With the kind permission of Radio Free Europe/Radio Liberty, InfoUkes Inc. has been given rights to electronically re-print these articles on our web site. Visit the RFE/RL Ukrainian Service page for more information. Also visit the RFE/RL home page for news stories on other Eastern European and FSU countries.
Return to Main RFE News Page
InfoUkes Home Page
MIKHAIL FRIDMAN: ALFA GROUP CHAIRMAN BUILDS RUSSIAN 'BENCHMARK' Mikhail Fridman, chairman of Alfa Group Consortium and vice president of the Russian Jewish Congress, is clearly one of the richest and most politically influential people in Russia. Last summer, "Forbes" magazine estimated Fridman's assets at $1.3 billion. Some media picture him as an extremely modest person. "Novaya Gazeta," for its part, argued that the secret of Fridman's success lies in his close ties with those who control Russia's financial flows and natural resources, or possess classified information.
According to "Stringer," Fridman was born to a practicing Jewish family in the Ukrainian city of Lvyiv in 1964. Both his parents, who recently moved to Cologne, Germany, were members of the Communist Party. Although politically active, they strictly adhered to Jewish traditions, which had to be observed secretly for fear of reprisal. Fridman has claimed his Jewish origin prevented him from entering the Moscow Institute of Physics and Technology, still one of the most prestigious educational institutions in Russia. Instead, he was admitted to the Institute of Steel and Alloys. As a student, Fridman began his "business career" by scalping theater tickets, "Stringer" reported. Moscow theaters were always popular with the public, but tickets were hard to come by. So the enterprising Fridman earned a living by scalping tickets -- just like another oligarch, Vladimir Gusinsky did.
"Novaya Gazeta" reported that Alfa Group's roots date back to the perestroika boom in 1989. First, Fridman created a small company named Alfa Photo, and then a joint-stock company, Alfa Echo, together with ADP Trading of Switzerland. According to "Stringer," Alfa Echo traded sugar, tea, and cigarettes on the domestic market. In 1992, Alfa Echo participated in a federal oil-export program. By 1994, Echo's oil sales had reached 10 million tons per year. Fridman's Alfa entered the vanguard of Russian business in early 1990s when Peter Aven, Fridman's business partner, served as minister of external economic relations. Today, Aven serves as president of Alfa Bank, the largest private bank in Russia, according to the "Financial Times." Aven's "insider" sources at the Kremlin have greatly benefited Alfa throughout its history. Alfa remained intact following the default in 1998. Alfa's leaders believe that the success of their business requires control of just three things: the executive, legislative, and judicial branches of power.
Fridman's acquisition of Tyumen Oil Company (TNK) vividly illustrates his business style. According to "Novaya Gazeta," Alfa bought 40 percent of state-owned TNK for $810 million through its affiliated structures in 1997. In 1999, the government decided to get rid of its 50 percent stake in TNK. And while it had paid $810 million for 40 percent of TNK, Alfa was able to acquire the state's 50 percent stake for a mere $270 million. The Russian state treasury, however, did not receive $1.08 billion for the combined 90 percent stake it had sold in the oil company: Fridman's Alfa paid $170 million of the $810 million price tag on the initial 40 percent stake, and $90 million of the $270 million sale price on the 50 percent stake.
Fridman rarely appears before the press. However, he recently gave an interview to "Vedomosti" on the current developments within Alfa Group. According to Fridman, Alfa has a streamlined management system. The group does not specialize in banking, petrochemicals, or telecommunications, as it might seem: Its business is investing. "This is our mission. Having bought a company, we establish those rules, which are [strict] and understandable for potential investors, primarily Western businessmen. Then we sell the company, because we cannot do anything else for it." Fridman said he believes the majority of Russian corporations function on a principal of monarchy -- "all decisions are made by one person. Our system is different, it is based on a collegial approach."
Fridman did not comment much on future Alfa Group strategy for development. But at least two scenarios have been offered in the media: one pessimistic and the other optimistic. The pessimistic scenario, closely linked with the economic situation in 2002-03, was offered by "Novye Izvestiya" on DATE. The year 2003 will be crucial to paying off $19 billion in Russian external debt. In 2002, Russia will have to pay $14 billion -- which is only partly covered within this year's budget. The shortfall is over $2 billion. According to the Finance Ministry, default is out of question and Russia will comply with its obligations. But it will need extra revenues.
According to "Novye Izvestiya," the government can receive extra revenues by "persuading" wealthy businessmen to pay their taxes, resorting to the threat of tax inspection, and relying on coercive measures. Alfa Group, through TNK, has borrowed an estimated $1.5-4 billion. The newspaper speculated that Fridman will effectively sell his assets in Russia and the former Soviet Union by drowning himself in massive debts. TNK will then face overwhelming foreign debt, and will be left explaining to foreign investors where their money went and how it will be repaid. Such an outcome could place the entire Russian market at risk, "Novye Izvestiya" concluded.
"Corriere della Sera" made a more optimistic prognosis. The Milan-based newspaper said that, these days, Russian oligarchs play by the Kremlin rules by investing internally. Otherwise, Russian President Vladimir Putin made himself clear, they will face "serious troubles." With this in mind, "Corriere della Sera" speculated, Russian oligarchs took interest in "local shopping," creating three major corporations that account for 15 percent of the country's gross domestic product. These corporations are: Millhouse Capital, led by Roman Abramovich; Interros, led by Vladimir Potanin; and Alfa Group, led by Fridman. The latter was defined by "Corriere della Sera" as the most influential consortium and valued at $16 billion. With the expansion of these corporations into the most profitable sectors of business, analysts unanimously agree, "Millhouse, Interros, and Alfa will be the benchmarks of Russia's economic rise within the next 10 years." (TSK)
END NOTE: NATIONAL IDENTITY AND CIVIL SOCIETY IN UKRAINE -- EXPLAINING THE YUSHCHENKO PHENOMENON
THIRTY-SIX GROUPS SEEK TO REGISTER FOR UKRAINIAN ELECTION. The Central Election Commission (CEC) told UNIAN on 30 January that 23 parties and 13 election blocs managed to submit documents for registration of their candidates for the 31 March parliamentary election. Under the election law, 29 January was the last day for submitting such documents. Interfax reported that the CEC has thus far registered 2,765 candidates on party lists and 1,160 candidates seeking parliamentary mandates in single-seat constituencies. The Verkhovna Rada has 450 seats, of which 225 will be contested in one countrywide constituency under a proportional system and the other 225 in singleseat constituencies. JM
UKRAINIAN OPPOSITION LEADER'S CAR CRASH SEEN AS 'EXTREME STAGE' OF ELECTION CAMPAIGN. Yuriy Kostenko, the leader of the Ukrainian Popular Rukh, said that the automobile crash of opposition leader Yuliya Tymoshenko on 29 January (see "RFE/RL Newsline," 29 January 2002) testifies to "the transition of the electoral process to an extreme stage," UNIAN reported on 30 January. "It is difficult for me to comment on the reasons for the crash. But everyone in Ukraine who has heard about this event -- I am sure 100 percent -- sees it not just as an [ordinary] road accident. [Such a perception] testifies to our assessment of the level of security in the state and to the fact that people in Ukraine have become used to criminal methods of political struggle," Kostenko noted. JM
UKRAINIAN PRO-PRESIDENTIAL BLOC TO TURN INTO PARTY. Volodymyr Lytvyn, the head of the presidential administration and the For a United Ukraine election bloc, said on 29 January that his bloc will transform itself into a party. "All members of the [For a United Ukraine] coordination board [have concluded] that we have to implement in practice the idea of setting up a political structure. We will tackle this in parallel with the election. Since we are associated with the party of power, think of it as a pro-presidential or presidential party," Ukrainian Television quoted Lytvyn as saying. The For a United Ukraine bloc consists of the Agrarian Party, the Popular Democratic Party, the Labor Ukraine Party, the Party of Regions, and the Party of Industrialists and Entrepreneurs. JM
ROMANIAN, UKRAINIAN PREMIERS SIGN COOPERATION AGREEMENT. Visiting Ukrainian Premier Anatoliy Kinakh and his Romanian counterpart Nastase signed an agreement in Bucharest on 30 January on economic cooperation, Romanian radio reported. Kinakh said trade between the two countries increased by a significant 25 percent in 2001 and amounted to $600 million. Nastase said Romania is interested in continuing participation in the construction of the Kryvyy Rih ore-dressing plant in Ukraine, and that the two countries are cooperating on hydroelectric projects on the Tisa River and on connecting their respective natural gas-transportation pipelines. He hinted that the dispute over the Black Sea shelf and Serpents' Island remains unsolved, saying that in the future "sensitive points" in Romanian-Ukrainian relations will be "important tests" that must be "approached from a European perspective." MS
NATIONAL IDENTITY AND CIVIL SOCIETY IN UKRAINE: EXPLAINING THE YUSHCHENKO PHENOMENON
Prime Minister Viktor Yushchenko entered Ukrainian politics on a national scale when he moved from chairman of the National Bank to prime minister in December 1999. During his government's 18-month tenure he oversaw Ukraine's emergence from a decade-long slump and paid off wage and pension arrears. A survey of different Ukrainian opinion polls conducted between June 2001 and January 2002 showed that Yushchenko's popularity ratings remained between 18-30 percent.
Western commentary has focused primarily on Yushchenko's personal popularity and has ignored why this popularity has not been transformed into a nationwide mass movement. In other words, why has Yushchenko not become a Ukrainian equivalent of Democratic Party of Serbia (DSS) head Vojislav Kostunica, who was able to mobilize both democratic and nationalist anticommunist mass opposition to former President Slobodan Milosovic in October 2000? Ukrainian President Leonid Kuchma is as unpopular as Milosovic was, and yet the opposition newspaper "Vecherniye Vesti" compared Ukraine unfavorably to Yugoslavia and asked, "What kind of people would put up with discredited rulers? Are we worse than the Serbs?"
In Ukraine, the creation of a similar mass movement is made more difficult because of the national question that prevents Yushchenko and his Our Ukraine bloc from capturing the same levels of high support elsewhere in the country that it already enjoys in western and central Ukraine. A November-December 2000 International Foundation for Electoral Systems poll found that approximately the same number of ethnic Russians and ethnic Ukrainians suffered as a result of a decade of social change. Nevertheless, only 26 percent of Russian respondents in the poll said they trusted Yushchenko, compared with 45 percent of Ukrainians. This gap in attitudes along ethnic lines was not reflected in attitudes toward President Kuchma, who was trusted by 31 percent of Ukrainians and 22 percent of Russians (the poll was conducted before the "Kuchmagate" scandal erupted in November 2000).
In the late Soviet era, the national democrats in Ukraine were strong enough to propel the country to independence, but not to take power. In the '90s they were nonetheless able to prevent Ukraine from fully sliding into authoritarianism, a regression that has been the norm in the remainder of the Commonwealth of Independent States. The opposition movement that grew up during the Kuchmagate scandal was based in the same regions as the anti-Soviet, nationalist movement of the late Soviet era, namely western and central Ukraine.
If the Ukraine Without Kuchma movement had been able to mobilize countrywide support, as Kostunica did in Serbia, it is doubtful that Kuchma would be still in power today. But, as in the late Soviet era, eastern and southern Ukraine remained passive. As Russophile activists Mykhailo Pogrebynsky and Vladimir Malynkowitch bemoaned in a roundtable convened at the Russian newspaper "Nezavisimaya gazeta" in April 2001, civil society is closely linked to national identity in Ukraine. Consequently, an active civil society only exists in western and central Ukraine, while the east is passive. Eastern and southern Ukrainians only become involved in politics in the run-up to national elections when their more numerous votes in regions such as the Donbas with its 10 million population are sought after by election blocs.
Because the national democrats were not able to take power in Ukraine they were therefore unable to ensure that Ukraine undertook the "radical reform and return to Europe" strategy adopted by the three Baltic states and post-Milosovic Serbia. Instead, Ukraine has muddled along with "third way" and "multivector" policies favored by the former Soviet Ukrainian elite-turned-oligarchs.
The only way Ukraine can escape from these confused policies is through the creation of a broad reformist movement, such as Our Ukraine, that combines a patriotic, anticorruption, and socioeconomic platform. For the first time since the late Soviet era, the Communist Party and its leader Petro Symonenko have been pushed into second place by Our Ukraine and Yushchenko. But, as in the late Soviet era when they allied themselves with the "sovereign communists," national democrats have today been forced to compromise by forming a tactical alliance with the centrists. The major difference between the late Soviet era and today is that Our Ukraine has for the first time expanded the reach of national democrats into eastern and southern Ukraine, the traditional preserve of the Communist Party and the oligarchs.
The link between national identity and civil society that makes Ukraine so different from Yugoslavia is reflected in a January poll by the Ukrainian Center for Economic and Political Research (UCEPS). Unsurprisingly, Our Ukraine is strongest in western and central Ukraine, where it commands 51.9 and 20 percent support. These are the only two regions where Our Ukraine has pushed the Communist Party into second place. In the north, east, and south Our Ukraine's popularity drops to second place after the Communist Party with 9.5, 7.9, and 11.6 percent respectively.
The two radical antipresidential Yuliya Tymoshenko and Oleksandr Moroz's Socialist Party election blocs are more geographically restricted to western and central Ukraine. The Yuliya Tymoshenko Bloc, although led by a party with its origins in the eastern Ukrainian city of Dnipropetrovsk, is only popular in western and central Ukraine, while the Socialists are confined to Ukrainophone central Ukraine. Opposition newspapers, such as Tymoshenko's "Vecherniye Vesti," are only able to obtain printing facilities in Western Ukraine.
Western and central Ukraine are the strongholds of the opposition movement against Kuchma and the oligarchs. According to the UCEPS poll, seven blocs would pass the 4 percent threshold for the 225 seats elected by proportional voting. In western Ukraine only four of these seven would pass the threshold, and of these Our Ukraine and the Yuliya Tymoshenko Bloc top the list. In central Ukraine, seven blocs would pass the threshold, of which the top four are national democratic or in the opposition camp (Our Ukraine, Yuliya Tymoshenko Bloc, Kyiv Mayor Oleksandr Omelchenko's Unity, and the Socialist Party bloc).
For a United Ukraine, the bloc favored by President Leonid Kuchma that includes five "parties of power," would not pass the threshold in either western or central Ukraine. In Kyiv, a city with a large number of state officials, For a United Ukraine would only manage to scrape through with 4.3 percent.
National identity, reform, and civil society are closely linked in Ukraine, as they are in other postcommunist states. Ukraine's regional and linguistic divisions inhibit national integration and a civil society encompassing the entire country. Meanwhile, the more pervasive Soviet legacy in eastern and southern Ukraine has led to a passive population and a weak civil society. This, in turn, prevents Yushchenko's Our Ukraine from becoming a mass movement throughout Ukraine in the same manner as Kostunica's DOS in Serbia. The popularity of Yushchenko's Our Ukraine in Western and Central Ukraine reflects the region's role as Ukraine's main engine for reform, a bastion of opposition to the Communist Party and oligarchs, and preventing a further slide to authoritarianism.