Soviet Military Production and the Expanding Influence of Ukrainian Regional Elites under Khrushchev and Brezhnev

With the enduring informal ties between the networks of regional elites on both sides meant that the boundary between the two former Soviet republics remained porous. Numerous confrontations over the demarcation of borders and sovereign waters, control over Ukraine's vast nuclear weapons cache, and the terms of the Russian fleet's presence in Sevastopol show that the process of separation was not seamless. In fact, Ukraine's last three presidents faced many challenges to the country's sovereignty and territorial integrity from its northeastern neighbour. Still, it was not until the collapse of the ruling government in Kyiv - marked by the flight of President Viktor Yanukovych and much of the ruling Party of Regions from the country - that the Kremlin openly transgressed Ukraine's borders by forcibly annexing the Crimean peninsula in February 2014.

That act thrust back into primary focus the issues of territoriality and sovereignty in the region, while underscoring the continued relevance of the complex infrastructural legacy that Ukraine inherited after 1991. For an account of the conformation between Ukraine and Russia over the Kerch Strait and the agreement between Leonid Kuchma and Vladimir Putin to share those waters jointly, see Kost Bondarenko, Leonid Kuchma: Portret na Fone Epokhi (Khar'kov: Folio, 2007); On interdepen-dence and national security, see Rawi Abdelal, “Interpreting interdependence: National Security and the Energy Trade of Russia, Ukraine and Belarus,” in Robert Levgold and Celeste A. Wal-lander, eds., Swords and Sustenance: The Economics of Security in Belarus and Ukraine (Cam-bridge, MA: The MIT Press, 2004), 101-128. See also: Hrihoriy Perepelitsa, “Military-Industrial Cooperation between Ukraine, Belarus, and Russia: Possibilities, Priorities, Prospects,” in Robert Levgold and Celeste A. Wallander, eds., Swords and Sustenance: The Economics of Security in Belarus and Ukraine (Cambridge, MA: The MIT Press, 2004), 129-158. As a number of scholars have shown, the war in the Donbas was driven in part by an unresolved crisis of infrastructure, exacerbated by an EU association agreement that was detrimental to particular sectors of the Ukrainian economy. It was a trade agreement that pressed on lingering, very important (and sensitive) economic ties between Ukraine and Russia - particularly, but not exclusively, in the machine-building sector. Yuri M. Zhukov, “Trading Hard Hats for Combat Helmets: The Economics of Rebellion in East-ern Ukraine,” Journal of Comparative Economics, November 1, 2015, 1-3. For instance, Viacheslav Boguslaev, director of Motor Sich in Zaporizhia, expressed concern about the negative impact of Euro-integration on highly technical sectors of the Ukrainian economy. Boguslaev argued that unless changes were made to the Association Agreement, up to 20,000 production standards used in Ukraine would become obsolete in a very short period of time. “Iefremov vypravdovuie deputativ-rehionaliv, iaki vystupaiut' proty ievrointehratsii” Tyzhden, September 2, 2013. URL accessed April 10, 2017: http://tyzhden.ua/News/88323;

A micro-level study conducted by Yuri M. Zhukov supports this interpretation, and his analysis shows that the districts most likely to have seen outbursts of violent separatism in Donetsk and Luhansk oblasts were those tied to machine-building enterprises that exclusively supplied Russian markets. They suffered when Russia used targeted trade restrictions and import substitutions in 2013, in order to pressure the Yanukovych government into backing out of the Association Agreement with the EU. Zhukov, “Trading Hard Hats for Combat Helmets, 1-3. Zhukov shows that industry was a much stronger predictor of rebel violence than ethnicity and language. Moreover, no other regions in Ukraine were as vulnerable to negative economic shocks caused by the opening of trade with the EU, and by austerity and trade barriers with Russia, which is why the separatist violence did not spread further. Yuri M. Zhukov, “Why the Ukraine Rebellion is Unlikely to Spread,” Newsweek, 11/25/2015 at 6:48pm. URL accessed April 3, 2017: http://www.newsweek.com/why-ukraine-rebellion-un- likely-spread-397530; Yuri M. Zhukov, “Ekonomika separatizma na vostoke Ukrainy,”Liga. Novosti, 11.11.2015 09:00. URL accessed January 17, 2017: http://news.liga.net/articles/poli- tics/7096887-ekonomika _separatizma_na_vostoke_ukrainy.htm.

Analyses like Zhukov's are very important, but they have only scratched the surface in terms of how Soviet infrastructural legacies continue to shape current events. Not all core institutions that tied the Soviet states together dissolved fully after independence. For instance, the military, state security services, and law enforcement agencies remain divided from within with regard to Ukrainian domestic politics, the policies of the Poroshenko government, and also Russia's military incursions into Ukraine (however unofficial). Some economic relationships have continued to function throughout much of the last five years, these economic continuities providing some measure of social stability. Some sectors, like military production, have been very slow to change. For instance, it was only after the prolonged war in the Donbas that some enterprises like the Antonov Aircraft Plant in Kyiv, Turboatom in Zaporizhia, and Yuzhmash in Dnipropetrovsk thought about scaling back or halting entirely the delivery of key components and the maintenance of Russian military hardware in 2016. Carol J. Williams, “Ukraine's freeze on military exports to Russia carries risks,” LA Times, No-vember 26, 2014. URL accessed Nov 15, 2016: http://www.latimes.com/world/europe/la-fg- ukraine-arms-russia-20141125-story.html.

The fact that Ukraine's armaments industry remains largely state-owned also indicates clear continuities with the past, even with the recent reorganization of the sector. Many of the enterprises Ukroboronprom oversees, such as Kharkiv's Malyshev Plant or Kyiv's Antonov, were created during the Soviet period. The Malyshev Plant made and designed tanks for the Red Army, while the Antonov Plant was responsible for producing planes during the war and afterward. Its facilities were moved to Novosibirsk during the Second World War, away from encroaching German forces, and then back to Kyiv in 1952. Petro Shelest, who later became the first secretary of the Ukrainian Communist Party, also moved to Kyiv during this time to serve as director of the Antonov plant.

By contrast, Motor Sich, a major aircraft and helicopter engine producer, was privatized in the 1990s, making it one of Ukraine's most effective and efficient companies. With the country at war, rumors of new shareholders and the transfer of technology became a serious source of concern. In September 2017, it was reported that a little-known Chinese company, Skyrizon, became a majority shareholder in Motor Sich, surprising industry experts. These developments led some to speculate that the ultimate aim of this partnership was transferring Ukrainian technology from “a once-vibrant sector ... with an exalted lineage dating back to Soviet days.” Charles Clover and Roman Olearchyk, “Chinese deal with Ukraine defence group raises hack-les,” Financial Times, October 5, 2017. Accessed April 24, 2018: https://www.ft.com/content/ e8aed9f4-a1dc-11e7-9e4f-7f5e6a7c98a2; Liu Zhen, “Chinese firm's stake in Ukraine military aircraft engine maker `frozen',” South China Morning Post, September 16, 2017. Accessed April 24, 2018: http://www.scmp.com/news/china/diplomacy-defence/artide/2111493/chinese-firms- stake-ukraine-military-aircraft-engine. There has been discussion of renationalizing the enterprise, which in April 2018 was also under investigation by Ukraine's State Security Services for a sophisticated share redistribution scheme that the SBU alleges was designed to weaken this strategic plant. “SBU provodit obyski v “Motor Sich” v Zaporozhe,” TASS, April 23, 2018. Accessed April 24, 2018: http://tass.ru/mezhdunarodnaya-panorama/5150215; “SBU raids Motor Sich aircraft en-gine manufacturer in “sabotage” probe,” UNIAN, April 23, 2018. Accessed April 24, 2018: https:// economics.unian.info/10092023-sbu-raids-motor-sich-aircraft-engine-manufacturer-in-sabo- tage-probe.html; Fedir Oryshchuk, “Motor Sich hotuyut do natsionalizatsiyi?” Glavkom, October 31, 2017. Accessed April 24, 2018: https://glavcom.ua/publications/motor-sich-gotuyut-do-na- cionalizaciji--448050.html. As with most dramas in this area of the economy, security concerns are only a part of the story. Analysts indicate that players in both Kyiv and Washington were concerned about the larger geopolitical ramifications of Ukrainian economic elites deepening co-operation with the Chinese, while others suggest that political infighting among may have led the SBU to step in.

Such rapidly shifting terrain makes it difficult to track what is happening in the more opaque sectors of the Ukrainian economy. Nonetheless, changes in the defense industry and in clusters of the regional economic elites involved in overseeing military-industrial production can, and should, be situated in a much larger trajectory. This is an important analytical frame that has been largely absent from the discussion of what is happening in Ukraine today. Patterns of competition and co-operation between Ukraine's various geographically based clan structures in the past are not just historical artifacts. They endure in the form of historically composed social structures and interrelationships forged over decades. I am deeply indebted to Monica Eppinger, who, as always, was able to distill the central argument in conversation about this piece. Many thanks! See also: Serhii Plokhy, The Gates of Europe: A History of Ukraine (New York: Basic Books, 2015). Therefore, it is important to remember that the choices made by economic elites and citizens in various regions were more than just event-driven responses to domestic and internal pressures.

Today's larger context for the shifting allegiances of regional economic elites in Ukraine includes both privatized assets and key state-owned enterprises, which have been actively courting new consumers and clients. Diversification and expansion into new markets has its risks, but keeping an eye on further developments in this area will be crucial for anticipating and understanding the inevitable shifts in Ukrainian domestic politics, and also Ukraine's place within the larger geopolitical game currently ongoing.

Conclusion

Further study of Ukraine's complex Soviet inheritance is essential in order to understand the longer-term patterns for shaping the behaviour of Ukrainian regional economic elites, as well as the hydra of corruption that continues to evade reformers. The war in the Donbas shows no signs of abating and has already had a deleterious effect on the Ukrainian economy and on efforts to fight corruption in the country. The oligarchs have been chastened by significant losses of wealth, fueled in part by the declining gas trade, the seizure and destruction of assets, and deteriorating economic conditions more generally. As Anders Aslund has observed, Ukraine is still stuck in “a vicious rent-seeking trap” not because of the grip of the oligarchs, but because of a multitude of “grey cardinals” in parliament - recent beneficiaries of Ukraine's changing geopolitical and economic terrain. It is they who control state companies like, for instance, the defense concern UkrOb- oronProm, which was created in 2010 during the Yanukovych presidency to manage the MIC in Ukraine and the enterprises that fall under its jurisdiction. Anders Aslund, “Ukraine's economy still stuck in vicious rent-seeking trap,” Kyiv Post, April 2, 2018. With the country at war, this appears to be a nearly bottomless source of revenue for these new cardinals.

This evolving interrelationship of private and state-controlled wealth should be watched closely, especially with presidential and parliamentary elections on the horizon. In terms of the larger discussion of whether economic elites are friends or foes, it appears that further close attention to the shifting circumstances is essential before making that determination. A case in point is Ihor Kolomoisky, who responded swiftly to immediate conventional and non-conventional threats to Ukrainian sovereignty in 2014, succeeding in squelching a credible broader separatist movement in the southeast. Nevertheless, he resigned just one year later after, clashing with President Poroshenko over UkrTransNafta and a number of other issues, indicating that their convergence of interests was short-lived. Guy Chazan and Roman Olearchyk, “Ukraine: An oligarch brought to heel,” The Financial Times, March 25, 2015. URL accessed April 16, 2017: https://www.ft.com/content/b0b04474-d232- 11e4-a225-00144feab7de. Five years into the war in the Donbas, it is clear that conditions have changed considerably, but the role of regional economic elites remains important and also hard to fully comprehend. With greater attention to the recent under-studied past, it is possible to situate these recent developments in a larger context that allows us to better understand the contours of the struggle and the infrastructural and institutional legacies hampering the efforts of reformers. The past is not just prologue; it can and should frame our analysis, even if only to recognize that some old Soviet patterns are really hard to break.

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