Parliamentary election scheduled for 28 October will be a mid-term test of support for President Viktor Yanukovych whose Party of Regions has been in power since his election in early 2010. At first glance, it would seem that the Party of Regions’ grip on power is firm. The party, supported by a parliamentary majority, controls almost all key posts in the executive, the central bank, the General Prosecutor’s Office, and even, some critics argue, large parts of the supposedly independent judiciary. Domestic reforms: two steps forward, one step back Despite this apparent control, there are some signs that the leadership of the Party of Regions is not taking its victory for granted. The reasons for this are many. The government has failed to make significant progress on such issues as fighting corruption, strengthening the rule of law and reforming the inept bureaucracy – top issues of concern for the voters, according to polls. Citizens and businesses run the risk of being confronted with corruption whenever they interact with state officials – be it the traffic police, a sanitary inspectorate or a local building permits office. Ukraine slipped in the Corruption Perception Index compiled by Transparency International from 134th place in 2010 to 152nd in 2011, out of 182 countries surveyed. The trust in government institutions remains low, and the political class is widely perceived as venal. Despite much talk about reforms – and some genuine efforts and successes – Ukraine remains a difficult place to do business. The country is now ranked 152nd (2011: 149th) in Doing Business, a project of the World Bank which measures the ease of doing business for small and medium-sized firms across 183 economies. Ukraine’s rankings in the Global Competitiveness Index of the World Economic Forum are also not flattering, with policy instability, corruption, burdensome tax regulations and inefficient bureaucracy cited as main obstacles for businesses. Overall, the government’s attempts to reform the business environment are often described as ‘two steps forward, one step back’. Our interviews with local industrialists and political analysts show increasing disappointment with the Regions-led government even in the mainly Russian-speaking regions in the east and south, which are the party’s traditional support base. Many businessmen, even those once loyal to the Regions, complain about ‘people from Donetsk (i.e., close to the current government) taking everything’. This means anything from privileged access to government contracts to ‘corporate raids’, or hostile takeovers of successful businesses in which the attacking party is assisted by corrupt courts, law enforcement officials or outright criminal elements. The economy, too, has not fully recovered from its plunge during the 2008-09 crisis when it contracted by 15%. The NBU is reluctant to devalue the national currency before the elections, though the strong hryvnia is hampering growth and devaluation in the near future seems inevitable. Meanwhile, co-operation with the IMF has been stalled since 2011 over the government’s reluctance to increase gas tariffs for households and utilities – another example how political expediency trumps economic rationale. It would seem that the main, if not the only, beneficiaries of the Region’s two and a half years in power have been some well-connected oligarchs, who have further consolidated their grip on key industry sectors such as power generation and chemicals. One of the president’s sons, too, has started to feature in the ranking of the 100 wealthiest Ukrainians. According to rumours in the tabloid press, no sooner was his father elected president than Alexander Yanukovych, a trained dentist, turned his focus to business and has already amassed a $94 million fortune, according to the Ukrainian edition of Forbes. He is also rumoured to be the leader of an emerging new power group known as ‘the Family’. Unlike other such groups close to the administration (Akhmetov-Kolesnikov, Boyko-Firtash, the Klyuev brothers etc.) members of this new group owe their rise to top posts – and associated opportunities – exclusively to the president, and thus are viewed as more loyal. The Yulia Tymoshenko case: a strain on foreign relations In its relations with key foreign counterparts, the Yanukovych administration managed the rare feat of alienating both Russia and the West, not least by jailing the former prime minister Yulia Tymoshenko for seven years for ‘abuse of power’. Vladimir Putin is said to be insulted by the sentence, which resulted from a gas deal she signed with him in 2009. In the West, the jailing of Tymoshenko has been denounced as persecution of political opposition by several EU and US leaders, bodies such as the Parliamentary Assembly of the Council of Europe and, most recently, the US Senate which condemned what it called ‘the selective and politically motivated prosecution and imprisonment’ of Tymoshenko and called for a visa ban for certain Ukrainian officials. Largely as a result of the Tymoshenko case, the association agreement between Ukraine and the EU remains unsigned, and the Ukraine-EU summit scheduled for December may be postponed. The former head of the EU delegation in Kiev who shortly before his term ended in August gave a critical interview about the Tymoshenko case to a local newspaper provoked a somewhat undiplomatic reaction from the foreign ministry. Its spokesman said that the outgoing ambassador’s opinion ‘should worry Cape Verde (to which he was soon to be posted) rather than the people and government of Ukraine’. In summary, the Regions’ record in power is hardly a success, and this partly explains its heavy-handed tactics in dealing with the independent media and the political opponents. The political landscape The Party of Regions pushed through electoral reform, raising the threshold for parties from 3 percent to 5 percent of the national vote. Now the Party of Regions leads in most polls, with about 30 percent, followed by the United Opposition (UO, a block comprised of Yulia Tymoshenko’s Batkivshchyna (‘Fatherland’) party, The Front of Change of ex-parliamentary speaker Arseny Yatsenyuk, and some smaller allies) with about 20 percent. Out of 22 parties that have fielded candidates under the proportional system (half of the parliament will be elected proportionally from party lists), only two other participants look sure to clear the 5 percent threshold. These are the Communists, the junior partners of the Regions in the current coalition, with about 10%, and Udar (‘Punch’), the political party of the world heavyweight boxing champion, Vitaly Klichko. Udar, which is running for parliament for the first time, may deliver the biggest surprise: according to some polls, it has almost caught up with the United Opposition. Udar seems to have joined forces with UO at the local level but suspicions remain that after the election it might tacitly support the Regions. Below but close to the threshold are the nationalist Svoboda (‘Freedom’) of Oleg Tyahnybok and Ukraine-Forward of Natalia Korolevska. Svoboda, which commands strong support in parts of Ukraine’s west, is set to win several single-mandate constituencies there and might be able to form a small parliamentary group of its own. As for Ukraine-Forward, its prospects remain unclear. A successful businesswoman from Lugansk and once a rising star in Yulia Tymoshenko’s block, Korolevska re-launched a political outfit of her own which, some opposition journalists suspect, could in fact be a ‘spoiler’ party formed to snatch votes from the opposition and funded by oligarchs close to the Party of Regions. Alexander Turchynov, Tymoshenko’s number two in Batkivshchyna, reportedly called Ukraine-Forward ‘a failed project’. With opinion polls suggesting that over 20 percent of those intending to vote are still undecided about whom they favour, it is difficult to predict what the composition of the next parliament will be. Possible outcomes While the consequences of any of the possible results remain uncertain, a political crisis is likely if the joint opposition (UO, Udar and Svoboda) wins a majority of seats. A hostile parliamentary majority would be able to dismiss the current cabinet through a vote of no-confidence but not to appoint a new head of government; the legislative process would probably stall, as a two-thirds majority (a prospect too far-fetched for the current opposition) is needed to push through a bill vetoed by the president. We believe that the most likely scenario is that the Party of Regions and its allies will be able to form the next majority coalition. The party still commands significant and genuine support in the east and south of the country; it heavily outspends opponents on advertising, has a close grip on most free-to-air TV channels (still the main source of information for most voters) and controls local administrations. As to just how this will be achieved, remains to be seen: despite the factors in favour of the Party of Regions, the opposition already fears that it might be tempted to resort to underhand tactics, such as electoral fraud, to secure victory. A victory under such circumstances would further damage the government’s already chilly relations with its western counterparties. A statement made on 12 October by Catherine Ashton, the EU high representative for foreign affairs and security policy and vice president of the Commission, and Štefan Füle, EU commissioner for enlargement, says that the elections ‘will be a litmus test of Ukraine’s democratic credentials’. Yet even some opponents of the government believe that a victory for the Party of Regions would be no tragedy for the opposition: in the words of one political analyst, ‘two more years of such rule by the Regions, and [President] Yanukovych might as well forget about running for re-election in 2015’. The best hope for Ukraine is that the government, relieved of immediate electoral pressure, will use the time remaining before the 2015 presidential election to advance necessary if sometimes unpopular reforms. By Valery Shturmarevich and Eugene Marshalov Moscow Office
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