Stasiuk-Cambridge Lecture 2009

четвер, 05 березня 2009 p., 15:53 GMT 17:53 за Києвом

Світлана Пиркало
Бі-Бі-Сі, Кембридж

ЄС, Україна, Росія і політ-ігрища: О. Пристайко
В славетному британському університеті Кембридж пройшла щорічна лекція імені Стасюка, присвячена Україні.

Це вже всьоме викладачі, студенти й експерти збираються, щоб послухати доповідь про сучасну Україну та її місце в світі.

Ці лекції організовує відділення українських студій, яке також пропонує студентам і викладачам уроки української мови, перегляд українських фільмів і взагалі знайомство з українською культурою.

Цього разу доповідачем на лекції Стасюка була Олена Пристайко, дослідниця брюссельського центру “ЄС-Росія”.

Пані Пристайко, яка займається питаннями спільної політики ЄС і Росії відносно їхніх сусідів, включаючи Україну, а також питаннями взаємин ЄС з Росією, заторкнула ці проблеми і намагалася спрогнозувати подальші стосунки в цьому трикутнику, і згодом повторила для Бі-Бі-Сі основні тези своєї доповіді.

Бі-Бі-Сі: Ви прочитали щорічну лекцію на тему стосунків Росії та ЄС і їхнього майбутнього. Як ви бачите ці стосунки?

Олена Пристайко: Під час своєї доповіді я намагалася намалювати картину того, де ці сторони знаходяться. Звичайно, події 2008-2009 року негативно вплинули на ці відносини. І події в Грузії, і “газова війна”, а також важкі наслідки для економіки України і Росії, фінансова криза не роблять відносини у цьому трикутнику більш позитивними.

Бі-Бі-Сі: Тобто попри підписані угоди між Україною та ЄС і попри декларації гарних намірів протягом останніх кількох років стосунки у цьому трикутнику погіршуються?

Олена Пристайко: Вони стають складнішими, оці події останнього року руйнують довіру один до одного. А довіра в сучасному світі, напевно, важливіша, ніж усі підписані папери. Саме в цьому проблема. І Україна, і Росія зараз у процесі переговорів з ЄС. Події 2008 року не роблять ці переговори легшими. Чи погіршуються стосунки в трикутнику? Я б не сказала. Але вони ускладнюються. Все більше факторів впливають на ці відносини. Щоб виправити цю ситуацію, напевно, усі три сторони мають зробити кроки.

Бі-Бі-Сі: Що робити Україні?

Олена Пристайко: Перш за все, завдання для України – це внутрішня стабілізація, знаходження внутрішнього консенсусу з тих питань, з яких зараз є розходження. Треба розпочинати реформи. Можливо, криза і є тим моментом, коли треба розпочинати ці реформи. Я думаю, завдання України – перш за все внутрішня робота, реформування і подолання внутрішніх розбіжностей, які насправді не такі вже й великі, щоб так сильно боротися один з одним. Можливо, там і розбіжностей особливих немає. В цьому поблема українського політичного середовища – там насправді немає серйозних політичних розбіжностей. Проблеми НАТО, мови, на мій погляд, роздуті. Це не ті проблеми, на яких потрібно зараз сфокусовуватися суспільству, яке за останні 2 місяці вже втратило 30-40% своєї економіки. Основною темою, на якій мають сфокусуватися не лише політики, а й суспільство – це подолання оцих внутрішніх криз, пов’язаних і з економікою, і з перебудовою. Адже Україна і досі у процесі побудови політичної системи, конституційний процес незавершений, і саме на цьому, а не на персональних чварах, суспільство має консолідуватися.

Бі-Бі-Сі: То чи можна на оцьому зруйнованому кризою просторі побудувати щось нове?

Олена Пристайко: Ящо не зараз, то коли? Я думаю, що вже настав цей момент. Інша річ – українське суспільство втратило довіру до своїх керманичів. Це справді велика проблема. Поки що важко сказати, якими будуть результати президентських виборів 2010 року. Можливо, цей період кризи знищить рейтинг теперішніх сил, вони вже втрачають. Я знаю, що Тимошенко за останній місяць втратила 15% довіри населення. Можливо, це і є шанс для того, щоб з’явилися нові обличчя і нова надія.

Бі-Бі-Сі: У своїй доповіді ви поклали відповідальність за те, що немає нових українських облич, на пропорційну систему виборів. Ви вважаєте, що повернення до змішаної системи виборів, коли половина парламенту обиратиметься за партійною приналежністю, а інша половина за мажоритарним принципом, могла б стати виходом?

Олена Пристайко: Це обговорюється в українському суспільстві лише як один з варіантів виходу. Але пропорційна система виборів в Україні зараз недобудована, оскільки списки політичних партій, які йдуть у парламент є закритими. Тому громадяни голосують всліпу, вони бачать лише лідера цієї партії. Ми вже зараз є свідками того, що в парламент прийшли люди, які не заслуговують довіри, однак через вади виборчої системи вони туди проходять. Україна має зробити свій вибір – чи буде це повернення до змішаної системи, чи щось інше, але потрібно зробити таку виборчу систему, яка б відповідала не інтересам політичних партій, а інтересам громадян, які мають знати, за кого вони голосують, щоб знати потім з кого спитати. Тобто має бути побудований нормальний двосторонній зв’язок, щоб політичні сили відповідали за свої дії.

Бі-Бі-Сі: Ви вважаєте, що чисто президентська форма правління в Україні вже відійшла у минуле?

Олена Пристайко: Немає чітко встановлених аксіом, які б казали, що ця ситема гарна для України, а інша – ні. У відході від президентської системи бачили запобіжний засіб, але це не означає, що президентська система погана як така. Є ж країни у світі, де вона працює. Але потрібні запобіжні механізми, які б захищали цю систему від еволюції до більш авторитарних форм.

Бі-Бі-Сі: Тобто як у США, де є конгрес і сенат, які можуть поставити питання про відповідальність президента?

Олена Пристайко: Звичайно. У світі не існує ідеальної політичної ситеми. Кожна країна проходить свій шлях, щоб знайти ту політичну систему, яка є оптимальною для цієї країни. На жаль, і Україна має пройти через це, і саме у період економічної кризи.

Бі-Бі-Сі: Ви говорили про те, що Росія діє всупереч своїм власним інтересам. Чому так, і що це означає для України?

Олена Пристайко: Це не означає нічого гарного не лише для України, а перш за все для стабільності на європейському континенті. Росія не демонструє приклад поведінки міжнародного актора, який відповідає за свої вчинки. Вона так діяла і у війні в Грузії, і у “газовій війні”, коли Росія перш за все діяла проти власних інтересів. У Грузії вона втратила обличчя держави…

Бі-Бі-Сі: Не тільки обличчя, але й гроші, оскільки акції російських компаній попадали, кредитні рейтинги Росії також були знижені. Чому ж було прийнято таке рішення?

Олена Пристайко: Я не знаю, чи сама Росія може відповісти на це питання. Чому вони діють проти власних інтересів? Можливо, річ у політичній системі Росії, у втраті політичного зв’язку з громадянами, іншими ланками суспільства, включаючи бізнес, неурядовий сектор. Можливо, влада надто зосереджена в одних руках в Росії. І немає сил, які можуть спитати у центру влади, чому він діє проти інтересів країни. Тому, можливо, що і для Росії криза є рушієм до політичної трансформації.

Бі-Бі-Сі: Коли в Україні почала поширюватися інформація про політичну структуру Заходу, про вільний ринок під час горбачовських реформ, була дуже сильна думка суспільства, що ринок сам себе виправить, що ринок – найкраща відповідь для всього. Зараз у світі величезна фінансова криза, і багато-хто запитує, чи цей ринок такий вже саморегульований? Чи у цьому регіоні ринок насправді грає роль, чи політичні й економічні труднощі пояснюються зовсім іншими чинниками?

Олена Пристайко: Зараз експерти запитують себе: чи це провина вільного ринку, тобто системи як такої, чи це провина людей, які керували системою? Чи потрібно нам через цю кризу відмовлятися від ринкових мехінізмів і принципів? Я так не думаю. Це буде найгіршим виходом. Людям дійсно потрібно провести роботу над помилками, і розібратися, чому це сталося. Я думаю, це все ж людський фактор. Дійсно, криза показала вади ринкової економіки.

Бі-Бі-Сі: Здавалося б, між Україною і Росією багато торгівельних зв’язків, їм вигідніше було б і далі торгувати, але ми цього не бачимо. Українська економіка дуже залежить від експорту до Росії. Чому замість того, щоб взаємовигідно торгувати, між Україною і Росією виникають такі конфлікти, які шкодять обом країнам?

Олена Пристайко: Все ж основним торгівельним партнером України є Європейський Союз, який в економічних стосутках виступає як єдине ціле. Ситуація з Росією дійсно прикра. Ми бачимо надмірну залежність економічних зв’язків від політичної ситуації і політичних ігрищ між Україною та Росією. Я думаю, здоровий глузд і намагання вижити у сучасних складних умовах переможуть політичні негаразди.

Бі-Бі-Сі: Яка угода з тих, що існують між Україною і ЄС, на вашу думку, дала б більше стимулів Україні для розвитку і водночас заспокоїла ЄС, який досі нервує після останнього розширення і не певен, що йому робити далі?

Олена Пристайко: Питання перспективи членства в ЄС насправді є ключовим у стосунках ЄС і України. На сьогодні сторони у цьому процесі переговорів прийшли до висновку, що вони будуть укладати угоду про асоціацію. Однак ця угода не означає, що Україні буде надана перспектива членства. Проте вона і не заперечує цієї можливості. Сьогодні справді, обидві сторони мають свої проблеми у питанні інтеграції України до ЄС. ЄС просто не готовий до прийняття України, а Україна не готова до інтегрування до ЄС через внутрішні негаразди. Угода, що найбільше б відповідала національним інтересам, – це угода, яка б найбільше допомагала Україні у внутрішній трансформації. Як вона буде називатися – вже питання другорядне.

THE NEW GAS DEAL: THREATS AND RISKS FOR UKRAINE

Katja Malyhina

The harshest dispute in the history of the “gas wars” between Russia and Ukraine is over. On January 19, in Moscow, the Ukrainian energy supplier “Naftogaz Ukrainy” and its Russian counterpart “Gazprom” signed a new gas deal for 2009-2019. According to the agreement, Ukraine received a 20% discount on the negotiated gas price in 2009, which corresponds to the average European level. The fee for gas transit paid by Russia remained, however, unchanged from 2008 at US $1.7 cubic meters per 100 kilometers.

Introduction

Are there really any winners in this war? Ukraine’s sagging economy has become even more weakened due to the gas dispute with its neighbor. A number of large industrial companies, including the Odessa port plant and the chemical group “Stirol”, were shut down because Russia suspended its gas supplies to Ukraine. However, Russia has also suffered some damages. According to some estimates, Gazprom has endured financial losses of up to $1.5-2 billion. Limitation of Gazprom’s foreign exchange gains has strengthened devaluation tendencies in Russia. On January 20, the Russian ruble dropped to its lowest value in a decade (RUR32.2 to US$1). A number of European gas companies are seeking reimbursements from Gazprom for the halt in gas supplies. The most important consequence, however, is that the gas conflict essentially undermined the images of both Russia and Ukraine in the eyes of the European community. The President of the EU Commission Jose Manuel Barroso recently questioned the reliability of the both countries as energy suppliers to the EU.

Because of huge financial losses and Ukraine’s lack of compliance Moscow took a very tough position concerning future gas relations with Ukraine. The signed agreement has already tightened the prolonged political conflict in Kiev. President Viktor Yushchenko heavily criticized the contracts that were negotiated by Premier Minister Yulia Tymoshenko. Meanwhile, Tymoshenko called the conditions “unique.” But what makes new agreements really “unique”, and what impact will they have on Ukraine?

“Unique” Conditions

According to Tymoshenko, the gas contracts are unique because for the first time they were signed directly between the energy companies Gazprom and Naftogaz without any intermediary. Also, another precedent, the gas deal will regulate gas relations between Russia and Ukraine for the long term instead of annual negotiations. Finally, the gas prices for Ukraine are now tied to oil prices, following the example of European countries. Undoubtedly, the elimination of the dubious intermediary “RosUkrEnergo” (RUE) from the gas trade is a positive result for Ukraine. However, the result should not be solely attributed to the active endeavors of Tymoshenko. Gazprom was also interested in this decision. With the aim to reduce the profitability of the Nabucco project, Russia increased prices for gas from Central Asia, which made any intermediary services unprofitable.

The removal of the intermediary seems to be the only positive outcome for Ukraine from the new gas deal. The increase of gas prices to market levels from 1 January 2009 is a very unfavorable result. The gas price will be calculated quarterly according to a formula with the basic price of $450 per 1,000 cubic meters. Tymoshenko assured the public that the base price corresponds to the average European gas price for the first quarter of 2009. But if one compares quarterly prices for Ukraine announced recently by Naftogaz with the would-be European quarter average (that is without the 20% discount), then the annual average price for Europe would amount to $316 per 1,000 cubic meters. Gazprom, however, declared recently, that the average gas price for its European customers in 2009 would be $280. As a result, natural gas for Ukraine will be even more expensive than in Europe in the future. Moreover, with the high base price of $450 for Ukraine, Russia can offset the costs of expensive Central Asian gas and profitably sell it to Ukraine. In any case, Russia has done everything to get the utmost benefits from the negotiations.

Nevertheless, Prime Minister Tymoshenko did succeed in obtaining relatively low gas prices for the current year. According to Tymoshenko, the annual average price for Ukraine would be $228.8 per 1,000 cubic meters in 2009. The 20% discount granted by Gazprom will not be the only source of low average gas prices for this year. Naftogaz Ukrainy announced that it would buy the lowest amount of gas in the first quarter of 2009, when the gas price for Ukraine will be the highest (only 5 billion cubic meters at a price of $360 per 1,000 cubic meters). Naftogaz also lays claim to 11 bcm of RUE gas stored in Ukraine. RUE owed $1.7 billion to Gazprom for this gas, which was paid off by a complex maneuver: Gazprom made an advance payment for the same amount in lieu of transit fees, which Naftogaz then returned to pay off RUE’s debts. However, the Ukrainian energy company has faced problems with the transfer of ownership rights from RUE in its own country. If the transaction is successfully completed, the price for 11 billion cubic meters of gas would be only $154 per 1,000 cubic meters, which is $25 less than last year.

With all the discounts added together, Ukraine will pay about $9 billion for imported gas this year, while it will get only about $0.6 billion from Russia for gas transit through its territory. The actual amount of about $2.3 billion should be reduced by the aforementioned $1.7 billion, which Gazprom “paid” Naftogaz via RUE’s debt assignment. Leaving the transit rates at the same level as in 2008 and switching to the gas prices formula re-calculation illustrate the asymmetry of the contracts. It turns out that a 20% discount on gas prices comes together with a discount in around 60% on transit fees. Such a discrepancy will also remain over the next year, when the transit rate will be calculated according to the aforementioned formula. Gazprom has already announced that the price for transit will be about $2.66 per 1,000 cubic meters per 100 kilometers in 2010. For comparison, the average transit fees in Europe are around $4. According to the Ukrainian experts’ estimates, transit rates should be increased to US $5.11, in order to cover costs of the pipeline system. As a result, Ukraine subsidizes the transit of Russian gas.

The asymmetry of the contracts has also been emphasized by the Secretariat of the President. On the one hand, Ukraine is obliged to continue the transit of Russian gas even in the case of bilateral dispute, while Russia has the right to stop its supplies if needed. On the other hand, Ukraine will cooperate with Russia on the principle “take-or-pay”. This means that Ukraine is obliged to pay for the entire amount of gas specified in the contract, regardless of the amount actually consumed. At the same time, Russia may alter the volumes of gas transit and, consequently, their payment as it wishes. So another principle works here: “We pay only for actually transited gas”. Another positive development for Russia is the increased presence of Gazprom at the Ukrainian gas market. Founded in the spring of 2008, a subsidiary of Gazprom, “Gazprom sbyt Ukraina”, will get 25% of the Ukrainian gas market, equivalent to about 13.5 billion cubic meters. In 2008 the company was allowed to sell only 7.5 billion cubic meters of natural gas.

If Ukraine fails to pay on time, it will be immediately transferred to a 100% advance payment. According to the Secretariat of the President, Russia has developed such a scheme especially for Ukraine, as there is no other European country where such a clause exists. Overall, the asymmetry in the contracts shows that the political component still plays an important role in gas relations between Russia and Ukraine. Relations between two business parties are built according to the mutually beneficial conditions.

Impact on the Economy

Ukraine has thus signed long-term contracts on very disadvantageous conditions, which will adversely affect the already deplorable state of the Ukrainian economy. Taking into account the increased prices for imported gas, Naftogaz Ukrainy will have to increase prices for all consumer groups in the domestic market. Ukrainian industrial companies already paid a price of $300-330 per 1,000 cubic meters of natural gas in 2008, owing to various surcharges. However, 2008 was also a record year in terms of prices on Ukrainian products. Ukrainian companies, after all, were able to pay high gas prices and even get profits. But if gas prices for this year stay at least at the level of the previous year, the Ukrainian economy might encounter enormous problems of maintaining competitiveness. To prevent this scenario, Ukrainian politicians will need to continue subsidizing Naftogaz Ukrainy from the state budget. The budget for 2009 provides support for Naftogaz in the amount of about $0.9 billion in comparison with more than $1 billion used for this purpose in 2008. Under changing circumstances, this amount is likely to be increased again. The amount of state subsidy to Naftogaz will increase alone due to the fact that consumer gas prices were tied to the official exchange rate by the end of the year. While Naftogaz buys gas from Russia in U.S. dollars, it sells the fuel in Ukrainian hryvnya (UAH) on the domestic market. Devaluation of the UAH consequently leads to a further increase in subsidies. All this will provide an additional fiscal burden.

In future, it will be very difficult for Ukraine to pay for the imported gas on time. Last year Naftogaz was able to pay back its debt to Gazprom only because the company received loans from state-owned banks. The exchange rate broke down the day after Naftogaz bought in one transaction almost $1 billion from the National Bank of Ukraine at the end of 2008. Thus, if such practices are repeated, the further devaluation of the UAH and rising debt of the public funds are not excluded. Moreover, a threat of advance payment means that Ukraine would have to provide a significant part of its state budget for the payments to Gazprom, before it is taken up by taxes and customs.

The difficult financial situation of Naftogaz also complicates the problem of timely payment for gas bills. Naftogaz has been constantly on the verge of bankruptcy in recent years. The hope to improve the financial situation of the company by eliminating the intermediary is not justified. Even after the exclusion of RUE, Naftogaz may increase its presence on the gas market in the best case from 50% to 75% (25% is reserved for “Gazprom Sbyt Ukrainy”) and thus its revenue would be increased only by a quarter. But even this modest increase in revenue could be relinquished by decreasing demand for gas from industrial enterprises, which plan to buy only 24 billion cubic meters of natural gas instead of the usual 30 billion. It therefore seems quite unlikely that Naftogaz will be able to raise its income above last year’s $7 billion. In addition, many non-industrial consumers pay their gas bills with delays. Their common obligations to Naftogaz for the years 1998 – 2008 amount to approximately $0.8 billion. The debt of Naftogaz itself amounts to $9 billion, while about $2 billion has to be repaid this year. That is why one might expect a huge budget deficit of Naftogaz by the end of the year.

The one positive note for the economy of Ukraine might be the following. Because of the high gas prices, Ukraine will likely be forced to take appropriate energy saving measures. The Ukrainian economy is in general 2-2.5 times more energy-intensive than industries in Europe. In response to the crisis, some steel companies have already begun to replace natural gas with coke in their production. If Ukraine manages to reduce its energy needs, it could sell its own produced gas to Europe. Russian gas does not come into question because the re-export of this gas is prohibited. All these trends confirm the gloomy forecasts for the economic situation in Ukraine, which leads the world in the fall of industrial production, inflation, devaluation of national currency, and the decline of stock indices. Therefore, there is a high probability of default in Ukraine, according to the new UN report on the global economic situation.

New Gas Conflict Possible

A possible reason why the gas war between Ukraine and Russia was so intense in January 2009 is that Russia tried to realize the so-called “Belarusian scenario” in Ukraine. Two years ago, Belarus and Russia signed a five-year contract for the supply and transit of gas. Under the agreement Belarus switches to EU pricing levels in 2011. Until that time a discount system operates. In return for price concessions, Gazprom acquires a 50% share of the Belarusian pipeline system “Beltransgaz” by the 2010. Currently, Gazprom owns 25% of this company.

For Ukraine, too, a gradual transition to European gas prices within three years was initially foreseen. This was reflected in the memorandum signed in October 2008 between Putin and Tymoshenko. It is not excluded that Putin once again called for the Ukrainian pipeline system to be privatized or rent for a long term during the negotiations on the new gas contract this winter. However, according to Ukrainian legislation, the privatization of the pipeline system is prohibited. In addition, the system has great significance for national security of Ukraine. Indeed, Gazprom could become a monopolist over gas supply to Europe in every respect with the Ukrainian pipelines as Gazprom controls, or will control in the near future, all other transit routes of Russian gas to the EU. That is why Ukraine wants neither to sell nor to rent Russia its pipelines. Even the gas war at the beginning of this year did not force the Ukrainian authorities to surrender to Gazprom. Although Putin again appealed to the Europeans for an international gas consortium on common control of Ukraine’s pipeline system, Ukraine refused this proposal.

It is possible that, unlike Belarus, Ukraine agreed to the accelerated transition to the European market prices precisely for these reasons. Thus, “the Belarusian scenario” lost its relevance and the Kremlin has now to search for a new strategy. But what the “energy weapon” could not achieve could be perhaps attained through Ukraine’s falling deep into debt. The world economic crisis arrived just at the right time for the application of this tactic.

Disadvantageous conditions resulting from new gas contracts and the threat of economic collapse of Ukraine increase the likelihood of a renewed gas dispute. This could happen in two different ways.

1) Under the terms of the treaty, Russia has the right to halt its gas supplies to Ukraine if the latter does not pay on time. This step, however, could lead to technical problems with gas transit to Europe. In that case, the events at the beginning of 2009 would be repeated. The only difference would be that all the blame for delivery failure and responsibility for the resulting problems would be laid on Ukraine. In this way, Ukraine gets entrapped by the signed contract.

2) Russia would not halt gas supplies, but rather allow debts and fines to accumulate. Then Ukraine would probably be unable to refinance its gas debts. At some point Gazprom would try to acquire the Ukrainian pipeline system in exchange for debt forgiveness. There is already such a precedent: in the late 1990s Russia exchanged Ukraine’s gas debt for the long-term lease of Sevastopol naval base to the Russian Black Sea Fleet. To avoid such pressure from the Russian side, Ukraine could declare default. However, together with its inability to pay back debts, Ukraine might face difficulties in meeting its obligations on gas transit to Europe. In this case, Putin would set the question of the gas consortium high on the agenda again.

In conclusion, no matter how the situation develops, Russia has gained a position of strong advantage.

First published at “Ukraine-Analysen №50″, p. 5-9.

Ukraine asks for IMF help

David Marples

The Ukrainian Parliament has agreed terms with the IMF for a loan of $16.5 billion to help the country through the present economic recession. However, the bill approving the loan has yet to pass through Parliament despite an overwhelming vote in favor of 248-2 and the country is still stuck in a seemingly endless constitutional crisis.

The impasse is the result of a personal conflict between the two key figures of the 2004 Orange Revolution: President Viktor Yushchenko and Prime Minister Yulia Tymoshenko. Following the abandonment of the Orange coalition by his Our Ukraine party and its ally People’s Self-Defense, Yushchenko called for new pre-term parliamentary elections. Tymoshenko, backed by the Regions Party as well as her eponymous bloc, refused to accept that decision, arguing that it was criminal to take on the expenses of a third election in three years simply to satisfy the whims of the president.

Yushchenko, whose popular standing has reportedly reached an all-time low of 4-5% in Ukraine, believes that his Prime Minister acted treacherously by declining to back his overt support for Georgia following that country’s attack on South Ossetia and Russia’s overwhelming response in September. He is incensed that she held talks with Russian Prime Minister Vladimir Putin, and also collaborated with Regions’ leader Viktor Yanukovych to push through a parliamentary bill intended to reduce the power of the president to that of a symbolic figure.

These events coincided with the impact of the economic crisis, which has affected Ukraine in a number of ways. Imports have increased while valuable exports have declined with Ukraine’s aged steel industry an early victim. With demands for steel falling dramatically, mass layoffs are anticipated. Inflation in Ukraine is the highest in Europe. Several banks are not expected to survive the crisis, while those that will have in some cases frozen the savings of pensioners who make up nearly one-third of the Ukrainian population.

Ukraine’s currency, the hryvnia, has plunged against the dollar from around 5 to 7.2 last Wednesday. It has recovered slightly as the Bank of Ukraine has sold some $3 billion of its reserves to back the hryvnia. That policy cannot continue indefinitely. Ukraine’s total reserves are estimated at only $38 billion though the IMF loan will presumably provide some back-up. The country’s impressive growth rates of the past are also expected to decline from the 2008 total of 6% to around 2.9% in 2009.

As in other countries badly affected by the world recession, consumer lending is likely to be cut back, particularly in view of the sort of stringent terms expected from the IMF as a condition for providing the loan. Ukraine is billions of dollars in debt and costs of repayment have naturally soared with the fall of the domestic currency.

Fuel is an increasing problem. Utility bills are expected to rise by about one-third on 1 December, and Ukraine still does not know how much it will be paying for Russian gas next year. One thing is certain: that particular bill is likely to rise steeply given the political differences between the Yushchenko administration and its counterpart in Moscow. Gazprom has traditionally lowered the tariff for its friends and partners and raised those for those states that have been obstructive in their relations with Russia.

Politicians have been searching for suitable scapegoats for the dark economic news. Tymoshenko has focused on the 69-year-old Bank of Ukraine chairman Volodymyr Stelmakh, demanding his resignation. However, he can hardly be blamed for the political side of the crisis, which owes much more to disputes between the two ostensible democratic leaders, Yushchenko and Tymoshenko herself.

Tymoshenko briefly dallied with the notion of forming a working alliance with the large Regions Party—Yushchenko has also negotiated with Yanukovych in the past, appointing him Prime Minister from August 2006 to December 2007. A large majority coalition in parliament would be one way to approach economic problems.

However, neither of the two democrats seems able to overcome basic character flaws that undermine their role as statespersons. Yushchenko lacks communication skills and does not provide the impression generally of an effective leader. His integrity and sincerity seem clear, but he appears indecisive and bumbling. He has not delivered on his 2004 election promises to take Ukraine into Europe and now even the Membership Action Plan for Ukraine’s entry to NATO seems unlikely to bear fruit at the next meeting of the alliance in December, despite strong support from the United States.

Tymoshenko is talented and glamorous but completely unable to conceal a lust for power that seems to dominate her political activities. True, she is the only leader with national support. But most of her actions seem driven by her personal ambition: either to be president after 2010 or to remain Prime Minister in a much empowered parliament.

Ukraine very much resembles Russia in the early 1990s with no solution yet in sight for the constitutional crisis and excessive government spending that could presage economic collapse if it continues at the present rate. Unlike in Russia its problems will likely not be resolved by violence, but they do need to be addressed promptly and that will mean putting a stop to the interminable political bickering, fist fights in parliament, and destructive conflicts between leaders who put their own desires before those of their country.

An earlier version of this article appeared in the EDMONTON JOURNAL on 3 November 2008..

Early Elections Again

By Ivan Lozowy

THE UKRAINE INSIDER
Vol. 8, No. 3
September 23, 2008

ITEM A.: THIRD TIME THE CHARM?

The collapse of the Yushchenko-Tymoshenko coalition which became official on September 16 is the culmination of nine months of intense work by Yushchenko’s chief-of-staff, Viktor Baloha. Ever since Tymoshenko was named Prime Minister last December, Baloha has gone to great lengths to undercut her. Every action of Tymoshenko’s was countermanded or undermined by Yushchenko and publicly criticized by Baloha or his subordinates in the Presidential Secretariat.

This process has been helped along by Tymoshenko’s own charismatic chaotic and devil-may-care approach. But the bottom line has been what is, in the view of Yushchenko’s team, the need to rein in Tymoshenko. Because of his own detachment and passivity, Yushchenko’s popularity has remained in the single digits whereas presidential elections are only a year away. There was no secret as to what Tymoshenko would do once she became Prime Minister a second time. She would do what she did before, in 2005, namely, privatize and attempt to redistribute former state property through re-privatization efforts while handing out government money in populist measures aimed at increasing her poll ratings.

Accustomed in the 1990’s to running the large quasi-state energy holding United Energy Systems of Ukraine, Tymoshenko has reached new heights as Prime Minister. Now she controls a budget of hundreds of billions of hryvnia, all geared to increase her own popularity.

It was this process that Baloha’s persistent and quite successful countermeasures were designed to disrupt. Thus it was only natural that, until this summer, the bitterest conflict between Tymoshenko and Yushchenko was over the State Property Fund. Last spring, Tymoshenko used her usual heavy-handed tactics to try and install her associate, the MP Andriy Portnov, as the head of the State Property Fund. This initiative backfired when Baloha called in the heavy guns, getting the Procuratura to initiate criminal cases against officials helping Portnov.

Despite repeated efforts, Baloha was unable to dislodge Tymoshenko because the parliamentary majority underpinning her government was difficult to manipulate. Apart from Tymoshenko’s own block, BYuT, the majority was based on the Our Ukraine coalition with the National Self-Defense organization headed by Minister of Internal Affairs, Yuriy Lutsenko, who is closely allied with Tymoshenko. For its part, Our Ukraine is chaired by Vyacheslav Kyrylenko, who also heads the party’s parliamentary faction, who is not very close to Baloha and who has tried to lead an independent line.

Baloha thus created his own party in back in March, Single Center (See The Ukraine Insider, vol. 8, no. 2 from May 6, 2008). He also got two of his associates, the MPs Ihor Rybakov and Yuriy But, to leave the Yushchenko-Tymoshenko coalition. But because of parliamentary rules, these moves did not affect the governing coalition.

Following the short-lived Russian-Georgia war in August, however, Baloha seized his chance.

Tymoshenko had famously got on very well with Georgian President Mikhail Saakashvili, but she was conspicuously absent in the public sphere when Russian tanks rumbled into Georgia. Baloha’s subordinates at first spread rumors then spoke openly of an alleged agreement between Tymoshenko and Russia’s Prime Minister Vladimir Putin that she would not criticize Russia over its actions in the Caucasus. The rumors spoke of two additional points on which Tymoshenko had folded in to the Kremlin’s demands: she would leave the Russian fleet in Krym’s (the Crimea’s) Sevastopol alone and would not allow the Odesa-Brody pipeline to pump oil to Europe in detour of Russia. In return, Tymoshenko would receive Russia’s blessing and even, possibly, financial support for her presidential bid in 2009. Taking into account the Kremlin’s appetites, Tymoshenko’s own actions and the confidence with which one of Baloha’s direct subordinates has accused Tymoshenko of “treason,” this version seems likel!
y.

Accusations against Tymoshenko of treason made an impact within the Our Ukraine parliamentary faction, which includes representatives from such patriotically inclined parties as Rukh and the Ukrainian National Party. During a meeting of the Our Ukraine parliamentary faction hastily convened on the night of September 2, for the first time there was a majority against further cooperation with BYuT and the fate of the Yushchenko-Tymoshenko coalition was sealed.

The direct cause of the September 2 meeting was a series of votes cast in the Rada, or parliament, that day in which BYuT voted together with the Party of Regions. This voting constituted an end run by Tymoshenko around Yushchenko, avoiding his obstructionist methods by cooperating with his former rival for the presidency, Viktor Yanukovych, head of the Party of Regions.

Yushchenko and Baloha were aghast. They had just been declared irrelevant in parliament. But, stoking the fires of indignation at Tymoshenko’s “betrayal,” Baloha was able to achieve the collapse of the Our Ukraine – BYuT coalition. Small wonder then that, as Tymoshenko herself said, immediately after the collapse Baloha and several friends, including the MPs Rybakov and But, left Ukraine on a charter flight to celebrate in a foreign, undisclosed location.

With new elections expected by the end of December, Baloha expects his Single Center party to enter parliament, with him in the role of king-maker. Where is the President in all this? Following docilely along. Rumors of the degree to which Baloha has come to dominate Yushchenko’s actions and even thinking have reached legendary proportions. Yushchenko has only helped along such surmises, as when, in response to complaints from some MPs as to Baloha’s inordinate influence, Yushchenko responded: “I am Baloha.”

(In the following issue: Baloha’s genius of destruction)

Correspondence should be addressed via the Internet to: lozowy@i.com.ua

(c) Ivan Lozowy

SEX AND SCANDALS ABOUND IN THE POST-SOVIET WORLD

David Marples

In the age of Internet and headline information about the private lives of national and international leaders, it is heartening to see that the independent states of the former USSR have not fallen behind. In fact in many ways Russia, Ukraine, and Belarus in particular are setting new trends, albeit in rather different ways.

Vladimir Putin has stepped down as president of Russia but he has not departed from the stage. He has not only agreed to become Prime Minister, but he has also accepted the leadership of the country’s largest political party, United Russia, even though he is not actually a member of it. He also declared last Aptil in a recent private conversation with President George W. Bush that Ukraine, Russia’s closest neighbor and trading partner, is not really a country, which provoked an official protest from Kyiv.

More interestingly, Putin for some time has colluded with the Russian media to establish himself as the leading sex symbol. He has been photographed frequently in military regalia as well as bare-chested and on horseback while on vacation in Tuva region of Siberia last year, and sporting a Marlborough hat. Clearly, however, he was taken aback by the antics of French president Nicholas Sarkozy, who suffered a painful divorce but rebounded to marry model Carla Bruni.

Last spring the newspaper Moskovski Korrespondent issued a story that Putin is about to divorce his wife of twenty-five years Lyudmila to marry Alina Kabayeva, a rhythmic gymnast who has twice won the world title, and was born the same year that the Putins wed. Kabaeva is half-Tatar and has been a member of the Russian Duma for United Russia since last year. Her displays as a gymnast include a remarkable routine with a ball that would leave David Beckham drooling.

When asked about the rumors, Putin denied them with a smile, remarking that Russian women are the most beautiful in the world and only Italian women bear comparison–his comments were made in the presence of another lothario, newly reelected Italian Prime Minister Silvio Berlusconi, aged 71. Subsequently the owner of Moskovski Korrespondent, Aleksandr Lebedev, a billionaire former KGB agent–no work of fiction could concoct better descriptions–disbanded his newspaper and its editor resigned in protest. The deputy editor, however, has stood by his story.

Switch to Minsk, Belarus, where the US-styled “last dictator of Europe” Alyaksandr Lukashenka, 53, has been in power for the past 14 years. Lukashenka’s wife has never been seen in the capital and has a job as a dairy maid in his native province in the east of the country. However, Lukashenka has another family–the Belarusian people–who refer to him as “Bat’ka” or Little Father. The Little Father, it transpires, has a little son, a 4-year old conceived by his mistress who–if rumors are to be taken at face value–is being groomed as the great man’s successor.

A March issue of the newspaper Komsomolskaya Pravda v Belorussii–literally it means ‘young Communist truth in Belarusian land’ but it neither advocates Communism nor espouses the truth–counters the adulation for Russia’s Putin by providing a large color portrait of Russian and Belarusian leaders. The headline reads “Lukashenka is 10 years older and 20 cms taller than [new Russian president Dmitry] Medvedev” and alongside each figure is listed his height: Medvedev, 168 cms, Lukashenka (towering) 188 cms, Putin 170 cms, and Belarusian Prime Minister Sidorsky 180 cms. Belarus may not have the ideal leader therefore, but at least he is bigger than anyone else.

Lukashenka, like Putin, is a devotee of sport and captains a hockey team that remains unbeaten in all competitions. During the games the president wears the number 1 shirt and no one to date has ever dared check him. Other players set up goals for him which he invariably misses. Such is his devotion to the game that he has had hockey rinks constructed in every venue in the country that he might visit. Last year he won a cycling competition, his hulking 250 lb frame huddled over the handlebars, because no competitor–they were all massed behind the frontrunner–dared overtake him.

Ukraine’s president Viktor Yushchenko might once have been a rival of Putin as a sex symbol but he was badly disfigured when his rivals tried to poison him in the 2004 presidential election campaign. He is now taking a back seat to his Prime Minister, Yuliya Tymoshenko, 47, aka the princess of Ukraine. The offspring (possibly, since no one actually knows he truth) of a Russian mother and Armenian father, she has used her onetime husband’s name to good effect, adopting Ukrainian braids as her trademark.

Tymoshenko’s personal website contains over 6,300 photographs of herself in various poses. It also contains perhaps the most self-serving biography of any modern political leader, about her constant battles against corruption and how more or less single-handedly she took on the oligarchs, as well as leading the Orange Revolution against the discredited regime of former president Leonid Kuchma. In the process she somehow became a billionaire. The sale of Tymoshenko’s handbags alone could pay off Ukraine’s national debt.

Whatever one may say about Princess Yuliya, she can at least hold her eggs. During a 2004 election campaign speech, an egg splattered on her designer dress without her turning a hair. Not so former Prime Minister and Regions Party leader Viktor Yanukovych, the loutish former governor of Donetsk with a criminal record for manslaughter. Stepping off his campaign bus in Ivano-Frankivsk he keeled over as if he had been shot and was rushed to hospital. Subsequently a raw egg was revealed to have been the weapon. Not surprisingly he has never been associated with a rhythmic gymnast.

By comparison, Western leaders Bush, Harper, Brown, and co seem rather dull.

(An earlier version of this article was published in the EDMONTON JOURNAL)

Brand “Ukraine” will be reloaded in 2012

by Kateryna Malyhina

In today’s post-industrial world the creation of a positive and appealing image of a country has become very important. Transnational companies understood the rule a long time ago: customers pay more willingly for Starbucks or Nescafé, rather than for the average cup of coffee. This understanding came into the world of politics only recently – to stay competitive countries need “country branding”.
The pioneers in this sphere and the fathers of “country branding” in late the late 1990s were Wally Olins and Simon Anholt. Back then it was a brand new idea – to “sell” a country as a product, that is to do it deliberately, in an organized manner and based on a preliminary analysis. Countries have always been interested in creating positive images of themselves: such cultural institutions as the German Goethe Institute, Alliance Française or the British Council are well-known. But for the first time countries began to use the services of private persons and private campaigns for the formation of the “correct” image of a country in the world. For example, the Russian government signed a contract with the well-known PR agency Ketchum shortly before Russia took over the presidency of the G-8 in 2006 [1]. The contract was extended in 2007. Another example – the Croatian Government held consultations with the specialist in “country branding” Simon Anholt when working out a strategy for Croatia’s accession to the EU [2].
Thus, countries spend billions of dollars each year to attract investment, tourists and business. The US, for example, spends each year on public policy and promotion of its image abroad about $1.4 billion, the United Kingdom and Germany– about $1.2 billion, and France – about $3.1 billion [3]. Saudi Arabia spends annually $6 billion to maintain its image of a reliable partner in the West [4]. And such expenses would have been senseless, if they did not bring profits to these countries. For instance, the United Kingdom in 2006 attracted about £ 80 billion ($ 43.5 billion) of foreign direct investment in its economy [5], and spending in the UK by overseas’ residents amounted to £16 billion ($8,6 billion) in 2006 [6]. For comparison, according to forecasts of the Ministry of Economy of Ukraine, the volume of FDI in Ukraine will be $ 5.5 billion in 2008 [7], or eight times less than in the UK.
The country brands cost respectively more than budgets. According to the fourth Anholt Nation Brands Index, “Brand America” is worth $18 trillion which is about 152% of the US GDP, “Brand UK” is estimated at $ 3.5 trillion, or 163% of GDP [8]. How many billions would Simon Anholt give for the “Brand Ukraine,” one wonders?
Unfortunately, there is not yet any understanding of the importance of “nation branding” in Ukraine. The Concept of the State Program on the Formation of the International Image of Ukraine for 2007-2010 foresees a budget provision of UAH $20 million with a 10% increase per year [9] – that is about $4 million annually! The prospect of any serious intentions of the program is out of the question. The country’s image abroad is being formed by foreign journalists, Ukrainian students, and migrants rather than state policy. The “Orange Revolution” in 2004 provided an unprecedented opportunity to improve the image of Ukraine: Experts estimate that Ukraine would have needed to spend $10 billion for such wide publicity in the world. But the country wasted its chance. Today Ukraine boosts intensively the image of a politically unstable country: political instability was named the key factor militating against doing business in The Global Competitiveness Report 2007-2008 by World Economic Forum. In its Index Ukraine ranks 115th among 131 countries in the first pillar “Institutions” of the Subindex A: “Basic requirements”[10], which is comparable to Burundi and Cameroon. Is this really the way to membership of the EU? All the efforts toward “Euro-integration” are undermined.
Yet the country remains “terra incognito” for the average European. Knowledge of Ukraine is fragmentary and often limited to the “Orange Revolution” and a “post-communist country.” The well-known fact is that it is much easier to create attitudes and stereotypes than to change them. Simon Anholt, for example, believes that by helping developing countries one can see tangible results, while the outcomes for rich countries are minor [11]. Therefore, Ukraine can still fill the minds of foreigners with positive information about itself and do so at a lower cost. It has one more chance – Euro 2012. This will be a true test for the Ukrainian branding campaign. If it doesn’t fail, then brand “Ukraine” will be once again reloaded.

Notes:
[1] Ляпоров, Владимир: “Бренд-политика как основа внешнеполитической стратегии”, in: http://www.sovetnik.ru/pressclip/more/?id=20837, 19.04.2008
[2] Данаева, Зауреш: “Имидж страны”, in: «Эксперт Казахстан» №9 (35), http://www.expert.ru/printissues/kazakhstan/2005/09/09ka-kmbiz1/, 19.04.2008
[3] Approximate data. Source – Foreign Commonwealth Office,
http://www.fco.gov.uk/Files/kfile/Annex%20E%20International%20Approaches%20to%20Public%20Diplomacy.pdf, 19.04.2008
[4] Ляпоров, Владимир: “Бренд-политика как основа внешнеполитической стратегии”, in: http://www.sovetnik.ru/pressclip/more/?id=20837, 19.04.2008
[5] Office for National Statistics: Business Monitor MA4 Foreign Direct Investment, in: http://www.statistics.gov.uk/downloads/theme_economy/MA4_2006data.xls, 19.04.2008
[6] The Office for National Statistics: Travel Trends 2006, in: http://www.statistics.gov.uk/downloads/theme_transport/TravelTrends2006.pdf, 19.04.2008
[7] Алексеенко, Юрий: “Украина страдает от оттока инвестиций”, in:
http://www.glavred.info/archive/2008/02/21/124538-7.html, 19.04.2008
[8] The UK is world’s most favourite nation in latest international poll, in: http://www.gmi-mr.com/gmipoll/release.php?p=20060221, 19.04.2008
[9] Концепція Державної програми формування позитивного міжнародного іміджу України на 2007-2010 роки, in: http://www.mfa.gov.ua/mfa/ua/publication/content/6652.htm, 19.04.2008
[10] Global Competitiveness Index 2007-2008. World Economic Forum, in: http://www.gcr.weforum.org/, 19.04.2008
[11] Данаева, Зауреш: “Имидж страны”, in: «Эксперт Казахстан» №9 (35), in: http://www.expert.ru/printissues/kazakhstan/2005/09/09ka-kmbiz1/, 19.04.2008

Ukraine’s Fast Track to NATO Too Quick for Many in Nation

David Marples

Ukraine has been accepted as the latest member of the World Trade Organization after fifteen years of negotiations. WTO membership is expected to accelerate Ukraine’s prospects of joining the European Union. Further, Prime Minister Yulia Tymoshenko has requested that Ukraine be permitted to participate in the Membership Action Plan (MAP), and ultimately to be accepted as a full member of NATO. What has been the impact of these events and what are the likely consequences?

WTO membership should bring some benefits to the Ukrainian economy, particularly for the steel industry, which faced prohibitive export tariffs from EU countries hitherto. The resulting free competition and reduction of barriers are expected to boost industrial growth and ensure the production of more high quality products in this nation of 46 million. However, it may also increase foreign competition in a number of sectors, such as banking and machine building. Ukraine’s acceptance preceded that of Russia, which is on the waiting list. Officially Ukraine supports Russian membership, since problematic issues such as Russian gas prices could then be resolved under the WTO umbrella rather than bilaterally.

There should be no problems with the Ukrainian parliament’s ratification of WTO membership. The same cannot be said of the bid to take part in MAP, which has aroused angry responses from the Party of Regions and from Russia. Over the past week, MPs from the large opposition party have blocked the rostrum in the Rada, refusing to allow debate on the issue of NATO membership. Regions leader Viktor Yanukovych has stated that on this issue there can be no compromise, membership is inconceivable without a national referendum, and a majority of Ukraine’s residents are firmly opposed to the country joining the defensive alliance.

For Russia too, the issue is a thorny one. Russian president Vladimir Putin is still smarting from Poland’s agreement to accept a US anti-missile base on its territory which, allied with a radar station in the Czech Republic, would serve as an interception point for missiles aimed at the United States by a rogue state (the inference is Iran). Russia has accepted NATO membership of former Warsaw Pact countries of Eastern Europe and the Baltic States. Ukraine is a different matter entirely.

Putin, who is due to step down as president next month, points out that whereas Russia has dismantled military bases in areas like Cuba and Vietnam, the United States has established new sites in Bulgaria and the Czech Republic, in addition to the anti-missile site slated for Poland. NATO’s eastward expansion to include Ukraine and Georgia is seen as a bid to surround Russia with hostile bases and to commence a new arms race.

Ukraine is a particularly sensitive case for Russia. Under Putin, Russian-Ukrainian relations were very close prior to the Orange Revolution in 2004, at which time Yanukovych, Russia’s choice for president, was defeated in a third run-off election. Though Putin’s likely successor Dmitry Medvedev has not engaged in anti-Western rhetoric, he is expected to echo Putin’s concerns over new perceived threats to Russian security.

NATO leaders, who meet in Bucharest in April, have welcomed the potential membership of Ukraine. NATO Secretary General Jaap de Hoop Scheffer noted that Russia’s protests would not be a factor when making a decision whether to accept Ukraine. The rationale behind further NATO expansion, however, has rarely been outlined. The implication is clearly that new members require protection from a real or potential external enemy, which could only be Russia. The latter country has not helped its case by its belligerence toward its neighbors. Estonian president Toomas Ilves stated recently that in making a decision on the future membership of Ukraine and Georgia, NATO members should not give into Russian threats and blackmail.

The danger for Ukraine lies in the precarious position of the Tymoshenko government. With a majority of just two deputies, it has embarked on a campaign to integrate Ukraine with Euro-Atlantic structures without further delay, including membership of the EU, which ostensibly has been boosted by WTO membership. But it is not in a position to join NATO without alienating a large segment of the population. While most residents of Ukraine welcome WTO and future EU membership, they do not feel the same way about the country joining the alliance. NATO has a poor reputation associated with past actions in Serbia and the Near East.

Others are concerned about the impact on relations with Russia, a country with which trade turnover totaled $30 billion in 2007–the next highest turnover, with Germany, was $5 billion. Ukraine’s plans to ease dependence on Russian resources by building pipelines from Turkmenistan seem based on wishful thinking rather than reality. Ukraine has a number of serious issues to discuss with post-Putin Russia, including the future of the Russian Black Sea Fleet in the port of Sevastopol. And Russia has never hesitated to use its greatest state-owned resource–gas– as a means of maintaining its former Soviet-era ties to Ukraine.

In short, whereas the government’s initiatives toward Europe seem logical, there are grounds to question the wisdom of a fast-track Ukrainian entry into NATO, particularly without a sustained internal debate on the issue first.

[This article was first published on 13 February 2008 by the Edmonton Journal, along with the subtitle: "But other initiatives toward Europe seem logical, enjoy wide appeal." Copyright is owned by CanWest and the article may be cited but cannot be reproduced without
permission]

The 2007 Parliamentary Elections: Winners, Losers, and Coalition Prospects

By Ilya Khineyko

On 30 September, for the second time in two years, Ukraine held parliamentary elections, which were recognized as free and fair by international observers from the West and Russia. Five blocs and parties: the Our Ukraine – People’s Self-Defense (OU-PSD, NUNS in the Ukrainian acronym), the Tymoshenko bloc, the Party of Regions (PofR), the Communist Party, and the Lytvyn bloc garnered more than the 3% required to get into the new parliament. It is, however, far from certain when the political forces represented in the new Rada will be able to form a parliamentary majority and appoint a new government. As it stands, the political crisis that has permeated the Ukrainian political scene since last spring is far from over. Some unexpected political alliances might emerge from the protracted political discussions that are likely to follow the announcement of the final results on 15 October. The Party of Regions has the largest percentage and highest number of seats, followed closely by the Tymoshenko Bloc, while the pro-presidential OU-PSD is a distant third. The two other factions in the new parliament have less than fifty seats combined, but it is widely expected that the smallest faction, the Lytvyn Bloc, could play the role of a kingmaker in the new parliament.

Results of 2006 Parliamentary Elections

Party Seats Percentage

Party of Regions 175 34.37
Bloc Yulia Tymoshenko 156 30.71
NUNS 72 14.5
Communist Party 27 5.39
Bloc Volodymyr Lytvyn 20 3.96

In assessing these results, a background of the events leading up to this election is useful. The election season in Ukraine began on 2 April when President Yushchenko issued a decree dissolving the previous convocation of the Verkhovna Rada. What seemed a last resort on the part of the President came after the ruling coalition of Prime Minister Viktor Yanukovych and Speaker Oleksandr Moroz had successfully wooed a handful of opposition deputies to switch sides, leading to talks on forming a constitutional majority, a move that would have rendered the president a purely ceremonial figure. Opinion polls indicated that the early elections would not change the status quo as the Party of Regions was expected to retain its high standings, while the fortunes of Our Ukraine seemed bleak. Indeed, the Party of Regions managed to increase slightly its percentage of the vote as did the OU-PSD bloc. However, both parties stand to lose a handful of seats each in the new parliament, due to the dramatic surge of the Tymoshenko bloc, the biggest winner in the elections. Tymoshenko’s parliamentary faction will expand from 129 to 156 deputies as a result of gaining 8% more votes than it received compared to the 2006 results. The combined tally of the OU-PSD and the Tymoshenko Bloc (228 seats) is enough to form a parliamentary majority and establish a new ‘Orange’ government. The events seemed to be following this course on election night when a jubilant Yulia Tymoshenko was greeted by leader of PSD and leading candidate on the OU-PSD candidate list, Yuri Lutsenko. During a joint press-conference both leaders vowed to stay true to the “ideals of the Maidan” and honor the pre-election agreements to form a coalition of democratic forces. However, on 3 October, President Yushchenko caused consternation among the Orange campwhen he issued a statement urging all political forces to “seek a compromise” and consider forming a broad coalition that would include the Party of Regions as well.

Why did the President decide to contradict the leader of his party and what lies behind the call for unity and compromise? Several observers pointed out that a Yulia Tymoshchenko government would seriously undermine if not completely dash Yushchenko’s hopes to run for the presidency again in 2008. By becoming the Prime Minister now, Yulia Tymoshenko would be able to use the powers of the office to boost her profile at the expense of Yushchenko to the point where nominating her as the presidential candidate of the Orange forces would be the only choice left to defeat Yanukovych or any other presidential hopeful from the Party of Regions. It appears in retrospect that Viktor Yanukovych made a huge political blunder by attempting to strip the president of the last vestiges of real power instead of forging a meaningful alliance with Our Ukraine that would relegate the Tymoshenko Bloc to the opposition benches. As the prominent Ukrainian pundit Yulia Lymar pointed out, “The problem of Yanukovych lies in the fact it took too long for him, that is until now, to realize that he needs Yushchenko as much as Yushchenko needs him… Unfortunately, this card cannot be played any more”

Yet, there is no unity within the OU-PSD bloc concerning Tymoshenko’s current candidacy. Whereas business groups in Our Ukraine represented by Yuri Yekhanurov are vehemently opposed to the possibility of Tymoshenko becoming Prime Minister as evidenced in a memo published by Ukrains’ka pravda, Yuri Lutsenko and his People’s Self-Defense group are clearly in favor of such a step. It is likely that if Yanukovych retains his prime-ministerial post, Lutsenko’s party members will break away from Our Ukraine and join forces with BYuT. Furthermore, the Orange electorate remains deeply antagonistic to the figure of Yanukovych, so Our Ukraine risks losing even more electoral support to the Tymoshenko Bloc if an alliance between Yushchenko and Yanukovych becomes a reality. In this light, the standings of Viktor Yanukovych within the PofR might not be as solid as they appear. As Ukrains’ka pravda’s analysis reveals, the Party of Regions candidate list was filled by people loyal to Rinat Akhmetov who is much more willing to seek rapport with Yushchenko in order to stop Yulia Tymoshenko even if it would mean changing the leadership of the party.

The prospect of an Orange coalition remains a more feasible option. After a closed door meeting with President Yushchenko on 4 October, Yuri Lutsenko opined that the Orange coalition might be formed by 15 October when the Central Electoral Committee is scheduled to announce the official results. However, given the factors described above, Ukrainian politics may yield more surprises in the coming weeks.

Published by the Stasiuk Program for the Study of Contemporary Ukraine, Canadian Institute of Ukrainian Studies. This article may be reproduced with appropriate acknowledgement.

What do Ukrainians want?

Hello, Prof. Marples,
Regarding your Journal piece, which I read in the latest Action Ukraine Report, I would not exactly agree that “order”, selected from the list “order, democracy, freedom, or liberalism”, is necessarily indicative of a desire for authoritarian rule. Given the historically perverted as well as recent negative connotations of demokratiia, and the relative unfamiliarity of Ukrainians with the social implications of the other two concepts, poriadok is a perfectly reasonable desire. The most successful slogan during the Orange Revolution was bandytam – tiurmu! That is what Ukrainians really want: the order that results from enforcement of the rule of law—which is in fact the hallmark of Western-style and Western-leaning democracy.
Z povahoiu,

Ksenia Maryniak
Production Editor
Northern Hunter-Gatherers Research Series (CCI Press)
Baikal Archaeology Project, Dept. of Anthropology
Univ. of Alberta, Edmonton

Ukrainians Are Neither Clearly Pro-Western Nor Pro-Russian

By Mykola Riabchuk

The wise man who distinguished the truth, the lie, and statistics, might well have included among the latter opinion surveys — at least as they function in Ukraine. David Marples’s article in the “Edmonton Journal” (Monday, July 30: “Ukraine’s ties with Russia run deep, and that’s not about to change”) is highly dependent on recent opinion polls. They seem to support firmly not only the first part of the title, which is rather obvious, but the second part as well, which is rather debatable.

David Marples perfectly captures the essence of Ukraine’s East-West dilemma in his conclusions. “Ukrainians,” he contends, “are not pro-Western today partly because the example set by Western democracies in recent times has hardly provided a model to emulate: beginning with NATO’s attack on Serbia in 1999 and culminating with the invasion of Iraq. Many also have been alienated by the EU’s negative response to Ukrainian desires for membership. And Ukrainians are for the most part pro-Russian because they see Russia as a strong counterforce to the United States and a nation with which they have more in common than with either the new democracies of Eastern Europe or the long-established democracies that no longer seem capable of providing fitting examples to follow.”

The only big “but” in this case, however, is that virtually all notions and terms in Ukraine are quite vague and fluid. For example, the concepts “pro-Western” and “pro-Russian” do not have the same meaning in the positivistic West and the highly ambivalent and ambiguous post-Soviet Ukraine. True, if being “pro-Russian” or “pro-American” means a sort of Realpolitik, a pragmatic approach to the inherited geopolitical, cultural-linguistic, and economic reality, then Ukrainians (for the most part) are certainly more “pro-Russian” than “pro-Western.” They simply prefer one bird in hand to two in the bush. They prefer the status quo because they feel that — in a country with feeble institutions and no rule of law, weak mechanisms for conflict resolution, low Western support and strong Russian pressure — any instability is dangerous. They opt for a bad peace over a good war just because they do not believe that a good peace is possible.

This does not mean, however, that they absolutely oppose a good peace, i.e., the EU or even membership in NATO, as the opinion surveys purportedly reveal. The surveys point out only that a good peace is not on the agenda (to paraphrase the standard response of Eurocrats to Ukrainians’ claims for EU membership prospects). Ukrainians, therefore, merely choose between the lesser of two evils. Yet again, these “evils” are not the West and Russia per se, but the most likely results people expect in their own cost-benefit analysis. Obviously, the benefits from Ukraine’s western integration would be much higher — but they appear largely unachievable; the costs, i.e., punishment for such attempts by Russia, are rather real and palpable.

To clarify this psychological mechanism, one must refer to the two referendums Ukrainians held in 1991. In March of that year, 70 per cent supported Gorbachev’s idea of a “renewed federation,” in other words, the preservation of the USSR. A few months later, in December, 90 per cent of Ukrainian voters endorsed national independence. This was not some mystical insight or miraculous breakthrough. In March they were quite supportive of independence — but not to the point of rocking the boat and putting their relative well-being and stability at risk. The cost-benefit balance sheet in March was unfavorable for independence. Yet by December, when the Soviet Union de facto collapsed and national independence — declared by the Ukrainian parliament — was a fait accompli, people felt that to oppose independence was more risky, i.e., more destabilizing, than supporting it.

Another graphic example comes from 2002 when president Kuchma, cornered by internal and international scandals, declared Ukraine’s resolve to join NATO. This was a clear attempt to reduce tensions with the US and to counter Ukraine’s growing international ostracism. (Today, few people remember that it was not Yushchenko, the “pro-Western” President, who made NATO membership a national strategic goal, but rather his allegedly “pro-Russian” predecessor). This strategic decision, and the equally strategic choice of sending Ukrainian troops to Iraq — again, made by the “pro-Russian” Kuchma, while the “pro-American” Yushchenko eventually withdrew them — did not evoke any serious protests in Ukraine or even lead to substantial public debate. Ukrainians simply do not much care about such things. Other opinion surveys reveal that such issues as membership in NATO or strengthening/weakening of the status of the Russian language are not among the top ten (and even top twenty) issues of importance to Ukrainians. Moreover, up to 90 per cent of Ukrainians surveyed confess they know nothing or very little about NATO. A few years ago, Ukrainian journalists contrived a nice hoax: they asked the same people about their attitude towards both “NATO” and the “North Atlantic Treaty Organization.” Apparently, in most cases the latter was evaluated much more positively.

This reveals two more problems with opinion surveys in countries like Ukraine: the low political awareness of the people being surveyed and the widespread misunderstanding (and misuse) of terms. The Russian language question serves as a good example of such ambiguity. Thus far there has been no real public debate setting out clearly for everyone what official bilingualism might mean, how it might work in practice, and what legal and other mechanism would be needed to facilitate it. Some people have a Soviet understanding of “two state languages”; they view this as a right of the dominant Russophone group not to learn, and never to use, Ukrainian — an idea that is graphically made real in today’s Belarus. Other people understand the idea in a Western, liberal manner: as a legally prescribed duty of all post-Soviet bureaucrats (predominantly Russian-speaking) to communicate with all citizens — understood as “clients” and as taxpayers — in the language of their choice — and not vice versa, as was the case with Soviet “bilingualism.”

In short, opinion polls in a society such as Ukraine primarily reveal confusion and a secret desire to maintain the status quo — because change is precarious, with easily predictable high costs but mostly indeterminate benefits. Ukrainian society, however, can be considered not only a glass that is half empty — namely, lacking civic maturity, national unity and strong commitment to Western values — but also half full. Forty four per cent of Ukrainians believe that democracy is the best state system, while only 17 per cent opt for authoritarianism; this is actually a good result for a nation that has had very limited experience with a functioning democracy, and even less experience with national independence and self-rule. Neither in Russia nor Belarus can one find anything approaching this.

And the fact that 93 per cent of surveyed Ukrainians opted for “order” as the most needed commodity, while only 25 per cent opted for “liberalism,” does not prove an “authoritarian” preference. It only proves the lack of “order” in the country, and the need to fix a feckless democracy rather than dismantling it in the Russian or Belarusian manner. In this sense, the Orange Revolution, indeed, was not about “pro-Western” or “pro-Russian” orientations, as David Marples rightly suggests, but about the way the country should be run. In other words, it was about values. But if one examines the values of the Kuchma regime, which were opposed by the Revolution, one will see that exactly those values still dominate Russia and other post-Soviet states. Conversely, if one looks at the values defended by the Revolution, we will see that they are the very principles upon which the West is built.

Consequently, the Orange Revolution was clearly pro-Western in its spirit, if not necessarily in political rhetoric and in actual geopolitical programs. So far, it has brought mixed results but, in most terms, post-revolutionary Ukraine is much closer to the fledgling democracies of Eastern Europe than to the consolidated authoritarianisms of post-Soviet “Eurasia.” Thus, the title of Marples’s article might be usefully paraphrased to read: “Ukraine’s ties with Soviet attitudes run deep, but they are changing.”

[Mykola Riabchuk is a Ukrainian writer and political and cultural analyst. He is the author of seven books available in English, French, German, Polish, and other languages. This academic year, he will be teaching at the University of Alberta (in the departments of Modern Languages & Cultural Studies and History & Classics) as the Stuart Ramsay Tompkins Visiting Professor.]