Yuschenko appears to win a round, but now faces potential scandal over NBU (04/01/01)

Yuschenko appears to win a round, but now faces potential scandal over NBU

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Just as the political pendulum began to move Prime Minister Viktor Yuschenko's way and all indications were that he would survive a vote of no confidence that certain lawmakers were demanding, a looming political scandal that could involve the prime minister may again leave him on shaky ground.

Mr. Yuschenko seems to have won a battle with Verkhovna Rada First Vice-Chairman Viktor Medvedchuk of the Social Democrats (United) faction and Oleksander Volkov, a leading national deputy and head of the Regional Rebirth faction, over a demand he form a coalition government and reshuffle his Cabinet to accommodate more members of the weak parliamentary majority over which the two lawmakers hold sway.

Many political experts believed the fight was the result of a power play by Mr. Medvedchuk to oust the reform-minded head of government in favor of himself or another leader of the several business clans that increasingly dominate political life in Ukraine. Some political experts in Kyiv have interpreted the moves as a sign that the oligarchs, and especially Mr. Medvedchuk, want the seat as a perch from which to better control preparations for the 2002 parliamentary elections followed by the 2004 presidential ballot.

Now Prime Minister Yuschenko must give his attention to a brewing crisis over the arrest of Volodymyr Bondar, who was one of his top assistants while he was chairman of the National Bank of Ukraine. On March 19 the Procurator General's Office detained Mr. Bondar, one of two top deputies to Mr. Yuschenko in the final years of his tenure at the helm of the country's central bank. Mr. Bondar was charged formally three days later with mishandling government funds resulting in a loss of $5 million.

On March 21 Mr. Yuschenko gave unqualified support for Mr. Bondar's innocence, saying that his former underling was not capable of committing a criminal act. "I always trusted Bondar when he was a member of Ukraine's National Bank board, and I trust him now," explained Mr. Yuschenko.

On March 27 Kyiv Procurator Yurii Haisynskyi indicated that his office would be interested in hearing more from Mr. Yuschenko when it requested that he and Minister of Finance Ihor Mitiukov appear for questioning in the case as witnesses.

The same day Mr. Bondar's attorney questioned the extent of Mr. Yuschenko's involvement in the events that led to the arrest. He said he found it difficult to envision that Mr. Yuschenko, who was responsible for large financial investments of the bank as its director, could not have known about such a large transaction as the one Mr. Bondar made, allegedly illegally.

The Kyiv chief prosecutor said Mr. Bondar improperly invested $75 million of the NBU's gold reserves in the Cyprus branch of the Credit Suisse First Boston Bank in December 1997, which resulted in an investment loss of $5 million. In other charges filed several days later, Mr. Bondar was accused of other illegal transactions in January and March of 1997, also involving the CSFB Bank, in which a total of $15 million was moved from the NBU to the Real Bank of Kharkiv. The Kharkiv bank was to receive an annual commission of 2 percent for managing the money.

CSFB Bank representatives maintain that the transactions were all done according to Ukrainian law.

While Mr. Bondar has told investigators that Mr. Yuschenko was not privy to the details of the deals, Mr. Haisynskyi suggested that ignorance is not a defense.

"If the head of the NBU did not know, that's even worse - that without his knowledge these amounts of gold reserves were removed from the bank and taken out of the country," said Mr. Haisynskyi, according to Interfax-Ukraine.

Mr. Haisynskyi responded to Mr. Yuschenko's assertions that his ex-employee is not guilty of the charges by accusing the prime minister of meddling into an ongoing criminal investigation.

Some political analysts are portraying the latest series of events involving the Ukrainian prime minister as a new tactical move by Mr. Medvedchuk, who they say has influence over the local public prosecutor's office, to keep Mr. Yuschenko off balance after the government leader seems to have won the battle over the no confidence vote the Rada vice-chairman speaker had threatened if a coalition government was not formed soon.

Mr. Yuschenko's success in his latest political battle with the business clans will not be absolutely certain until after he gives his quarterly report on the state of the government before the Verkhovna Rada on April 10. But the apparent victory, which will most likely result in only a few changes in Cabinet posts made to appease his political opponents in the Verkhovna Rada, was achieved thanks to a demonstrative public relations campaign by the prime minister in which he repeatedly and in great detail explained in a series of press conferences the economic accomplishments of his government in the last year.

The campaign also included detailed explanations of why the formation of a coalition government was premature until laws were in place on the responsibilities of a majority coalition and the Cabinet of Ministers.

Mr. Yuschenko also diffused attacks by moving toward compromises, one of which was to agree to negotiations between the parliamentary majority and the government to work out a political agreement.

In another conciliatory gesture, he stated on March 23 that the government was ready to adopt "a flexible policy" on changes in his Cabinet so as to assure cooperation between the two sides.

Mr. Yuschenko made one of his few un-diplomatic statements during the struggle for his post - which the newspaper Den called an indication that he was winning the fight with his critics - when he told journalists during the same interview that "the government is not supposed to be a branch of the Social Democratic Party (United) or any other parliamentary faction."

Two days later Mr. Medvedchuk indicated that he had failed in the attempt to unseat the prime minister when he said he believed that a political agreement was possible before April 10 and that current negotiations have been "fruitful."

But the Rada vice-chairman noted, as Mr. Yuschenko had somewhat earlier, that a decision had to be made on who would sign the document and what it would be called.

Mr. Yuschenko had pointed out even before negotiations began that the agreement could not be between the legislative and executive branches of government because their specific responsibilities and relations are based on the Constitution and normative law, which would supercede any agreement. He added that, if an accord were to be reached between the parliamentary majority and the government, it still would require additional directives explaining what a majority is and how it is developed.

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