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Poland, Belarus & Ukraine Report: September 2, 2003

2 September 2003, Volume 5, Number 32
LUKASHENKA UNEASY ABOUT CURRENCY UNION WITH RUSSIA. During a meeting with voters in Orsha Raion of the Vitsebsk Oblast on 27 August, President Alyaksandr Lukashenka said he fears that the planned introduction of the Russian ruble in Belarus in 2005 under the conditions proposed by Moscow might put his country in a "secondary" and "subordinate" position in the Russia-Belarus Union. "Are we once again, as in Soviet times, to crawl on our knees somewhere there, in the Russian Central Bank, and beg for money to pay wages?" Lukashenka asked. He said that a week before, Russian President Vladimir Putin proposed the signing of an accord introducing the Russian ruble in Belarus. The Belarusian president said, however, that so far there has been no agreement between Minsk and Moscow on the terms of the planned currency union. "Please, don't be worried. [And] take my advice: keep your Belarusian rubles in your pockets," Lukashenka stressed. "They are scarce, but they are our own."

The following day, Lukashenka said the Russian ruble can be introduced in Belarus only after the two countries meet their commitments under the 1999 Treaty on the Formation of the Union State. The treaty calls for the formation of a common economic space, equal conditions for economic entities on the territory of the union state, and the adoption of a constitutional act. Meanwhile, Russian President Vladimir Putin's press service said on 28 August that Putin recently sent a message to Lukashenka with a proposal to sign "in the near future" an accord on the introduction of the Russian ruble in Belarus. According to the press service, the drafting of the accord has been "actually completed."

Lukashenka's current battle of words with the Kremlin over the currency union seems to be connected with his desire to obtain some political and/or economic concessions to compensate the impending loss of control over monetary policies in his country. It is hardly possible that Lukashenka expects Moscow to allow him to print the Russian ruble or have a significant say in the board of directors that oversees the operation of Russia's Central Bank. But he may well be interested in gaining more favorable conditions regarding the exchange rate of Belarusian rubles for Russian ones, or regarding the planned interest-free loan that Moscow reportedly agreed to issue to Minsk to make possible the replacement of the Belarusian currency with the Russian one.

It is also not ruled out that Lukashenka's current backpedaling on the currency union with Russia is linked to his desire to negotiate the most favorable price of Russian gas supplied to Belarus. Currently, Gazprom pumps gas to Belarus at the price set for its domestic consumers in Smolensk Oblast (which is approximately two times lower than that for Russian gas delivered to Ukraine, and three times lower than the price of Russian gas supplied to the Baltic states). Belarus is expected to exhaust its quota of the cheap Russian gas in early November.

Some Belarusian observers also suggest that now is the best time for Lukashenka to bargain with the Kremlin over his remaining in power beyond 2006, when his second presidential term ends. The Kremlin, they argue, now has other important concerns -- parliamentary elections in December and presidential elections in March 2004 -- therefore it is unlikely to be very tough on Lukashenka or to risk an open conflict with him during and between the election campaigns.

Lukashenka and Putin will have a chance to exchange views on the Belarus-Russia currency union at a planned Commonwealth of Independent States summit in Yalta, Crimea, on 19 September. (Jan Maksymiuk)

CONSTITUTIONAL REFORM: WHAT'S IN THE PIPELINE? The Verkhovna Rada gathers for its autumn-winter session on 2 September. According to preliminary plans, it has some 900 bills for consideration. No doubt, one of the most important issues tackled by the Ukrainian legislature in the next few months will be the constitutional-reform plan proposed last month by President Leonid Kuchma and reportedly supported by the Communist Party and the Socialist Party (see "RFE/RL Poland, Belarus, and Ukraine Report," 26 August 2003). The "Ukrayinska pravda" website reported on 29 August that it had received a political-reform plan that was approved the previous day by presidential administration chief Viktor Medvedchuk, Socialist Party leader Oleksandr Moroz, and Communist Party leader Petro Symonenko. The website warns that it may not be a final version of the political-reform plan.

According to this draft, the Verkhovna Rada -- within a month after its inaugural session or within a month after the dissolution of a previous pro-government coalition -- will establish a new coalition of caucuses and groups in order to form a new cabinet.

The president proposes four high-ranking officials for parliamentary approval: prime minister, defense minister, foreign minister, and head of the Security Service of Ukraine. The prime minister proposes all other cabinet members as well as heads of the Antimonopoly Committee, the Broadcasting Committee, and the State Property Committee. Apart from approving these nominations, the parliament has the right to dismiss all these officials.

The prime minister also proposes all regional governors who subsequently need to be confirmed by the Cabinet of Ministers.

As under the current system, the president nominates a prosecutor-general who must be subsequently confirmed by parliament. An innovation is the proposal that the dismissal of the prosecutor-general also must be approved by the Verkhovna Rada.

There are two key innovations in the draft. First, the Verkhovna Rada is to be elected in 2006 under a fully proportional system from party lists. Second, this newly elected Verkhovna Rada is to elect a president within a month after its inauguration. The election of the president requires a three-fourths majority (338 votes in the 450-seat legislature). Thus, the direct presidential ballot in 2004 is expected to produce an "interim president" for two years.

The Verkhovna Rada may be dissolved if it fails to form a pro-government coalition within 30 days, form a cabinet within 60 days, elect a president within three months, or convene for more than 30 days during the ongoing session.

A people's deputy may be stripped of his/her parliamentary mandate if he/she fails to participate in plenary sittings for more than 60 days, quits the caucus of the party that placed him/her on the ballot, or fails to suspend his/her salaried activity outside the parliament (except for scientific, educational, or creative pursuits). On the other hand, lawmakers may hold posts in the government without surrendering their parliamentary mandates. (Jan Maksymiuk)

THE SINGLE ECONOMIC ZONE OR THE EU? Ukraine's Finance Minister and Deputy Prime Minister Mykola Azarov, together with his counterparts from Russia, Belarus, and Kazakhstan, last week approved a draft agreement on the formation of a single economic zone encompassing their countries.

The agreement is to be signed by the four countries' presidents at a Commonwealth of Independent States (CIS) summit to be held in the Crimea next month. The zone is intended to increase trade by simplifying bureaucratic regulations and scrapping tariffs. Russian Prime Minister Mikhail Kasyanov indicated it could lead to deeper integration, a single currency, and common economic borders.

The plan has taken many in Ukraine by surprise, with some observers saying the move appears to contradict Ukraine's declared aim of strengthening ties with the European Union. But the EU itself does not appear to be concerned by the plan.

Steffen Kovmand is the acting head of the European Commission's Kyiv office. On 26 August, he was among the Western diplomats to attend a meeting called by Azarov.

Kovmand said that the EU has not been shown details of the proposed agreement. But he said Azarov's briefing gave the EU no reason for worry over its relationship with Ukraine.

"[Azarov] certainly managed to reassure everyone in the room that this was in no way contradictory to Ukraine's EU ambitions. And he pointed out that it was something that he felt could make good economic sense to Ukraine. And he also pointed out that in various articles and provisions of this agreement -- that, I repeat, we haven't actually seen yet -- the speed and depth of integration was very much something that would be decided step-by-step, and by each signatory to the agreement," Kovmand said.

EU Enlargement Commissioner Guenter Verheugen is due to visit Kyiv on 11-12 September, and Kovmand says the economic zone agreement has not affected his plans. Kovmand says that Verheugen will ask Azarov and other members of the government for more details about the plan. For his part, Finance Minister Azarov tells RFE/RL the proposals did not exclude the desire for a closer relationship with the EU.

"I do not see any obstacles [to the EU] in the agreements that have been signed. Again, I emphasize, I would not sign any agreement that would produce such obstacles," Azarov says.

The single economic zone also appears to have surprised some officials at the Ukrainian Foreign Ministry. Foreign Minister Anatoliy Zlenko says that Ukraine's priority remains closer ties with the EU.

"We already have a strategic course for our country, and that is toward European integration. And currently we are mobilizing -- by this I mean the president of Ukraine is mobilizing -- all our efforts for the realization of this political course for our country," Zlenko says.

Zlenko said Ukraine could only enter the new economic zone if such an arrangement was compatible with EU regulations and standards and did not impede Ukraine's timetable for closer relations with the EU. He added that the zone could improve Ukraine's chances as an EU candidate if it improved the country's economy.

Former Ukrainian Foreign Minister Boris Tarasiuk now heads the Ukrainian parliament's committee on European integration. He says Ukraine should seek better relations with Russia and other former Soviet republics. But he added that trying to integrate Ukraine with both the EU and Eurasia simply did not seem practical.

"If integration with the European Union is the natural path for Ukraine, then integration with the East, which is represented by the Single Economic Zone, is the Kremlin's main objective and nothing else," Tarasiuk says.

Kyiv has a history of often appearing to change its foreign policy priorities, at times seemingly moving toward the West and at others toward Russia and Eurasia. President Leonid Kuchma has characterized such apparent vacillation as a "multi-vector [directional] policy." Tarasiuk described it in the following way.

"In connection with the behavior of the Ukrainian government and the use of popular slogans -- such as 'European integration,' 'European course,' 'Euro-Atlantic course' -- and what actually happens, I want to say that we are witnessing the diagnosis of what doctors call a split personality," Tarasiuk said.

He said the government is deliberately keeping its intentions unclear in order to play the EU and Russia against each other.

Tarasiuk thinks the government will be able to secure the two-thirds parliamentary majority needed to ratify an agreement on the economic zone. But he believes that in reality, Moscow and Kyiv -- the two most powerful players in the potential zone agreement -- are far from reaching a final agreement:

"Ukrainian and Russian participants in the talks have absolutely different concepts of what constitutes a Single Economic Zone. Ukrainian participants take it to mean a free trade zone, while the Russian participants mean a common currency, a common customs union and so forth. These are completely different levels and I think problems will arise out of this," Tarasiuk says.

Tarasiuk adds that other such schemes have been created in the past to augment economic ties between CIS republics: "There have been ideas for economic union and free trade zones between Ukraine and Russia, and free trade zones between CIS countries, but nothing has ever come of it. I want to say that of the thousands of projects initiated during the 12 years of the CIS's existence, none, luckily, have materialized."

Tarasiuk says he believes the current idea may suffer the same fate. (Askold Krushelnycky)

FEAR DRIVES POLITICAL REFORM. Pro-presidential blocs and parties fought the 2002 Ukrainian parliamentary elections in support of strengthening the executive. This tallied with President Leonid Kuchma's own preference since his first election in 1994 for a Russian and CIS-style "super-presidential" constitution. This was also the aim of the flawed and internationally unrecognized April 2000 referendum.

Kuchma, though, failed to obtain his desired "super-presidential" constitution and had to compromise with parliament. The result was a "semi-presidential" regime that has meant conflict between the legislature and executive with neither side dominant over the other.

In Ukraine, as in other CIS states, election programs rarely translate into policy after the elections. The pro-presidential For a United Ukraine (ZYU) bloc disintegrated into eight parliamentary factions only a month after the elections. None of these successor factions is willing to accept ZYU's responsibility to voters for its election promises.

This would be anyhow impossible in one key area, political reform, because the successor factions to ZYU and its allied Social Democratic Party-united (SDPU-o) have radically changed their policies since the elections. ZYU's election program called for the strengthening of executive power (i.e., a move toward a "super-presidential" system).

Yet, in August 2002, President Kuchma announced a program of political reform with the ostensible purpose of changing Ukraine from a "semi-presidential" to a parliamentary-presidential regime. This would ostensibly signal a move away from the typical CIS "super-presidential" system that ZYU had supported, to an east-central European and Baltic constitution. As Freedom House's annual "Nations in Transit" survey of 27 postcommunist states has shown, parliamentary-presidential (or pure parliamentary) systems have been more conducive to democratization.

This then begs the question as to whether President Kuchma, when he announced his political reform proposals in draft form in March, had as his ultimate purpose to advance Ukraine's democratization after its regression since the late 1990s.

The answer to this question is "no," as it is fear that drives Kuchma's political reform and the support given to it by his centrist oligarchic parliamentary allies. These reform proposals aim to undertake two steps. First, to strip all power away from the executive as an insurance policy in case the opposition wins the 2004 presidential elections. At all costs an opposition president must not be allowed to possess the same degree of power as Kuchma currently possesses.

Second, to prolong Kuchma's term in office by two years by changing the constitution so that all elections will be held in the same year (i.e. postponing the 2004 elections to 2006 when parliamentary and local elections are due). A third term for Kuchma is not seriously being discussed because even his allies know he would have colossal problems in winning an extra term because of constantly low ratings of 5 percent.

Despite cosmetic attempts at improving the executive's and government's standing in public eyes and more sinister black operations against the opposition in the media and against their business supporters, public opinion polls continue to give the same results. Our Ukraine leader Viktor Yushchenko continues to obtain 21 percent-30 percent support followed by Communist leader Petro Symonenko. Prime Minister Viktor Yanukevych's rating continues to rise but still remains far lower and less than 10 percent. Yanukevych, who represents the Donetsk clan, is not a candidate that some other oligarchic groups would like to see elected president. The presidential administration has still not found a neutral candidate acceptable to all clans who is able to take on and win against Yushchenko.

Former presidential adviser Oleksandr Volkov indirectly admitted that fear drives Kuchma's political reform. Volkov, like Kuchma, resents the passivity of the pro-presidential majority, not all of whom are threatened by a Yushchenko victory in 2004. The subset of this is the fear that some pro-presidential groups will agree separate deals with Yushchenko, a process which has already started. Kuchma is fearful that once he is no longer in power, he will have less control over his parliamentary supporters who are not allied through ideology but by fear of their businesses being closed and corruption charges leveled against them. As Volkov admitted, "the largest component [of the pro-presidential majority] has not even a clue as to what is going on. And it does not want to have a clue."

Volkov was less critical of Yushchenko than Kuchma. Nevertheless, he admitted that Yushchenko's allies were those "who we all fear" if he became president. As president under the current constitution, Yushchenko would --Volkov warned -- be in charge of the security forces, and he was fearful that this would lead to people being imprisoned. Interviewed by "Zerkalo nedeli," Volkov called upon Kuchma to seek guarantees for himself and his "team, which has faithfully served him over 10 years."

Volkov is in effect admitting that President Yushchenko would be too weak to prevent his allies from changing Ukraine's virtual program against corruption into a real one and that the main victims of this would be oligarchs. Extending Kuchma's term in office through postponing elections, which Volkov supports, would also defer the question of Kuchma's fate and whether he should be granted immunity from prosecution.

On 7 July, when parliament was stalemated over Kuchma's political reform, the president launched a vicious attack on Yushchenko for blocking the reforms. Yushchenko replied that Kuchma was attempting a "constitutional coup" to prolong his term in office, which showed a "complete degradation of Ukrainian politics." This was the first occasion where Kuchma had openly showed that he perceived Yushchenko to be his main threat in the transition to the post-Kuchma era.

(This report was written by Dr. Taras Kuzio, a resident fellow at the Centre for Russian and East European Studies, University of Toronto.)

"Today we hear ambiguous opinions regarding the introduction of the Russian ruble as our currency. The population has already sorted out this issue. While earlier, people shouted to give them the Russian ruble because they believed it to be more advantageous, today they have already come to their senses and say: you know, even if our currency is weaker, it is ours. What is currency? The introduction of a different currency -- in this case, the Russian one -- means an actual unification with Russia." -- Belarusian President Alyaksandr Lukashenka on 27 August, quoted by Belarusian Television.