Big Fuss Hides Real Reasons For Political Crisis In Ukraine

President Victor Yushchenko made a drastic move dismissing the government on Sep 8. He signed the respective order during a live TV interview at midday of Thursday. Before signing it, Victor Yushchenko gave explanations why this move was necessary.

The major arguments were as follows: the government had the widest credentials in Ukrainian history, but did not manage to improve the economic situation. Along with worsening of macroeconomic indices in 2005, government was responsible for several crises that shattered economic stability, Yushchenko declared during his speech. In particular, government initiated
fuel crises in spring and sugar and meat crises in summer.

The last drop that destroyed the president's patience was attempts of a rough change of top management in major industrial enterprises that are now being re-privatized. The assaults on Nikopol Ferroalloy plant and chemical enterprise Azot (Severodonetsk) had been backed by government officials.

But the most obvious need to dismiss the government, president declared, was lack of unity in the government team. Most members of government do nothing but use their authority in their own commercial needs or in preparation for the next general elections. Government became as corrupted as the previous government was, the president concluded.

State secretary Alexander Zinchenko provokes political scandal by his resignation

The political crisis in Ukraine broke out after state secretary Alexander Zinchenko on Sep 5 accused many high-ranking officials of corruption. During the press conference devoted to his resignation, on Sep 3 Zinchenko demanded president Victor Yushchenko to fire secretary of national security
and defense council (CNSD) Petro Poroshenko, accusing him of corruption.

According to Zinchenko, for a long time he called Yushchenko to fire Poroshenko. But the latter kept his post, becoming the main reason of Zinchenko's resignation. Poroshenko together with Yushchenko's first aide Alexander Tretyakov and leader of parliamentary group Our Ukraine Mykola
Martynenko cynically misused their authorities, Zinchenko declared.

Poroshenko used his power to press on courts. He has subdued customs service for his business needs and controlled senior officials in ministry of internal affairs, Zinchenko underlined. He also said Tretyakov is guilty of trying to take control over major areas of economic and social activities
in the country, for instance mass media, gas industry, etc. Zinchenko denied the assumption that he would become the next Ukrainian ambassador to Russia.

Petro Poroshenko was present at Zinchenko's press conference but kept silent until ex-state secretary finished his speech. Just after Zinchenko left the conference hall, Poroshenko took his place and started his own press conference. He declared that all accusations were false and he was ready to disprove the charges.

Poroshenko informed he would bring an action against Zinchenko to defend his dignity. Later, Mykola Martynenko also announced he would start a law suit against Zinchenko. According to Yuschenko's spokeswoman Irina Geraschenko, a special commission would be created to investigate all the facts disclosed by Zinchenko. She did not say the president would declare any changes in the government.

Nobody could predict dismissal of government until the last minute

At that moment nobody could predict that Victor Yushchenko would dismiss the entire government. It seemed that even most government members and senior officials did not suppose Yuschenko would go that far. This view is based on declarations of deputy PM Mykola Tomenko and Petr Poroshenko, who in the early morning of Sep 8 declared their resignations.

Tomenko (like Zinchenko) also accused Poroshenko of using his power for personal purposes. Poroshenko even tried to dictate which people should represent Our party Ukraine in the next general elections, Tomenko added. But Tomenko in his rough speech did not mention the forthcoming dismissal of government. We suppose he did not know about it yet then.

In several hours, president Yushchenko made his now famous statement about dismissing the government including PM Timoshenko. It became evident that lack of unity was not only within the government, but also between Yushchenko and his closest ally Timoshenko.

Dissolution of the tandem that was the core of orange revolution's success proved a major political crisis has erupted in the country.

Discharged PM Yulia Timoshenko reacts very softly on her resignation

Everybody started to wait for the reaction of discharged Timoshenko, because her statements could deepen the crises or, vice versa, soften it. Timoshenko chose not to worsen the situation. On Sep 9 she gave a 1.5 hour live TV interview, declaring her view of the situation.

To sum up, her position is: Yushchenko decided to sack the government and PM under pressure of his close allies, namely Petr Poroshenko and his team. She would continue her political career; gather around herself allies and participate in the general vote as leader of her political party.

Timoshenko also declared her dismissal was just a political move, as her government did not make any serious mistakes in economic policy. Timoshenko stressed that the government managed to tackle schemes of money laundering and smuggling; legalized business, bringing an extra UAH 22bn to the state budget, increased pensions by 21%, etc.

Splitting from Yushchenko ex-PM Timoshenko becomes one of the major contenders for parliament seats after next election

Timoshenko announced plans of her political career: to participate in the elections "not together with Yushchenko". This move is very important for understanding the future political situation in Ukraine. Distancing herself from president Yushchenko, Timoshenko created the second most powerful political force in Ukraine that would likely unite moderate opponents of Yuschenko.

It is obvious that Timoshenko's party will take plenty of seats in the next parliament. She has many supporters among the general public and politicians. Parties that are outsiders today get a choice which side to join in the next election: Timoshenko or Yushchenko. There is no major third party that can compete with them.

To CONCLUDE, the breakup of the main political force in Ukraine brings it hidden benefits.

FIRST, we can predict these two parties will take a combined absolute majority of seats in Rada. Uniting in the new parliament allows them to receive total control over political and economic life.

SECOND, as we supposed above, third parties would prefer to team up with Timoshenko or Yushchenko and not to create an alternative major party to compete for seats. That excludes the "contra-orange revolution" some experts predicted earlier, taking into account the general vote gives a chance to Russia to participate in a masked way by sponsoring the opposition.

THIRD, by means of a political scandal it became possible to push aside officials that discredited authorities by their corruptive actions (such as Petr Poroshenko who with his huge capital enjoys serious influence on politics and the economy).

All said above make us think the government's dismissal was a coordinated circumspect act. Yushchenko and Timoshenko's move would keep the situation in Ukraine tense but stable before the vote. However, it would be not easy to obtain clear evidence of such a plot. Of course, Timoshenko and Yushchenko would not show any signs of "intimacy" in the next few months.

Part of the president's duties would soon be transferred to parliament, with the PM becoming the most influential figure. The PM would be nominated by Rada, which makes control over it crucial for incumbent authorities. Current Rada Speaker Vladimir Litvin was mildly oppositional to the new
government, thus we expect him to cling closer to Yushchenko now. Assuring virtually unhindered control over Rada.

We cannot exclude government dismissal was a planned action of Yushchenko and Timoshenko

We also do not predict any worsening of the economic situation in the nearest future. Things could not get much worse than they are now. President Yushchenko made the right move to appoint as acting PM Yuri Yekhanurov, head of Dnipropetrovsk regional administration. Our personal impressions from meetings with him are quite positive.

He is a well-known economist and manager with more that 25 years of managing experience. Also, Yekhanurov was not involved in political conflicts, which shields him from any accusations of making a political move by heading the government.

President Yushchenko and leaders of major parliament factions assured that Yekhanurov will be nominated as PM in the next 2-3 weeks. Political neutrality makes it possible for Yekhanurov to invite into government professionals rather then politicians. Yushchenko confirmed there would be
no person in government who was involved in business activities. The new government will include several ministers that were dismissed by the president.

At the same time, several people who had been fired due to support of Yushchenko's main opponent Victor Yanukovich during the presidential elections, but are revered professionals, will be returned to government. The government of experienced professionals will be able to keep the economic situation stable during the next general vote.

SECOND, we expect a warming of political and economic relations with Russia. Yekhanurov was born in Russia and sympathizes with his native country. While ex-PM was persona non grata in Kremlin, and never visited Moscow during the last 8 months, now he can easily go to Russia for any negotiations.

That can improve the situation with import of energy resources from Russia. Plus, Yekhanurov showed himself as a conciliator, taking part in talks on Nikopol ferroalloy plant. He met all sides of the conflict and managed to resolve it. Thus, proving to be fair, he can guarantee fair participation of Russian companies in key privatizations in Ukraine.