Ukraine faces challenges of coalition infighting, devolution

(Business New Europe – bne.eu – Sergei Kuznetsov in Kyiv – April 30, 2015)

While Western nations refuse to provide Ukraine with arms, preferring instead to financially drip-feed the country and maintain pressure on Russia with sanctions, Kyiv is facing several new challenges – in particular keeping the ruling coalition together at the same time as managing the thorny process of giving more power to the regions.

It appears that Kyiv faces the risk of finding itself sooner or later in the same situation as that during the presidency of the pro-EU Viktor Yushchenko, whose rule during 2005-2010 was overshadowed by the infighting with former prime minister Yulia Tymoshenko. This situation finally led to a loss of trust in the ruling elites by voters and foreign investors.

Recent statements by politicians in Kyiv haven’t helped matters. “We cannot afford any political instability. The parliamentary coalition should be united, coherent and effective,” Prime Minister Arseniy Yatsenyuk stated on April 22, conceding that the Rada (parliament) “demonstrates a certain turbulence”.

It is not surprising, therefore, that the issue of the unity of the five-party coalition – Yatsenyuk’s People’s Front, Petro Poroshenko Bloc, Self Reliance, Radical Party of Oleh Lyashko and Batkivshchyna – was one of the first questions addressed to the prime minister at the donor conference held in Kyiv on April 28, which was supposed to showcase the success of reforms in Ukraine to the country’s backers. “As President [Petro] Poroshenko already indicated, the key precondition for reforms is to stay united. Unity between the president, the government and all factions inside the coalition is a key precondition,” Yatsenyuk answered, adding that the participants of the coalition “definitely need [to show] political maturity”.

Alexei Ryabchyn, an MP who represents Tymoshenko’s Batkivshchyna (Fatherland) party, believes that the coalition will continue to stay united despite “some tensions” that have appeared between its members. “Sometimes there are different positions on some issues related to the country’s development agenda, but these differences are resolved through negotiation,” Ryabchyn tells bne IntelliNews.

On the other hand, Ryabchyn admits that, “there are certain elements of distrust” between the two major forces of the coalition – the political parties run by the president and prime minister. Speculation over possible discord between the country’s two most important politicians intensified after parliament made a decision recently to create a parliamentary task force to investigate possible corruption among the cabinet. A member of parliament representing Poroshenko’s party was among the initiators of this move.

Decentralisation

Among a long list of reforms that the authorities in Kyiv are committed to implementing is the fraught process of decentralisation at a time when a separatist war is going on in the east. According to the central government in Kyiv, Ukraine’s regions should, in particular, receive additional financial facilities for financing local needs. Plans to change the country’s political landscape are also on the table, according to the PM.

“We believe that the best pattern for Ukraine in implementing a real decentralisation is just to use Poland’s model. We are similar [countries], and if we adopt Poland’s model in Ukraine, this definitely will work. So, we expect that the parliament will pass the constitutional amendments in the nearest future, and we will devolve additional rights and responsibilities to the local authorities,” Yatsenyuk said during the donor conference.

But the decentralisation process is a minefield for Ukraine’s authorities for geopolitical reasons, given that Russia is trying to use Ukrainian constitutional reform to achieve some kind of autonomy for the breakaway Donbas region. Said Sergei Lavrov, Russia’s foreign minister, in December: “Ukrainians from all regions… should meet and discuss how these regions would elect their leaders; to agree on a system of distribution of taxes between the central and local authorities; on which language is preferred for a particular region; on which holidays they celebrate.”

However, such a plan would be unacceptable for Kyiv. Western backers are also opposed to Russian attempts to hijack the process for its own ends. “We have a very strong view that it is not Russia’s place to have any voice in this process. The decentralisation process is only to be owned by Ukrainians,” Jeffrey Payette, US ambassador to Ukraine, tells bne IntelliNews.

The diplomat underlines that Ukraine’s regions often already have strong self-governance and are ready “to get away from a Kyiv-centric political system”. In March, Ukraine’s parliament passed a bill that provides for special self-rule status to the parts of Donbas that are not under Kyiv’s central control.

Asked about the Donbas region, Payette says that, “the Minsk [agreements] provide for the kind of decentralisation law that the Rada has passed: an offer of a greater level of local autonomy than has ever been seen anywhere in the post-Soviet space. If the separatists want to be part of that, they should show the courage to test themselves at the ballot boxes, to be a part of the elections.”

Ghosts of war

This tough stance towards the status of Donbas could lead to a possible recommencement of hostilities in the east of the country between pro-Russian separatists and government forces. “Getting investors to a country at war with a nuclear power, Russia, is a very complicated task. And [Russian President Vladimir] Putin has a purpose in creating a situation whereby foreign investors do not want to come to Ukraine,” Yatsenyuk said on April 28.

And as long as private investors stay away from Ukraine, Kyiv is forced to rely on multinational institutions. According to the prime minister, up to $3bn will be channelled to the economy in 2015 by different multinational structures, including the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). “In total, we’ve provided about $450mn in assistance since the start of this crisis. In addition to a $1bn loan guarantee last year, another $1bn loan guarantee will be finalised in the coming days, and a further $1bn [will be provided] at the end of the year if Ukraine continues the path of reform,” Joe Biden, the US vice president, said in a video address to the participants of the donor conference on April 28.