Inside Ukraine October 30, 2014 №35 Content The Government Policy . 1 Coalition: ongoing battle about coalition standards . 1 Challenges of separatists’ elections . 2 Economic Situation . 3 Further drop in foreign trade . 3 Ukrainian government: between the rock and the hard place . 5 Political competition . 6 The President’s party failed to implement a minimum program . 6 Arseniy Yatsenyuk’s jackpot . 7 “Samopomich” as an illustration of demand for new faces . 8 “Opposition bloc” keeps hold on the electorate of Party of the Regions . 9 Ups and downs of Oleh Lyashko’s Radical Party . 9 Party “rejuvenation” did not help “Batkivshchyna” . 10 Those who have not got into parliamentary “boat” . 10 Inside Ukraine 35 The Government Policy Parliamentary elections in Ukraine were held Under dramatic reversals in coalition formation, according to democratic standards. They have giv- the government should keep in mind the upcoming en a popular mandate to pro-European democratic elections in the self-proclaimed Donetsk People’s parties, which pledged to implement much-needed Republic and Luhansk People’s Republic, which are reforms. The creation of coalition will also follow scheduled for November 2, 2014. These elections new rules which are to be agreed by leading coali- will allow separatists to create their own quasi-state tion members. This parliament will not be able to institutions and will help play out the “Transnistria scapegoat others for the absence of reforms. For scenario” in Donbas. Ukrainian government should this reason, a new parliament should assume full decide how it is going to counter such scenarios, es- responsibility for any, even unpopular, state deci- pecially in view of Petro Poroshenko’s “peace plan”, sions. They may lose public approval rating, but according to which local elections in Donbas have only in this way they can lay foundation for irre- to meet Ukrainian legislation. This clause of the vocable changes in public administration. Having President’s peace plan will probably apply only to done that, pro-democratic parties will provide a those districts of Donbas which are now controlled springboard for a new political elite, free of corrup- by Ukrainian government. tion and with no links to the old regime. Coalition: ongoing battle about coalition standards The keynote of political life in November will be- Front” and “Samopomich” (Self-Reliance Party) high come a discussion over the format of future parliamen- voting results, Ukrainian President will have to make tary coalition. The President favours the broadest for- more political concessions than he expected. mat of parliamentary majority. Prior to the elections, The most positive moment about the elections Petro Poroshenko’s team The President is that pro-European democratic parties, which hoped to become a lead- will have to make pledged to promote reforms and use the EU- ing force in the coalition more political Ukraine Association Agreement as a road map and create a constitutional concessions for changes, have won absolute majority. If earlier majority. Due to “People’s Ukrainian government could use resistance of for- Inside Ukraine 35 1 The Government Policy mer members of the Party of Regions as an excuse the coalition agreement will contain a shortened for lack of reforms, now it is Ukrainian President version of President’s program “Strategy-2020” as and Prime Minister that have the carte blanche. well as a schedule when draft laws related to the At the same time, the biggest risk is that “Bloc of “Strategy-2020” should be approved. It is unlikely Petro Poroshenko” and “People’s Front” will not be that “People’s Front” will take on such precise ob- able to give up their ambitions and they will chan- ligations, especially under the President’s reform nel their energy into mutual political infighting in- program. Arseniy Yatseniuk already presented his stead of reform implementation. text of the coalition agreement, which contained If in one or two years they fail to make signifi- 36 draft laws to be adopted in the parliament by cant progress at least in some urgent reforms, such the end of this year. as justice or constitutional ones, leading political According to the preliminary President’s coalition parties may promptly lose public support, face mass agreement, workings bodies of the coalition include protests and necessity for snap elections. Under the Coalition Assembly and Council. The Coalition most positive scenario, the coalition could take re- Council will be formed under “one representative sponsibility for the im- Without reforms, per 15 faction deputies” The President plementation of the key the leading parties principle, whereas lead- proposed to create reforms and hold next will soon lose public ers of coalition factions working bodies elections under new vot- support will become co-chairmen of the coalition ing rules, which would al- of the Council. low for reset of the entire political system in Ukraine. It is important that the main political parties Electoral reform should include introduction of pro- stress the need to get rid of party quotas. However, portional representation system with open lists, in- there is dissonance between such declarations and escapable punishment for electoral fraud and trans- “People’s Front” ambitions as regards a number of parent rules for election campaign finance. ministerial posts. In turn, the President’s variant of On October 26, 2014, Yuriy Lutsenko, the the coalition agreement excludes the quota principle leader of “Bloc of Petro Poroshenko”, stated that to be applied in the appointment of deputy ministers. Challenges of separatists’ elections Parliamentary elections in Ukraine were con- Ukrainian President and Prime Minister have ducted according to democratic standards. Ukrai- not come up with any information policy in this nian law enforcement bodies managed to avert pos- regard. There is no counter-propaganda campaign sible provocations. Electoral fraud was not systemic, to neutralize separatist initiatives, as it was the though some activists claimed that there were some case with the May referendum in Donbas. Ukrai- violations in certain single-member constituencies nian government does nothing to explain to the in Kirovohrad, Mykolaiv and Luhansk regions. public what possible repercussions their partici- What is more worrisome is that Ukrainian gov- pation in the elections and further freezing of the ernment is ignoring the fact that separatists prepare conflict will have. elections in Donbas for November 2, 2014. Russia’s Donbas elections may have an immense nega- support for these elections will somewhat legiti- tive impact on Ukrainian central authorities. The mize leadership of the self-proclaimed republics in Kremlin have already used this episode to desta- Ukraine’s East and poses a risk of Donbas becoming bilize situation in Ukraine by announcing that “Ukrainian Transnistria”. For the time being, Ukraini- these elections were one of secret clauses in Minsk an government has failed to explain how it is going to agreements. In addition, representatives of sepa- counteract this scenario. Ukrainian ratist republics have been trying to create their Official government posi- own quasi-state insti- government ignores Elections will tion is just about ignor- the preparation tutions for quite a long ing these elections as ones time. Elections, even fic- speed up creation of elections in of quasi-state that do not comply with separatist-held area titious ones, will only ac- Ukrainian legislation. celerate this process. institutions 2 Inside Ukraine 35 Economic Situation The NBU reports deterioration of economic situ- the major debtors for the gas consumed. Terrorists ation in Ukraine, which results in negative dynam- refuse to repay gas debts towards Ukrainian gov- ics of major macroeconomic indicators, namely in ernment and hold negotiations on direct supplies foreign trade and industrial production. Overall of energy resources from Russia. Initiative of some situation in production was slightly be improved by Ukrainian government officials to cut gas supplies growth in agriculture and food industry. to LNR and DNR due to exposure may be consid- Donbas territories occupied by terrorists are ered as recognition of their subjectivity. Further drop in foreign trade Every month economic situation in the country stituted 16.5% p.a., while overall export made up deteriorates, which influences dynamics of major USD 4.4 bln. In September and August 2014 pace of macroeconomic indicators, namely in foreign trade commodity import decrease was similar (40% p.a.), and industrial production. with the import being at the level of USD 4.9 bln. According to the NBU, current account deficit The worst deterioration of export was observed of external balance, which displays export/import in machine manufacturing and metallurgy — by dynamics, made up USD Current account 35.6% and 28.9% accord- Export dynamics 612 mln. in September deficit of external ingly. Negative dynamics deteriorated due 2014 comparing to USD balance made up was caused by destruc- to destruction 91 mln. in August 2014. USD 612 mln . tion of production facili- of infrastructure In particular, drop in in September 2014 ties in the East and sus- in the East commodity export con- pension of deliveries to Inside Ukraine 35 3 Economic Situation Russia due to trade restrictions. At the same time positive dynamics in agriculture. At the same time, negative trend is slightly mitigated by 8.3% growth high rate is explained by low basis for comparison, in agricultural products export, namely through which is a temporary factor and will not influence increase in delivery of crops of a new harvest (by following periods. 19.4%), oil and fats (by 58.8%), as well as export of Agricultural production growth contributed to meat products (by 46.4%) to the EU and Iraq. higher volumes of food production (by 13% p.a.). The NBU data show that non-energy import de- It led to the fact that industrial production drop crease slowed down from 39.7% to 31.0% due to slowed down to 16.6% p.a.