Government Report

 

Viktor Yanukovych’s Government has made its mark on Ukrainian history in a number of ways. First, it held power during this, Ukraine’s 10th year under modern, independent rule. It was also the first coalition government with a Cabinet of Ministers composed of candidates slated by the parliamentary majority. Most notably though, Team Yanukovych was, from the very outset, engaged in major political and economic challenges.

 

Despite a few bumps in the road, the Yanukovych government has thus far proved itself an effective entity. Hoping to fashion a favorable public persona by adhering to a proven Ukrainian political tradition, Yanukovych has positioned himself as a manager rather than a politician. The Prime Minister made regular statements claiming that economics, not politics, is his number one priority. Polls show, however, that this tack of image building has not been fully successful with most Ukrainians who still regard Yanukovych primarily as a politician. For example, based on an opinion poll in March 2004 by the Ukrainian institute of social research and the “Social monitoring” center, 14.5% of the respondents indicated that they would vote for Victor Yanukovych in the presidential elections, leaving him in second place behind Victor Yuschenko, whose support was at 24%; Petro Symonenko, whose support was at 11%, was third.

 

In addition to implementing its economic program, the Yanukovych government has tried to expand its appeal to a broader constituency to secure more popular support, a task complicated by individual political vanity. With many government ministers working on their personal political ambition rather than offering their support to solidify the image of a serious, committed, industrious body, the government has lacked the substance to deal effectively with many of its challenges.

 

In mid-March 2004, 239 deputies approved the Government Program for 2004 and voted confidence in the Yanukovych government by assessing its performance in 2003 as satisfactory.  Constitutionally, the approval means that the Yanukovych government will not face the possibility of dismissal for another year. The opposition vote was united, rejecting the simultaneous consideration of the proposed program together with the performance of government in the previous year, which it considered to be unacceptable.  Opposition leaders pointed to the rise in prices for food, utilities, medications, crisis in agriculture and reduction in minimum wage, and new tax pressure on small business.  They questioned why people were not seeing any growth in their personal incomes despite the evident economic growth and accumulation of capital, and who was benefiting from the growth, several tens of political-business groups and clans, or the average Ukrainian.

 

grain market CRISIS

 

One of the challenges the government had to face last year, was the summer’s crisis in the grain market and uncertainty in the food market. It was caused by an unfortunate confluence of events when projections of a bad harvest sharply increased demand and inflated prices.

 

Political scientist Volodymyr Fesenko was one of the experts who found it quite possible that the crisis was artificially provoked. Noting that food crises are often used to attack a sitting Prime Minister and his government, Fesenko added that the inadequate, reactionary measures taken in response to the problem only aggravated it. While these accusations could be a natural reaction to the government’s failure to improve the situation, they arouse suspicion that the crisis could have been plotted to discredit the Yanukovych Government. For his part, the Premier shifted responsibility for the crisis to the Ministry of Agrarian Policy, the Ministry of the Economy, and the Anti-Monopoly Committee. In the end, although it reacted with a small degree of ineptitude, the Government survived with its reputation generally intact.

 

THE COMMON ECONOMIC SPACE (CES)

 

At a September 19, 2003 summit of the Commonwealth of Independent States (CIS), the four countries of Ukraine, Russia, Belarus, and Kazakhstan signed an agreement to form a Common Economic Space (CES). As it prepared to sign the agreement, the Yanukovych government met with strong resistance both from the Verkhovna Rada and its own members.

 

The dissension was so strong that First Vice-rime Minister Mykola Azarov who represented Ukraine in the inter-governmental group that crafted the agreement, had to demand that government ministries and agencies halt their overt criticism of the CES initiative.

 

One of the main opponents of the agreement in the Cabinet of Ministers was former Minister of the Economy and European Integration, Valeriy Khoroshkovskiy. He pointed out how the authors of the treaty had manipulated the text by substituting the term “free trade zone” for “customs union.” Khoroshkovskiy raised the question of whether the document, which was to be signed by the presidents of the four signatory nations, jeopardizes Ukraine’s sovereignty since it conflicts with Ukraine’s constitution. He further pointed out that the treaty could derail the nation’s foreign policy strategy of integration with the European Union (EU) and the World Trade Organization (WTO).

 

Offering further proof of an internecine government at odds over the CES, the Labor Party of Ukraine announced it would recall Vice-Prime Minister Dmytro Tabachnyk, the Minister of Industrial Policy Anatoliy Mialitsa, and its Minister of the Economy Valeriy Khoroshkovskiy from their posts if they refused to support creation of the CES.

 

Other ministers assessed the agreement favorably dismissing the threat to state foreign policy. According to the Minister of Defense Yevhen Marchuk, formation of the CES does not conflict with Ukraine’s intention to join NATO, while Minister of Transport Heorihy Kirpa described as groundless any claims that signing the CES agreement will adversely affect hopes for Ukraine’s EU and WTO membership.

 

The most dramatic opinion was registered by Anton Buteiko, Ukrainian ambassador to Romania and one of the nation’s most experienced diplomats. Buteiko resigned from his post to illustrate how ardently he objects to the pact. Explaining his motives, Buteiko said his resignation was prompted by strong feelings that the terms of the CES agreement contradicts the Ukrainian Constitution as well as other laws. Buteiko echoed concerns that formation of a CES will not only be detrimental to Ukraine’s process of European integration, it will violate national interests and have a wide range of negative consequences for Ukraine’s relations with other countries.

 

Finally, the Minister of Foreign Affairs, Kostiantyn Hryshchenko, in his address to the Verkhovna Rada, announced that his ministry along with the Ministry of the Economy and European Integration, and the Ministry of Justice had recommended that President Kuchma sign the CES agreement with reservations. Hryshchenko asserted that the country would adopt a policy of limited adherence to the terms of the document, a tactic that only supports the creation of a free trade zone within the four countries. Serhiy Tihipko, the Head of the National Bank of Ukraine voiced similar sentiments allowing that Ukraine will benefit from a free trade zone but not from uniform customs procedures.

 

This wrangling ultimately forced President Leonid Kuchma to sign a compromised CES agreement which reserved Ukraine’s right to comply only with those provisions that respect its constitution. In the end, the CES controversy starkly illustrates the range of disparate views on foreign policy held by policy makers of every stripe.

 

THE BORDER DISPUTE OVER TUZLA

 

In early October 2003, Russia began the construction of a dike from its mainland Taman peninsula to the Ukrainian spit of Tuzla in the Kerch Strait that connects the Black and Azov Seas. It did so without consulting Ukraine. This political brinkmanship sparked a heated dispute between the two countries and put them on the verge of war.

 

Solving the border dispute became the government’s major political task with Premier Yanukovych actively involved in talks with Russian officials. The government took a firm stand on the issue and claimed Tuzla Island an integral part of Ukrainian territory. President Kuchma supported the government and personally contributed to solving the problem. Commenting on the situation, the president remarked that “the closer the dike gets to our shores, the more sympathetic towards Europe and to the West in general grows popular sentiment in Ukraine.” The president also decreed that if Russia were to cross the Ukrainian border, the Ukrainian side would withdraw from the CES.

 

In late December, Kuchma sat down with his Russian counterpart Vladmir Putin in Crimea and signed a bilateral agreement on cooperation regarding the use of the Sea of Azov and the Kerch Strait. After signing the agreement, Kuchma proclaimed that Ukraine and Russia settled the Tuzla dispute “once and for all.”

 

APPOINTMENTS AND DISMISSALS

 

Busy as he was signing the CES and Tuzla treaties, President Kuchma was also actively realigning senior personnel in major ministries and government agencies. Experts regard the new appointments as a re-distribution of power among the elite rather than evidence of a wholesale, qualitative change in Ukrainian politics.

 

On September 2, 2003, Kuchma recalled the Ukrainian Ambassador to the United States Kostiantyn Hryshchenko and appointed him Foreign Minister in place of Anatoliy Zlenko who had reached the age of mandatory civil service retirement. Kuchma also replaced Internal Minister Yuri Smirnov with Mykola Bilokon’, the lead administrator for the agencies of legal reform, military units, and law enforcement.

 

Yevhen Marchuk was appointed Defense Minister having served as Secretary of National Security and Defense Council (NSDC) since 1999. Volodymyr Radchenko, the former Head of Security Service of Ukraine (SBU), became a new NSDC Secretary. The former first deputy secretary of the NSDC Igor Semeshko succeeded Radchenko. In November, Hennadiy Vasyliev, the former first deputy speaker of the Verkhovna Rada replaced Sviatoslav Piskun as prosecutor general. Notwithstanding sharp criticism by the President of Sviatoslav Piskun’s work, by February 16, 2004 the former prosecutor general was appointed to the post of Deputy Secretary of the Council on National Security and Defense. Kuchma also dismissed the Vice Prime-Minister of Fuel and Energy Vitaliy Haiduk. Initially, the official grounds for dismissal were attributed to inadequate fuel and energy planning for the winter, but later the president confirmed speculation that he had acted in response to Haiduk’s opposition to the formation of an international consortium on controlling the gas transportation system of Ukraine.

 

The string of dismissals continued into 2004. At the beginning of the year, the president discharged Valeriy Khoroshkovskiy who had been the Minister of Economy since November 2002. In Khoroshkovskiy’s view, he was fired because he objected to economic policy being formulated solely by the Finance Ministry which is directed by one man wearing two hats, Finance Minister and First Vice-Prime Minister. Khoroshkoskiy maintains that under such an organization, the country’s economic policy is largely an ineffective, administrative exercise. The Head of the State Committee on Regulatory Policy and Business, Inna Bohuslovska, offered similar reasons upon her resignation mid January 2004. In early March 2004, the President dismissed the Minister responsible for Fuel and Energy, Serhyi Yermilov, a strong proponent of transporting oil westward from Odessa to Brody, which had been approved earlier by Cabinet in February. The departure of the Minister was immediately followed by Cabinet dismisal of the working group analyzing issues related to the Odesa-Brody pipeline and the inter-agency working group on effective use of the national gas transportation system. More changes in the government can be expected in the future. New dismissals and appointments might result from changes in the political and/or economic climate, new deals between the Premier and the parliamentary majority, or from presidential whim.

 

In his assessment of the government’s performance in 2003, Viktor Yanukovych concluded that forming a coalition government was an important and successful political experiment. Although there is ample room for improvement, the performance of this first coalition government portends well for an improved future.

 

THE BUDGETARY PROCESS

 

On November 27, 2003, the Verkhovna Rada approved the state budget for the year 2004 despite vigorous protests from the opposition. Indeed, Viktor Yushchenko’s Our Ukraine party (OU), Yulia Tymoshenko’s bloc, the Socialist Party of Ukraine, and the Communist party of Ukraine all refused to take part in the vote. Moreover, on the day of voting, these opposition forces mounted a large-scale protest near the parliament building. Once the budget was approved, the OU faction immediately called for a review of what it referred to as an “anti-societal” budget. The head of parliament’s Budget Committee, OU member Petro Poroshenko expressed disappointment with the budget that according to him reflected strong political influence. Commenting on the outcome of the voting for the budget, Poroshenko told journalists that he felt “ashamed that such a document has been approved.”

 

Those more upbeat on the budget included First Vice-Prime Minister Mykola Azarov and Speaker Volodymyr Lytvyn. Azarov noted that the 2004 budget provides more money for social requirements from both state and local budgets, while Lytvyn, although generally pleased, admitted that the procedure had lacked transparency given some behind-the-scenes agreements with the government. Lytvyn acknowledged that not all affected parties had been fully acquainted with the document’s pertinent content.

 

International financial organizations reacted favorably to the budget’s approval, however. Michael Deppler, the Director of the International Monetary Fund’s Europe Division, called the budget “real and balanced.” The same opinion was expressed by Alexander Kaliberda, the acting Head of the World Bank’s Mission in Ukraine.

 

KUCHMA’S SUCCESSOR

 

With criticism of the government largely focused on its fumbling on the food crisis issue, an issue from which it has made a reasonable recovery, opposition leaders recognize Premier Yanukovych as a viable contender to succeed President Kuchma. Our Ukraine’s Mykola Tomenko feels certain that Yanukovych is most likely to emerge as the presidential candidate among those in power today.

 

Last August, with his name being floated as a potential presidential candidate, Yanukovych encountered his first serious image problem. The source was a rumor that during the 2004 presidential elections, a Yanukovych candidacy would be supported by six centrist parties: the Party of Regions, the Labor Ukraine, the Social Democratic Party of Ukraine (united) (SDPU(o)), the Party of Industrialists and Entrepreneurs of Ukraine, the Agrarian Party of Ukraine, and the People’s Democratic Party. The rumor spread quickly making the Premier vulnerable to criticism from both the parliament and the president.

 

Since then the number of problems on the Premier’s radar screen has been escalating, and his fate as a politician will depend on his ability to solve them. Looming as its first test, the government must effectively regulate the food market and hold down prices. Secondly, it has to deal with multiple problems in the fuel and energy sector where the dynamics are aggravated by open hostility between clans.

 

Pavlo Frolov, the head of the Institute of Social and Political Psychology expressed the view that the public face of the Premier is still developing and can eventually come into focus with some favorable characteristics giving Yanukovych a considerable advantage over his potential rivals whose images are already firmly in the mind of the electorate. According to Frolov, strength, willpower, energy, and a desire to put the country in order will become the major features of Viktor Yanukovych, the presidential candidate.

 

Political scientist Victor Nebozhenko believes that the premier has acquired so much political weight that, regardless of his chances of winning, Yanukovych is bound to participate in the 2004 presidential campaign if only to remain on the national political scene.

 

The overall prospects look good for the government if it continues to be effective and efficient as it deals with economic and political challenges. That sort of leadership could be the springboard into a successful October 2004 presidential campaign for Victor Yanukovych.