I spent the last few days in Kyiv trying to get a handle on the looming Ukrainian presidential elections due to kick off on March 31 with the first-round vote.
The big plus is that there are 44 candidates and, while only three of these look like they have a realistic chance of winning, we still don’t know with certainty who will emerge victorious likely after a second-round runoff on April 21. That immediately marks Ukraine out as a democracy, and that is still one of the hard-fought gains from the EuroMaidan Revolution, that ousted President Viktor Yanukovych in 2014, and, I guess, the Orange Revolution a decade before that brought Viktor Yushchenko to power.
It also marks Ukraine out from many other emerging markets and indeed now developed markets which seem to be moving away from the Western liberal democratic model to more autocratic tendencies or even “regimes”.
Less positive I think is the prevalence still of post-Soviet political “technologies.” There is talk of vote buying, and particularly damaging in my mind is the emergence of clone candidates with two Y Tymoshenko’s. To be quite frank (and coming from a friend of Ukraine) this is a pretty disgusting affront to democracy and those behind it should be ashamed of themselves (they obviously don’t get the spirit of this democracy business, albeit they likely view it as a “business”), as they clearly aim to disadvantage one particular candidate, and quite unfairly. I am surprised the Central Election Commission and indeed Western countries have not called this out for what it is – dirty tricks and cheating. If the primary candidate falls short by a few percentage points with votes going to the clone, is that fair?
I also worried a bit about talk, even a presumption from some, that “administrative” means can be deployed by the incumbent to ensure victory in the elections. I think the Euro
In terms of the three leading candidates, incumbent Petro Poroshenko, disruptor Yulia Tymoshenko and the comedian and really the joker in the pack,Volodymyr Zelenskiy, any of them could win in an evolving and quite an uncertain election campaign.
Back at the end of last year, the only certainty seemed to be that Tymoshenko would get into a second run-off vote, as she had consistently topped the polls for the prior 12-18 months. But with the emergence and mercurial rise of Zelenskiy to top the polls, as the fresh face in Ukrainian politics, Tymoshenko’s ratings have plateaued, with Zelenskiy and then Poroshenko seeming to take a larger share of the weight of undecided voters. And now any two of the three candidates could still win through to the second round run-off vote.
If I had to make any predictions I would contend that it’s going to be a real uphill struggle for Poroshenko to secure a second term as he has this weight of incumbency around his neck in an era where electorates are voting against establishment figures/outcomes, as reflected by victory for Donald Trump, Emmanuel Macron, Brexit and Brazil’s Jair Bolsonaro, amongst others.
Recent weeks have seen his poll ratings gain momentum and, if you believe the polls (not sure I entirely do given they are generally manipulated also as part of this post-Soviet political technology concept) he had moved into second place (14-15 percent), behind Zelenskiy (20-25 percent) and ahead of Tymoshenko (10-12percent). The consensus had been until this week that Tymoshenko would further fade (she peaked too early?) and then it would be a Poroshenko versus Zelenskiy runoff. Poroshenko’s team had seemed confident that they could beat the inexperienced Zelenskiy in the runoff as they would sell a message that with the country at war do you really want to trust the nation’s defense to an untested comedian? But this week, the wind seems to have been knocked out of the sails of the Poroshenko campaign.
A few things have happened:
* First, the Poroshenko campaign has been hit by a major corruption allegation, that the son of a close friend of Poroshenko and deputy head of the National Security & Defense Council had been buying military spare parts from Russia and inflating the prices in selling these items on to the Ukrainian military. The journalistic sources of these allegations generally seem to be credible (albeit you might question the timing of the leaks and ultimate sources) and I think they have really shocked many Ukrainians. Remember that the number one issue for the electorate in the polls, alongside peace in the east, is fighting corruption. This hits both bases. And remember that Poroshenko has been pushing a ticket of “army, religion and language,” so it begins to undermine one leg of that. But whether Ukrainians can be shocked by any new allegation of corruption after numerous previous scandals is open to question and given that this campaign still has 1-2 months to go lots can still happen and change. It will be interesting to monitor Poroshenko’s ratings in the next few days, but those I spoke with thought it would hit his support.
* Second, the Constitutional Court overruled a lynchpin of the anti-corruption effort, the asset wealth declaration system. Poroshenko has promised to resubmit a revised bill to overcome the action but suspicions run deep that somehow backroom deals were done to erode the efficacy of the anti-corruption effort and for political and perhaps business tradeoffs in the run-up to elections. Note also that the anti-corruption effort is a lynchpin of the current International Monetary Fund lending program and backtracking, as suggested by the Constitutional Court ruling, could also jeopardize disbursements from the IMF – and again here Poroshenko has sold himself as the guarantor of a stable/sound economy and good relations with international creditors. That could now be in doubt.
* Third, and related to the IMF, this week Poroshenko announced big pension increases on the same day the corruption allegations broke. This similarly raises doubts as to Poroshenko’s adherence to prudent macroeconomic management and the IMF program, and it erodes any differentiation with other candidates which had been perceived as being more populist.
Fourth, the past week has seen reformers, including former finance minister , Alex Daniliuk, and former economy minister, Aivaras Abramovicius, begin to engage with the Zelensky camp, which has also held meetings with the IFIs and members of the diplomatic community. While Daniliuk and Abramovicius have been eager to stress that they are not formerly on the Zelensky ticket, the engagement of reformers with the Zelensky team is helping to erode Poroshenko’s message that the economy is only safe in his hands. Indeed, it is possible now to imagine a President Zelensky formally engaging reformers such as Daniliuk and Abramovicius and working with the IMF and other IFIs to maintain the reform agenda.
It also seems that Tymoshenko is understanding that she is less likely (but still possible) to win the presidential election, and beginning to conserve resources/plan for the parliamentary elections due in October, which could be equally important given Ukraine is a parliamentary/presidential democracy. Tymoshenko’s agenda is to push for electoral and constitutional reform, and then try and emerge as the prime minister from parliamentary elections, with parliament as the dominant institution as a result. She might hence be looking to cut deals with Poroshenko or Zelenskiy going into the second round run-off vote. But people were generally of the view that she would find it hard to cut a deal with Poroshenko given their poor history, and a deal with Zelenskiy might be more likely – albeit does he need it, and isn’t he better keeping his distance from traditional politicians like Tymoshenko? But you might think that Tymoshenko lining up behind Zelenskiy would be the terminal blow for Poroshenko.
Trying to imagine the market/economic policy outcomes from the three candidates:
Poroshenko
It’s fair to say that a Poroshenko second term would be viewed as low risk by business, investors and I guess Western diplomats. With Poroshenko you know what you get. Oligarchs and big business will continue to dominate. The economy will be stable, with real gross domestic product growth moderate at 3-4 percent. Public finances will be prudently managed and barring war or another external shock, Ukraine likely will pay its debts and the currency will remain stable. The IMF will remain engaged but structural reforms will be slow moving. Little rapid progress is likely in the fight against corruption, and the business environment will remain challenging and hence foreign investment flows will remain subdued. Critics would argue that over the longer term this would be a worst-case outcome for Ukraine, as oligarchic capture of the economy would be resumed even completed. And low growth and a glass ceiling for anyone not within the oligarchic elite would continue to fuel outmigration of the young and talented. Oligarchs will be left to fight over the slices of the cake, but the cake will grow larger only slowly. There will be little movement in geopolitical space, with little prospect of substantive peace efforts in the East. The Ukrainian military will gradually grow in strength, emerging as an important bulwark for NATO against Russia. But progress on EU and NATO membership will be slow-moving largely as the EU and NATO have their own internal problems, and are reluctant to overly antagonize Russia by quickly enlarging to include Ukraine – and post-Brexit, European Union enlargement to a large new potential entrant like Ukraine looks dead and buried. Ukraine will hence gradually move more into the Western orientation but will lack a substantive reform anchor for example from a real EU accession perspective. Poroshenko is promising EU and NATO membership within a 5-10 year period as part of his re-election ticket, but frankly, these are gifts not within his grasp, and any such ambitions are unrealistic.
Tymoshenko
I guess much the same as Poroshenko, but with higher risks in terms of the economic policy orientation. Under Tymoshenko there is likely to be more competition between oligarchic elites, and perhaps the cake will be more evenly disbursed with fewer much larger hungry oligarchs taking much more than their fair (not that any such division of the cake by oligarchs is fair) share. And I doubt the cake will grow much. But I think the risk of policy errors/missteps are larger, given Tymoshenko’s stated policy impulses towards the energy sector and gas price increases, the banking sector and independence of the central bank, and budget allocations. Relations with the IMF could be challenging, albeit they might reach a head sooner, rather than later, and markets might force Tymoshenko to adopt a more orthodox response. Critical will be her appointment of her economy team. If she chooses well, the outcome could be less disruptive and closer to a Poroshenko presidency in terms of macro outcomes, even better.
Zelenskiy
A Zelensky presidency is something of a blank piece of paper. We simply don’t know very much about policy, given that he has not revealed much and has been talking about crowdsourcing policy and ministerial appointments. The hope is that tested reformers such as Oleksandr Danylyuk and Aivaras Abramovicius quickly pin their colors to his mast, and you could make out a best-case reform scenario. But I guess the big hope with a Zelenskiy presidency is that he can break the oligarchic logjam, and economy/state capture. Real structural reforms could be rolled out, corruption tackled, and that can radically improve the business environment, boost investment and put real GDP growth onto a much higher plane – think 6-7 percent. Equally, failure by Zelensky to hire talent into his economy team, economic and foreign policy and geopolitical strategic mistakes could see crises situations emerge quite quickly. Buckle up in that latter case.
Going back to the comparison to Brazil, a problem for a President Zelenskiy (or Tymoshenko for that matter, albeit she has a party in the Rada) is that at least initially he would not have a party in parliament until at least October, and does not command a majority – hence cannot actually appoint a new prime minister or finance and economy team. In Ukraine, the president only has the right to appoint the foreign and defense ministers and the head of the Security Service of Ukraine and National Security Council.
The question for both Zelenskiy and Tymoshenko is how they manage the relationship with the cabinet and parliament up until parliamentary elections in October. Maybe the country drifts leaving it vulnerable to economic and geopolitical shocks, or is held stable by technocrats in the Ministry of Finance and National Bank of Ukraine, but equally there is a chance of confrontation – remember the “war of laws” in the 1990s under the Leonid Kuchma presidency? But both Tymoshenko or Zelenskiy would quickly have to indicate how they expect to govern in the period to parliamentary elections to assure business and investors. They would need to move fast.
On Russia?
Two risks here for a Zelenski presidency:
First, that Russia sees a weakness with an inexperienced Zelenskiy presidency, and looks to quickly re-escalate in the east.
Second, because Zelenskiy is a native Russian speaker, you might see a nationalist revolt against him from within Ukraine. Poroshenko’s guys are playing the “Zelensky cannot be trusted on Russia” line, and the nation is only safe with Poroshenko.
But while Zelenskiy is a Russian speaker, he is also been criticized for being something of a product of Kolomoisky, who is generally thought to be despised by Putin for comments made while he was Governor of Dnipropetrovsk during the height of fighting in Donbas. So really I don’t see Zelensky as being particularly pro Russian, albeit he has made clear his desire to try and negotiate with Russia on longer-term solutions over Donbas and Crimea. But whatever Zelenskiy might try and do I think he will be severely constrained by the strong patriotic mood at home. He will have to play his desire to negotiate with Russia very carefully and again his choice of foreign and defense/national security council ministers/heads will be mission critical.
Not sure on the above that the playbook will be that much different for Tymoshenko, albeit she has well known and respected foreign and defense/security advisers such as Grigory Nymyria and Boris Tarasyuk, whose loyalty to Ukraine is not in doubt.
And I think it is important to say that once elected, I think an array of talent will present itself to new presidents Tymoshenko and Zelenskiy, as people will want to serve. The challenge for both will be sifting out the very good, from the very bad, the latter of which unfortunately all too often always tend to try and get close to power and money in Ukraine (as elsewhere).
On the nationalist front, I think US/Western support for Zelenskiy – which will be coming if he chooses the right team – would calm the nationalists down.
And on Russian re-escalation in the east, would Moscow want to destabilize a Russian-speaking president, likely securing strong support in eastern Ukraine, along with younger voters, who has offered peace talks with Moscow? Zelenskiy said he would get down on one knee to Vladimir Putin. Perhaps not initially at least until they get the sense of the man.
Perhaps the bigger risks here are that Poroshenko loses, but as per 2004, administrative means are used to get him over the line, or that Zelenskiy makes a mistake over peace talks and enrages nationalists at home. Either way, we could see violent demonstrations, exploited by Russia to destabilize Ukraine and take Ukrainian territory. The hope again is that the West warns political actors (and importantly Russia) to play by the democratic script in elections and that Zelensky quickly hires an experienced foreign minister and policy team more generally.
So who is going to win?
At this point, these elections look like they are Zelenskiy’s to lose. He is in the driving seat and in pole position but the race remains long and positions can still change. An inexperienced driver such as Zelenskiy can easily crash out, while Poroshenko and Tymoshenko are experienced drivers and will finish the race, that’s for sure. They will also be around for the next race – the parliamentary elections. But I think we need to get used to the prospect of a Zelenskiy presidency, as I think some of the reformers are.
