President Viktor Yanukovych confirmed last might that he will keep to his scheduled trip to China today – that visit is now seen as critical for his administration to secure loans to secure financing and improve the government’s negotiating position as it heads to talks with Russia over the next few weeks on cheap gas and financial assistance. He must though have in the back of his mind whether his administration will still be in place upon his return, and indeed whether he will be able to return.
The focus today in Ukraine will shift to the Verkovna Rada where two bills are due to be considered by deputies. The first is a vote of no confidence in the government of Prime Minister Mykola Azarov, and the second is a bill to allow the freeing of opposition leader, Yulia Tymoshenko.
I expect the first bill to pass, but I am doubtful that the second will secure the required majority.
On the first of these support for the Regions Party in parliament now appears somewhat flaky with a number of high level defections from the parliamentary party (which had numbered 207 in the 450 seat chamber).
Azarov’s original nomination as prime minister appeared more as the candidate most acceptable (or least objectionable) to most wings within the party – and Regions is a coalition of oligarchic groups. And since the current European Union crisis began, Azarov has often appeared remote and out of touch with the demonstrations on the street.
The Yanukovych administration needs to give the opposition and street demonstrations something, a concession, which will ease tensions, and they will hope that a change of leadership at the top of the government will help. Forming a new administration could well be difficult though, as presumably there will be some effort to create a coalition government albeit the opposition may prefer early elections.
On the second bill, Regions are unlikely to want to release Tymoshenko at this stage, as their fear surely is that she would inevitably take leadership of the protests, and would be a further clarion call for the opposition. Indeed, one criticism of the opposition thus far has been the absence of a clearly defined single leader to drive the demonstrations forward – and arguably Tymoshenko excels in such circumstances, as proved the case in 2004. One argument for releasing her still though might be the fact that the administration might just think that her presence on the streets might serve to split some elements of the opposition with which they might then be able to ally.
One notable development today was the FT’s editorial on Ukraine which calls for sanctions against those using violence against demonstrators.
http://www.ft.com/cms/s/0/9689221a-5b4f-11e3-848e-00144feabdc0.html
This also comes as various petitions are doing the rounds in the US calling for Belarus-style sanctions against members of the Yanukovych regime. This, together, with concerns over heightened default risks in Ukraine – and closed market access for Ukrainian corporates – hurts Ukrainian blue chip companies, and is a real threat to Ukraine’s business elites. The latter group have extensive connections and business interests in the West and would be loathed to have to surrender these for a reorientation back East. I thought that it was notable today that SCM the group of Ukraine’s richest oligarch, Rinat Akhmetov, has called for compromise and respect for European values.
Russia’s stance, post Vilnius, has been a little difficult to understand or read. In the immediate days after Vilnius, Russian President Vladimir Putin appeared happy to bask in the glow of media perceptions that he had beaten the West in the battle for Ukraine – albeit that no longer appears to be the case.
The assumption was though that the Yanukovych regime had been peeled off from signing the AA/DCFTA by the use of extensive carrot and stick. Subsequently though the Putin administration has denied that cheap gas or loans have been agreed, or that any negotiations have been held or are underway. PM Medvedev affirmed this week that while gas and loans to Ukraine were possible, Russia needed cast iron assurances that commitments to such things as the CIS Customs Union would be needed.
Russia hence looks set to play very hard ball with the Yanukovych regime. The problem for Russia, or rather for the Yanukovych administration, is that such a deal is no longer saleable in Ukraine given the presence of mass ranks of demonstrators on the streets of Ukraine. Putin’s use of the term “pogrom” yesterday also appeared insensitive given Ukraine’s bitter memories from the Soviet-inspired famine of 1933 that left millions dead and was only commemorated a matter of weeks ago in Ukraine. The tone also raised the spectre of ethnic conflict in Ukraine – the nuclear option, for all sides. For Putin though Ukraine is the Great Game with the EU, and the big prize and he appears to think that it may be now or never in terms of Russia’s ability to pull the country firmly back into Moscow’s grasp. This latter consideration appears to be driving Moscow’s rather hard line position.
On the issue of loans, Yanukovych indicated yesterday that he could still renegotiating the DCFTA with the EU to make it even more favourable to Ukraine. He argued that it had been negotiated in haste – a strange comment given that it was years in the making. The EU has made clear that the AA/DCFTA is not up for negotiation, and is a good deal for Ukraine. Deputy Prime Minister Serhiy Arbuzov has though indicated that he will visit Brussels shortly to look at getting agreement with the EU back on track, and has indicated that Ukraine needs as much as $10 billion in financing. It does though remain clear that any EU financial support will be wrapped within an International Monetary Fund programme with tough conditionality attached. Thus far the administration has baulked at accepting to is conditionality.
