Key political risks to watch in Ukraine

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Dec. 23, 2011, 7:18 a.m. | Politics — by Reuters

In this Tuesday, Dec. 20, 2011 photo, Russian President Dmitry Medvedev shakes hands with his Ukrainian counterpart Viktor Yanukovych, left, shake hands in the Gorki residence outside Moscow.
© AP


A long-awaited summit intended to bring Ukraine into Europe's mainstream foundered when the European Union said it would not sign a landmark political and trade deal until Kiev resolved the case of jailed opposition leader Yulia Tymoshenko. All technical questions for an association agreement had been solved, but the pact would remain unsigned and so unratified until Tymoshenko's jailing was resolved, visiting EU leaders said.

Though President Viktor Yanukovich emphasised that EU membership remained a long-term aim, the outcome of the Dec. 19 summit raised uncertainty about how the ex-Soviet republic would confront a looming balance of payment crisis.

The government, having balked at raising the price of household gas to plug a budget deficit, has failed to persuade the International Monetary Fund to resume a $15 billion loan programme.

Ukraine had reasoned that if it could get a lower price from Russia - its main supplier of natural gas - it would be spared from raising the price that consumers pay at home.

With political tension high over Tymoshenko's jailing and a parliamentary election due next October, raising prices would be tantamount to political suicide since the vast majority of Ukraine homes are heated .

So Mykola Azarov, Yanukovich's dour, hard-nosed prime minister, has been pressing Russia to bring the price down from a high-end $400 per thousand cubic metres to plug the deficit. However, he and Russian Prime Minister Vladimir Putin failed to achieve a breakthrough in talks on Dec. 21.

On Dec. 22 the Ukrainian parliament reluctantly approved a 2012 budget based on an unchanged pricing formula for its gas imports.

There is a constant drumbeat from Russia that it is ready to offer Ukraine an easier relationship in the shape of cheaper gas if it binds its economy more closely to Moscow. But so far Kiev is resisting entreaties to join a Russian-led customs union.

Despite refusing point-blank to raise household gas prices during talks with the IMF, Kiev faces a balance of payments crisis and little investor appetite for its debt.

That means it will need a fresh slice of IMF cash soon unless the global economy quickly improves or Russia comes up with an acceptable offer for cheaper gas.

Azarov now concedes that the global slowdown will have a major impact on vital export industries. He has cut his government's forecast for economic growth next year to about 4 percent from an earlier estimated 5.5 per cent.

Ukraine's economy is dominated by steel exports, making it volatile to changing global demand, and the EU, which might be heading towards recession, is one of its main export markets.

Trying meet the IMF half-way - by reducing the bloated pensions sector, raising the retirement age for women and implementing a more rigorous tax regime for small and medium-sized businesses - has brought anger from large sections of the population.

One person died in the large mining town of Donetsk in late November when police broke up a tent sit-in by survivors of the 1986 Chernobyl nuclear accident who were protesting over cuts to their special pensions.

The IMF's stand-by programme is a big factor in allowing Ukraine to borrow on the international debt markets at a relatively low price.

Under the deal with the Fund, Ukraine is to receive credits worth $15 billion over two and a half years, which could be a valuable spur for renewed investor interest. The programme is key to the government's efforts to revive its economy after a 15 percent contraction in 2009.

What to watch:

- Will the government, after all, raise energy prices for households?

- Possible resumption of talks with the IMF.

- Signs of a New Year gas agreement with Russia.

- Signs of strain on the economy because of high gas prices under the current agreement.

- Renewed pressure by Moscow for a gas merger between Russia's gas giant Gazprom and Ukraine's state energy firm Naftogaz.

- Pressure from Moscow over control of Ukraine's gas transit pipeline structure.


The prosecution of former prime minister Tymoshenko for exceeding her authority by brokering the 2009 gas deal with Russia, has turned into a PR disaster for the Yanukovich team.

Tymoshenko, whom Yanukovich narrowly beat for the presidency in 2010, was sentenced to seven years in prison in what she described as a "lynch" trial.

Despite pressure from the EU and the United States Yanukovich has refused to intervene to secure her release and prosecutors have been piling up more and more charges against her for alleged misdeeds going back to the 1990s.

At the Dec. 19 summit in Kiev, European Council President Herman Van Rompuy told Yanukovich: "Our strong concern is primarily related to the risks of politically motivated justice in Ukraine. The Tymoshenko trial is the most striking example."

Yanukovich's opponents say the Tymoshenko trial shows that old-style authoritarianism is on the rise under his rule. The EU and the United States have urged him to honour his pledges to defend democracy and a free press.

On Dec. 22 she abandoned her appeal against the conviction, a court case her lawyers branded a "farce". What to watch:

- After international pressure, will Yanukovich relent and bring about Tymoshenko's release from jail?

- Could her plight stir mass protest like that of the Orange Revolution of 2004 ?
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Anonymous Dec. 23, 2011, 9:12 a.m.    

Ukraine will NEVER be a fee independent democratic state as long as it remains holden to presidential power and authority.

Ukraine has and continues to struggle to gain the rights to become a Parliamentary representative democracy. It made progress and took a significant step towards this goal in 2004 when it enacted Constitutional reform.

The Parliamentary Assemble of the Council of Europe (PACE) and the Venice Commission have both advocated Constitutional reform and the adoption of European models of governance. It has done so since 2003 and earlier.

Estonia and Latvia adopted a Parliamentary system and they are now successful EU member states.

Sadly Yushchenko had opposed Ukraine becoming a democratic state and consistently sought to undermine political stability in order to preserve the Soviet presidential authoritarian system, going so far as unconstitutionally dismissing Ukraine's previous parliament and causing seven months of political and civil unrest in 2007.

If Ukraine wants to become a EU member state then it must first put its house in order address issues of governance, representation and the functioning of its judiciary.

Instead of implementing the recommendation of PACE and the Venice Commission Ukraine Ukraine has taken a backward step. Until and only when Ukraine implements the necessary constitutional and judicial reforms the prospect of EU membership should not be considered.

Ukraine must decide Democracy or Autocracy; Parliament or President; Europe or Russia?

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Anonymous Dec. 23, 2011, 1:36 p.m.    

Medvedev looks like a pigmey. LOL!

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Anonymous Dec. 23, 2011, 10:58 p.m.    

Listening to the United States Public Radio correspondent, Sylvia Piggoli, today annoucing the miserable financial conditions of high-end stores from Rome was akin to reading 1930s literature during the world-wide Depression of that time.

The economic condition of Italy is at best abysmal, with the Middle Class suffering badly and the wealthy refusing to buy. One store owner sited a 50% drop in business from last year.

That is just one instance of what is happening throughout the wealthier areas of Europe. The long-term prognosis is not good.

Considering that report, and a plethora of others in this Holiday Season throughtout both North America and Europe, the prospects for

Ukraine are bleak at best. Yanuckovych would get more satisfaction from sucking on his thumb that he will get from Putin.

Putin sees a golden opportunity to reabsorb Ukraine back into his sphere, just as he has done with Belarus.

Yanukovych is now finding himself between a rock and a hard place.

When the EU Court finishes with him over Tymoshenko, the people will be in the streets by the millions again after having put three more holes in their belts.

When he is overthrown, he and all of his cohorts should be facing another Nurnberg/like Court like the one that was set up to try former Nazia after WWII.

Afterward, they should all be hung--and preferablly with the same type of hangman's knot that was used on Hussien of Iraq.

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