“Black Holes” in the Political Economy of Ukraine: The Neoliberalization of Europe’s “Wild East”

Abstract

This paper analyses the complex interactions between ruling and emergent capitalist forces in Ukraine and the structures of transnational capital. It argues that the implementation of neoliberal market reforms along the lines laid out by the IMF, EBRD, EU, and WTO has facilitated the formation of “black holes” in the country’s economy. Through creating legal spaces for tax evasion, capital flight, money laundering, administrative and tax pressures, the country’s productive base continues to be subjected to a process of accumulation by dispossession, deepening socio-economic disparities and furthering transnationalization of the state. Covered by the discursive and legal façade of pluralist democracy, the large-scale embezzlement of economic assets undermines the stabilisation of a new social order whilst disrupting relations with foreign states and transnational business. The paper looks at (1) privatisation including the transfer of state-owned enterprises to financial industrial groups mostly controlled by oligarchs; (2) FDI regulations, the chronology of their reform, and their uneven implications for accumulation by both domestic and foreign capitals; (3) the creation and functioning of special economic zones and capital operation in those zones; and (4) tender and state-purchasing legislation reform and procedure abuse.

Keywords:

• Ukraine
• marketization
• capitalist class formation
• capital accumulation
• transnationalization of the state

Notes

1. For detailed discussions of the “transnational state” see: Anievas (190–206); Robinson 11–54; Robinson 157–200; Robinson 500–8; Robinson 316–28; Robinson 559–74; Robinson 529–33; Went 473–97; Wood “Global Capital, National States”.

2. Trade Union Federation of Ukraine. “Протягом останнього року рівень абсолютної бідності в Україні скоротився на 3,3%”. Report based on data from the UN Development Programme and Ptukha Institute for Demographic and Social Research. http://www.fpsu.org.ua/index.php?option=com_content&view=article&id=8732%3A----------33-&catid=71%3A2009-08-01-15-59-55&Itemid=37&lang=uk. Accessed 21 August 2012.

3. Source: Minfin. Available at: http://index.minfin.com.ua/index/wage/. Accessed 23 August 2012.

4. Source: Minfin. Available at:http://index.minfin.com.ua/index/salary/. Accessed 23 August 2012.

5. Korrespondent calculations, full report available at: http://korrespondent.net/business/1226985-zolotaya-sotnya-korrespondent-sostavil-rejting-bogatejshih-ukraincev. Accessed 2 September 2012.

6. “IMF Executive Board Concludes 2012 Article IV Consultation with Ukraine Public Information Notice (PIN)” No. 12/72; July 6, 2012. Available at: http://www.imf.org/external/np/sec/pn/2012/pn1272.htm. Accessed 2 September 2012.

7. “US threatens sanctions against Ukraine over Tymoshenko case”, RT from 23 September, 2012. Available at: http://rt.com/politics/us-ukraine-sanctions-tymoshenko-769/. Accessed 20 October 2012.

8. The method and its application will be discussed later in the paper. For detailed analyses see: Cox Production, Power and World Order: Social Forces in the Making of History; Gramsci Selections from the Prison Notebooks of Antonio Gramsci; Overbeek 168–83.

9. Carroll “Transnationalists and National Networkers”; Carroll The making of a transnational capitalist class: corporate power in the twenty-first century; Overbeek Restructuring hegemony in the global political economy: the rise of transnational neo-liberalism in the 1980s; Radice “The Role of Foreign Direct Investment”; Van Der Pijl Transnational classes and international relations; Van Der Pijl The making of Atlantic ruling class; The making of Atlantic ruling – to mention a few.

10. For details on circulation and circuits of capital see Karel 109–99.

11. For detailed discussions of the emergence and functioning of the criminal–political nexus in (post-)Soviet Ukraine see: Boyko; Feldbrugge “Government and Shadow Economy” ; Foglesong and Solomon Crime, Criminal Justice and Criminology in Post-SovietUkraine; Godson Menace to Society: Political–Criminal Collaboration Around the World; Glenny McMafia: Crime without frontiers; Kononchuk and Pikhovshek; The Dnipropetrovsk Family-2. Los 111–42; Shelley “Russia and Ukraine” – among others.

12. For details on the functioning of SEZs and PDAs see Пехник.

26Пасхавер, O. Й., Верховодова, Л. Т., and Агева, К. М. 2006. Приватизація та реприватизація в Україні після “помаранчевої” революції. Центр економічного розвитку; “Міленіум”.

13. Чивокуня, http://www.pravda.com.ua/articles/2006/04/27/3100046/, http://www.ft.com/cms/s/0/bc326650-d58a-11da-93bc-0000779e2340.html#axzz1YlE6Hpkx

14. Ukraine. Verkhovna Rada of Ukraine. Law “Про загальні засади створення і функціонування спеціальних (вільних) економічних зон.”. 17 February 2006. http://zakon2.rada.gov.ua/laws/show/2673–12

15. Makohon. http://zakon2.rada.gov.ua/laws/show/2673-12

16. Gaztek is legally owned by owned by the Cypriot companies Porala Venchers Limited, Pasler Enterprises Limited, Nesiba Venchers Limited, and Krezer Holdings Limited which are linked to Firtash.

17. “Газтек” привлек у банка “Надра” кредит на 250 млн грн для покупки акций облгазов’. Unian News Agency. 3 September 2012. http://economics.unian.net/rus/detail/138741.

27Государство подарило Фирташу более $100 млн.” Forbes.ua. 18 October 2012. http://forbes.ua/business/1340236-gosudarstvo-podarilo-firtashu-bolee-100-mln

18. “Торгуют все. Правительство отменило монополию на продажу импортного газа”. Kommersant.ua. 16 October 2012. http://www.kommersant.ua/doc/2045426?isSearch=True.

19. Euracoal. “Ukraine”. http://www.euracoal.be/pages/layout1sp.php?idpage=269.

20. “Бойко пропону роздати українські ТЕЦ у приватні руки.” EPravda. http://www.epravda.com.ua/news/2012/01/23/313626/.

21. “Интересы в тепле. Государство начинает приватизацию ТЭЦ.” Kommersant Ukraina 18 Oct. 2012. http://www.kommersant.ua/doc/2046882?isSearch=True.

22. “Cтрану готовят к распродаже. Государство избавится от 1200 предприятий.” Kommersant Ukraina. 26 September 2012. http://www.kommersant.ua/doc/2030491?isSearch=True.

23. Ibid.

24. EPravda. 4 September 2012. “Як відроджуються СЭЗи” http://www.epravda.com.ua/publications/2012/09/4/333881/.

25. “Коммерсантъ Украина”, no. 127 (1617), 27 August 2012.