Bankers Called to Arms for Ukrainian War as Rolls-Royce for Sale

Aug 05, 2014 9:14 pm ET

(For more on the Ukraine conflict, see EXT2.)

Aug. 6 (Bloomberg) -- A knock on the door for Andriy Gerus came on a Monday morning in July.

Fresh from getting his MBA in London, a managing director at Ukrainian investment company Concorde Capital was preparing to go for a stroll with his baby in Holosiyiv, a leafy district of Kiev, when a surprise visitor handed him a military summons.

“I imagined myself with a gun, marching,” Gerus, 32, said at a cafe in central Kiev. “Everyone has two choices: to comply with Ukrainian law, go with your conscience and prepare for mobilization or avoid joining the army by relocating and risk three to five years in prison. I prefer the former.”

The war is coming home for thousands of Ukrainians as part of the latest wave of mobilization ordered last month by President Petro Poroshenko to defeat a pro-Russian insurgency simmering since April in the easternmost regions of Donetsk and Luhansk. By putting professionals like Gerus near the frontline of the country’s bloodiest battles since World War II, Ukraine is trying to offset a mismatch in military capability in a conflict that’s pitted it against neighboring Russia, which it accuses of backing the rebels and whose defense spending is about 56-fold Ukraine’s outlays on the army.

Ukraine, the second-most-populous former Soviet republic, and its allies in Europe and the U.S. are laying the blame for stoking the conflict on Russia, a country of 143 million people with a $2 trillion economy, which this decade has embarked on its biggest overhaul of the armed forces since the Cold War.

‘Poorly Equipped’

In contrast, the Ukrainian army numbered about 70,000 at the start of the conflict, the U.K.’s Royal United Services Institute for Defense and Security Studies said in a report in April, adding that it’s “poorly equipped and would struggle to mobilize fully.” Russia’s 2013 State Defense Plan puts the nation’s total troop level at 80 percent of the planned strength of 1 million soldiers, according to London’s International Institute for Strategic Studies.

Russia has deployed 45,000 soldiers near its neighbor’s borders, a Ukrainian military spokesman, Andriy Lysenko, told reporters in Kiev yesterday. That makes it the biggest buildup since Russian troops were withdrawn from the area in May. The renewed deployment raises the specter of a possible invasion, Polish Foreign Minister Radoslaw Sikorski said yesterday.

The separatist forces now number about 15,000, up from 300 when the conflict started, and hold less than half the territory they did four weeks ago, Ukrainian Defense Minister Valeriy Geletey said in an interview with the BBC, broadcast on Aug. 3. Geletey’s son got his call-up notice on Aug. 1, the minister said on Facebook Aug. 1.

‘Severe Cuts’

“The Ukrainian army has been facing severe cuts in the last years,” said Janis Berzins, director of the Center for Security and Strategic Research at the National Defence Academy of Latvia in Riga. “The result, as always, is reduced operational capability.”

Since Ukraine went on an offensive against rebels in mid- April, the army has lost 363 soldiers, with 1,434 wounded, a spokesman for the military, Andriy Lysenko, said July 30.

To replenish the ranks, Ukraine is turning to people like Gerus and Oleksandr Bondar, 32, who employs seven people at his IT business in Lviv near Poland. Deployed on the border of the regions of Donetsk and Dnipropetrovsk about 1,000 kilometers (620 miles) from home, he’s serving as deputy chief of a logistics support squadron, supplying munitions and fuel to the frontline about 100 kilometers away.

Vacations, War

“My first thought was: All is lost!” Bondar said by phone from his area of deployment about his reaction to being drafted in mid-April. “I wasn’t prepared for serving in the army at all. I was preparing to have vacations, and already had tickets on hand. Another question on my mind was: How long will my business operate without me?”

While Bondar says he answered the “call of duty,” for others the drive is bringing to the surface regional tensions and conflicting priorities.

As soon as Poroshenko issued the call to mobilization, protests -- led mostly by women -- swept through Ukraine from Mykolayiv on the Black Sea to Chernivtsi near Romania. People scuffled with the police and blocked roadways and bridges, questioning why their men are enlisted to fight far from home.

The protests were “very local,” said Bohdan Senyk, a spokesman for the Defense Ministry.

‘Everyone’s Problem’

“In any country, there are different people -- patriots and those who would rather avoid a fight, and Ukraine is no exception,” said Anton Mikhnenko, a deputy head of the Kiev- based Center for Army, Conversion and Disarmament Studies. “But they, too, should understand: if their husbands and sons don’t help now, this military conflict will spread and could cover their native territory as well. It’s everyone’s problem.”

With the insurrection nearing its fifth month, the government may be running short on time before the country cleaves in two, Berzins said.

“Ukraine needs to finish the rebellion ASAP,” he said. “People there want peace and stability. If they feel Russia is able to end the conflict, they will support Russia. If Ukraine wants to keep the eastern part, it shall resolve it very quickly and should not underestimate the potential support of local people just wanting to have a normal life again.”

With the country on a war footing, some Ukrainians aren’t waiting for their draft notice. Vyacheslav Konstantinovsky, 53, who with his brother shares a fortune estimated by Focus magazine in 2013 at $355 million, put up his Rolls-Royce Phantom for sale and joined a volunteer battalion fighting in eastern Ukraine. The proceeds from the sale will go to meet army needs, he said.

No Exception

“Why did I do that? I don’t want to say I’m a big patriot,” he said by phone. “It’s more because of a sense of justice. And because a lot of nice, clever, well-educated, friendly people are on the frontline now. So why should I be an exception?”

The partial mobilization will enable the military to deploy forces in areas cleared of rebels, which are lacking in security and need to guard against attacks by saboteurs, said Mikhnenko, the military analyst in Kiev. Two earlier waves of mobilization were carried out in March and May.

Should Ukraine draw a larger lesson for how to overhaul the military, the authorities will use the experience to upgrade weaponry and turn the mostly conscript army into a more professional force, he said.

‘Europe’s Israel’

“Ukraine’s army has existed for the past 20 years without having any external or internal military threat,” Mikhnenko said. “The best option for us would be to implement, say, the army model used in Switzerland or Israel, where most of civilians are engaged, constantly undergoing training. If we become Europe’s Israel, that would be great.”

Unlike most enlisted men who received little preparation, Konstantinovsky, who served in a tank brigade in the Soviet conscript army, went through a “few months” of training before joining the fight. His twin brother, Oleksandr, has assumed a caretaker role in their joint business, which includes the Kiev- Donbass Development Group, a real estate company.

“Now I’m an ordinary soldier again,” he said. “Of course, it’s scary. What did I see there? Everyone with a gun, moving very fast, everyone is very tense. Forest, fields of very high maize, ruined buildings. And there you understand very well that one man doesn’t matter much.”

Pervasive Fear

It’s a sentiment echoed by Bondar, the IT entrepreneur from Lviv. “I feel scared every time we are heading to the frontline, and every time I realize that what I have experienced previously is nothing compared with the current situation,” he said.

Swept up in the conflict, the enlistment may mold a nation that’s been torn apart by conflicting loyalties. Gerus, the banker in Kiev who has no military background, said an official at the recruitment station told him that he can be mobilized at any time now.

“Military service in wartime affects your thinking a lot,” Bondar said. “You can see people from different spheres, to which you don’t belong, and you can compare their life with your own. You understand all are equal. For the shell or the bullet, it doesn’t matter who you were in your civilian life.”