The Malaise in Ukraine

The business community is fed up with President Yanukovych's corruption and management. Is real change on the horizon?

Over the past two-and-a-half years, Ukraine has been transformed, but not for the better. In February 2010, Viktor Yanukovych -- whose previous "victory" in the 2004 election was overturned in what became known as the Orange Revolution -- was elected president with a slight margin in a free and fair election. This ex-convict from Russian-speaking eastern Ukraine has quickly consolidated power. Increasingly, his family loyalists, primarily represented by his son, the businessman Oleksandr, dominate the Ukrainian government.

On Oct. 28, Ukraine is holding critical parliamentary elections. These elections will be either the final step in Yanukovych's consolidation of power or his opponents' last chance to disrupt his family rule. This time, however, the most palpable threat to his rule comes not from the crowds on the street but the elite businessmen he has alienated.

Yanukovych was lucky to win the presidency in the first place. Ukraine was hit hard by the global financial crisis in 2008 under the tenure of Prime Minister Yulia Tymoshenko, who was running against him for the presidency. The uneasy Orange coalition government led by Tymoshenko and President Viktor Yushchenko was consumed by infighting and eventually collapsed. Yushchenko now leads an officially sanctioned splinter group that is taking votes away from the real opposition.

Yanukovych already had a parliamentary majority when he came to power and was thus quickly able appoint his government. He also managed to gain control over the Constitutional Court, which abolished constitutional amendments passed in 2004 and returned the country to its 1996 constitution, which included stronger presidential powers. Meanwhile, Tymoshenko was sentenced in a blatantly political prosecution to seven years in prison for an allegedly shady gas agreement with Russia while she was prime minister.

Yanukovych has also taken steps to increase his control over television. In particular, the stubbornly independent cable channel TVi has been refused licenses and is gradually being ousted from various cable services through pressure from the authorities. In the run-up to these elections, television is firmly in the hands of the incumbent.

But pure repression can't save the president if his support among Ukraine's most powerful business interests continues to erode. Yanukovych initially appointed a government dominated by nine big business groups, each of which was represented by one or more ministers in his cabinet, but their number has quickly dwindled. Instead, Yanukovych family loyalists now dominate the government. They control all the law enforcement bodies, the central bank, and the Finance Ministry, while the businessmen complain that they are being squeezed out by Oleksandr Yanukovych. As a consequence, Ukraine has fallen even deeper on Transparency International's Corruption Perceptions Index to No. 152 out of 183 countries, and property rights have been further undermined.

This year, I had a chance to observe the dissatisfied Ukrainian opposition up close. Each year, Victor Pinchuk, a highly respected international Ukrainian businessman, organizes a major international conference in Yalta. In mid-September, the ninth Yalta European Strategy took place, attracting the whole Ukrainian political elite as well as foreign luminaries including the Americans Condoleezza Rice, Newt Gingrich, Robert Zoellick, and William Daley.

Yanukovych attended as usual, but in sharp contrast to previous years, he no longer seemed to be in a mood to placate his foreign guests. Last year, he promised to work to get Tymoshenko out of prison, where she lingers still. This time, both he and the audience seemed to realize that no new promise of reform would be credible, and he ignored the issue entirely.

His loyalists displayed the same attitude. Prime Minister Mykola Azarov answered my question on the increasing sleaze and graft under his watch by claiming that reports of corruption had been exaggerated. (According to recent surveys, 59 percent of the Ukrainian public disagrees.)

But some of the VIPs in attendance were obviously not satisfied by the status quo, including First Deputy Prime Minister Valeriy Khoroshkovskiy, Economy Minister Petro Poroshenko, and Deputy Prime Minister Sergei Tigipko. All are billionaires and major business leaders. Although they all still belong to Yanukovych's party, they seemed more eager to accommodate foreign politicians and businessmen. In their remarks, they acknowledged the current governance problems in Ukraine, and all called for closer cooperation with Europe and faster economic reforms.

It's not hard to understand why these officials are turning against the president. A few days earlier at a public meeting, Yanukovych had threatened to "rip off" Poroshenko's head amid a technical dispute over the implementation of car fees. "Well, thank you. We'll operate without your help," the unfazed Poroshenko responded.

These thuggish antics won't exactly endear Yanukovych to already skeptical foreign governments. Deflecting criticism that he is too close to the Kremlin, he has claimed European integration as his main goal, and last fall Ukraine inked a major free trade agreement with the European Union, a monumental document of 1,000 pages that had been negotiated for four years. But the EU has refused to sign the documents as long as Tymoshenko remains in prison on spurious charges.

Yanukovych has threatened to turn to Russia if the EU cold-shoulders him, but his threat lacks credibility because Russian President Vladimir Putin almost refuses to see him. On July 12, Putin arrived in Crimea and lingered for hours with a group of Russian nationalist bikers from Moscow until he finally went to Yanukovych at the Livadia Palace. At the meeting, he spent 20 minutes talking to his associates, ignoring Yanukovych and avoiding all discussion of substance. Desperately seeking friends, Yanukovych is now warming up to China. After mutual visits, the Chinese have offered several multibillion-dollar contracts, but so far none of several announced agreements between the two countries has come to fruition. The Ukrainian business environment is so tough that not even the Chinese government wants anything to do with it, and the Chinese pose specific conditions on their workers carrying out construction work.

Domestically, the isolation is even more pronounced, thanks to Yanukovych's shortsighted habit of victimizing his country's most powerful people. There are numerous allegations of Yanukovych family loyalists seizing partial ownership of companies without payment and accepting kickbacks of up to 40 to 70 percent on major state contracts. Large sectors of the economy are closed to all but a handful of Ukrainian businessmen, notably the critical steel, gas, electricity, mining, and chemical industries.

The president is therefore at his most vulnerable moment as he heads into this October's elections. Yanukovych hopes to further consolidate his power with a constitutional majority of two-thirds of the seats, but that seems unlikely. His personal popularity is less than 20 percent, and his party, the Party of Regions, is at around 25 percent. With a dismal economic record, the party is running by promising political stability and appealing to ethnic Russians by promising an official status for their language. To enhance his chances, Yanukovych has changed the electoral system so that half the parliamentary members will be chosen by nationwide popular vote, and the other half by individual districts choosing a member to represent them, an arrangement that favors incumbents and rich businessmen. But this may not be enough to prevent Yanukovych's party from being punished at the polls, and there's no guarantee that the loyalists who are elected will continue to support him in the future.

A victory for the democratic Orange opposition does not seem likely either. Several Orange parties have merged into the United Opposition under the leadership of the young and skillful Arseniy Yatsenyuk, who has served as speaker, foreign minister, economy minister, and first deputy presidential chief of staff. But Yatsenyuk lacks Tymoshenko's charisma, and in any event the Yanukovych regime has rigged the system against him. Not a single businessman dares to give the opposition money; several of its leaders are in prison; it has limited media access; the authorities have set up several splinter parties -- including Yushchenko's -- to confuse voters; and the opposition faces frequent harassment, including arrests and beatings by public authorities.

Walking through the center of Kiev in September, I was struck by the near absence of political campaigning. The United Opposition is probably still is too demoralized after the chaotic Orange rule of 2005 to 2010 to pull off an upset, though Ukrainian voters have repeatedly surprised their rulers by voting against them. They did so in 1994, 2005, and 2010.

A third scenario seems more plausible: a repeat of the 2002 elections, when the ruling party split into nine oligarchic party factions immediately after the vote. Poroshenko was able to laugh off Yanukovych at Yalta because he is about to re-create his own regional party with some 20 parliamentarians in Vinnitsa in central Ukraine. Emergencies Minister Viktor Baloga is doing the same in Transcarpathia in western Ukraine. A fractured oligarchy would not amount to democracy, but it would offer some checks and balances to the current family rule. Two years after the 2002 elections, Ukraine saw a democratic breakthrough, which might be more successful next time.

Yanukovych's problem is that he uses only sticks and no carrots. The fruits of his predatory rule are being shared by too few from a narrow circle of friends and family members from his native Donetsk. He has consolidated power at an amazing speed, but he has done so by steamrolling friends and foe alike. Therefore, his power might be at its zenith, and Ukraine may see a more pluralist system arising once again.

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National Security

Hey, Big Spender

Republicans like to say that Obama's gone soft on nukes. In fact, he's spending $213 billion more on them.

The Republican Party platform would have you believe that the strongest nation on Earth has decided to hang it up. "The United States is the only nuclear power not modernizing its nuclear stockpile," the party's 2012 platform warns.

Nonsense. All the major nuclear powers -- China, Russia, and the United States -- are modernizing their nuclear forces. While the Cold War has been cold for two decades now and the world no longer sits at the brink of conflagration, nuclear weapons enjoy a strange momentum. Bombs, warheads, and the means to deliver them are being refurbished and created anew so they will remain potent well into this century.

How do we know anyone in 2050 will want them? We don't, but we are delivering them nonetheless. A gift for the next generation.

It's true that in his Prague speech in 2009, President Barack Obama vowed "to seek the peace and security of a world without nuclear weapons." But he immediately qualified it, saying, "This goal will not be reached quickly -- perhaps not in my lifetime."

His policies have not exactly been a rush to disarmament.

In his 2010 Nuclear Posture Review, the president kept intact the land-sea-air strategic triad, and backed off his pledge to take nuclear missiles off high alert status. He did eliminate one weapon: a sea-launched, nuclear-armed cruise missile.

Obama also negotiated an arms treaty with Russia, limiting both sides to 1,550 deployed strategic nuclear warheads by the treaty's end, after seven years.

But the treaty's reductions from previous levels were modest. Moreover, there are more nuclear weapons outside the treaty than are covered by its limits. This includes about 2,000 strategic warheads in the U.S. non-deployed "reserve" and thousands more Russian tactical nuclear weapons left over from the Cold War -- which have never been covered by any arms control treaty.

When it comes to spending on nuclear weapons, and the complex of laboratories and facilities that support them, Obama has been downright generous in tough fiscal times.

When he submitted the New START arms reduction treaty to the Senate, the president laid out a congressionally required 10-year plan for modernizing and maintaining U.S. nuclear forces, including the warheads, delivery systems, and related infrastructure. Over the decade, the plan envisioned about $88 billion in spending for the National Nuclear Security Administration (NNSA), a semi-autonomous unit of the Energy Department, and $125 billion for updating strategic delivery vehicles, such as submarines, missiles, and bombers.

There's been some grumbling among Republicans that the president didn't keep his promise on this score. The GOP platform declares, "It took the current Administration just one year to renege on the President's commitment to modernize the neglected infrastructure of the nuclear weapons complex -- a commitment made in exchange for approval of the New START treaty."

This is pretty weak criticism. The administration is actually shoveling cash into the nuclear weapons stockpile. The NNSA is carrying out a 20-year, multibillion dollar effort, known as the Life Extension Programs, to prolong the life of four types of nuclear warheads and bombs. It is painstakingly difficult work -- which involves replacing old parts while adding security systems and controls -- and expensive.

Just one of them, the B-61 gravity bomb life extension, was estimated two years ago to cost $4 billion, but in July, Sen. Diane Feinstein, (D-Calif.), who chairs the Senate appropriations subcommittee that oversees the program, said the cost had doubled to $8 billion. A separate Pentagon estimate runs even higher, to $10 billion.

Under the original 10-year plan, the budget anticipated for NNSA next year was to be $7.95 billion, but the president's request was slightly below, at $7.58 billion. There is a good reason for this, one that the Republicans are well aware of: the Budget Control Act. Given that kind of pressure, coming in just a shade under the 10-year plan is not a sign of bad faith, as some in the GOP suggest. Actually, the president is spending considerably more for nuclear weapons upkeep than did his predecessor, whose budget for NNSA weapons activities in the last year of his administration was $6.3 billion.

Obama also promised in a February 2011 letter to the Senate to accelerate, "to the extent possible," work on design and engineering for a new plutonium facility at Los Alamos National Laboratory in New Mexico. It is to be called the Chemical and Metallurgy Research Replacement (CMRR) building, and the project is estimated to cost $6 billion. Another project, the Uranium Processing Facility at Oak Ridge, Tennessee, was to proceed in parallel. But the cost of doing them simultaneously grew to the point where the administration realized it could not sustain both. The White House decided to postpone the CMRR for five years, while boosting the budget for the uranium facility. This is just common sense at work, not some kind of subterfuge, as the Republicans suggest.

The president has not stinted much on the big-ticket modernization of delivery vehicles, either.

One of the largest is the Navy's planned replacement of the fleet of Ohio-class ballistic missile submarines. Today's fleet of 12 deployed submarines carries a total of 288 Trident II D5 submarine-launched ballistic missiles. The first of them entered service in 1981. These were the real workhorses of nuclear deterrence -- nearly invulnerable and incredibly accurate from 4,000 miles away. The Ohio-class boats each can carry up to 24 missiles, but will only have 20 under the new treaty with Russia. The new class of submarines, the SSBNX, will carry just 16 missiles, for a maximum of 192 when the fleet is fully replaced. The cost of this new generation of submarines, now advancing through the planning process, is roughly $100 billion.

Similar replacements will be offered for land-based missiles and the air leg of the strategic triad. Whoever is elected the next president will face enormous budget pressures and may yet decide that a triad is a Cold War relic, and no longer necessary. But Obama did not want to go there in 2010. His nuclear posture review looked at the possibility of a two-pronged nuclear deterrence force, say just land-based missiles and submarines, and shuddered. The report declared: "Retaining all three Triad legs will best maintain strategic stability at reasonable cost, while hedging against potential technical problems or vulnerabilities."

And as to the Republican criticism that Obama's deterrence strategy is insufficient, that seems like old politics. In 2008, presidential candidate Obama promised to take nuclear-tipped missiles off launch-ready alert. He didn't.

Today, one-third of U.S. strategic forces, including almost all land-based missiles and some sea-based, are still ready for a prompt launch. This has not changed since the Cold War ended. The launch-ready alert time is four minutes from the moment the president gives the order for land-based missiles, and about 12 minutes for submarines.

Obama's nuclear posture review acknowledged the need for more presidential decision time in a crisis, but the alert posture was left unchanged. The only reason the United States maintains a hair-trigger posture today is because Russia does. (China is not believed to keep weapons on launch-ready alert.)

Despite tensions that flare up, the United States and Russia are no longer enemies; the chance of nuclear war or surprise attack is nearly zero. We trade in each other's equity markets. Russia has the largest audience of Facebook users in Europe, and is open to the world in a way the Soviet Union never was.

Yet the missiles of Armageddon are still on prompt launch.

Another nuclear relic of the Cold War are the 200 or so tactical nuclear weapons the United States still retains in Europe as part of the NATO nuclear deterrent. The refurbished B-61 bombs would replace the older tactical B-61s now deployed at bases in Belgium, Italy, Germany, the Netherlands, and Turkey. These forward-based tactical nuclear bombs were intended to deter a Soviet land invasion of Europe. That threat vanished long ago, and so has the military mission for the weapons. They are now there entirely as a political device to reinforce the idea that non-nuclear members are sharing in the alliance defense burden.

Obama didn't change this. Perhaps he concluded these nuclear weapons should be part of a larger deal with Russia later on, putting the big Russian stockpile on the negotiating table. But some NATO members are growing restive about them, and these weapons are ripe for a future deal.

Clearly, Obama is not a disarmament dreamer. But what would he do in a second term? Would Obama consider negotiating deeper cuts in the arsenals with Russia? Would he take missiles off prompt launch?

The White House carried out a detailed implementation study after the nuclear posture review. Sources say the study sketches out alternative paths for U.S. nuclear forces -- keeping today's levels, or seeking deeper reductions. The results of this study have been locked up during the election campaign, but if Obama is re-elected, he will have to make decisions relatively early in a new term.

Mitt Romney opposed the New START treaty and called for a large defense spending increase and even more for missile defense. In general, he seems skeptical of the need for negotiated nuclear arms control and has promised to stand up to Russian President Vladimir Putin. But if elected, he would face some pressures similar to those confronting Obama. The large number of Russian tactical nuclear weapons is a continuing worry. Congress is unlikely to approve such a large defense spending increase, and the new president may have to find ways to scale back the strategic nuclear deterrent as a result -- perhaps with fewer submarines or missiles. The NATO allies are restive about continuing to station American nuclear bombs in Europe. The question is what would Romney do once in the White House -- and how much does his campaign rhetoric really say about where he would take nuclear weapons policy?

At the Seoul summit, in March 2012, President Obama declared, "We can already say with confidence that we have more nuclear weapons than we need..." For him, too, the question is: What will he do about it?

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