Posted May 2014
Ukraine – The article that never got written
Call it a journalist’s occupational hazard. Sometimes our stories don’t get written. Usually, it’s either because you cannot find enough sources to back up a juicy rumour, or because the story, when published, would immediately point to its whistleblower. In my line of work this has happened a few times. But never have I had to contend with the fact that political events beyond my control would wipe out months of research.
I travelled several thousand kilometres across the Ukraine by car in September last year to get a better feel for the beer market. True, there is a lot to be said for desktop research. With all the material that’s available on the internet and the rest which can be sourced from market research companies, there is little reason for business journalists to leave their offices and exchange the comforts of air conditioning and freshly brewed coffee for the discomforts of weeks on the road.
I may be old-fashioned, but I like to see things for myself, especially when it comes to emerging markets and alcohol consumption. In the case of the Ukraine, it’s impossible to say anything valid about beer consumption without looking at its main competitor: vodka, the Ukrainians’ tipple of choice. The Ukraine sits squarely in what has been called the “vodka belt”, which stretches from the Nordic and Baltic states to Poland, Belarus, the Ukraine and Russia.
Therefore I decided not just to visit the Ukraine’s big cities but to spend as much time as possible in the villages and small towns along my route, checking out their shopping options and talking to people about their consumption habits to see if my suspicions were right that what people drink depends largely on where they live.
Upon my return, I thought, I would sit down and write it all up. But within weeks the country started tumbling into disorder, violence and now civil war. As I, like millions of others, watched in horror the evening news, I became more and more convinced that, if I came out with my article, readers would call me callous or cynical. Besides, who would want to read about the brewers’ predicament while people in the Ukraine lost their lives in striving for greater freedom and the unity of the country?
Intentionally foregoing a press visa, I had opted to tour the country as a tourist. As I often tell immigration officers: aren’t journalists allowed to take holidays too? Also, with my mother, born in the Ukraine, at my side, I thought the two of us would provide enough of a reason to argue – in case someone asked – that we were on some sort of “recherche du temps perdu”. Moreover, being mother and daughter always puts the locals at ease. No one feels offended when we talk to local women about life in general and I subtly bring the conversation round to “alcohol”. Trust me: women always have a lot to say on that topic.
That meant I was in effect on a clandestine mission and could not approach the companies I wanted to visit directly. But I still managed to get into a few breweries through means you will understand I cannot reveal.
Although it would have piqued my curiosity to see a vodka distillery from the inside too, this proved impossible. Despite my fixer doing his best, all routes to finagle an entry proved closed. In the Ukraine, vodka must be big business, albeit often shady. The market research company Canadean says that Ukrainians on average drink about 6 litres of spirits per year. Multiply that by 45 million inhabitants and you have an impressive figure. But 6 litres is only the recorded volume. How much vodka is really knocked back by Ukrainians is anybody’s guess. Some estimates put unrecorded vodka – which is the illegally produced stuff plus what people distill at home – at twice that volume. After my trip I am inclined to say that this is probably a realistic account, given that in January the Ukrainian government acknowledged that it had already closed down 18 illegal vodka factories in the first few weeks of the year alone.
The great cultural divide
Fearful of what the country roads would do to our backs and our car’s shockers, I limited our tour to the western half of the Ukraine. My route would take us from Lviv in the west down south to Odessa, a port on the Black See, up north to the capital Kiev and back to Lviv. That the Ukraine is a country marked by a deep cultural and economic divide, immediately became glaringly obvious. Lviv, a city in the west within shouting distance from the Polish border, could be mistaken for another Krakow (Poland) or Bratislava (Slovakia), as in its long history it has formed part of Poland, Austria, the Austro-Hungarian Empire and most recently the Soviet Union, while Odessa looks like a miniature St Petersburg and Kiev like a smaller version of Moscow. The cultural divide was most noticeable when it came to language. How to address the locals without causing offence? In effect, it was best to wait and listen which language was the locals’ preferred lingo. In Lviv that would have been Ukrainian, in Odessa Russian, whereas in Kiev you could not be sure.
To most foreigners, except perhaps Quebecois, the Ukrainians’ squabbles over the “right language” would have appeared, well, exaggerated squabbles. However, anybody with eyes could see that the cultural divide had already morphed into a fully-fledged cultural war, fought over national monuments. Ruling over the symbolic and literal airspace, monuments are basically large-scale markers in aid of “civic branding”, meant to develop identity and reinforce image. Now, you could not say that the Ukraine is sparsely furnished with monuments. In fact, it’s littered with them, foremost war memorials, pointing to the fact that the Ukraine, as part of the Eastern Front, was the main battlefield of World War II (an often overlooked fact in the West). I would say that almost every Ukrainian village has a war memorial. But in recent years, a new type of monument has been erected in western Ukraine: one to Stepan Bandera, a 20th century Ukrainian nationalist who was killed by the KGB in Munich in 1959. To residents of western Ukraine he’s a hero, while to Russians and ethnic Russians in eastern Ukraine, Bandera is a villain, who allied himself with Adolf Hitler in the worst years of World War II.
Given the huge and on-going controversy around Bandera (the Russian President Vladimir Putin referenced Bandera twice , calling him “Hitler’s accomplice” during his speech to the Russian Parliament calling for the annexation of Crimea), I’d say he has proven a poor choice to reflect on Ukraine’s unity, let alone develop one. No wonder, that in response to the Bandera-hype in western Ukraine, people elsewhere in the Ukraine took to polishing up their Lenin busts (even in my mother’s dirt poor village), which in turn has driven western Ukrainians to fury. All of this left me pondering as we crossed the country: how can the Ukraine put its pieces together and develop a sense of unity if all of its people consider themselves victims – either of Soviet aggression (western Ukrainians) or of Nazi aggression (eastern Ukrainians). Given both sides’ total fixation on the past for their self-definition, there is nothing around in terms of symbolic material that could help this country to overcome its past and look to the future.
That people in western Ukraine feel more European than Russian should not come as a surprise after one look at the map of Europe: The distance between Lviv and Italy’s Trieste on the Adriatic (1100 km) is shorter than the distance between Lviv and Yalta on the Black Sea (1200). Western Ukrainians, on the whole, appear to be much better off, too. At least their villages looked much better kept than those in the south. A clear indication of the villagers’ relative wealth is the number of orthodox churches that have sprung up in recent years. All would have been paid for by the parishioners themselves.
Same with the roads. They were in far better nick in the west than in the south. It would have been in the eastern foothills of the Carpathians, the mountain range between the Ukraine and Romania, when the tarmacked roads gave way to their underlying pebbled predecessors. Most of these single lane roads would have been pebbled a century ago. Imagine what decades of heavy farming vehicles have done to them. As the deep pot holes had been filled rather shoddily over the years, driving on these country roads was like a dangerous slalom and progress very slow.
In the throes of history
Moving south towards Odessa we traversed what used to be called the Ukraine’s wheat basket: black earth farming country. Although the collectivised farms were dissolved two decades ago and the land was handed back to the farmers, the large fields I saw seem to point to the fact that they have since been taken over by local oligarchs or foreign agricultural investors (see the entries under Ukraine at http://farmlandgrab.org). Sadly, the villagers appeared to be poorer than they were before and even more cut off from the rest of the country. Plenty of houses had neither aerials nor satellite dishes; more worryingly, they did not have gas mains lines either, which in western Ukraine visibly travel over fences and gates on both sides of the road; they certainly had no churches down south. Instead, they still sported weather-beaten monuments from Soviet times, hailing proud and healthy farm workers. And, yes, they still had a big bust of Lenin in their midst. The Lenin busts were not just a way of saying that during Soviet Times their lives were better. No, these villagers are mostly Russian, or at least Russian-speaking, and through their continuing allegiance to Lenin they wanted to express their protest against western Ukrainian nationalism.
Up until the 18th century, southern Ukraine was more or less an empty space because it was a contested borderland between different empires. Only after it was annexed to the Russian Empire, the region became popular for agricultural migrations. It was the Empress Catherine the Great, who invited European foreigners, many from Germany, to settle there. Also millions arrived from all over the Russian Empire in the years before the Bolshevik Revolution. Ethnic Russians in eastern Ukraine, the Donbass area, started arriving at the end of the 19th and beginning of the 20th century when coal and iron were discovered there. In effect, the region has long held a lure for many peoples. When my great-grandfather moved to a village near Odessa at the end of the 19th century, he thought Odessa was on par with New York both in terms of wealth and culture.
That today’s Ukraine seems to be divided into ethnic Ukrainians and Russians is a legacy of 20th century history. All the many other ethnic groups, who had lived - often in fear for their lives - in the region for centuries, namely Jews, Poles, Germans, Tartars, Greeks, Turks, Armenians, Bulgarians, and who might have wanted a say in today’s situation, were either deported or killed in the Holodomor (Stalin’s “extermination by hunger” in 1932/33), the Holocaust and World War II, with numbers running into the millions.
When I visited Odessa last year, I was pleased to see a thriving Jewish community, numbering 30,000 people, though down from about 200,000 (or 30 percent of the city’s population) from before the Holocaust. That’s why it pains me to read that Anti-Semitism is rearing its ugly head again. In April this year, Jews emerging from a synagogue said they were handed official-looking leaflets which accused them of being in support of the Bendery Junta, a reference to Bandera, and ordered to provide the authorities with a list of property they owned and pay a registration fee “or else have their citizenship revoked, face deportation and see their assets confiscated,” reported Ynet News, Israel's largest news website. Already, Jewish communities have evacuation plans in place, not least after events in early May, when several dozens of pro-Russian protesters were burnt to death in Odessa by a mob in the city’s trade union building.
I confess that of the three Ukrainian cities I visited, I enjoyed Odessa the most. This has got nothing to do with my family’s links to the place. I was taken in by its charms, its Mediterranean flair and its street life. While it resembles St Petersburg most closely in terms of architectural style, it lacks St Peter’s overpowering grandeur. In Odessa’s city’s centre, most of the old buildings only have three floors. Everything is more human-scale, even the posh cafés, many of which were furnished in what I call “oligarch baroque”, which is synonymous with luxury and excess in terms of materials and colours: think lots of mirrors, dark red walls, and black velvet armchairs with intricate, elaborate carvings in gold. Unfortunately, you have to take my word for this because I did not dare take any photos. Even, early on a Sunday morning, there were men sitting there, nursing a drink and engaged in deep conversation while their invariably very young, very beautiful and very bored looking girlfriends stared holes into the ceiling. Would they have minded to be photographed? You bet.
There’s poverty – and abject poverty
From Odessa’s oligarch baroque or glam rock cafés to Lviv’s underground bars with their thick and solid wooden interiors, reminiscent of a Viking long barn, and Donetsk’s funky Biker’s Bar, which friends of mine visited some time ago and reported back that it had VIP rooms (with a double bed each), a shooting range, where you could hit a target looking like Hitler, and a cinema hall: Ukraine’s cities offer lots of swanky watering holes for those with money to spare. But once you leave the cities behind, you could be in an altogether different country.
On my travels I have become something of an expert in poverty and I can tell you that there is never anything romantic or scenic about being poor. But there is a difference between poverty and abject poverty – poverty that is so hopeless and destitute that it does not bear looking at. That’s what I saw in southern Ukrainian villages: toothless old women living in ramshackle houses because their husbands had died (mostly of alcohol abuse); younger women, who looked sixty but were probably only forty, doggedly tending to their vegetable plots, while their men stood by the fence, a bottle in their hands, watching the traffic go by (little that there was), and small groups of teenagers hanging out at deserted bus stops, smoking and drinking. Usually, in eastern Europe, if there is poverty there’s also plenty of booze, to which the villagers’ ravaged faces bear testimony. A discrete way to find out what kind of booze they consume is to check out the rubbish tip. In parts of Russia, you only have to walk to one end of the village and you will stumble over heaps of plastic rubbish, mostly plastic bottles for beer or soft drinks. Remarkably, these Ukrainian villages did not have a tip. One likely reason is that the women burn their rubbish in their gardens. But as there were many villages which had no kiosks at all, everybody must have been busy home-distilling. This would explain the dejected apathy I saw.
During my trip I did not pick up on any outright hostilities between Russians and Ukrainians. But I certainly sensed that tensions were building up. In Odessa our companion worried that our car could be vandalised just because it had a Lviv licence plate. Luckily, it was not. Most Ukrainians I spoke to complained about the country’s rampant corruption, saying they have to give illicit payments to everyone, from civil servants to doctors to get what by law they should be entitled to. I can vouchsafe for that: Where we parked our car in the centre of Odessa should have been free public parking according to the signpost. Alas, some clever entrepreneur had turned the spot into serviced parking, charging us for the privilege. Just to make sure everybody got the message, he had bolted clamps to the ground. Nevertheless, when asked, he offered to issue a receipt: handwritten on a page from an old calendar, which I kept as a souvenir.
Of corruption big and small
Corruption in the Ukraine is so pervasive that the same people, who complain about corruption, would not think twice when offered a chance to make a bit of money on the side themselves. However, they would not call it corruption. They’d call it “making ends meet”. In Lviv, at the central market, I saw a Budweiser beer truck parked, which did not sell beer, as one might have thought. From the back of the truck the driver was selling canned foods. I am convinced the world’s number one brewer AB-Inbev, which operates in the Ukraine through its subsidiary SUN InBev (3,000 employees) and leads the market with 36 .7 percent share, has not branched out into the food business. More likely, the driver did an extra delivery round, with proceeds this time going straight into his own pockets.
Whereas I thought these kinds of wheeling and dealing amusing, our Ukrainian companion fumed. Still, they pale in comparison to much grander schemes of graft. How unashamedly Ukraine’s elite has been lining its pockets is best highlighted by the motorway that links Kiev with Odessa. Close to Kiev, the bridges across the motorway are fully constructed. However, the further south you travel, the more skeletal they become, until you only have the pillars left. Obviously, some people must have found a better use for the funds which were supposed to go towards the construction of these bridges.
In its most recent Corruption Perceptions Index, released in December 2013, the watchdog Transparency International slammed the Ukraine, calling the country the most corrupt nation in Europe, placing it on the 144th place (out of 177) in its ranking next to Cameroon, the Central African Republic, Iran, Nigeria, and Papua New Guinea. Ukraine’s ranking on Transparency’s index may give a good indication that a lot is not well in the Ukraine. Yet, it leaves out a much more worrying issue: For several very violent centuries, various elites have enriched themselves on the Ukraine, while showing no regard whatsoever for their country, its society and its peoples. As I see it, not even the present political and economic elites had a genuine interest in establishing the rule of law. And why should they? This would have run counter to their profiteering. Displaying a haughty, egotistical “the devil may care” attitude, all have taken the money and run at the earliest opportunity. Even when the Ukraine’s longer-established oligarchs secretly sided with the pro-European protesters and against the then President Viktor Yanukovych, did this not mean a change of heart on their part. “The oligarchs may not care so much about ‘European values’ but they see ‘European value’,” said one foreign diplomat quoted by The Financial Times in December 2013.
What actually worried people most in the autumn of last year was the perceived return of their country to the bad old days of the early 1990s when particularly vicious and bloody contract killings of businessmen were the order of the day. While in the old days, only businessmen with links to strategic industries made for likely targets – which included brewers in eastern Ukraine - in 2013 anybody could get killed if certain parties were after his company. By and large, contract killings were a last resort. Open Democracy, a digital commons, reported in January 2013 that the process was usually thus that the “power structures”, that had taken a shine to your business, would start making problems for you and then suggest, as a way out, that they get a cut of your profits or shares. That way you were being dispossessed of your company. “Whatever they may call it, we call it theft”, Open Democracy wrote.
Last year, several businessmen, who privately owned breweries in the Ukraine, certainly took the threats seriously. I heard of one who thought it best to flee the country together with his family.
That security was tight at breweries I can testify. At the unmarked First Private Brewery in Lviv (unmarked because there was not a single sign or billboard testifying to its name or beers, as would be the case in the rest of the world), I saw so many armed guards with machine guns that you could have thought they were protecting an army camp where they had stored nukes. Even at the Radomyshl brewery near Kiev, which had been sold by the Ukrainian businessman Petro Poroshenko to Oasis CIS, a company owned by two Russian businessmen, in 2011, guards were on red alert. When we drove past and I decided to get out of the car to take a picture, a gate suddenly opened behind me and guard dressed like a combat fighter stepped out, pretending to light a cigarette.
I am not sure how a car with two women inside could have given him the idea that we were about to make an ambush on the brewery. True, there were plenty of lorries parked outside the brewery, whose drivers would have been bringing with them bundles of cash in exchange for beer – you are allowed to speculate freely as to why beer is still a cash business in the Ukraine. But why my mother and I seemed so highly suspicious, I still have no idea. In any case, we immediately drove on.
A ray of hope
I have heard all kinds of stories as to why the businessman Poroshenko sold his brewery while hanging on to his other businesses. Perhaps the offer was just too good to be turned down. In any event, Mr Poroshenko is all too familiar with the Ukraine’s underhand ways. In November 2013 he told The Economist that his business suffered more from being raided by Ukraine’s security and tax men than it did from Russia’s sanctions. The 48-year-old Mr Poroshenko is best known in the Ukraine as “the chocolate king”. He owns the Ukraine's largest confectionery manufacturer Roshen with revenues estimated at USD 1.2 billion.
Mr Poroshenko is actually a diabetic but still eats chocolate over sugar-free options. It’s “a stance”, he told the Moscow Times that “relates to everything. It is better to both eat and act genuinely and properly.” He also owns Kanal 5, the most popular news channel in Ukraine, which has shown clear pro-opposition sympathies during the political crisis.
Before moving into politics, media say that Mr Poroshenko got rich buying up state assets after the Soviet Union collapsed in 1991. He may be a political chameleon, having worked for both pro-Russian and pro-Western administrations since being elected into Parliament in 1998, but unlike many of the Ukraine’s other oligarchs, he is not widely perceived as corrupt. Forbes magazine estimated his wealth at USD 1.6 billion in March 2013.
Mr Poroshenko comes from the mainly Russian-speaking Odessa region, although his political stronghold is believed to be in the central Vinnytsya region, where he started his business and political career, says the BBC.
Moreover, he is seen as one of the front-runners in the Ukrainian presidential elections scheduled for 25 May 2014.
When he visited Berlin on 7 May 2014 he told German media that in the event of his election victory he would stem the influence of shady oligarchs in politics. A major goal of the new government must be to fight corruption. “Laws alone do not work, we must make it clear from day one that the country lives under the new rules,” he was quoted as saying.
This also means that the people “who have become very rich through corrupt methods at the expense of the state, ie the taxpayers,” would get expelled from politics. He also said that the famous Ukrainian oligarchs Rinat Akhmetov and Dmytro Firtash would in future have no more influence on politics. Mr Poroshenko announced further that should he become president he would sell his company - with the exception of his TV channel.
With the Ukraine crisis now entering its sixth month and in view of Russia’s continuing sabre-rattling, many observers fear that the presidential elections will have to be called off as the country descends fully into civil war. This might cause the Ukraine to eventually split into two – a process all too reminiscent of the fate of former Yugoslavia in the 1990s.
What about Russia?
While the crisis in the Ukraine continues to grab our attention, we should not ignore the situation in Russia altogether. It’s an interesting question for how long Russia will be able to support its Ukrainian grandstanding. Tensions around the Ukraine have exacerbated a fall in investment in Russia and an outflow of capital that have had a major negative impact on Russia’s economic growth. How long before ordinary Russians begin to realise that Russia’s involvement in the Ukraine will cost them dearly too?
The World Bank said in April 2014 that capital outflow from Russia may come to USD 150 billion if the crisis deepens. Already the slump in Russia's economy is taking its toll on sales and profits at businesses in the rest of Europe, including the world’s leading brewers. Danish brewer Carlsberg, the world’s number four, was forced to issue a profit warning for the full year on 7 May 2014, blaming a bigger than expected fall in Russian demand and the weakness of the ruble - which has fallen more than 7 percent against the dollar this year. Carlsberg's beer sales in eastern Europe (Russia and the Ukraine), its biggest market region, fell 7 percent by volume in the first quarter. Its shares have fallen 12 percent so far this year. AB-InBev’s beer sales in Russia have dropped even more: 10 percent in the January to March quarter. Already last month, Dutch brewer Heineken, which ranks third world-wide, reported a 37 percent fall in first quarter net profit, citing “challenging beer market conditions in Russia.”
The economic fallout from the Ukraine crisis may be significant for the brewers. But it’s nothing compared with the Ukrainians’ plight. That’s why there will be no report on the Ukrainian beer market from me – not for the foreseeable future anyway.
2013 december · april
· may ·