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Kyiv Post | 29Dec2016 | Taras Kuzio
https://www.kyivpost.com/article/opinion/op-ed/taras-kuzio-kleptocratic-coalition-clans-captured-ukrainian-state.html

A kleptocratic coalition of clans has captured the Ukrainian state

[W.Z.  As background to this article by Taras Kuzio, I have archived the book Abuse of Power by J.V. Koshiw (2013) based on the Melnychenko Tapes of conversations between President Kuchma and members of his administration circa the year 2000. Reproduced below are excerpts from the book that were recently posted by Stefan Lemieszewski on the  politics@infoukes.com mailing list.]

Is the glass half full or half empty? Indeed, is this debate irrelevant because the glass has been long stolen?

There are certainly two notable improvements in the fight against corruption Ukraine since the Euromaidan. The first is that Ukrainians and civil society are more politically mature than they were after the Orange Revolution. Then, revolutionaries and civil society activists went home and left the task of transforming Ukraine to the new ‘good czar’ Viktor Yushchenko. We all remember what a disaster he was. After the Euromaidan Revolution this did not happen and Ukrainian patriots, journalists and civil society activists have continued to participate, cajole, lobby and write about Ukraine’s reforms or the lack of them. President Petro Poroshenko and other members of the ruling elites are less politically mature than the average Ukrainian taxi driver who can tell you what, when and who stole what and what should be done about it.

The second is through pressure from Ukrainians and the West, new institutions and processes have been created that could over time improve the rule of law and reduce high-level corruption. E-declarations forced ruling elites to disclose embarrassingly large and exotic sums they had stolen during a quarter of Ukrainian independence.

But, these important psychological changes in the mindsets of Ukrainians and building of new state institutions are faced by two major hurdles.

The first is a complete absence of political will on the part of President Petro Poroshenko to fight corruption and bring to justice the thieves, murderers and traitors in the Yanukovych clique. Vox Ukraine’s Index for Monitoring Reforms ranks reforms between minus five and plus five in five areas. In the field of governance and fighting corruption, Vox Ukraine have ranked Ukraine between 1-2 which is not the worst but nevertheless an underachievement.

The second is that fighting and winning the battle against high-level corruption is a huge task and has to overcome a deeply ingrained culture. Former Minister of Finance Natalie Jaresko said recently to a seminar in Berlin that I participated in that the problem of corruption in Ukraine rests not only with a small group of oligarchs but includes thousands of others who have an interest in not changing the system.

Two democratic revolutions and two presidents -- Yushchenko and Poroshenko -- have failed to reduce the high levels of corruption in Ukraine. Transparency International continues to rank Ukraine with higher levels of corruption than all but three of the 15 former Soviet republics. Poroshenko’s commitment to fighting corruption is not taken seriously in Brussels and Washington because five members of the Eurasian Economic Union have lower levels of corruption than a country that claims to be integrating into Europe!

We have to look upon the persistently high levels of corruption in Ukraine as a product of a kleptocratic coalition of clans controlling the economy and political system who emerged in the 1990s. The E-declarations forced them to show some of their stolen assets. They are very scared of losing these stolen gains and, even if some of them would want it, they have no trust or faith in a transition to a post-corrupt world. Who would guarantee an amnesty and the drawing of a line on the past in a country where levels of trust have been very low for decades?

The coalition of kleptocratic clans defends all of its members through the presidents control of the Prosecutor General’s Office and the Security Service of Ukraine, known as the SBU. Therefore, nobody important is ever criminally charged and imprisoned. The only members of the ruling elites who have gone to jail have been in Germany and the U.S. -- but not in Ukraine.

Defending the interests of the kleptocratic coalition of clans is far more important than domestic goals of “reform” or foreign policy goals of “returning to Europe.” Hence their rhetoric is never matched by actions to achieve these goals.

It is profoundly wrong to divide oligarchs and kleptocrats into “pro-Western” and “pro-Eastern” groups. Indeed, “pro-Western” Yushchenko or Poroshenko have a lot in common with “pro-Russian” Rinat Akhmetov and Yushchenko backed Viktor Yanukovych over Yulia Tymoshenko in the 2010 elections.

Their prime motivation is self-interest and not national interest. I wrote 12 years ago that President Leonid Kuchma’s foreign policy is neither pro-Western or pro-Russian but pro-Kuchma (http://www.rferl.org/a/1343966.html). The same could be said about the incumbent president’s foreign policy being pro-Poroshenko.

The kleptocratic system breaks down when dissident oligarchs, such as Pavlo Lazarenko and Ihor Kolomoisky (the Russian examples would be Mikhail Khodorokovsky and Boris Berezovsky), attempt to challenge incumbent presidents. Sanctions are applied against them forcing them to move abroad (Lazarenko and Berezovsky) or they are threatened with jail or imprisoned (Hennadiy Korban and Khodorokovsky). Their business empires are taken over by loyal oligarchs or the state. Others, such as Kolomoysky, withdraw their opposition after negotiating a non-aggression pact.

Tymoshenko is the exception to this rule in refusing to flee abroad in the late 1990s or under Presidents Leonid Kuchma and Yanukovych. From 2000-2004 she fought against Kuchma, who briefly imprisoned her, and against Yanukovych who was more successful in imprisoning her for a longer period of time.

Despite two democratic revolutions, Ukraine’s post-Soviet political and economic system has been immune to change because presidents such as Poroshenko continue to draw upon the kleptocratic coalition of clans for mayors and governors in eastern and southern Ukraine. The examples are numerous and include Odesa Mayor Hennadiy Trukhanov and Kharkiv Mayor Hennadiy Kernes, both of whom are conservative, resistant to change and unaccountable for their actions.

The only manner to prevent mass protests and political instability is to hold pre-term parliamentary elections. If these are not held, Ukraine’s next popular protests, and possibly third democratic revolution, should not negotiate compromises with members of the kleptocratic coalition of clans who have hijacked and undermined two earlier popular revolutions.

Taras Kuzio is a senior fellow at the Canadian Institute of Ukrainian Studies, University of Alberta and author of the forthcoming “Russia’s War Against Ukraine: Nationalism, Revolution and Crime.”



[... Koshiw2013AbuseOfPower.pdf ...]

As in Russia, so also in Ukraine, there was an alliance between the intelligence agencies, the politicians, and the mafia. For example, both Putin and Kuchma provided protection/krysha for Mogilevich. And Lazarenko/Mogilevich/Fisherman gave Tymoshenko a “career boost” through the UESU corporation (United Energy Systems of Ukraine) which was the largest natural gas importer in Ukraine (making Yulia “the Gas Princess”) buying it’s gas from Russia’s Gazprom. Tymoshenko’s offshore company controlling UESU was United Energy International Limited (UEIL). Lazarenko was also a part owner of UESU.  Below is an excerpt from “Abuse of Power” by J.V. Koshiw:


Stefan Lemieszewski, 28Dec2016 Part 1
 
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Chapter 5  Kuchma and Putin Share Secrets
[ . . . ]
 
Another secret shared by Presidents Putin and Kuchma was their protection of Semyon Mogilevich who was wanted by the FBI. Described by some as “the world’s most dangerous gangster” (Friedman 2000), the FBI wanted to question Mogilevich, Fisherman and other associates about a $10 billion money laundering operation through the Bank of New York, the disappearance of $1.2 billion of World Bank loans to Russia (Block 2003), and the $150 million share scam on the Toronto stock exchange. Mogilevich and his partners had fooled investors into buying $150 million shares in a company that supposedly manufactured super-miniature magnets that would revolutionize machines (U.S. v. a/k/a “Simeon Mogilevitch” et al 2003). In August 1999, Mogilevich and associates fled from their headquarters in Hungary from a joint FBI and Hungarian National Police task force to take refuge in Russia (Jones 1999) (Ashley 2003).

Kuchma also welcomed Mogilevich. In 1999, when Mogilevich was the FBI’s top ten most wanted fugitive from justice, the SBU chief Leonid Derkach praised him in a newspaper interview as law abiding, a great investor and an entrepreneur. Derkach even compared him with Henry Ford, and complained that the FBI was making “attempts to include us in investigating his activities” (Mostova 1999). Derkach told Zerkalo nedeli that Mogilevich’s company had created “a scientifically unique mini-magnet that would revolutionize industry and transport.” This was pure nonsense or Derkach was naive. The so-called mini-magnets didn’t exist. Mogilevich and his associates had used them to cheat investors out of $150 million.
 
In response to Derkach’s public tributes to Mogilevich, the American ambassador to Ukraine, Stephen Pifer, complained to Ukraine’s Secretary of State for Security and Defense, Yevhen Marchuk. On December 22, 1999, the ambassador handed Marchuk a thirty-one page confidential dossier on why the FBI wanted Mogilevich. The FBI agent accompanying Pifer, Michael Piszczemukha, told Marchuk that Derkach’s extolling of Mogilevich’s magnet company was contradicted by the fact that YBM had been closed down on criminal charges in America and Hungary (Yeltsov 2001b).
 
At the beginning of February 2000, Mogilevich came to Kyiv to meet Derkach and to conduct his business affairs. Despite giving him a glowing public tribute, Derkach met him in secret. They had conducted a business deal in April 1999, when Mogilevich and his partner Igor Fisherman convinced Derkach to buy for the SBU a “situation center,” an electronic intelligence gathering system to be used for the October 1999 presidential elections. The SBU paid Mogilevich almost $4 million dollars for a system that apparently cost just over $2 million in America (Ibid.).
 
Mogilevich and his first lieutenant Fisherman were born in Ukraine and both studied at the University of Lviv. From 1995 to 1997, Fisherman was an advisor to Pavlo Lazarenko, when he became the deputy prime minister in charge of energy and prime minister. This must had caused tension between them, as Lazarenko cut back Itera’s dominant share of the gas market in favor of Tymoshenko’s UESU.
 
[ . . . ]
 
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Here’s another excerpt from ”Abuse of Power” by J.V. Koshiw about Ukrainian government aircraft being used to transport drugs for South American drug cartels. That resulted in getting Ukraine boycotted from the aviation transport market in USA. Notice at the end that when Tymoshenko became Prime Minister, her SBU chief, Oleksandr Turchynov had Mogilevich’s police file destroyed. (Yanukovych also had his police file altered). And Kuchma punished Smeshko by demoting him because he raised the Mogilevich issue. Kuchma protected Mogilevich very well.

Stefan Lemieszewski, 28Dec2016 Part 2
 
=======================
 
- from Abuse of Power
 
Ukraine’s military intelligence chief, Ihor Smeshko, was outraged at Kuchma and Derkach for dealing with Mogilevich. On Feb. 10, 2000, two days after Derkach spoke to Kuchma about Mogilevich, Smeshko came to his office to warn the president about the international consequences of associating with the wanted fugitive (Kuchma and Smeshko Feb. 10, 2000). The conversation revealed that Kuchma like Putin also had a scandal involving South American drug cartels.
 
Smeshko began by presenting a request from the FBI to help find Igor Fisherman, a Ukrainian citizen and Mogilevich’s top associate. Kuchma replied that he could cooperate with the FBI only “on one condition -- Ukraine is not there,” meaning that there must be no mention of Fisherman’s presence and activities in Ukraine. Smeshko reminded Kuchma of the damage that was done to Ukraine’s image by being associated with illegal drug syndicates. He recalled how during his 1996 state visit to the U.S. an article in The Los Angeles Times reported that Ukrainian government aircraft had transported narcotics for drug barons. The newspaper had reported that Ukrainian Antonov-32B twin-engine turboprop planes were being used to smuggle cocaine from Columbia to Peru, Panama and Mexico (Rempel and Pyes, 1996). Another article reported: “The Clinton administration said Tuesday that it will question Ukrainian President Leonid D. Kuchma during a scheduled visit to the White House about reports that the Kiev government has sold and leased aircraft to South American drug traffickers. State Department spokesman Nicholas Burns described the report in Tuesday’s editions of The [Los Angeles] Times as disturbing, although he noted that the Ukrainian Foreign Ministry had denied that the government-owned aircraft company is doing business with drug lords” (Kempster, 1996).
 
He reminded Kuchma that while Ukraine had officially denied these newspaper reports, the SBU had turned over to the FBI seventy pages of operational information, which included statements from Ukrainian government pilots that they had transported drugs in and out of Colombia. As a consequence, Smeshko said, “the Americans do not want to allow us on the aviation transport market.”
 
[Smeshko] ... Today a similar situation may reoccur. Look what the security service is providing the FBI about Mogilevich. [Kuchma can be heard turning over pages.] [Kuchma] Your view is that the Konstantynivsky [the twins born in 1960, Vyacheslav and Oleksandr Konstantynivsky, owners of the “Kiev-Donbas” company] are in league with this well-known gang? Is this your view? [Smeshko] This represents, this document is from State Security [from Derkach’s SBU]. ... Such documents are exchanged between the FBI and SBU. While at the time the head of the SBU announces: “He [Mogilevich] is ours. He is an informer” … Speaking honestly, with all due respect, Leonid Vasylevich [Derkach] and our security service are powerless against Mogilevich. What kind of an ass informer is he! To say in the press he is clean [reference to Derkach’s interview with Yuliya Mostova, (Mostova 1999)], when tones … [the remaining words cannot be heard]. Just look. This is the database. Any investigator could find this in the MIA [Ministry of Interior Affairs] database. This is a direct print out from the MIA database. (Kuchma and Smeshko Feb. 10, 2000)

While Kuchma was surprised that the FBI could so easily obtained such information from the Ministry of Interior, Smeshko lambasted the SBU for protecting Mogilevich:
 
[Smeshko] They are gangsters! Yes, of course gangsters, big gangsters, who, who can strike, and not only in the teeth. This is understood. We are putting ourselves in an idiotic situation with the Americans. The lower levels exchange operational information, but on the highest level, we say that he is an honest man, just like Ford. … Every operative, lieutenant, knows that he is a criminal. … This is why the FBI considers Mogilevich’s organization to be under the complete protection of the SBU. … [Kuchma] I want to show [Derkach these documents]. [I] will tell him: “You organized this leak?” [Smeshko] I have already given him this document. I delivered it to him. I gave him about “Kyiv-Donbas.” Leonid Danylovych, what more can be done? (Ibid.)
 
Smeshko insisted that the president read about Mogilevich’s criminal activities from the reports prepared by the Ministry of Interior and SBU. He naively believed that the president didn’t know who Mogilevich was. He told Kuchma that acting President Putin gave Mogilevich a Russian passport in a different name because Mogilevich was a valuable intelligence agent. He claimed Mogilevich had been a highly regarded intelligence-gathering network and had helped Yeltsin win the presidential elections in 1996.
 
The president had not shared with Smeshko about his negotiations with Mogilevich to provide a witness against Lazarenko. The irony was that while the FBI was building a case against Lazarenko, Kuchma was using their most wanted fugitive to find Lazarenko guilty in an American court.
 
The president punished Smeshko for criticizing his relationship with Mogilevich. In September 2000, he demoted him from head of military intelligence to a military attache at Ukraine’s Swiss embassy.
 
Mogilevich’s name has cast a long shadow over Ukraine since its independence. From its inception, Mogilevich and his associates have played a major role in the supply of energy, especially natural gas, to Ukraine from Russia and Central Asia. They did this by creating intermediary companies that paid kickbacks to politicians in the former Soviet republics in return for the privilege of selling natural gas to Ukraine or anywhere else in Europe.
 
Following the Orange Revolution, Prime Minister Yuliya Tymoshenko attempted to remove Mogilevich and his partners from the gas market. This brought her into conflict with the presidents -- Yushchenko and Yanukovych -- and was a reason for her imprisonment in 2011.
 
However, when she worked as a gas trader with Pavlo Lazarenko, she too had a relationship with Mogilevich, be it as a competitor. As mentioned, from 1995 to 1997, Fisherman was an advisor to Pavlo Lazarenko, when he was the deputy prime minister in charge of energy and prime minister.
 
When Tymoshenko became prime minister in 2005, her close political ally, and then chief of the SBU, Oleksandr Turchynov, had Mogilevich’s file destroyed. She was not the only politician whose records have been adjusted to suit their needs. Viktor Yanukovych altered his criminal records to rebrand his public image. (see Chapter 16)

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See also
Stefan Lemieszewski, 26Dec2016 Part 1
Stefan Lemieszewski, 26Dec2016 Part 2