Yushchenko Unrepentant As Ukraine Sours On Orange Revolution

KIEV, Ukraine -- Ukrainian President Viktor Yushchenko swept into power five years ago at the head of an Orange Revolution that promised national revival. Now he is running fourth in polls as voters blame him for political paralysis and a collapsing economy.
Even as he faces likely defeat in Jan. 17 elections, Yushchenko offers no regrets. He casts his rivals, Prime Minister Yulia Timoshenko and pro-Russian leader Viktor Yanukovych, as “populist” vote-chasers and himself as a champion of unpopular truths about the need for an independent national identity.“I say words that many don’t like, but I won’t give up,” said Yushchenko, 55, in a Sept. 17 interview in his Kiev office. “If a lot of people don’t agree with you, that doesn’t mean that you are wrong. Either you aren’t popular but deliver a strategic service to the nation, or you dream about elections.”Others say the unrelenting enmity between the president and his adversaries has created a deadlocked government and exacerbated the former Soviet republic’s economic troubles.“This disunity and continual political infighting is setting back the cause of reform and the ability of the country to consolidate its independence and stand comfortably on its own two feet,” said John Lough, an associate fellow for Russia and Eurasia at the London-based research group Chatham House.Parliament has been dissolved on two occasions in the past two years, Russia has twice shut off the country’s natural gas supply and the European Union is withholding concrete promises of membership talks.Economic WoesThe Ukrainian hryvnia has shed 45 percent against the dollar in the past year, the worst-performing of all currencies tracked by Bloomberg. The economy contracted 20.3 percent in the first quarter, the most for all 32 European countries tracked by Bloomberg. Inflation -- 15.3 percent in August -- is the highest of any European country tracked.Investors have noticed. Elena Suslova, a Moscow-based portfolio adviser with Wermuth Asset Management GmbH, said Ukrainian investments represent only 2 percent of the $250 million in assets under management that she advises.After a surge of interest in Ukraine after the 2004 political upheaval that brought Yushchenko to power, Wermuth Asset Management in early 2008 advised its funds to stop all projects in the portfolio for now, Suslova said.High RisksUkrainian voters have also noticed. A poll released Aug. 10 by the Kiev-based Razumkov Center, a research institute, showed Yanukovych, head of the opposition Regions of Ukraine political party, with 21.7 percent, followed by Timoshenko with 13.2 percent, former parliamentary Speaker Arseniy Yatsenyuk with 10.9 percent and Yushchenko with 4.2 percent. The margin of error was 2.3 percentage points.An unpublished poll by Washington-based PBN Co., an advisory firm for business leaders, investors and governments in eastern Europe, showed a similar result, with Yushchenko in fourth, according to figures provided by Myron Wasylyk, managing director of PBN’s Kiev office.“Five years ago, I believed my country had a chance and was so proud of it and now I am very disappointed,” said Lyudmyla Telnyuk, 63, as she waited for her granddaughter at a Kiev music school.“Yushchenko has been trying really hard to restore Ukrainian culture as well as people’s memories of Ukraine’s real history, but fights between all these politicians stole away everyone’s attention,” Telnyuk said.Ukraine has made some progress, Wasylyk said. It joined the World Trade Organization, the poverty level has dropped to less than 20 percent from 45 percent in 2004 and a free press has emerged, he said.Falling Jobless RateUnemployment fell to 6.9 percent in 2008 from 9.2 percent in 2004, using International Labor Organization standards, Ukrainian state data shows. The International Monetary Fund projects a 2.7 percent growth rate for 2010.Yushchenko took credit for the progress, saying in the interview: “Today, Ukraine is another country, a country used to the freedom of speech and freedom of choice. That is due to my policies.”Yushchenko spoke about his battles with his adversaries in his high-ceilinged office in the center of Kiev, adorned with a large portrait of Ukrainian writer and painter Taras Shevchenko. He and Timoshenko, 48, have clashed over her push to raise social spending and his demands for budget cuts. Next year’s budget deficit, Yushchenko said, may reach 12 percent of gross domestic product.The prime minister has already started her presidential campaign, with billboards around Kiev that say, “They are blocking, she works.”‘Won’t Give Up’“I don’t think about elections, I think about my kids -- what country I am going to leave them?” the president said. “I say words that many don’t like, but I won’t give up.”Yushchenko spoke about the tensions during his tenure between Ukraine and Russia, which opposes Ukraine’s stalled bid to join the North Atlantic Treaty Organization.Russian President Dmitry Medvedev last month said he hoped to rebuild ties under “Ukraine’s new political leadership” after the elections. Yanukovych blamed Yushchenko for “poor relations” with Russia in a Sept. 19 campaign speech posted on his Web site. He said he shared Medvedev’s view that under the current “authorities it is impossible to improve ties.”Yushchenko said that Russia “will have less influence on the January presidential elections. But it is not because they are now less interested and their desire is less. It is only because my nation became more independent.”His face still bears some of the scars from an illness during the 2004 presidential campaign that he said was caused by poisoning from dioxin produced by Russia, a charge Russia denies.Though Yushchenko didn’t mention Yanukovych, 59, by name, he made clear he knows he is far behind him in the polls.“High ratings are easy to get,” Yushchenko said. “You just play populism games and it’s there. That is not my way.”

Ukrainian President Says Murder Investigation Will Impact Election

KIEV, Ukraine -- Ukraine's president says finding those who ordered the killing of prominent independent journalist Heorhiy Gongadze is a crucial issue for the whole society, RFE/RL's Ukrainian Service reports.
Talking to journalists on August 28, Viktor Yushchenko said that finding and punishing all of those who organized the killing of Gongadze would show that "the law in this country is equal for everyone."He added that those who ordered the murder are still sitting in "big armchairs," and that therefore he, as president, is under "huge political pressure."He also said that the investigations of the case and their results would influence the presidential election scheduled for January next year.Gongadze, a co-founder of online "Ukrayinska Pravda" news resource, was abducted in September 2000. Two months later his decapitated body was found in Kyiv Oblast.On March 4, 2005, former Interior Minister Yury Kravchenko was found dead with gunshots to the head just hours before his testimony as a witness in the case.Three former officials of Ukraine's Interior Ministry were found guilty of involvement in Gongadze's murder and sentenced to long prison terms in March 2008.A fourth former top official of the Ukrainian police, General Oleksiy Pukach was arrested on July 22 this year as a suspect in the murder. He has given investigators a location where Gongadze's severed head might be.Forensics experts in Ukraine confirmed on August 27 that the fragments of a human skull found at the site are the remains of Gongadze.Gongadze's widow Myroslava Gongadze believes that the masterminds of her husband's assassination are still at large.

Biden and Yushenko

Ukraine's President And Prime Minister Feud As Their Country's Economy Sinks

KIEV, Ukraine -- In Ukraine, it’s truly noteworthy only when the president and prime minister stop fighting.President Viktor Yushchenko and Prime Minister Yulia Tymoshenko — who stood shoulder-to-shoulder just four years ago as Orange Revolution allies — have spent the better part of the last year at each others' throats, in a vituperative, take-no-prisoners struggle that has split the government down the middle and paralyzed the country’s political process.The situation would be humorous if it were not so critical: Hardly a week seems to go by without some sort of outburst from the president (or his minions) against the prime minister (and her backers). The two camps regularly hurl back and forth phrases like “criminal,” “traitor,” “con artist” and “idiot."Meanwhile, Ukraine is facing its biggest economic challenge since the economic drought that immediately followed the Soviet Union’s breakup.Industrial output declined by 30 percent year on year this January. The national currency, the hryvnia, has lost half of its value since highs last year. Banks have stopped lending, and many are permitting only miniscule withdrawals, to head off a run on banks. Factories, shops and businesses throughout this eastern European country of 46 million are closing their doors, while unemployment and public dissatisfaction are spiking.“Re-arranging the deck chairs on the Titanic,” “Fiddling while Rome burns,” — so the local and international press describe the Ukrainian morass.The Ukraine-Russia gas dispute was interpreted by many partially as a product of the two leaders’ struggle. In February, the second tranche of a critical $16.5 billion International Monetary Fund bailout program fell through because of infighting in the government. Finance Minister Viktor Pynzenyk, a Yushchenko ally, resigned in protest. Tymoshenko accused the president of spreading “falsehood, panic and hysteria.”Earlier this month, agents from the Ukrainian Security Service (SBU), some wearing baklavas and brandishing automatics, stormed the offices of state energy company Naftogaz.At issue was the ownership of a large amount of natural gas — between 6.3 and 11 billion cubic meters, depending on which report you read — valued at about $1 billion. The SBU said the gas belonged to RosUkrEnergo, a shadowy Swiss-based company with reputed ties to Yushchenko and other top politicians, while Naftogaz said it was the rightful owner.But since the SBU answers to the president — and just a few weeks earlier Yushchenko named a close ally, media magnate Valery Khoroshkovsky, as the SBU’s deputy head — and Naftogaz comes under the prime minister’s aegis, this was viewed as just another clash in the two leaders’ battle royale, albeit with the new, extremely disturbing development of involving the country’s law enforcement bodies.“This is not new,” said Yuri Yakymenko, director of political and legal programs at the Razumkov think tank, adding that the struggle originally reached fever pitch and stayed there when the president tried to dissolve parliament last autumn and called for new elections. “Unfortunately the fight among the political groups has witnessed a drop in legitimacy for the whole political system.”The current sparring is believed to be a preview of the presidential elections, scheduled for January next year. Tymoshenko is the front-runner, though her position takes a beating with every new piece of jaw-droppingly horrible economic news. Yushchenko for his part incredibly appears still to be considering re-election — or at least he has not said that he will not run – although his approval ratings are at 2.5 percent. (That could mean zero or lower, when you factor in the margin of error.)For this reason — and maybe because they at times actually are concerned for the future of their country (though this is not a given) — the two leaders have occasionally set aside their differences. Most recently this happened in the wake of the IMF bailout delay. Yushchenko and Tymoshenko issued a joint statement laying out a unified economic reform program. Both leaders now say they are confident that the country will receive the second $1.8 billion payment.The damage to both leaders’ reputations — in fact to the whole ruling class — has been irrevocable. Ukrainians will say in one breath that they want to be part of Europe and the West, but at the same time that they are disillusioned with the Orange Revolution, capitalism, as it is now practiced in their country, and even democracy.On Kiev’s central Independence Square, where hundreds of thousands gathered in 2004 to protest a stolen election and sweep Yushchenko and Tymoshenko to power, a few tents have stood since January. They are part of a movement called “All of them — Out!,” which seems mostly to be made up of groups from the nationalist fringe.“All of our leaders must go and be replaced by new forces,” said Nadezhda Batolkina, a movement member. As the weather warms, and with demonstrations expected throughout the country, we will soon know to what extent others agree with her.

The Never Ending Ukraine Story

KIEV, Ukraine -- The one positive thing to come out of the Russian-Ukraine gas crisis, which caused shortages in 20 European countries for more than two weeks amid freezing temperatures, was the direct contract signed between Gazprom and Naftogaz and the removal of shadowy Swiss-based intermediary RosUkrEnergo AG. Goodbye and good riddance!

Asked if the mysterious RosUkrEnergo, which was the sole importer of gas to Ukraine from 2006, has now been completely and irreversibly excluded from that role, Ron Smith, chief strategist at Alfa Bank, said, “Yeap, probably so. It does clarify substantially by removing a middleman that by all indications really added nothing to the process except another layer of potential problems. By having direct contract between the actual company purchasing and distributing and the actual company selling that’s much improved,” he told New Europe, telephonically from Moscow.As the war between Ukrainian President Viktor Yushchenko and former Orange Coalition ally-turned-foe Prime Minister Yulia Tymoshenko is gaining momentum, the latter was more than happy to cut RosUkrEnergo out of the deal and trim a rumored cash source for Yushchenko.“Well, I think there’s a lot going on there than we have any idea about,” Smith said, adding that the Russia-Ukraine contract brokered by Russian Prime Minister Vladimir Putin and Tymoshenko established a direct relationship between the two countries’ companies “instead of going through the shadowy Swiss-made intermediary.”Yushchenko on February 10 called Tymoshenko a “traitor” for signing what he called a disadvantageous gas import deal with Russia and secretly agreeing to emergency credits from the Kremlin. “This is nothing less than a betrayal of the national interest,” Yushchenko said at a televised Ukrainian National Security Council meeting.Tymoshenko flatly denied Yushchenko’s claims, calling them “groundless” and “invented.” Russia, which canceled an arrest warrant for Tymoshenko in 2005, now enjoys a pragmatic relationship with the Ukrainian premier.Staying away from politics, Viacheslav Kniazhnytskyi, energy officer at Ukraine’s Mission to the EU, told New Europe that the January contract between Naftogaz and Gazprom setting terms for the fuel’s import into Ukraine, and on-shipment into Europe is ruled by Swedish law and will provide better transparency.“This is not an agreement; this is a contract. That is why this is a substantially different thing of what it used to be in the past. This is a contract, absolutely precise,” the Brussels-based official said, adding that any disagreements would have to be resolved in an international court. “There’re two companies and politicians should refrain from efforts to have any impact on the contracts,” Kniazhnytskyi said, adding that his primary concern is that the gas crisis would not be repeated in the future. “As far as this contract goes, it’s not a political agreement between two governments or between the Russian Federation and Ukraine so I’m cautiously optimistic that we will not have any other crises from now on,” the Ukrainian energy officer said.Meanwhile, Gazprom and RosUkrEnergo are at odds over the transit of 11 billion cubic metres of gas stored at the Ukrainian underground gas storage facilities. “I think these two guys should fix relations among themselves,” Kniazhnytskyi said. “I’m not sure relations between Gazprom and RosUkrEnergo are very clean.”Alexander Medvedev, deputy chief executive officer of Gazprom, was quoted by the press as saying that Gazprom has no plans to sell its 50 percent stake in RosUkrEnergo. RosUkrEnergo owes Gazprom about USD 500 million, he said. Ukrainian billionaire Dmitry Firtash owns 45 percent of RosUkrEnergo and his business partner Ivan Fursin the remaining five percent.Kniazhnytskyi said the problems in the past were the result of these murky deals. “We don’t need at any given time any intermediary. I’m talking with you as a humble Ukrainian customer. I don’t need any intermediary,” he said. “Any intermediary will mean higher tariffs for my family in Kiev.”

Cleaning Up Ukraine

Ukraine needs to reform its corrupt gas sector and reduce its dependency on Russia. It's in the EU's interest to help.
The war in South Ossetia in August last year evidently taught Russian leaders the value of PR: however shaky your story, it's worth getting your side out there as loudly and as often as possible.Well before the dispute began, the Russian side was spreading its message in foreign-language media and in EU capitals that this was a "commercial" dispute, and that Ukraine was to blame. They set up a website to provide "facts" about the dispute. The site also carried English-language media reports that followed their interpretation.Even if we accept the argument that the spat began as a commercial argument, Moscow's PR efforts, combined with their actions during the crisis, have demonstrated a clear political aim: to discredit Ukraine and its leaders in the eyes of the EU and Ukrainians.By showing Ukraine as an unreliable transit partner, Russia hoped to push its case for the Nord and South Stream pipelines bypassing the country and to gain some amount of control over Ukraine's pipeline network. In this way it hoped to undermine Ukraine's primary bargaining tool in gas negotiations: its control over gas pipelines.Two of the main accusations about Ukraine's reliability need questioning. First, Russia accused Ukraine of siphoning gas from transit supplies, the reason originally given for cutting flows. The jury remains out on this, but EU energy commissioner Andris Piebalgs has said he has seen no evidence that Ukraine took gas without permission.Second, Russia accused Ukraine of not keeping its side of the agreement to resume gas supplies to Europe on 13 January. But not only did the Ukrainian side complain that the gas was sent in such a way that made delivery impossible, this was also confirmed by independent analysts and EU sources.To deliver the gas would have required supplies to be cut off to the populous areas in the east of the country, leaving the Ukrainian authorities between the devil (an angry EU waiting for deliveries) and the deep blue sea (a backlash from Ukrainians already angry at their handling of the economic crisis).One of the more ironic accusations from the Russian side was made by Russian prime minister Vladimir Putin on 8 January, when he blamed the crisis on the "high degree of official corruption" in Ukraine and the fact the Ukrainian leaders were fighting for "the possibility to maintain one or other intermediaries so that they can use the proceeds for their personal gain and also get resources for future political campaigns."The intermediary concerned was RosUkrEnergo, set up by none other than then-Russian president Putin (along with ex-Ukrainian president Leonid Kuchma) – 50% of which is owned by Gazprom.Gazprom itself has been described by one economist as "effectively an economic crime syndicate"; insiders have spoken of private slush funds and given detailed accounts of the complex nexus of political and business interests at its heart.Ukrainian prime minister Yulia Tymoshenko has, by and large, been singing from the same hymn sheet in obliquely accusing Ukrainian president Viktor Yushchenko of corruption through RosUkrEnergo.It suits both her and Putin to try to weaken Yushchenko. Tymoshenko is involved in a long-running political battle with the Ukrainian president, and should win points at home for showing she can do a deal with Russia and removing RosUkrEnergo from the trade; Putin is furious with Yushchenko for his moral support of Georgian president Mikhail Saakashvili during the war with Russia in August last year and clearly wants a more pliant leader in Kiev.But there has been one clear winner in the gas crisis – Ukraine's pro-Russian opposition leader Viktor Yanukovych. Already benefiting from public dissatisfaction at the authorities' handling of the economic crisis, the man defeated by the Orange Revolution has been able to pose as the only one who could strike a good deal with the Russians and follow Moscow in blaming Ukraine's "Orange" leaders for the problem. A recent poll put support for Yanukovych in the upcoming presidential elections at 23%, compared with Tymoshenko at 14% and Yushchenko at 5%.The relative success of Russian PR (compared to previous efforts) has been enhanced by the Ukrainian leaders' propensity to consistently shoot the country in the foot with their infighting and inability to deal with the corruption that cripples the country's gas sector.But the PR drive failed in its aim to obfuscate the corruption problems on Russia's own side of the gas trade and redefine our image of Gazprom as a purely commercial entity. In fact, by focusing on the Ukrainian side of the problem it has highlighted the country's potential role in a solution.By giving Ukraine incentives to clean up its gas sector, the EU can put to the test the claims of all three of its top political figures to be pro-European and at the same time reduce Ukraine's dependence on Russia.

Victory: Tymoshenko

KIEV, Ukraine -- In the ongoing blood sport that is Ukrainian politics, Prime Minister Yulia Tymoshenko appears to have scored a key victory over her political rivals — especially President Viktor Yushchenko — in reaching a gas agreement with Russia last week.
But analysts say the battle among the country’s ruling elite is far from over, and could spell further instability in the coming months.Millions in eastern Europe were stranded without electricity and heat just after the new year, when Russia cut off all gas deliveries through Ukraine because of a pricing dispute (about 80 percent of Russian gas headed for Europe traverses Ukraine). Tymoshenko traveled to Moscow Jan. 17, where she and Vladimir Putin, her Russian counterpart, held an all-night session behind closed doors, during which they hammered out an accord that permitted shipments to resume.Under the accord, Ukraine agreed to pay $360 per 1,000 cubic meters of gas: The amount was 20 percent less than what Moscow was aiming for, but was significantly higher than the $200 that Kiev wanted. At the same time, Ukraine agreed not to raise Russia’s transit price.Observers took note that it was the two countries’ prime ministers — and not their heads of state, Yushchenko and Dmitri Medvedev — who were tasked with, or more likely took on the responsibility for, brokering the deal. Equally significant was the fact that the two leaders seemed to work well together, a remarkable development given both the acrimonious atmosphere that had characterized the gas dispute and relations in general with the Ukrainian president.Tymoshenko "has added to her image as a ‘can do’ leader,” wrote Christopher Weafer, chief strategist at the Russian bank UralSib.“Tymoshenko was the winner,” agreed Mikhailo Pogrebinsky, director of the Kiev Center for Political and Conflict Studies. “She showed herself to be a more acceptable partner for Russia — one with which it is difficult, but in the end possible, to reach agreement.”Pogrebinsky and others also said that Tymoshenko strengthened her position by apparently eliminating RosUkrEnergo — which is owned by Russian gas giant Gazprom and two Ukrainian businessmen — as the intermediary company that sells Russian gas to Ukraine.RosUkrEnergo’s activities are highly opaque, but analysts believe — without any documentary proof — that the company, which enjoyed vast profits from its middleman position, is linked to Tymoshenko’s political rivals. By removing it, Tymoshenko has simultaneously added an element of transparency to the Ukrainian gas trade and possibly starved a major source of financial support for her competitors.“Tymoshenko came out of the tawdry affair looking better than President Victor Yushchenko,” according to an editorial in the English-language Kyiv Post. “He emerged from the deal looking like an incompetent, corrupt bumbler who got caught trying to prop up the shady RosUkrEnergo for reasons of personal gain.”Tymoshenko's victory may be fleeting, however. The ink was scarcely dry on the agreement before knives were drawn among the Ukrainian political elite, pointing towards further infighting and possibly political deadlock. Oleksander Shlapak, Yushchenko's economic aide, said that the deal might have to be re-negotiatiated. And the president himself lashed out at Tymoshenko, albeit without mentioning his one-time Orange Revolution ally by name."We must not blindly believe alluring promises,” he said. “We must not blindly believe politicians who, within an instant, betray the national interest.”The prime minister gave as good as she got: “I believe that if the president could have secured better conditions, there was no one to stop him.”Tymoshenko, 48, is a controversial figure in Ukrainian politics. She is a striking figure who sports a halo of blond braid wrapped around her head — almost giving her the air of a mythical heroine. Some supporters practically worship her. Her critics, meanwhile, claim she is corrupt and voraciously ambitious, and point to her extensive involvement with the country’s energy sector, both as a businesswoman and as government deputy minister. She is sometimes referred to as the “gas princess” or “Lady Yu.”She is also the political leader most closely associated in the public mind with the economy, and as the country’s financial woes deepen, she may suffer for this. Analysts anticipate political and social unrest in the spring.“The most important issue at the moment is the economic crisis,” said Volodymyr Fesenko, director of the Penta Center for Political Studies. “Tymoshenko’s victory may be relative and short-term.”