Did Biden meet with a murderer in Kiev?

Graham Stack in Kiev

Among the eternally quarreling Ukrainian politicians Joe Biden met during his visit to Kiev 20-22 July, one of the more pleasant interlocutors may have been speaker of parliament Volodomyr Litvin. Litvin’s ironic charm is a vital resource when bringing calm to Ukraine’s tumultuous and corrupt parliament, where fist fights are common place, and deputies openly conclude shady deals on their mobile phones during speeches. In a culture where looks are vital to political appeal, the 54 year old’s debonair features, coiffed silver hair and a past career as eminent scholar lend him sophistication lacking among the country’s notoriously unruly officials.

But for all his charisma, Litvin may be hiding a secret that could make Biden soon want to forget their meeting.

At exactly the same time as Litvin met Biden in Kiev on the afternoon of Tuesday July 22, security forces detained former police general Oleksiy Pukach, Ukraine’s most wanted man, in a village not far from the capital.

Pukach, in hiding since 2004, was in March 2005 found guilty in absentia of the brutal murder of journalist Heorhiy Gongadze, a journalist bitterly critical of former Ukrainian president Leonid Kuchma. Gongadze’s headless corpse was discovered in a shallow grave November 2000.

Three weeks later, a disgruntled presidential security officer produced audio recordings that implicated Kuchma and his then chief of staff directly in the murder. Kuchma’s chief of staff was none other than current parliamentary speaker Volodomy Litvin, at the time nicknamed ‘the grey cardinal’ of Ukrainian politics.

Litvin has understandably always denied the claims that he ordered the murder of Gongadze. However, investigators say he has refused to provide recorded voice samples needed to verify the authenticity of the recordings. And no one doubts that Pukach was acting on orders from above when carrying out the murder. With Pukach finally apprehended, everyone in Kiev is waiting for the next round of revelations.

They may not have long to wait. According to deputy head of Ukraine’s security service Vasyl Hrytsak, Pukach is singing like a nightingale after a long night of interrogation. “He has confessed to the murder and also confirmed the complicity of individual officials – there will be a lot of interesting information,” Hrytsak told the press. Hrytsak also said Pukach would lead investigators to the place where he buried Gongadze’s head.

Now the vultures are gathering around Litvin.

They may not have long to wait. According to deputy head of Ukraine¹s
security service Vasyl Hrytsak, Pukach is singing like a nightingale after a long night of interrogation. He has confessed to the murder and also confirmed the complicity of individual officials – there will be a lot of interesting information,” Hrytsak told the press. Hrytsak also said Pukach
would lead investigators to the place where he buried Gongadze¹s head.

Sources in the secret service were quoted today saying Pukach had named three former officials as having ordered the killing. One of these ‘occupies a very high position’, according to the sources, and one is dead. This would dovetail with the evidence contained in the tapes: with Litvin the high official, ex=president Kuchma the second still alive, and the deceased third man former interior minister Yuri Kravchenko, who shot himself after Kuchma lost power in 2004.

Ukraine’s President Viktor Yushchenko, himself the target of a near-fatal
and unsolved poisoning when he unseated Kuchma in 2004, confirmed “the public will soon learn very explosive things.” Yushchenko on taking office swore to find and prosecute Gongadze’s killers.

Litvin today accused Yushchenko of “politicising” the arrest of Puchak and the Gongadze murder.

Gongadze’s widow, 37 year old Miroslava, who has fought unceasingly to keep the memory of her husband alive, told the press, “there is every
reason for Leonid Kuchma to be afraid, and there is every reason for
Volodymyr Litvin to be afraid.”

The secret service has said that Puchak will take investigators to where he buried Gongadze’s head. That, together with justice for the men who ordered the murder, may finally bring her closure – nine years too late.

Litvin’s debonair cool may be in for its toughest challenge yet.

And US officials may take note just how deceptive appearances can be in Ukraine and other former Soviet countries.

Gongadze murderer could cause political earthquake in Ukraine

Graham Stack in Kiev

Ukraine’s Security Service deputy head Vasyl Hrytsak told a briefing that Oleksy Pukach, arrested July 21 for the murder of journalist Heorhiy Gongadze in 2000, has named the people who ordered the crime.

“[Oleksiy] Pukach has confirmed his complicity in that crime. He has also confirmed the complicity of individual officials – there will be a lot of interesting information,” Hrytsak said, according to Interfax.

President Viktor Yushchenko also said that “the public would learn very interesting things” following Pukach’s detainment.

Opponents have called the timing of the move to detain Pukach political. It turned out that Pukach had been living in a village near Kiev since 2005, and under secret service surveillance.

Gongadze, a fierce critic of former President Leonid Kuchma, disappeared in September 2000, and his headless corpse was found soon after. Tape recordings of conversations between Leonid Kuchma and top officials, including current parliamentary speaker Vladimir Litvin who met with US VP Joe Biden yesterday, indicated Kuchma’s displeasure with the journalist. Kuchma appeared to recommend Gongadze be “turned over to the Chechens.” The authenticity of the tapes, leaked by former head of Kuchma’s security detail Melnikov, has never been proven.

Gongadze’s murder and subsequent revelations played a key role in the development of democratic opposition to Kuchma, culminating in the Orange Revolution 2004.

Three former police officers have since been sentenced to 12 year prison sentences for the murders. They said they were operating under Pukach’s orders. Pukach went into hiding in 2005.

Cut the budget deficit and raise energy prices, Biden tells Ukraine

Graham Stack in Kyiv

In a speech in Kiev yesterday July 23, on the last of his Ukraine visit, US vice president Joe Biden told Ukraine to do exactly what the IMF says, and on two specific points: “The Fund requires that your government, and your government agreed to critical reforms to cut the budget deficit, revive a striving [sic*] banking system, and phase out energy subsidies, which I know from experience is a very difficult thing to do. Carrying out this agreement requires very hard choices and tough action, but it will help put you on the road to growth and competitiveness.”

Biden told Ukraine that, “moving toward market pricing for energy is brave, but also absolutely necessary pre-condition.”

Biden argued that shifting to market prices would strengthen Ukraine’s energy security. However, it also the Russian position that Ukraine must shift to market prices for gas.

If the US is resetting its relationship with Russia, it appears the US is also rethinking its relationship with Ukraine.

Biden as expected committed to Ukraine’s independence and sovereignty, and praised Ukraine’s democracy as the ‘the freest country in the region.” He emphasized however NATO or EU membership would be entirely Ukraine’s choice, and that the US would not push Ukraine to join. “The USA supports Ukraine’s deepening ties to NATO and to the European Union. But again, we recognize they are your decisions, your choices, not ours whether you choose the EU or seek to, or NATO. We recognize that how far and how fast to proceed on your choices is, again, a uniquely Ukrainian choice — it is not ours.”

Yesterday, Biden warned that the sustainability of Ukraine’s democracy was threatened by economic collapse and pervasive corruption.

“Mature democracies survive because they develop institutions such as a free press, a truly independent court system, an effective legislature – all of which serve as a check on the corruption that fuels the cynicism and limits growth in any country, including yours,” Biden said. Referring to Ukraine’s economic problems, Mr Biden asked: “Can you name me a place where democracy has flourished where the economic system has failed?”

He also harangued ruling politicians for their failure to work together. “Communications among leaders has broken down to such an extent that political posturing appears to prevent progress.”

Committing the US to respect for national sovereignty is a retreat from the neocon supremacist position, and, although delivered with an anti-Russian twist in the Georgian context, in facts coincides with longheld Russian and Chinese demands for the US to abide by international law.

Underlining the shift, Biden said the US was committed to a “multi-polar world” – an expression straight out of the Putin / Primakov phrasebook.

Ukraine’s poisoned president launches doomed bid for second term

Graham Stack in Kiev

Ukrainian president Viktor Yushchenko, the world’s most unpopular president according to opinion polls, climbed Ukraine’s highest mountain Sunday July 19 to prove his fitness for a second term in office. At the summit of Mount Hoverla (2016m) in the Carpathians, with a view westwards to the Europe he aspires to, Yushchenko announced officially that he would run for a second term in office in elections in January 2010.

“I would like to officially announce here that I will be running for the Ukrainian presidency in January,” he said.

A small band of supporters who had followed him to the peak in beautiful summer weather struggled with tears after his announcement. Opinion polls give Yushchenko an approval rating of only 2% – less than the margin of error – meaning he is facing utter humiliation in the elections. Pollsters point out that his rating constitutes a world record for unpopularity. His motorcade regularly encounters a hostile cacophony of blaring horns as it winds through Kiev streets.

Yushchenko’s record-breaking unpopularity is astonishing considering his initial approval rating of over 60% on taking office in January 2005. Yushchenko was swept to power by mass protests against electoral fraud in late 2004, known as the Orange Revolution. In the run-up to the rigged elections, opponents poisoned Yushchenko with dioxin. The images of his severe facial scarring that resulted have become an icon of people’s struggle for democracy.

The scarring, the medical term for which is chloracne, and facial immobility are still very obvious. The subtext of yesterday’s ascent of Hoverla was not only symbolic, but also simply to prove that the president is physically fit enough for high office in times of crisis.

Poisoned chalice

Leading international toxicologists familiar with the case argue however that the poison has massively impaired the president’s performance. They dispute Yuschenko’s claim that his body has got rid of 95% of what was one of the highest dioxin doses in humans ever recorded.

“My belief is that he will suffer many ill effects of dioxin for many years, including possible brain damage,” says dioxin expert University of Texas professor Arnold Schechter. “His chloracne not only affects the face, but the whole body – as every single follicle may be involved in severe cases as the one of president Yushchenko is,” agrees Vienna’s Alexandra Geusau.

Yuschenko has traditionally said little about the effects of the still unsolved poisoning, except to claim he is in good health. Last month, however, he admitted he had undergone 26 secret operations in the first two years of his presidency. “Nobody knew about the operations, because they were carried out at the weekend, on Friday evenings, and on Monday I was already back at work,” Yushchenko told journalists, adding that each operation lasted over three hours.

Toxicologists say Yushchenko’s out-of-touch performance in office is a direct result of the poisoning.

During the Orange Revolution, the poisoning added fuel to the popular fury at stolen elections. But according to Valery Khmelko, president of Kyiv International Institute of Sociology, “following the poisoning, Yushchenko became more interested in his presidential palaces, amateur history and bee-keeping than in running the country.” Crisis-hit Ukrainians see their president as out of touch with reality and incapable of exercising power.

British toxicologist Alastair Hay of Leeds University lists lethargy, enervation, numbness, liver damage and weakened immune system as medium-term consequences of dioxin poisoning

“Yuschenko’s behaviour is what you might expect from someone exposed to dioxin in the quantities he was,” says Hay. “The chloracne indicates he is genetically susceptible to dioxins, so he may have many systems of his body damaged. It must have taken an effort of will to continue in his high-octane job.”

Now, in a bitter irony of history, the clear favorite to win the upcoming elections is the man whom the Orange Revolution prevented seizing power in 2004, pro-Russian former Prime Minister Viktor Yanukovych.

A further bitter blow is the decision on the part of Barack Obama’s new US administration to send only the vice president to Ukraine, while Obama himself visited Moscow last week without any stop-over in Kiev. Yushchenko has staked everything on a pro-US foreign policy aiming at NATO membership, and Obama’s rapprochement policy with Moscow is making this look like a dead end.

Earlier this week, Yushchenko’s foreign policy spokesman said pointedly that the main topic of discussion with Biden would be to negotiate a visit to Kiev by Obama himself.

West should beware “junta” coalition, says Yatsenyuk

Graham Stack in Kiev

With a grand coalition in Ukraine’s parliament looking set to cancel upcoming direct presidential elections and change the constitution, Arsenyi Yatsenyuk, dubbed Ukraine’s Obama, and one of the favourites to win the elections, has warned the West of a Russian-backed “junta” that could turn Ukraine into “a banana republic.”

“I know the West is exhausted of the stand-off in Ukraine,” 35 year old Arsenyi Yatsenyuk, parliamentary deputy and leader of Ukraine’s “Front for Change”, told this correspondent in perfect English, ”but this is very dangerous. Because if the coalition’s plans go ahead, Ukraine will return to the sphere of influence of a certain big country,” he added, leaving no doubt he had Russia in mind. “It will also turn Ukraine into a banana republic,” he added.

Yatsenyuk called the nascent coalition’s plans to cancel presidential elections and shift power to the parliament “an anti-constitutional conspiracy,” and promised to head a campaign to stop what he referred to as a “junta”.

Asked if there would be a second Orange revolution, Yatsenyuk said, “you will see.”

The two parties which are negotiating the coalition, Prime Minister Yulia Tymoshenko’s Bloc Yulia Tymoshenko and opposition leader Viktor Yanukovch’s Party of Regions, together command 70% of the parliament, meaning the coalition will monopolise power in the country if comes to fruition, as it is expected to within this week.

Currently, presidential elections are scheduled for January 2010. The nascent coalition and its plans to abolish presidential elections are expected to be formally announced coming Tuesday.

Analysts agree that the move would condemn Ukraine to follow Russia and Belarus along the path to authoritarianism, by sidelining opposition and restricting political participation.

Until Yatsenyuk threw his hat into the ring, the presidential elections were seen as a two horse race between Yanukovych and Tymoshenko. Incumbent president Viktor Yushchenko, although also intending to run, has poll ratings of 2%, making him a marginal candidate.

Yatsenyuk’s rating has already reached 14% and is rising monthly. PM Tymoshenko is on 15% and opposition leader Yanukovych on 25%.

Yatsenyuk’s campaign team have no doubt that his rapid rise has prompted the move to cancel elections, with both Tymoshenko and Yanukovych now uncertain of their chances in the winner-takes-all presidential race. Yatsenyuk declared his candidacy on May 22 on turning thirty five, the minimal age for a presidential candidacy.

Former PM Yanukovych and current PM Tymoshenko were on opposing sides during the globally-acclaimed 2004 Orange revolution. It was largely Tymoshenko’s firebrand rhetoric and actions that stymied Yanukovych’s attempt to rig the elections in his favour. Now they appear to be divvying up power between them to keep Yatsenyuk out. Reports indicate Yanukovych will have himself elected president by parliament, in return for Tymoshenko continuing as prime minister.

Yanukovch openly favours a pro-Russian Ukraine. Tymoshenko, formerly vehemently pro-Western, has shifted radically to a pro-Russian position since the Russian-Georgian conflict of August 2008, prompting Ukraine’s secret service to investigate her for betraying the national interest.

Yatsenyuk’s soaring popularity in Ukraine has led to him being dubbed the Ukrainian Obama. Like Obama, he is a legal scholar by profession, with a background in civil activism. Despite his youth he has held high office in Ukraine as Minister of Economy, Foreign Minister and Parliamentary speaker. He has however avoided being mired in political sleaze and backstabbing that has dogged the country.

His campaign is also modeled on Obama’s success in 2008, with its slogan of ‘change’, and reliance on grassroots activism and also financial support from the pockets of ordinary people donating via the Internet.

His campaign team, however, playfully disclaim any such parallel, saying there are significant differences between the two young politicians. “Obama uses a blackberry, while Yatsenyuk prefers an i-phone’ a source close to Yatsenyuk joked.

–

Yushchenko least popular president in Ukrainian history

In opinion poll results comparing current popularity of incumbent Ukrainian president Viktor Yushchenko with his two predecessors in the post, Leonid Kuchma and Leonid Kravchuk, Yushchenko trails in 3rd place, according to the results of the Omnibus national monthly poll conducted amongst 1,200 respondents in March 2009 by the TNS Ukraine company.

A mere 7% of respondents named Yushchenko as Ukraine’s best president.

Despite Yushchenko’s having been swept into power in 2004 by the people power of the Orange Revolution, directed against the previous president Leonid Kuchma and his circle, some 39% said they now consider Kuchma the country’s best leader to date.

Another 21% named Leonid Kravchuk, Ukraine’s first president 1991-1994 the best, despite the complete economic collapse Ukraine experienced during his presidency.

Over one fourth of respondents (27%) were undecided and 6% refused to be polled.

Uncertainty mounts in Ukraine, as Yushchenko calls all change

Graham Stack for business new europe (www.businessneweurope.eu)
President Viktor Yushchenko, in a pre-recorded televised message played last night, announced the dissolution of the Verkhovna Rada and today, in a decree posted on his website, called preterm parliamentary elections for Sunday December 7. Yushchenko invoked his constitutional power after parties failed to form a new coalition within one month of the breakup of the last coalition in September.

In his televised address late Wednesday, Yushchenko blamed the coalition’s collapse on Prime Minister Yulia Tymoshenko, leader of the eponymous bloc.

“I am convinced, deeply convinced that the democratic coalition was ruined by one thing alone — human ambition. The ambition of one person,” he said in his address.

He also told viewers that Tymoshenko had exhibited unrelenting “thirst for power”.

Tymoshenko’s BYuT party immediately said it would consider challenging the constitutionality of the dissolution.

Andriy Portnov, a deputy leader of BYuT’s parliamentary faction, was quoted by Interfax as saying, “we deem this step anti-constitutional and senseless. What has happened was certainly provoked by the president. It is he who stands behind the coalition’s breakup.”

“We will not vote for any bill aimed at legitimating these anti-constitutional steps by the president,” he added.

The constitution states that the president has the formal authority to dissolve the legislature if no majority coalition has been formed within 30 days after the collapse of its predecessor.

However, lawmakers still have to adopt changes to the current legislation in order for early elections to be held legitimately, as some clauses of the existing law are impossible to implement by December 7. The legislature must also allocate money for holding elections out of the state budget for 2008.

A further potential legal quibble arises from the date of Yushchenko’s decree, according to Rencap analysts.

On 3 September, the President announced he would use his constitutional right to dissolve the Rada if a new coalition was not formed in the next 30 days.

However, the break-up of the ruling coalition was first officially announced in the Rada on 16 September, meaning that Yushchenko’s decree dissolving the Rada and calling new elections could be ruled premature.

This means that there is likely to be continued political uncertainty in the coming weeks about how and when elections are going to take place.

“Tymoshenko seems intent on derailing or at least delaying the upcoming vote to take advantage of widespread disapproval of new snap elections among voters ,” says Dragon’s Viktor Luhovyk.

Ukrainian roulette

Beyond likely legal disputes, the outcome of the elections themselves, when they take place, is equally uncertain, due to floating voters, electoral fatigue, a plethora of small parties and a low threshold of only 3%.

“Voting day comes 14 months after the last elections,” says Galt & Taggart’s Spolsky, “and with Ukraine’s population suffering election fatigue the president is risking a very low turnout on elections.”

Polls show a drift away from established parties to small parties, making the outcome in terms of a governing coalition is thus even more open, according to analysts. So even after elections, coalition negotiations are likely to be even more protracted than was the case last year.

According to recent polls, BYuT is supported by 18-24% of the electorate (vs 30.7% at the previous elections), the Party of Regions has 20-26% (vs 34.4% last year) and OU-PS 4-10% (vs 14.2 %), say Rencap analysts.

Support for smaller parties is on the increase, with the Lytvyn Bloc possibly getting 5-7% (vs 4.0%) of votes and the Communist Party – 4-6% (vs 5.4%), according to Rencap.

According to Concorde’s Verbyany, “looking at current poll numbers, both the Party of Regions and Tymoshenko blocs have good chances of increasing their seats in parliament – while the pro-presidential Our Ukraine party risks not breaking the 3% threshold to get in. A number of smaller parties will again stand in the election, and considering voter’s distain for current political personalities, they could very well make the cut.”

Galt & Taggart’s Spolsky comments, “with several parties fracturing internally – some quite severely – the political landscape could see some changes, especially with a few better-known politicians set to change allegiances, establish new parties, or make the jump from municipal to federal politics.”

Orange eats itself: Yushchenko vs. Tymoshenko

A number of analysts argue that Yushchenko’s move is aimed at removing Tymoshenko from government in the run up to next year’s presidential election campaign, and that the president is ready to reestablish the coalition with current opposition Party of Regions, with current defence minister Yury Yekhanurov as prime minister, that fell apart in spring 2007.

“The opposition Party of Regions, which lost power after last year’s elections, has tacitly taken Yushchenko’s side and is eagerly awaiting a new vote to return to government office, possibly by forming a majority coalition with the president’s party in the next parliament,” comments Dragon’s Luhovyk.

Foyil’s Ismail Safaraliyev argues that “although Prime Minister Yulia Tymoshenko’s eponymous bloc (BYuT) will remain a force to be reckoned with, we can expect Regions of Ukraine to win more seats in Parliament than it now controls, with Ukraine’s Communists returning as allies to create a bloc of MPs that would be enough to build a stable ruling coalition. In this scenario, which we find the likeliest, Regions would nominate its leader and former PM Victor Yanukovych as Prime Minister, with Mrs. Tymoshenko going into opposition to both President Yuschhenko and Mr. Yanukovych.”

G&T’s Spolsky argues trenchantly, “President Yushchenko’s main goal in the month-long political turmoil was the end of Yulia Tymoshenko’s premiership. Both Tymoshenko and Yushchenko have their sights firmly set on the battle for president in early 2010, and President Yushchenko deemed it necessary to remove Tymoshenko from her post in an effort to discredit her and reap the public opinion benefits. The president chose elections, and it is widely believed that no matter the outcome, Tymoshenko will not find herself in the prime minister’s chair come the new year.”

Yushchenko’s move to dissolve the Rada and break political deadlock thus can hardly be seen as a move to some new stability, but as exacerbating instability, just as the effects of the global financial crisis start to bite deeper into the Ukraine economy.

Concorde’s Volodymyr Verbyany comments, “from the political view, the Rada’s dissolution could be a logical attempt at resolving the deadlock that has paralyzed Ukraine’s parliament. But from the economic point of view, amid the C/A deficit concerns and exchange rate volatility, and particularly considering the population’s staunch opposition to new elections, the call to dissolve parliament is a very risky move.”

And Foyil’s Safaraliyev says tersely,”considering that the global financial crisis is starting to seriously affect key industries of the Ukrainian economy, the last thing this country needs is more political uncertainty.”

Parties play blame game as Ukraine counts down to Rada dissolution

Graham Stack for business new europe (www.businessneweurope.eu)
Ukrainian President Viktor Yushchenko has set parties a deadline of Tuesday, October 7 to reach a new coalition agreement, otherwise he will dissolve Ukraine’s parliament, the Verkhovna Rada, and call fresh elections.

As of October 3, Yushchenko has had the constitutional right, but not the obligation, to dissolve parliament following the collapse in September of the coalition between the Bloc Yulia Tymoshenko (BYuT) and the president’s Our Ukraine/People’s Self-Defence (NU-NS).

“I fully understand that I am absolutely entitled to dissolve the parliament today,” the presidential press service quoted Yushchenko as telling journalists on Saturday October 4. However, Yushchenko said he could wait until October 7 to see if a coalition appeared.

But hopes for renewing the previous “democratic” coalition by taking on board the small Volodomyr Lytvyn Block led by former speaker Volodomyr Lytvyn were dashed on October 3. Members of the Lytvyn Bloc declared that the coalition negotiations were merely “a cynical political game,” according to Lytvyn’s faction leader Oleh Zarubinskiy. “The coalition of the three [ByuT, NU-NS, and Lytvyn Bloc] is impossible,” he said at a briefing, according to Interfax.

Including the Lytvyn Bloc in the coalition could have restored its majority in the Rada. The coalition had been technically a minority government following the defection of two deputies in June. Without including the Lytvyn Bloc, restoring the coalition would have done little to overcome the political instability and deadlock.

Blame game

Zarubinskiy’s comments adds grist to the mill that the various party leaderships are now only interested in avoiding the blame for unpopular and expensive new elections they are already secretly preparing for. For his part, Zarubisnkiy put the blame for the breakdown of talks squarely on the presidential administration, telling Interfax that, “script writers and directors at N11 in Bankovaya Street are not interested in any coalition in the Verkhovna Rada and are doing everything to make sure that there is no coalition.”

Prime Minister Yulia Tymoshenko, leader of the eponymous bloc, also blamed Yushchenko for the Lytvyn Bloc’s exit from talks. bne reported October 1 that President Viktor Yushchenko said during a summit in Washington that he had given up hope of re-forming the coalition between BYuT and NU-NS and is preparing for new elections. Yushchenko expressed scepticism October 3 about the genuineness of recent conciliatory moves by Tymoshenko, leader of BYuT. Such moves included a promise to retract the bills passed September 2 that transferred powers from president to parliament that originally caused the coalition to collapse.

On October 3, Tymoshenko went one step further by finally adding her signature to a statement on the Georgian crisis of August that implicitly criticizes Russia. She then claimed at a press conference that BYuT had now complied with all conditions NU-NS and the president had specified for renewing the coalition, passing the buck back to Yushchenko.

Tymoshenko’s BYuT party stands to gain at the expense of the pro-presidential NU-NS in the event of fresh elections. This makes Yushchenko’s claims that Tymoshenko is only going through the motions of talks very plausible.

However, BYuT is still only neck-and-neck with the opposition pro-Russian Party of Regions (PR) at 25%. Thus, for Tymoshenko to form a stable government following elections, she has to take votes off PR. The best way for her to do this is to shift to a (relatively) pro-Russian platform by deemphasizing, and perhaps dropping altogether, the divisive policy of Ukrainian accession to Nato. This is what Tymoshenko seems about to do. During the Georgian conflict, she kept a conspicuously low profile, and has sounded conciliatory notes towards Russia. This has met with a warm response from Moscow and rewards.

On October 2, Tymoshenko flew to Moscow for talks over crucial gas imports with Russian Prime Minister Vladimir Putin. She came home with a deal going forward that was considerably softer for Ukraine than many had anticipated, especially with Putin simultaneously accusing Ukraine of supplying arms to Georgia. The gas deal provides for a three-year transition for gas delivered by Russia to Ukraine to reach European price levels minus transit differential. There were fears Russia would demand world market prices staring in 2009. Even so, the final 2009 price has not yet been specified, meaning that Moscow is retaining leverage until a later date.

However, Tymoshenko’s shift towards Moscow, aimed at taking votes off PR, has opened up an unbridgeable chasm between her and Yushchenko. Members of Yushchenko’s entourage have openly accused Tymoshenko of treason, and the Ukrainian secret service SBU has investigated her on suspicion of actions harmful to national interests.

The standoff between the two reached new heights as Tymoshenko was preparing to fly to Moscow on October 2. The government plane that she was meant to travel on was commandeered at the last minute by Yushchenko to take him to the West Ukrainian town of Lvyv. Tymoshenko was forced to charter a Slovenian jet instead. The presidential administration claimed that the presidential jet had been damaged, and there was no reserve plane. However, adding to the farce, the Transport Ministry informed journalists that the presidential plane had been in perfect working order.

Tymoshenko prefers Kremlin to Yushchenko

Graham Stack for business new europe

In a further sign of her startling pro-Moscow shift, Ukrainian Prime Minister Yulia Tymoshenko called on President Viktor Yushchenko to clarify with Russia the price for gas for 2009. She said this was an essential precondition to her finalizing the 2009 budget.

“The budget can be clarified after the final price for the natural gas is fixed. I think that if the Ukrainian president is talking so much about “Moscow’s hand,” then let him try to receive gas from this “hand” at moderate prices in the short term,” Tymoshenko said after a government session, as quoted by Interfax.

In a veiled threat not to pass the budget before an agreement is reached, Tymoshenko said the Rada would not clarify the budget until a final price had been arranged with Russia.

Underscoring the shift in Tymoshenko’s position regarding Russia – a shift that has triggered a secret service investigation into her dealings and accusation of treason – Tymoshenko explicitly put the blame for deteriorating relations with Russia on President Viktor Yushchenko, not the Kremlin.

Tymoshenko’s current position regarding gas prices is a u-turn on her position at the start of 2008 on paying Ukraine’s gas debts to Russia.  In talks over size and payment of Ukraine’s gas debt, Yushchenko took a conciliatory position and Tymoshenko a stridently anti-Kremlin position.

Now they have reversed their roles.

“President Viktor Yushchenko is personally responsible for all the radical decisions made with regards to Ukraine,” Interfax cites Tymoshenko as saying at a news conference Wednesday September 17 , referring to alleged Russian initiaives to restrict the free trade regime with Ukraine.

Tymoshenko went on to actively back Kremlin claims about an information war being waged against Russia by the West and Western allies.

“When information wars are declared on some countries, and when states are insulted and humiliated, Ukraine anticipates a return blow. Therefore, Viktor Yushchenko will be personally responsible for all the bad trends in relations between Ukraine and Russia, in my opinion,” Tymoshenko said, according to Interfax.

Gas price conflict next up

Yesterday Alexander Shlapak, an aide to Ukrainian President Viktor Yushchenko, admitted that the Ukrainian government’s gas price projection of $250-260/tcm in its 2009 budget now appears to be unrealistic and will need to be raised at least to $300/tcm.

“However we note that this expectation is still below the projected European market price of $340/tcm for 2009. Negotiations between Russia and Ukraine over pricing have yet to be completed,” write UralSib analysts.

Several months ago Gazprom signed an agreement to purchase Central Asian gas in accordance with its “net-European” gas price formula (average gas price in Europe minus excise taxes, transportation costs and Gazprom’s margins).

Since Ukraine consumes almost all of the Central Asian gas, a gas price for the Ukraine below the EU market price less transport differential would make Gazprom sales to Ukraine loss-making, argue UralSib analysts.

Ukraine is threatening to use as a bargaining chip the tariffs it charges for Russian gas transit to Europe.

Yesterday Uriy Kolbushkin, Deputy CEO of Ukraine’s gas distribution monopoly Naftogaz, said that Natfogaz could increase gas transportation tariffs for Russian gas by over double to 86 hryvnya for 1000 cubic meters for 1km starting from 2009, according to Vedomosti.

UralSib analysts writes, “we note that Ukraine provides transit for about 80% of Russia’s total gas exports to the EU. If Gazprom increases gas prices for Ukraine too aggressively, the Ukraine may respond by raising transportation tariffs and Gazprom’s margins would be squeezed.”

Russia is making it clear that the gas price hike for Ukraine is not political. Yesterday Gazprom also announced a price hike for Armenia, a loyal Russian ally. However the price hike for Armenia looks like being more gradual, according to UBS.

Orange eats itself, what’s the next course?

At the Verkhovna Rada’s session this morning, Speaker Arseniy Yatseniuk announced that the ruling coalition composed of the Yulia Tymoshenko Bloc and the Our Ukraine-People’s Self Defense Bloc (NU-NS) was officially dissolved.

This spells the end not just to the  ’democratic coalition’, but to ‘Orange’ itself.

Four years after the Orange revolution stopped former prime minister, now opposition leader Viktor Yanukovych becoming president in rigged elections, the two main figures in Orange, President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, are now  as distant from each other as each is to Yanukovych.

Moreover, Timoshenko and Yanukovych possibly share something very important  against Yushchenko:  at the heads of strong parties, both might stand to gain from shifting political power from the presidency to Ukraine’s parliament, the Rada.

It is still unclear whether the current political crisis is a repeat of 2007’s early elections and coalition reshuffle, or something very different: a concerted effort by the Rada majority to seize power from the president.

What does seem clear is that the Orange coalition  between Tymoshenko’s Bloc Yulia Tymoshenko (BYuT) and Yushenko’s Our Ukraine-People’s Self-Defence (NU-NS) will not be renewed.

Early elections are the most likely outcome.

According to the Constitution, parliamentary parties have 30 days to form a new coalition, after which point the president has the right, not the obligation, to dissolve parliament and call new elections.

Brokerage Galt & Taggart analysts write, “with the majority of parties already renting billboard ad space and organizing election offices around the country, pre-term parliamentary elections remain the most likely scenario.”

Ukrainskaya Pravda reports today that Prime Minister Yulia Tymoshenko, head of the eponymous bloc, has already ordered her deputies to mobilise for elections.

Tymoshenko is reported to have told deputies that she sees the Orange being reformed as 10% with a 90% chance for  elections.

Confirming the low probability of any coalition being formed, BYuT deputy Andrei Shkil said today that both Yushchenko’s party Our Ukraine and the Ukraine Communist Party were refusing to hold talks with BYuT on forming a coalition, according to korrespondent.net.

Early elections will benefit BYuT. BYuT stands to pick up votes both from NU-NS, suffering from the single digit ratings of ineffective president Yushchenko, as well as from the oppositional pro-Russian Party of Regions: Tymoshenko has conspicuously flirted with a pro-Russia position during the Georgian crisis.

However, all members of the current coalition will do all they can to avoid the blame for another bout of expensive early elections.

Thus Yushchenko has called for a renewal of the ‘democratic coalition’, by taking the small Lytvyn Bloc on board.

BYuT has also been in talks with the Party of Regions (PR). But an alliance with PR would prove unpopular among Tymoshenko’s core constituency. The possibility of a coalition of BYuT with the Party of Regions (PR) was not even discussed at today’s BYuT parliamentary faction meeting, according to Millenium analysts.

A BYuT-PR coalition would, however, create a huge majority in the Rada, sufficient to override the presidential veto on legislation and allow the Rada to continue shifting power from president to parliament.

“A coalition between BYuT and the Party of Regions would serve to unite Ukraine’s east and west, but it is unlikely to be supported by the Donbas business elite, including Rinat Akhmetov, Serhiy Taruta and Vitaliy Hajduk,” write Galt&Taggart analysts.

Millenium analysts agree that “a coalition  between BYuT and the Party of Regions would be very unlikely due to diverging opinions of these political forces on most policy matters.”

“We continue to see an anticipated election as the most likely scenario,” says Millenium analyst Bogdan Kochubey.

Rencap’s Geoff Smith, however, says BYuT-PR could work out: “Tymoshenko and Yanukovych have a chance to prove that they have tired of deadlock,that they accept that power must be shared and exercised with restraint,that they realize how urgently effective government, reform and privatization are needed.” says Smith. “It could be beautiful – but don’t hold your breath.”

What we don’t know:

We don’t know what Tymoshenko wants.  Does she want simply to shore up her majority in parliament at the expense mainly of Our Ukraine, to free herself on dependence on Yushchenko? In this case, elections are on the cards. But Ukraine would remain a presidential republic, with Yushchenko responsible for foreign policy and able to veto laws.

Does she want to change Ukraine into a parliamentary republic, thus usurp power from Yushchenko? She would then have the top job without having to wait a year for presidential elections. A year is an eternity in politics, her current popularity is only slightly in front of Yanukovych’s, and next year could see economic problems ahead. To make the changes, she would need to hook up again with Party of Regions, but not necessarily in a formal coalition. But what would be in it for Party of Regions?

What’s the significance of her shift to moderation regarding Russia, and her obvious ambivalence about Nato membership? Is this preelection manoeuvering to  win the pro-Russian vote from Party of Regions? Or a concession towards the Party of Regions? or an attempt to stave off a potentially crippling gas price hike?

Tymoshenko might be hoping for a landslide elections victory, eliminating Our UKraine and cutting swathes into the PR vote. That would set her up in a position to change the constitution and move to a parliamentary republic with herself as prime minister.