The Aftermath
Revolutions normally begin after the headline events that launch them. As Ukraine moved into 2005, many in the old elite thought they had pulled off a great survival stunt on 8 December. The new government, however, proved surprisingly radical, determined not to let the dust settle before 2006. A political and economic clean-up was promised. Several key figures from the old regime fled, or died in suspicious circumstances. On the other hand, it seemed unlikely that Ukraine would stage some great cathartic trial, or ‘Truth and Reconciliation’ process, like South Africa after apartheid.
In Brussels in February, President Yushchenko declared that he wanted the Gongadze affair solved within a month or two. That seemed highly unlikely after the former interior minister, Yurii Kravchenko, shot himself on 4 March just hours before he was due to give evidence. Kravchenko's first shot went up through his chin and out; the second was more effective, straight through the right temple. His suicide note to his wife read: ‘My dear. I'm innocent. I'm sorry. I've become the victim in political intrigues of President Kuchma and his circle. I'm leaving with a light heart. Farewell.’1 A few days before, the gangster Nesterov had been injured in a grenade attack at his ‘safe’ apartment. Oleksii Pukach, the other key suspect in the Gongadze affair, was reported to have fled to Israel. Kuchma himself was questioned, as was Lytvyn, though this was only cursory, as he still seemed too powerful to be investigated thoroughly. The trail of evidence seemed to stop with Kravchenko, although several of those who actually organised the murder were now in custody. Another apparent victim in June 2005 was Ihór Pluzhnykov, who owned 71 per cent of the Inter TV channel, and who died from a mystery illness at the age of 46 in a Czech health spa, allegedly poisoned for his willingness to move Inter away from the SDPU(o) to circles more sympathetic to the new authorities. Pluzhnykov voted the SDPU(o) line in parliament several times after his death, as his grief-stricken colleagues used his electronic voting card.
The new authorities barely mentioned the Pandora's Box of the remaining Melnychenko tapes. Melnychenko, meanwhile, was losing credibility through his entanglement with Berezovskii, who sought to use the tapes to lever himself into political influence in Kiev, and through stories alleging that Melnychenko had tried to sell the recordings elsewhere. In April 2005 Berezovskii threatened to present his version of the tapes, but was alleged to have sought out ‘conversations of Kuchma with Yushchenko and Tymoshenko, in which they look much worse than they claim to be’,2 and to have attempted to shed better light on Kuchma or anybody else who might pay him.3 Yushchenko's poisoning continued to be investigated, but again with only underlings in the dragnet.
It seemed more likely that several members of the Zoriany team would – or should – end up in jail. In February 2005, a libel case filed by Medvedchuk against Rybachuk for ‘exposing’ the Zoriany tapes was thrown out by a Kiev court. In April, prosecutors reopened the investigation into the death of Viacheslav Chornovil in 1999. By spring 2005, Serhii Kivalov, former head of the CEC, former oligarch, Ihor Bakai, former interior minister, Mykola Bilokon, former Sumy governor, Volodymyr Shcherban, and former Odesa mayor, Ruslan Bodelan, were all on the run. Leonid Kuchma, Serhii Tihipko and Rinat Akhmetov all went on long holidays, during which they no doubt shared their critics' thoughts about whether they should return. The likes of Viktor Medvedchuk continued to brazen it out.
Busy Bankivska
As well as covering its back over the Gongadze affair, the outgoing administration (which in Ukrainian is often referred to by its location, on Bankivska, ‘Bank’, Street, in the same building that once housed the Central Committee of the Communist Party of Ukraine) persuaded Yanukovych to initiate a lengthy appeals process, while they settled last-minute accounts and destroyed as many documents as they could. The election observer mission from Russia and the CIS, which had noticed nothing untoward in the previous two rounds, now found that pro-Yushchenko leaflets and all-things orange were now everywhere on election day. Yanukovych's appeal was undermined not by its triviality, however, but by its sheer size, which was obviously designed with delay in mind. Yanukovych's team submitted no less than 621 volumes of printed documents and 233 audio and video cassettes.4 Many of the complaints they made were identical to one another. Yushchenko would not be officially inaugurated until 23 January.
Meanwhile, Yushchenko complained that the outgoing powers were organising a flurry of ‘barter deals in the energy sector, reimbursing VAT to structures close to Kuchma–Yanukovych, dispensing them licenses, forming retrospective privatisation agreements, setting up fictitious joint enterprises for undertaking questionable financial operations and so on’,5 such as doling out long-term leases on lucrative commercial buildings in Kiev and entire enterprises elsewhere. Ihor Bakai helped transfer ownership of Kuchma's favourite winter dacha in the Carpathian mountains to an offshore company, even though it was owned by the state.6 Brezhnev's old Crimean dacha Hlitsyria (Wisteria) was sold to the Russians via a children's charity. In total, Bakai was involved in suspect transfers – including that of the Dnipro Hotel in Kiev to ‘Mad Max’, Kurochkin for UAH92 million ($18 million) – allegedly amounting to UAH319 million (about $60 million).7 Bakai fled to Russia. The outgoing presidential administration was accused of issuing two hundred passports with aliases for other members of the old regime. One and a third billion dollars left the country in November and December. On 15 December, Medvedchuk made a secret flight to St Petersburg,8 but this seems only to have been to inform Putin that the game was up. Several of Ukraine's most popular sanatoria were also disposed of. Bakai also specialised in decrees that changed investment conditions after sale; i.e. that reduced or eliminated the amount that buyers had promised to pump into their new purchases.9 In March the new finance minister, Viktor Pynzenyk, accused the old authorities of hiding UAH17 billion ($3.2 billion) in budget funds. Several huge projects had been allegedly plundered, at least in part, including $700 million for the new Kiev bridge over the river Dnipro, $480 million for rebuilding the Kiev–Odesa highway, and a $107 million credit to Kuchma's old rocket factory, Pivdenmash.10
Another complex scheme involved the Russian energy giant Gazprom, which used to organise the export of gas from Turkmenistan to Ukraine. From December 2003, however, it seemed complicit in the creation of fictitious companies to provide nominal ‘transport services’ in return for hundreds of millions of dollars. First was Eural Trans Gas, which allegedly divided its cut of 13.7 billion cubic metres as follows: 50 per cent to Gazprom, 30 per cent to Oil and Gas of Ukraine and 20 per cent to the mobster Semion Mogilevich. Its replacement, RosUkrEnergo, was half-owned by Gazprombank and by ‘Raiffeissen Investment AG’, with the latter again allegedly serving as a front for Ukrainian oligarchs such as Ihor Bakai and Yurii Boiko. Despite the lost revenue, Russia allowed the scheme to continue throughout 2004 to fund Yanukovych's campaign. Eural Trans Gas admitted a gross profit of $220 million. Other estimates were twice as high, as gas supplied by Turkmenistan at $44 per thousand cubic metres could be resold in Central Europe for $119 or more. Money was also siphoned out of Ukrmorport (the State seaports agency) and Ukravtodor (the highways agency).
Kuchma finally accepted Yanukovych's resignation as prime minister on 5 January, but replaced him with the equally controversial Mykola Azarov, whose sole significant act in office was to steer through Kuchma's ‘retirement package’ on 19 January. Azarov secured Kuchma the right to continue drawing a full presidential salary rather than pension (with index-linking potential), to use state dacha number 72 and its staff, as well as providing him with two cars and four drivers, free travel (except taxis, which he hardly seemed likely to need), free medical care for himself and his wife, half off his electricity bill (a particularly curmudgeonly demand), and an adviser and two assistants, all of which were to be paid for from the state budget for the rest of his life. This was in addition to the three-storey building for his ‘Ukraine’ Foundation which had already been provided by the state.11 Not surprisingly, the new government was soon trying to undo this overly-generous offer.
Maintaining Momentum
On the other side of the fence, the role of conscience of the revolution was initially shared by Tymoshenko and Pora. Roman Bezsmertnyi, the camp ‘manager’ on the Maidan, thought the protestors could disperse after the second version of the second round on 26 December, but Tymoshenko encouraged them to stay on until the inauguration (and was threatening to bring them back by March). Three trucks and a minivan arrived to gee up the remainder on 15 January, but they stayed put. Bezsmertnyi accused Tymoshenko of ‘blackmail’.12 More serious by far was the leaking of the secret part of the ‘Force of the People’ agreement signed by Tymoshenko and Yushchenko back in July 2004 (see plate 22). Clause one of the agreement promised Tymoshenko first shot at the premiership, and not just as a token gesture. Yushchenko would use the ‘force of his personal moral authority’ to ensure that Our Ukraine deputies would join the Tymoshenko bloc to support her candidacy ‘in full’. Clause two promised that a precise 55 per cent of government posts would go to Our Ukraine and 23 per cent to the Tymoshenko bloc (the Socialists were not party to the agreement); clause three stated that the remaining 22 per cent ‘is reserved … for securing the formation of a new parliamentary majority’, that is, for distributing to any new allies from the old regime. Clause seven promised that the two sides would decide ‘together’ how to ‘normalise the situation in the electronic mass-media market’. Most interestingly, clause eight of the deal promised a big purge of the old guard bureaucracy and that the two parties to the ‘Coalition will confirm the securing of the regions [to Kiev] with the leaders of the political and staff structures of the Coalition’.13 When the new government was drawn up in February, despite several predictions to the contrary, Yushchenko was not forced to include any of the more odious figures of the Kuchma era. He had his doubts about Tymoshenko, however.
Come January, Tymoshenko was busy shafting her rivals for the premiership with old-style methods. Petro Poroshenko's candidacy was undermined by stories about his links with Mykola Azarov, an old Donetsk kingpin, and by a ‘special operation’, which made out that he was trying to bring back the old guard into the new government. Poroshenko's invitation to Azarov to visit the Maidan was a big mistake. According to the gadfly journalist Kost Bondarenko, himself something of a hired gun, Poroshenko had talked secretly with Kuchma ‘at the height of the Orange Revolution’, who had offered him the premiership and the backing of the necessary ‘majority’ factions, if he backed the constitutional reform package – as indeed happened on 8 December.14 However, this may all have been black PR, or may have been orchestrated by Tymoshenko, who declared on 4 January on Channel 5 that ‘people, who have business, should not pretend to a place in the [new] government’. Poroshenko was perfectly capable of responding in kind, and it was even rumoured that he and Tymoshenko were already spying on one another (once in government, Poroshenko controlled the National Security Council, while Tymoshenko took charge of the SBU – see below). Tymoshenko, however, still got the benefit of the doubt. Her nomination to the premiership on 24 January, Yushchenko's first full day in office, therefore elicited opposite reactions in Ukraine and in Russia and the West. Despite her business past and her still unexplained wealth, in Ukraine she was seen as more likely to take on the oligarchs than a safer choice such as Poroshenko or Anatolii Kinakh. Oleksandr Moroz was never a serious candidate, as Yushchenko's inner circle has never considered him a serious economist. Nevertheless, the decision to nominate Tymoshenko startled many, especially because it was made public on the day Yushchenko made his first bridge-building trip to Moscow.
This was all reminiscent of the politics ‘made in the corridor’ of old. Tymoshenko could still behave like a big Bolshevik in a blouse. The first scandal to hit the new government also raised the odd eyebrow, when the justice minister Roman Zvarych, who had been born in New York to Ukrainian refugees, was accused of self-interest in voting against a measure to ban oil re-export from Russia. (His wife, Svitlana, was deputy director of a company, Oil Transit, which was involved in such traffic to Slovakia.) Zvarych accused the politician-businessman Ihor Yeremeiev of creating the scandal by suggesting his wife transfer her oil to his company, Halychyna, so he could claim a dubious VAT refund. Both sides planted stories in the press and internet under pseudonyms. Zvarych clearly had enemies, because a second story appeared a month later (via an anonymous letter to www.pravda.com.ua) claiming that both his MA and PhD from Columbia were fictitious – or rather that he had failed to complete either.15 While fictitious degrees from Kiev or Moscow were common enough amongst politicians, telling less than the truth about ‘real’ degrees from abroad was thought to be a more serious offence – as was the appointment of a justice minister who had no law degree. A third story claimed Zvarych was actually a bigamist.
Several of the new government's measures were slipshod, and ran roughshod over various laws, even over the Constitution.16 Yushchenko continued Kuchma's habit of issuing secret decrees, producing forty in his first two months in office. More generally, much was done in haste, as neither the new president nor prime minister had a programme of action ready for inauguration day. This was no great sin, just further evidence that their victory had been a surprise to many.
Tymoshenko was also criticised for welcoming some strange allies, such as the veteran (presumed ex-) oligarch, Oleksandr Volkov, who was now drumming up support for her nomination in the Rada – though Yushchenko had insisted that no money should change hands. Pora, on the other hand, set itself up for a second phase in its activity by declaring itself the ‘Cerberus of Democracy’. It promised to collect a register of election promises, to help in the ‘objective investigation’ of the deaths of Gongadze and other journalists such as Ihor Aleksandrov (the director of TOR TV and Radio Company in Sloviansk, Donetsk, who was beaten to death with baseball bats in 2001), to draw up a list of those who had falsified the elections and a more general blacklist of their supporters, and to press for full redress for all those who had lost their jobs or otherwise suffered for opposition activity in the elections. Most ambitiously, Pora called for all state servants to be released and rehired on a competitive basis.17 (By June, 18,000 had actually been replaced.) A formal winding-up ceremony was held on 29 January in the Hotel Rus. Andrii Yusov was tasked with setting up a party on the basis of Yellow Pora, although some also talked of setting up some kind of international watchdog, tentatively entitled the Centre in Support of Weak Democracies. Allegedly, Pora had money left over from the winter. Significantly, it now posed as the party of young entrepreneurs, and of ‘small and medium’ business.
Out With the Old, In With the New?
On 4 February 2005, a day late, Tymoshenko was confirmed as Ukraine's new prime minister, with a record-breaking 373 votes out of 450. The Communist Party was the only significant force to vote against her, and the three deputies who broke ranks to vote for her were promptly expelled. The other two parts of the ‘new opposition’ largely backed Tymoshenko, with only five Social Democrats abstaining or absent (though these included Surkis and Satsiuk), and only eight abstentions from Yanukovych's Party of Regions. Fears that up to a third of Our Ukraine deputies might not back Tymoshenko – either because of concern at her courting of Yanukovych's supporters, or because they were annoyed at being jumped by the secret deal – were not borne out. Tymoshenko could magnanimously afford not to vote for herself.
As the July agreement had promised, the new government was a coalition, but with some new members. The Socialists were now on board, as was Anatolii Kinakh's mini-party, and one or two independents. The Socialists had three ministries: agriculture, interior, and science and education. The interior ministry guaranteed the party a high, potentially populist, profile, especially as the new minister was the youthful Yurii Lutsenko, who promised a big purge of personnel and tangible improvements in everyday life via a bonfire of controls and more honest traffic cops. Agriculture was a mixed blessing. The countryside was the party's natural fiefdom, but anything remotely resembling the market reform the sector so obviously needed would alienate large numbers of their supporters. Another Socialist, Valentyna Semeniuk, was given the powerful position of being in charge of the State Property Fund, that is, the privatisation committee. Semeniuk, who looked like a Soviet grandmother, was actually a Communist deputy until 1995 and had been a staunch opponent of all privatisation in the past – which raised interesting questions about the new government's commitment to reprivatisation (see below).
Tymoshenko was prime minister, but her namesake bloc had few other prizes, though Tymoshenko made her mark in the ‘force’ ministries, placing a civilian intellectual, Anatolii Hrytsenko, at defence, and close ally Oleksandr Turchynov as head of the SBU. In his previous job as head of the Razumkov Centre, Ukraine's premier intellectual think-tank, Hrytsenko had been an articulate advocate of defence modernisation and rapprochement with NATO. Turchynov would ask difficult questions both about the Yushchenko poisoning and about the SBU's attempts to whitewash its role in the Orange Revolution. But the clearest sign of the times, and of Tymoshenko's working methods, was the appointment of Mykola Syvulskyi, who had been arrested when working for Tymoshenko back in 1998 (see page 21), as Chief of the Auditing and Inspection Commission – in other words as Tymoshenko's hired gun to clean up corruption in government and state industry. Oksana Bilozir at Culture was part of Tymoshenko's choice, part glamour rival.
Yushchenko's supporters, on the other hand, monopolised the four powerful deputy premierships. Anatolii Kinakh, Yushchenko's successor as prime minister from 2001 to 2002, represented the Party of Industrialists and Enterprise Bosses, and was in charge of maintaining links with industry while simultaneously delivering the new clean-up message. Yushchenko's faithful servant, Oleh Rybachuk, led a powerful new post dedicated to ‘European Integration’. This position was so powerful, in fact, that although Borys Tarasiuk became foreign minister as expected, he was somewhat peeved to be subordinated to Rybachuk, who was to lead a drive to upgrade relations with the EU (though Rybackuk's enemies soon responded by ignoring the drive). Mykola Tomenko was deputy premier for humanitarian affairs – that is, the sensitive area of mass media relations. Tomenko had been head of media relations for Kiev city council from February 2000 to March 2001, during which period he had been distinctly proactive, launching one brand-new paper, Hazeta po-Kyivsky, and changing the format of two older papers, Khreshchatyk and Vechirnii Kyïv. (The latter was changed twice.) After 2002, he served as head on the Rada's committee of freedom of speech and the mass media. As so much of the media was hostile to Yushchenko and Tymoshenko, critics predicted that the old system of temnyky (weekly orders on news management) would be replaced by ‘Tomennyky’, and that maintaining media freedom would be a key test. The appointment of Taras Stetskiv, a professional politician with no media experience, to head the national TV company raised a few eyebrows. On the whole, however, the government planned to proceed by morphing the existing UT channels into a new public service broadcaster, a ‘Ukrainian BBC’, rather than by unleashing some kind of monopoly commission against its opponents' channels. Several papers, on the other hand, seemed likely to fold, as they had been run as loss-making political projects by various oligarchs. Lastly, Tymoshenko's foe, Roman Bezsmertnyi, was made deputy premier in charge of the difficult job of administrative reform.
President Yushchenko declared that his new government ‘will not steal’ and that business would be kept out of politics. Ukraine was still not the West, however, and new ministers with business interests were not exactly expected to set up blind trusts to run their affairs. Nevertheless, in addition to Tymoshenko, with her often-questioned past, all of Our Ukraine's key financiers had key jobs. Petro Poroshenko was made head of the National Security and Defence Council on the same day Tymoshenko was appointed premier, though it was unclear whether he had relinquished control of any of his substantial interests. Davyd Zhvaniia was made minister for emergency situations. The most obvious potential conflict of interest concerned Yevhen Chervonenko, who ran a transport business, but now also headed a reduced transport ministry that had been a hot-bed of corruption in the past. Volodymyr Shandra became minister for industrial policy, while Yurii Nedashivskyi, an ally of Zhvaniia's, headed Enerhoatom, Ukraine's atomic energy industry.
All eyes were on whether the ‘new oligarchs’ would resist the temptation to make good the undoubted losses their businesses had suffered over the past two to three years. Outside the government, Konstantin Grigorishin was pressing for the return of ‘his’ oblenergos. Technically, if this were to be effected, it would not count as reprivatisation, as Grigorishin was still the majority shareholder. Viktor Medvedchuk, the cuckoo in this particular nest, was the one sending in the security guards, to create the appearance of a scandal and hold on to his ill-gotten gains. Initial signs overall were mixed. There may not have been a new reign of universal virtue, but there was a potential critical mass of people prepared to play by the rules.
Petro Poroshenko signalled his dissatisfaction that few of his supporters had posts, but he was given considerable power at the National Security Council, including control over issues that had little to do with security, such as the judiciary and auditing other government departments, as well as a big say in personnel. He even interfered in foreign policy, devising a ham-fisted plan to settle the separatist conflict in Moldova, which the Moldovan authorities initially chucked straight in the bin (see page 196). He was also able to build himself a mini-empire of four governors in and around his native Vinnytsia. In general, however, Yushchenko's gubernatorial appointments were bold; nearly all the new men were representatives of the parties in the Kiev coalition rather than the local powers-that-be, with only a few Lytvyn supporters as handovers from the Kuchma era. Yushchenko and Tymoshenko had given a clear signal that they would not tolerate the so-called ‘bureaucratic separatism’ that made the headlines in December.
Radicals were kept away from the key education and culture ministries, to allay fears of forcible Ukrainianisation amongst former Yanukovych voters. On the other hand, the most striking feature of the new government was that it contained no major politician from the east. Although Tymoshenko, Rybachuk, Kinakh et al. were all born in the east, they no longer represented it politically. Most of the twenty-three new ministers were from central Ukraine, and only four were from the west. The new government was also extremely youthful, with an average age of forty-four. Ukraine was now promised the elite turnover it had missed out on in 1991.
Early Steps
Yushchenko had balanced his allies with skill, which was at least better than Kuchma's habit of balancing the clans. Although Tymoshenko was prime minister, the overall balance within the government was towards Our Ukraine's pragmatic business wing. In contrast to her stint as deputy prime minister in 1999 to 2001, Tymoshenko had little power over the economy. Her economic approach remained instinctively populist, however, and there were soon tensions within the government.
The first of these occurred over the so-called ‘reprivatisation’ issue. Hundreds of enterprises had been sold in controversial fashion under Kuchma. Yushchenko had criticised the way this had been done, rather than the fact that it was done, and had therefore called not for them to be renationalised, but for the state first to buy them back and then to arrange for resale via open competition and a fair price. The new Cabinet signalled its radical intent by immediately ruling for a complete reprivatisation of the most controversial recent example, the giant steel mill at Kryvorizhstal, which had been sold for half-price ($800 million, despite a foreign offer of $1.5 billion) to leading oligarchs Viktor Pinchuk and Rinat Akhmetov during the election campaign, rather than simply demanding a higher payment from both. Tymoshenko talked of ‘three thousand’ reprivatisations, but this soon turned out to be rhetoric for domestic consumption. The actual list was likely to be much closer to Yushchenko's alternative suggestion of ‘thirty’, though the threat of retrospective justice taking precedence over property rights still caused jitters amongst potential investors in the West. According to one leading commentator, the ‘winners are not strong enough to start a major war of redistribution’.18 Oleh Rybachuk promised that there would be no replay of the notorious Yukos affair in Russia (Yushchenko took offence in Moscow when Putin tried to claim both were anti-oligarch crusaders). All cases would go through the courts and would involve full repayment first. Rybachuk even intimated that the eventual list would include some cases involving businessmen now on the government's side. The list's appearance was constantly delayed, however. On 27 April, Yushchenko showed his frustration by demanding the Cabinet publish it within ten days. They didn't. But a list of twenty-nine companies was leaked in May, which included Kryvorizhstal and some other infamous cases such as Rosava and Oranta, which was one of four companies that were Russian-owned, the others being Zaporizhzhia and Mykolaïv Aluminium, and Ukraine's largest petrochemical company, Lukor.
If reprivatisation were to be confined to a few high-profile cases, as seemed likely, the old oligarchs might not lose too much. It was even possible that Pinchuk and Akhmetov might be able to buy Kryvorizhstal again, if they agreed to pay something over $1.5 billion for it. There was an argument that their old assets might actually be worth more in the long term, with World Trade Organisation (WTO) membership and the EU opening some trade doors to the ‘new Ukraine’. The various groups faced very different prospects, however. Pinchuk had been trying to advertise his new respectability for some time, and the SDPU(o) empire was likely to collapse, so the key question was about the future in Donetsk. The Donetsk clan's main hidden weakness was that its export profits were dependent on subsidised inputs of coal and electricity, although it was highly unlikely that the new government would touch these before the 2006 elections. Its main hidden strength was its international ambition. The Akhmetov group already had business interests in west Ukraine and was seeking to expand in Poland (see page 139) and Hungary, where the IUD had bought the Dunaferr metallurgical plant in December 2003 and DAM steel in July 2004, in an attempt to duck under the EU tariff wall. The government claimed there was no witch-hunt against oligarchs in general. On the other hand, it was claimed that Akhmetov was milking his businesses for dividends and that Pinchuk was preparing a flash sale including his Ukrsotsbank. It was also rumoured that the Kharkiv group had put Ukrsibbank up for sale. This could be a sign either of distress, or of the need for cash in the reprivatisation process.19
The new Cabinet also faced difficulties in the wider economy. It soon trumpeted its successes in raising taxes and customs duties, but there were some signs of serious budgetary deterioration, with UAH2.1 billion in domestic borrowing in February alone, half the planned amount for the whole year.20 The 2005 budget passed in March was blatantly populist, with a 50 per cent increase in welfare spending and in public sector wages, back-dated to the start of the year, including a trademark Tymoshenko measure providing a tenfold increase in payments to new mothers, UAH3,384 at birth and UAH5,113 in the next year (some $1,500 in total, which would be thought generous in some parts of the West). Tymoshenko argued that implementing Yanukovych's campaign promises as well as Yushchenko's was a necessary bridge-building measure with east Ukraine. Inflation, however, was already 12.3 per cent by the end of 2004. The new government also faced sharply rising fuel prices, which Yanukovych's PR machine had warned would happen in the autumn, safe in the knowledge that Russian exporters had agreed to forgo following rapidly rising world crude prices upwards until the election was over. In January and February, as winter bit, they went sharply up. Tymoshenko raged at collusive ‘price-fixing’ and in April tried to cap fuel prices. It was only possible to do so by allowing the exchange rate to appreciate from UAH5.19 to UAH5.05 to the dollar, so as to cancel out rising import prices. Domestic dollar holdings took a theoretical hit of $250 million, much of which belonged to the new middle class.
The government sharply cut several taxes, including VAT from 20 to 15 per cent, gambling that it could close the gap with rising expenditure via a revenue surge as businesses moved out of the black economy. Sensibly, its projected reprivatisation revenues remained small, at UAH6.75 billion ($1.2 billion). On the other hand, the government was determined to scrap all tax privileges, which it estimated had grown under Kuchma (or grown again since Yushchenko had been ousted as prime minister) to cost the economy UAH8.7 billion ($1.55 billion) annually. Tymoshenko also ordered an audit of all the state businesses under new management, such as Oil and Gas of Ukraine after Bakai, the railways after Kirpa and Ukrtelekom after the Zoriany team. She clearly hoped money could be saved if these sieves could be prevented from leaking. This was obviously an election budget, the success of which depended on whether the projected revolution in business culture turned out as promised, particularly as some businesses were being hit pretty hard. Tough measures, whether cuts in social subsidies or coal subsidies, were not on the agenda until the election was over.
East and West
Ukraine's underlying linguistic and regional divisions are real enough, if latent. I gained a certain notoriety in the 1990s for pointing this out.21 The divisions may have been artificially brought to the fore in 2004, but there is no disputing the fact that they were dramatically apparent in all three rounds of the election, even if it seemed likely they might subside again thereafter. The new government contained few real Ukrainian nationalists. In fact, Yushchenko's strategy for the 2006 election seemed to rely on his new centrist mega-party, allowing the nationalists to run on their own. On the other hand, the new government contained no real easterners. Several of his new governors in the east were replaced within months, most notably Lytvyn's close ally Serhii Kasianov in Dnipropetrovsk. Yushchenko also faced problems in Zaporizhzhia, Poltava, Transcarpathia and Chernivtsi. Yushchenko's first post-election visit to the east was for a speech in Donetsk on 10 February 2005. His all-guns-blazing assault on local corruption and those who had disrupted his campaign visit in November 2003, when posters depicting him giving a Nazi salute had been put up, built no bridges.22 (In contrast, when Tymoshenko had appeared on the Donetsk-based Ukraïna TV channel in December she had worn the orange T-shirt of the local club Shakhtar.)
It was widely assumed that Yushchenko's reception in 2003 had been organised by Borys Kolesnykov, chair of Donetsk council and local head of Yanukovych's party, Regions of Ukraine.23 It was often said in the Donbas that Akhmetov looked after economics, Yanukovych looked after politics and that Kolesnykov took care of the ‘other stuff’. In other words, he was a racketeer. In April 2005, Kolesnykov was arrested, but there was confusion over what he was actually charged with. According to one version, it was for extorting shares from Donetsk's largest multi-storey shopping centre, ‘White Swan’. According to another, he had personally ordered three assassination attempts. According to a third, it was for his central involvement in the ‘separatism case’, i.e. for helping to organise the December 2004 meeting at Severodonetsk. There were certainly legitimate suspicions that Yushchenko bore a grudge against Kolesnykov.
The former governor of Dnipropetrovsk turned chair of the local council, Mykola Shvets, was also taken in for questioning in April over the irregular finances of the Tavria resort complex on the Crimea coast. Then the head of the Crimean cabinet of ministers, Serhii Kunitsyn, was forced out, allegedly because of the dossier that the SBU had quietly placed in front of him in private. A local court overturned the 2002 election of alleged arms smuggler Ruslan Bodelan as mayor of Odesa (he was supposedly involved in illicit traffic to the ‘Dnister Republic’ and with the neftemafiia, or local ‘oil mafia’), and replaced him with Eduard Hurvits, who leant towards Our Ukraine but also had alleged links to organised crime. Former Sumy governor, Volodymyr Shcherban, who had left a trail of corruption throughout his various jobs in east Ukraine, was charged with extortion. Former Kharkiv governor, Yevhen Kushnariov, was also in the firing line, and Viktor Diadchenko, former governor of Transcarpathia, was charged with faking the result in the controversial Mukachevo election in April 2004.
Clearly, a higher proportion of investigations were against politicians and businessmen based in the east than against those from other parts of Ukraine. Hryhorii Surkis was accused of a bizarre transfer of UAH6 million from the football club Dynamo Kiev to Kuchma's charitable fund, but he was almost an honorary easterner. Optimists claimed that a cleansing of the stables was a necessary condition for the rebirth of democracy in the east, and that ‘protest’ rallies in support of the victims were once again artificial, carefully-costed affairs. On the other hand, the arrest campaign gifted the old guard the kind of propaganda that could keep resentments high. Oleksandr Yefremov, the former governor of Luhansk, was hauled in for questioning over the ‘separatism’ saga, but it was far from clear that arrests were the best way to deal with what was basically a political issue. Crucially, the campaign, and the fact that it seemed to be orchestrated, cast doubt on the independence of the new legal team. It was also not yet accompanied by any symbolic concessions to east Ukraine, particularly as regards language policy and relations with Russia. Yushchenko was widely reported to have drawn up a decree ‘On the Protection of Citizens' Rights to use the Russian Language’, but it remained in his desk. ‘Exporting’ democracy and civil society eastwards after 2004 might prove no less difficult than ‘exporting’ the Ukrainian language eastwards after 1991.
2006
If the new authorities could consolidate their gains at the Rada elections due in 2006, then their slogan of ‘1 + 5’ years of stable progress might become reality. One option was for the Yushchenko camp to create a single party, but every part of the Our Ukraine coalition wanted to be its nucleus. The parties with stronger organisations were reluctant to stand them down. Running several parties would satisfy all ambitions but hamper the main cause, which was to maximise Yushchenko's coat-tails effect. He could only anoint one vehicle. The dream scenario would be a broad coalition with Tymoshenko at number one, and 40 per cent of the vote. Step one was the creation of a pro-presidential super-party on 4 March, dubbed People's Union – Our Ukraine, organised by Bezsmertnyi. Unlike Yeltsin and both previous Ukrainian presidents, Kravchuk and Kuchma, Yushchenko agreed to be the honorary head of the new party. It reflected the balance of power in the new government, so the more nationalist groups such as Rukh and the People's Party seemed likely to stay out. Moving to a more centrist position was obviously sensible, especially with most of the rival centrist parties who once backed Yanukovych imploding so spectacularly. Whether Yushchenko was allying with the right centrists was another matter. Yushchenko let it be known that the new vehicle would need two stabilisers, Tymoshenko on one side and Lytvyn's People's Party on the other. Lytvyn, despite being the most questionable hangover from the Kuchma period, was allowed to sit on a parliamentary report into the Gongadze affair. The People's Party's head in the Rada was Ihor Yeremeiev, with whom justice minister Roman Zvarych had recently crossed swords. There were murmurs that the new mega party's leaders, Bezsmertnyi, Yekhanurov and Poroshenko, were rather too old guard, and even that it had begun to act as ‘the party of power’ rather than a ‘party in power’. Petro Oliinyk, the new governor of Lviv oblast, had, for example, ‘encouraged’ local bureaucrats to join. Pora openly mocked the new party as ‘For A United Ukraine, Mark 2’.
In part, the new party was designed to compete with Tymoshenko's rising popularity, or to lock her into a common front, but it was an open question whether she would eventually appear on its list. Tymoshenko was obviously on the way up – even numerically. In 2002, Our Ukraine won five times more seats than the Tymoshenko bloc. The secret part of the July 2004 agreement set a ratio of 55 to 23 per cent; the negotiations before the formation of the 2005 government were based on a formula of 50 per cent to Our Ukraine, 25 to BYuT and 25 per cent to the Socialists. While Yushchenko's supporters talked of a minimum of 30 per cent in 2006, Tymoshenko's team were certain she could now win 20 per cent. Tymoshenko's bloc was also rapidly re-expanding in the Rada, with several surprise recruits, including Oleksandr Abdullin, a colleague of Tymoshenko's old rival, Ihor Bakai, and Oleh Lukashuk from the SDPU(o). In May she swallowed the ‘Union’ group whole, and in June she took on board the notorious businessman-fixer-politician Vasyl Khmelnytskyi, who had financed the fake ‘Green’ Party in 1998 and the fake ‘Women’ Party in 2002. Professional oppositionist Stepan Khmara flounced out of the bloc in claimed disgust. Other recruits seemed attracted by Tymoshenko's political dynamism. Lev Biriuk, who had been number 76 on the original Our Ukraine list in 2002, was promoted to a vacant seat after (most of) the new Our Ukraine ministers resigned their seats and defected to Tymoshenko within days.
Tymoshenko was also now the ironic beneficiary of the constitutional reform package. Whispers that maybe it should not be implemented after all now came mainly from the presidential camp. Tymoshenko had lodged an appeal against it with the Constitutional Court back in December, and some now talked of calling a referendum on the issue. Both leaders enjoyed high approval ratings. By March 2005, they were basically level-pegging. Yushchenko's balance of positive over negative ratings was + 39.5 per cent, Tymoshenko's was + 37.6 per cent, and the government's overall ratings had also gone up. An impressive 47.4 per cent considered the country was moving in the right direction, and only 21.1 per cent said it was heading in the wrong direction. This was a dramatic reversal of the situation just before the Orange Revolution in September 2004, when, despite record economic growth, only 26 per cent considered Ukraine to be on the right track, and 54 per cent described it as on the wrong track.24
Tymoshenko was also widely rumoured to be making a deal with the Donetsk clan. In any country other than Ukraine this would make no sense, but in Ukraine, each needed the other. Despite her colourful reputation, Tymoshenko needed money, though this time for campaigning, not for herself, and for their part, the Donetsk group still had ambitions in all-Ukrainian business and in the West. The most intriguing new governor was Vadym Chuprun in Donetsk, who had headed the local council in 1992–4, but, more importantly, had just served as ambassador to Turkmenistan. He was therefore link-man to do a deal with the energy interests in the region. As premier, Tymoshenko appeared to maintain a hands-off attitude to Akhmetov – at least it was apparent there would be no attempt to run down Ukraine's enormous coal subsidies before 2006.
The Socialists were likely to run on their own. Traditionally, they do well in central Ukraine, but it seemed that this time they were aiming at the relative vacuum in the east. Oleksandr Moroz introduced a bill in the Rada to upgrade the Russian language to a second official language, and in March 2005 made a bizarre trip to Moscow, where he made very strange bedfellows with the Russian nationalist party Rodina, signing a cooperation agreement to ‘promote the socialist ideal in both states’ (sic) with the party leader and Russian presidential hopeful Dmitrii Rogozin. There was even talk of the Socialists using the education ministry to make history textbooks reintroduce the Soviet term ‘Great Patriotic War’ for World War Two. Several leading Socialists were already itching to go into opposition, especially Moroz, who was not in government, solely because they could see no one else doing the job.
The Communists hoped to recover to something like the 12.7 per cent their Russian equivalents won in 2003, if not the 20 per cent they themselves won in 2002, but may have done themselves permanent damage by handing their electorate so passively over to Yanukovych in 2004. The SDPU(o) were in free-fall. Given the dynamics of a parliamentary election and the post-revolutionary realignment, it was most unlikely that there would be any east Ukrainian ‘front’ capable of capturing the 44 per cent Yanukovych won in the third round. Yanukovych himself was likely to be dumped as the Donetsk clan strove to reinvent itself, despite optimistically relabelling his website as www.ya2006.com.ua. Local political culture doesn't like losers. The Industrial Union of the Donbas (IUD) had already deserted him financially; Akhmetov was busy drawing in his horns, and plotting a relaunch with Andrii Kliuiev behind Yanukovych's back.25 Yanukovych's opposition ‘coalition’, launched on 13 April, again showed a disastrous preference for fake allies, including both fake leftists such as Vitrenko and Bazyliuk and fake rightists such as Korchynskyi, who would be inexplicable bedfellows in any non-virtual world. The Donbas, however, was the one Ukrainian region where the local machine seemed certain to survive, under whatever new label it chose. The short-term prospects for the old ‘Party of Regions’ remained good. Its polling rating of 20 per cent or just below, however, probably reflected east Ukrainians restating their preference from the 2004 elections, rather than its real long-term prospects.
Elsewhere in east and south Ukraine, local elites were already setting up a series of small regional parties with new ‘brand’ labels that were unlikely to ally with the Donetsk group. These included New Democracy (Kharkiv), Democratic Ukraine (Dnipropetrovsk, the old Labour Ukraine) and the People's Will (the old National-Democratic Party, NDP). The Rada chair, Lytvyn, had at one time seemed most likely to lead a coalition of the formerly powerful (the NDP et al.) and win something like the 11.8 per cent that For A United Ukraine won in 2002, but either this would now go to the new Yushchenko mega-party, or it was up for grabs. The one wild card was who would win the support of alienated east Ukrainian voters, of whom there were undoubtedly many.
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In short, there was every chance that the new mega-party might win a majority at the next elections. With Tymoshenko on board, it might win even a two-thirds' majority. The opposition was fragmenting. Many business groups were reluctant even to go into opposition, and the old guard was ineffective in its new role, stubbornly reluctant to abandon the methods that had lost them the 2004 election, though no less than the American National Democratic Institute promised to help Yanukovych operate more effectively as an opposition leader. The introduction of a fully proportional system for the first time in 2006 would over-reward the main parties with big chunks of the vote and punish the smaller fragments. Short-term circumstances favour Ukraine more than they had Yugoslavia–Serbia after 2000, whose own post-revolutionary tandem of Koštunica and Djindjic lasted barely two years. The great compromise made on 8 December might turn out not to be so important after all, but expectations of what can be achieved will only increase in the event of a second victory in 2006, and the balance of power between Yushchenko and Tymoshenko will undoubtedly change. It was not impossible to imagine Tymoshenko seeking a populist majority on her own, in alliances with the Socialists and others. A whispering campaign against her began as early as April 2005, but, given her popularity, the president would be foolish to allow her so easily into opposition.
On the other hand, the 2006 elections would undoubtedly be the last outing for the broad coalition that had coalesced by the end of 2004, made up of the old right, Yushchenko, Tymoshenko, the Socialists, the Lytvyn group and other defectors from the Kuchma regime, and all the various parties' respective business supporters, but this is perfectly normal. Like Solidarity in Poland or Sajudis in Lithuania, a broad civic coalition dedicated solely to a change of power cannot be expected to last forever; and a normal politics of ideological division will always eventually return to the surface.