New Rada Needs to Pick Government Ready to Address Key Issues

December 6, 2012
-- Prospects for Opposition Bloc Complicated by "Svoboda" --
James George Jatras
Deputy Director, AIU

With the December 3 resignation of the government of Prime Minister Mykola Azarov, all eyes are directed to next week’s opening of the new Verkhovna Rada constituted on the results of the October 28 election. Now that complaints over the conduct of the election are dying down both in Ukraine and abroad, pro-government and Opposition forces each need to focus on how Ukraine will address some formidable challenges.

Despite possible concerns about the loyalties of some deputies elected in individual mandates, it is assumed that Party of Regions (PoR) and its allies, notably the Communist Party of Ukraine, will be able to form a parliamentary majority to approve formation of a new government under Azarov’s successor. “Apparently, the president does have a guaranteed majority vote [in the Rada] to confirm his choice of premier, as he'd hardly have parted company with Azarov if he didn't,” noted Mykhailo Pohrebynsky of the Kiev Center for Political and Conflict Studies. “But now he has a higher degree of freedom, as it were.”

Azarov’s departure immediately generated substantial media speculation about who will be named the new Prime Minister to replace him. Among those mentioned have been First Deputy Prime Minister Valery Khoroshkovsky, Deputy Prime Minister Sergey Tigipko, National Bank chief Sergiy Arbuzov, and Deputy Chief of the Presidential Administration Iryna Akimova (who may have removed herself from contention by foregoing registration as a deputy in the new Rada). Similar speculation has taken place concerning distribution of ministries.

Among the top priorities for the new government will be producing a successful result in negotiations with the IMF for a third round of international financial assistance to Ukraine. In 2008, under President Viktor Yushchenko’s administration, the IMF approved a $12.5 billion payment under a two-year deal that, after President Viktor Yanukovich’s election, was extended and increased to $15 billion. But that program expires this month and a replacement or extension is far from a sure thing. A failure to extend the IMF program would be a severe blow to Ukraine’s ability to attract other needed lending and investment.

Among the IMF’s key demands is that Kiev increase natural gas prices to get Naftogaz Ukrainy’s balance sheet into order and to end what the key international lender sees as an unacceptable drain on state finances. This means that Ukraine’s financial future is inextricably tied to decisions about energy. Kiev essentially has three options, none of which is likely to make the next government (or Yanukovich) very happy: raise prices for Ukrainian consumers (which would please the IMF but risk voter backlash), continue state subsidies and keep prices low (at the almost certain loss of essential IMF lending to Ukraine), or cut the subsidies and keep prices low via a deal with Russia over the future of Naftogaz. Yanukovich’s reluctance to accept the last option is well known.

Illustrative of the quandary is the embarrassing $1.1 billion deal Ukraine thought it had with Spain's Gas Natural Fenosa, and which turned out to be fake. Widely hailed as a way to diminish Ukraine’s dependence on Russia, in the end it only emphasized the extent to which such reliance continues to be unavoidable – so much so, that there even has been gossip (nothing more than that) that Gazprom had set up the whole farce. (It remains to be seen whether the Fenosa non-deal will have any impact on Energy Minister Yuriy Boyko’s prospects in the new government.)

Given the magnitude of these challenges for the new government, there should be ample opportunity for the Opposition, led by Bakivshchina and UDAR, to exploit points of vulnerability. That may depend, however, on the formation of a viable Opposition bloc. In that regard, among the first orders of business will be whether Yulia Timshenko (via Bakivshchina deputies in the Rada), Arseniy Yatsenyuk, and Vitaliy Klitschko will decide to boycott cooperation with “Svoboda,” which has been harshly criticized in the West – especially in the United States and Israel – for its extreme anti-Semitic, Nazi-nostalgic rhetoric and symbolism.

Indicative of the problem is Svoboda deputy Igor Miroshnichenko’s referring to the popular Ukraine-born American actress Mila Kunis as a “zhydovka.” “Anti-Semitism is condemned by the world public, and using of this topic is the sign of political immaturity, which Svoboda demonstrates by the similar statements,” said Oleksandr Feldman, PoR deputy and founder of the Institute of Human Rights and Prevention of Extremism and Xenophobia (IHRPEX), referring to the comment about Kunis. “The parliamentary elite, which became the part of legislative system of Ukraine, must be socially responsible, balanced and correct, otherwise we shall obtain additional seat of tension connected with the national issue.”

Inclusion of Svoboda as a member-in-good-standing of the formal Opposition risks staining not only the larger parties but their leaders personally. This is a particular problem for Klitschko, regarded internationally as a rising star, and for Timoshenko, who can’t afford to jeopardize broad western support in her legal predicament.