Once dubbed Ukraine's 'hope for reform,' the Cabinet of Viktor Yushchenko is being paralyzed by infighting over how to reform the country's intractable energy sector
The government of Prime Minister Viktor Yushchenko was dubbed “Ukraine’s hope for reform” when it took office at the turn of the year. Now, just five months later, those hopes look to have been dashed. Mired in infighting, the government is also making enemies outside its ranks – in the country’s elite political and business circles.
The cause of the strife is the government’s attempts to reform the energy sector – a rich feeding trough for many of Ukraine’s businessmen cum politicians.
A near-constant, three-way fight between the deputy prime minister in charge of the energy sector, the fuel and energy minister, and the management of state oil and gas company Naftogaz Ukrainy, have stymied attempts to restructure the chaotic energy sector.
The situation in the sector has drawn criticism from outside of Ukraine as well, from the country’s principle creditors – the International Monetary Fund and the World Bank.
The rows between Energy Minister Serhy Tulub and his superior – Deputy Prime Minister Yulia Tymoshenko – plus President Leonid Kuchma’s public dressing down of Tymoshenko over the state of the energy sector, have placed Yushchenko in a difficult, and perhaps ultimately untenable, position.
“If [Yushchenko] fires [Tymoshenko], he automatically loses support of two factions in parliament – that’s nearly 60 people,” said lawmaker Oleksandr Volkov, an influential businessman and politician. “But he’ll have to do it eventually.”
Tymoshenko controls the 35-deputy Batkivshchyna faction, which is in alliance with Yury Kostenko’s 21-strong Rukh faction.
Tymoshenko’s party colleague, Oleksandr Turchynov, gave another reason why Yushchenko should hesitate before sacking Tymoshenko: If he moves her out of the line of fire, he could be the next target of the oligarchs’ ire.
More worryingly, Yushchenko appears to be losing the wholehearted support of the presidential administration: The prime minister’s name was conspicuously absent from the list of those invited to meet with Bill Clinton during the U.S. president’s visit to Ukraine on June 5. The list was drafted by presidential administration officials.
Meanwhile, President Kuchma has already moved to clip Tymoshenko’s wings, dismissing her as head of the supervisory council of Naftogaz Ukrainy, to which she was appointed earlier this year.
Turchynov, however, talked down the significance of the president’s actions. He said that all government officials would eventually be removed from the supervisory councils of large state enterprises.
Apparently regarding her position in the government more secure, Tymoshenko has firmly ruled out running for election to parliament on June 25 by-elections. Instead, her office chief, Mykola Syvulsky will run in a Kirovohrad constituency in her place. Syvulsky’s candidacy is also generating controversy, however: He is currently being investigated by the Prosecutor General’s office in two criminal cases related to United Energy Systems, a gas trading company that Tymoshenko headed from 1992 to 1997.
Meanwhile, another government official, Economy Minister Serhy Tyhypko, was registered in Pavlohrad, Dnipropetrovsk region. Speaking to a local TV station, Tyhypko said that he will be the government’s ambassador in parliament and will support Yushchenko’s reform efforts by voting for them.
Yushchenko himself presented Tyhpko’s move to the Rada as an effort to support the government:
“If there was a godfather in parliament who could represent both the ideology of the political majority and the ideology of the government’s practical actions, this would be wonderful,” he told Ukrainian News on May 26.
But others doubt that relations between the prime minister and his soon-to-be former economy minister are quite as rosy as their public comments suggest.
“Tyhypko is a man with brains, he understands that this government is far from being reformist. And he’s right that he’s running away the first, like a rat from a sinking ship,” Volkov said.
Volkov’s is not the only voice criticizing the government for ineffectiveness.
Kuchma on May 30 lashed out at the Cabinet for inactivity and lack of direction. He also downplayed government statements about increasing budget revenues.
“There’s no need to be euphoric that the budgetary revenues are 1.5 times more than last year’s, because it’s mainly the result of inclusion into the budget of the revenues that used to function separately, like the innovation fund, the social insurance fund, and other targetet non-budgetary funds,” he said.
In another blow to the government, Kuchma also said that he won’t sign an “unrealistic” new budget – especially if it’s based on the old tax system.
The government’s draft tax code is currently being examined by the Rada along with several alternative drafts. The government’s draft might still undergo drastic revision, deputies said.
Moreover, the government’s much-hyped promise to pay off pension debts this year and pay current wages in the state sector in full is looking more and more like a hasty, ill-conceived pledge.
However, the government remains optimistic, and says that the positive indicator of GDP growth – about 6 percent in the first quarter of 2000 – is the best argument on their side.
“Compare it to any period of Ukraine’s development – we’ve never had such growth,” said Natalya Zarudna, the prime minister’s spokeswoman.
