UKRAINE BUSINESS NEWS - TEN ARTICLES
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1. UKRAINE, RUSSIA: STEEL AND POLITICS
Stratfor Global Intelligence, Austin, TX, Fri, Jan 8, 2010
2. UKRAINE: RUSSIAN INVESTORS TAKE CONTROL OF ISD
By Roman Olearchyk in Kiev, Financial Times, London, UK, Fri, Jan 8 2010
3. TIDE TURNS FOR EUROPEAN IPO MARKET
By Radi Khasawneh, The Wall Street Journal, NY, NY, Mon, Jan 11, 2009
4. FACTBOX- UKRAINE'S POLITICS AND FINANCES
Reuters, Kyiv, Ukraine, Tue, Jan 5, 2010
5. POLAND WAKES UP TO HARSH UKRAINIAN BUSINESS CLIMATE
"So what does Ukraine do to address those problems? Nothing. Literally, nothing."
By Marcin Sobczyk, WSJ Blogs, New Europe
Dispatches from Dow Jones writers across Eastern and Central Europe
The Wall Street Journal, NY, NY, Wed, January 6, 2010
6. UKRAINE'S PRESIDENTIAL ELECTION: A PRIMER
Analysis & Commentary: by David Kramer
Foreign Policy and Civil Society Program, Focus on Ukraine #1
German Marshal Fund of the United States, Wash, D.C., Dec 18, 2009
7. MORE THAN A NEIGHBOR: WHY UKRAINE MATTERS
Analysis & Commentary: by Jörg Forbrig and Dakota Korth
Foreign Policy and Civil Society Program, Focus on Ukraine #2
German Marshal Fund of the United States, Wash, D.C., January 5, 2010
8. ENERGY SECURITY FOR UKRAINE AND EUROPE
Analysis & Commentary: By Jörg Himmelreich
Foreign Policy and Civil Society Program, Focus on Ukraine #3
German Marshal Fund of the United States, Wash, D.C., Mon, Jan 11, 2010
9. UKRAINE'S DILEMMA
Editorial, Financial Times, London, UK, Sun, January 10 2010
10. MIXED LEGACY OF UKRAINE'S ORANGE REVOLUTION
By Roman Olearchyk in Kiev, Financial Times, London, UK, Mon, Jan 11 2010
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1. UKRAINE, RUSSIA: STEEL AND POLITICS
Stratfor Global Intelligence, Austin, TX, Fri, Jan 8, 2010
A Russian business group has purchased Industrial Union of Donbass (ISD), one of Ukraine’s largest steel manufacturers. ISD is based in Ukraine and operates steel mills in Poland and Hungary, so the purchase gives Russia key assets and increased influence in three countries.
The timing of the deal indicates that Ukrainian Prime Minister Yulia Timoshenko — who facilitated the deal — is looking to boost her presidential campaign. The Kremlin’s backing of the deal indicates that Russia’s influence in Ukraine is on the rise.
ANALYSIS
A Russian business group has purchased Industrial Union of Donbass (ISD), a leading Ukrainian steel manufacturer, according to a press release issued by ISD on Jan 8. The group is led by Alexander Katunin, a former owner of Russian metals giant Evraz and current co-owner of Swiss trading firm Carbofer.
The deal, which calls for the Russian group to obtain 50 percent plus two shares of ISD for an estimated $2 billion, will be financed by Vnesheconombank (VEB), Russia’s state-owned development bank. Russian President Vladimir Putin, who is also the chairman of VEB’s Supervisory Board, reportedly brokered the deal.
The ISD purchase represents a major Russian move in Ukraine, a country that STRATFOR said would be a top target in Russia’s resurgence and reconsolidation in 2010. The timing — and the Kremlin’s backing — of the deal is significant for the future of Russian influence in Ukraine.
ISD ranks among the world’s 30 largest steelmakers, producing more than 10 million tons of steel annually. While it is based in Donetsk and operates plants in Dneprovskiy and Alchevsk (all located in Eastern Ukraine’s industrial heartland), it also has steel mills in Poland and Hungary.
In ISD, Russia is gaining significant assets not only in Ukraine but in two key European countries (especially Poland) on which Moscow has its sites set. And with the financial crisis causing a precipitous decline in global demand for many of Ukraine’s industrial materials, particularly steel, Russia was able to acquire these assets relatively cheaply.
ISD is known to have ties to Ukrainian Prime Minister Yulia Timoshenko. Timoshenko (known as Ukraine’s “steel princess” due to her ownership of significant assets in the industry and other ties to steel firms) was closely involved in the ISD deal. Therefore, it is probably no coincidence that the ISD deal — which reportedly was concluded in December 2009 — was announced when it was. Ukraine’s presidential elections are scheduled for Jan. 17, and Timoshenko is in the running.
While Timoshenko has been a leading candidate since the election was announced, recent polls show she has slipped considerably behind frontrunner and current opposition leader Viktor Yanukovich. This deal is likely a last-minute attempt by Timoshenko to show the electorate that she is capable and willing of working with the Russians (although an attempt that is not without cost, as Timoshenko has faced criticism from less pro-Russian elements in Ukraine for selling key Ukrainian assets to Russia).
This is particularly important now since Moscow has pulled Ukraine away from the West and into Russia’s sphere of influence. Indeed, it is reported that several million dollars from the ISD sale will be (and likely already have been) used to fund Timoshenko’s presidential campaign.
This deal also is of interest since Putin brokered it in tandem with Katunin, a member of Russia’s oligarch class. Putin has worked to destroy the oligarchs as a ruling class, sparing only the influential and business-savvy oligarchs who would answer to the Kremlin and advance state interests. Katunin has shown his loyalty by participating in the ISD purchase, which certainly benefits the Kremlin.
With Ukraine’s elections fast approaching and Russia consolidating the work it has done to regain influence there, the ISD deal is likely only a small part of Russia’s moves in Ukraine and other countries in its periphery.
LINK: https://www.stratfor.com
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2. UKRAINE: RUSSIAN INVESTORS TAKE CONTROL OF ISD
By Roman Olearchyk in Kiev, Financial Times, London, UK, Fri, Jan 8 2010
KIEV - ISD, the debt-laden Ukrainian steel group which controls mills from Ukraine to Poland and Hungary, confirmed on Friday that its billionaire
owners had agreed to sell a 50 per cent plus two share stake in their business to a group of Russian investors.
ISD revealed in a statement that one of its new owners is Swiss-based steel trader Carbofer, itself co-owned by Russian businessman Alexander Katunin.
But the identity of other Russian investors and the value of the acquisition, estimated to be in the billion-dollar range, remain unclear. Oleksandr Pilipenko, a vice president within the ISD group, said other “financial investors” would become co-owners of ISD as part of the transaction, which is being financed by Russia’s state-owned Vnesheconombank.
He could not identify the others or reveal Mr Katunin’s partners in Carbofer, saying only that “none of the new owners would have more than a 20 per cent stake”. “I do not have authority to reveal the other shareholders, but I think it will become public in the future,” he said. Ukrainian businessmen Sergey Taruta and Oleg Mrktchan would together retain a 49 per cent stake, while their erstwhile Ukrainian partner, Vitali Gaiduk, has left the business, Mr
Pilipenko confirmed.
Mr Pilipenko said the arrival of new investors would strengthen ISD, which is struggling to restructure some $3bn in debts amid falling steel demand and prices. ISD owns two steel mills in Ukraine, one each in Poland and Hungary. But the group lacks raw materials, namely ore and steel-making coal, which analysts have described as a weakness.
Carbofer was not available for comment but also appears to lack ownership of raw materials used in making steel. But Mr Pilipenko insisted ISD’s new
partners were “influential enough to guarantee access to competitive raw materials from Russia and other markets”.
Earlier this week, Ruben Vardanian, chairman of Troika Dialog, a Moscow investment bank acting as exclusive financial adviser on the deal, said it
represented a big move to consolidate metals assets in Russia and Ukraine and boost co-operation between the two.
But Tomas Fiala, managing director of Kiev-based investment bank Dragon Capital, said the absence of a partner with strong access to raw materials “casts unclarity over the deal”.
However, the arrival of new investors would be likely to help ISD with is short-term debt troubles, and, Mr Fiala speculated, a strategic investor
could be brought in at a later time.
The timing of the sale, coming on the eve of a hotly contested presidential election in Ukraine, has fuelled speculation about possible political
motivations that could have driven an ownership change.
Mr Gaiduk is an adviser on energy relations with Russia to Yulia Tymoshenko, Ukraine’s prime minister and candidate in the January 17 vote. Polls show
she has some 20 per cent support, about 10 percentage points behind frontrunner Viktor Yanukovich, an ex-prime minister. Both seek to revive
relations with Russia that went sour under Viktor Yushchenko, the pro-western incumbent president.
Mr Yushchenko, meanwhile, has accused both of selling out Ukrainian interests to Russia.
LINK: http://www.ft.com/cms/s/0/baa4a32c-fc76-11de-bc51-00144feab49a.html
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3. TIDE TURNS FOR EUROPEAN IPO MARKET
By Radi Khasawneh, The Wall Street Journal, NY, NY, Mon, Jan 11, 2009
Bankers once again have something to smile about, with companies from Russia, Ukraine, Poland, the Czech Republic and the U.K. all preparing to issue shares in initial public offerings.
The activity in IPOs suffered much of last year as markets lurched out of recession. However, in the fourth quarter, the tide began to turn, with European IPO volumes reaching $6.8 billion, according to data provider Dealogic. That total dwarfed the $811 million raised through IPOs in the previous three quarters combined and signaled a return of investor appetite.
Bankers said the year ahead will see a return of big-ticket deals, but warn that wary investors may force down prices.
Sam Dean, co-head of global finance for Europe, the Middle East and Africa at Barclays Capital, said: "There is no doubt that investor sentiment has improved dramatically in a short period of time, but the primary market so far has demonstrated clearly that investors will continue to be selective."
Peter Guenthardt, head of European equity capital markets at UBS AG in London, said investors will look to large-cap stocks for "defensive growth" but have been "more reluctant to look at small names, and I expect that to continue."
One of the biggest themes expected this year is the return of sponsor-led IPOs, as private-equity firms look to exit investments.
A consortium of buyout firms, including Kohlberg Kravis Roberts & Co. and Blackstone Group LP, is planning a multibillion-euro float of Danish telecommunications company TDC in February or March. Blackstone also owns Merlin Entertainments Group, the operator of London tourist attractions Madame Tussauds and the London Eye, which is slated for a £2 billion ($3.21 billion) offering early this year.
The market for IPOs by private-equity companies looking to either fully or partially exit investments declined as the financial crisis affected valuations and global stock markets plummeted.
That intensified after Lehman Brothers Holdings Inc.'s collapse in September 2008, but the recovery that started in March last year has meant that flotation plans are being dusted off.
Big-ticket IPOs should encourage smaller companies to come to market, but one change expected this year is a return of listings from regions that have been inactive.
Several Russian companies have lined up deals in recent months. Among those is mining company Suek, which plans a $9 billion dual listing in Moscow and London, with Citigroup Inc. and VTB Capital advising.
Aluminium manufacturer UC Rusal also is preparing a listing in Hong Kong, the first for a Russian company. Most recently, Russian media firm ProfMedia also threw its hat in the ring, with plans for a $500 million listing in London early this year. ProfMedia has hired Bank of America Corp. and Credit Suisse Group.
Other Central and Eastern European companies looking to float include Ukrainian insurance company Powszechny Zaklad Ubezpieczen SA, or PZU, which aims to come to market in the first quarter, and Polish energy company Tauron SA.
The region also is hosting one of the few remaining spinoff IPOs in the pipeline. Belgian bank KBC Groep NV has announced that it will spin off its Czech bank, CSOB, this year. That would make it the largest listing on the Prague Stock Exchange.
In the U.K., the IPO pipeline has been bolstered by privately held companies looking to profit from improved market conditions. Companies that have demonstrated growth in difficult markets are likely to be the strongest contenders, said bankers. They pointed to online-grocery retailer Ocado Ltd., which is expected to launch an IPO valued at about £600 million.
More at www.efinancialnews.com; Write to Radi Khasawneh at radi.khasawneh@dowjones.com
LINK: http://online.wsj.com/article/SB1000142405274870365210 4574652192653026758.html?mod=googlenews_wsj
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4. FACTBOX- UKRAINE'S POLITICS AND FINANCES
Reuters, Kyiv, Ukraine, Tue, Jan 5, 2010
KYIV - Ukraine holds a presidential election on Jan. 17, its first since the pro-Western "Orange Revolution" of 2004/5 which led to a re-run poll that was won by President Viktor Yushchenko. Most commentators expect there to be no outright winner on Jan. 17 and foresee a second round of voting on Feb. 7.
Following are key facts about Ukraine's politics and finances and why the ex-Soviet state is especially vulnerable to heightened risk aversion among international investors.
POLITICS
[1] Ukraine has been plagued by political turbulence since "Orange Revolution" protests in 2004 brought to power President Viktor Yushchenko and a team committed to moving closer to the West and joining NATO and the European Union.
[2] Rows pitting Yushchenko against his former ally Yulia Tymoshenko split the "orange" camp and brought down governments, blocked policy-making and delayed a $16.4 billion IMF lifeline earlier this year.
[3] Ukraine fell into a deep recession marked by plunging steel exports and a much weakened currency which in turn destabilised the banking sector. The economy contracted by up to 15 percent in 2009.
[4] Ukraine's fractious political life reflects the country's longstanding division into the nationalist west and centre, which looks to the EU and United States, and the Russian-speaking east and south, which are friendlier towards Moscow.
[5] Relations with Russia, bumpy throughout the post-Soviet period, have sunk to unprecedented lows under Yushchenko. The Ukrainian president denounced Moscow's military intervention in Georgia in 2008, while his Russian counterpart Dmitry Medvedev called him anti-Russian.
[6] Ukraine depends heavily on Moscow for gas supplies and is a transit country for gas going to Europe. Disputes over gas prices between Moscow and Kiev have led to supply cuts to Europe, which receives 25 percent of its gas from Russia.
CURRENCY POLICY
[1] The hryvnia currency plummeted in late 2008 as the economic crisis took hold, losing over 60 percent of its value to the dollar as its exports sank.
[2] It has since strengthened to about 8.0 per dollar, from a historic low of almost 10/$ in December 2008 and compared to that year's peak of 4.5/$.
[3] Its weakness has made it difficult for millions of Ukrainians to pay back debt which they took out in dollars. That in turn has shaken the banking sector.
[4] The central bank, using its reserves and IMF funds, has intervened on the foreign currency market on an almost daily basis since the start of the crisis to prop up the hryvnia.
FINANCES
[1] Ukraine has received over $10 billion from the IMF since November 2008. The loan came on condition of fiscal prudence, recapitalisation of banks and a liberal exchange rate mechanism.
[2] The Fund suspended its programme and refused to disburse a $3.8 billion tranche after parliament and the President raised the minimum wage contrary to the government's wishes, costing the budget potentially billions.
[3] IMF chief Dominique Strauss-Kahn said the fund would resume work only after the presidential election.
[4] But in a surprise move, the IMF did allow the central bank to spend $2 billion of its foreign currency reserves -- effectively answering Ukraine's demands made in December for an emergency loan of similar proportions.
[5] Foreign exchange reserves as of the end of November dipped to $27 billion. The reserves amounted to $32 billion at the start of 2009 and were at record highs of almost $38 billion in the summer months of 2008.
[6] Analysts estimate the trade and current accounts as close to balanced in 2009 as imports dropped because domestic demand waned and exports become better priced because of the weakened hryvnia.
FOREIGN DEBT
[1] The central bank estimates Ukraine's foreign debt obligations in 2010 will be about $20 billion, $18 billion of which is commercial debt.
[2] The government said it had paid all its domestic and foreign debt due in 2009 on time and in full, despite investors' fears throughout the year of some sort of default.
[3] It has however restructured a so-called quasi-sovereign bond of state energy firm Naftogaz by swapping its foreign debt for a new issue worth $1.6 billion.
[4] It is also in the process of changing the terms of another quasi-sovereign bond of its state railway company, news of which sent jitters round European markets.
Ukraine was forced to restructure its debts in 2000 and made the final payments only in 2008. Credit default swaps -- a tradable instrument that measures risks of debt default -- have been the highest in the world for Ukraine. Compiled by Sabina Zawadzki; Editing by Charles Dick)
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5. POLAND WAKES UP TO HARSH UKRAINIAN BUSINESS CLIMATE
"So what does Ukraine do to address those problems? Nothing. Literally, nothing."
By Marcin Sobczyk, WSJ Blogs, New Europe
Dispatches from Dow Jones writers across Eastern and Central Europe
The Wall Street Journal, NY, NY, Wed, January 6, 2010
Polish computer hardware distributor Action decided to pull out of Ukraine and sell shares in its unit there.
Despite Action’s huge loss on the entire investment, analysts who cover this Warsaw-listed company offered a loud sigh of relief after the pullout as
Ukrainian operations continued to generate losses from quarter to quarter without any promise of a better tomorrow.
The company said it views the situation in Ukraine negatively, as declining gross domestic product, high inflation and unemployment mean the country’s
economy will be depressed for many quarters ahead.
Flashback to the early 1990s — some politicians, maybe listening to what Russia was saying or maybe just being useful idiots, were saying Poland was
wrong in reorienting its own economy from Comecon to the West. Why go West if you have the vast markets of the East, they would say?
Fortunately, Poland didn’t listen and now nearly 80% of its foreign trade is with other European Union countries, with more than 50% of the total with
the euro zone.
In the meantime, Russia has repeatedly tried to block Polish exports, and even the Orange Revolution in Ukraine, which Polish politicians eagerly
supported, has failed to change anything for Polish companies there.
Keep in mind that many Polish executives who are still active now also have the experience of the communist regime and its crazy economic logic, and
they somehow got by. But present-day Ukraine just beats them.
A number of Polish companies that are covered by the financial media here have investment projects in Ukraine. This group includes or used to include
radio broadcaster RMF FM, one of Poland’s largest banks PKO Bank Polski, media firm Agora and now South African-owned online communicator Gadu-Gadu, as well as a number of real-estate developers.
And they all complain that business rules in Ukraine are unstable, employees disloyal, corruption out of control. Leszek Czarnecki, a Polish financial
tycoon with, to put it mildly, a lot of experience with communist Poland, has recently said his decision to invest in Ukraine was one of the biggest mistakes of his life.
Contrary to what many in old-EU countries think, there is no common culture in Poland and Ukraine, and the two countries are increasingly diverging. For
many Polish investors the experience of Ukraine is a true culture shock.
So what does Ukraine do to address those problems? Nothing. Literally, nothing.
Several weeks ago I had the pleasure of speaking at a conference for Ukrainian journalists co-organized by the Polish Foreign Ministry. What surprised me most when I heard my Ukrainian colleagues was their obsession with politics — and their absolute disinterest with the economy.
For any post-communist country, real integration with the west and real security guarantees begin when economic stakes are high for foreign
investors — billions of dollars of investments and billions of profits.
Instead, all I heard was: Will Yushchenko this, will Tymoshenko that. Will NATO accept us, will EU give us free travel. Will Poland advocate for us.
If there’s no cash incentive, who cares, really?
LINK: http://blogs.wsj.com/new-europe/2010/01/06/poland-wakes-up-to-harsh-ukrainian-business-climate/
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6. UKRAINE'S PRESIDENTIAL ELECTION: A PRIMER
Analysis & Commentary: by David Kramer
Foreign Policy and Civil Society Program, Focus on Ukraine #1
German Marshal Fund of the United States, Wash, D.C., Dec 18, 2009
WASHINGTON, D.C. - This is the first in a GMF series, Focus on Ukraine. The set of briefs will discuss Ukraine before, during, and after the 2010 presidential election.
SUMMARY: On January 17, 2010, Ukrainian voters will go to the polls to choose their next president. Nobody knows who the winner will be—and that reflects very well on Ukraine’s democratic development. Most observers expect that next month’s election, while not flawless, will continue a trend in Ukraine of "free and fair" elections.
Those seeking the presidency actually have to go out and drum up support for their candidacies— they have to earn voters’ support. That doesn’t happen everywhere in the region. The two leading candidates are former Prime Minister Viktor Yanukovych and current Prime Minister Yuliya Tymoshenko, but neither is expected to win in the first round, forcing a runoff scheduled for February 7.
ARTICLE: On January 17, 2010, Ukrainian voters will go to the polls to choose their next president. Unlike in some other countries in the region, in Ukraine it will in fact be the voters, not a select group of politicians cutting backroom deals, who will determine their country’s future leadership.
Nobody knows who the winner will be—and that reflects very well on Ukraine’s democratic development. Efforts to fix elections, which failed during the Orange Revolution in 2004, have not been repeated in two nationwide votes for the Rada, Ukraine’s parliament.
International monitors deemed the 2006 and 2007 Rada elections to have passed the "free and fair" test, and most observers expect that next month’s election, while not flawless, will do the same, thanks in many respects to a vibrant civil society and free media that keep a close eye on things.
Moreover, those seeking the presidency actually have to go out and drum up support for their candidacies—they have to earn voters’ support. That, too, doesn’t happen every place in the region, and such positive developments should not be taken for granted.
While the winner of the election may be unknown at this point, what does seem certain is that Ukraine will have to undergo a second round of elections on February 7 since no candidate is likely to secure the 50 percent plus one requirement to win outright on January 17.
The two leading candidates are former Prime Minister Viktor Yanukovych and current Prime Minister Yuliya Tymoshenko, with Yanukovych maintaining roughly a 10 percent lead, give or take depending on the poll. One challenge for pollsters is that a sizable percentage of Ukrainian voters remain undecided or at least are not telling pollsters whom they’ll support.
The big question is whether Yanukovych, in a runoff against Tymoshenko, could see his level of support rise to get him across the threshold. Conventional wisdom suggests that he faces a ceiling, that his support won’t go above 45 percent, and that Tymoshenko will reap the backing of voters who opted for other candidates in the first round.
Conventional wisdom, of course, isn’t always right. Turnout will also be critical and depend on regional breakdowns: higher turnout in the east and in Crimea would benefit Yanukovych, whereas a strong showing of voters in the center and west is apt to favor Tymoshenko.
The dominant issue in the campaign is, not surprisingly, the economy, and connected to that is the issue of energy security and the possibility of another Russian cutoff. Ukraine’s GDP is expected to plummet some 15 percent this year, the steepest decline in the region. Issues such as whether to seek membership in NATO, the status of the Russian language, the future of the Black Sea Fleet, and even the H1N1 epidemic are largely irrelevant to most voters. It’s the economy, stupid.
Tymoshenko has run on a campaign of getting things done. "They strike-she works" and "They block-she works" blare from Tymoshenko’s billboards around the country. She and her party in the parliament opposed legislation supported by Yanukovych’s party-and which President Viktor Yushchenko signed into law—providing for large increases in wages and pensions.
The International Monetary Fund strongly advised against this massive spending boost and subsequently suspended its loan program to Ukraine. Tymoshenko also has pushed for closer integration with the European Union, with an emphasis on reforms Ukraine needs to undertake to enhance prospects for such integration, while emphasizing the importance of simultaneously maintaining good ties with Moscow.
As the main opposition leader, Yanukovych represents change—some argue a return to the past—from the current political leadership. His emphasis on returning to economic growth, restoring standards of living, and offering political stability is matched with his constant blaming of Yushchenko and Tymoshenko for Ukraine’s current difficulties.
Yanukovych accuses them of damaging relations with Russia and has made restoring bilateral ties with Moscow a central theme of his campaign. In an interview with the Wall Street Journal in mid-November, Yanukovych said, "I have never denied the influence of the Russian factor in Ukrainian politics."
Russia has not repeated its experience from five years ago when it supported Yanukovych’s candidacy with some $600 million and then-Russian President Vladimir Putin twice visited Ukraine to stand shoulder-to-shoulder with him. (The U.S. and EU also provided support to Ukraine in 2004 but for purposes of running a decent electoral process, not in support of one candidate over the other.) Speculation is that after the experience in 2004, Russian leaders are neither impressed with nor trust Yanukovych.
Still, Russian President Dmitriy Medvedev played an active role in 2004 in support of Yanukovych’s campaign when Medvedev was Putin’s chief-of-staff, and some believe that he continues to back Yanukovych. In a rather blatant effort to influence the Ukrainian domestic scene, Medvedev sent Yushchenko a public letter on August 11 blasting the Ukrainian leader for "anti-Russian" policies and behavior. The letter generated more attention for Yushchenko, who is running for reelection, than anything else the Ukrainian president has done on his own. With or without the letter, Yushchenko has no chance of winning.
Putin, on the other hand, has met several times with Tymoshenko, with whom he has worked out an energy agreement, whereby Ukraine will not be penalized for taking less gas than it had agreed to in January and Russia will agree to pay higher transit fees next year. Some analysts conclude that the Putin-Tymoshenko interaction means that Russia is betting on her.
When asked at his recent question-and-answer marathon about this, however, Putin flatly denied supporting Tymoshenko. He worked with her "because she is the Ukrainian prime minister and I am the head of the Russian government," he explained and went on to note his United Russia party’s "special relations" with Yanukovych’s Party of Regions.
Russia’s rather subdued role compared to 2004 may reflect a desire to avoid betting on the wrong horse this time—and it doesn’t know yet which horse is likely to win. It may also reflect the fact that divisive issues like NATO, about which Russia has strong views, are not prominent in the campaign. The leading candidates, while certainly different, offer less of a black-and-white choice on key issues compared to the campaign in 2004.
The United States and the European Union, while stressing the importance of a free and fair process, have also taken a low profile in the election. Yet, that is how it should be, for this is an election for Ukrainians to decide, not outsiders.
Still, Russian money reportedly has gone to a number of different candidates, as Moscow seeks to cover all necessary bases. Money from the Ukrainian business community has also been spread out among the leading candidates to cover various bets. One oligarch, Serhiy Tyhypko, is running himself.
While the election is likely to boil down to Yanukovych versus Tymoshenko, there are other candidates running. Trailing far behind the two top candidates is former chairman of the Ukrainian parliament and former Foreign Minister Arseniy
Foreign Policy and Civil Society Program
Yatsenyuk. Despite being the youngest candidate in the race (he’s only 35, the minimum age required to be president), Yatsenyuk’s campaign has lacked energy, and after some rise in support over the summer, his numbers have bottomed out. Also far behind is Yushchenko, who, despite being fairly active, stands little chance of being reelected and spends most of his energies trying to bring down the current prime minister.
Rarely does he miss a chance to blame Tymoshenko for every sort of problem in the country; for example: "It is humiliating to comment on the tone of recent negotiations between the Ukrainian and Russian premiers," Yushchenko said on November 24. By comparison, Yushchenko rarely voices criticism of Yanukovych, his archrival in 2004, indirectly offering him support through his attacks on Tymoshenko, Yanukovych’s main competitor this time.
Don’t expect the political situation to settle down after the second round and the announcement of a new president. There is a distinct possibility that there will be a call for a new parliamentary election and the selection of a prime minister, which the Rada must approve, is also likely to be a contentious matter. Politics in Ukraine, in other words, are not likely to be resolved and go quiet any time soon.
ABOUT DAVID J. KRAMER:
As a Senior Transatlantic Fellow, David J. Kramer works on issues related to Russia/Eurasia and wider Europe as well as democracy and human rights. He came to GMF after more than eight years at the U.S. State Department in various capacities, most recently as assistant secretary of state for democracy, human rights, and labor.
Before that, he was a deputy assistant secretary of state for European and Eurasian Affairs, responsible for Russia, Ukraine, Moldova, and Belarus affairs, as well as regional nonproliferation issues. He also served in the Office of Policy Planning and as senior advisor to the Under Secretary of State for Global Affairs.
Before joining the government, Mr. Kramer was a senior fellow at the Project for the New American Century, associate director of the Russian and Eurasian Program at the Carnegie Endowment for International Peace, and assistant director of Russian and Eurasian studies at the Center for Strategic and International Studies. Mr. Kramer received his master’s degree from Harvard University and his bachelor’s degree from Tufts University.
USUBC NOTE: David Kramer serves as a Senior Advisor to the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
ABOUT GMF:
The German Marshall Fund of the United States (GMF) is a nonpartisan American public policy and grantmaking institution dedicated to promoting greater cooperation and understanding between North America and Europe. GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders to discuss the most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can address a variety of global policy challenges.
In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany on the 25th anniversary of the Marshall Plan as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has seven offices in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, Ankara, and Bucharest.
GMF, 1744 R Street NW Washington, DC 20009 T 1 202 745 3950 F 1 202 265 1662 E info@gmfus.org.
LINK: http://www.gmfus.org//doc/GMF_UkraineSeries_Kramer.pdf
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7. MORE THAN A NEIGHBOR: WHY UKRAINE MATTERS
Analysis & Commentary: by Jörg Forbrig and Dakota Korth
Foreign Policy and Civil Society Program, Focus on Ukraine #2
German Marshal Fund of the United States, Wash, D.C., January 5, 2010
WASHINGTON/BERLIN - This is the second in a GMF series, Focus on Ukraine. The set of briefs will discuss Ukraine before, during, and after the 2010 presidential election.
SUMMARY: With expectations disappointed among Ukrainians, and impatience widespread in the West, it may be tempting to disregard the January 17, 2010 presidential election as just another in an endless series of polls that have done little to advance Ukraine in recent years. That verdict, however, would be as premature as it would be irresponsible.
Given the significance and potential of Ukraine, as well as the enormous challenges facing the country, it should be clear, rather, that the country merits all the assistance the West can muster in order to swing the momentum back toward democratic reforms, economic development, and geopolitical stability. The January 2010 election marks an important occasion for the West to reengage in Ukraine, possibly the last moment that the broad spirit of the Orange Revolution and its democratic promise are still alive in the country.
ARTICLE: Anton Chekhov once remarked that "any idiot can face a crisis; it’s the day-to-day living that wears you out." In Ukraine today, many seem worn out after years of political infighting in Kiev while the country slipped ever deeper into economic crisis and social hardship.
What a contrast with the enthusiasm of the Orange Revolution when, a mere five years ago, hundreds of thousands took to the streets in Ukraine to protest fraudulent elections, oust a corrupt regime, and return democracy to the country. The West, in those days, watched in awe as Ukraine exemplified the appeal of freedom and democracy. Yet that optimism has since turned into frustration.
With disappointed Ukrainians and an impatient West, it may be tempting to disregard the January 17, 2010, presidential election as just another in an
endless series of polls that have done little to advance Ukraine in recent years. That verdict, however, would be as premature as it would be irresponsible.
On the contrary, the West would do well to remember what is at stake in Ukraine, why the country matters, and why enhanced Western efforts are needed to help Ukraine on its road to democracy, development, and stability.
Such stock-taking should start with the considerable positive developments that have taken place in Ukraine. Since the Orange Revolution, Ukraine has held two nationwide elections for parliament that have been deemed free and fair by international observers, and it is generally expected that this trend will continue with the upcoming election for president this month.
The Ukrainian media is by far the freest in the region, and civil society is flourishing with thousands of non-governmental initiatives working on issues from citizen participation and anti-corruption to environmental and social affairs.
Ukraine’s parliament, the Verkhovna Rada, is a platform for political discussion that, if at times fierce, is incomparably superior to the previous practice of rubber-stamping presidential decisions. These positives must not be overlooked. They are gains worth defending, and a basis upon which more stable and effective democratic institutions can be built.
Making democracy work beyond the election will be Ukraine’s formidable task over the next several years. On one hand, this will require institutional reforms to address the labyrinth of competencies between president, government, and parliament; between center and periphery; and to put an end to the political bickering that has been at the root of recent stagnation.
On the other hand, Ukrainians expect effective public policies to resolve the looming social crisis in the country. Swathes of Ukrainian society, be it pensioners or public employees, see their often meager salaries arrive weeks or months late, if at all. The demographic situation is dismal, with a vicious circle of low birth rates, high mortality, and large-scale emigration.
Public health is deteriorating, as demonstrated by the recent swine flu epidemic or HIV/AIDS infection rates, the highest in Europe according to a recent UN report. Environmental degradation is severe, especially in the heavily industrialized eastern and southern parts of the country.
On these and other accounts, lack of government response diminishes the quality of life of millions of Ukrainians, erodes their confidence in the democratic system, and feeds a charged public mood and political instability.
Enthusiasm toward market economy and democracy is on the decline in the country—as evidenced in the most recent survey by the Pew Global Attitudes Project where only 30 percent of Ukrainians favored democracy in 2009 compared to 72 percent in 19912 —and it may be only a matter of time before calls are heard for a strong hand to lead Ukraine to greater prosperity. Hence, little time is left to restore the democratic optimism that was so overwhelming among Ukrainians during the Orange Revolution.
What is more, success in building effective democracy in Ukraine would have important repercussions throughout the former Soviet Bloc. Advancing liberal democracy and market economy in Ukraine would inspire reformers across the region, while failure would provide neighboring autocrats with an additional excuse for their own non-democratic agenda.
This effect is probably most obvious in relation to Belarus and Russia, both of which share close historical, cultural, and human ties with Ukraine. No other people are as closely watched by Russians and Belarusians, and seeing their Ukrainian brethren prosper in democracy and independence, and eventually move closer to Europe, will provoke these Slavic neighbors to question the political course set in Minsk and Moscow.
The regional impact of a strengthened democracy in Ukraine extends further, however, in that it would turn the country into an anchor of geopolitical stability. Enhanced democratic institutions would allow Kyiv to accommodate the diversity of Ukraine’s regions, and alleviate fears existing among
Russian speakers, Crimean Tatars, or Ruthenians, among others, that are all too often exploited for political gain.
Absent such threats (perceived or actual) to its integrity as a state, Ukraine would regain the confidence to handle geo-strategic issues on its own soil, such as the Russian naval base at Sevastopol, and to contribute to resolving such issues in neighboring countries, as in the case of the Transnistria issue in Moldova.
Most importantly, however, Ukraine has the potential to temper Russia’s imperial ambitions. "As Ukraine moves toward Europe," Zbigniew Brzezinski has noted, "the imperial option for Russia closes forever and Russia then only has one option—to follow suit in the lead of its older brother."
Beyond this eastern vector, Ukraine holds weight vis-à-vis Europe, North America, and the international community. Large diaspora communities exist in the United States and Canada, and hundreds of thousands of Ukrainian migrant workers can be found across Europe. Ukraine shares a substantially long land border with European neighbors, with all the attendant potentials and problems that can be found at such frontiers, from cross-border cooperation to trafficking in persons.
With the backing of a majority of its people, Ukraine wishes to move closer to the European Union; NATO, too, may one day be in the cards should popular support increase. The country has active personnel in peacekeeping missions across the globe, including in Kosovo, the Democratic Republic of the Congo, Liberia, Sudan, Iraq, and Afghanistan. These international and Western ties are often highlighted by Ukrainians who, at the same time, feel that these existing bonds are underappreciated in Europe and the United States.
Finally, Ukraine has tremendous economic potential that to date remains largely untapped. It has a high-caliber workforce, though many of Ukraine’s best and brightest continue to leave in search of a better life elsewhere. The country has some of the most fertile land in Europe that once made it the breadbasket of the Russian Empire and Soviet Union alike, yet today millions of hectares are lying fallow for lack of investments and Byzantine regulations.
Coal mines and steel mills in Eastern Ukraine formed the backbone of Soviet industrialization, yet their safety records today are among the worst worldwide. And even Ukraine’s fortunate location as the main transit country for Russian oil and gas to the European Union has been a mixed blessing, with frequent gas disputes and cut-offs having undermined its reliability as an energy corridor.
Much of this misery has to be blamed on rampant corruption, confusing regulations, and inept governance that earn Ukraine the title of one of Europe’s most troubled economies. The country’s woes have delayed the latest bailout from the International Monetary Fund, and continue to threaten neighboring and global economies, be it through a sovereign default or another energy dispute.
Given the significance and potential of Ukraine, as well as the enormous challenges facing the country, it should be clear that the country merits all the assistance the West can muster in order to swing the momentum back toward democratic reforms, economic development, and geopolitical stability. The January 2010 election marks an important occasion for the West to reengage in Ukraine, possibly the last moment that the broad spirit of the Orange Revolution and its democratic promise are still alive in the country.
Western outreach needs to occur on all possible levels, from an open-door policy from the EU and NATO and assistance to Ukraine’s battered economy to enhanced support for civil society and stronger human and cross-border contacts that send a signal of Western solidarity directly to Ukrainian citizens.
In return, the West should take Ukraine’s political elites to task, demanding that they put aside personal animosities and tackle the country’s genuine problems instead, including deficient governance, corruption, and festering social issues. Only this dual effort, by domestic leaders and their transatlantic partners, can keep Ukraine from sliding backwards. Otherwise the upcoming presidential election will only lead to greater frustration.
FOOTNOTES:
1 Jörg Forbrig is a senior program officer for Central and Eastern Europe and Dakota Korth is a senior program officer for Foreign Policy and Civil Society with the German Marshall Fund of the United States (GMF). The views expressed are those of the authors and do not necessarily represent the views of GMF.
2 See Pew Global Attitudes Research Project, "Two Decades After the Wall’s Fall: End of Communism Cheered but Now with More Reservations," http://pewglobal.org/reports/display.php?ReportID=267
WRITERS:
[1] Jörg Forbrig is senior program officer for Central and Eastern Europe, based out of the German Marshall Fund’s office in Berlin. In this capacity, he contributes to GMF’s work in Europe’s East, including analytical and policy work on the new member countries of the European Union, and the EU’s Eastern neighborhood; Marshall Memorial Fellowship activities; and support for civil society, elections and political processes in transitioning democracies.
Prior to joining GMF in 2002, he worked as a Robert Bosch Foundation fellow at the Center for International Relations in Warsaw, Poland. Dr. Forbrig holds a Ph.D. in social and political sciences from the European University Institute in Florence and master’s degree in political science from Central European University in Budapest.
[2] Dakota Korth is senior program officer for Foreign Policy and Civil Society at GMF’s headquarters in Washington, DC. His portfolio includes the Balkan Trust for Democracy and the Black Sea Trust for Regional Cooperation, GMF’s regional civil society grantmaking programs. Mr. Korth lived and worked in Ukraine between 2001-2003.
ABOUT GMF
The German Marshall Fund of the United States (GMF) is a nonpartisan American public policy and grantmaking institution dedicated to promoting greater cooperation and understanding between North America and Europe. GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders to discuss the most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can address a variety of global policy challenges.
In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany on the 25th anniversary of the Marshall Plan as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has seven offices in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, Ankara, and Bucharest.
GMF, 1744 R Street NW Washington, DC 20009 T 1 202 745 3950 F 1 202 265 1662 E info@gmfus.org
LINK: http://www.gmfus.org//doc/GMF_UkraineSeries_ForbrigKorth_Final.pdf
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8. ENERGY SECURITY FOR UKRAINE AND EUROPE
Analysis & Commentary: By Jörg Himmelreich
Foreign Policy and Civil Society Program, Focus on Ukraine #3
German Marshal Fund of the United States, Wash, D.C., Mon, Jan 11, 2010
WASHINGTON/BERLIN - This is the third in a GMF series, Focus on Ukraine. The set of briefs will discuss Ukraine before, during, and after the 2010 presidential election.
SUMMARY: Reforming Ukraine’s energy sector is vital for the future of Ukraine’s economy and security. Ukraine narrowly averted national bankruptcy following the global financial crisis. But Ukraine’s economic recovery depends on reforming the energy sector, which has suffered severe politicization since the 1990s leading to non-transparent business operations and mega-corruption.
European concerns about secure gas supplies from Russia, via Ukraine, have become the overarching policy matter on the current EU-Ukraine agenda. To strengthen Ukraine’s energy sector, the new Ukrainian president should start abandoning domestic subsidies for oil and gas prices and let the price reach global market levels. The energy sector must also improve its business transparency significantly in order to encourage foreign capital investment.
ARTICLE: More than any other issue, energy security will determine Ukraine’s future. Energy is the driving force in Ukraine’s relations with Russia and with the European Union. And it is the reform of the energy sector that will decide the success of urgent domestic political and economic reforms.
The global financial crisis hit Ukraine harder than almost any other country of the former Soviet Union. After years of growth rates as high as 10 percent, Ukraine’s GDP has declined by 15 percent since October 2008, the Hryvnia (Ukraine’s national currency) has lost 60 percent of its value, and bankruptcy of the country could only be averted by an emergency stand-by credit facility from the International Monetary Fund. Economic reform can only succeed, however, if the new Ukrainian president reforms the energy sector.
Ukraine is blessed by its geography: it has generous hydrocarbon resources and is strategically well positioned between Russia, the world’s largest gas producer, and the European Union, Russia’s main gas customer (the EU receives 25 percent of its gas needs from Russia, and 80 percent of that gas is transported via Ukraine).
In spite of often loud Russian rhetoric about its future gas sales to China, Europe will remain Russia’s main market for a long time, if not indefinitely; therefore, Ukraine’s favorable strategic location will not change. Even the North Stream pipeline project, an alternative Russian route that circumvents Ukraine, will not seriously affect this strategic position since it will not be completed until 2015 at the earliest.
Furthermore, the pipeline’s projected annual gas volumes will divert only about a third of European gas imports from Russia that currently traverse Ukraine while European demand for Russian gas continues to grow.
Nonetheless, since the early 1990’s, Ukraine has been struggling with energy security due to the almost complete politicization of the Ukrainian energy sector. This politicization leads to entirely opaque, non-transparent business structures and revenue sources—and mega-corruption.
The Ukrainian energy sector is not governed by business economics but by politicians and their parties. They often use their positions to extract revenues and to choose commercial winners and losers for their personal—private or political—convenience.
Control over the energy sector is a major prize in the political contest; indeed, seizing that control is what makes the political competition in Ukraine so fierce. Other countries debate economic stimulus packages, bail-out measures or other policy actions to limit the economic crisis.
Ukraine, however, has been stuck for more than a year in the deadlock of the personal competition between the President, the Prime Minister, and the head of the Party of the Regions for the presidential election. Ukraine’s political system with its independent media and free elections is different from the Russian model. But its non-transparent and policy-controlled energy sector is altogether too similar.
Ukraine’s energy industry, weakened by the political party rivalries, opened an ideal playing field for Russian political interference. Russian Prime Minister Vladimir Putin inserted himself by doing a favor for his Ukrainian counterpart when he agreed with Prime Minister Yulya Tymoshenko on November 19, 2009, to release Ukraine from fines that it owed Russia for failure to buy the amount of gas that it had committed to.
As a consequence of illegal Ukrainian gas siphoning in January 2009, Russia’s cut-off of gas supplies to Ukraine and Europe not only undermined European confidence in Russia’s credibility as a reliable gas supplier, but also Ukraine’s reliability as a gas transporter. Although this winter’s energy supply disputes seem to involve Belarus, not Ukraine, European concerns about a secure gas supply via Ukraine have become the overarching matter on the current EU-Ukraine policy agenda.
Indeed, it overshadows progress achieved in negotiations of the EU-Ukraine Association Agreement, previously planned to be concluded by the end of 2009. Neither the overwhelming majority of the Ukrainian people nor Russia’s leadership is fundamentally against Ukraine’s EU accession—in contrast to the broad rejection to an accession of Ukraine to NATO.
On the other hand, in their national electorate only a few European leaders presently find support for giving Ukraine a clear EU-membership prospective. It is more important to offer Ukraine pragmatic ways toward EU integration. If an EU free trade agreement with Ukraine could be concluded in 2010, it would offer the country a sales market of almost 500 million customers and the potential for European integration of the Ukrainian economy.
In spite of all political difficulties in dealing with Ukraine, the European Union has to keep in mind that a geopolitical vacuum in its Eastern neighborhood will not exist: if the EU doesn’t act, Russia will do so and increase its efforts to undermine Ukraine’s European integration process. But Ukraine has to contribute constructively to this integration process.
To translate the potential of Ukraine’s energy sector into a strength that contributes to the long-term economic and political stabilization of the country, two major transformations have to be pursued after a new president is elected:
[1] First, the new Ukrainian president needs to start abandoning domestic subsidies for the oil and gas prices for private households and let the price reach global market price levels. This will have profound consequences for other sectors and domestic industries, but is an indispensable step in a transformation at the end of which business and market economics matter more than political control.
Ukraine’s energy intensity is twice as high—or twice as inefficient—as neighboring Poland. This potential to use energy more efficiently can only be explored by lifting domestic subsidies for energy prices.
[2] Second, the energy sector has to improve its business transparency significantly, otherwise, urgently needed foreign capital will shy away from investments into the modernization of the energy infrastructure and new production fields on and off-shore in the Black Sea.
This is not about broad political EU accession but about pragmatic European energy integration, the same way the European Union itself was built up. Even if the EU’s readiness to offer Ukraine a clear EU membership prospective exists, only in the distant future can the EU play a decisive role in the modernization of Ukraine’s energy sector and the improvement of its transparency. Last July, for the first time, the EU offered credit to Ukraine to enable Naftogaz, the national Ukrainian gas transporter, to pay its monthly bill to Gazprom.
But more than this: the EU should think about buying into or leasing stakes in Naftogaz by the European Bank for Reconstruction and Development (EBRD) or other international financial institutions. Such an EU investment touches Ukrainian sensibilities about its sovereignty, because gas pipelines and storage capacities are perceived as assets of Ukraine’s sovereignty.
But the EU stakeholdership should also be seen as strengthening Ukraine’s negotiating position with Gazprom. The European Union as a stakeholder could then enforce the transparency of Naftogaz and Ukraine’s energy sector—and that would unblock Ukraine’s political and economic transformation.
WRITER: Jörg Himmelreich, Senior Transatlantic Fellow, GMF
Jörg Himmelreich is a non-resident senior transatlantic fellow of the German Marshall Fund of the United States (GMF). He focuses on Russia, CIS, global energy security, South Caucasus, Central Asia, India, and transatlantic relations. Dr. Himmelreich comes to GMF from the German Foreign Office, where he served as a policy planner in 2004. Previously, he worked with the DaimlerChrysler Board of Management, where he focused on political and economic relations in Russia, Central Asia, and Eastern Europe and convened meetings of heads of state from these areas.
He also served as director of investment banking for media and communications for the London office of European commercial bank WestLB, having established and directed the bank’s Moscow subsidiary from 1996 to 2000. Dr. Himmelreich has held appointments as head of privatization of the construction industry at the Federal German Trust Agency and as a junior professor at the Institute for Public Law at the Free University of Berlin.
About GMF
The German Marshall Fund of the United States (GMF) is a nonpartisan American public policy and grantmaking institution dedicated to promoting greater cooperation and understanding between North America and Europe. GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders to discuss the most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can address a variety of global policy challenges.
In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany on the 25th anniversary of the Marshall Plan as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has seven offices in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, Ankara, and Bucharest.
LINK: http://www.gmfus.org//doc/GMF_UkraineSeries_Himmelreich_Final.pdf
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9. UKRAINE'S DILEMMA
Editorial, Financial Times, London, UK, Sun, January 10 2010
Five years ago, Ukraine’s presidential elections captured the imagination as Viktor Yushchenko emerged triumphant.
On Sunday, Ukrainians vote in the first presidential election since 2004 and in very different circumstances from the Orange Revolution. Mr Yushchenko’s failure to create stability, fight corruption or protect citizens against a rapacious bureaucracy has created widespread disillusion.
The gloom is compounded by the economic crisis, which has forced Kiev into an International Monetary Fund rescue programme.
Despite the political chaos, the Orange Revolution’s legacy has survived in a free media, openness to the outside world, and multi-party competition.
Despite constant Russian interference, Ukraine’s sense of identity as an independent state has grown. And, despite the economic crisis, Ukraine is a richer place than five years ago, with a better stock of housing, cars and consumer goods.
But Mr Yushchenko’s political failures have left voters with a lamentable electoral choice. He stands no chance of retaining office. The top contenders are Viktor Yanukovich, the opposition leader, and Yulia Tymoshenko, the prime minister, Mr Yushchenko’s 2004 ally but now his bitter rival.
It is humiliating for Ukraine that Mr Yanukovich, whose 2004 presidential campaign was widely seen as fraudulent, has not been hounded out of politics. He has survived thanks to a cynical political culture and the backing of big business. Even Mr Yushchenko has done deals with him.
Ms Tymoshenko should, in principle, be a more attractive choice, given her Orange credentials. But she has proved herself shamelessly opportunistic and shares the blame with Mr Yushchenko for the failures of the Orange camp. Her economic policies show a unnerving penchant for populist intervention, eg with arbitrary price caps.
In international affairs, both would balance ties with Russia with a slow push for European Union integration. Not much to choose between Ms T and Mr Y on this score.
So, whom to back in Sunday’s first round and next month’s run-off? Given the candidates’ shortcomings, voters must focus on what is important. The key now is political stability. Only a stable Ukraine can achieve economic reform and recovery. Ms Tymoshenko is the polar opposite of a stabilising force. Mr Yanukovich, for all his manifest faults, may prove the lesser evil.
Pity Ukraine that it has come to this.
LINK: http://www.ft.com/cms/s/0/b2dd84ee-fe13-11de-9340-00144feab49a.html
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10. MIXED LEGACY OF UKRAINE'S ORANGE REVOLUTION
By Roman Olearchyk in Kiev, Financial Times, London, UK, Mon, Jan 11 2010
KIEV - For Yevhen Zolotaryov, this weekend’s presidential election in Ukraine highlights what has gone right since the country’s Orange Revolution, not just what has gone wrong.
This comes as a surprise as the views of Mr Zolotaryov, one of the youth leaders in the 2004 pro-democracy movement, contrast with the way many in Ukraine are disillusioned with the political events of the past six years. “Many are disappointed, but this is democracy ... [it was] what we fought for,” says Mr Zolotaryov, who is now an ecological activist.
Mr Zolotaryov’s bittersweet view is shared by other leading activists from the revolution. They are pleased with Ukraine’s fierce multi-party competition for power, its media freedoms and an end to the sense of fear that pervaded politics before the Orange Revolution. But, like Mr Zolotaryov, they wish more had been done to promote stability, fight corruption and boost the rule of law.
“Many thought it was enough to hold one big protest, demand democracy and everything will be fine. We achieved democratic elections, but we didn’t achieve many other things,” says Mr Zolotaryov. “The Orange Revolution was a sweet event for us, but . . . we failed to replace the existing leaders, in part due to our own ambitions and infighting.”
Nothing highlights Mr Zolotaryov’s argument more clearly than the remarkable comeback of Viktor Yanukovich, the villain from the disputed 2004 election. Rather than being punished by voters for his alleged role in election fraud, he is the frontrunner in Sunday’s first round of elections. A second round is likely on February 7.
Yulia Tymoshenko, the prime minister who rallied citizens behind Viktor Yushchenko’s presidential candidacy six years back, trails Mr Yanukovich by a whopping 10 per cent. In a sign of the poisonous atmosphere, Mr Yushchenko is fighting to sabotage her presidential bid.
The nightmare for Orange Revolution supporters started soon after hundreds of thousands of street protesters pinned hopes for justice and improved living standards on Mr Yushchenko. Their hopes plunged along with Mr Yushchenko’s popularity. He proved unable to forge partnerships with either opponents or allies. With each year, political wrestling matches between Kiev’s leaders intensified, putting off reforms.
But what looks like a nightmare scenario is actually a victory, activists from the 2004 protests insist.
“I can understand how it looks [like] something went wrong if Yanukovich becomes president,” says Vladislav Kaskiv, who, like Mr Zolotaryov, was a leader of Pora, the youth movement that sparked the protests in 2004. He is now a lawmaker in Ms Tymoshenko’s camp.
“The victory of the Orange Revolution was not about names but to uphold democracy. However, the fact that nobody was punished for the 2004 election falsification is a bad precedent. They should have started with this,” Mr Kaskiv added.
Many citizens see the Orange Revolution as a final turn from Ukraine’s authoritarian past but expected faster reforms.
“Many today take for granted the gains in democracy and media freedom, but so much more could have been achieved. We still don’t have rule of law or functioning government institutions. Barriers for investors are too high. Living standards improved, but much of the economy is still in the shadows,” said Dmytro Potekhin, a civic rights activist.
Petro Kobryn, one of tens of thousands of western Ukrainians who backed Mr Yushchenko in 2004, said: “Ukrainians now see there is no easy solution, no ‘miracle’ presidential candidate.” He worries about a Yanukovich victory. “Will the country turn into a haven for bandits and oligarchs backing him? Will we be pulled back to Russia? Sadly, if such a risk re-emerges, the politicians fighting against it will not have public support again to hold massive protests. Trust is exhausted.”
Ms Tymoshenko is desperate to rally disillusioned citizens against Mr Yanukovich, much like in 2004. Polls show it is her only chance of victory but also show a quarter of citizens are undecided, likely to vote against all candidates, or to not vote at all.
Mr Potekhin hopes “massive disillusionment” will wake up Ukrainians, “encouraging” them to become more involved in grassroots politics and activism: “Hopefully a new generation of leaders will appear in the next election and they will not allow the system to change them, but will change the system.”
LINK: http://www.ft.com/cms/s/0/b9700bce-fee0-11de-a677-00144feab49a.html
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