LVWKDWDQRXWVLGHDFWRU´3ULYDWµLV among the leading key players in UHJLRQDOSROLWLFV´3ULYDWµKDVKHOSHG another outsider, V. Baloga, to establish KLVRZQ´FKDQQHOIRULQÁXHQFHµLQWKH IRUPRIDWULDQJOH'QLSURSHWURYVN² Kiev – Lutsk. Elsewhere in western Ukrainian, Privat purchased two stra- WHJLFUHÀQHU\SODQWV´1DIRWNKLPLN Prikarpatia” in the Ivano-Frankivsk 2EODVWDQG´*DOLFKLQDµLQWKH/YLY oblast. The current governor of the REODVWLVEHOLHYHGWRKDYHEHHQDSSRLQWHGWKDQNVWR´3ULYDWµDQG9%DORJD,WVHHPVWKDW WKHPD\RURI/XWVN%6KLEDDQGKLVGHSXWLHV9'PLWU\XNDQG6.UDYFKXNDUHDOVRXQGHU

´3ULYDWµFRQWURO

Source: Volynska Oblasna Rada, http://www.volynrada.gov.ua/

Source: Miska Rada Lutska, http://www.lutsk.ua/

(15)

7KH´&RQWLQLXPµJURXSRLOSURGXFWVUHWDLOHUPLONLQGXVWU\RUJDQL]HGLWVLQÁXHQFH QHWZRUNVE\HVWDEOLVKLQJWLHVZLWKVHYHUDOSROLWLFDOSDUWLHV,Q²WKHJURXSFKDLU- PDQ,JRU<HUHPH\HYWRRNDQDFWLYHSDUWLQSROLWLFVZKHQKHEHFDPHDGHSXW\RI9/LWLYLQ LQWKH´/LWYLQ%ORFµ%HFDXVHRIWKHIDLOXUHRIWKHEORFLQWKHHOHFWLRQV<HUHPH\HY OHIWSROLWLFVEXWNHSWFORVHOLQNVZLWK/LWYLQHOHFWHGSUHVLGHQWRIWKH5DGDLQ$WWKH VDPHWLPH<HUHPH\HYLVFRQVLGHUHGWRKDYHFORVHWLHVZLWK<XOLD7\PRVKHQNR7KHJURXS LVOLQNHGWR´2XU8NUDLQHµWKURXJKRQHRIWKHVHFRQGDU\EXVLQHVVSDUWQHUV3HWU'\PLQVN\

/YLYDQG1LNROD\.DWHULQFKXNOHDGHURIWKH(XURSHDQ3DUW\DQGDQ´2XU8NUDLQHµ03

$QRWKHUEXVLQHVVSDUWQHURI<HUHPH\HYLV6WHSDQ,YDNKLQZKRZDVDVVRFLDWHGZLWKWKH

´/LWYLQ%ORFµDVZHOO7KHWKLUGEXVLQHVVSDUWQHURIWKHJURXSLV6HUJH\6ODEHQNRFXUUHQW FKLHIRIWKHJURXSRIGHSXWLHVRI´2XU8NUDLQHµZLWKLQWKH5HJLRQDO&RXQFLOIRUPHU´2XU 8NUDLQHµ036ODEHQNRPLVNQRZQWRKDYHDJRRGUHODWLRQVKLSZLWKWKH3UHVLGHQWLDO 6HFUHWDULDWDQGZLWKWKH=KHYDJREURWKHUVRIWKHJURXS´)LQDQFHVDQG&UHGLWµDVVRFLDWHG ZLWKWKH%<X7

8NUSURPLQYHVWRI33RURVKHQNRRZQVDQDXWREXVSODQW/8$=´%RJGDQµ&RUSRUDWLRQ LQ9RO\QREODVW7UDGLWLRQDOO\3RURVKHQNRKDVUHPDLQHGFORVHWR´2XU8NUDLQHµDQG9

<XVKFKHQNR7KHPRGHORIHPEHGGHGQHVVRIZHVWHUQ8NUDLQLDQVHHQLQ9RO\QREODVWLV based mainly on (1) a privileged relationship with the central power through representatives RIWKH:HVWLQ.LHY3RURVKHQNR%DORJDHWFDVWUDWHJLFDOOLDQFHZLWKDQRXWVLGHFODQ

´3ULYDWµDQGLWVHPEHGGHGQHVVLQORFDOSROLWLFVWKURXJKGLYHUVLÀHGSROLWLFDODOOHJLDQFH

(16)

´©/LWYLQ%ORFµ´2XU8NUDLQHµDQG%<X7,QVSLWHRIWKHWUDGLWLRQDOGRPLQDQFHRIWKH

´RUDQJHµSDUWLHVLQZHVWHUQ8NUDLQLDQLQWKH35VXFFHHGHGLQHQWHULQJLQWRVRPH UHJLRQDODQGPXQLFLSDOERGLHVZKLOH'RQHWVNEXVLQHVVJURXSVSXUFKDVHGVRPHDVVHWVLQ WKLVUHJLRQ)RUH[DPSOHWKH´$9.µJURXSRI9$YUDPHQNRPDVVRFLDWHGZLWKWKH 35RZQVDFRQIHFWLRQHU\SODQWLQ0XNDFKHYR=DNDUSDWWLDREODVWWKHPXQLFLSDOFRXQFLO of which contains an important group of PR deputies (18%).

5. Poltava Oblast

From a political point of view, the oblast could be considered a border territory between the central and southern Ukraine. There is no single political party dominating the Regional

&RXQFLO%<X7²RIVHDWVWKH35²´2XU8NUDLQHµ²WKH638²WKH .38²DQG´/LWYLQ%ORFµ²7KLVSROLWLFDOIUDJPHQWDWLRQOHGWRWKHIRUPDWLRQRIDQ RULJLQDOUXOLQJFRDOLWLRQPDGHXSRI%<X7WKH35DQG´2XU8NUDLQHµ5HJLRQDOSRZHULV VKDUHGDPRQJWKHVHSDUWLHVWKH35KROGVWKHFKDLURIWKH5HJLRQDO&RXQFLO%<X7KROGVWKH SRVWRIPD\RURI3ROWDYDFLW\DQG´2XU8NUDLQHµFRQWUROVWKHSRVWRIUHJLRQDOJRYHUQRU

There are two big business groups based in the oblast:

´)LQDQFHV DQG &UHGLWµ RI .

=KHYDJREQDQG´.HUQHOµRI

$9HUHYVN\P%RWKJURXSV KDYHEHHQDVVRFLDWHGZLWK%<X7 through the engagement of their owners, who have been elected

%<X703V.=KHYDJRLVEHOLH- ved to have been one of the major IXQGHUVRI%<X7

In the course of their political FDUHHUVERWKEXVLQHVVPHQKDYHPRYHGIURPRQHSDUW\WRDQRWKHU$9HUHYVN\KDVEHHQDQ 03VLQFH$WÀUVWKHEHORQJHGWRWKHSDUOLDPHQWDU\JURXS´8QLWHG8NUDLQHµ WKHQWRWKHGHSXWLHV·JURXS´(XURSHDQ&KRLFHµ,QKHPRYHGWRWKHJURXS

´8NUDLQH·V5HJLRQVµ356LQFHKHKDVEHHQD%<X703.=KHYDJRVWDUWHGZLWK WKHGHSXWLHV·JURXS´6ROGDULW\µDQGWKHQPRYHGWRWKHJURXS´(XURSHDQ&KRLFHµ ,QKHMRLQHGWKHJURXS´8NUDLQH·V5HJLRQVµ35,QKHPRYHGWRWKH JURXS´5HIRUPVDQG2UGHUµ,QWKHSDUW\´5HIRUPVDQG2UGHUµMRLQHG%<X7

,QWKHV$9HUHYVN\KDGWLHVWR the SPU through his father, who was a UHSUHVHQWDWLYHLQWKH3ROWDYDREODVWRI$

Moroz. The SPU networks helped him FRQQHFWZLWKWKHUHJLRQDO´FKDQQHOVIRU LQÁXHQFHµ6LQFHWKHV9HUHYVN\

has been linked to the mayor of Poltava,

$QGUHw0DWNRYVN\%<X7HOHFWHGLQ ZKRSUHYLRXVO\KHDGHGWKH)LVFDO

$GPLQLVWUDWLRQRI3ROWDYD0DWNRYVN\LV

Source: Poltavska Oblasna Rada, http://www.oblrada.pl.ua/

Source: Miska Rada Poltavy, http://www.meria.poltava.ua/

(17)

DOFORVHWR´©3ULYDWµFORVHWR´2XU8NUDLQHµDQG%<X7EHFDXVHLQ²KHZDV GHSXW\FKDLUPDQRIWKHUHJLRQDOEUDQFKRI´3ULYDW%DQNµ

Verevsky created a vertical agro-industrial holding, specialized in producing and expor- WLQJVXQÁRZHURLODQGJUDLQ+LVDJURLQGXVWULDODVVHWVDUHVLWXDWHGPDLQO\LQWKH3ROWDYD DQG.KDUNLYREODVWV+HDOVRRZQVDJUDLQWHUPLQDOLQ,OLFKHYVNVHDSRUW9HUHYVN\EHORQJV WRWKH5DGDFRPPLWWHHIRU$JULFXOWXUHDQG/DQG5HODWLRQVDQGLVFRQVLGHUHGDPRQJWKH PRVWLQÁXHQWLDOSROLF\PDNHUVLQDJULFXOWXUHLQWKH8NUDLQLDQ3DUOLDPHQW,Q² ZKHQWKHJRYHUQPHQWLQWURGXFHGH[SRUWDWLRQTXRWDVIRUVXQÁRZHURLOKHREWDLQHGPDMRU quotas, to the detriment of his competitors, and expanded his share in the national market.

7KHVWUDWHJLFDVVHWVRIWKH´)LQDQFHVDQG&UHGLWµJURXSRI.=KHYDJRDUHEDVHGLQWKH 3ROWDYDREODVWWKHPLQLQJIDFLOLW\´3ROWDYVN\*2.µDQGWKHDXWRPRELOHSODQW´$YWR.UD]µ +RZHYHUKHRZQVRWKHUDVVHWVRXWVLGHRIWKHREODVWLQ=KLWRPLU%HUGLFKHY/XKDQVN 6WDNKDQRY.KPHOQ\WVN\L.DPHQHWV3RGROVN.KHUVRQ'QLSURSHWURYVN=KHOW\H9RG\

'RQHWVN0DULXSRO=DNDUSDWWLD8]KJRURG&ULPHD6LPIHURSRO.HUFKDQG.LHY$EURDG KHFRQWUROVDIHUURDOOR\VSODQWLQ0DFHGRQLD7KLVJHRJUDSKLFGLYHUVLÀFDWLRQRIDVVHWVLV SDUWRIKLVSROLWLFDOHPEHGGHGQHVVVWUDWHJ\EHFDXVHKHKDVEHHQWUDQVIRUPLQJ´)LQDQFHV and Credit” from a regional group into national corporation.

7KH3ROWDYDPRGHOUHOLHVRQÁRDWLQJSROLWLFDODIÀOLDWLRQDQGRQDQH[SDQVLRQRIWKHRULJLQDO UHJLRQDOEDVH%RWKEXVLQHVVPHQFKDQJHGWKHLUSROLWLFDODIÀOLDWLRQVHYHUDOWLPHVEHFDXVHRIWKH VWURQJSUHVHQFHRIRXWVLGHEXVLQHVVJURXSV´3ULYDWµ7$6RI7LJLSNR$OH[DQGHU6DYFKXNWKDW pressured local businessmen, as well as of the traditional weakness of regional political elites.

(18)

6. City of Kiev.

Traditionally, control of the Ukrainian capital is considered a strategic advantage in WKHÀJKWIRUWKHFHQWUDOSRZHU$WWKHVDPHWLPHWKHEDODQFHRISRZHULQWKHFLW\GHSHQGV strongly on changes within the central power. For the last ten years, the political chessboard of the city has changed considerably. This evolution can be divided into three major phases.

In the late 1990s, a so- FDOOHG ´.LHY FODQµ GRPL- nated local politics. It was structured around the FC

´'LQDPR.LHYµDQGOHGE\

the brothers Igor and Grogory 6XUNLVPDQG9LNWRU 0HGYHGFKXNP2WKHU members of this business clan ZHUH % *XEVN\ P 9=LQFKHQNR''YRUNLV 9 =JXUVN\ P , 3OX]KQLNRY<X/\DNKDQG<X.DUSHQNR%HVLGHVWKH)&'LQDPR.LHYWKHFODQKROGV assets in metallurgy, shipyards, sugar industry, electricity generating facilities, media, banking, oil and gas branch, and beverages. Under Kuchma, V. Medvedchuk had a successful SROLWLFDOFDUHHU+HZDVWKHFKDLUPDQRIWKH6'38R²FKDLUPDQRIWKH5DGD WKHFKLHIRIWKH3UHVLGHQWLDO6WDII7KH6'38SDUW\ZDVDSROLWLFDODUPRIWKH .LHYFODQ+RZHYHULQWKHFODQVSOLWZKLOHLQWKH6'38FRXOGQRWHQWHUWKH 5DGD7KHHOHFWRUDOEORF´1H7DNµWRZKLFKWKHSDUW\EHORQJHGREWDLQHGOHVVWKDQRI YRWHV6RPHPHPEHUVRIWKHFODQZHUHLQFRUSRUDWHGLQWRWKH´RUDQJHµSDUWLHV)RUH[DPSOH

%*XEVN\HQWHUHG%<X7DQGZDVHOHFWHGWRWKH5DGD2WKHUPHPEHUVVXFKDVWKH6XUNLV brothers, left politics, while Medvedchuk tried to return to national politics either through WKH35RUE\QHJRWLDWLQJZLWK%<X7

,QDQRWKHULQÁXHQWLDOEXVLQHVVJURXSWRRNWKHSODFHRIWKHHYLFWHG.LHYFODQ7KLV JURXSZDVPDGHXSRISHRSOHZKRVXSSRUWHGWKH´2UDQJHµUHYROXWLRQWKHPD\RURI.LHY

$OH[DQGHU2PHOFKHQNR<XUL<HNKDQXURYZKRZDVWKH3ULPH0LQLVWHULQ DQG9ODGLPLU3RO\DFKHQNRPRI´.LHYJRUVWUR\µ+RZHYHUDIWHUWKHGLVPLVVDORI

<HNKDQXURYDQGWKHHOHFWRUDOIDLOXUHRI2PHOFKHQNRLQDQRWKHUEXVLQHVVFODQWRRN SRZHULQWKHFDSLWDO,WLVOHGE\WKHQHZPD\RURI.LHY/HRQLG&KHUQRYHWVN\P DVVRFLDWHGZLWK´2XU8NUDLQHµ

The balance of power within the Municipal Council is favorable to Chernovetsky:

´&KHUQRYHWVN\%ORFµZKLFKLQLQFRUSRUDWHG´2XU8NUDLQHµGHSXWLHVQXPEHULQJ RIVHDWVLVRSSRVHGWRWKH%<X7JURXS2WKHUJURXSVDUH´.OLFKNR%ORFµ .OLFKNRLVDPDMRUFKDOOHQJHURI&KHUQRYHWVN\´/LWYLQ%ORFµ.LHY&LYLO

$FWLI²*$.WKH35DQG´.DWHULQFKXN%ORFµ&KHUQRYHWVN\LVDPHPEHU RIWKH&KLVWLDQ/LEHUDO3DUW\EXWKHLVDVVRFLDWHGZLWK´2XU8NUDLQHµ,QKHZDV DFDQGLGDWHLQWKHSUHVLGHQWLDOHOHFWLRQVDQGVXSSRUWHG<XVKFKHQNRLQWKHVHFRQGURXQG Since he was elected Kiev mayor, Chernovetsky has been slowly moving from business

Source: Miska Rada Kiiva, http://kmr.gov.ua/

(19)

WRSROLWLFV,QKHVROGWKHEDQN´3UDYHNVµZKLFKZDVWKHFRUHDVVHWRIKLVEXVLQHVV JURXS+HLVUXQQLQJFLW\KDOOZLWKKLVVRQLQODZ96XSUXQHQNRZKLOHKLVVRQ6WHSDQLV in charge of the business group. Major posts in the city administration are held by those FORVHVWWR&KHUQRYHWVN\7KH%<X7JURXSLQWKH0XQLFLSDO&RXQFLOLVPDGHXSRIUHSUH- sentatives and partners of B. Gubsky, considered a major funder of the Tymoshenko party in Kiev municipal elections.

´.OLFKNR%ORFµKDVEHHQIXQGHGPDLQO\E\/HY3DUWVNKDODG]HFRUSRUDWLRQ´VWFHQ- WXU\µDQGKLVEXVLQHVVSDUWQHU$QGUH\0LUJRURGVN\ZKRKDGEHHQHOHFWHGGHSXWLHVRIWKH Municipal Council.

7KURXJKWKHGHSXW\PD\RU0LNKDLO*ROLWVD´/LWYLQ%ORFµLVOLQNHGWR93RO\DFKHQNRRI

´.LHYJRUVWUR\µ*ROLWVDZKRLVLQFKDUJHRIWKHFLW\DGPLQLVWUDWLRQRIODQGLVVXHVVHHPVWR have been lobbying on behalf of the business interests of Polyachenko’s construction com- SDQ\$IWHUORVLQJWKHVXSSRUWRIWKHSUHYLRXVPD\RUWKH´2XU8NUDLQHµ0393RO\DFKHQNR ZDVTXLFNO\LQFRUSRUDWHGLQWRLQÁXHQFHQHWZRUNVLQ.LHYSROLWLFV*$..LHY&LYLO$FWLI is quite an original electoral bloc because it was founded by two businessmen, Vassily .KPHOQLWVN\PDQG$QGUH\,YDQRYPZKRRZQDODUJH.LHYEDVHGKROGLQJ

´.LHY,QYHVW*URXSµEDNHU\SODQWVJDVZDWHUDQGKHDWLQJGLVWULEXWLRQEDQNLQJ7KHLU RULJLQDOHPEHGGHGQHVVPRGHOFDQEHGHÀQHGDVQRPDGLFLQWKHVHQVHWKDWWKHVHEXVLQHVV- men are constantly moving from one geographical area to another and from one political network to another. In this way, they adapt themselves to a changing business and political context. In the yearly 1990s, both started their business activities in Ukraine and then moved to Russia, where they secured and accumulated their starting capital. In the late 1990s, they FDPHEDFNDQGVXFFHHGHGLQSULYDWL]LQJWKHVWHHOPDNHU´=DSRUR]KVWDOµ=DSRUL]KLD2EODVW

$IHZ\HDUVODWHUWKH\VROGLWDQGPRYHGWR.LHYZKHUHWKHLUPDMRUDVVHWVDUHQRZVLWXDWHG

$IWHUWKH´RUDQJHµUHYROXWLRQWKH\HQWHUHG%<X77KXV.KPHOQLWVN\ZDVHOHFWHGD%<X7 03ZKLOH,YDQRYEHFDPHD%<X7GHSXW\LQWKH.LHY0XQLFLSDO&RXQFLO+RZHYHUVLQFH WKHLUEXVLQHVVJURXSKDVEHHQXQGHUVWURQJSUHVVXUHIURP/&KHUQRYHWVN\

$WWKHVDPHWLPH5$NKPHWRYSXUFKDVHGVRPHHOHFWULFLW\JHQHUDWLQJIDFLOLWLHVLQ.LHY DQGEHFDPHDFRPSHWLWRURI´.LHY,QYHVW*URXSµ,YDQRYDQG.KPHOQLWVN\ZHUHWKHQXQGHU double pressure and the balance of power was not in their favor because their business depended on Chernovetsky (city administration is an important shareholder of their group) DQGRQ$NKPHWRYKLVHQHUJ\JHQHUDWLQJIDFLOLWLHVDUHLQDQXSVWUHDPSURYLGLQJWKHHOHF- WULFLW\WRWKHLUKROGLQJ,QWKLVQHZFRQWH[WLQERWKEXVLQHVVPHQOHIW%<X7,YDQRY ZDVLQFRUSRUDWHGLQWR´&KHUQRYHWVN\%ORFµXQWLOWKHPXQLFLSDOHOHFWLRQVRIZKLOH Khmelnitsky was elected a PR MP. This maneuver simultaneously stooped the attack from

&KHUQRYHWVN\DQG$NKPHWRY,Q.KPHOQLWVN\DQG,YDQRYIRXQGHGDQHOHFWRUDOEORF

*$.ZLWKRXWDQ\SHFXOLDUSURJUDPDQGIXQGHGLWVHOHFWRUDOFDPSDLJQ1DWXUDOO\WKLVEORF EHFDPHRQHRIWKHDOOLHVRI&KHUQRYHWVN\ZLWKLQWKH0XQLFLSDO&RXQFLO+RZHYHUWKLVWLPH LWZDV7\PRVKHQNRZKRVWDUWHGDQHZDWWDFNRQ´.LHY,QYHVWPHQW*URXSµ1HYHUWKHOHVVWKH balance of power within the Municipal Council allowed Khmelnitsky and Ivanov to resist.

In a certain way, this business group embodies a Kiev model, founded on a central symbolic resource. This resource depends strongly on the balance of power between the mayor, the President and the Prime Minister, which is continually changing. This could explain the geographic and political nomadism of many Kiev-based businessmen, who are JHQHUDOO\RXWVLGHUV'=KYDQLDIURP*HRUJLD/&KHUQRYHWVO\IURP.KDUNLY$'HUNDFK

(20)

IURP'QLSURSHWURYVN$6ORERG\DQIURP7HUQRSRO)6KSLJIURP&KHUQLKLY9DVVLOL

*RUEDOIURP/YLYHWFDQGDUHNQRZQWRKDYHEHHQH[WUHPHO\ÁH[LEOHLQRUGHUWREHFRPH established in the capital’s politics.

Conclusion

The analysis of interactions between the centers of power and business clans in Ukraine has revealed complex networks managing constant transactions between the private sector and the state. Using explanatory models of relationships between the regions and the centre, as well as within regions, this analysis draws several conclusions.

First, the Ukrainian administrative system is strongly intertwined with the private VHFWRU0RVWEXVLQHVVJURXSVVXFFHHGHGLQ´SULYDWL]LQJµVWUDWHJLFDGPLQLVWUDWLYHSRVWVRU ERGLHV7KH\LQÁXHQFHVWDWHSROLF\PDNLQJWKURXJKOHJLVODWLYHERGLHV5DGDUHJLRQDODQG municipal councils). The line dividing private business and state affairs has become unclear DQGÁRDWLQJ6RPHUHVHDUFKHUVDUJXHWKDWWKHVWDWHKDVEHHQSULYDWL]HG

6HFRQGIRUPDOWLHVGHÀQLQJRZQHUVKLSDQGLQÁXHQFHLQ8NUDLQHVKRXOGEHFRPSOHWHG by informal ties. Some state-owned corporations are in fact being managed indirectly WKURXJKHLWKHUPLQRULW\VKDUHKROGLQJVRUWKURXJKPDQDJHUV´FRQWUROOHGµE\EXVLQHVVJURXSV 8NU1DIWDE\´3ULYDWµ1DIWR*D]E\,6'DFRQVLGHUDEOHQXPEHURIREOHQHUJRVE\6&0 This confusion does not allow for the correct evaluation of the real size of business groups DQGRIWKHLUUHDOLQÁXHQFHRQSROLF\PDNLQJ,QDGGLWLRQWKHHYDOXDWLRQRIWKHLULQÁXHQFH

(21)

in terms of the value of their assets and turnover is not precise. The real share of large EXVLQHVVJURXSVLQ8NUDLQLDQ*'3LVFRQVLGHUDEO\XQGHUHYDOXDWHG

7KLUGE\PDSSLQJLQÁXHQFHQHWZRUNVPDGHXSRISROLWLFDOSDUWLHVDQGQDWLRQDODQGUHJLR- QDOEXVLQHVVSHRSOHZHVHHWKDWWKLVQHWZRUNLVGRPLQDWHGE\WZRUHJLRQV'QLSURSHWURYVN DQG'RQHWVN,QFRPSDULVRQZLWKWKH'QLSURSHWURYVNFODQVDQGRWKHUPLQRUUHJLRQDO JURXSVWKHLQÁXHQFHRIWKH'RQHWVNEXVLQHVVPHQLVEHWWHUVWUXFWXUHGDQGFRQVWDQW7KLV could be explained not only by a very high concentration of industrial and mining assets in WKLVREODVWEXWDOVRE\DSHFXOLDURUJDQL]DWLRQRIWKHLU´FKDQQHOIRULQÁXHQFHµ,QIDFWWKH business group SCM and its associates have not been funding an outside political force in DQRSSRUWXQLVWZD\OLNH´3ULYDWµ,6'DQGPRVWPLQRUUHJLRQDOJURXSV7KH6&0IRXQGHG its own political bloc in which its leaders are formally engaged. Unlike other parties, the

´3DUW\RIUHJLRQVµLVPRUHD´EXVLQHVVSURMHFWµWKDQDQ´RUGLQDU\µSROLWLFDOSDUW\)URPD JHRSROLWLFDOSRLQWRIYLHZVLQFHWKHFHQWHURILQÁXHQFHRQQDWLRQDOSROLF\PDNLQJ has shifted from western Ukraine (from the regional political elites) to eastern Ukrainian HDVWWRZDUGVWKH'RQHWVNEXVLQHVVHOLWHV

Annex 1

Ports Total %

Berdyansk

%HOJRURG'QLHVWURYVN\

Evpatoria

Izmail

Ilichevsk 18904

Kerch

Mariupol

Nikolayev

Odessa

Oktyabrsk

Reni

Sebastopol

Skadovsk

8VW'RXQDLVN\

Feodosia

Kherson

<XMQ\

<DOWD

Total 132181,4 100

Source : http://ukrmaritimerating.com/raetings/m-ports.html

The freight of Ukrainian seaports in 2008 (in thousands of tons)

(22)

Bibliography

$1'(566218%/$1.(1%85*+2/0'-2+$16210., Opportunities, relational embeddedness and network structure, in3*KDXUL$+DGMLNKDQL--RKDQVRQHG2SSRUWXQLW\'HYHORSPHQWDQG%XVLQHVV 1HWZRUNV3DOJUDYHSS

$6/81' $ +RZ 8NUDLQH EHFDPH D PDUNHW HFRQRP\ DQG GHPRFUDF\ 3HWHUVRQ ,QVWLWXWH IRU ,QWHUQDWLRQDO (FRQRPLFV:DVKLQJWRQ'&

$6/81'$5HÁHFWLRQVRQ8NUDLQH·VFXUUHQWHFRQRPLFGLOHPPD, (XUDVLDQ*HRJUDSK\DQG(FRQRPLFV, vol.

QSS²

%$80 &+) &$*/$<$1 0 6&+b)(5 ' 7$/$9(5$ O., Political patronage in Ukrainian banking, (FRQRPLFVRI7UDQVLWLRQYROQSS²

%2,6270$1'&+,/'-. )URPÀHIVWRFODQVDQGQHWZRUNFDSLWDOLVPH[SODLQLQJ&KLQD·VHPHUJLQJHFRQRPLF order$GPLQLVWUDWLYH6FLHQFH4XDUWHUO\9ROQSS

%$51(<-%)LUP5HVRXUFHVDQG6XVWDLQHG&RPSHWLWLYH$GYDQWDJH-RXUQDORI0DQDJHPHQWQSS 1991.

%5(',(6 I., Institutionenwandel ohne Elitenwechsel: das ukrainische Parlament im Kontext des politischen 6\VWHPZHFKVHOV²0QVWHU+DPEXUJ/,7

'$)75/2UJDQL]DWLRQWKHRU\DQGGHVLJQ6W3DXO:HVW3XE&R[[LY

FLIKKE G., Pacts, Parties, and Elite Struggle: Ukraine’s Troubled Post-Orange Transition, Europe-Asia Studies, 9ROQ0D\SS²

GÖLS&'LHSROLWLVFKHQ3DUWHLHQLQGHU8NUDLQHHLQH$QDO\VHLKUHU)XQNWLRQVIlKLJNHLWLQ:DKOHQ3DUODPHQW Regierung)UDQNIXUWDP0DLQ1HZ<RUN3/DQJ

KÖNIG Th., Pappi F.U., /HVRUJDQLVDWLRQVFHQWUDOHVGDQVOHVUpVHDX[GXGRPDLQHSROLWLTXHXQHFRPSDUDLVRQ

$OOHPDJQHeWDWV8QLVGDQVOHFKDPSGHODSROLWLTXHGXWUDYDLO5HYXHIUDQoDLVHGHVRFLRORJLH9RO,VVXH SS

.2121&+8.63,.+296+(.9'QLSURSHWURYVNDVLP·\D.LHY$JHQF\8NUDLQH

.26$/6 / ,QWHULP RXWFRPH RI WKH 5XVVLDQ WUDQVLWLRQ FODQ FDSLWDOLVP 'LVFXVVLRQ 3DSHU 1R .\RWR,QVWLWXWHRI(FRQRPLF5HVHDUFK.\RWR8QLYHUVLW\S

0200(1$9$/8(99*2/812967KHULVHRIFRQJORPHUDWHVLQ8NUDLQHWKH'RQHWVNFDVHin

$)HUQDQGH]-DQG%+RJHQERRPHG%LJEXVLQHVVDQGHFRQRPLFGHYHORSPHQWFRQJORPHUDWHV and economic groups in developing countries and transition economies under globalization, London, New

<RUN5RRWOHGJHSS

OLEINIK$$ 0RGHO RI 1HWZRUN &DSLWDOLVP %DVLF ,GHDV DQG 3RVW6RYLHW (YLGHQFH -RXUQDO RI (FRQRPLF ,VVXHV9RO;;;9,,,1R0DUFKSS²

28&+,, W. G., 0DUNHWVEXUHDXFUDFLHVDQGFODQV$GPLQLVWUDWLYH6FLHQFH4XDUWHUO\QSS 3$33,)8+(11,1*&+, 3ROLF\1HWZRUNV0RUH7KDQD0HWDSKRU"-RXUQDORI7KHRUHWLFDO3ROLWLFV9RO

1RSS

3,.+296+(.99'\QDPLND HOLW\.LHY$JHQF\8NUDLQHS

3,.+296+(. 9 0,.+$,/,&+(1.2 . .2121&+8. 6 'QLSURSHWURYVND VLP·\D .LHY )XQGV RI 'HPRFUDF\

PLEINES+8NUDLQLVFKH6HLOVFKDIWHQ,QIRUPHOOH(QÁXVVQDKPHLQGHUXNUDLQLVFKHQ:LWVFKDIWSROLWLN² 0QVWHU

320$=1(99.LHYVNLNODQUYHWVMDNYODVWL.LHY·VFODQÀJKWVIRUSRZHU9UHP\DRUJQRYHPEHU ZZZYUHP\DRUJXDFRQWHQWYLHZ

PUGLISI R., 7KH5LVHRIWKH8NUDLQLDQ2OLJDUFKV'HPRFUDWL]DWLRQQSS

(23)

RUMELT, R. P., Towards a Strategic Theory of the Firm in R. Lamb (ed.) Competitive Strategic Management, (QJOHZRRG&OLIIV1-3UHQWLFH+DOOSS

6:$,1 $ HG 5HFRQVWUXFWLQJ WKH SRVW6RYLHW LQGXVWULDO UHJLRQ WKH 'RQEDVV LQ WUDQVLWLRQ 5RXOHGJH /RQGRQ1HZ<RUN

92/<16.$<$&+/,$.+7$%,=1(6.LHYÔQRYHPEUHKWWSZZZEXVLQHVVXDL D

:(//*5$) S., 'LH0LOOLRQHQJDEHQ2OLJDUFKHQXQG)XVVEDOOLQGHU8NUDLQH, Ostereuropa6WXWWJDUWQ

SS

WERNERFELT, B., $UHVRXUFHEDVHGYLHZRIWKHÀUP6WUDWHJLF0DQDJHPHQW-RXUQDO9ROSS² :,//,$0621 2 ( 0DUNHW DQG +LHUDUFKLHV$QDO\VLV DQG$QWLWUXVW ,PSOLFDWLRQV )UHH 3UHVV 1HZ<RUN

=,00(5 K., Formal Institutions and Informal Politics in Ukraine, in G. Meyer (ed.), Formal institutions and LQIRUPDOSROLWLFVLQ&HQWUDODQG(DVWHUQ(XURSH+XQJDU\3RODQG5XVVLDDQG8NUDLQH2SODGHQ)UDPLQJWRQ +LOOV0,%DUEDUD%XGULFK3XEOLVKHUVSS

=,00(5.7KH&DSWXUHG5HJLRQ$FWRUVDQG,QVWLWXWLRQVLQWKH8NUDLQLDQ'RQEDVVin Tatur, M. (Ed.), The 0DNLQJRI5HJLRQV9RO:LHVEDGHQ96

(24)