Can an Electoral Victory by “Bloc Petro Poroshenko” Stabilize Ukraine?

October 17, 2014
James George Jatras
Deputy Director, AIU

A lot of bettors are placing high stakes on the hope that the elections for a new Verkhovna Rada that will be held in most of Ukraine on October 26 will help reverse the country’s precipitous political and economic slide. Not only President Petro Poroshenko and his domestic supporters but his foreign backers in Europe and the United States are hoping his Bloc Petro Poroshenko and its allies can garner enough votes to give him a working parliamentary majority.

This is especially critical given constitutional revisions that took place following the ouster of Victor Yanukovych, which returned significant presidential powers to the Rada – and thus, to Ukraine's current, unelected Prime Minister and Poroshenko’s de facto rival for power, Arseny Yatseniuk. Poroshenko needs to have effective legislative control to escape his current predicament of having limited authority but unlimited responsibility.

Nothing better illustrates the fix Poroshenko is in than this week’s appointment of National Guard commander Stepan Poltorak as the new defense minister – Ukraine’s fourth in less than eight months. The new incumbent in “ Kiev’s least secure job” will have the Sisyphean task of “maintaining the territorial status quo – with Ukraine at least temporarily accepting the existence of a breakaway outpost [i.e., the Donbass] while trying to prevent it from spreading further.” It is perhaps significant that prior to his appointment Poltorak commanded Ukraine’s National Guard – a problematic force that by general account has held up better than Ukraine’s regular army – units of which include significant numbers of extreme nationalist elements.

In any case, lurking behind expectations over the elections is the fear – or depending on one’s point of view, the hope – that hostilities may restart in the east after installation of a new parliament and council of ministers. Even minus the Crimea and parts of the east not under Kiev’s control, Ukrainians’ opinions remain sharply divided, unsurprisingly correlating largely by region. A September poll by the International Foundation for Electoral Systems (IFES), partially funded by USAID, found the far west and Kiev region much more likely to advocate more use of force and a military solution, whereas the eastern part of the country – even without the Donbass – is more in favor of a negotiated settlement.

Despite Poroshenko’s limited ability to determine outcomes – or even to formulate Ukraine’s policies – the October 26ballot will be seen to some extent as a referendum on his brief tenure. This may help explain his ambivalence on resumption of the war. In contrast to the more overtly nationalist elements among the forces that brought Yanukovych down, Poroshenko has at least in principle occasionally accepted that “ no military solution” is possible in the east. Of course, that was only a week after his request to the U.S. Congress for lethal military aid fell flat.

The same IFES poll showed majority support (combining “very satisfied” and “somewhat satisfied”) for Poroshenko’s performance only in the areas of “addressing status of Ukraine and the EU” and “respecting the rights and freedoms of media.” In every other area polled – energy independence, bridging Ukraine’s regional divide, political stability, relations with Russia, curbing corruption and oligarchic interests, keeping prices low, and creating jobs – the combined “satisfaction” rating was in negative territory. In the crucial area of jobs, Poroshenko’s “very satisfied” and “somewhat satisfied” tallies were a miserable one and five percent respectively, against a whopping 83 percent who are either “somewhat” (36 percent) or “very” (47 percent) dissatisfied (with 11 percent “don’t know” or “no response”).

One might think, then, Poroshenko’s prospects are grim. Not so:

The Bloc of President Petro Poroshenko continues to push 40 percent of the vote and the Radical Party of Oleh Lyashko slips to 12.9 percent. The Bloc of Yulia Tymoshenko, known as BYuT, inches upward to 8.5 percent. BYuT shows no signs of failing to pass the five percent barrier. Former Defense Minister Anatoly Hrytsenko’s Civil Platform dropped to 7.7 percent, but is comfortably positioned to win seats. Svoboda jumps to 5.2 percent overall. Meanwhile, the Opposition Bloc continues to grow their support, which now stands at 2.1 percent.

It is notable that the nationalist groupings trailing Poroshenko but above the five percent threshold for making it into the Rada – notably Lyashko’s Radicals, Bloc Tymoshenko, and Svoboda – oppose any gesture of compromise with the east. (Also noteworthy is the weakness of the Opposition Bloc, a sad remnant of the formerly ruling Party of Regions (PoR), which is struggling to reach the five percent cutoff. According to the IFES poll, many former PoR constituents – if they will take part in the elections at all – have doubts about the fairness of the process. Others may see Poroshenko’s lukewarm calls for peace as the best viable option.)

Some observers consider a Poroshenko victory all but a foregone conclusion. Even if that turns out to be the case, it is hard to see how Poroshenko, with or without a compliant parliament, can pull Ukraine out of its tailspin. Even if the ceasefire in the east holds, the economic – and particularly, the energy – situation, remains dire, with “ systemic economic failure” looming:

Ukraine is in desperate need of a new international financial aid package, economists say, but none appears imminent. [ . . . ]

“I now fear systemic economic failure — unless there is a positive confidence shock,” said Timothy Ash, London-based head of emerging markets research at Standard Bank. He said Ukraine’s banks are fragile, the budget deficit is more than 10 percent of gross domestic product, and the economy could shrink by as much as 10 percent, greater than the current IMF estimates.

Ash said that there were “lots of warm words for Ukraine but not many greenbacks” from the United States or the European Union, which is mired in its own economic stagnation. Ash said in an e-mail that on an official visit to Washington recently, Ukrainian President Petro Poroshenko “gave the speech of his life and got $53 million, which is small change. That funds the cost of the war in the East for 9 days.” [ . . . ]

In the most important sector — energy — a new chief executive was installed several months ago at Naftogaz, the state-owned natural gas monopoly. In an interview, he urged the government to cut consumer and industrial subsidies starting Jan. 1 to slash waste, reduce imports from Russia and boost Ukraine’s own gas output.

“This is something we need to tackle,” said Andriy Kobolyev, chief executive of Naftogaz. “There is no option to extend and pretend, pretending that we can continue this way. The sooner we implement changes, the sooner we can become financially viable.”

Ukrainian households pay about one-eighth the market price for natural gas, Kobolyev said; about a third of Ukraine’s households pay monthly gas bills of just $2, he added. Because of these subsidies, Naftogaz expects to run a deficit of 7.4 percent of GDP this year, Kobolyev said, more than the government’s expenditures on any other budget item. . . . Ukraine uses more energy per unit of GDP than all but two countries.

In such circumstances, the electoral winners may well come to envy the losers.