Borderland (32 page)

Disillusioned Shevchenko-lovers apart, Ukraine’s fuzzy sense of national identity has paradoxically turned out to be something of an advantage. Lviv may be unmistakably Ukrainian and Donetsk unmistakably Russian, but the vast swathe of country in between is neither quite one nor the other. The population is thoroughly mixed — not only in the Bosnian sense that two different peoples have lived there side by side for a long time, but also in the sense that there is no longer any sharp cultural dividing line between them. The typical twenty-something Kievan speaks a mixture of Russian and Ukrainian at work and to his children, Russian to his parents, and Ukrainian to his grandmother down at the dacha at weekends. All share Orthodoxy, a potent force in pulling Russians and Ukrainians together ever since Khmelnytsky signed up to Russian protection at Pereyaslav.

Another potential liability with an unexpected upside is the sheer ghastliness of Ukraine’s recent history. Wracked by a century of suffering and upheaval, Ukrainians long for peace and stability. Lvivites may cultivate angry Russophobia, but the instinct of the man on the Khreshchatyk omnibus is to stay out of politics at all costs. After all, for several generations any Ukrainian who made himself conspicuous had a good chance of being shot. ‘My house is outside the village,’ runs a proverb; ‘I don’t know anything.’ If one word sums up the national character, it is ‘stolid.’ Get into a lift with a Russian, and you will be deep into debate on the theory of capitalism or the existence of God before you reach the top floor. Chat up a Ukrainian, and he will tell you about his mother-in-law’s stomach problems and the prospects for next year’s tomato-crop. All through the hy-perinflationary winters of 1993–5, when lights went out and flats froze, Kiev remained eerily quiet. There were grumbles but no big demonstrations, still less riots. ’
Eto sytuatsiya,
’ people said with a shrug — ‘It’s the way things are.’ Visiting journalists, ghoulishly anticipating Weimar-style disintegration, went home disappointed.

If Ukraine’s success story is the ethnic issue, its disaster story is the economy. When the Soviet Union broke up, Ukraine was supposed to be the republic with the best chance of doing well economically. It produced a third of the Union’s steel, nearly half its iron ore, over half its sugar. It lacked Russia’s oil wells and gold mines, but its workforce was well educated, and its ‘black earth’ fabled for fertility. A World Bank report said it had the potential to become one of ‘the richest countries in the world.’

By the time I arrived in Ukraine in the winter of 1993, whoever wrote those words must have been wishing them unsaid. The ‘bread-basket of Europe’ had turned into an economic basket-case. The budget deficit stood at 40 per cent of gross domestic product, prices were doubling every month, and one enterprising factory was using the national currency, the aptly named coupon, for the manufacture of lavatory paper. Except for the lucky few with dollars, the country’s savings had been wiped out. Living in Kiev was like watching a textbook lesson on the evils of inflation come to life. All day long, as I sat with my feet propped inside the oven for warmth, old men in once-respectable overcoats dug through the rubbish-bins outside my kitchen window. Sometimes I ran down and shamefacedly persuaded one to take some grubby notes: a handful was worth less than a dollar, the lower denominations fractions of a cent. In the outdoor markets, women stood in the snow for hours, holding out a glassful of sunflower seeds, a single garlic bulb or a pathetic handful of plastic bags — all they had to sell. Even with money enough, supplying oneself with basic necessities required wartime determination and ingenuity. Each week, wild rumours swept the city — matches, sugar, flour, postage stamps were about to go into shortage — and everyone raced to stock up. Step onto a trolleybus with a loaf of bread under your arm, and people crowded round to ask where you had bought it, then leapt out and dashed for the bakery themselves. Flash a dollar note in public and everyone stiffened, as if you had produced a suitcase full of gold or a loaded gun.

That winter and next, the only thing that saved Kiev from starving was its remarkable ability to grow its own food. Most urban Ukrainians are only a generation or two away from the farm, and still have access to their own or relatives’ plots of land somewhere in the countryside. Come each spring, seed packets ousted Snickers bars from the oddments stalls in the metro ticket-halls, as Kievans trekked off to dig over their potato-beds and plant out tomatoes. Even people like my scholarly, relatively well-off interpreter Sergey spent their summers growing and bottling industrial quantities of fruit and vegetables, to tide them over the long winters when the shops emptied and prices in the private bazaars shot sky-high. The last time Kiev had emptied in this way was during the war, when 60 per cent of the population fled to the villages to escape Nazi food confiscations.

By the time Kuchma took office in the summer of 1994, it was obvious to the most bone-headed central planner that without drastic changes, Ukraine would turn back into a nation of peasant farmers. With Russia knocking at the door for unpaid oil and gas bills, it might even lose independence. In October the new president accordingly announced a comprehensive economic reform programme. He would liberalise prices and exchange rates, lift restrictions on trade, privatise state-owned firms and cut subsidies to loss-making farms and factories. In return, the International Monetary Fund promised a $1.5 billion loan, most of which was to go on paying Ukraine’s fuel debts to Russia.

Kuchma has done some of what he promised, but not all. His great achievement has been to end hyperinflation. In September 1996 the government was able to ditch the loathsome coupon in favour of the hryvnya, named after the currency issued by the Rada government of 1918. By early 1997 price rises were down to around 2 per cent a month. But parliament’s subsidy-guzzling industrial and farming lobbies have kept budget deficits high, forcing the IMF to hand out aid in grudging monthly dollops. The average wage grew to $80 a month by 1998, then halved when the government forcibly rescheduled its hard-currency debt. The overall economy — black market included — is still shrinking.

Privatisation is progressing at a snail’s pace. Though small businesses — shops, cafés, hairdressers and the like — are out of the government’s hands, most were given over to existing cooperatives, which carry on running them as badly as before. Central Kiev has lots of shiny new supermarkets full of overpriced Twinings tea and Bahlsen biscuits, but in the suburbs and the provinces shops are as drab as ever, brusquely promising ‘Milk’ or ‘Fruit and Vegetables’ on the outside, and offering nothing but giant jars of murky brown pickles within. Few big firms have been privatised at all. Every six months or so, the government announces an impressive target of so many thousand companies to be auctioned by the end of the year. Amidst much fanfare, a few semi-bankrupt factories are indeed sold off. Parliament then votes to take ‘strategic’ firms — meaning anything from steel-mills to bakeries — off the list. The industrial ministries put absurdly high reserve prices on the remainder, and the government’s target is quietly shelved. Ukrainians are convinced — often rightly — that the whole process is simply a means whereby politicians and their friends rob the state.

Farming, potentially Ukraine’s economic mainstay, is as backward as ever. Over 80 per cent of agricultural land is still owned by the state or by collectives, and so inefficiently farmed that it produces only half the country’s agricultural output. The rest comes from small private plots, planted, hoed and harvested by hand. Go-ahead farmers are stymied by state-owned monopolies on the sale of seed and fertiliser, and on storage and processing facilities. ‘The worst,’ a depressed EU consultant told me, ‘are the local ministry people. They just want their cut, and give absolutely nothing in return.’ Like everywhere else in the ex-Soviet Union, land privatisation is political anathema. Aleksandr Moroz, leader of the Socialist Party and a former speaker of parliament, speaks for the left when he calls it ‘an evil idea.’ Collective workers themselves fear — with good reason — that it would simply mean their bosses scooping the farm.

Stagnation in the state sector would matter less if a new private sector were growing to replace it. In Poland, where privatisation is still not complete, small start-up firms got the economy growing soon after inflation had been brought to heel. In Ukraine, it is not happening. To blame is the sheer red tape involved in running a legal private business. A survey by the World Bank’s Kiev office lists the problems: Byzantine licensing requirements, a constantly changing tax code, complicated restrictions on exports and foreign exchange. One small knitwear manufacturer found it had to get fourteen different permits to legally export a sock.
¹

The regulations stay because they allow the extraction of bribes. In March 1996, according to another World Bank survey, registering a business cost $175, a fire certificate $40, an export licence $125, a phone line $900 in a smart district of Kiev, $200 or $300 in a suburb.
²
A Spaniard’s account of the shenanigans involved in exporting a shipload of sunflower seed, delivered over a seven-dollar beer in one of Kiev’s fast-multiplying ex-pat bars, is typical:

On top of officials, there is the mafia to be paid off. A basic requirement for anyone going into business in Ukraine is an ‘umbrella’ — an agreement with one or another local gang whereby it takes a percentage of profits in exchange for ‘protection.’ Even big Western firms are not immune. Coca-Cola posted men in fatigues in its reception area after armed men walked in demanding a ‘partnership agreement;’ the American lawyers Baker & McKenzie paid $2,500 a month to a ‘security firm.’

The result, not surprisingly, is that Ukraine has attracted little foreign investment — far less than the Czech Republic or Hungary, both a fifth of its size. The only Western firms with the stomach for doing business in the country tend either to be big multinationals prepared for years of losses, or plucky little one-man-bands. Both regularly get ripped off by their Ukrainian partners. The head of the first venture-capital fund into Ukraine says that ‘companies keep three sets of books — one for the taxman, one for the Western investor and one for themselves.’ Going to the court is futile: ‘You choose your lawyer not for his legal skills, but because he knows the judge.’

For all this, Ukraine really is potentially a rich country. Politicians may burble about the necessity for ‘gradualism’ or a mythical ‘Ukrainian way,’ but there is no technical reason why it should not have gone about reform as swiftly as Poland or the Baltics. With the arguments on how to make the transition to a market economy long over, Ukraine should in theory be benefiting from others’ experience. ‘Whatever they need to learn from Europe,’ says Roman Szporluk, head of Ukrainian studies at Harvard, ‘they can learn from Warsaw and Cracow. But they have a kind of amnesia, a blank spot.’ If and when Ukraine does see the light, its economy could pick up fast. Western investors would be only too happy to put money into the country if it showed signs of repeating Poland’s success, and black-marketeers tell pollsters that they would turn legal if the tax and licensing systems allowed them to do so without going bust.

But before they get economic reforms, Ukrainians have to vote in a reformer. In the 1998 parliamentary elections the most popular free-market party got a miserable 3 per cent of the vote, a pattern that was repeated when Kuchma won his second term eighteen months later. Support for the left, in contrast, is growing, with the result that in 1999 a Communist Party candidate made it through to the presidential run-off for the first time since independence. Ukrainians are now convinced that ‘reform,’ rather than the lack of it, is to blame for their falling living standards and crumbling public services. It will take a brave, charismatic politician — or perhaps, in the worst case, a brief, mind-concentrating return to central planning — to change their minds.

Sorting out its economy is something Ukraine has to do for itself. What it cannot alter is its geography. With a bearish Russia to its east, and an expanding NATO and European Union to its west, Ukraine remains, as ever, a disputed borderland between rival powers. Ukrainians try to view their position as a blessing. They talk about being a ‘crossroads,’ a ‘doorway,’ a ‘lever,’ a ‘bridge.’ But in this part of the world, bridges tend to get marched over or blown up. As long as Russia and the West simmer with mutual distrust, to maintain its independence Ukraine has to pull off a fine diplomatic balancing act between the two.

For two years after independence, Ukraine’s relations with the West were mired in mutual misunderstanding. Ukrainians resented the blandishments poured on Yeltsin’s new democratic Russia, and had not forgotten Bush’s insulting ‘Chicken Kiev’ speech of August 1991, when he warned against ‘suicidal nationalism based on ethnic hatred.’ The West, for its part, had difficulty taking Ukraine seriously at all. Russophile Sovietologists widely predicted, to Ukrainians’ fury, that the country was bound to rejoin Russia before long. It was a tradition — chippiness on the Ukrainian side, ignorant dismissiveness on the West’s — that dated back to the Paris peace talks of 1919, when Margolin deplored the crowds of ‘urbane and polished’ Russian and Polish exiles who undermined Allied support for the Ukrainian government in Galicia.

Relations worsened when the nuclear powers demanded that Ukraine sign up to the START-1 arms reduction treaty, committing it to surrendering the Soviet-inherited nuclear missiles stationed on its soil. Nationalists smelt a plot to neuter their fragile new state: ‘If nuclear weapons are such a bad thing,’ a Rukh activist asked me, ‘why don’t you give up yours too?’ Utterly failing to appreciate the strength of Western feeling on the issue, Kravchuk allowed his country to turn into a virtual pariah-state before capitulating, in a ‘Tripartite Agreement’ with Russia and America, in January 1994. Under the agreement, Ukraine agreed to ship its warheads to Russia for dismantlement, in exchange for nuclear fuel for its power stations and a Russian promise to respect ‘existing borders.’