Wednesday, December 2, 2009

THE UKRAINE INSIDER: Tymoshenko, the profligate PM

With Ukraine's presidential elections only two months away, the main contenders are squabbling fiercely amongst themselves, more intent on scoring points against each other than making a positive impact on voters' lives.

The crux of their infighting centers on the fact that Yulia Tymoshenko currently occupies the post of prime minister and has shamelessly used this position to promote her candidacy. Tymoshenko has used government largesse to buy votes while staving off the country's financial collapse through "creative accounting." She has also played the role of crisis manager for the swine flu epidemic sweeping the country.

Tymoshenko's prodigious political talents have meant that she has retained the image of a delicate-looking woman who is surrounded by bestial men of low character. This image probably works well, because some of these men – opposition leader Viktor Yanukovych, who has served two prison terms, comes to mind – indeed literally ooze low character.

Yet what drives her opponents to distraction is that they are fully aware that Tymoshenko has remained largely unaffected by the financial crisis because of smoke and mirrors.


Earlier this year, the tax service - headed by a Tymoshenko stalwart, the banker Seriy Buriak - did a shake-down of companies by asking that taxes be paid in advance. Then, to hide the budgetary shortfall, expenditures were shifted to the last quarter. Stabilization credits from the IMF, of which $11bn has been received, are being used to cover the budget deficit by paying government salaries and pensions. Without this cash injection, the government would not have been able to make these payments, which in turn would have caused popular dissatisfaction, perhaps even a popular revolt.

True to her profligate and headstrong character, Tymoshenko has not even taken a stab at tightening the purse strings. On the contrary, she has been spending money wildly - and promising even more - in an attempt to both convey the impression that all is well and to keep voters happy. The list of new and increased expenditures that Tymoshenko has already begun financing this year covers the proverbial kitchen sink.

As PM, Tymoshenko has begun paying for an ambitious government programme to re-equip all of Ukraine's notoriously unsafe mines. Her government is subsidizing the metallurgical sector with preferential prices for natural gas and transportation via the national railway carrier. She has promised to spend billions on building new subways in the cities of Donetsk and Dnipropetrovsk, providing a new water supply for the city of Lviv, even buying milk trucks for agricultural producers. Her government has also ordered agricultural equipment from the US and medical equipment from other western countries to the tune of the hundreds of millions of dollars - all on credit. This "slash-and-burn-money" approach may have saved Tymoshenko from a disastrous drop in the polls, but it spells financial ruin for Ukraine following the elections.

Tymoshenko's campaign has even bought the services of Western policy analysts in an attempt to bolster her reputation abroad. Given this pattern of behaviour, small wonder that many suspect Tymoshenko of making secret promises to Russia's president, Vladimir Putin, including selling Ukraine's gas transportation system, keeping Ukraine out of Nato and the EU, and introducing Russian as a second official language in Ukraine.

In the meantime, Tymoshenko's opponents are in a quandary about what to do about her? Currently, they are dithering about whether or not to see off her government.

A vote of no confidence in Tymoshenko's government is a real possibility. On November 6, Tymoshenko's opponents united in the Rada, or parliament, to vote through increases in minimum salaries for government workers and the minimal living standard used to calculate social spending, ie. subventions to pensioners and the poor. Their move is fiscally irresponsible, designed to politically increase the strain on Tymoshenko's government, hopefully - in her opponents' imagination - bringing about widespread dissatisfaction.

But Tymoshenko is such a fearsome campaigner that sending her government into retirement and her into opposition may well backfire and her opponents are right to be wary. Given the widespread dissatisfaction with the governing elite, sending Tymoshenko into opposition would only boost her poll ratings, although a last-minute vote of no confidence just before the first round of voting set for January 17, 2010, is possible.

Opposite opponents

Tymoshenko could not provide more of a contrast with her principal opponent, Viktor Yanukovych, the leader of the Party of Regions, who is hopelessly uncomfortable both in opposition and in front of the TV cameras. Yanukovych's campaign has been singularly ineffective. One would have to search far and wide to find a voter who believes Yanukovych's slogan on his billboards, which declares, "He will hear everyone out." Ukrainian voters have few illusions about Yanukovych - who, according to credible information, deals in hundreds of millions of dollars in slush funds - as someone who cares about ordinary voters.

Yanukovych's most prominent supporters seem to have the fear of a presidential victory by Tymoshenko stamped on their foreheads. And for good reason - in a second round run-off against Tymoshenko, as seems likely, Yanukovych would almost certainly lose. Compared to Tymoshenko, he is a big brutish-looking fellow with a reputation for using physical force against his opponents. He speaks slowly, Ukrainians say, in order to avoid cursing every other word, as is the habit of both ex-cons and organized crime figures.

Yanukovych cannot afford another defeat (he lost to current President Viktor Yushchenko in 2004) at the polls. If he loses again, his political career is over and he will lose his position as the political face of the Regions party. Small wonder then that highly-placed security officials mutter about the "Donetsk clan," as Regions is known, going so far as to physically remove Tymoshenko before the second round, ie. having her killed in a contract killing. This would be par for the course if multitudinous accounts of the criminal background of Yanukovych's principal sponsor and Ukraine's richest man, Renat Akhmetov, are correct.

By Ivan Lozowy . Published on 2 December 2009
Copyright (c) 2009. BNE. Reprinted with the permission of Business New Europe
The views expressed in this article are the author's own and do not necessarily reflect those of S & D.

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