On the sidelines of the March 31-April 1 nuclear security summit, in Washington, President Barack Obama made it clear to Ukrainian President Petro Poroshenko that the U.S. will not issue $1 billion in loan guarantees to Ukraine until a new government is in place (President.gov.ua, April 1). And Vice-President Joe Biden noted that assistance from international financial institutions was also contingent on the appointment of a new government (President.gov.ua, March 31).
Ukraine’s economy is in better shape now than in 2014-2015, when the national currency collapsed under the weight of war in eastern Ukraine and low international prices for Ukrainian commodities. Nonetheless, assistance – particularly from the International Monetary Fund – is essential to jump-start the country after its GDP plunged by 7 percent in 2014 and by another 10 percent last year. However, the IMF has been delaying assistance because of the government crisis (Interfax, March 3).
The crisis erupted in February. Although Prime Minister Arseniy Yatsenyuk survived a no-confidence vote in the Verkhovna Rada on February 16, engineered by the Poroshenko Bloc, the majority coalition broke up. The junior coalition partners, Samopomich and Batkivshchyna, quit, accusing the senior partners, the Poroshenko Bloc and Mr. Yatsenyuk’s People’s Front, of corruption (Lb.ua, February 18). Those events were themselves preceded by corruption allegations against influential national deputies linked to Messrs. Poroshenko and Yatsenyuk – Ihor Kononenko and Mykola Martynenko, respectively (see Eurasia Daily Monitor, December 11, 2015).
Mr. Yatsenyuk, if he does not resign voluntarily, can carry on at least until the next Parliament session in September, as no new no-confidence motion is possible until then, according to the Ukrainian constitution. At the same time, President Poroshenko has the right to dissolve the Parliament and call early elections, if there is no majority coalition within one month, as is the case now. However, Mr. Poroshenko wants to avoid early elections. First, his party may lose them, as recent opinion polls show (Ukraine-elections.com.ua, accessed on April 1). Second, Western creditors oppose early elections in a situation when the peace process in eastern Ukraine is far from complete. Ukraine heavily depends on international assistance, and populist factions, such as Yulia Tymoshenko’s Batkivshchyna and Oleh Liashko’s Radical Party, are likely to defeat the more moderate parties, particularly the Poroshenko Bloc and People’s Front, in early elections.
Mr. Yatsenyuk wants to avoid early elections for the same reasons, and he has apparently agreed to step down in order to avoid them (rbc.ua, February 26). However, it has thus far proved impossible to set up a new coalition to support a replacement for Mr. Yatsenyuk. The Poroshenko Bloc and the People’s Front have been negotiating a new coalition with all three former partners, Samopomich, Batkivshchyna and the Radical Party, which quit the coalition last year. However, no agreement has been reached thus far, as each of the three put forth conditions unacceptable to Messrs. Poroshenko and Yatsenyuk.
Batkivshchyna and the Radical Party insist on cutting taxes and domestic gas prices, which Ukraine’s creditors will not accept (Espresso.tv, March 4; Pravda.com.ua, March 29). Samopomich flatly refused to join a new coalition at a meeting with the Poroshenko Bloc’s leadership, on March 31, although it offered support to a new prime minister picked by the Poroshenko Bloc and People’s Front. But the Poroshenko Bloc and People’s Front do not want a government without majority support from the parliament, arguing that this would contradict the constitution (Lb.ua, March 31).
As far as Mr. Yatsenyuk’s successor is concerned, the most probable candidate is parliamentary speaker Volodymyr Groisman, who is from the Poroshenko camp. None of the five parties participating in the talks have thus far voiced strong objections against his candidacy. Last month, the Poroshenko Bloc offered the post of prime minister to Finance Minister Natalie Jaresko as well as the mayor of Lviv and leader of Samopomich, Andriy Sadovyi. However, People’s Front and Batkivshchyna reportedly rejected Ms. Jaresko (Lb.ua, March 21; Dsnews.ua, March 22), while Mr. Sadovyi declined the offer (Espreso.tv, March 15). Later on, Mr. Groisman announced that he was ready to replace Mr. Yatsenyuk (Pravda.com.ua, March 28).
Mr. Groisman, 38, is a former mayor of the central Ukrainian town of Vinnytsia, and he has always stood in Mr. Poroshenko’s political shadow. Thus, if the Poroshenko Bloc’s Mr. Groisman becomes the next prime minister, Mr. Poroshenko will strengthen his grip on power. This will be a risk to Ukraine’s still-weak democratic institutions, as Mr. Poroshenko apparently prefers to govern in a top-down fashion. Moreover, recent polls show that the Ukrainian president is becoming increasingly unpopular (Ukraine-elections.com.ua, accessed on April 1), which could provide an incentive to centralize his power as much as possible. Another weakness of Mr. Groisman is that Western creditors clearly prefer the U.S.-born Ms. Jaresko, who is relatively independent of domestic politics and has a good track record of furthering economic reforms and negotiating assistance from international financial institutions and governments.
If the Poroshenko Bloc and People’s Front fail to form a new coalition this spring, it will be incredibly difficult for the Yatsenyuk Cabinet to continue reforms without support from the legislature – and the West will be more likely to withhold financial support. This may prompt Mr. Poroshenko to risk early elections. As a last resort, the president may try to set up a coalition with the help of defectors from other factions, according to the most recent leaks from his camp (Censor.net.ua, March 31). However, one should recall that former President Viktor Yanukovych notably tried a similar strategy several years ago, which led to political corruption on a mass scale. The stakes for Ukraine are thus very high.
The article above is reprinted from Eurasia Daily Monitor with permission from its publisher, the Jamestown Foundation, www.jamestown.org.