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Ukraine back at the crossroads

Ukraine's business community and political analysts are wondering what the surprising electoral gains of Iulia Timoshenko, the charismatic former prime minister, will mean for the country's pro-West tilt.

Last Modified: 28 Mar 2006 19:49 GMT
Timoshenko may be forced to form a government with rivals

Ukraine's business community and political analysts are wondering what the surprising electoral gains of Iulia Timoshenko, the charismatic former prime minister, will mean for the country's pro-West tilt.

There are worries as to what a government led by her may mean for relations with giant neighbour Russia, and with the domestic interests held by some local business mandarins, known as the "oligarchs".

Although her party, the Timoshenko Bloc, is running second in the count, the leading group, the Party of the Regions, will almost certainly not have enough votes to form a government.

This leaves a period of coalition-building ahead, with the most likely outcome an alliance between Timoshenko and the party of the current government, Our Ukraine, which is running third in the count.

These two led the Orange Revolution of December 2004, when protests overturned a presidential election result found to be flawed.

In the re-run, Our Ukraine leader Viktor Yushchenko was elected president, and he then appointed Timoshenko as prime minister.

But the two Orange parties then fell out last year, with Yushchenko firing Timoshenko and her entire government.

Differences buried?

The result of the parliamentary election may therefore see the two parties forced to bury some bitter differences.

"There are risks in such a coalition," says Vira Nanivska, director of the Kiev based International Centre for Policy Studies. "There is a question over whether they will be able to organise themselves coherently and speak with one voice."

Both groupings have roughly similar ideas when it comes to Ukraine's overall orientation.

Last year the two parties that led
the Orange Revolution fell out

Both are in favour of opening up the country more to the West and seek membership of Nato, the World Trade Organisation and, eventually, the European Union.

These policies have pitted both of them against the more pro-Russia leaning Party of the Regions, which is based mainly in the east of the country.

Yet Timoshenko has made a name for herself pushing more radical economic ideas than Yushchenko.

"They have very different ideas on reprivatisation," says Nanivska. Timoshenko has previously favoured taking back into state control many companies that were sold off during the 1990s to the oligarchs for sums she says were well below market value. These would then be sold off again in a more transparent manner.

Business jitters

But this has caused great uncertainty in Ukraine's business community and, many say, deterred investments in the country. It is also opposed by Our Ukraine.

Market watchers now say that Timoshenko will likely moderate her stance on this when in power.

"She was pushing these populist policies before," says Tomas Fiala, managing director of Kiev-based brokerage Dragon Capital. "But with no more elections due for another four years, I think [reprivatisation] will be pushed into the background."

One other key area where a Timoshenko government could face controversy will be in its relations with giant northern neighbour, Russia.

The parliamentary vote failed to
produce a clear winner

The Orange parties have most of their support in the Europe-leaning west of the country, where Ukrainian nationalism has long been stronger and Russia is looked upon with more suspicion.

Likewise, Moscow has long viewed Timoshenko with a wary eye, with Russian observers in yesterday's elections pointing out problems with the vote that Western observers largely dismissed.

The election results so far have also confirmed the long-standing split between the pro-European west and pro-Russian east, where many citizens declare both Ukrainian and Russian identity.

"This is a very dangerous situation," says Valeriy Khmelko, president of the Kiev International Institute of Sociology.

"Our studies show the Orange parties got about 67% of their votes in the west, while the Party of the regions got about 65% of its votes in the east. This hasn't changed since the Orange Revolution."

"In the west, most people want the EU; in the east they want union with Russia and Belarus. This is radically different geopolitical orientation in the two halves of the country."

Gas deal issue

During the campaign, Timoshenko promised to cancel a key gas deal signed with Moscow back in January by the current Our Ukraine government - a move that may antagonise relations with Russia still further - and with her coalition ally.

This deal came after Russia cut natural gas supplies to the Ukraine in mid-winter, with Moscow insisting that Ukraine pay the full market price for its supplies.

Ukraine is largely dependent on Russia for its gas, which heats many homes and powers electricity plants and factories.

"In the west, most people want the EU; in the east they want union with Russia and Belarus. This is radically different geopolitical orientation in the two halves of the country"

Valeriy Khmelko,
President,
Kiev International Institute of Sociology

Previous pro-Russian governments had received Russian natural gas at a much lower price.

The eventual deal turned the gas back on, but, according to Timoshenko, Ukraine ended up paying too heavy a price.

Others agree. "The deal wasn't a particularly good one," Fiala says, "so if Ukraine now becomes much tougher in negotiations over this, it will be a positive step. Russia's pipelines to Europe all go across Ukraine, so Ukraine has quite a lot of leverage here."

Ukraine has also recently fallen out with Russia over Russian bases in the Crimea, part of Ukraine which has long been home to the Russian Black Sea fleet and which has an ethnic Russian majority.

This nearly led to conflict over a series of Crimean lighthouses claimed by both countries in February.

Rhetorical differences

Yet others see Ukraine's relations with Russia as far too important to be worsened by a new government - of whatever political hue.

"You may get differences of rhetoric about Russia," says Nanivska, "but essentially, policy will be the same. Relations with Moscow have to get better, it's just not really an option but to get on with them."

Foreign policy may also stay largely in the hands of the president, who retains wide powers in this field.

With half the vote counted, negotiations have been going on since the morning over the future shape of the coalition that will lead Ukraine. "Whatever the outcome, and whichever coalition of parties emerges," Nanivska adds, "it seems the new government will have a difficult road ahead."

Source:
Aljazeera
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