The Demise of Merchants

3 February 2011, 12:06

Image: Serhii Vasylkivsky. The Chumaks on the Romodanosky Way


The history of Ukrainian business successes preserves the names of the biggest figures only, such as the Yakhnenko, Symyrenko, and Kharytonenko families. The image of merchants somehow falls out of this pantheon of entrepreneurs as if confirming Ukrainians’ aversion to commerce, trade and speculation. Is this a reason for it?

Foreign trade in ancient Ukraine

The advantageous geopolitical location of Ukrainian lands at the ancient dividing line between the farming world and nomads always was a favorable factor in the development of, above all, transit trade. Moreover, it was one of the key factors in the formation of the ancient Rus’ state whose core territories stretched along the trade route “from the Varangians to the Greeks” and whose ruling elite was a mixture of Slavic ability and the top figures of the Norman military and trade groups. The emergence and establishment of other trade routes in the 11th through the 16th century which connected eastern and central Europe, the Baltic territories and the Black Sea region, middle East and northern territories boosted the status of Ukraine-Rus’ as an important trade region. The border status also dictated the way of life: trade went hand in hand with war and required military support. Therefore, the local nobility were always better positioned to do business than other population groups. This model was also efficient in Polish-Lithuanian Commonwealth (Rzeczpospolita) and in the Cossack Hetman state which inherited not only control over the trade routes but also the traditional infrastructure, commercial ethics and law.

Senior Cossack officers and Orthodox monasteries, which enjoyed the protection of the hetman’s government, were the most powerful players in internal and external trade. Their leading role was secured through their control over large areas of land and possession of sizable floating assets, as well as owing to political clout and protection. Second to them were colonies of foreign merchants — Greeks, Armenians, Russians, Turks, and Jews whose businesses also depended on relationships with the powerful and proximity to them.

The external trade of the Hetman state which brought money to the state’s coffers had two major vectors: the western one linked it to Europe through Polish and Austrian markets and the south-eastern one which led the Ottoman Empire, its main trade partner. The western trade route was used to transport cattle, grain and various agricultural products to the West and was established back in the 15th century. It connected Poltava and Starodub merchants with Gdansk, Breslau (now Wrocław), Stettin (now Szczecin), Marburg, Riga, and other large trade centers in early modern Europe. However, the success and efficiency of any trade route was a function of the state’s interest and protection.

A change of course

The situation changed dramatically when in the early 18th century Russia began to promote its political and economic interests in this region. The positive outcomes of the Great Northern War (1700–1721) enabled it to reconfigure political clout in Central and Eastern Europe to its own benefit and impose its own rules of international trade on its less fortunate neighbors. In 1714, Petersburg approved a list of the so-called preserve materials which included strategically important expendables for the defense industry, such as potash, flax, tallow, ship timber, etc. A ban was imposed on the imports of gold and silver coins and textile products in order to stimulate the purchase of Russian-produced goods. At the same time, Ukrainian merchants were forced to transport their goods to the northern ports in Riga and Arkhangelsk rather than going along the usual routes that led to Cracow, Gdansk and Breslau.

Russian governors had to take care of the system of nearly 40 advance posts and customs offices along the western and southern borders of the Hetman state which monitored exports and charged excise duty. Under the new rules, an ordinary merchant had to first go to Kyiv or Briansk where he would declare goods and receive a permit and travel documents to go to Russian or foreign ports. Moreover, instead of supporting individual merchants, the government threw more support behind organized financial-industrial groups of the so-called kumpanstva which typically consisted of Russian merchants protected by the tsar’s inner circle. Their protégés, such as Gavrilo Raguzinsky, nephew to well-known Peter I-era diplomat Sava Raguzinsky, were granted trade concessions in Ukraine on favorable terms and even the right to levy duties on foreign trade, something that had always been the prerogative of the hetman’s government.

Southern route

Another traditional and no less powerful destination of foreign trade was the Crimea. In the mid-18th century, Cossack Ukraine’s foreign trade balance with the Crimea reached half a million rubles per year, an astounding amount by the standards of the time. However, as merchants transported precious oriental goods, they wanted to travel along safe routes, something the Black Sea steps were clearly not. The Tatars and the Zaporizhia Cossacks were a permanent threat compounded by the threat of epidemics which accompanied trains of the traders’ wagons. (The infamous Black Death, a pandemic of plague which swept across Europe twice in the 14th century, came precisely in the Crimea.) Preventive measures (sojourns in quarantines set up at border checkpoints) were a real test to the merchants: it took time, was exhausting, and had to be paid for out of their own pocket.

Therefore, most of them chose a roundabout way which traversed Right-Bank Ukraine, which was part of Rczechpospolita at the time. Wine, sugar, cereals, oriental sweets, silks, weapons, and jewelry traveled along this route to the Hetman state, Sloboda Ukraine, and southern Russian gubernias. This steppe route was used primarily to move three staples that made the bulk of the trade — cattle, salt and fish. This segment of commerce was completely controlled by the Turks, the Cossacks and the chumaks, wholesale traders from the Hetman state who were used to the extreme conditions of the wild steppe.

Surprisingly, southern trade routes yielded sky-high profits during wars, and the 18th century saw as many as four wars with Turkey and the Crimea. The Russian government eagerly commissioned Ukrainian merchants to make provisions for its armies, because their goods were cheaper and they had good knowledge of the southern steppes and river crossings. The situation changed dramatically after the Russo-Turkish War (1768–1774) which disrupted trade with the Crimea, opening instead new prospects for transporting goods via the Black Sea ports and bases of which Kherson was the biggest one initially.

However, Ukrainian merchants again found themselves out of favor. When Poltava-based traders who were in close contact with not only Turkish but also Greek, Saxon, French, and Dutch companies sent a memorandum on trade growth in the Black Sea region to Prince Grigory Potemkin, governor-general of Russia’s new southern provinces, their appeal fell on deaf years. These traders lacked floating assets as most of their money had been invested in trade with Western Europe, and so they asked the government to issue an interest-free loan of 300,000 rubles secured by the city magistrate and help them by providing ships and protection. Petersburg had other priorities: colonizing the newly annexed territories first and then developing them in economic terms. Governor-generals of these territories, high-ranking court figures, and Russian and foreign merchants closely linked to them were favored to organize wholesale trade in agricultural products intended for export.

From de-Polonization to Russification

Left without government support in foreign trade, Ukrainian merchants were forced to switch to domestic wholesale and retail trade. Historians have observed that in the second half of the 18th century trade fairs boomed but were not accompanied by an increase in the number of merchants, which suggested all possible groups of urban and countryside population, peasants and the Cossacks, were involved in trade. This was also facilitated by the senior Cossack officers and monasteries — both were very active on the domestic market and enjoyed significant privileges granted by the hetman’s government. However, starting from the 1780s, the Russian government began to prohibit Cossack officers, nobility and monasteries in cities from engaging in trade in order to protect the economic interests of cities.

The next step was the regulation of the legal status of merchants and entrepreneurs. Any economic activity was permitted exclusively to Russian subjects registered as merchants. The estate of merchants was divided into three classes, or guilds, based on their financial means. Membership in one guild or another authorized certain types of trade and entrepreneurial transactions. For example, wholesale and foreign trade was available to merchants whose capital was 50,000 rubles at the minimum. It was nearly impossible to be promoted from one guild to another without protection and bribes, because promotion involved financial hurdles and red tape. Under government regulations, the state had control over commerce, regulated it, and imposed taxes. And it also Russified business.

Since the mid-1830s, when Petersburg set out to de-Polonize Right-Bank Ukraine, merchants moving here from Russian gubernias were offered significant privileges. After Magdeburg Rights was abolished in Kyiv in 1834, Tsar Nicholas I signed the Edict “On Privileges Extended to the Merchants of the City of Kyiv” which encouraged merchants and manufacturers from Great Russian gubernias to move to Kyiv. They had an immediate advantage over their less prosperous Ukrainian, Polish and Jewish competitors. The edict permitted the newly arrived merchants to obtain membership in one of the guilds without paying state duties, provided they bought a house or other real estate in the city. In 1841, merchants settling in Kyiv, Volhynia and Podil gubernias were granted exemption from state taxes and duties for 15 years.

The first ones to come to Ukraine were merchants from the so-called textile Russian gubernias (Vladimir, Kostroma, Moscow, and Tver). Initially, they came to participate in trade fairs in Sloboda Ukraine and regions along the Dnieper and later began to settle in these areas en masse. Government support quickly stabilized their businesses and fostered their development, establishing their role in the life of cities, as well as in their governance and cultural and civic affairs. Ivan Aksakov, well-known Russian political writer, said in the mid-19th century: “If you trace the origins of prominent traders in Ukrainian cities, you will see that they all hail from Kaluga, Yelets, Tula, and other purely Great Russian provinces.” In his opinion, such cities as Sumy and Kharkiv emerged in the process of intensive construction works during the industrial revolution as the products of purely Russian business elites and embodied their whimsical and pre-modern tastes and values to the full.

The problem was not only that the Ukrainian market was re-oriented to export raw materials and import finished products from Russia. This process also involved Russification of cities, where a non-indigenous ethnic group was economically the most powerful one. According to the 1897 census, merchants of Ukrainian origin were present in greater numbers than merchants of other ethnic backgrounds in just a handful of district towns in Kharkiv gubernia. In all other cities, the two biggest groups were Russians or Jews: 55.5 and 31.2 percent, respectively, in Odesa; 60 percent and 38 percent in Katerinoslav; and approximately fifty-fifty in Kyiv. Now Ukrainian merchants were marginalized also on the domestic market where they were pushed into the low-level bazaar niche.

The archetypical image of a traditional Ukrainian trade fair includes either an exotic chumak (their business declined as river and railway transport developed in the second half of the 19th century) or the chatty scandalmonger Sekleta Lymerykha holding a tray with a pile of Opishnia plums. The results of Petersburg’s protectionist policies turned out to be so “natural” and  inconspicuous to the contemporaries that statisticians wrote without hesitation at the time along the following lines: “Great Russian merchants are found here in both gubernia and district cities in larger numbers than their Little Russian counterparts, even though the Little Russian tribe dominates the population. This proves that Little Russians are disinclined to commerce.” In the era of the Hetman state this would have sounded as a bad joke, but a century later it was the sad reality.

A SCENE BY THE FIRE. Fragment of folk painting “Cossack Mamai.” 19th century.

Merchants in gubernia cities in Ukraine


Kharkiv — 2,596

Kyiv — 1,388

Odesa — 5,676


Kharkiv — 3,585

Kyiv — 5,064

Odesa — 4,965

Merchants in Ukraine by nationality


Jews — 55.9%

Russians — 30%

Ukrainians — 6.9%





Greeks — 7.2%

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