The Rise and Establishment of Oligarchs as Party Substitutes in Ukraine: an Assessment of the Post-Revolutionary (Orange) Years

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The Rise and Establishment of Oligarchs as Party Substitutes in Ukraine: an Assessment of the Post-Revolutionary (Orange) Years

Lidiya Zubytska - PhD in Political Science, University of Kansas.

This article traces the rise and establishment of the Ukrainian oligarchs as “party substitutes” in the transitional period around the Orange revolution. It argues that the transition of the political system during that time constituted a specific environment of political uncertainty. In this context, the elected officials were more prone to seek an accommodation of interests beyond the traditional voter base, in order to maintain their political relevance, reputation, safe exit and/or political immunity, rather than to aim for re-election. Ukrainian oligarchs, who had been engaged in complex balancing during the Kuchma presidency for years, and accumulated a wealth of material and organizational resources, became logical providers of such “political goods” to the Ukrainian transitional leaders. Thus, during the post-Orange years, the Ukrainian economic elites tipped the institutional balance from depending on government for krysha and immunity towards utilizing the government resources in their augmented role as party substitutes for personal economic gains.

Key words: oligarchy, party system, political transition, Orange revolution

orange revolution ukrainian oligarch

Over the span of a decade, Ukraine saw two revolutions that rocked its political and social life to the very core: the Orange Revolution of 2004 and the Revolution of Dignity of 2014. The political transition following the first change of power, from the authoritarian-leaning President Kuchma to the pro-re volutionary Orange government, exhibited a new political trend: the economic elites - actors who had hitherto played behind the scenes of the Ukrainian political life - entered the stage and actively sought to improve their public image and win voter support. Moreover, they prominently spearheaded political campaigns for specific policies, as well as openly managed parties in way that effectively converted their role from being mere interest groups to replacing the democratic functions of political parties in the Ukrainian context. In this article, I trace the rise and establishment of the Ukrainian oligarchs as such “party substitutes”,1 able to deliver political benefits to prospective candidates for office in the transitional environment surrounding the Orange Revolution.

This article will first examine the academic literature on developing party systems and political transitions, which establishes my theoretical grounds for modelling the role of oligarchs as party substitutes in Ukraine. I then provide a short review of the emergence of Ukrainian economic elites during the years of Leonid Kuchma's presidency. I will further argue that it was precisely the uncertainty-fraught transitional nature of post-Orange political environment in Ukraine that enabled the oligarchic elites to consolidate their role as party substitutes under President Yushchenko, from 2004 to 2010. Conclusions will summarize the findings of this paper.

Party Substitutes and the Uncertainty of Transition: A Theoretical Overview

The political context of transitional states has characteristics that are distinct from what scholars typically assume for stable and democratically advanced states. We know from comparative research, for instance, that political parties in developing democracies form party systems with a volatile dynamic. Henry E. Hale, “Why Not Parties? Electoral Markets, Party Substitutes, and Stalled Democratization in Russia,” Comparative Politics 37, no. 2 (2005): 147-66. Marcus Kreuzer, “Assessing Causal Inference Problems with Bayesian Process Tracing: The Economic Effects of Proportional Representation and the Problem of Endogeneity,” New Political Economy 21, no. 5 (2016): 473-83. Margit Tavits, “Organizing for Success: Party Organizational Strength and Electoral Performance in Postcommunist Europe,” The Journal of Politics 74, no. 1 (2012): 83-97. They are also not necessarily organized along social cleavages, Herbert Kitschelt, “Formation of Party Cleavages in Post-Communist Democracies: Theoretical Propositions,” Party Politics 1, no. 4 (1995): 447-72. and are characterized by weaker voter attachment. Russell J. Dalton, and Steven Weldon, “Partisanship and Party System Institutionalization,” Party Politics 13, no. 2 (2007): 179-196. Further, once in office such parties may pursue “promiscuous power-sharing” with unlikely coalition partners. Dan Slater, and Erica Simmons, “Coping by Colluding Political Uncertainty and Promiscuous Powersharing in Indonesia and Bolivia,” Comparative Political Studies 46, no. 11 (2013): 1366-93. On the other hand, we know from Brader, Tucker, and Duell Ted Brader, Joshua A. Tucker, and Dominik Duell, “Which Parties Can Lead Opinion? Experimental Evidence on Partisan Cue Taking in Multiparty Democracies,” Comparative Political Studies 46, no. 11 (2013): 1485-1517. that party-voter policy congruence is very sensitive to the longevity, incumbency, and ideological clarity of parties in both developed and emerging democracies.

Under such conditions, political actors may expect to not engage in repeated interactions (e.g., elections) and thus seek to maximize their payoffs in a single-shot game. In other words, uncertainty “may lead party elites to emphasize short-term gain from holding office over longer-term preferences for maximizing votes”. N. Lupu, and R. B. Riedl, “Political Parties and Uncertainty in Developing Democracies.” Comparative Political Studies 46, no. 11 (2013): 1339-65. In such conditions, party substitutes emerge to offer political actors the political and financial support they require. Henry E. Hale, “Why Not Parties? Electoral Markets, Party Substitutes, and Stalled Democratization in Russia,” Comparative Politics 37, no. 2 (2005): 147-66. Akin to machine politics, according to Henry Hale, the fused financial, industrial, and political influence of party substitutes - such as financial-industrial groups in Russia - allows political leaders in power to conceive of their professional career and personal well-being beyond the reliance on party-voter linkages.

In Henry Hale's work Henry E. Hale, “Why Not Parties? Electoral Markets, Party Substitutes, and Stalled Democratization in Russia,” Comparative Politics 37, no. 2 (2005): 147-166., party substitutes are analyzed from an economic theoretical standpoint, where individual political actors are buyers and parties are sellers of a particular commodity: electoral votes. Hale innovatively resolves the puzzle of conflicting evidence on the strength and weakness of the party system in Russia by proposing a concept of what he calls “party substitutes” on the electoral vote market. With an array of organizational, material and reputational resources at their disposal, party substitutes are able to bypass the publicly controlled political parties and deliver votes to individual candidates. According to Hale, in the Russian context party substitutes are financial and industrial complexes or local governor-run political machines.

Applying this approach in the specific conditions of transitional uncertainty, where time horizons for political actors are significantly shortened in decision making, I theorize that transitional leaders can also turn to party substitutes for the same organizational, material, and reputational resources, as Hale suggests. However, their goal may not necessarily be re-election but continued political relevance, reputation, safe exit, and/or political immunity.

In the Ukrainian context, party substitutes are primarily oligarchs Denoting rule by a small group, the terms oligarch and oligarchy originate from the philosophical works of Aristotle. In the Ukrainian context, I follow a popular definition explored by Aslund and McFaul (Anders Aslund, and Michael McFaul, eds. Revolution in Orange: The Origins of Ukraine's Democratic Breakthrough (Washington, D.C.: Carnegie Endowment for International Peace, 2006), 10), who discuss an oligarch as a “politically well-connected tycoon, a dollar billionaire or near-billionaire, who is the main owner of a conglomerate and has intimate ties with the president.” However, since the relative influence of the office of the Ukrainian president varies vis-à-vis the Prime Minister, it is useful to view oligarchs more generally as being connected to several top decision makers, such as the President, the Prime Minister, Minister of the Interior, and Prosecutor General, among others. Oleh Havrylyshyn, The Political Economy of Independent Ukraine: Slow Starts, False Starts, and a Last Chance? (London, UK: Palgrave MacMillan, 2016), 201. whose financial, industrial, and media resources have been underwriting many political events and processes for the past twenty-seven years of independence. Indeed, due to the significant influence of these financial magnates on Ukrainian politics and a concomitant high level of corruption, the country's current political system has been variously described as an oligarchate11 or piranha capitalism Stanislav Markus, Property, Predation, and Protection (Cambridge, UK: Cambridge University Press, 2015).. Such systems are characterized by massive practices of embezzlement, insider trading, and corrupt privatization maneuvers, including armed violence and raider attacks on competitors Anders Äslund, “The Economic Policy of Ukraine after the Orange Revolution,” Eurasian Geography and Economics 46, no. 5 (2005): 327-53. Viatcheslav Avioutskii, “The Consolidation of Ukrainian Business Clans,” Revue Internationale D'intelligence Economique 2, no. 1 (2010): 119-41. Rosaria Puglisi, “The Rise of the Ukrainian Oligarchs,” Democratization 10, no. 3 (2003): 99-123..

Several academic works in political science have underscored the influence of the new big capital on Ukrainian politics. Margarita Balmaceda explored the fusion of oligarchic and political interests in the Ukrainian energy sector. Margarita Mercedes Balmaceda, “The Politics of Energy Dependency: Ukraine, Belarus, and Lithuania between Domestic Oligarchs and Russian Pressure,” Studies in Comparative Political Economy and Public Policy, vol. 40. (University of Toronto Press, 2013). Melnykovska, Schweikert, and Kostiuchenko dwelled on the role of oligarchs in state institutional reforms. Inna Melnykovska, and Rainer Schweickert, “Who You Gonna Call?: Oligarchic Clans as a Bottom-up Force of Neighborhood Europeanization in Ukraine,” Arbeitspapiere Des Osteuropa-Instituts 67 (2008): 1-32. Melnykovska, Inna, Rainer Schweickert, and Tetiana Kostiuchenko, “Balancing National Uncertainty and Foreign Orientation: Identity Building and the Role of Political Parties in Post-Orange Ukraine,” Europe-Asia Studies 63, no. 6 (August 2011): 1055-72. Havrylyshyn, Matuschak, and Puglisi each respectively delineated the rise and scope of economic influence of the new business elites in independent Ukraine. Oleh Havrylyshyn, The Political Economy of Independent Ukraine: Slow Starts, False Starts, and a Last Chance? (London, UK: Palgrave MacMillan, 2016). Slawomir Matuszak, The Oligarchic Democracy: The Influence of Business Groups on Ukrainian Politics (Warsaw: Osrodek Studiow Wschodnich im. Marka Karpia, 2012). Rosaria Puglisi, “The Rise of the Ukrainian Oligarchs,” Democratization 10, no. 3 (2003): 99-123. However, comparatively little scholar attention has been dedicated to the role of oligarchic interests in the very process of party formation and development. While efforts continue by civil society activists to expose corrupt fusions in Ukrainian politics (e.g., the NGOs Obiektyv (Lens) project, Anti-Corruption Centre, Skhemy (Schemes) project, etc.), we know little about how the oligarchic elites were able to enter Ukrainian party politics during the conditions of transitional uncertainty. This is the theoretical gap that the present article attempts to bridge, by examining the rise and consolidation of these party substitutes in the years leading to and following the 2004 Orange Revolution.

The Rise of Oligarchs in Ukrainian Politics: From `Krysha' to Rada under President Kuchma

Ukraine arrived at the dawn of the 21st century with a well-defined (even if not well exposed to the public) circle of business elites that had formed strong links to Kuchma regime. The government granted them tax breaks, legal protection, insider privatization opportunities, and direct budget subsidies, among other privileges, in exchange for kickbacks from rent-seeking activities and loyalty to the regime. Oleh Havrylyshyn, The Political Economy of Independent Ukraine: Slow Starts, False Starts, and a Last Chance? (London, UK: Palgrave MacMillan, 2016), 207-16.

Members of this group had accumulated their initial wealth from the chaotic privatization - popularly dubbed prykhvatizatsiia grab-ization' - processes that occurred after Ukraine gained independence in 1991 (following the collapse of the Soviet Union). They had a priori privileged access to government stemming from their links to the Communist Party or other positions of power in the old Soviet system of governance. However, with few large state-owned enterprises and companies remaining by the late 1990s, and with the initial competition between major Ukrainian business players having stabilized, the major concern for the oligarchs became the ability to protect their assets and their rent-seeking mechanisms from unpredictable state intrusion, reprivatization, and other pressure from the government.

Notoriously cumbersome and seemingly unending Ukrainian state regulations on anything from fire safety to high taxation rates gave much trouble to small and medium businesses in Ukraine, and privileged the consolidation of big business. However, these typically repressive regulations also made big businesses inevitably liable for violation of any given code, and thus required a krysha `roof', or protection from local or national authorities. This, in passing, is also a reason for some of the major retail businesses from abroad having stayed out of the Ukrainian market. For instance, IKEA did not want to enter the Ukrainian market because it did not want to be embroiled in corrupt business practices and Ukraine's byzantine bureaucracy (details, e.g., at http://www.worldbulletin.net/europe/165278/ukraine-wants-ikea- store-symbol-of-anti-corruption-fight). In addition, prior to the Orange Revolution Ukraine had scored 58.70 on the World Bank's Starting Business measure, and only slightly improved that score in the year following the revolution, 61.68 in 2005. The measure aids in assessing the absolute level of regulatory performance and how it improves over time, allowing users to see both the gap between a particular economy's performance and the best performance at any point in time; it complements the annual Ease of Doing Business ranking, which compares economies with one another at a point in time. Source: http://www.doingbusiness.org/data/distance-to-frontier. The fate of the Ukrainian oligarch and former Prime Minister Pavlo Lazarenko, As Kuchma's prime minister in 1996-97, Lazarenko was named “one of the top 10 corrupt officials” in the recent history by Transparency International; he embezzled at least $114 million from the Ukrainian government. For more, see: https://www.nytimes.com/2016/07/07/business/ international/a-ukrainian-kleptocrat-wants-his-money-and-us-asylum.html?_r=0. tried subsequently on corruption charges in the USA, and the jailing of the renegade oligarch Mikhail Khodorkovsky in neighbouring Russia, were alarming examples for the Ukrainian oligarchs of the state's capability of cracking down on individual wealth and business interests.

Beyond personal and familial connections to the ruling Kuchma regime, one of the ways to acquire a krysha, and further assurance of non-intrusion on the part of the government, was to obtain the legal indemnity and immunity granted to an elected official. Such rights were guaranteed under the 1996 Constitution of Ukraine and further expanded in the Law of Ukraine “On the Status of People's Deputies of Ukraine.” The Ukrainian-language version of the law is available here: http://zakon3.rada.gov.ua/laws/ show/2790-XII. First introduced as early as 1992, this Law saw fifteen different amendments adopted by Ukraine's parliament, the Verkhovna Rada, prior to the Orange Revolution. In the same time frame, the scope of deputy immunity underwent the scrutiny of the Constitutional Court of Ukraine six times.

President Kuchma took the issue of immunity even further. To curb the influence of the Rada, he put the question of immunity before Ukrainian voters in a national referendum in 2000. Eighty-five percent of the cast ballots were in favour of curtailing deputy immunity. For various political reasons, however, the results of the referendum were never put in practice.

To the contrary, in fact, an update to the 2001 law expanded the rights of Rada members. Previously Rada deputies were immune to prosecution for their political statements and votes in the legislature - as is the parliamentary norm in democratic states. But also, according to Part II, Article 17 The full official version of this law is available here: http://zakon.rada.gov.ua/laws/show/2328-14 in the revised law, they were now granted unlimited access to any territory or state or local government or private agency, enterprise, or other facility. Additionally, they obtained the right to demand immediate restitution for any identified violation of Ukrainian law, under the threat of legal or criminal responsibility of those who refuse to do so. In effect, what this meant was that Rada deputies could have access to any entity in Ukraine without regard to the form of ownership or level of confidentiality. In addition, if they inflicted damage to such an entity, they were constitutionally protected from liability.

This was a huge opportunity for the Ukrainian economic elites to protect their assets and rent-seeking mechanisms, and led to an unprecedented rise in the number of parliamentarians who came from big business. Alsund estimated that at the start, near 1994, 20% of the seats in the Rada were controlled by individuals who had accumulated significant wealth from the initial state privatization programs. Anders Aslund, How Ukraine Became a Market Economy and Democracy (Columbia University Press, 2009), 65. Then, after the 1998 election, at least 28% of the seats were serving the interests of these nouveaux riche groups. Rosaria Puglisi, “The Rise of the Ukrainian Oligarchs,” Democratization 10, no. 3 (2003): 109. But after the promulgation of the revised law on the status of national deputies, by 2002 300 of the 450 Rada deputies were dollar millionaires. Bayrachny, quoted in Oleh Havrylyshyn, The Political Economy of Independent Ukraine: Slow Starts, False Starts, and a Last Chance? (London, UK: Palgrave MacMillan, 2016), 214. This marked a new stage of oligarchic relationship with the Ukrainian government, which had previously provided krysha protection and opportunities for rents, but now became its own unique kind of asset for business purposes. This dynamic is akin to political clientelism in Latin America, where interactions between political actors are built on personal relationship and hierarchy. In traditional clientelism, “large numbers of low-status individuals, such as those in the slums of rural and underdeveloped areas, are protected by a powerful patron who defends their interests in return for deference or material reward.” In the modern version of political clientelism, businesses, parties and bureaucracies develop their own network ofpatrons, brokers, and clients (John D. Martz, The Politics of Clientelism: Democracy & the State in Colombia (New Brunswick, NJ: Transaction Publishers, 1997), 29). As such, loyalty to a patron in exchange for favours becomes the major operating principle of the political system. Certain parallels have been drawn to the Ukrainian case (see, for instance: Henry E. Hale, Patronal Politics: Eurasian Regime Dynamics in Comparative Perspective (Cambridge: Cambridge University Press, 2015).

Such a direct influence on the decision-making process in the Ukrainian context means that the fusion of political and financial interests contributed to a cyclic interest loop between oligarchs and politicians, We may also observe another way through which oligarchic-political interests were connected: the political appointment to executive offices of either oligarchs themselves (e.g., Mr. Poroshenko as Minister of Foreign Affairs under President Yushchenko and Minister of Trade and Economic Development under President Yanukovych, or Mr. Kolomoisky as an oblast governor under the more recent Poroshenko government) or those closely linked and beholden to them. For more details, see: http://www.bbc.com/ukrainian/politics/2015/03/150326_oligarch_ukraine_map_vc. as pointed out by Melnykovska and Schweikert:

[Oligarchic clans] are mainly interested in accumulating wealth and capturing new markets. However, the oligarchic clans also are different from a classic business entity in the way they use the strategy `power-money-power' for wealth accumulation. Namely, access to state power enables the oligarchic clans to secure their economic interests and make profits, which they use to broaden their political power. A symbiosis of politics and business does not involve just a simple patronage connection. Besides lobbying, networking and bribing to influence politics, the oligarchic clans aim at assimilating the political elite. The assimilation of clan members in politics and vice versa is a common phenomenon in Ukraine. Inna Melnykovska, and Rainer Schweickert, “Who You Gonna Call?: Oligarchic Clans as a Bottom-up Force of Neighborhood Europeanization in Ukraine,” Arbeitspapiere Des Osteuropa-Instituts 67 (2008): 9.

In fact, Leonid Kuchma himself, looking back at his years in office, acknowledged that during his presidency years, “Our main common failure was the failure to separate power from business”. Leonid Kuchma, “Oligarchs Disappointed Me Less Than Yushchenko,” Unian.ua, September 22, 2018, https://www.unian.ua/politics/231837-kuchma-rozpoviv-yak-viv-yuschenka-pochi- nayuchi-z-natsbanku.html

Thus, having emerged in the early 1990s following the state privatization process Serhiy Kudelia, and Taras Kuzio. “Nothing Personal: Explaining the Rise and Decline of Political Machines in Ukraine,” Post-Soviet Affairs 31, no. 3 (2015): 250-78. and undergone fierce, at times violent, competition, The practice of reiderstvo `raidership' or violent takeover of some companies by armed groups to force a change of ownership between oligarchs is further explored in Matthew Rojansky's “Corporate Raiding in Ukraine: Causes, Methods and Consequences,” Demokratizatsiya: The Journal of Post-Soviet Democratization, 22.3 (2014): 411-43. the Ukrainian oligarchs achieved a relatively established system of power, balancing vis-à-vis each other and the government, by the end of Kuchma regime. Margarita Mercedes Balmaceda, “The Politics of Energy Dependency: Ukraine, Belarus, and Lithuania between Domestic Oligarchs and Russian Pressure,” Studies in Comparative Political Economy and Public Policy, vol. 40. (University of Toronto Press, 2013), 99. They began by primarily pursuing accumulation of wealth, and in the context of vast corruption, found ways to protect their rent-seeking through personal connections to the Kuchma regime and/or through deputy indemnity and immunity. Other ways and means by which Ukrainian oligarchs have been connected to political power- holders are explored in more detail in Viatcheslav Avioutskii, “The Consolidation of Ukrainian Business Clans,” Revue Internationale D'intelligence Économique 2, no. 1 (2010): 119-41), who emphasizes the regional origin and character of the Ukrainian oligarchic clans, the level at which the original links between big business and politicians are made. Havrylyshyn (Oleh Havry- lyshyn, The Political Economy of Independent Ukraine: Slow Starts, False Starts, and a Last Chance? London, UK: Palgrave MacMillan, 2016), however, argues that Ukrainian oligarchs overcame the regionalization of capital and influence by the end of Kuchma regime, and thus for my period of study it is more fitting to analyze them at the national (Rada and other state institutions) rather than regional level.

The impending end of the turbulent second term for President Kuchma foretold a major upset in the comfortable relationship between the oligarchs and the regime. Part of the reason for the oligarchs' concern was that Kuchma's prospective successor Viktor Yanukovych, in contrast to the incumbent president, favoured a very clear and undiversified regional oligarchic connection with his home base of Donetsk. As a former governor of this oblast, he worked to strengthen the Party of Regions along with other individuals involved in heavy industry, business, and mining in the Donbas. Hence, the prospect of a single ruling oligarchic clan from Donetsk was unsatisfactory to the other wealthy Ukrainian magnates. Scott Radnitz, “The Color of Money: Privatization, Economic Dispersion, and the Post-Soviet `revolutions,'” Comparative Politics 42, no. 2 (2010): 127-146. Already after 2000, under the premiership of Viktor Yanukovych there was a clear preference pattern of awarding privatization deals, with a bias toward those who consolidated their support behind Yanukovych. Heiko Pleines, “Manipulating Politics: Domestic Investors in Ukrainian Privatisation Auctions 2000-2004,” Europe-Asia Studies 60, no. 7 (2008): 1177-97.

When a relatively more popular alternative to Yanukovych came forth in the form of the opposition movement headed by Viktor Yushchenko, many oligarchs put their resources in support of this political opportunity. Although they were not united in a single coalition, as the opposition movement started to grow, they pursued interests that united them for the time being at this critical juncture of the pending transition of power. John A. Gould, The Politics of Privatization: Wealth and Power in Postcommunist Europe (Boulder, CO: Lynne Rienner Publishers, 2011). Serhiy Kudelia, “Society as an Actor in Post-Soviet State-Building,” Demokratizatsiya 20, 2 (2012): 149.

To summarize, initially the dubious post-Soviet privatization transactions and illegal rent-seeking schemes drove the new class of oligarchs to seek out kry- sha protection through close and strong connections with the Ukrainian government. Throughout the 1990s they secured their profits through personal connections, and further proceeded to solidify their influence through bribe-influenced executive appointments, parliamentary seats with coveted immunity, that improved their influence over policy outcomes in their favour. By the beginning of the 2004 Orange Revolution, the Ukrainian oligarchs had accumulated enough political experience and financial resources to reverse the power relationship with the government. Not only were they uncontrolled by Kuchma any longer, this group was now in a position to offer material, organizational, and parliamentary support to prospective politicians in order to boost their chances for political success.

Such was the emergence of the political influence of party substitutes in Ukraine. If early on the oligarchs pursued politics for reasons of security and profit, by the end of the Kuchma presidency it was the politicians who sought oligarchic support for their own political benefit.

Functions of the Oligarchic Political Parties in the Post-Orange Years

Henry Hale's concept of party substitutes, as presented above, originates from a distinctly economic model, where the only essential function that a party substitute fulfills in relation to a political decision maker is the delivery of votes. Admittedly, Hale's theoretical propositions remain analytically open to what kind of actors - financial-industrial groups, governors, or (as in the present case) oligarchs - step into the role of substitutes, depending on the contextual variables. He posits that the exact nature of party substitutes may differ from society to society, since it largely “hinges on the particular pattern of concentration of those political and economic resources that can potentially be mobilized for electoral purposes”. Henry E. Hale, “Why Not Parties? Electoral Markets, Party Substitutes, and Stalled Democratization in Russia,” Comparative Politics 37, no. 2 (2005): 150.

In this sense, to demonstrate that in the post-Orange years the Ukrainian oligarchs indeed assumed the function of political party substitutes after their rise and establishment during the Kuchma term, evidence must be provided of their critical support for candidates in the Ukrainian elections. This will be the task of the section below.

To start, as it was shown above, the rise of oligarchic influence in Ukrainian politics revealed that these actors were an established part of the Ukrainian political scene - as parliamentarians, top executives, and others. By the beginning of the Orange Revolution, they actively sought to reshape the political system by using their wealth of material, organizational, and other resources to deliver votes to prospective candidates. In Ukrainian politics, clear examples along this line come from both the pro-Orange political side as well as the Party of Regions.

As for the latter, Avioutskii claims that the Party of Regions was created in order to achieve a well-defined objective: victory for Prime Minister Yanukovych in the 2004 presidential elections. In subsequent years, the objective was slightly modified by widening its electoral base beyond Donetsk oblast. The majority of party control remained behind its indubitable powerholder, Rinat Akhmetov. In Avioutskii's assessment, “His influence in policy making is so overwhelming that even his opponents are bound to appoint his representatives to high-ranking posts in the state administration [...] This is considered a kind of parallel government in Ukraine. The nominal leader of the P(arty) of R(egions), V. Yanukovych, is in fact supported by only a very small circle of party members”. Viatcheslav Avioutskii, “The Consolidation of Ukrainian Business Clans,” Revue Internationale D'intelligence Économique 2, no. 1 (2010): 127. Avioutskii further lists ten key oligarchs connected to Rinat Akhmetov and the

Party of Regions. Matuszak provides a more elaborate map of their connections to other political and oligarchic figures. Slawomir Matuszak, The Oligarchic Democracy: The Influence of Business Groups on Ukrainian Politics (Warsaw: Osrodek Studiow Wschodnich im. Marka Karpia, 2012).

It is clear from the Party of Regions' performance in the Ukrainian parliamentary elections that oligarchic support for this political project was essential to gain a landslide of votes. After its inception in 1997, in the first electoral cycle (1998) the Party of Regions won only two seats in the Verkhovna Rada. However, after major backing from the oligarchic groups - at the brink of a possible power transition from Kuchma to Yanukovych, when new political alliances were forged - the Party of Regions experienced a dramatic spurt in growth: in the 2002 elections it saw a thirteen-fold increase in gained party seats. Furthermore, in the 2006 elections it claimed 186 seats.

With that, oligarchs' parliamentary influence was slated only to grow when the constitutional reforms of 2006 shifted the Ukrainian electoral system to a closedlist, fully proportional electoral format. This institutional rearrangement provided incentives for oligarchs to engage not only as individual deputies but, more importantly, as high-profile sponsors, leaders, and managers of political parties. Rinat Akhmetov, for instance, became a Rada deputy in 2006 and again in the snap elections of 2007, as #5 and #3, respectively, on the party list of the Party of Regions.

Not only did the oligarchs uniquely act through the Party of Regions by delivering votes to prospective presidential and parliamentary candidates, as predicted by Henry Hale, but moreover they acted directly to offer and barter prospective electoral votes. Thus, Donetsk-based oligarchs approached Viktor Yushchenko early on after his resignation as prime minister in 2001 with proposals to support his candidacy by delivering close to 10% of the votes in the Donbas region. Taras Stetskiv, “We Invited Kuchma Over to Sit, Drink and Talk,” Hvylyna.net, 2016, http:// hvylya.net/interview/politics2/taras-stetskiv-mi-zaprosili-kuchmu-do-sebe-tipu-posiditi-vipi- ti-pogomoniti.html.

Further evidence that the Party of Regions was able to carry its banner only as far as the oligarchs were willing to take it is the contrast between the electoral results for the Party in 2012 and 2014. The new electoral law of 2011 reinstated a mixed electoral system, changing it back from a fully proportional one. The effects of this change are primarily felt at the level of single-member (first-past-the-post) districts. At the electoral level, the reputational assets and damages of political parties during transition may vary vastly. But the ability of individual candidates to appeal to (and occasionally buy the votes of) localized district interests is to the advantage of those “pork-rich” candidates who have connections to the consolidated executive powers and/or oligarchic support and resources. Hence, for instance, while the Party of Regions was trailing in approval ratings, at around a modest 20%, it was nonetheless able to amass a sweeping 113 of 225 seats in single-member districts.

This party became a lynchpin for political and oligarchic connections and interests from 2001 to 2015, and its collapse was also revealing of who was acting behind the scenes. So, immediately after Yanukovych's exodus, the Party of Regions fell apart, and its head, Mr. Rybak, resigned two days afterwards. This is another sign that the party primarily served the needs and interests of certain figures behind it, rather than functioning to give policy representation to its members and voters. To underscore this point, in the 2015 local elections most of the former Party of Regions representatives were standing for office under various new party banners Svitlana Dorosh, “Opposition Block at Elections: Victory or Imitation?”, bbc.com, November 24, 2015, https://www.bbc.com/ukrainian/politics/2015/11/151019_opposition_block_election_ chances_sd - set up and run, in fact, by the same group of key political and oligarchic actors as before. Vitaliy Hrushevskyi, “`Oppositional Block' Are Yanukovych's Best Students Says Ex-Party of Regions Member,” Unian.ua, September 17, 2014, https://www.unian.ua/politics/986103-eks-re- gional-opozitsiyniy-blok-tse-kraschi-uchni-yanukovicha.html.

This is precisely the way, as predicted by Henry Hale, that the oligarchs backing Mr. Yanukovych were acting as party substitutes, promising votes in a system that was based on their connection to voters, through controlling their salaries and employment. Indeed, these tactics of voter pressure, intimidation, ballot stuffing, and falsification to boost the electoral results to a desired number were later used by the Kuchma regime and his team in the 2004 elections, sparking the onset of the active stage of the Orange Revolution amid the accusations of electoral fraud.

As for the Orange leaders themselves, their political fortunes likewise were strongly linked to the oligarchic weight behind them. As the “grand balancer” Kuchma was preparing to leave office, his prospective successor, Viktor Yanukovych, indicated that only certain oligarchic groups would be privileged. In this context, many Ukrainian oligarchs found it more profitable to put their stakes with the opposition camp under the leadership of Viktor Yushchenko. Petro Poroshen- ko, a chocolate magnate, appeared on stage at the Orange protests, whereas others preferred less public gestures that involved backdoor negotiations and material support. Yulia Tymoshenko, Viktor Yushchenko's ally, was backed by her Dnipro- petrovsk connection, the oil and banking mogul Ihor Kolomoisky. Oleh Havrylyshyn, The Political Economy of Independent Ukraine: Slow Starts, False Starts, and a Last Chance? (London, UK: Palgrave MacMillan, 2016).

Lucan Way estimated that overall, Yushchenko's presidential campaign cost over $100 million, which went to fund “nearly ubiquitous banners and logos; transportation] for poll observers and thousands of $300 video cameras to record violations on election day; enormous video screens and other equipment for rock concert-like demonstrations all over the country in the aftermath of the fraudulent election; and tents, camp kitchens, and other equipment to facilitate the occupation of central Kyiv”. Lucan Way, “The Real Causes of the Color Revolutions,” Journal of Democracy 19, no. 3 (2008): 55-69. Such influx of capital was from the Ukrainian large and medium business elites, the author argues, with Western funding for exit polls and other training programs paling in comparison.

My interview with a Ukrainian activist also confirms that support from the West was primarily received through Western NGOs for training conducted by

Serbian and Georgian counterparts, rather than direct financial contributions. Other insiders' reports, looking back at these events years after they took place, also confirm that Western partners provided training, advice, and analytical support rather than direct funding. Taras Stetskiv, “We Invited Kuchma Over to Sit, Drink and Talk,” Hvylyna.net, 2016, http:// hvylya.net/interview/politics2/taras-stetskiv-mi-zaprosili-kuchmu-do-sebe-tipu-posiditi-vipi- ti-pogomoniti.html.

The financial capital and networks that Ukrainian oligarchs generated during the 1990s were turned to serve rising politicians in exchange for continued security of their rent-seeking channels and guarantees of immunity from prosecution. In this way, the declared values of the Orange Revolution, such as “Bandits - Behind Bars!” and other promises of ridding the post-Orange Revolution Ukrainian government of bribery and corruption were, to a degree, Problematic from the very beginning. The Orange politicians were backed by certain oligarchs who supplied them with organizational and material resources in exchange for non-execution of the Orange threats - the very same resources that Henry Hale predicts party substitutes are designed to supply to their political allies.

Several contextual events inaugurated a new relationship between business and government elites in Ukraine after the Orange Revolution. On the political side, the inability of the government to assuage public discontent following the assassination of the muckraking journalist Heorhi Gongadze, the “Kuchmagate” scandal, and Prime Minister Viktor Yushchenko's resignation after his largely successful 1996 monetary reform revealed a deep crisis in the current authoritarian-leaning system, which routinely handled viable opposition by resorting to extra- or quasi-judicial violence. To some degree, as a reaction to these tendencies there was a growing consensus among business and political elites that more power and authority should be shifted to the parliament. With 450 electoral seats, the Verkhovna Rada of Ukraine offered a more diversified field for competing oligarchic influences than a single-handed decision-making process by the President. This reaction was finalized in an agreement, signed in the heat of the Orange Revolution on December 7, 2004, between the Orange leaders and the outgoing regime, shifting the institutional setup of Ukraine from the semi-presidential to the parliamentary model.

After the victory of Viktor Yushchenko, Ukrainian oligarchs were in a waiting mode to see what his policy toward the big capital elites was going to be. Certain oligarchic opponents that had lined up behind Mr. Yanukovych were afraid of retributions. In fact, after Yushchenko left Presidential office, a former Orange colleague accused him of receiving bribes in cash from the very oligarchs who had supported Yanukovych and Kuchma, in return for security guarantees that he allegedly agreed to provide to them. Mykola Tomenko, “After the Revolution, Yanukovych Oligarchs Brought Cases with Cash to Yushchenko,” Intvua.com, 2012, http://intvua.com/news/politics/51572-tomenko-srazu-posle-revoly- ucii-yuschenko-zanosili-chemodany-s-dengami-oligarhi-iz-okruzheniya-yanukovicha-video.html.

Contrary to the Orange slogans promoting the cleansing of government from corrupt influences, no retributive actions were implemented. Instead, Yushchenko shied away from the role that Kuchma had practiced in his relations, monitoring and arbitration between the oligarchs. For their part, the waiting mode for the oligarchs was exacerbated by several extenuating circumstances. In the first few years of his presidency, Yushchenko underwent 26 surgeries to counter the debilitating effects of poison. Viktor Yushchenko, Non-State Secrets: Notes from Memories' Distant Shores (Kharkiv: Folio, 2014), 323. Second, during the first three months of his presidency the time of convalescence for Mr. Yushchenko was combined with extensive official visits abroad. Both these personal and logistical reasons contributed to Yushchenko's general reluctance to assume the same “arbiter” role for oligarchs that Kuchma had previously held.

Hence, a large majority of the oligarchs understood that no arbitration, balancing, or punishment would be disbursed from Yushchenko's office. Meanwhile, Prime Minister Yulia Tymoshenko, a former oligarch herself, conveyed a different position early in her premiership in 2005. She stated that oligarchs are not to be jailed or prosecuted, but rather that their capital needs to be “legalized” in Ukraine and fill government coffers. “I believe that oligarchs are not to be jailed but they are to be forced to share,” she said on the record in April 2005. “Tymoshenko Won't Kill the Oligarchs, She Will Milk Them,” Pravda.com, 2005, http://www. pravda.com.ua/news/2005/04/18/3008921/mode_amp/.

Thus, at the beginning of the Orange regime this group of party substitutes received assurances that neither persecution for malfeasance nor wrongly directed political support were going to threaten their personal or business security. They were encouraged to come out of the shadow and become more publicly visible and socially engaged. In terms of their relative influence vis-à-vis each other and the rest of the government, the oligarchs were left to settle their affairs without Yushchenko's direct interference, except for a few who were connected by their rent-seeking to him personally.

In this context, oligarchic groups functioned as party substitutes during the post-Orange years in a few distinct ways. First, their influence on Ukrainian politics through the ability to deliver votes was evident in the new approach of the Ukrainian media to covering the political landscape of the country. During Kuchma's presidency, government censorship and temnyky (regime-scripted instructions on how to cover the political news) were repressive practices against which the pro-Orange journalists eventually rebelled. But the live coverage of the Orange protests that was broadcast by 5 Kanal - a media resource owned by Petro Poroshenko - was a remarkably new phenomenon for Ukrainian political and social life. Subsequently, the new media freedom that President Yushchenko's administration ushered in was a notable achievement for the Orange government protection of civil liberties.

On the flip side of such liberalization of speech, however, the major media outlets also became loudspeakers for specific political ideologies and interests. Indeed, it became a customary practice for Ukrainian oligarchs to buy major media and news outlets and use them to promote certain ideological positions, policies, and party images while sheltering their owners from negative exposure. Joseph Dresen, “Media in Ukraine: A Domain of the State, the Oligarchs, or the Politics?”, Wilson Center, July 7, 2011, https://www.wilsoncenter.org/publication/media-ukraine-domain- the-state-the-oligarchs-or-the-public. Iryna Fedets, “Oligarchs on the Airwaves.” Foreign Policy (blog), November 11, 2015, https://foreignpolicy.com/2015/11/11/oligarchs-on-the-airwaves- ukraine-media/. In fact, their influence on public political opinion was so prominent in Ukraine that of the 80% of the Ukrainian population for whom television was a primary information medium, in 2004-15 two- thirds were receiving their news from stations controlled by Ukrainian oligarchs. Heiko Pleines, “Oligarchs and Politics in Ukraine,” Demokratizatsiya: The Journal of Post-Soviet Democratization 24, no. 1 (2016): 123-24.

Therefore, through their media influence the Ukrainian oligarchs were displacing the essential functions of political parties in two ways. First, they were activating citizens during elections and mobilizing them to political participation (e.g., 5 Kanal coverage of the protests, etc.). Second, the oligarchic media were providing ideological linkages between voters and candidates by informing the electorate about policy choices in different local and national elections during the transitional post-Orange years, thereby shaping voter preferences for specific policy alternatives.

Finally, another example of oligarchic substitution for political parties during the transitional post-Orange Revolution years was the effect of dwindling oligarchic support on the demise of the Orange political party Nasha Ukraina. Similarly to the fortunes of the Party of Regions, as political chances for re-election slipped rapidly away from President Yushchenko due to domestic policy failings and political infighting, so was the oligarchic backing withdrawn for the Orange Party's projects. Nasha Ukraina was in fact officially registered as a political party only after the revolution was finished, in 2005. This was done primarily in order to coalesce the electoral popularity of Viktor Yushchenko and capitalize on the name brand “Nasha Ukraina” that technically, prior to 2005, was simply a coalition of political parties that had already been functioning on the Ukrainian political horizon for years. Namely, there was no acute gap in representation that the Nasha Ukraina party was aiming to fill, but rather it was attempting to capture the political momentum of the popularity of the Orange political forces and give it a distinctly Yushchenko-associated brand name - as opposed to, say, Yulia Tymoshenko, his ally quickly turned rival, who already had a political party of her own.

As a party, Nasha Ukraina did succeed: a year following its foundation and in a bloc with other parties under the same umbrella name, “Nasha Ukraina” collected 13.95% of votes in the 2006 parliamentary elections. Again, such confusing name-branding - from being the title for a political alliance during the revolution to becoming a party name, which was subsequently given as the name of a political bloc - is another sign that its political handlers were more concerned with capturing the association with Viktor Yushchenko rather than necessarily fashioning a distinct ideological and policy position to represent voters. Once again, as the political chances for re-election were turning out to be dim and oligarchic alliances shifted away from Yushchenko to new players, the party's electoral results slumped. In the snap elections of 2007, Nasha Ukraina had to add another political ally, the People's Self-Defense party, to remain at the same level of electoral support. And once President Yushchenko was out of office, in the following parliamentary elections of 2012, Nasha Ukraina failed to get past the 5% electoral threshold, only receiving 1.11% of national votes. As votes and oligarchic support shifted from this party, the ability of Nasha Ukraina to sustain a tangible political relevance, or even presence, in the Ukrainian party system waned. Pleines underscores this point of shifting oligarchic alliance, which moves from one political leader to another in an almost cyclical nature, by pointing out that “with their informal influence over a significant share of parliamentary deputies and with their control of important mass media, oligarchs [...] clearly contributed to the creation of an uneven playing field, putting the political opposition at a pronounced disadvantage” and, as a result, “as catalysts for an ongoing change [.] giving additional support to the supposedly winning side.” Heiko Pleines, “Oligarchs and Politics in Ukraine,” Demokratizatsiya: The Journal of Post-Soviet Democratization 24, no. 1 (2016): 126.

To summarize, the oligarchic influences were strong and privileged under President Kuchma, who had a balancing effect on the oligarchs with the constant threat of an authoritarian crackdown. Yet the oligarchic influences after the Orange Revolution not only remained strong, they further expanded in both the economic and political realms. This was done through the encouragement of quasi-transparency, “social responsibility” projects and direct involvement in the formation of parties, organizations, and legislative activities, without proper governmental vigilance as to their potentially harmful business or political practices. Political-oligarchic ties were not only not severed during the Orange regime, they further exacerbated the party-oligarchic-parliamentary dysfunction in Ukraine - and, as I have shown, the role of oligarchs as party substitutes in this regard was very paramount.