Ukraine interim govt includes pro-EU politicians, nonpartisan officials

Ukraine’s new interim government was presented on the EuroMaidan stage the night of Feb. 26. Arseniy Yatsenyuk, the political council chair of the pro-EU Fatherland party, will serve as prime minister. Oleksandr Shlapak, a veteran bureaucrat, will serve as finance minister. Pavlo Sheremeta, the founder of the Kyiv-Mohyla Business School and president of the Kyiv School of Economics, will serve as economy minister. Andriy Deshchytsia, a veteran diplomat, will serve as Foreign Minister. Former Foreign Minister Borys Tarasyuk will serve as vice prime minister for EU integration. Yuriy Prodan is returning as Fuel and Energy Minister after serving in this post between 2007 and 2010. Veteran anti-corruption activist Tetiana Chornovol, brutally beaten during the EuroMaidan, will chair an anti-corruption bureau, while another civic activist, Yegor Sobolev, will lead the lustration committee.

The EuroMaidan crowd greeted the new government with mixed reaction, generally cheering the civic activists while jeering the political veterans. Parliamentary Head Oleksandr Turchynov criticized the crowds for jeering some nominations. He added the interim government is “doomed. Three, four months and they won’t be able to work anymore because they are doomed to make unpopular decisions.” Arseniy Yatsenyuk, the political council chair of the Fatherland party, defended the government, stating no such government has emerged in Ukraine’s history in which there are no oligarchs. He echoed Turchynov’s view that its members are committing “political kamikaze,” anticipating the painful reforms they will need to approve.

“The Treasury is empty, it is $75 billion in debt,” Yatsenyuk told reporters. “The overall volume of Ukraine’s debt is USD 130 bln. Pensions are being fully paid in more than a month. The international reserves have been stolen. And we are now doing everything to control the situation and we’ll do that. We don’t have any other choice.”

Zenon Zawada: The good news is that Ukraine may have a new government by the end of today, and this government will be eligible to receive badly needed macro-financial support from the West as soon as possible. The bad news is the Cabinet has been not completely formed: the defense minister has yet to be selected as several EuroMaidan forces are trying to nominate their representative. Meanwhile, Olha Bohomolets, the EuroMaidan’s chief doctor who was nominated as humanitarian vice prime minister yesterday, has declined the position.

We agree with Yatsenyuk’s remark that this Cabinet is unprecedented in Ukraine’s history, in terms of its independence from oligarchs and presence of non-partisan officials. But it’s not good enough. On the whole, the positions in the Cabinet were distributed based on political tribute, to those politicians who support the EuroMaidan and those civic activists who were at its forefront. In particular, Shlapak is an old guard bureaucrat who, although experienced, is unlikely to introduce any innovative reforms in government finance. He served the administrations of former presidents Leonid Kuchma and Viktor Yushchenko. Yatsenyuk also represents stability, but little innovation in governance as he has been linked to corruption schemes. Tarasyuk and Deshchytsia are fine diplomats. We expect the anti-corruption and lustration committees will face fierce resistance. Meanwhile, the only identifiable nonpartisan technocrat, Sheremeta, was placed in a non-influential position as the Economy Minister, who decides little in Ukraine. Therefore, the interim government fails to meet the demand from the Ukrainian public and EU officials for nonpartisan technocrats.

The view expressed by Turchynov and Yatsenyuk about the interim government being doomed is underestimating the intelligence of their electorate, in our view. Having always pursued a populist approach to politics, they’re making the assumption that citizens won’t bear painful reforms for long-term gains. However all of the EuroMaidan’s supporters – composed mostly of Ukraine’s struggling middle class—understand that the economy is a disaster and painful reforms are needed. Quite the contrary, they will be disappointed if sharp reforms are not pursued, particularly in lessening the tax burden and other measures to make it easier to do business in Ukraine.

It’s quite revealing that politicians from the Fatherland and Freedom parties are participating in the interim government, while the Ukrainian Democratic Alliance for Reform (UDAR) is avoiding it altogether. That’s a bad omen as we see UDAR pursuing a strategy of capitalizing on its failures for the May 25 presidential election, in which its founder Vitali Klitschko will be a leading contender. Political rivalry between the pro-Western parties is the last thing Ukraine needs, but it is inevitable, unfortunately.

Moreover, we anticipate political conflicts throughout the next six months. They will be between the idealistic, anti-corruption reformers versus entrenched, old guard politicians, pro-EU liberals versus socialist-oriented nationalists and those citizens wanting free market, anti-bureaucratic reforms versus those who want stability and government payments (pensioners, in particular). Moreover, what’s left of the Russian-oriented Party of Regions and Russian government will seek to exploit these conflicts to their advantage. So we see Ukraine’s political crisis continuing for many months.