European Affairs

Ukraine on the Political and Fiscal Brink     Print

The ruling government in Ukraine, hailed as the inheritors of the Maidan protests’ legacy, is now tottering in crisis mode after PM Arseniy Yatsenyuk’s bloc has lost the support of two parties in the ruling coalition and must seek out new partners in 30 days of face new elections. This follows President Petro Poroshenko’s earlier backing of an eventually unsuccessful effort to sack Yatsenyuk with a no-confidence vote in the Ukrainian legislature (Rada). 

At the same time billions of dollars in vital aid money necessary to keep Ukraine afloat are in jeopardy as Western sponsors grow impatient with the government’s lackluster efforts at battling corruption.

On February 10, the International Monetary Fund’s managing director, Christine Lagarde, expressed disappointment in Ukraine’s reform efforts and questioned whether a $40 billion aid package could still be justified: “Without a substantial new effort to invigorate governance reforms and fight corruption, it is hard to see how the IMF-supported program can continue and be successful,” Lagarde said. “Ukraine risks a return to the pattern of failed economic policies that has plagued its recent history. It is vital that Ukraine’s leadership acts now to put the country back on a promising path of reform.” Since October of last year, IMF officials have grown increasingly more concerned that any aid offered is destined to be stolen by government officials. The program assigned to Ukraine by the IMF has always hinged heavily upon economic and political reforms. The Ukraine’s economy has been contracting at an annual rate of 7%. It is widely accepted that, without IMF relief, the Ukrainian economy would crash.

Lagarde’s comments were likely triggered by the sudden resignation of the Minister of Economic Development and Trade Aivaras Abromavičius, regarded as an important member of the reform movement, on February 3. Abromavičius, a Lithuanian granted Ukrainian citizenship when he assumed office, was hired by the newly-elected regime in 2014 in recognition of his financial acumen. In a letter written by the ex-Economy Minister following his departure, he described the vested business interests still at work in Ukraine: “Neither I nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for those who, very much like the ‘old’ government, are trying to exercise control over the flow of public funds.” In December of last year, Abromavičius and his ministry seized control of the natural gas company NAK Naftogaz. Soon after this, according to the former Minister, corrupt government officials attempted to influence Naftogaz by installing their own cronies. Abromavičius accused MP Ihor Kononenko in particular, deputy head of Poroshenko’s bloc in Ukrainian parliament and sometimes described as the president’s “gray cardinal”, of this practice.

A statement by the Embassy of Sweden to Ukraine and signed by American Ambassador to Ukraine Geoffrey R. Pyatt, as well as Canadian ambassador Roman Waschuk, and Italian ambassador Fabrizio Romano,  showcased Western frustration with the resignation of Abromavičius.   “During the past year, Abromavičius and his professional team have made important strides -- implementing tough but necessary economic reforms to help stabilize Ukraine’s economy, root out endemic corruption, bring Ukraine into compliance with its IMF program obligations, and promote more openness and transparency in government,” said the statement. 

Another notable reformer, Deputy Prosecutor General Vitaliy Kasko, has also resigned. Citing similar reasons to Abromavičius, Kasko pins much of the blame on those who head the Prosecutor General’s office, namely Prosecutor General Viktor Shokin. The Prosecutor General’s office is concerned with criminal investigations of political officials. Shokin has widely been accused of sabotaging his own office and blocking any reform to Ukraine’s judiciary. Last year, he spoke out against an EU action plan to root out corruption – a prerequisite for the easing of EU visas -- and threatened to sue the Ukrainian Foreign Ministry when it criticized one of his nominations, Yury Hryshchenko, for the board that will select the prosecutor to head the National Anti-Corruption Bureau. Hryschenko is the boss of one of the infamous “diamond prosecutors” - two high-profile prosecutors arrested for accepting massive bribes. 

Ukrainian civic organization Transparency International Ukraine has said that Shokin is “personally responsible” for the country’s current failures with combatting corruption. Eighty-four percent of the local prosecutors Shokin has appointed, previously worked in the Yanukovych regime, making reform seem more like rotation than actual change. Speaking with Ukraine Today, Kasko stated that his relationship with Shokin soured after Kasko led the arrest of the diamond prosecutors. Kasko has long been a critic of Ukraine’s prosecutors, having once said, “Prosecutors are continuing to take a surprising amount of money. They are living like it is their last day on Earth.” Some Ukrainians reacted to Kasko’s resignation by gathering outside President Poroshenko’s mansion and demanding for Shokin’s resignation. 

Pressured by Poroshenko, Shokin resigned on February 16. 

On Monday, January 15, in an effort to appease international and domestic forces, Poroshenko called for the increasingly unpopular Prime Minister Arseniy Yatsenyuk to resign. In a statement released that day, the Ukrainian President said, “The tension between the government and the factions has become so high that it poses a threat to the coalition’s functioning.” The next step then, according to Poroshenko, should be a “total reload of the government.”  For some time now, Yatsenyuk has been a unpopular figure in Ukrainian politics, with an approval rating reportedly in low single digits. Accusations that he has blocked reform, either ignored or encouraged corruption, and is an enabler of the oligarchs who have ruled Ukraine since its independence from the Soviet Union have dogged the Prime Minister. The next day, Poroshenko’s bloc rushed for a vote of disapproval of the government’s performance. 

In a speech before the no confidence vote, he defended his record, pointing to successes, “Dear deputies, we now have a country with full state coffers, an armed Ukrainian army, written-off debts, and paid salaries and pensions.” The no confidence vote failed with only 194 of the necessary 226 required to remove the Prime Minister and cabinet. 

On February 17, former Prime Minister Yulia Tymoshenko pulled out of the governing coalition, taking the 19 seats of her party Fatherland. “We consider it inadmissible to be part of that pack, which has no chance because it doesn’t want to conduct reforms, protect Ukraine and renew our life,” Tymoshenko said. The next day, on February 18, the other small party in the ruling coalition, Samopomich (meaning “Self-Reliance”), withdrew its 26 members from the ruling coalition. Now Yatsenyuk is without a majority and must seek out partners in 30 days or else the legislature will be dissolved and new elections called.