Blue &Yellow: Politics and Economics in Ukraine

The blow to the Ukrainian economy has been horrendous. In January, industrial production fell by no less than 34 percent over January 2008, and GDP is estimated to have plunged by 20 percent. Steel production, mining and construction have fallen by half. In current dollars, Ukraine’s GDP is likely to plummet by 40 percent this year. Exports are likely to drop by half, and imports even more, reducing the current account deficit to an insignificant level. Millions of workers are being laid off, and the stock market has contracted by 90 percent.

No other country has been hit as hard as Ukraine, and it needs all the support it can get to mitigate the social shock. The Ukrainian government reacted swiftly, asking the International Monetary Fund for support last October. Within four weeks, Ukraine and the IMF had agreed on a large, strong two-year standby agreement with $16.4 billion of IMF credits.

A short post by Taras Kuzio on Kravchuk's recent statement. He writes that " collapse of a presidents popularity on this staggering level would lead to a national crisis" in another democracy. 

Keeping that in mind, the president recently gave an interview to Korrespndent, which has been posted in English at Kyiv Post. I would describe him in this article as evasive and focused on blaming the Rada and the Government. There is no discussion about his single digit approval ratings in the interview or its implications for governing the country.  Some excerpts from the interview given below (full article here).

K: Everyone is tired of endless infighting between the president and the prime minister. The country’s reputation is suffering. Polls show that 80 percent of Ukrainians want Ukraine to have a single pair of strong hands. Doesn’t that frighten you?

VY:  No, it does not frighten me. It shows that the structure that was introduced to the Constitution is deeply irrational. The people who initiated the Constitutional reforms dreamt of one thing: When the star of the third term of presidency stopped shining for them, they did everything to give the president’s powers to the prime minister ... and a part of them was transferred to parliament. There was one serious mistake made. We lost the balance of power.

A single unstable institution such as the parliament of Ukraine cannot form stable politics and stable power. Instability cannot breed stability. But the parliament received a mandate from the people, and today two mega-parties are polarizing it. And the institute of stability that the presidency used to represent is out of the game today.

That’s why I would say that polls show us one thing. We have to seriously reconstruct political order in the country, and to find the answer we have to choose the most democratic method. I am deeply convinced that a national referendum on the constitution can be the only compromise that suits all political powers.

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K: How satisfied are you with your achievements as president. And why have you not managed to fulfill some points of your program – fighting corruption, for example?

VY: Believe me, the last four years have not been the worst time in the life of Ukraine. Unfortunately, the year 2009 cannot become like that.

I do not want the nation to live as it did in 1990, 1991, 1993 or 2000 – any of those years. I want the nation to repeat the tendencies we have had in the last four years.

One may say: Was this the maximum of what was possible to achieve? This is far from being so. We could have achieved more if the constitution had not been touched, if we had constitutional balances. If there weren’t such deeply implanted party-based and proportional political models, we would not have a clear tendency for power usurpation we have now.

Today the prosecutor general is practically controlled by a single person because his destiny is decided by 226 [parliamentary majority], united communists and what we call a coalition. The same goes for head of the Supreme Court, the interior minister, and the whole law enforcement system is under the influence of a single person. There is no counterbalance.

The land scandals created by one of the political forces within the coalition – we cannot make justice in this system, over this crime because who are the judges? Whoever holds the cover decides whether justice is going to happen or not.

Ukraine has plenty of accumulated problems, too. Its property boom has crashed, and its steel and chemical industries are almost at standstill. But it mainly needs relief from the political problems that have accumulated since the Orange Revolution in 2004.

Corruption in the gas industry is the factor most responsible for driving the revolution off track. The notorious intermediary RosUkrEnergo made a publically stated profit of $795 million in 2007, but its payment in kind, 20% of gas deliveries to Ukraine, was worth more like $4.35 billion. That kind of money buys influence and fuels the constant gridlock in Ukrainian politics.

Prime Minister Yulia Tymoshenko has long campaigned in public against RosUkrEnergo, but the key agreement with Mr. Putin this month was made behind closed doors. The company may diversify into the domestic market, where it now controls 75% of distribution. But removing the cancer of gas corruption is a necessary precondition for cleaning up the political system in Ukraine.

No one has emerged well from the current crisis. But all will benefit if it prompts a serious search for a radical solution.