Yatsenyuk leaves office with public
and international confidence in Ukrainian anti-corruption efforts at their
lowest points since the fall of Viktor Yanukovych in February 2014. His
resignation occurs just days after the explosive revelations of the Panama
Papers revealing Poroshenko’s establishment of an offshore tax haven company
and the Dutch public’s overwhelming rejection of an EU association agreement
with Ukraine.
Poroshenko and his new prime minister will face an uphill struggle to recapture the Ukrainian public’s confidence.
In order to regain the public’s trust, Poroshenko needs to embark on a radical
political transparency and austerity campaign. This will draw a stark contrast
between his polices and those of his rivals. It will also underscore that his
continued leadership gives Ukraine the best chance of achieving European
integration
Why Poroshenko needs to take a hardline stance on political transparency
Since the start of his tenure
as president, Poroshenko has faced criticism for his use of symbolic rather than
substantive measures to crack down on Ukraine’s endemic corruption problem. His
administration vowed to hold Yanukovych-era officials accountable for their
crimes and claimed to have prosecuted 2,702 former Ukrainian officials during
the first year of his presidency, but the most powerful elites still found
loopholes to escape justice.
Prosecutor General Viktor
Shokin’s resignation in February was welcomed by the United States as a
necessary step to restoring the Ukrainian public’s confidence in the justice
system. But overthrowing personnel will achieve little without a radical change
in Ukraine’s political culture that has fostered egregious corruption for
generations.
The latest revelations
shrouding Poroshenko’s presidency, the Panama Papers scandal, reaffirmed the
stagnant trajectory of Ukraine’s anti-corruption reform agenda. Transparency
International argues that Poroshenko’s establishment of an offshore company as
president without a public declaration violated the Ukrainian constitution.
Oleksiy Khmara, the executive director of the Ukrainian wing of the
anti-corruption watchdog, has urged Poroshenko to release a truthful electronic
declaration about his asset transfers.
Poroshenko has pledged to
crackdown on offshore investments but this appears hypocritical if he does not
provide transparency on his own assets. An immediate rectification of this
double standard is necessary if Poroshenko is to avoid politically divisive
impeachment proceedings that would cripple the Ukrainian government’s ability
to make progress on peace talks or economic rebuilding. Moreover, he needs to
articulate his plans to reform Ukrainian business practices, as high tax rates
and ineffective law enforcement incentivize the use of offshore tax havens by
oligarchs and business elites.
Once the current political
crisis is defused and the situation in eastern Ukraine becomes more stable,
Poroshenko should seriously consider holding earlier-than-expected
parliamentary elections. The campaign process will force Poroshenko to present
a fresh set of ideas to improve political transparency Ukrainian people, and
give Ukrainians a chance to express their opinions on the new political figures
replacing those who recently resigned.
New elections would also give
the Ukrainian public the opportunity to vote out members of the political
establishment who are actively obstructing reforms. The backlash from the
Panama Papers increases the likelihood that reform-minded politicians will
triumph in the next election cycle. And there is a clear empirical correlation
between new elections and inclination to reform. Anders Aslund noted in a
recent policy briefing for the Atlantic Council, that 54% of parliamentarians
elected in October 2014 had never sat in the Rada before. These
parliamentarians were largely reformist in their outlook, but the 46% with
extensive political experience were inclined to uphold the corrupt practices of
previous administrations.
Poroshenko’s critics regarded
the resignation of Aivaras Abromavicius, Ukraine’s minister of economy and trade, to be part of a concerted attempt to replace reform-minded ministers
with agents of the status quo. Holding early elections might be the only way to
convincingly dispel these politically toxic insinuations.
Why Poroshenko needs to stay true to his austerity agenda
In recent months, the lack of
substantive improvements in the rule of law and Kyiv’s struggles to devise a
credible plan to reduce Ukraine’s national debt, have dealt a blow to Ukraine’s
European aspirations. The Dutch public’s rejection of the Ukrainian EU
association agreement was a victory for right-wing populists who argue that the
protection of Ukraine is an economic and security burden that Europe should not
assume.
While Brussels’ initial
response to the Netherlands referendum has been sanguine, as the EU has pledged
to move forward with the offer of visa-free travel for Ukrainians, the question
of Ukraine’s future in Europe remains unresolved. In order to keep Ukraine on a
European integration trajectory, Poroshenko must reaffirm his unwavering
commitment to austerity and fiscal responsibility, even if the measures being
implemented are unpopular in the short-term. Future IMF loans and EU trade
deals depend on Ukraine’s modest uptick in economic productivity in 2016, being
accompanied by a credible debt reduction plan.
If Poroshenko stays true to
his austerity agenda, he will be able to weather the political backlash by
emphasizing that the economic policies advocated by opposition parties are
reckless and threatening to Ukraine’s European integration prospects. An
eventual parliamentary election campaign would allow him to unequivocally state
his position to the Ukrainian public.
Increased political
instability in Ukraine has caused populist and nationalist parties to become
more popular. But much of their rhetoric on corruption and the economy is
dubious and easy for Poroshenko to discredit. Odessa’s governor Mikhail
Saakashvili frequently rails against corruption in Ukraine, alleging that $5
billion is wasted by the government every year.
However, his claim that 40 percent of the corruption is concentrated in Ukrainian railways is inaccurate and his
populist demagoguery has not been matched by credible solutions to Ukraine’s
corruption crisis. Andriy Pivovarsky, minister of infrastructure, has even
alleged that Saakashvili’s rhetoric cost Ukraine hundreds of millions of
dollars in Western railway investments.
By taking a strong stance in
support of austerity measures, Poroshenko will eventually be able to regain the
grudging confidence of a disgruntled Ukrainian populace. As austerity measures
have led to pension cuts and a drastic upsurge in the price of gas, populist
platforms resisting these necessary policies have widespread popular appeal.
Rejecting austerity will
cause Ukraine to be isolated further from international creditors and lead the
EU to conclude that Ukraine is a fiscally irresponsible partner. European
integration is essential for Ukraine’s future prosperity, and Poroshenko will be
able to rally Ukrainians around this common cause, if he shows a greater
consistency of purpose than he has demonstrated until now.
Poroshenko’s legacy and the
future trajectory of Ukraine depend on his willingness to make hard choices in
this critical juncture of his presidency. If Poroshenko displays resolve that
he has so far lacked, Ukraine will move inexorably towards European integration
and an honorable peace with Russia. He will also likely be able to retain a
workable reform-minded coalition after the next parliamentary election cycle.
If Poroshenko backs down to political pressure, Ukraine could be plunged into a
period of prolonged instability and political polarization that could make
Kyiv’s European dream more illusory than ever.
