Blue &Yellow: Politics and Economics in Ukraine: July 2009

Leaders: Approval rating appallingly low

If one wants to understand where Ukraine's leadership stands in comparison to other former Soviet countries, gallup.com has an article on it. According to Gallup, only 4% of Ukrainians approve of the job performance of its political leadership. Compare that to Moldova, 25%, or Georgia, 21%. More interestingly, Tymsohenko's approval rating is 20% and of course Yushchenko has 7% approval rating. Since the economic crisis began last year in Ukraine what little support remained for the government has dwindled away. Last year 25% of Ukrainians approved of the government's job performance according to Gallup. The gas crisis, internal political turmoil, banking and economic crisis have taken a severe toll on those in power. Something not lost on Yanukovych or Yatsenuik who hope to take advantage of the situation.

Economy: IMF decision coming soon

Update: IMF gives Ukraine third tranche.

IMF ~~will~~ ~~soon decide~~ ~~if it~~ will release the third loan installment to Ukraine. Vladimir Socor notes in EDM (V.6, issue 114) some of the political issues surrounding the conditions the IMF placed before Ukraine in return for a loan

Finally, there must be adequate financing for anti-crisis programs. The International Monetary Fund (IMF) has disbursed the first two tranches of a $16.4 billion anti-crisis package that the United States supported. Disbursement of the remainder, however, is conditional on a decision by the Ukrainian government to raise internal prices for natural gas prices for domestic consumers through at least partial elimination of state subsidies. More realistic prices could also save Naftohaz Ukrainy from the constant threat of bankruptcy and possible takeover of its pipelines by Gazprom. A price hike by Yulia Tymoshenko's government ahead of the January 2010 presidential election could, however, predetermine Tymoshenko's defeat and the victory of her rival Viktor Yanukovych. Meanwhile, the Tymoshenko government agreed during Biden's visit to settle the claims of the U.S. Overseas Private Investment Corporation (OPIC) in the country. This move will enable OPIC to resume its activities in providing risk-protection for U.S. small and medium-sized entrepreneurs investing in Ukraine (Interfax-Ukraine, UNIAN, July 21 - 23).

Biden Trip: One last look

Radio Free Europe on how the Biden visit to Ukraine and Georgia can be perceived as a "color reset" that tried to balance the need to support the two countries, but distance themselves from the individuals associated with the colored revolutions.

The message Biden was sending to both the Georgian and Ukrainian was that the Rose and Orange revolutions were works in progress, that they were still incomplete, and that their promise was yet to be fulfilled

But a deeper signal Biden appeared to be sending was that institutions are more important than individuals and that Washington would structure its policies toward these two allies accordingly.In 2003 and 2004, Georgian and Ukraine brought the term “colored revolutions” into the international political lexicon to describe pro-Western popular uprisings that usher in a more democratic form of governance.

Despite the widespread popular dissent and participation that made the Rose and Orange Revolutions possible, each quickly became personalized and tightly identified with their leaders. In the case of Georgia with Saakashvili’s charismatic style of rule; in Ukraine with the troubled political tandem of President Viktor Yushchenko and Prime Minister Yulia Tymoshenko.

Its a good assessment by RFE, the US acknowledges the political problems that plague both countries and the need to have a arm's length relationship, especially in the case of Yushchenko who has low chances of winning a second term. The president is a lame duck, he can only obstruct or block the other factions, but his influence is weak. The US realizes that there could be a Yanukovych presidency or even a Yatsenyuik one. Tymoshenko's success in the next election will be tied to her success in containing the economic crisis in the country. Therefore the US is hedging its bets by depersonalizing the relationship, at least until it knows who is the new president. The upcoming presidential election may put to test if there has been a reset in the relationship between Russia and the US. How much interference will each side tolerate in Ukraine?

Meanwhile, Steven LeVine sees the overall trip to Georgia and Ukraine as a way to reassure troubled neighbors that US still rejects a Russian sphere of influence, at the rhetorical level at least.

Assorted links

Gongagdze murder: alleged organizer nabbed. [Unian]
However, Taras Kuzio sees a conspiracy over the arrest.
As do others. [ForUm]
Yushchenko takes a jab at Tymoshenko's economic management.[Kyiv Post]

US-Ukraine: Biden Visit

During Vice President Joe Biden's visit to Ukraine, the vice president reassured Ukraine that the US still supports the country's entry into NATO. Biden rejected the notion that another country could have " right to dictate to you or any other country what alliance you will seek to belong to or what bilateral relationships you have" (via Reuters). The vice president closely linked the energy issue to democratic stability in Ukraine. Biden also argued that energy independence is an important factor in creating a more competitive economy. Unspoken by Biden is the use of Ukraine's energy dependence by Russia to interfere in the county's internal politics.

"Nowhere is the relationship between democracy, development, and security clearer than when it comes to energy. Right now, in the United States, we are making significant efforts - at some political expense I might add - to diversify our energy supply, to invest in efficiency, and make some very difficult decisions about how to deal with the carbon footprint," he said.

In his meeting Tuesday with Prime Minister Yulia Tymoshenko, Biden discussed ways to revive the Ukrainian economy, which has been hit hard by the global economic crisis. In his address, he noted that the Ukrainian government has agreed to economic and banking reforms and also to phase out energy subsidies.

His statements while in Ukraine couldn't come at a more important time for the country, which faces a bleaker economic contraction according to the World Bank. Its predicting a 15% contraction in GDP this year, another downward revision for the county.

Assorted links

RA blog post on Eastern Europe, US needs to listen to Eastern Europe.
Biden visits Kyiv. [Kyiv Post]
On his visit to Ukraine, Biden makes gaffe appropriate to the country. [HuffPost]
Yanukovich says future prime minister and president on the same team (his team).[Interfax-Ukraine]

Rada: Unfinished business

The Rada has been kept from working by Regions who are strongly pushing a populist measure to increase the social standard and minimum wage. Yanukovych expects the Rada to make a decision soon on this issue.The speaker of the Rada has expressed his willingness to take up this issue during the next meeting of the Rada. Regions has everything to gain and very to little lose in pushing its measure, Yanukovych position is feel bolstered by his front runner status in the presidential election. His been ahead of Tymoshenko for some time now, as the prime minister has been hammered by the economic crisis.

The Rada also needs to make changes to the budgetary code that the president just vetoed. Lytvyn has also expressed his view on the budget code and its political implications. He sees the prime minister and Regions coming to an agreement, but what will BYuT give Regions in exchange for the votes?

Kyiv: Rate hike dispute

For those who forgest whose the mayor of Kyiv, this will remind you. The mayor is trying to push up rates on Kyiv residents utility fees. There are several layers to this conflict between the mayor and the cabinet besides the actual rate hike dispute. BYuT doesn't like the mayor, but has failed to oust him. The mayor is eccentric and strange behavior hasn't been contained to his personal life, but shown up in the kind of fees his sought for the city government. BYuT political woes have probably prevented them from confronting the mayor, they tried to push him out via an early election and failed. I'm curious if the mayor will survive until the end of his term or will he be pushed out by the next president?

Assorted links

Rada: Still blocking the Rada

It appears that Regions won't give up blocking the Rada today. According to BBC Ukraine, Regions will not budge until the bill on minimum wage is taken up by the Rada. BYuT deputy Serhiy Mishchenko thinks that Yushchenko will try to dismiss the Rada using Regions blocking as cover. The BYuT deputy believed Yushchenko could dismiss the Rada after 2nd August, but UNIAN pointed out that the 24th July deadline on dismissing the Rada. As the next presidential election would be six months away, the president would not be able to dismiss it. And so the president, Regions,and BYuT may be heading to a new confrontation on Rada elections by the end of the month.

Rada: Brinkmanship

With no grand coalition, Tymoshenko and Yanukovich are now playing a game of political brinkmanship in the Rada. The ongoing blocking of the Rada prevents any business from being conducted. Yanukovich ostensibly wants an increase in minimum wage and pension. This issue is very popular in an election year. While new Rada elections have not been called, Yanukovich can look forward to the presidential election. However, the possibility of a early elections still exists. As EDM recently reported (V.6, issue 130) Regions and Yushchenko have an interests in forcing new elections, but there is a legal deadline.

There is little time remaining for Yushchenko to
consider these options. According to the constitution, the
president may not dissolve parliament within six months of his term
expiring. Parliamentary Speaker Volodymyr Lytvyn said that
Yushchenko can dissolve parliament on July 24 at the latest, as his
term should expire on January 23, 2010 (www.proua.com, July 6). If
Lytvyn is correct and the PRO's goal was to prompt Yushchenko to
dissolve parliament, then they left it too late to obstruct its
functioning. One indisputable legal option for the president to
dissolve the legislature is in the event that it proves unable to
work for one month, but the blockade of the rostrum by the PRU
started on June 26, and there will be less than 30 days until July
24.

The PRU is so fixed on snap elections because
its popularity has probably peaked, while that of the BYT is set to
slump as it steers the government during a period of deep economic
crisis. According to the latest opinion poll by the Kyiv
International Institute of Sociology, the PRU would secure 37
percent of the vote had the elections been held in June, while the
BYT would muster only 21 percent, followed by the party of former
speaker Arseny Yatsenyuk with 15 percent. Moreover, the poll showed
that Yatsenyuk's party might defeat Tymoshenko's in her stronghold
of West Ukraine (Ukrainska Pravda, July 2).

The Rada is expected to open tomorrow, according to Ukrainska Pravda. The article quotes vice-speaker of the Rada Mikola Tomenko who predicts that the Rada will hold its meeting at 1600. Another BYuT deputy says that Regions has promised not to block the Rada tribunal tomorrow. It appears that at least part of Regions demands will be met, BYuT will give a second reading to the wage and pension increase bill. Will this end the stalemate? No, Regions and Yushchenko still have its legal deadline on July 24.

Language Politics

An example from Interfax-AVN of Russia pushing back Ukraine on language. Its a nice addendum to the discussion on Russian and Ukrainian historical narratives. Here we see the use of language as a political tool by Russia. Whatever rift mentioned by the spokesman is being exploited by Russia for its own political goals.

MOSCOW. July 9 (Interfax-AVN) - Russia urges the Office of the OSCE High Commissioner on National Minorities not to encourage what it called Ukraine's discriminatory steps in relation to the Russian language and the Russian speaking population.

"The consistent transition of the informational, educational, judicial, and administrative fields fully to the Ukrainian language is deepening the split in Ukrainian society," Russian Foreign Ministry spokesman Andrei Nesterenko said at a news briefing in Moscow on Thursday.

via Johnson's List 2009-#130

"Moscow Urges OSCE To Address Discrimination Of Russian Language In Ukraine"

History: Mazepa, Then and Now

In the Atlantic Council blog, a post about Cossack hetman Ivan Mazepa and his role in Ukrainian history. Mazepa allied the Cossacks to the side of Swedish king Charles XII against Russia. They were defeated by Peter I at the battle of Poltava. However, as Motyl and Karatnycky note his impact on the historical narratives of Russia and Ukraine is still felt today.

Poltava helped shape Europe's geopolitics for three centuries. Russia's emphatic rout of Sweden and its Cossack allies signaled its emergence as a European superpower and ensured Russian dominion over Eastern Ukraine for the bulk of three centuries. Peter constructed a new narrative for his realm. Instead of being Muscovy, it was to be Russia. As such, he and his state could claim lineage with the Kievan state called Rus that had accepted Christianity in 988 and collapsed in the 13th century. In one simple historical revision that complemented his opening to the West, Peter and his realm would be transformed from Asiatic upstarts to a European empire. Kiev would become the "mother of all Russian cities."

Its a familiar sounding argument for those who have read Andrew Wilson's book, The Ukrainians: Unexpected Nation. But it shows how important these figures still are today to both sides, serving either as a villain or hero depending what side your on. The two authors rightly emphasize how Russian attacks on Mazepa are still part of the age old attempt by Russia to deny Ukraine its own historical narrative.

While this Russian effort to upend Ukrainian national identity is not likely to succeed, over the short term it can help perpetuate Ukraine's east-west divide, promoting instability and increasing Russia's opportunities to reassert hegemony over its weak neighbor.

Until Ukraine can shape its historiography calmly and professionally without external interference, its polity will continue to be plagued by divisions and its society by lack of cohesion. This is why the contemporary battle over the meaning of Poltava is as significant as the Battle of Poltava was three centuries ago

I was amused to find that Den has a piece on Mazepa that presents a less black and white image. The author also uses his article criticizes current Ukrainian politics, trying to draw a historical line between bad politicians then and now. I don't know if the author read the Motyl and Karatnycky piece, but his article read like a counter argument to it. Not by countering the notion that Ukraine needs its own narrative, but by demolishing Mazepa as a hero.

Economy: IMF forecasts 14% contraction in GDP this year

According to an IMF forecast, Ukraine's GDP is expected to contract by 14%, up from 8%, reports the Wall Street Journal. The IMF will be releasing a larger tranche to Ukraine, says Bloomberg. The larger tranche had been discussed by the IMF back in June. The country will get $3.3 billion rather than the $3.2 billion. However, as the WSJ reports the decision is conditional on Ukrainian political action.

Ceyla Pazarbasioglu, the IMF's mission chief, said a decision on the loan would be taken by the fund's executive board in the next three to four weeks "pending the completion of prior actions" by the Ukrainian authorities, including approval of amendments to banking legislation in parliament.

Meanwhile, Bloomberg mentions the political paralysis currently in the Rada over a dispute on raising the minimum wage.

The situation is aggravated by clashes between President Viktor Yushchenko, Timoshenko and the parliament ahead of January 2010 presidential elections. The opposition, led by former Prime Minister Viktor Yanukovych, who wants closer ties with Russia, has physically blocked the parliament since last week, demanding to raise social spending.

Tymoshenko discussed the IMF forecast, but focused on the lower inflation expected this year (13% instead of 16%). She also pledged to implement the anti-crisis program that the IMF has asked for before it releases the next tranche. Unfortunately, the GDP contraction is of greater concern. Ukraine's economy, even with IMF assistance, has gotten worse. An AFP article notes, Ukraine is "one of the world's worst hit countries in the global economic crisis." The budget is also projected to rise from 4% to 6%, apparently a result of Naftogaz's own budget deficit. The next tranche, says Tymoshenko, will partly be used for foreign debt redemption.

The prime minister is therefore unwilling to hold early Rada elections in this economic environment. As of now, her strategy seems to be to hold control of the Rada and hope she can pull off a victory in the presidential election. By the time of the next election, January 17 2010, the economy may have improved enough that the BYuT leader doesn't face a strong political backlash. Of course, other political scandals may emerge or perhaps some other issue that could knock out the coalition.

Assorted Links

SBU chief comments on the Rusyn movement in transcarpathia.[RFE]
On Tymoshenko's recent political woes. [Kyiv Post]
On Fascism and Communisms.[via Taras Kuzio]
Ukraine still remains in top ten of riskiest sovereign debt.[Bloomberg
Ukraine's cash strapped hospitals.[BBC]
Foreign Policy Failed State Index, see where Russia and Ukraine rank.

Rada: End near for coalition?

As a previous post noted, there is a growing sense that Tymoshenko's coalition may collapse. Both President Yushchenko claims that an actual coalition doesn't exist anymore except on paper. However, he also thinks that he can win the election. Something only possible if he engages in massive fraud considering the current level of support. Meanwhile, Arsen Yatsenyuik also took a swipe at the current coalition, calling it defunct. Yanukovich has asked the coalition for a report on its present and future activities. His requests suggests that he doesn't think that the current coalition isn't viable. How real is claim? If Tymoshenko has votes to appoint new ministers than we'll know that she still has support to hold the coalition together.

Economy: Gas deal revisited

According to the Kyiv Post, EU will provide aid to Ukraine for gas purchases. However, it will be tied to reforms in the gas sector. TYmoshenko assures the public that Ukraine will pay on time. Meanwhile, Paul Taylor commentsin the Moscow Times over the current situation between Russia and Ukraine. His article includes also includes criticism of the January gas deal.

The dispute arises out of an unrealistic deal that Prime Ministers Vladimir Putin and Yulia Tymoshenko signed in January to end the previous round of gas wars. The deal committed Ukraine's Naftogaz to fill up its storage tanks this summer with gas bought from Gazprom and sell it back in the winter for supply to the West.

The problem is that Ukraine is skint, and Naftogaz, which can barley manage to pay its monthly gas bill to Moscow, can't afford the reserves. Ukraine has thrown itself at the mercy of the EU, begging Brussels to lend it the money. But the EU has no fund to make such a loan, and it doesn't trust the Ukrainians to keep their hands off the gas.

Instead, the EU says Ukraine should borrow the money from the International Monetary Fund on three conditions: that it implement long-promised budget reforms, raise domestic gas prices and, most controversially, spin off some of Naftogaz's assets, in which European companies could buy a stake. The European Commission has called a meeting with international financial institutions on Monday to discuss a loan.

But the budget reforms are blocked by internecine warfare between Tymoshenko and President Viktor Yushchenko. Hiking domestic gas prices is not the kind of measure that anyone wants to take before an election. And Tymoshenko is adamant that Naftogaz -- officially one of Ukraine's crown jewels and unofficially a cash cow for its political elite -- is not for sale, in whole or in parts.

The ex-speaker of the Rada, Arsen Yatsenyuik, has also criticized the gas deal and called it Gazprom's best deal. According to him, the deal has led to high prices for Ukraine, while world price has fallen because of the global recession. He predicts $600 dollar for gas, which sounds more like rhetoric than an actual forecast. However, his point on the deal isn't as far fetched like his prediction.The deal gave the advantage to Gazprom and forces Ukraine to come up with the money for gas purchases each month. Whats astounding is that the deal seems to have no mechanism for handling dispute that were bound to emerge (it may, I haven't read the full document so I could be wrong).

Rada: The politics of election scheduling

EDM has an article (Volume 6, Issue 126--Ukrainian Coalition Nears Collapse) on the rescheduled presidential election and the political implications for Tymoshenko. Its an interesting take that looks at the new schedule as a win for Tymoshenko's rivals, but also looks at the reasons behind the original date October 25th.

In April parliament scheduled the election for
October 25, as the two major caucuses, Tymoshenko's and the PRU
feared that President Viktor Yushchenko would call an early
parliamentary election. An earlier presidential election would have
precluded that possibility. Yushchenko appealed, and the
constitutional court on May 12 found parliament's decision to be
unconstitutional. In theory, parliament could try to set an early
presidential election date again, but this was no longer in the
PRU's interests after the break-up of the grand coalition talks
with Tymoshenko. Had the talks proven successful, Yanukovych would
need the current parliament to elect him as president in accordance
with Tymoshenko's parliamentary republic design.

As it is now clear that the next president will
be elected popularly, Yanukovych has lost interest in the fate of
the current parliament. Moreover, he has resumed his earlier calls
for snap parliamentary elections. Meanwhile, he wants the
Tymoshenko cabinet to continue (Inter TV, ICTV, June 28).

Prior to scheduling the election for January
2010, parliament rejected a bill drafted by an ally of Tymoshenko's
which called for holding the election in November. Only 42 people's
deputies voted for that bill, which showed the depth of
Tymoshenko's defeat (www.proua.com, June 23). It was in her
interest to hold the election sooner rather than later, since the
protracted financial crisis which hit Ukraine hardest within the
entire CIS region damaged the popularity of the prime minister -who
is also a presidential candidate.

Now Tymoshenko's chances of defeating Yanukovych
in the run-off which most probably will be held on February 7, 2010
(Interfax-Ukraine, June 23) appear quite slim. Furthermore,
Tymoshenko might not even make it into the run-off. The popularity
gap between her and the third most popular candidate, the liberal
prodigy Arseny Yatsenyuk (he turned 35 this past May) has been
within the range of just one to four percentage points over the
past six months. According to the most recent poll, conducted by
the Kyiv International Institute of Sociology, 34.7 percent of
Ukrainians were ready to vote for Yanukovych in mid-June, 21.5
percent for Tymoshenko and 17.6 percent for Yatsenyuk (Zerkalo
Nedeli, June 27).

While its still too early to predict the outcome of the next presidential election, certainly the woeful state of the economy leaves the prime minister politically vulnerable. In addition, monthly gas payment problem adds to the prime minister's problems. A reminder that Tymoshenko's deal with Russia/Gazprom is a bad deal.

To underscore her current problems in the Rada, she faces a blocked Rada by the Party of Regions who want several ministers dismissed including Yuri Lutsenko. Regions is also demanding an increase in pensions and minimum wage before unblocking the Rada. The Rada will remain paralyzed until the party's demands are met. This situation leaves the prime minister in a bind; giving in gives Yanukovich a political victory, while rejecting his demands may further erode her popularity. Will this leave to a collapse of the coalition as EDM title suggests?

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