Ukraine Cabinet of Ministers approved by parliament

Ukraine’s parliament approved on Dec. 2 the new Cabinet of Ministers to be led by Prime Minister Arseniy Yatsenyuk. The measure earned 288 votes, a solid majority but short of the 304 MPs claimed to be part of the coalition. The new Cabinet includes four ministers with investment banking backgrounds: Andriy Pyvovarskiy will serve as infrastructure minister, Volodymyr Demchyshyn will serve as energy minister, Lithuanian-born Aivaras Abromavicius will serve as economic development and trade minister and American-born Natalie Jaresko will serve as finance minister. Lifelong diplomat Pavlo Klimkin will remain as foreign minister and Stepan Poltorak, who built his career as the director of the Internal Army Cadet Academy, will remain as defense minister.

Of the 20 Cabinet members, five ministers belong to the Petro Poroshenko Bloc (nine fell under its quota), four belong to the People’s Front (led by Yatsenyuk), two are from the Fatherland party, one is from the Self-Reliance party, one is from the Radical Party and three are foreign-born, who became naturalized. Numerous coalition MPs didn’t support the vote because it required the approval of the complete Cabinet, without the ability to vote on individual candidates. As a result, the creation of a controversial Information Policy Minister was approved, which will be led by Yuriy Stets, the godson to the wife of President Petro Poroshenko. Meanwhile, parliament has yet to approve the heads of its committees.

Finance Minister Natalie Jaresko told a press conference after the parliamentary session that her priorities are to submit tax code amendments to boost budget revenue and cut spending in the 2015 budget, which she aims to be ready by Dec. 20.

Zenon Zawada: It’s a relief to see mostly new faces in the Cabinet, many being young professionals with practical experience. A particular promising appointment is Finance Minister Jaresko, who has managed a venture capital fund and has extensive experience working with IFIs. Besides those who have worked for investment banks, Ecology Minister Igor Shevchenko built a successful legal career before retiring at a relatively young age. Agrarian Minister Oleksiy Pavlenko worked as an executive for an electronics retailer and a private agri-firm.

A press conference following the parliamentary session was particularly revealing, in which the three foreign-born ministers indicated they didn’t have a team of foreigners to help them implement reforms. They said they’d be relying on the current Ukrainian employees, though Economy Minister Abromavicius said his structure will need to be overhauled, hinting at a significant personnel rotation. We believe their success will be limited, given the Presidential Administration’s inertia towards reform, the resistance of oligarchs to reform and the post-Soviet bureaucracy and traditions of their respective ministries. What will be revealing is who they’re capable of selecting as their deputies and other key personnel.

So despite the presence of talented, young professionals with extensive experience in legitimate business, we are pessimistic on the prospects for tectonic change that the president has called for. Part of the reason is the president’s own failure to live up to his rhetoric in requiring the approval of the creation of a questionable Information Ministry, to be led by the godson of his wife. Poroshenko has called for an end to quotas, but the Cabinet was clearly formed that way, in a weeks long process that was utterly opaque. Demchyshyn offers experience as former head of the National Energy Regulation Commission, but has business ties to National Bank Head Valeriia Gontareva, who in turn has close personal business ties to Poroshenko.

Instead we expect a respectable tide of reforms that will barely satisfy Ukraine’s Western creditors to keep the economy afloat, yet fall short of satisfying the public, which will suffer from austerity measures, layoffs and cuts in social payments. We also expect rivalries among Ukraine’s oligarchs to cause conflicts and halt reform efforts in the government, leading to an extremely turbulent year in politics. Rivalries between parliamentary factions have prevented committee heads to be named, as had been planned for yesterday. It was particularly revealing that the 304-vote majority claimed by the president (enough to amend the Constitution) dwindled when the Cabinet had to be approved, which calls into question its availability for future votes.