Don't hold your breath..

When visiting Donetsk on Tuesday 30th May, President Yushchenko, at a press conference, stated, "The law provides 30 days from the first sitting of the Verkhovna Rada for a coalition to be formed. So on the 29th day I will pose the question to the forces which are forming the coalition. At the moment they [their discussions?] are solely in the constitutional field." He added, "I am convinced that we all understand that the matter of a coalition of orange forces, which would have a majority of [only] 17, is delicate and brittle."

Yushchenko's recent assertive declarations, will also complicate and delay formation of any coalition. In particular, democratic coalition partner Oleksandr Moroz won't be too happy by some of the President's ideas on the Constitution - he was always keen on reform; and there is not much there to indicate that the President is more amenable to Yuliya Tymoshenko becoming PM.

Looks like it's going to go 'to the wire'.

Yushchenko gets tough..

In his regular radio address last Saturday, President Victor Yushchenko controversially stated that he would refuse to approve the Verkhovna Rada's Prime-Minister nomination until the VR attests the judges of the Constitutional Court.

Last December, Monitoring Committee of the Council of Europe Parliamentary Assembly (PACE) urged the Ukrainian Parliament to carry out its constitutional duty and renew the composition of the Constitutional Court of Ukraine without any further delay. [Some good further info in this particular link]

One of the reasons for the VR's foot-dragging was that it did not want the Constitutional court to assess the validity or otherwise of Law № 2222-VI on amendments to the Constitution of Ukraine, December 8, 2004, which the VR approved at that time. This law came about after negotiations between Kuchma, Yushchenko, and intermediaries, and was considered a 'trade-off', enabling the repeat of the second round Presidential elections to take place just after the Orange Revolution.

The law, which came into effect 1st January 2006, reduced the powers of incoming President Yushchenko, compared to those of his predecessor, Kuchma.

In December 2005, the Ukrainian National Commission on Democracy and Rule of Law had come to the conclusion that the Law № 2222-VI should be regarded as 'nullum ab initio', and therefore not be considered as the element of the current Ukrainian Constitution, according to a press release by Ukraine's Ministry of Justice .

As things stand at present, the President is the only state authority that can attempt to sort out the mess, and this perhaps explains Yushchenko's uncharacteristically forthright declaration last Saturday. He wants to regain those lost Presidential powers.

Language issues

Following the recent legally dubious granting, by their regional councils, of regional language status to the Russian language in Donetsk and other Eastern Ukrainian regions , the Donetsk 'novosti' website conducted a straw poll on this issue.

When local respondents were asked if the granting of regional status to the Russian language would improve the prosperity of their families, 95% said No.

When asked if they considered that the work of the city economy would improve, once Russian is granted regional language status, 99% said No.

When asked for whom they thought that life would get better once Russian is granted regional language status, 89% replied, Nobody.

And 91% considered that none of the city's problems would be solved by the recent declarations in the Donetsk city council on enhancement of the status of the Russian language and on Ukraine's ties with NATO.

As in many matters, Ukraine's politicians are sometimes behind their citizens in their thinking. The language issue is periodically 'wheeled out' to challenge the authorities in Kyiv and probe the government's weakness. Everybody knows that central government is far too weak to make any changes on the ground in the regions on these matters, even if it wanted to.

Most enlightened Russian-speaking Ukrainian politicians are aware that it is smart to have some knowledge of spoken Ukrainian. Kuchma, and Yanukovych made an effort to learn passable Ukrainian. Yulia Tymoshenko on entering politics, spoke little Ukrainian, but now, in public, this is usually her language of choice, even though BYuT tend to avoid taking a firm line on this delicate issue.

Even the King of Donbas, Rinat Akhmetov, on being elected to to the Ukrainian parliament, last month promised to learn Ukrainian, calling his own inability to speak the language a shortcoming. And in the recent VR elections, the party that took the most vociferous line on the language issue, Nataliya Vitrenko's Progressive Socialist Party, performed worse than expected, and narrowly failed to breach the 3% barrier.

Note: In comprehensive surveys conducted in 1997, 44% of Ukrainians said Russian was their language of preference, 41% said Ukrainian, while 14% were equally happy in either language. [From Andrew Wilson's 'The Ukrainians: Unexpected Nation'.]

The currency

I'm not a finance guy so I don't pretend to know everything about currency and currency markets but if a country has to defend it's peg to the dollar and uses $1.7 billion to do it, it is hard for me to understand how that same currency can be considered undervalued. But that is what the Ukrainian National Bank did in the first quarter, use $1.7 billion to defend the hyrvna.

But experts are still saying that the hyrvna is undervalued and that a correction is in the offing in the fall. I assume they mean a correction which strengthens the hryvna against the dollar. Which again raises the same question: if the hryvna is strong why then did the central bank have to intervene to defend it?

Any thinking on this would be welcome.

First day back in VR

The Verkhovna Rada of the fifth convocation, which was elected on March 26, gathered for its first session in Kyiv today. Newly elected deputies took an oath of office and the text of the oath was read out by the oldest parliamentarian, Ivan Herasymov from the Communist Party.

The initial festive atmosphere soon turned sour. [some nice photos here and here including this one below: My caption - Yanukovych is saying, "I'm not going to hurt you....yet..]

The formation of an Orange coalition seems to have taken a major step forward. The deputies of NSNU, BYuT, and the Socialists all voted together [an impressive 240 votes] to adjourn the VR until 7th June.

PRU and Communist deputies tried to block the dais and prevent the vote taking place, or at least call for a 'time-out' to discuss the matter further, and the usual verbal 'custard pie fight' ensued.

About 60 of their deputies surrounded the acting [Socialist] speaker's chair, but their attempt to halt proceedings failed. Maybe the tactics of which I wrote a few days ago are paying off already.

The orange fractions say is that they need the two-week break to form their coalition.

Later, in a press-conference Yuliya Tymoshenko castigated PRU for their behaviour, which included mass stamping of feet, whistling and shouting. "I want to say this is not a soccer ground, it is not a 'Shakhtar vs Dynamo' game, so I ask deputies to be civilized and tolerant," she said.
Before the Orange revolution, the then-opposition used similar tactics too. Once, while she was addressing the VR and saw the PRU deputies had entered the chamber wearing blue and white scarves which they waved to taunt her, she sneered at them, "I'm pleased you all have your scarves - something to hang yourself on when you lose the elections.."

Rinat Akhmetov, Ukraine's richest businessman and PRU 'banker', on his first day as a Ukrainian VR deputy was quoted as saying, "If there are going to be any fights in Parliament, I want to remind everyone I was a boxer for 7 years.." [And what else..?]

PIRANHA!

We heard a news report earlier in the week that they had found piranha in one of the lakes here in Ukraine. I thought it one of those types of reports that show up periodically that are long on sensationalism but short on facts. My problem with it was how a tropical fish could survive the harsh winter here. So I dismissed it.

Turns out I was wrong. Looks like they found a few in a Kasianka Lake in eastern Ukraine. I guess they can survive the harsh winters because it looked like they did here.

So now I have a pressing question to pose: has anybody looked into whether there are crocodiles in the sewers of Kiev yet?

Incentives and population decline

There has been some interesting debate in the US about population decline spurred by Putin's state of the union address. (One example is here.) In that address he offered financial incentives to get women to have children. The point for Russia is that it's in demographic freefall; they're losing 700,000 a year. Ukraine is in the same boat per capita though it has a smaller population. But the same factors are at work here.

I can tell you though that the program here to get women to have more children has been a bust. The incentive was 8000 hyrvna last year, or about $1600. Thats a pretty good sum for Ukraine. It's about 8 months pay on average.

But that 8000 hryvna only succeeded in raising the birthrate by a half of one percent. That doesn't sound like much of an increase. The budgeteers may be happy with this but the demographers may not be.

Ukrainians favour Orange Coalition

Almost 40% of Ukrainians support an 'orange' coalition, according to an OP conducted by the Razumkov Center. Amongst the residents of Western and Central regions, the figure is over 50%.

Residents in Eastern Ukraine favour a PR-NSNU coalition. Of all Ukrainians questioned, 17.4% support this arrangement, and 13.2% support a grand coalition. The latter figure is interesting, and possibly indicates BYuT's rising popularity in the east.

Almost a quarter did not express a preference.

Almost 55% of those questioned consider there was no hindrance to their casting their vote. Almost 10% claim there were significant obstacles

These results are broadly in line with previous OP's where fewer respondents failed to express a preference.

In the March Parliamentary elections, PR received 32%, BYuT 22%, NSNU 14%, Socialists 6%, and Communists just over 3%, of votes cast.

Tomorrow is 'first day at school' for many of the newly-elected deputies.

"The Ukrainian parliament gathers for its inaugural session on May 25. President Viktor Yushchenko is expected to attend the session and make a speech. Under the amended Ukrainian Constitution that took effect on January 1, 2006, the president has the right to dissolve parliament if it fails to form a majority within 30 days after its first sitting or to form a new cabinet within 60 days after the dismissal or resignation of the previous one."

[From http://www.rferl.org/newsline/3-cee.asp]

Seating arrangements in VR

The seating arrangements in the newly-elected Parliamentary deputies have been agreed, and the first sitting of the new Verkhovna Rada is to take place on Thursday.

Yesterday BYuT, NSNU, and the Socialists had decided on one possible seating arrangement, but this morning the Socialists wanted to change it, for reasons that provide some insight into the workings of the VR.

The Socialists were to be seated in a narrow wedge of seats in twos and threes, behind one another, but this would have made it more difficult for one of their deputies [a so-called 'piano-player] to vote, by pressing a panel button in front of each seat, on behalf of other, absent deputies, in the short period of time allotted for voting. This kind of officially impermissible behaviour has frequenly taken place in the past.

The Socialists will now sit in a group either side of the central aisle, giving them strategic 'control' of this all-important passageway. The workings of the VR are often disrupted by deputies storming and blocking the central dais. The Socialist deputies alone should now be able to block the central aisle and make staging of such charges and blocking by disgruntled deputies more difficult.

PR will dominate the left hand side of the VR, giving them easy access, via the nearest exit to an empty lobby, where they can quickly plot 'off-the-cuff' strategy without journalists, who normally linger in the opposite lobby, being present.

But the best seats, to the right of the speaker, are retained by NSNU - this is an area most favoured by TV and mass media cameras. The government ministers' lobby is nearby, and so this location is a parliamentary action 'hot-spot'.
From Ukrainska Pravda]

It's the culture, stupid

The title of this post is taken from the phrase the Clinton election team kept in front of its face in the election of 1992. The stupid was added to bring home the fact that the economy was the only thing that mattered in that election. So "it's the economy, stupid" was the theme.

One of the points I have been trying to make here from the start is that it is a mistake to generalize across cultures. That is a tendency on the part of Americans and it has gotten us in some trouble in Iraq and in other places (including in business, I might add.) But generalize we do.

The reason for this is that generalizing about human beings is a part of our culture. We will argue to the heavens, though, that it's not a cultural matter but a rational one. I get this all the time and have had a tough time with students when I raise that issue in the cross-cultural courses I teach. But it is a fact; Americans generalize about human beings because it is a part of our culture to do that. "All men are created equal" is an expression of this. The idea expressed by all pols no matter where they are found along the political spectrum that all people want liberty is another example of this.

But the fact is that people are different and the cultures that set the limits about what is acceptable from them, are all different too. And we need to understand that if we are going to be of any use in trying to solve the problems of the world. From my perspective, though, very few consultants, even the high powered types they fly in to staff these country programs, understand this. They figure if you tinker with the system and get it perfectly balanced, all fine tuned, then you can fly home with another successful country program under your belt and post your resume for the next challenge. But that is a typical American response. Why do they do that? Because it works in America. The problem is that it does not work in other cultures.

An example: They fly in consultants into this part of the world to help get the country humming along democratically. What they end up doing mostly, is writing laws and setting rules and procedures for it all. And what is the result? A nice, pretty new collection of laws of the country but no real change in the way the country does it's business.

The big problem here is corruption and it is a cultural problem, not a legal problem. Everyone points to that nasty little man Kuchma and talks about how bad he was while they go to the premiere school in the area and pay $300 to the principal to get their little dear enrolled. All understood by everyone, all accepted and acceptable, and all perfectly illegal under the law. But Kuchma is the bad guy.

What is going to change that kind of thing? Passing more laws?

Milton Friedman the acclaimed economist once said that he got it wrong in Russia. He had said, "Privatize, privatize, privatize." But he understood that was wrong now. Instead it should have been, "Rule of law, rule of law, rule of law." Well, he's still got it wrong. It is "Culture, culture, culture." And that is a beast of a different order of magnitude.

Here's a quote from Orwell that expresses the point: "Till recently it was thought proper to pretend that human beings are very much alike, but in fact anyone able to use his eyes knows that the average of human behaviour differs from country to country. Things that could happen in one country could not happen in another." It still is proper and in the US, rational to think this way.

And seeing what is before our eyes is an important thing to do if we are going to be useful at all. We in this little blog have tried to do that.

Yuschenko Jr., the Orange Revolution and Peru

It is possible the brat son of Yuschenko is taking advantage of his name and not of some behind the scenes calls from daddy. The risk that something might happen because you nabbed the top man's son would outweigh most anything else even if the top man doesn't call. That means a pass for junior. People are habituated to that kind of influence here. It seems to be in the cultural DNA. So the risk of it can be the fact of it. At least I hope that's what it is.

But if dad is running interference for junior that should be made public and Yuschenko take his lumps for it. The problem is that it is not only junior that does it. Anybody with connections or money will do the same thing. Life is cheap here and any consequences for risking it or taking it can disappear through the magic of money or of the right contacts. Get to the right person and pay the right fee and it will be as though it never happened. Kind of like what you might expect from a capitalist version of 1984.

I was going to post a link to the article below over a year ago--January 5th, 2005 to be exact-- to serve as a cautionary tale for Yuschenko. (We have done this quite a bit here on Foreign Notes. A lot of the posts have been with the idea that maybe they could avoid making some mistakes that were obviously in waiting. Not much luck though, I'm afraid.) I didn't then but now seems like a good time. There are some similarities between the two presidents and situations. Reading too much into it might not be helpful, but there could be something to be learned from the similarities.

Anyway, here it is: Peru President's Kin Create Headaches.

Andriy Yush in hot water..again.

According to an article in the normally-staid 'Korespondent', President Yushchenko's spoiled brat of a son, Andriy, is in 'hot water' again.

Last Friday evening his BMW was pulled up by the Boryspil prosecutor, Oleksandr Kuzovkin, after Andriy's 'beemer' had overtaken him and 'carved him up'. The occupants of both automobiles got out of their vehicles and Kuzovkin, having recognized the young Yushchenko, announced who he was. After Kuzovkin explained that the 'beemer' was being driven recklessly and that an accident may have been the result, Andriy verbally abused, and then assaulted him. For good measure, Andriy Y's bodyguard shot Kuzovkin in the thigh with a rubber bullet, and they left him wounded, lying in the road.

The 'Korespondent' article says, 'Andriy Yushchenko promised the prosecutor in a course manner, that tomorrow he would be sitting in prison, and subjected to humiliation of a sexual nature.' [Very coy..]

The police consider the incident to be 'of an everyday nature, [well that's all right then] and Yushchenko's press office has asked people not to jump to conclusions, but wait for an official statement from law-enforcement officials.

There have been rumors over many months that Yushchenko, like his predecessor, sometimes cannot resist, and solves problems by 'phoning and 'leaning' on people when required. The Ukrainian media will be watching closely - if Andriy receives any preferential treatment [which he probably will,] this, hopefully, will be exposed. These stories are doing great damage to the President's prestige..but hey, does he really care? Last time Andriy made a fool of himself, the Pres. called the journalist from 'Ukrainska Pravda', who ran the story, 'a hired killer.'

Now the prosecutor-general's office has announced that amongst the materials in the case of bodily harm rendered to the Borispil procurator, 'there is no information on the President's son's involvement in any of these incidents'.

Tymoshenko's support in Eastern Ukraine

In the March 26th Ukrainian Parliamentary elections, the final declared results in the Donetsk Region were PRU 74%, Vitrenko bloc 7%, Socialists 4%, Communists 3%. BYuT 2.4% NSNU 1.4%

A recent OP, published on the 'Novosti Donetska' website, reveals that now, two months after polling, almost 20% of Donetsk oblast residents would be ready to support Tymoshenko as PM. Interesting..

Of the Orange leaders, she would be the most acceptable to those in the eastern Ukraine, if their man Yanukovych were not to be PM.

ByuT had complained that there had been some shady arithmetic during the ballot counts following the March elections, in the Easternmost oblasts.

Chernovetsky and the teachers

We know someone who is a teacher in the Kiev district. She tells us that Chernovetsky has taken away the bonus that Omelchenko gave them for some reason. She says he's anti-teacher but I don't think she really knows why. We don't know why either.

Apparently, Omelchenko raised their pay 10% in a kind of cost-of-living raise. Then he added another 10% as a sort of bonus. All of this was an attempt to raise their pay, which is abysmal by any standards. But according to her, Chernovetsky has taken that away.

Some of these teachers supplement there meager wages with offers--demands, really--to tutor the children outside of class. That will give the student a leg up, something implied if not stated, and so the bribe is paid. But our experience is that these are not usually the best teachers anyway.

There has been an outflight to some extent of teachers to other jobs in the economy. And that has left a lot of mediocre to bad ones. There are some excellent teachers still there but they aren't there for the pay but for the love of it. But Ukraine cannot afford to lose the good ones. They can kiss the rest goodbye if they cannot educate their children adequately.

When we get more on this, we'll post more.

Yushchenko's decline..

In a periodically repeated opinion poll, conducted over the last two years, when respondents were asked, "Do you support the actions of Viktor Yushchenko?" the following percentages responded: 'Support them fully.'

February 2005 - 48.3%
April 2005 - 49.0%
August 2005 - 33.2%
October 2005 - 19.2%
January 2006 - 21.3%
April 2006 - 15.6%

[Note: In September 2005 Yushchenko sacked PM Tymoshenko and her ministers.]

The reasons given by observers for this precipitous decline are:
-Voters hopes dashed after the Orange revolution
-Yushchenko's dithering and inability to take any firm decisions
- his lack of passion for any innovation
- he prefers to delegate, rather than to tackle serious problems personally
- an inability to listen to wise council
- and his continued inability to form an effective executive

Yesterday, Party of Regions, after a meeting of their 'big-shots', [see photos from Ukr Pravda] announced they have approved a coalition agreement document which they are prepared to officially propose to NSNU. In the March 23rd Parliamentary elections, PR polled 32%, and NSNU 14%, so not totally unreasonably, PR are demanding Yanukovych be PM, and ministerial porfolios be apportioned two-and-a-half to one, in PR's favor.

Yushchenko's dithering over the formation of a 'democratic coalition' in the VR with Tymoshenko as PM, is further eroding his support amongst the electorate. His approval rating is probably now below 15% - NSNU's is around 10%

One commentator calls the coalition negotiations an Ukrainian Rubick's cube - an apt metaphor.

One step forward and two steps back..

A report from today's 'Unian' website:

"Our Ukraine again suspends coalition talks
Our Ukraine has suspended the coalition talks until the Yulia Tymoshenko Bloc clarifies its stance, following Tymoshenko`s statement on the distribution of cabinet jobs. Tymoshenko said that her bloc would get the post of Prime Minister; the Socialist Party - the post of speaker; while Our Ukraine already has the post of President. Head of the Our Ukraine election team and participant in the coalition talks Roman Zvarych claimed about the suspension on Tuesday."

With such mutual mistrust and with participants negotiating in what can only be described as 'bad faith,' how long can any possible 'democratic coalition' survive?

This from an article in the latest 'Dzerkalo Tyzhnya': "[Rinat] Akhmetov [Party of Regions' main sponsor and 'puppet-master'] is ready to wait half a year, [or] until the authorities come to him.."

And, "One of the most influential members of PR told 'Dz.T.' "It would be best for us to stop messing about with this president and his party, and do a deal with Tymoshenko. But she doesn't want this."

The article goes on to say that BYuT members in newly-elected city, oblast, and regional councils are already entering coalitions with other parties. If BYuT go into opposition in the Kyiv parliament, some of their members, many of whom funded the election campaign, will no-longer have any obligation to the party on whose ticket they rode into those city, oblast and regional councils.

These machinations are causing NSNU' rating to fall from 14% just over a month ago, to an almost Kuchma-like 10.4%

35.3% of Ukrainians would like to see Yanukovych PM - 31.6 % favour Tymoshenko.

The informal economy and growth

Here's a good article on the drag the informal economy is on growth. The countries with the largest percentage are in this area of the world. I know there has been talk about enticing businesses out of the shadows and there has been some effort to streamline and lower taxes for business. And I think there has been a consensus about this across the board--at least I think there has been. But it does need to be dealt with here.

It's a wonder with all the shadow businesses around here that there are any others. But there are and they seem to compete at least on some level. The article, though, maintains that there is no incentive to invest in greater productivity on the part of these businesses. So growth is slowed or stalled. Not good for the people.

One of the problems is the perennial problem here--people with the power of government protecting these businesses because they get paid by them for that protection. This has a long tradition here extending back even to the Soviet period. (The party leaders needed stuff and protected those who could get it for them.)

It will be interesting to see what more the new government will do about this.

Democratic Coalition edging closer?

The possibility of a grand coalition that includes PR has decreased, according to one of their leading-lights, Vladimir Landik, deputy chairman of the Luhansk department of the Party of Regions He had been asked on a Luhansk TV channel to comment on the recent registration as VR deputies of acting PM Yuriy Yekhanurov, Secretary of Security and Defense Council Anatoliy Kinakh, and a string of other current cabinet ministers. Many of them had said previously they would not work in a Tymoshenko cabinet.

Oleksiy Ivechenko, former head of Naftohaz Ukrainy, and Valentyna Semeniuk, chair of the State Property Fund, responsible for privatizations, have also recently registered their seats in the VR.

"I think that now for sure there won't be the wide coalition. We know that Ivchenko has left, who said that he was not going to work with Yulia Tymoshenko , now Kinakh who said that he wouldn't work under Yulia Tymoshenko, and Yuri Yekhanurov might also be leaving to Verkhovna Rada. It means that everything is being done for Yulia Tymoshenko. And you are perfectly aware of our relations with her," added V. Landik.

PR polit-rada member Yevhen Kushnaryov echoed Landik's remarks, "You can always return into the government, into the Security and Defense Council, or any other executive position from the Verkhovna Rada, but to get back into VR you have to wait 5 years." He also added that PR has no wish to claim any leading positions in a democratic coalition.

The Ukrainian constitution does not allow MPs to hold executive posts, but a parliament seat provides immunity from prosecution. After the orange revolution, newly-appointed cabinet members had to give up seats in the VR, weakening the 'democratic' majority. After they had been sacked by President Yushchenko during the September 2005 crisis, there was no way back for them into parliament until the March 2006 VR elections.

The first session of the newly elected parliament will take place on 25 May. The decision was made today at a session of the working group for preparing the first session of the Verkhovna Rada of Ukraine of the fifth convocation.

Yuliya Tymoshenko considers the agreement between BYuT, NU and the Socialists in choosing the chairman for this VR working group an indication that the democratic coalition has started to work together. And a BYuT-NU-Socialist 'democratic coalition' working group has completed and created [yet another] agreement document for formation of a coalition today.

The eccentric mayor

Here's some more on what the mayor of Kiev is looking to do. More populism? Sometimes the mayor makes a lot of sense and sometimes he sounds crack-brained. Which one is he really? I don't know, but government owned stores selling to the poor and the elderly--really the same thing here--makes a certain sense. This one, at least, isn't crack-brained. The poor here are just going to get poorer and going to be in a lot more jeopardy than they were what with the rise in energy prices which is going on apace. But it just won't work. It will just create some more Mercedes and BMW drivers because it will increase opportunities for graft and corruption.

"So, just have some kind of agency oversee what goes on in these stores. Make an example of a few of the people who engage in this kind of corruption and that will end it." Won't happen. Just cut the members of the agency in on a piece of the action and the way is paved for your grand dacha in the protected portions of the wilderness.

It will create great expense and it will poorly serve the poor. It will bust the budget and leave some guys in tailored suits and slick, pointed shoes, smiling. In other words, it will be more of the same.

Some coalition commentary

Here's some more commentary on coalition maneuvering that summarizes what LEvko has been pointing out for a couple of weeks. If it comes down to dissolving Parliament and calling for new elections, I think that Our Ukraine will be the loser. They just won't show up to vote.

Will that mean Yuschenko won't do it? No, he might just do it anyway. It could be that he is operating on some kind of principle and dissolving Parliament might be consistent with that principle. This is just to say that anything might happen.

Chernovetski's church

Here's something on the church Kiev's mayor belongs to. Not anything strange for America but it is a different thing for here.

The charismatic movement has landed, looks like.

Yushchenko interview

Polish newspaper 'Gazeta Wyborcza,' whose exemplary reporting of the Orange Revolution and after was second to none, today published an interview with President Yushchenko - He probably feels more relaxed talking with 'G.W's' journalists than with those in Ukraine, so his replies were candid and revealing.

When asked whether Ukraine's path to integration with the European Union was still a subject of dispute, he replied that this was no longer the case. "30% of our exports today go to EU markets - 5 years ago it was barely 18%. Ukrainian businesses have already voted with their feet for a European direction for the country. We are conviced that the large European market is opening for us - but it is also a challenge...We are not confronted with a choice as to which way we are to go - East or West - but with the task of fulfilling conditions, necessary for integration," he added.

In reply to a question whether he would agree to Yuliya Tymoshenko becoming PM again, he quoted the results of the OP about which I blogged a couple of days ago - perhaps indicating that he takes account of OP's too. [I wonder what his own current ratings are]. He states unequivocally, "An Orange Coalition is the best possibility," and "..[the possibility] of an orange-blue coalition is excluded for today."

And would he agree to Tymoshenko occupying the PM's position? "I do not exclude this. But the most important task is to find a formula for a stable coalition. I especially do not allow discussions on allocation of [governmental] posts...without determination of goal[s], discussions on [ministerial] portfolios will bury the orange coalition." He should read Tammy Lynch's excellent piece on the recent German coalition-building process, and why personnel decisions have to be sorted out first.

Partiya Regioniv are complaining that 'nobody likes them no more'. They blame BYuT, the NU bloc, and Socialists' representatives for frustrating the working group preparing formalities for the first session of the newly-elected VR.

The orange parties' representatives failed to turn up for the first meeting of the working group, then their representatives were unprepared for subsequent meetings, which ended without any progress being made. PR appeal to their fellow committee members to work constructively and to act in a professional manner. They consider that representatives of NU, Socialists and BYuT are putting at risk the opening of the first VR session scheduled for 24th May. [Maybe because they are incapable of sorting out an Orange coalition before that date?]

Coalition-building drags on..

The latest OP indicates 35% of Ukrainians would like to see Yanukovych PM, while 32% would like to see Tymoshenko in that position. Yekhanurov comes in a weak third at 7%.

47% of those questioned would favour a BYuT-NSNU-Socialist coalition, while 38% a RU-NSNU coalition - the former possibility, significantly, being supported by 36% of NSNU supporters.

One of the problems with all of this coalition-building is that leading members in both NSNU and the Socialist party are not 'singing from the same hymn sheet'. Yesterday veteran Socialist leader Oleksandr Moroz admitted that his party may be included in a Grand coalition with NSNU and PR. And yet today Yosyp Vinskiy, head of the Socialist polit-rada, says that entry of his party into coalition with PR is not permissable.

Although the Socialists garnered less than 6% of the votes in the elections, they have a pivotal role to play, and are under a deal of pressure to join a grand coalition. If they did so, BYuT would be left out in the cold [with the Communists]. For Moroz it would be a last chance to get his hands onto the levers of power rather than go into opposition with BYuT.

It's generally accepted that NSNU #1 Yekhanurov is keen on a grand coalition, but other leading members of his party, eg Zvarych and Bezsmertniy are far less enthusiastic. I've written in past about some waverers in RU, but now Yanukovych has stamped his authority on his party again, and has probably brought them back into line - and he wants the PM's job.

There are even rumors that several members of BYuT would rather 'jump ship' and join a grand coalition than go into opposition. Many newly elected deputies paid large sums of money 'up front' for a favourable place on party lists. They didn't pay to go into opposition.

Meanwhile President Yushchenko ostensibly declared last week that he is not a participant in coalition negotiations, and that formation of a coalition is solely the responsibility of the newly-elected political blocs entering parliament.

Today Communist leader Petro Symonenko, whose party is the smallest to 'scrape' into the VR, prognosticates that a grand coalition will eventually be formed between PR and NSNU [and possibly Socialists]. The coalition will be dominated by business structures, with Yekhanurov remaining PM, and the remainder of the cabinet dominated by PR.

Whoever forms the ruling coalition, most observers agree that the new government will continue to progress on Ukraine's path to Europe. As ex-Economics minister Seghiy Teryokhin says in an an interview today, "The top managers in PR are [now] used to living by the rules of European life - they want stability and certainty for the future."

My own hunch is that if PR were driven into opposition, then the fissures that must exist in that party would open up too.

A Ukraine energy plan

This is news to me, but it looks like Ukraine has an energy plan. The shock produced by Gazprom in January must have shaken some people awake.

Gazprom's price move was seen here as Moscow's revenge for Ukraine's so-called Orange Revolution, which led to the election of a Western-friendly government in 2004. Gazprom, in which the Russian government holds a controlling stake, denies any political motivation. But the effect has been that Ukraine, which has a population of 50 million, has quickly produced a program to reduce gas consumption. It has set up a new energy-efficiency agency to direct the plan and is pouring government money into efforts to carry it out.

"My inbox is filled with letters from metals and chemicals companies asking for help in cutting their energy use," says Yevgen Sukhin, the new agency's chief.

The kicker? Same old, same old:

There are big obstacles to carrying out all of Ukraine's plans. Financing can be hard to get where companies and local authorities are poorly audited, often unprofitable and often corrupt. Ukraine's political instability has consistently undermined government plans. "We've had a lot of broken promises," says Stanislav Potapenko, program coordinator in Ukraine for a nonprofit organization called Alliance to Save Energy, though he says attitudes are changing.

That should read "poorly audited, unprofitable and corrupt" to make the point clear. Those three travel together.

But if they have gotten as far along already as they have with outside contractors, such as Alfa Laval AB, working to solve problems, it does look like some attitudes have changed. Things don't usually happen that fast. Maybe January and the Kremlin sobered the right people up. Let's hope so.

Report on Free Trade between the EU and Ukraine

A hefty report [248 pages, available as a free pdf file download] entitled:

"The Prospect of Deep Free Trade between the European Union and Ukraine," by the Centre for European Policy Studies, has recently been published.

A quote from the intro:

"This study examines the feasibility, content and likely economic impact of a free trade agreement between the EU and Ukraine. A simple and shallow free trade agreement, adding only the elimination of tariffs on trade in goods to the conditions for WTO accession, is the most easily feasible option, but would yield only modest benefits for Ukraine and less still for the EU.

By contrast, a deep free trade agreement (or ‘FTA+’) with the EU, while posing more difficult issues of feasibility, could be a centrepiece of an economic strategy leading Ukraine into rapid growth. An FTA+ with the EU would entail an extensive, yet still selective, alignment of Ukraine’s external and internal market laws and standards with those of the EU. Politically, this step would be consistent with Ukraine’s ‘European choice’.

The country has little or no chance of becoming a prosperous economy and society without openness and integration into the European and global economy, alongside compliance with normal standards of advanced economic governance at home. Not being a natural resource-based economy, Ukraine has no choice but to develop a competitive and diversified economy centred primarily on industrial and service sectors. This point is underlined by the increase in the price of imported energy since the start of 2006.

Nevertheless, there is evidence suggesting that the combination of economic openness, convergence on modern European and international standards of economic regulation and corporate governance and proximity to EU markets could lead to a sustainable high growth path for Ukraine.

The country’s economic paradigm could change drastically, with a re-branding of its reputation and with its industry entering into the European and global supply chain. Such a strategy would also be of value to the EU economy in meeting the challenges of globalisation and Asian competition."

Date Published April 2006

Holidays

Last week, we had May Day and that was two days off which maybe got stretched to a little more than that just to accommodate the festivities. This week, it's victory in the Great Patriotic War and we have another two days off for that, which may get stretched a little bit more again.

The one this week is a big one, though. It was a cause celebre in the Soviet Union. If there was nothing else to recommend it, at least they could always point, with a lot of reason, to the victory over the fascists as a reason. So we celebrate.

It is an interesting thing to be in an audience, have the speaker congratulate all the veterans of the war as he has them stand up and see only women standing. It was a bit jarring to me to see it. But that is the fact here. The home front was the front and everyone was in it.

We know a woman who was in her twenties during the war and saw the Nazis roll into her little village. The stories she tells are riveting. When they left, a lot left with them, the portion that is, that wasn't destroyed. And over 90% of the men in that village died during the war so there were a lot of widows. Those widows are the veterans left there.

Alternative suppliers of gas?

National Security & Defense Coucil Secretary Anatoliy Kinakh, in an interview in today's 'Ekonomicheskie Ivestiya', says Ukraine intends to start discussions on the supply of gas from Russia with alternative companies other than gas behemoth Gazprom.

"We're talking of a more liberal gas market. In particular, one of our discussion strategies is obtaining access to independent suppliers to the gas transport system, formation of a natural gas market, and creation of a gas exchange," he said.

"There's a lot of companies that wish to supply us with gas at quite attractive prices. Lukoil, TNK, and string of other structures. We're talking of tens of billions of cubic metres," he added.

Kinakh explained that according to Russian law, the many regions in which gas is extracted are also owners of a portion of this gas, and stated, "When we contact the authorities in these regions directly, we become convinced of their readiness to supply gas. The problem, which should be decided at governmental level, is their access to the Russian gas transport system, in particular the ratification by Russia of the European Energy Charter."

Gazprom deputy chief executive Alexandr Medvedev stated recently that Russia is not interested in ratifying the EU Energy charter which would allow third-party access to the Gazprom's pipeline network.

Kinakh also mentioned the need to solve problems of limited throughput capability of the 'Central Asia - Center' pipeline, which is vital for supplying Ukraine with Turkmen gas, and about which I have blogged previously.

President Niyazov of Turkmenistan is to visit Ukraine in the near future when"not only gas relations for the next half-year are to be determined, but also long-term agreements with Turkmenistan are to be signed.

Are Kinakh's remarks just a small part of a co-ordinated effort to break Gazprom's monopolistic grip of Russia's gas transportation system? It's going to be a big struggle..

Impulses from the Prez?

On Friday Yushchenko is to meet the leaders of the political forces which will make up the new Parliament - Tymoshenko, Moroz, Yekhanurov, Yanukovych and Symonenko. He promised to apply maximum effort, in order that the process of formation of a [ruling] coalition "receives a new impulse, and is completed in the nearest one or two weeks."

He had previously spoken of a coalition being formed by the last weeks in June. Whether this new 'impulse' is in response to Tymoshenko's and Moroz's joint letter which was submitted yesterday, is unclear. [see yesterday's blog]

Yushchenko's made his remarks in Vilnius, while attending the "Common Vision For A Common Neighborhood” conference together with the 'great and good,' including Javier Solana, Dick Cheney, and heads of state of neighbouring countries. Has someone been whispering in his ear?

Meanwhile Head of PR political council, the odious Mykola Azarov who some say is an old pal of Poroshenko, announced that it has sent their version of a coalition agreement to all of the parliamentary parties. My impression is that since the elections their heart has not really been into this 'coalition-building' thing. The problem is who do they speak to? There is no chance of them dealing with BYuT. And as for NSNU, well Bezsmertny and Zvarych say its too late for deals, and yet Poroshenko and Yekhanurov are offering different messages.

Yushchenko's foot-dragging..

Taras Kuzio, in a recent article "Oligarchs into Businessmen: Ukraine’s Transition to the Post-Kuchma Era" [in Egle Ridzeviciute ed., Contemporary Change in Ukraine. Baltic and East European Studies 5 (Stockholm: Baltic and East European Graduate School, Sodertorns Hogskola, 2006), pp.10-34] writes the following when describing the build-up to the 2004 Presidential elections:

"Those within the pro-presidential camp were evolving from oligarchs to businessmen understood the need for change.

A 'critical mass' of businessmen would like to operate in a 'normal' legal environment where the success or failure of their businesses will not be dependent on their faithfulness to the president. These former oligarchs, eg Pinchuk, maintain good relations with Yushchenko. Pinchuk and the Donbas clan are also legitimizing their business interests by inviting international auditing firms to place their business empires on a legal and transparent footing."

It seems, then, that Ukraine's most powerful businessmen, many of who also 'pull the strings' in its political parties, are changing the way their businesses are run, for the better. [I have written previously about 'Oxford-trained MBA's' working for Akhmetov]

Contrast this with some quotes on Naftogaz, the Ukrainian state-owned gas company from the recent GlobalWitness report:

"..hair-raising practices of Naftogaz under Yuriy Boyko, its chairman from 2002 to 2005.

Despite persistent questions about the intermediary companies, against a backdrop of public concerns about official corruption and organized crime in the countries of the former Soviet Union, there has never been sustained, thorough and high-level oversight of these companies, and the structures and people involved in them.

..critics might question Yushchenko's political will to confront Kuchma's legacy of opaque and unaccountable business practices.

Ukraine needs clear reforms to promote open and accountable management of its gas industry...Without reforms, the transit of gas to Ukraine will continue to be a highly politicised, opaque and unstable business"

President Yushchenko and his administration are lagging behind public opinion and treating the Ukrainian electorate with contempt. They are also lagging behind Ukraine's big businessmen.

ps Yuliya Tymoshenko and Socialist leader Oleksandr Moroz today proposed a meeting to discuss coalition-building with President Yushchenko, in a jointly written letter. They suggest they all meet before 5th May. A source from the President's administration says, however, "There has been no official documentary appeal to the Secretariat." More foot-dragging..

Kryvorizhstal--the next instalment of the story

Here's something on what's happening with Kryvorizhstal, now Mittal Steel, now. It will be interesting to see how that works out.

These are telling figures though:

Kryvorizhstal employs 57,000 people. With the average worker supporting a family of four, 228,000 people depend on the plant.

And each employee's total benefits cost around $5000. That means a total cost of $285,000,000? Is that possible?

Ukraine's economy

Here's a good article on Ukraine's economy from a historical perspective. If true, his claim that the economy is only 63% of the economy of 1990, the pre-independence economy, ought to sober people up a lot.

Better is a relative term. Things might be better now but compared to what?

I can say that things here have improved a lot since I came here in 2002. More buying power, more products to chose from are both a lot better. In fact, Ukraine is the third fastest growing retail market in the world. From where it started, however, just about any growth at any rate would make it that. And again better than what? Than they were? Than they might have been?

There have been lots of opportunity to make things different here. There are still lots of opportunities to do that. We can only hope that these opportunities won't be squandered.