Why this man is not fit to be Ukraine's president

By bne IntelliNews January 30, 2014

Ben Aris, Graham Stack and Nicholas Watson -

Events in Ukraine are spiralling out of control and no one in Kyiv, Washington, Brussels or Moscow can be quite sure where they will end. But whatever the eventual outcome, much rests on the fate of one man who stands at the centre of the maelstrom engulfing his country and who has played a crucial role in its chaotic politics for the past decade.

Viktor Yanukovych was elected the president of Ukraine in February 2010 with almost 50% of the vote, in a presidential runoff that was hailed at the time by western observers as fair and "truly competitive." It made Ukraine one of the very few in the former Soviet Union that has held what the West deems a truly democratic election.

Since then, his administration has shown itself to be incompetent, corrupt and chaotic, bringing the country to the edge of a full-scale economic meltdown at the end of last year and resulting in the fateful decision in November to abandon a long-standing deal that would have brought Ukraine closer to the EU, instead caving in to Russian pressure and signing some murky deals with its giant neighbour.

The upshot of this incompetence is protestors battling it out with riot police on the streets of Kyiv and other cities, the grinding to a halt of government business by the occupation of ministries and regional administrative centres, and a further deterioration in Ukraine's already precarious financial position. The situation is clearly unsustainable and described by group of former US ambassadors to Ukraine on January 28 as "on the verge of spinning out of control."

Yanukovych appears to be making efforts to diffuse the situation (that also appear to be insincere); on January 28, Mykola Azarov, the prime minister, resigned, while in a rare show of bipartisanship the pro-government Party of Regions joined with opposition lawmakers to repeal two-thirds of the laws that were rammed through parliament the previous week restricting freedom of speech and assembly, which were much of the cause of the descent of the protests into violence.

Yet most protestors and a significant chunk of the country want Yanukovych to resign before his term of office ends with the next presidential election in 2015.

The constitution states that the authority of a president is "subject to an early termination" in cases of:

1) resignation;

2) inability to exercise presidential authority for health reasons;

3) removal from office by the procedure of impeachment;

4) his/her death.

The opposition is in a constitutional bind, as for better or for worse - and clearly the latter - the people chose Yanukovych as their president in 2010 in an internationally acknowledged democratic election. Simply bringing the country to a standstill in an effort to force the president's resignation has dubious legality. With no indication that Yanukovych intends to resign, and few signs of ill health, the constitutional route to getting rid of him is impeachment, for which there is a procedure "if he commits treason or other crime."

bne lays out its case that Yanukovych has indeed committed crimes that are of an impeachable nature. He is demonstrably corrupt; he has fixed elections and the chances of a fair and free vote for the presidency in 2015 are already low and diminishing; and he has already proven he is willing to ride roughshod over the constitution that is supposed to guarantee democracy in Ukraine.

At this point it should be noted that no one has raised the topic of impeachment, partly because it is at the moment politically unworkable, given the ruling Party of Regions' domination of the Rada. But that is no reason for not proposing it, as it remains one of the only legitimate mechanisms for forcing Yanukovych out of office. And the case against him is already very strong; if he were a western leader, he would have been impeached long ago.

Russian ties that bind

Yanukovych is worth hundreds of millions of dollars. This is a man who was a truck driver in the 1980s and spent the next two decades as a logistics expert before being appointed governor of the eastern region of Donetsk in 1997. He has never worked in the private sector, nor does he publicly own any successful company. The sheer size of his fortune raises big question marks.

An extensive investigation into the Yanukovych family's wealth conducted by the PEPWatch NGO uncovered detailed evidence of corruption and international money laundering. "We believe that the authoritarian regime of President Viktor Yanukovych has been fuelled by proceeds of corruption laundered via the international financial system through the network of shell-companies and professional intermediaries," says PEPWatch, presenting the results of the work of the country's leading investigators from websites Nashi Groshi and Ukrainskaya Pravda.

According to PEPWatch, Yanukovych's palatial Mezhihirya estate outside Kyiv, built partly with public money, is owned via a UK company Blythe (Europe) UK, while his vast hunting grounds encompassing 75,000 hectares at the Suholuchchya estate are held via another UK company Astute Partners Limited.

bne inquiries have also implicated Yanukovych and his closest associates - former prime minister Azarov and the hardline head of the presidential administration Andriy Klyuyev - with structures held via a family of Austrian lawyers with links to the Kremlin.

What all these foreign holding structures used by Yanukovych and his associates have in common are past and present links to Reinhard Proksch, an Austrian provider of corporate services, both via directorships as well as via holding structures that Proksch used to set up companies for clients.

Contacted by bne, Proksch insists that none of the companies mentioned in the press ever "received any funding from Ukraine nor do any of these companies hold any cash assets. We never distributed any 'commissions' or other payments. No link to Mr Yanukovych exists," he told bne.

Yet company filings show that he has acted as a director for at least one of the shell companies used to control assets linked to Yanukovych. And Proksch's name also comes up in connection to assets belonging to Russia's first deputy prime minister, Igor Shuvalov, probably the third most powerful man in Russia.

In 2011 the Russian press exposed a scheme where Shuvalov had bought tens of millions of dollars of Gazprom shares that were sold via his offshore holdings. The fact that Shuvalov and Yanukovych share the same lawyer, the same sort of secret offshore company network and are both intimately connected to the workings of Gazprom should also raise another huge red flag given Gazprom's central role in Russo-Ukrainian relations.

That the Kremlin's hold over Ukraine may not be restricted to the geopolitics, but include shadowy financial strings to the president should be a cause of worry to Ukrainians of all stripes. After all, the Yanukovych administration has accused jailed former prime minister Yulia Tymoshenko of betraying national interests when as PM in January 2009 she signed a ruinous agreement with Russia over gas price increases. According to her foes, Tymoshenko was blackmailed into signing the agreement due to leverage the Kremlin had over her, deriving from a Russian criminal case opened from the 1990s relating to her gas trading company's debts. According to her critics, she agreed to punitive gas prices for Ukraine in return for the case being closed.

The fix is in

Yanukovych has form when it comes to fixing elections. He was the establishment's candidate who opposed Viktor Yushchenko in the disputed 2004 presidential election. Widespread irregularities in the vote ended in street protests and the Orange Revolution, which forced the presidential runoff to be rerun and victory for Yushchenko.

And Yanukovych was back at his old games just last December. Fraud and voter manipulations were so high during the 2013 parliamentary in five constituencies - Cherkasy, Kaniv, Pervomaisk, Obuhiv and Kyiv - that even the Yanukovych-controlled Constitutional Court said the votes there had to be rerun. Exit polls taken by independent observers showed that the opposition won clear victories in three of the five whereas the official tally produced only one opposition victory.

"One vote at Ukraine's by-election in five parliamentary single-mandate districts on Dec. 15 goes for (hryvnia) 400. Sometimes some food is thrown in. But the payment, cunningly, comes in two instalments. The first half is paid when the person agrees to vote for the right candidate, and the other half is given after the voter presents photographic proof of the vote as they exit the polling station," Ukrainian election observers were quoted by the Kyiv Post as saying at the time.

Subverting the constitution

But the most blatant abuse of power was the parliamentary vote on January 16 that pushed through the so-called "dictatorship laws" that sparked the widespread riots a few days later.

Widely condemned by both the protestors and the international community, these laws were pushed through by ruling Party of Regions deputies in just a few minutes, with no debate at all, and by a simple show of hands after opposition deputies blocked access to the electronic voting system.

After the meeting, the counting commission frankly admitted to the press that it was unable to count the votes and just "assumed that all the Regions deputies were present and made a majority," and recorded a vote of 235 for the motion. Other video footage showed some deputies voting for absent colleagues.

Subsequently, opposition activists used photos from the floor of the Rada to count the hands and came up with the number 84 - far from the 225 votes required to pass the law.

Quite apart from blatantly ignoring parliamentary protocol, the new laws also broke several articles of Ukraine's constitution including: Article 84 that guarantees voting in the Rada will be open, inclusive and insists that deputies vote in person; Article 5 that says the people are the ultimate power in the country and their rights cannot not be usurped; Article 22 that guarantees the people's basic human rights; and Article 60 that says no one has to "execute directions or orders that are manifestly criminal."

What next?

Yanukovych's hand had been forced into making conciliatory gestures after protestors had taken over the regional administration of at least 10 regions, leaving only four regions clearly under the government's control. His administration looks close to collapse, but the situation remains extremely fluid and the future impossible to call.

The protestors have dug in their heels and are insisting on nothing less than early elections. In the middle, the opposition leaders together with the international mediators are still hoping to find a solution that avoids more fighting, but any compromises that leave Yanukovych in power will be hard to sell to the street. And finally Yanukovych is desperately trying to hang on to power until the February 2015 elections.

A move to impeach the president has so far remained ignored, yet politicians in Ukraine are by and large a venal and craven lot, who can certainly be swayed if their access to money and power looks to be cut off. Indeed, on January 29 there were reports coming out of Switzerland from Ukrainian journalists that several oligarchs are already having trouble getting credits from banks there and moving their money about.

In theory it is possible to persuade Party of Regions deputies to rebel and vote for impeachment if the situation becomes desperate enough - and the situation is already pretty desperate.

The group of former US ambassadors argue in their open letter for US and European officials to engage directly with Yanukovych's inner circle and the oligarchs who back him in order to help force a settlement, with the threat of visa bans and financial sanctions as a stick. "It is in Europe that Ukrainian oligarchs close to the president park their money, buy luxury residences, travel on holiday, and send their children to school," the four former ambassadors - John Herbst, William Green Miller, Steven K. Pifer, William B. Taylor Jr. - write in their open letter. "People such as the oligarch Rinat Akhmetov must understand that they have a personal stake in achieving a peaceful, democratic settlement."

And to add substance to the threats, bne has reported that Dmitry Firtash, one of Ukraine's richest and most powerful oligarchs, has already been barred from entry into the US.

For all concerned, if Yanukovych refuses to resign and appears intent on fixing the next election to keep himself in power, removing the president by such democratic means as impeachment remains Ukraine's best hope of staying on a democratic path and avoiding a descent into widespread and uncontrollable violence. After all, Yanukovych still has the option of sending in the troops to retake control of the country - an outcome nobody wants.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more