Central Europe Review: politics,
society and culture in Central and Eastern Europe
Vol 2, No 1
10 January 2000

C E N T R A L     E U R O P E:
Ukraine 1999:
On the threshold of change?

Sarah Whitmore

The prospect of a change of power in the presidential elections remained at the top of Ukraine's political agenda throughout most of 1999, and the struggle between the president and parliament, more or less contested since independence, gathered momentum. Freshly re-elected President Kuchma demonstrated a desire to solve the matter decisively by altering the Constitution in his favour. As inter-branch rivalry spilled over to economic policy, economic reforms were minimal and the risk of foreign debt default loomed. On the international stage, despite the difficulties caused by the Kosovo crisis, Kuchma's multi-vector policy was maintained, although the hoped-for EC membership prospects remained remote. At the end of the year, optimism was rekindled as Ukraine gained its first truly reformist Prime Minister.

The presidential election

The political scene in 1999 was dominated by the presidential elections held in October and November. The incumbent Leonid Kuchma won in the second round with 56 per cent of the vote to Communist party leader Petro Symonenko's 38 per cent. Kuchma's victory was more a vote against a return to Communism than an affirmation of the incumbent's policies. Declining GDP and living standards, stalled reforms and the widespread perception of corruption and cronyism at all levels of the state administration meant that Kuchma was hardly in a position to emphasise his achievements over the past five years. Instead, he copied the strategy that had proved successful for Yeltsin in 1996. Playing to the electorate's conservatism, the campaign was framed as a choice between stability and a return to the Soviet past. Strong control over the media was coupled with the participation of state officials in the campaign at all levels. This was virtually acknowledged to the public, as Kuchma sacked governors in regions where he failed to poll a majority. Already facing a Communist in the second round - as had Yeltsin - the Russian 1996 scenario was completed by finding Ukraine's Lebed, at least superficially. Centre-right presidential candidate Yevhen Marchuk gained 8 per cent of the vote in the first round. The general, former prime minister and former chief of Security Service was appointed to head the influential National Security and Defence Council between the two rounds of the election.

International observers such as OECD and PACE reported that the second round was far worse than the first for electoral violations but that, on the whole, this had not affected the final outcome. The high turnout in both ballots (70 and 74 per cent respectively) and unambiguous result were interpreted by Kuchma as a victory for democracy. The experiences of the past five years and the recent election campaign present a serious challenge to this position. However, the fresh electoral mandate does present the President with some opportunities to finally prove his democratic credentials with deeds.

Kuchma's inauguration speech was replete with appropriate promises about guaranteeing freedom of speech, tackling corruption and implementing economic and political reforms. "Before you stands a new president," he vowed. However, the controversy surrounding the inauguration ceremony itself very much resembled the "old" Kuchma. He insisted that the ceremony be held not in the parliament, as the Constitution (rather vaguely) suggests, but in the Palats Ukraina concert hall. The symbolism of such an act was clear, and Parliament's attempts to resist the move were futile. Just two hours before the ceremony began, 245 deputies voted to support the President's wishes. Ultimately, a majority in Parliament recognised that events were beyond their control and backing Kuchma's choice was the only way to salvage some fragments of credibility - by endowing the inauguration with a clear legal status.

Executive-legislative relations

The manoeuvring over the inauguration provides an indication of the current state of executive-legislative relations, as Kuchma's recent electoral mandate will bolster his position in the long-standing power struggle between the branches of power.

The current parliament (Supreme Council), elected in March 1998, has no overall majority, but the leftist factions are able to block the legislature's work and kill bills. Throughout the year, the left halted laws on privatisation and tax reform, raised pensions in contradiction with the budget and forced Ukraine to join the CIS Inter-Parliamentary Assembly by blocking Parliament's work until a positive vote was attained. Debates on the latter issue degenerated into a brawl between nationalist and Communist deputies in the chamber. The Supreme Council's work was also constantly distracted by the election campaign. This was compounded by the presence of 13 presidential aspirants among the deputies and Kuchma's attacks on the parliament, which increased during the year.

Kuchma's decision to target Parliament in 1999 also indicates his dissatisfaction with the current, poorly defined separation of powers outlined in the 1996 Constitution. This can be interpreted as the result of frustration at the inefficiency of the current system or of his authoritarian tendencies. At the beginning of the year, Kuchma suggested a referendum to extend his decree powers (which expired in July 1999) and introduce a bicameral assembly - with half of the upper chamber appointed by the president. The debate on a bicameral assembly rumbled on throughout the year while the arrest of ex-Premier Pavlo Lazarenko at the end of 1998 in Switzerland on money-laundering charges raised the spectre of deputies' immunity from prosecution. The deputies lifted Lazarenko's immunity in February, but with a couple of other deputies also under investigation, Kuchma's promise to add a referendum question on this issue would prove popular. This issue was also on the Russian agenda, as various blocs vying in December's parliamentary election saw lifting immunity as a vote winner.

If Kuchma offered a referendum as one way out of the executive-legislative impasse, an alternative was also floated. Before the election, Kuchma suggested that the "Our Choice - Leonid Kuchma" bloc of some 19 political parties and groups could become the basis of a pro-presidential majority in Parliament, instrumental in forming the government. Various centre-right forces tried to co-ordinate their efforts in November, prompting much faction switching by deputies. This illustrates the fluidity of partisan allegiances and how unstructured Parliament is.

Parliament rejected the President's first candidate to head the government, Valery Pustovoitenko, a close ally of Kuchma's who held the post since 1997 with few notable achievements. However, the second candidate, Victor Yushchenko, was confirmed by the Supreme Council with a comfortable majority. Yushchenko, who headed the National Bank for five years, is credited with most of Ukraine's few economic achievements - such as controlling inflation and introducing the new currency. He is seen as truly pro-reform - untainted by corruption - and commands respect at home and abroad.

Despite the insistence of both the President and Prime Minister that a parliamentary majority is essential for the implementation of much-needed reforms, its formation still remains in the discussion stage - even after the confirmation of Yushchenko by centre and right forces in Parliament. If a majority were formed, it would be unlikely to be more than situational for a number of reasons. As the institutional framework does not provide for the functioning of a parliamentary majority, there would be nothing to hold such a majority together. In addition, Kuchma intends to oversee the appointment of all the key posts, and as government formation is currently taking place in the absence of a majority, Parliament is unlikely to exert much influence. It would therefore be unrealistic to expect a coalition majority composed of a spread of centrist and national-democratic factions to unquestioningly back the government and, moreover, bear responsibility for its failings. In this light, Kuchma's plan to make the Supreme Council responsible for the government cannot fail: he either gains a pro-presidential working majority or, more probably, the parliament will prove unable to form a majority, strengthening Kuchma's argument about the incapacity of the Supreme Council under the current arrangement and the need for a referendum on constitutional changes in his favour. Therefore, inter-branch relations are likely to remain unstable and dominate the political process in the coming months.

Economic policy

Fraught presidential and parliamentary relations have been harmful for the economy, as control over economic policy remained embroiled in the struggle, exacerbating the effects of irresolute reform attempts. In the past year, both the executive and Parliament sought to restrict the other's tax setting powers and continued to clash over specific measures. The 1999 budget was finally adopted by the Supreme Council on 31 December 1998 -after more than 20 votes - while the torturous process of the 2000 budget is ongoing. Parliament rejected the surplus budget drafted by the government and instead adopted a no-deficit one in the first reading on 19 November 1999. This version was drafted by the Parliament's Budget Committee, while the government and Parliament continue to disagree over expenditure and revenue targets.

In 1999, GDP and international trade continued to decline, and foreign investment fell to half its 1998 level. In addition, the currency was unstable, fuelled by political uncertainties due to the presidential election. This volatility is expected to continue while the position of the IMF and the World Bank is renegotiated. Ukraine remains dependent upon imported energy and foreign loans. Ukraine is due to pay USD 3.1bn in foreign debt in 2000, most of it to the IMF. The prospect of default exists, particularly as the IMF's USD 2.6bn extended fund facility (EFF) was suspended in September, and the World Bank postponed all its lending to Ukraine in October. The EFF is conditional on the implementation of an 88-point programme that would have required a huge legislative and administrative effort - which was impractical during election year. The lack of political will in both the executive and legislature coupled with the weak institutional base for implementation exacerbated an already difficult task. In June, Kuchma did issue a clutch of economic decrees just before his decree powers expired to tackle budgetary problems and satisfy some IMF conditions. These included the sale of 25 per cent of Ukrtelecom, which was rejected by Parliament several days later. However, it was too little, too late.

The Supreme Council has remained opposed to the sale of strategically important industries, while the executive has tended to overestimate the revenues it can raise. Closed forms of privatisation rewarded the President's powerful supporters with the most profitable firms; for example, in September, Kuchma's daughter's boyfriend acquired a lucrative metal works. As a consequence, social inequality is increasing and reforms have languished while foreign loans kept the government afloat. Kuchma publicly acknowledged the risk of default in 2000 and the need to reschedule the debt. For this, Ukraine needs the IMF and World Bank back on board. Since his re-election, Kuchma has been working hard to this end, trying to convince foreign governments and international bodies of his commitment to reform by cutting the size of the government, decreeing the end of the system of collective agriculture and nominating a respected reformer to head the government.

Yushchenko took office promising 100- and 1000-day programmes, with reform of the government administration and strengthening of the financial system as top priorities. However, his ability to implement such measures will be largely dependent upon the attitude of the President. Cynics believe that Yushchenko will remain Prime Minister only long enough to regain IMF and World Bank support. Toward the end of the year, these bodies began to evince a tougher line on Ukraine, stating that all financial support to the government would be contingent on political and economic reform. The hardening attitude of Western institutions was reflected in the media; George Soros, for example, argued that "crony capitalism that enriches a tiny elite" can no longer be funded by the West just because of Ukraine's key geopolitical position between NATO and Russia (Washington Post, 23 November 1999). As in 1999, economic and foreign policy will remain inextricably linked in 2000.

Foreign relations

Foreign policy is often seen as Kuchma's most successful sphere. Ukraine's "multi-vector" policy of balancing NATO and the European Union on one hand and Russia on the other - all the while retaining non-aligned status - continued in 1999 but was placed under considerable stress by the Kosovo crisis in the spring.

Ukrainian public opinion, hitherto benign toward NATO, began to perceive the Alliance -and by association the US - as a greater threat to Ukrainian security than Russia. The Kosovo crisis tested the Ukrainian government's ability to deal with anti-Western sentiments without abandoning its pro-Western orientation. Public opposition to the bombing was articulated through parliamentary resolutions. At the same time, Kuchma tried to maintain delicate poise by condemning actions taken without UN sanction but defending the advantages of Ukraine's relationship with NATO. The brush-off given to Kuchma's mediation initiatives further strained the country's "strategic partnership" with the US and exposed Ukraine's impotence on the international stage - as NATO assigned the mediation role to Russia. Relations between Ukraine and Russia were also jeopardised as Russia took a harder line against NATO - rescinding its special charter - and NATO in return pushed for Ukraine to close its airspace to Russian military planes. In December, tensions mounted as Russia renewed allegations that Ukraine was stealing Russian gas, while the sudden departure of Yeltsin will generatefurther uncertainty in 2000.

The ambivalent attitude demonstrated by NATO and the US to Ukraine during spring and summer was somewhat echoed in the country's relations with European institutions. In January, the Council of Europe Parliamentary Assembly (PACE) warned Ukraine about failing to honour its commitments, including the abolition of the death penalty. In June, PACE moved to suspend the Ukrainian delegation and later reported violations of the law and free speech during the election campaign. This will not aid Ukraine's bid for EU membership. With EU expansion due to include Poland, Hungary and the Czech Republic, Ukrainian trade will suffer as borders are closed and markets for its goods are re-orientated westward.

The government's response has been to seek assurances from the EU of Ukraine's right to membership once the necessary political and economic conditions are met. Nowhere has this been more prominent than in Kuchma's inauguration speech on 30 November. The President announced that Ukraine's primary strategic aim was EU membership. However, the EU's strategy - confirmed at the Helsinki Conference on 11 December - placed Ukraine in a similar category to Russia, encouraging reform and the closure of Chornobyl but giving no indication of its membership prospects.

The failure of the EU to offer Ukraine a realisable long-term goal could jeopardise the multi-vector policy and force a reorientation of Ukraine's foreign policy. To a significant extent, this wil be determined by domestic factors - particularly economic performance and the balance of forces among policy-makers. It is likely that Kuchma will try to use his fresh mandate and consolidated position to force constitutional changes. Whether this will encompass the serious reform commitment desired by the international financial bodies is another question. Such attempts would bedeeply contested both by the general public and among political elites. However, the appointment of Yushchenko as prime minister, who for once seems tobe the best person for the job, graces the new year with hope.

Sarah Whitmore, 4 January 2000



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