Odessa is Ukraine's Real Battleground

Published on June 23, 2014

Politics

It's not all about the East

The fight­ing is in the east but the white col­lar and big busi­ness bat­tles are just as much in Kyiv and Odessa. The re­cent deaths of mainly pro-Russ­ian ac­tivists in the trade union build­ing fire have high­lighted the volatile sit­u­a­tion in Odessa and the ex­tent of Russ­ian in­flu­ence there. The “lit­tle green men” we heard about in East­ern Ukraine don’t need to be brought in to Odessa. They are al­ready there as the city is a favoured re­tire­ment lo­ca­tion for “for­mer” naval and mil­i­tary per­son­nel from So­viet times, not least from the GRU mil­i­tary In­tel­li­gence.  No one ever re­tires from the GRU.

This is re­ally wor­ry­ing the new gov­ern­ment in Kyiv, as well it might. And they are ac­tively seek­ing help from the West to tackle the “deep state” is­sues “down there”. Such help will, if forth­com­ing, have to be much more fo­cused and cul­tur­ally, strate­gi­cally and tac­ti­cally in­te­grated than the past ad hoc and some­times un­co­or­di­nated as­sis­tance.

Odessa mat­ters.  It is to a sig­nif­i­cant ex­tent the West Berlin or Vi­enna of any new Cold war be­tween a West­ern lean­ing Ukraine and Rus­sia. Like those cities, it is likely also to see some in­ter­est­ing and un­usual al­liances, be­cause every­one has some idea of where the bod­ies are buried. Much of Ukraine’s con­sumer goods agri­cul­tural prod­ucts come in to Odessa and out of it. This is also the case for much of Rus­sia’s agri­cul­tural im­ports.

Cor­rup­tion and chick­ens

The loss of Crimea hasn’t changed that yet. Se­bastopol is not a deep sea con­tainer port and won’t be for years. Both coun­tries rely heav­ily on con­sump­tion taxes so these im­ports are closely linked with pub­lic rev­enues. All this means that there are enor­mous temp­ta­tions for bribery and cor­rup­tion. An ex­am­ple is the mas­sive over im­por­ta­tion of South Amer­i­can chicken im­ports to the Transnis­trian en­clave in Moldova, where the audit trails go cold. Sales are ac­tu­ally made off record from big su­per­mar­kets in Ukraine, Transnis­tria, Moldova it­self and prob­a­bly Ro­ma­nia. Every­one gets a cut of the un­taxed prof­its, in­clud­ing Russ­ian or pro-Russ­ian groups based in or con­nected with Odessa.

What the new Chief of the SBU state Se­cu­rity ser­vice, Mr. Na­ly­vaichenko, can do and ac­tu­ally will do in Odessa will be a key early in­di­ca­tor of who is com­ing out on top in the long term. As every “side” has prof­ited from the cor­rup­tion and smug­gling in Odessa and linked to it, every­one is vul­ner­a­ble to dis­clo­sures. The sides are the pro Or­ange Rev­o­lu­tion elites, the pro Yanukovy­chites and the Rus­sians, the lat­ter ob­vi­ously closely linked with the Russ­ian gov­ern­ment and Putin’s inner cir­cle. But the di­vides are by no means ab­solute and the oli­garchs typ­i­cally have links to sev­eral or all of these camps.

Anti-anti-Russ­ian back­lash?

Going after one group is ob­vi­ously going to lead to a back­lash from that or­gan­i­sa­tion, which will have the power to em­bar­rass or black­mail the other in­ter­ests. The tar­get­ing of Russ­ian linked groups is ob­vi­ously going to lead to the counter ar­gu­ment that the clean-up is re­ally a dis­guised anti-Russ­ian or anti-Russ­ian speaker ex­er­cise, rather than a gen­uine drive against cor­rup­tion. So it will be as in­ter­est­ing to see who is not tar­geted as much as who is. The SBU has been, for many years, heav­ily pen­e­trated by its Russ­ian coun­ter­part, the FSB, and that is be­fore the ubiq­ui­tous lit­tle green men in Odessa are taken into ac­count.

The other law en­force­ment agen­cies in Ukraine are watch­ing Mr. Na­ly­vaichenko’s bal­anc­ing act with great in­ter­est too. They re­alise that the pub­lic cof­fers are heav­ily de­pen­dent on con­trol of Odessa, and that he who has that con­trol has his fin­ger on Ukraine’s jugu­lar. At the height of the “in­va­sion” fears in early April, the Cus­toms Ser­vice felt that loss of com­mer­cial con­trol of Odessa was a real pos­si­bil­ity, and with it loss of state in­de­pen­dence. The South mat­ters at least as much as the East. 

The west needs to step up

But their west­ern coun­ter­parts need to raise their game sig­nif­i­cantly. It is no longer enough – it never was – to see how Ukraine can help them on is­sues such as il­le­gal mi­gra­tion, cig­a­rette smug­gling, heroin and more re­cently co­caine traf­fick­ing and human traf­fick­ing for sex­ual pur­poses. It now has to be about how the EU and its Mem­ber states and Turkey and the USA and Canada can help to track down all the pro­ceeds of these crimes and the gar­gan­tuan lev­els of com­mer­cial smug­gling and cor­po­rate tax eva­sion. The vast sums in­volved here are in­creas­ingly being de­posited out­side the EU and the USA through long cor­po­rate paper chains.

You can be sure that some peo­ple – many peo­ple – in Lon­don’s pin­stripe army of ac­coun­tants, lawyers and com­pany for­ma­tion agents and ship­ping bro­kers and in­sur­ers are fa­cil­i­tat­ing this or have a pretty good idea who is.

What is dif­fer­ent now is that there are some peo­ple in Ukraine who have stepped up to the plate. And the in­for­ma­tion they can pro­vide will be very em­bar­rass­ing to Rus­sia – at all lev­els. That in­for­ma­tion could be a very use­ful bar­gain­ing chip for the EU and the USA, so let us hope Ukraine gets proper recog­ni­tion for pro­vid­ing it.  It is going to take enough of the very best peo­ple, in the best places at the best times, to do this. Let us hope they have al­ready started, and re­alise that any­thing linked to Odessa is not just linked to Kyiv but also to Moscow and St. Pe­ters­burg.