Rich neocon's twisted scheme: Meet the private equity hawk cheering for Ukraine

How a super-wealthy friend of Ted Cruz acts as a window to the State Department's morbid cheerleading in Ukraine

Published September 15, 2014 11:43AM (EDT)

Michael Bleyzer      (CNBC)
Michael Bleyzer (CNBC)

As the ongoing conflict in Eastern Ukraine flared up, clashes involving Ukrainian government forces broke out on May 9 in Mariupol – a Ukrainian town on the Sea of Azov, dozens of miles west of the Russian-Ukrainian frontier. After the violence subsided, seven people were dead – six were anti-government, pro-Russian protesters. The next day, Human Rights Watch official Anna Neistat reported that “Ukrainian units might indeed have used excessive force ... which resulted in deaths and injuries of some unarmed people.” She called for a full investigation. The State Department, however, decided that it needn't wait for a probe to apportion blame. While U.S. policy often dovetails suspiciously with HRW, State officials were swift in their finger-wagging. The bad guys were the ones incapable of defense; neither in the streets, nor before a judge, nor in the court of public opinion.

“We condemn the outbreak of violence caused by pro-Russia separatists this morning in Mariupol, which has resulted in multiple deaths,” State Department spokesperson Jen Psaki said on May 10. “We continue to call for groups who have jeopardized public order by taking up arms and seizing public buildings in violation of Ukrainian law to disarm and leave the buildings they have seized.”

Questions of its veracity aside, the statement effectively described tactics employed by some of the militant Euromaidan protesters, the darlings of Washington a few months prior. Morality proved fluid after the changing of the guard in Kiev.

But if Foggy Bottom's swift condemnation doesn't make sense, logically or metaphysically, it can, however, at least be explained partially, in the context of political economy – of all things, by a Facebook post. A week before the Mariupol killings, a fire in Odessa took the lives of 46 pro-Russian protesters holed up in a trade union building. The blaze occurred after pitched battles – sparked by a pro-Russian killing of a government supporter – raged throughout the city. HRW said that “many died from burns, smoke inhalation, and gunshot wounds,” and that an investigation “should not only identify the causes of the fire but also examine police failure to contain the violence.” Some Ukrainian nationalists, however, were happy to take responsibility before an official fact-finding mission could be launched. “Nobody defended their city as Odessa,” a local city hall deputy named Dmitriy Spivak pronounced in a Facebook victory declaration (in Russian). “Nobody had rebuffed Kremlin provocateurs and extremists' imports. Odessa! You are really a CITY OF HEROES!!!”

How this acts as a window upon the State Department's Mariupol victim-blaming is that it was shared by a Ukrainian-American private equity neoconservative who has both used and been used by Washington's foreign policy interests.

“Maybe Odessa will finally show them how to do it!” added the man, Michael Bleyzer.

There is a pattern of official Washington dismissing these kinds of Ukrainian nationalistic impulses. Of course, there is ample evidence that Russian-backed forces have been responsible for escalating the violence and numerous human rights abuses. Even if a U.N. Security Council probe finds out that rebels weren't responsible for the downing of Malaysia Airways Flight 17 – a scenario that seems unlikely – HRW found they did delay the repatriation of victims' remains. The insurgents also, according to the group, have: hijacked medical facilities and ambulances; carried out execution-style killings; detained and beaten political opponents; forced dubiously arrested prisoners to perform labor; tortured detainees, including journalists; subjected at least one political detainee to mock executions, and violently harassed election officials and pro-government candidates in May.

The Russian military, meanwhile, according to the Guardian, appears to have sent regular units across the frontier to fight, with the rank-and-file left in the dark about the nature of the mission. But at the same time, the West hasn't exactly strained itself in a serious effort to defuse the tension since conflict started. Though U.S. officials have not been reluctant to denounce the factions allied with or backed by Moscow, HRW (which, again, has significant documented ties to the U.S. foreign policy establishment) described U.S. and EU attitudes toward the Ukrainian government as giving Kiev “ a pass on human rights.”  Abuses from the post-Maidan administration chronicled and condemned by HRW include: fatal indiscriminate rocket fire on civilian areas; the military targeting of medical facilities; deadly airstrikes on civilian homes; the torture of a detainee accused of mounting an attack on state security forces; the disappearance of a politically inconvenient journalist; other abductions and abuses of “people accused of involvement with the insurgency” carried out by an extremist member of parliament, no less, and a law that could undermine judicial independence.

This hypocrisy is not surprising, given that the Euromaidan movement, in its ascension, was supported both by Western governments and neo-fascist elements (the latter, it should be noted, are playing a role in the budding civil war on the government's side, and attracting sympathetic extreme right-wing fighters from across the continent in the process, according to an Aug. 11 Telegraph report). Whatever the case, it appears the West is content to act as if the conflict boils down to a Manichaean battle between good and evil – between Putin and democracy. In reality, over 2,000 people have lost their lives in a political struggle that has seen comparable callousness toward human rights and democracy on both sides. In Luhansk alone, 300 civilians have been reported killed in indiscriminate volleys of rockets, shells and even cluster bombs. In most cases, circumstantial evidence, according to HRW, dictates “that government forces were responsible for many of the attacks.” An Aug. 29 State Department travel warning for Ukraine, however, claimed the majority of possible danger to U.S. civilians who might be in Luhansk and Donetsk was posed by Russian-backed forces. The Ukrainian military units, it only noted, “have launched an operation to reclaim” the administrative regions.

Bleyzer – his ideology, his economic ambitions and his ties, both formal and informal, to U.S. state power – help explain this feigned official concern about human rights. The interwoven priorities between the financier and other high society Ukrainian nationalists, and U.S. diplomats can barely be concealed. After the Odessa fire that Bleyzer cheered, State Department spokesperson Marie Harf – while passively saying “any loss of life is horrible” and cursorily dismissing a reporter's suggestion that the U.S. is victim-blaming – declared that “Kiev has shown enormous restraint.” The incident in Odessa, she said, “started because pro-Russian forces and separatists started basically mob action attacking protestors. So going forward we think that restraint is important, but so is keeping law and order.”Arsonist vigilantes showing the rest of Ukraine “how to do it,” it seemed, was not a priority concern for Foggy Bottom, even if it was on the minds of international human rights observers.

If Bleyzer's friends and ties in Washington are any indication, possible similar actions, in the future, will result in similar State Department non-denunciation denunciations.

* * * 

Michael Bleyzer has every reason to feel passionate about shaping Ukraine's future. Jockeying in Kiev is, after all, how he built a $1 billion investment portfolio and a $5.7 million Houston home.

A Jewish refusenik, Bleyzer escaped the Soviet Union in 1978 with a master's degree in digital electronics and quantum physics, his young family and little else. The oil industry lured him to Houston, where he became a U.S. citizen and spent 13 years climbing the ladder at Exxon.

But after the collapse of the Iron Curtain, he eschewed the ways of the Company Man. Bleyzer made his way back to his homeland in 1993 – in time to ride the first wave of post-Soviet privatization. Partnering with local entrepreneur Valery Dema, over the next few years, he raised $100 million in capital from the likes of Goldman Sachs and UBS. SigmaBleyzer, his private equity firm, was born. It worked hard to rid Ukraine of the specter of communism. According to a fawning May 2006 Institutional Investor profile, he spent half of the $100 million in Wall Street capital purchasing “82 Ukrainian companies that were going private, from utilities and turbine makers to ice cream factories.” By the middle of the aughts, he had sold 54 of his initial investments, turning a profit on all but three. (Salon sent SigmaBleyzer's office in Houston three emails requesting comment for this article. They declined to respond.)

This crucial initial success and all that followed hasn't been achieved through unadulterated entrepreneurial talent, however. Bleyzer has doggedly pursued state connections to expand his brand and ideology, employing the “crony capitalism” that profit-worshiping academic free-marketeers love to hate without an iota of self-awareness. SigmaBleyzer's current Washington-based director of government affairs, Morgan Williams, worked closely with Bob Dole when the '96 also-ran was in the Senate. Williams had unique expertise, having also served as a senior adviser to USAID on food projects in Russia and Ukraine. He joined the firm in 2001. Edilberto Segura, chief economist and SigmaBleyzer partner, had 26 years of experience at the World Bank before joining the firm in 1998.

While these appointments aren't indicative of overt influence peddling, they needn’t be. Bleyzer has openly admitted that the smoke-filled room is a pillar of his business strategy – one he termed “hybrid investing,” according to Institutional Investor. The magazine cited his contributions to Viktor Yuschenko's 2005 inaugural ball and his establishment of a free market think tank, the Bleyzer Foundation, as examples of the tactic. In 2002, the foundation itself stressed the importance of state connections in a blueprint for economic development modestly titled the Bleyzer Initiative. The manifesto invokes both Milton Friedman and Sept. 11 (2001, not 1973) to argue that the cultivation of market economies is a step in the direction of evolutionary progress – one that needs more than an invisible hand up (two of its policy groups are titled “Liberalize and Deregulate Business Activities” and “Minimize Political Risks”). A January 2003 MarketWatch story described Bleyzer's paradoxical libertarian Marshall Plan, and how he explicitly sought meetings “with officials in Washington and Europe to promote more private equity investment in developing countries.”

Fortunately for Bleyzer, his turn-of-the-millennium desire to bring the ideas of Von Mises et al. to the starving masses happily coincided with the drawn-out buildup to the U.S.-led invasion of Iraq. The neocon gleefully lent his intimate understanding of liberty to the United States in her hour of need. Tim Shorrock reported that he and a former Army secretary named Martin Hoffman were “briefing senior U.S. officials, including [then Secretary of Defense] Rumsfeld himself, on their ideas for the rapid privatization of Iraq's state-run industries”[1] and noted that the pair wrote a Wall Street Journal Op-Ed in 2003 laying out their vision of corporate nation building. “At a time when President Bush and other administration leaders pursue their vision for political reform and democracy in Iraq,” Hoffman and Bleyzer wrote just a week after the start of the war, “we in the private sector should help create and implement the policy measures that will make an attractive investment climate in Iraq. This public private partnership could play a critical role in making possible dramatic social and economic changes in Iraq and other countries in the region.”

* * *

Since that ill-fated invasion and occupation, Bleyzer's associates have labored to bridge the gap between Supply and Demand and Search and Destroy, with an eye on his motherland. And they have bent some rather powerful ears on the issue. Williams and Segura, for example, are both a part of an organization called the US Ukraine Business Council (USUBC); SigmaBleyzer and the Bleyzer Foundation are listed as members. Creating an inherent conflict of interest – rational in the realm of “hybrid investment – Williams is its president and CEO, and was listed as its only paid employee in 2012, with a salary of $65,000.Well-heeled executives serve on its board,[2] and the USUBC counts deep state nomenklatura among its senior advisers[3]. One such adviser, Freedom House president David Kramer, recently testified before the Senate Foreign Relations Committee, arguing that the U.S. must “punish Putin and his regime” by offering Kiev assistance that includes “anti-tank and anti-aircraft missiles.”

If there were any doubt as to whether Bleyzer himself disagreed, he helped lead a Ted Cruz fact-finding mission to Ukraine sponsored by a group called “Secure America Now.” Roaring like a Cold Warrior, Bleyzer said on Facebook that Secure America Now's “statements about the situation in Ukraine and a global threat resulting from Putin's ambitions and plans, [sic] represent a much stronger and better defined strategy that must be adopted by USG [the US government] to help Ukraine, and at the same time protect vital US interests throughout the world.” While the organization itself claimed that “no one supports direct military involvement by America,” it noted Sen. Cruz “heard Ukrainian leaders ask for the United States to supply materials like night vision glasses, helmets, and other military equipment so Ukraine can defend itself.” Integrity and gun-shyness, however, don't exactly appear to be core values of Secure America Now. “Russia is not only bullying Ukraine, but it is actively aiding Iran in its quest to attain nuclear weapons,” it casually added, despite a dearth of evidence that Iran is actually plotting to manufacture such armaments. “Ignoring Russia's aggression will lead to more aggression and threaten economic interests.” The think tank posted a picture of Cruz walking around the Maidan in Kiev, with the silver-haired Bleyzer on the senator's right flank.

It also posted another photo of Cruz “addressing the US-Ukraine Business Council” seated next to Bleyzer. In the background are banners of both the USUBC and SigmaBleyzer. Bleyzer introduced Cruz at the event. He was quoted in a USUBC press release as saying he considers “Sen. Cruz a dear and trusted friend.” He described the controversial junior senator as “a unique politician.”

“For most politicians, the gap between their words and their deeds is wide. With Ted Cruz, I have always found that what he said and what he did were one and the same. That makes him a very impressive man and political leader,” he added.

In his statements to the group, according to the press release, Cruz said that the U.S. and its recent boom in natural gas production “could help Europe and Ukraine free themselves from the blackmail and political pressure that Russia has been able to exert for years.” He also said he wanted American “support for Ukraine in helping defend itself.”

Cruz isn't the only influential neoconservative legislator effusive in praise of American military might and capitalism to have cemented bonds with Bleyzer through the USUBC, either. In September 2012, Rep. Ileana Ros-Lehtinen, R-Fla., gave a speech at an incestuous USUBC gala honoring Bleyzer at the Ritz-Carlton in Washington. Ros-Lehtinen remarked that she has “known Michael for several years and [has] been aware of his most outstanding work to assist his homeland Ukraine.” She feted SigmaBleyzer, saying that it can help Ukraine “grow and become a prosperous nation and at the same time strengthen its democratic institutions and the rule of law.” The critic of perceived Obama administration foreign policy weakness toward Russia, the Middle East and Latin America received $10,000 in campaign donations from SigmaBleyzer that election cycle – equal to about two-thirds of the private equity firm's previous campaign expenditures put together.

* * *

Whether Bleyzer's commercial concerns inform his hawkishness, or vice versa, or not at all is moot – the connections between himself and American state power are real, both ideologically and materially. And in at least two cases, a straight line can be drawn between Bleyzer's bottom line and U.S. interests in establishing a Western-oriented Ukrainian government.

In 2012, he again cast aside his firm belief in the righteousness of the free market, when SigmaBleyzer received $50 million in financing from the Overseas Private Investment Corporation – a state organ that describes itself as “the US Government’s development finance institution.” While an OPIC press release described the loan – “to make equity and equity-related investments in southeast European private and public companies” – as supporting “private sector development in Ukraine,” and “extending our ongoing commitment to invest in Ukraine,” it's doubtful that the welfare of Ukrainians was a driving factor in bureaucrats' decision to underwrite this line of credit. According to the 1969 legislation that established the corporation, OPIC is bound “to conduct its activities in consonance with activities of the agency primarily responsible for administering ... the international trade, investment, and financial policies of the United States Government, and to seek to support those developmental projects having positive trade benefits for the United States.”[4]

OPIC declined to comment in response to questions about Bleyzer's Facebook commentary on the May 2 Odessa fire and what the credit it extended to SigmaBleyzer ultimately financed. Describing SigmaBleyzer as “an active fund,” an OPIC spokesperson referred Salon “to the SigmaBleyzer website, which lists select investments in the current portfolio.”

The European Bank for Reconstruction and Development (EBRD) – owned and funded by a coalition of Western governments, with similar goals to OPIC – has also funded SigmaBleyzer and its subsidiaries to the tune of about $75 million between 2005 and 2011. Despite its name, the EBRD’s biggest shareholder is, in fact, the United States, with a 10 percent share. In the spring, the bank approved a further €150 million of emergency funding for its existing Ukrainian clients. 

* * * 

These state-backed investments are only bound to pay greater dividends for Western rentiers like Bleyzer and his Wall Street backers, should Ukraine fend off the anti-Western elements within its borders (and beyond). The U.S. and EU are currently discussing further economic integration via the Transatlantic Trade and Investment Partnership (TTIP). Unsurprisingly, among the economic elites in Ukraine are a number who either seem warm to or openly cheer employing American support to forcefully consolidate the power of the new government.

The new government itself, on the provincial level, includes two billionaire governors. Ihor Kolomoysky, the appointed governor of Dnipropetrovsk, has interests in steel, airlines and the media. Sergei Taruta, who agreed to lead Donetsk, is the chair of ISD Corp., a multinational steel company.  Both were appointed in the wake of the Maidan movement's victory, after former President Viktor Yanukovich decided to flee the country as protests raged in Kiev.

Some elites are explicit in their geopolitics. Viktor Pinchuk – a steel magnate and Ukraine's second richest man; a backer of Tony Blair's education foundation; a longtime ally of new Prime Minster Arseniy Yatsenyuk and a friend and ally of Bill and Hillary Clinton – is a financial backer of the Brookings Institution's Center on the United States and Europe. In March, it held an event featuring NATO Secretary General Anders Fogh Rasmussen making the case that the ongoing Ukraine crisis is a reason to rejuvenate the militaristic Cold War alliance he has led since 2009. Newly elected  President Petro Poroshenko, Ukraine's seventh richest man took this argument one step further amid the unfolding of the Crimea Crisis (he was a mere civilian billionaire then) when he called on the U.S. to use "all instruments," not excluding force, to "stop the war." In July, Poroshenko's secretary of defense promised to take back Crimea from the Russians, despite the fact that the vast majority of its inhabitants have shown little enthusiasm for remaining part of Ukraine since the collapse of the Soviet Union.

* * *

Ukrainian elites yearning for Washington's involvement in the face of opposition and Russian-backed rebellion (the former is significant and organic) hasn't exactly come out of left field. The U.S. hasn't been reluctant to shower affection on pro-EU Ukrainians. The Maidan protests and the government they created came on the heels of significant “hybrid investment” by the United States. The State Department claims to have sunk $5 billion in Ukrainian organizations that “promote civic participation and good governance” since the Soviet Union's collapse – the lion’s share has gone to partisan outfits. Center UA, for example, a Kiev NGO run by Oleh Rybachuk, was funded by USAID and private benefactors including Pierre Omidyar – the eBay founder and billionaire backer of First Look media (the Omidyar-Tufts Microfinance Fund also sponsored a microfinance institution that received $25 million from OPIC in 2009). A former deputy prime minister under Orange Revolution hero Viktor Yushchenko, Rybachuk called for a second iteration of the movement as far back as March 2012.

A spokesperson for the Omidyar Network said that it “supported Centre UA to further the objectives of our Government Transparency initiative, namely to improve the relationship between citizens and government in democratic societies.”

Muscovite intervention and domestic remonstrations notwithstanding, the U.S. seems rather pleased with how that movement has played out –  a tapped phone call amid the initial protest movement (believed to have been leaked by Russian spies) revealed that Yatsenyuk was the State Department's choice to succeed Yanukovich.

He has not disappointed. In March, speaking before an audience in Kiev that included 100 USUBC members, Yatsenyuk laid out his plans to flog publicly owned energy concerns and to carry out IMF-prescribed austerity. Bleyzer himself has described the latter on CNBC as something Ukraine “badly needs,” and his charge Morgan Williams – the SigmaBleyzer lobbyist/USUBC president – gushed like a derrick about the former. Naftogaz, the most prominent state energy company, claimed to have made $13.13 billion in revenue in 2011[5] while employing 1 percent of Ukraine's workforce.

Acting on its giddiness, the USUBC became a “supporting organization” of the 2014 Ukraine Energy Forum – a June conference where attendees heard "first-hand about Ukraine’s national Energy Strategy from key government officials and the heads of state energy companies." Speakers included a host of state-energy functionaries, private sector opportunists, and U.S. Ambassador to Ukraine Geoffrey Pyatt. Pyatt, according to his Twitter feed, proclaimed that “energy security is national security” and urged Ukraine, “as it debates its future,” to choose “the road to energy independence.” Ukraine, the ambassador earnestly added in another tweet, “can achieve its European choice and create a vibrant economy.”

If past events and opinions are any indications, should Ukraine turn away from “the road to energy independence” and the “European choice,” there will be elites urging more militaristic elements to "show" Ukrainian leaders “how to do it.” It wouldn't be foolish to bet that Bleyzer would, again, be among them.


Note: For full disclosure, I used to work for RT America, a Russian state-owned channel, mostly for “The Alyona Show,” a series that garnered significant praise despite the inaccurate information routinely broadcast by many other RT programs. I currently have no conflict of interest with any Russian or Ukrainian institutions, and spoke to National Journal in March about my time at RT. I have no plans whatsoever to appear on RT to discuss this article, and hope that the network includes the segment about Russian-backed militias' human rights abuses if its producers decided to cover the information discussed here.

[1] To add to the Eastern European intrigue, Shorrock also noted they used to “consult frequently with Robert 'Bud' McFarlane, President Reagan's National Security Adviser, who runs a company that invests in energy projects in Russia and Eastern Europe”

[2] ) Board members include executives from Monsanto, Boeing, Dupont, Eli Lily, Chevron and Cargill.

[3] ) Senior advisers include National Endowment for Democracy vice president of programs Nadia M. Diuk, former chief of NATO’s Ukraine liaison office James Greene, four former U.S. Ambassadors to Ukraine, and think tank functionaries, including scholars from the Peterson Institute for International Economics, The Rand Corporation, The Heritage Foundation, The Atlantic Council, and Freedom House.

[4] ) This mandate helps shed at least a little light on OPIC's other recent projects in Ukraine, including $4 million for a billboard advertisement business and $20 million to support a luxury car import and retail outfit.

By Sam Knight

Sam Knight is freelance journalist living in Washington, D.C. His writing has been published by Salon, TruthOut, Washington Monthly, In These Times, and The Reykjavik Grapevine. Follow him on Twitter @samknight1.

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