[Ohio UZO News] Ukraine: Economist; FT; reminder/directions

[Deychak, Orest]

The Economist

Caretakers

Mar 12th 2010 



Old faces return to form a new government for Ukraine, at last



THE best thing about Ukraine's new government is that there is one. Five
weeks after Viktor Yanukovich (on the right in our picture) narrowly won
the presidential election, he has managed to form a coalition in
parliament and install a loyal lieutenant as prime minister. Fears of
more political gridlock in Ukraine have been averted. Moreover, after
years of instability, democracy is still strongly alive. Yulia
Tymoshenko, the charismatic former prime minister and heroine of the
"orange" revolution of 2004-05, has moved into opposition and will keep
the new government on its toes.

Yet that is where the good news ends. The process of forming this
coalition was controversial, bordering on bending the constitution.
Having failed to form a conventional coalition with other parties, Mr
Yanukovich signed a law to allow a coalition to be formed by individual
MPs, rather than by factions only, as the constitution demands. After a
few days of busy trading, Mr Yanukovich's Party of Regions has won over
235 members to its side.

Under the constitution the prime minister is nominated by parliament and
then forms a government. But Mr Yanukovich has circumvented this
"formality" and de facto appointed his own prime minister and cabinet.
In effect, he has reinstated the presidential power enjoyed by a former
president, Leonid Kuchma. And he has managed it without scrapping the
constitutional amendment in 2004 that split executive power between the
president and the prime minister. The constitutional court is yet to
rule on the legitimacy of the coalition, but expectations in Kiev are
that the timing and outcome of its decision will lean towards Mr
Yanukovich. Yet if Mr Yanukovich decides he wants new parliamentary
elections after all, the court may find the coalition illegitimate.

The new cabinet consists mainly of old faces, many of them associated
with the worst excesses of Mr Kuchma's rule. It is also representative
of various business interests. Nikolai Azarov, the 62-year-old
Russian-born prime minister, is one of the longest-serving bureaucrats
in Ukraine. He has twice been finance minister. His reputation is mixed.
He was the architect of the repressive tax administration under Mr
Kuchma. According to Anders Aslund, an economist at the Peterson
Institute for International Economics in Washington, DC, and author of a
book on Ukraine, this 70,000-strong organisation "was considered
massively corrupt and became a major impediment to business." 

Yet Mr Azarov is also seen as a solid manager and a safe pair of hands,
with a minute knowledge of Ukraine's public finances. He has promised to
stabilise the economy (at present Ukraine does not even have a budget)
and to unlock funding from the International Monetary Fund that was
suspended last year. Mr Azarov may be able to bring Ukraine's desperate
fiscal situation under control, but his ability to reform Ukraine's
economy and welfare system is more doubtful.

Optimists say this may not matter much, since the main decisions on
reforms will be made in the presidential administration, which includes
such reform-minded people as Sergei Levochkin, head of Mr Yanukovich's
office, and Irina Akimova, who is backed by Rinat Akhmetov, Ukraine's
richest steel magnate. In effect, Mr Azarov may be more of a caretaker
prime minister than a strategist. His main job will be restoring
Ukraine's dysfunctional system of governance so that it can carry out
decisions made elsewhere. The new cabinet will be completely subservient
to the presidential administration, says Yulia Mostovaya, editor of
Zerkalo Nedeli, a weekly. 

Mr Azarov's deputy for the economy will be Serhiy Tyhypko, who came
third in the first round of the presidential election. A few days ago Mr
Tyhypko accused Mr Yanukovich of breaching the constitution and swore
not to join his government-or at least not in a secondary role. But
allegiances and animosities are a fluid currency in Ukraine. Mr Tyhypko,
who once ran the central bank, was head of Mr Yanukovich's election
campaign in 2004. Yet when the orange revolution broke out, he was quick
to distance himself from the disgraced candidate.

He has been largely absent from Ukraine's politics for the past five
years which has boosted his popularity (along, perhaps, with his picture
on the cover of Men's Health magazine). As a rich businessmen in his own
right, Mr Tyhypko is flesh and blood of Ukraine's oligarchic political
system. In Ms Mostovaya's words, the new cabinet resembles a board of
directors of Ukraine, Inc.

The strong link between business and bureaucracy is most conspicuous in
two other appointments: Valery Khoroshkovsky, a media magnate and
co-owner of Ukraine's main television channel, Inter, as the new head of
the security service; and Yuri Boiko, who was closely involved in
RosUkrEnergo, a gas intermediary, as energy minister. RosUkrEnergo,
which pocketed big profits from providing nominal services in the trade
of gas from Turkmenistan and Russia, was scrapped by Ms Tymoshenko when
she was prime minister. Mr Boiko's first task will be to renegotiate the
price that Ukraine pays for Russian gas. He may also offer Russia's
Gazprom a stake in Ukraine's gas-transport consortium.


Perhaps the most encouraging cabinet appointment is Konstantin
Grishchenko, a well-respected diplomat, who becomes foreign minister
(for the second time). A fluent French- and English-speaker, Mr
Grishchenko has served as Ukraine's ambassador to Washington, Brussels
and, most recently, Moscow. He will no doubt improve relations with
Russia. But he also knows that Ukraine's strategic interest lies in
moving closer to the European Union. How fast it moves will depend more
on Ukraine's domestic affairs than on its foreign policy. 


Financial Times


www.ft.com


Yanukovich appointee creates storm


By Roman Olearchyk in Kiev

Published: March 13 2010 

Viktor Yanukovich, Ukraine's new president, is facing criticism after
the coalition government he formed this week put a controversial
businessman-politician in charge of the energy sector, including the key
Russia-European Union gas transit trade.

Yuriy Boyko, 52, who was appointed energy minister on Thursday, ran into
a storm of protests from opposition leaders, who condemned what they saw
as the takeover of energy policy by a group of businessmen linked to
Rosukrenergo, a Swiss-registered trading company that until last year
played a central role in gas transit.

Yulia Tymoshenko, the former prime minister whom Mr Yanukovich defeated
in the recent presidential election, claimed Mr Boyko's appointment had
brought to power "the Rosukrenergo squad". She told a press conference:
"I was shocked to see that the ideologues and founders of Rosukrenergo
have ended up in crucial positions of government. Rosukrenergo has in
its complete squad come into the Yanukovich government."

Ms Tymoshenko has repeatedly claimed Mr Boyko has close ties to Dmytro
Firtash, the billionaire gas trader who controlled Rosukrenergo jointly
with Russia's Gazprom.

Mr Boyko headed Ukraine's state gas company, Naftogaz, from 2002 through
2005, and later served as energy minister in 2006-2007. During these
years, Naftogaz and Gazprom together awarded to intermediary companies
associated with Mr Firtash, contracts putting them at the centre of the
multi-billion-dollar business of supplying Ukraine and EU states with
gas from Russia and central Asia.

The first was Hungarian-registered Eural Trans Gas, owned by Mr Firtash.
Later in 2004, it was replaced by Swiss-registered Rosukrenergo, a joint
venture between Mr Firtash and Gazprom. The intermediaries were cut out
in January 2009 in a deal between by Vladimir Putin, Russia's premier,
and Ms Tymoshenko, who was then in office.

Mr Putin claimed the Ukrainian side had used the intermediary companies
to channel funds to Ukrainian political leaders. He said: "They had to
have a middleman so they could receive dividends, and finance their
political campaigns."

On Friday, Global Witness, the London-based transparency watchdog, said
in a statement it was "concerned" that Mr Boyko, "a controversial figure
from the murky past of Ukraine's gas industry", had been put back in
charge of a key gas supply route from Russia to the EU.

"Yanukovich's election as President had already raised concerns that
reform in the Ukrainian gas sector would go backwards. Now with Mr Boyko
in charge, Ukraine will have to work twice as hard to prove itself an
open and reliable energy partner to the European Union. The entire gas
sector must be opened up to public scrutiny and independent audits,"
said Tom Mayne of Global Witness.

Mr Firtash and Mr Boyko have repeatedly denied wrongdoing, but were not
immediately available for comment. A person close to Mr Boyko on Friday
declined to answer the FT's questions.

It is unclear if Mr Yanukovich will now reintroduce gas trading
intermediaries. He has suggested forming a new consortium to manage the
pipeline system which could include Russia and the EU, as well as
Ukraine. But he has not specified which companies - state- or privately
owned - might participate.

Commission hearing notice:

Directions for those planning to attend:  When you come into the main
entrance of the Capitol Visitors Center (located on  E Capitol St NE &
1st St NE, on east side of the Capitol), go through two sets of double
doors until you're into the main lobby of the CVC.  Turn right when you
get in and go to the end of the hall.  Once you're at the end, take a
left and then go straight.  You'll see a gift shop on your right side
and on your left is a set of escalators.  Take the escalator down one
floor - once you get off, look to your left and there is an appointments
desk.  Check in there, you'll get a badge, and they'll tell you where to
go.

 

 

 

U.S. HELSINKI COMMISSION

 

COMMISSION HEARING NOTICE

 

 

"Ukraine: Moving Beyond Stalemate?"

Tuesday, March 16, 2010

10:00 a.m.

SVC 201/200 (Capitol Visitor Center)

 

 

President Victor Yanukovych's narrow victory over former Prime Minister
Yuliya Tymoshenko in February's run-off election opens a new chapter in
Ukraine's ongoing post-Orange Revolution transition.  Despite the
election receiving high marks from international observers and Ukraine
being the most free and democratic of the post-Soviet non-Baltic
republics, the country faces numerous internal challenges:  digging
itself out of the economic crisis, reducing its energy dependence on
Russia, combating pervasive corruption, strengthening rule of law, and
overcoming five years of frequent policy deadlock.  Although Yanukovych
is more oriented towards Russia than his predecessor, he has declared
integration into the European Union a priority.

 

At the first hearing since Yanukovych's election, the Commission will
examine the new challenges and prospects Ukraine faces domestically and
internationally and their implications for U.S. policy toward this
strategically important country.  

 

Witnesses scheduled to testify:

Daniel A. Russell, Deputy Assistant Secretary of State for Russia,
Ukraine, Belarus and Moldova, Department of State

Damon Wilson, Vice President and Director of the International Security
Program, Atlantic Council

Anders Aslund, Senior Fellow, Peterson Institute for International
Economics

 

_______________________

 

For more information, please contact Orest Deychakiwsky of the
Commission staff at 5-1901 or via e-mail at 
Orest.Deychak at mail.house.gov. 

 




 

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