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November 23, 2004

Analysis: What Might A 'Yanukovych Presidency' In Ukraine Bring?

by Roman Kupchinsky

Could a 'President Yanukovych' paper over his differences with opponents at home and abroad?

If rapidly unfolding events in Kyiv do not reverse Viktor Yanukovych's seemingly insurmountable lead in official figures that have emerged in the wake of the Ukrainian presidential runoff on 21 November, his official triumph will not have been totally unexpected.
Most Western election monitors agree that enormous pressure was brought to bear on local officials, government agencies, and the media by the administration of Leonid Kuchma to ensure Yanukovych's election.

Yanukovych would assume leadership of a bitterly divided country. In such cases, the procedure might presumably be to attempt to heal rifts in society and at the same time fulfill campaign promises to the electorate. Given that many voters are alleged to have been coerced or paid to cast their ballots for him (some are believed to have cast them often), Yanukovych might arguably be more flexible in this respect.

Campaign Pledges

Nonetheless, he would be expected to make good on some of his campaign pledges. Promises to increase government salaries and pensions are unrealistic and would require flooding the economy with new hryvnyas, and unless he was willing to risk a major rise in inflation, such economic promises would have to be shelved and more realistic measures adopted.

His proposal for dual Ukrainian-Russian citizenship would require a change in the constitution, a difficult task under the best of circumstances but an even more formidable one under the pall of perceptions of electoral foul play.

In light of the furor it might cause amid postelection bitterness, Yanukovych's advisers might well urge him to bury his divisive pledge to make Russian the country's second official language.


As for Yanukovych's foreign policy, the West and Russia would need to carefully monitor his behavior on the following issues:

1. Ukrainian-Russian relations

The hyperactivity of the Russian political establishment in promoting Yanukovych is a debt that Yanukovych would be expected to repay in full. Any future Ukrainian government would likely acquiesce to Russian President Vladimir Putin's relentless drive to integrate large sectors of the Ukrainian economy with Russia's.

One important factor in the Ukrainian-Russian relationship is more difficult to decode: Does Yanukovych view himself as president of Ukraine or as governor of the "South Russian gubernia"? Do the managers of the Donetsk and other Ukrainian clans and financial-industrial groups wish to see Russian ministers interfere in their business dealings?

Anatolii Chubais recently proffered a concept of Russian "liberal imperialism," it should be kept in mind, which was not warmly received by the Ukrainian political or business elite regardless of their support or antipathy for Yanukovych.

The Single Economic Space (SES) would likely expand and become a more or less permanent feature in the region. This body, created at President Putin's initiative, seeks to first coordinate and then merge the economic might of Russia, Ukraine, Belarus, and Kazakhstan into what some insist on calling a "customs union" or a "free trade zone" while others see it as another example of Russian economic imperialism.

If a President Yanukovych did the unlikely and allowed Putin a free hand in setting policy for the SES, the economic-imperialism view would likely predominate and the Ukrainian economy would be seen as becoming more beholden to Moscow. How this would affect potential investors is difficult to gauge.

As it stands today, a great deal of Ukrainian economic growth is dependent on cheap Russian and Turkmen energy resources. If Putin were to play the "gas card," which he mistakenly did in the case of the much more pro-Russian Belarus, a Yanukovych administration might respond in kind and block the gas pipeline that supplies 90 percent of Russian gas destined for Europe. By doing so, Ukraine could prevent billions of dollars from going to the Russian treasury.

The chances of this taking place would be slim, however. In all likelihood, a Yanukovych administration would be unlikely to veer far from the policies set by its predecessor. Yanukovych would weave and bob as the situation demanded in order to maintain a balance between Ukrainian corporate interests and those of its Russian neighbors.

Nonetheless, Yanukovych would not be expected to undo deals such as the one signed on 16 November whereby Russian state oil-pipeline company Transneft assumed control over Ukraine's oil-pipeline system for 15 years.

He is also conscious of the fact that beginning in January 2005, Ukraine will not be able to buy the 36 billion cubic meters of gas it needs every year directly from Turkmenistan but rather must do so from Russian Gazprom, in which the Russian state now holds a controlling stake.

2. Ukrainian-Polish relations

Relations between these neighboring states could deteriorate to some degree under a Yanukovych administration. The Industrial Union of the Donbas has been involved in a dispute with Polish authorities over its desire to buy the Huty Stali Czestochowa steel mill due to Polish resistance to sell them that valuable asset. Yanukovych would likely lobby on behalf of the Industrial Union of the Donbas and risk being rejected in order to prove his loyalty to the Donetsk Clan.

Yet it is unlikely that Yanukovych would turn away from Poland altogether, given that Poland might remain his only open window to the West and Ukraine's only backer of the country's eventual EU membership.

3. Ukrainian-U.S. relations

Washington would certainly take a dim view of the manner in which Yanukovych was elected. His victory, however, might not have any great impact on relations between the two countries, given that relations were already visibly strained during the last five years of the Kuchma administration. Kuchma's alleged intention to sell an advanced radar system to Iraq, the still-unsolved murder of Internet journalist Heorhiy Gongadze, the reversal of the Odesa-Brody pipeline -- all have served to isolate Ukraine in Washington's eyes.

Ukrainian military participation in Iraq was meant to pacify the United States and rehabilitate Ukraine in the eyes of the Washington. Moscow understood this and did not protest when Ukrainian forces were dispatched to Iraq. Yanukovych has promised to withdraw this contingent and would likely keep that pledge.

4. The rise of the Donetsk clan

There can be little doubt that the strength and power of the Donetsk clan, the informal group of individuals and companies that controls much of industrial and financial life in the Donetsk region, would grow immeasurably under a Yanukovych administration. The old adage that "Kyiv makes policy while Donetsk makes money" is no longer accurate: Donetsk now makes both, and anyone who challenges this postulate might find himself in serious trouble.

The rise of the Donetsk clan would clearly affect Ukrainian steel and rolled-pipe exports to Russia, the largest buyer of those commodities. It is projected that by 2020, Russia will need to build up to 27,000 kilometers of new, large-diameter gas pipeline. Many of the enterprises that construct those items are controlled by the Donetsk clan and Viktor Pinchuk, a parliamentarian and outgoing President Kuchma's son-in-law, through his Interpipe group. This would help temper Russians from using the "energy card" against Ukraine.

5. Transparency and civil society

The rise of the Donetsk clan, many of whose cadres might be appointed to senior posts in a Yanukovych administration, would signal few advances for legality and rule of law in Ukraine in the coming five years. A clan purportedly built on violence, assassination, and ruthlessness could hardly be expected to bolster civil society.

Transparency would thus remain a largely alien concept in Ukraine.

In practical terms, law enforcement would thus remain largely under the control of the presidential administration, "guidance" of the press would remain the norm, and the scandals of the Kuchma administration might go unpunished.

The question of Ukrainian membership of NATO and the European Union saw little forward movement during the Kuchma years, and would be unlikely to gather momentum under Yanukovych. It should be noted that at least some of the motivation for keeping Ukraine isolated from the West lies in NATO and the European Union not wishing to upset Russia.

Russia by and large maintained official silence during deliberations on EU and NATO expansion, but Moscow was always present in the minds of Europeans eager to avoid angering their major supplier of energy by getting too cozy with Ukraine.
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