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The Gas Princess and the Chocolate King
September 9, 2005 08:15 AM
The dizzying speed of developments here in Kiev has made it difficult to provide useful analysis in the last week. But no longer. Yesterday's announcement by ousted PM Yulia Tymoshenko that she is casting her lot with the opposition virtually ends any hope that president Viktor Yushchenko will be able to impose a meaningful degree of political and economic "stability" -- at least until crucial parliamentary elections are held in March. Tymoshenko's move to the opposition was, of course, always one possible outcome of the president's decision to dismiss the government Thursday morning. Yet Yushchenko clearly believed he had been left no choice after failing to reach accommodation with Tymoshenko in 11th-hour talks. In fact, Tymoshenko's departure ratchets up the stakes in the March elections even further. Ukraine is set to adopt constitutional reforms in January that will devolve some of the presidency's extraordinary powers to parliament. It is yet unclear how the events of the past week will impact that process, but this is a matter of great speculation and concern around the capital and around the diplomatic community. In the meantime, the possibility that Ukraine will adopt economic reforms needed for accession to the World Trade Organization before the elections is now approximately nil. This is in itself important, because it provides an opportunity now for Russia to enter the W.T.O. ahead of Ukraine, providing the Eastern neighbor with competitive advantages in the world marketplace that could hurt Ukraine considerably.
It is worthwhile to establish some context for these developments. There would likely never have even been an Orange Revolution -- or a Yushchenko presidency -- without the highly charismatic Tymoshenko, who urged Ukrainians into the streets in the wake of last year's corrupted election. It was she who prodded Yushchenko to symbolically swear an oath on the Bible in parliament, the day before the incumbent government's candidate (Yanukovich) was declared winner, thus setting the stage for the popular revolt. Yushchenko's subsequent decision to appoint Tymoshenko -- a potential rival whose own popularity rivaled his own -- as prime minister created a symbolic tableau of unity that enabled Ukrainians to come together behind the formation of a new government. Yet the two politicians were never an ideal match. Tymoshenko, a billionairess known as the "Gas Princess" for the fortune she amassed in that sector, was a populist politician who pushed aggressively for the new government to reverse perhaps "thousands" (her word) of deals made under the previous regime of Leonid Kuchma that sold off major state industrial holdings to insiders at firesale prices. She was also a strong advocate of increased social spending as a means of raising the Ukrainian population's very low standard of living. Yushchenko, by contrast, was a market liberal who believed it best to act conservatively toward "re-privatization," as it was known, in the interests of fostering stability. (It bears mentioning that Western governments, including the United States, have always been cool toward the program of re-privatization. Although all would agree that the original deals were bogus, they also agreed that post-revolution stability was not well-served by the impression that one Ukrainian government could reverse the agreements made by its predecessor. Yushchenko, as well, was cognizant of the signal these actions send to potential foreign investors, who want to be confident in the government's willingness to enforce contracts and protect private property.) Yushchenko's insurance against the political maneuvering of his rival came in the form of Petro "Chocolate King" Poroshenko, a key ally who was himself a billionaire through his success in the confectionary industry. Yushchenko appointed Poroshenko state security chief, a role in which he could serve as a political foil to Tymoshenko, preventing her from amassing too much power in the new government. In Poroshenko, Tymoshenko found not only an ideological opponent -- he, like Yushchenko, is a free-marketer -- but a rival for prime minister, which is the post he had hoped to be awarded in the wake of the Orange Revolution.
This was a toxic mixture, as the ensuing policy and personality
clashes gradually overwhelmed the reform agenda. While Yushchenko has repreatedly urged the government to speak with "one voice," such pleas have often been made in the course of rebuking Tymoshenko, both for her economic policies and for her hard-nosed approach to re-privatization. (While she has cited "thousands" of possible candidates for re-privatization, Yushchenko has cited "dozens.") It had only made matters worse that Poroshenko, who was assumed to hold Yushchenko's proxy, squabbled directly with Tymoshenko on many of these issues. As reforms have stalled, polls in Ukraine have shown mounting disenchantment with Yushchenko and Tymoshenko, and with the government's ability to deliver on reforms.
All of this culminated last week in the dramatic resignation of Yushchenko's chief of staff, Alexander Zinchenko. In a press conference the following day, Zinchenko publicly charged three high-ranking officials around Yushchenko -- including Poroshenko and Mykola Martynenko, the head of Yushchenko's Our Ukraine faction in parliament -- of massive corruption. I've covered a presidential impeachment and a contested election in the United States, but this was the most unusual and dramatic press conference I've ever witnessed. As Zinchenko spoke, Poroshenko appeared behind him, frowning as he listened to the scalding remarks. When Zinchenko left the podium, the press corps, which filled the room to well over capacity, burst into applause. Poroshenko told reporters he had come upon Zinchenko's press conference while flipping channels in his office, and decided to come over and see the situation first-hand. Reporters responded by arguing with Poroshenko that he could not have made it to the press conference from his office in the ten minutes he said it took, as he would have needed to make it across town during midday traffic. (Poroshenko offered to bring a reporter along on the trip back to the office, which timed out at five minutes and 30 seconds or so. Ummm, okay.) Anyhow, Zinchenko has never fully elaborated on the corruption charges he levelled against some members of Yushchenko's inner circle (though it is assumed to have a good deal to do with Poroshenko's alleged meddling in the justice system and the state media). Martynenko and Poroshenko, who resigned from the president's cabinet on Wednesday, have threatened to sue for slander, but on Friday Zinchenko revealed that he has turned over some documents to the state prosecutor that lay out the case in black and white. It should be noted that Poroshenko's resignation followed the resignation of deputy prime minister Mykola Tomenko, who said,
"I have realized that some people steal and others resign. I don't want to bear common responsibility for people who have created a corrupt system."
All of this, needless to say, has been a disaster for Yushchenko, who pledged in his campaign to end government corruption. In Ukraine, this was sort of like pledging to end daylight. Corruption was considered to be so rife among the country's traffic police, for instance, that Yushchenko sacked all 26,000 of them shortly after taking office. Meanwhile, the extent to which politics and business comprise an interlocking web of relationships here is astounding. It is not unusual for an active industrialist to serve as a parliament deputy at the same time. Viktor Pinchuk, one of the wealthiest men in Ukraine, is a parliament deputy. He also happens to be former president Kuchma's son-in-law, and benefitted more than perhaps anyone else from the initial round of privatizations undertaken by his father-in-law's government. Now he's one of the main targets of the re-privatization efforts.
Yushchenko has sought in the wake of the week's tumult to signal that the government remains stable overall. His inner circle has indicated to media here that several -- perhaps even most -- ministers from Tymoshenko's government may be asked to stay on. (Tymoshenko, incidentally, has not cast any blame of Yushchenko for the government meltdown, but rather upon this same "inner circle" that surrounds him.) Yushchenko has also installed his close ally Yuri Yekhanurov, a Russian-born economist and experienced politician, as the new prime minister. Yekhanurov, who is viewed as a disciplined technocrat, began immediately upon his appointment to try to reassure the public and Western governments that things will level out. "I have one goal... to ensure stability," he told reporters at a press conference.
