Inside Ukraine’s economic crisis

Eric Ellis
Published on:

When Euromoney penetrated the economy and finance ministries in Kiev in late May, as well as the central bank, it found an atmosphere of unease and uncertainty. A supposed dream-team, which in reality is a collection of talented and driven novices, has a battle on its hands to keep Ukraine’s economy afloat. Can Kubiv, Schlapak and Sheremeta make the transition from protest to pro-growth?

It’s a blossomy spring morning in Kiev and Stepan Kubiv, Ukraine’s new central bank governor, steps briskly into his natural habitat.

But Kubiv’s comfort zone is not where Euromoney usually finds central bank bosses, in their sterile offices of chart-toting advisers and economists, brows furrowed in the essentials of the national accounts.

No, the burly Kubiv has plunged, without a security detail, into a rowdy crowd of disgruntled depositors that’s only a few decibels removed from a mob, engaging protestors gathering by the minute in number and noise outside the National Bank of Ukraine’s renaissance-inspired palazzo on Institutskaya Street, in the capital’s official district.

Inside Ukraine bigger envelope
A protester walks past a burning pro-Russian tent camp Odessa in May

As businesses fail by the score across this struggling land engulfed by political and economic crisis, Kubiv is meeting victims of a crashed regional bank who have come to Kiev to vent to the central bank, or to anyone who’ll listen, their all-too-common story of today’s Ukraine. "Our money has been stolen," 40-something housewife Irina laments. "They are all corrupt, everything is corrupt, Ukraine is corrupt. We will always be corrupt."

This is an affecting neighbourhood for Ukrainians. From the balconies of the central bank above, just three months earlier, a dictator’s snipers killed pro-democracy protestors surging into this government quarter from Independence Square, the capital’s now legendary Maidan.

Institutskaya Street and adjacent Hrushevskogo Street are home to Ukraine’s two other key economic centres: Oleksandr Schlapak’s finance ministry and Pavlo Sheremeta’s economy and trade ministry. These two ministers, with Kubiv, have been generously dubbed Ukraine’s economic dream team.

Much blood was spilt along these streets during February’s violence that ended president Viktor Yanukovych’s rule. Moving impromptu memorials to the martyred Heavenly 100 have been erected all around here, in the bloodstains where they fell. In a park across the street, victims of the 1986 Chernobyl nuclear disaster protest about their unpaid pensions. Maidan is still volatile, can still be turned on.

All of this, three months on from the revolution, makes it a tricky time for officials like the 52-year-old Kubiv and his colleagues Schlapak and Sheremeta at the heart of Ukraine’s unelected post-Maidan cabinet.

They all hail from Lviv, the biggest city of Ukraine’s EU-leaning west, the core of what has been called the 'western clique’ now running the country, usually by those from the country’s Russia-tilting east who no longer do.

And expectations are high that these three men will transform Ukraine, and set this troubled country of 46 million on a path toward membership of the European Union, the destiny many believe its corrupt post-Soviet past and complicated relationship with Russia has denied it.

Stepan Kubiv
 When I was the commandant of the Maidan protest in the trades union building, I never thought I would become the governor of the central bankStepan Kubiv

With his populist touch, Kubiv is a former parliamentarian, commercial banker and one-time member of Komsomol, the Communist Youth League of Ukraine’s Soviet past. The central bank and its council have been a passage to the presidency in Ukraine – ex-president Viktor Yuschenko ran the NBU through the 1990s and the recently elected Petro Poroshenko was a council member – but Kubiv got the job primarily because of his leading role at Maidan.

"Although my background is banking," Kubiv tells Euromoney, "when I was the commandant of the Maidan protest in the trades union building, I never thought I would become the governor of the central bank."

The tieless central banker – he only wears one at international meetings, he tells Euromoney – adds: "I stayed at Maidan for 101 days, always communicating with the people. And I am very grateful for all the people, I could see it in their eyes; that they strongly believe this was a victory for them.

"The normal people today, from credit unions and insurance companies and commercial banks, wanted to meet the central bank governor on the street, and I couldn’t reject this idea I wanted to meet them too."

Kubiv placates the distraught depositors – for now – and they eventually move on. They didn’t get the money they demanded – Ukraine’s broken guarantee fund doesn’t cover their 'unofficial’ bank even if it had enough funds anyway – but they got Kubiv’s prayers, a sympathetic ear and a promise to work harder and fulfil the spirit of Maidan.

But will that be enough, Euromoney asks?

"I told them what reforms we are making at the central bank," Kubiv says, "and I thanked them for their role in supporting the revolution, and they ordered me not to steal the country’s money. And I will not."

THE CARNEYS, YELLENS AND Draghis don’t do things like this but, with the spirit of Maidan still evident in Kiev, this was no stunt. Inside the NBU with Euromoney a few minutes later, Kubiv unexpectedly breaks down during our interview. "I saw dead people at Maidan," he remembers. "I took them in my arms, I closed the eyes of the dead with my own fingers. Even today, these memories hurt me and I have dreams about it every night." His eyes well with tears, and he takes a few moments to compose himself before resuming discussion of the profound problems that plague his nation.