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This Week

KREMLIN ACID TEST FOR ORANGE UNITY

This month President Yushchenko and Prime Minister Tymoshenko will travel separately to Moscow for energy talks, with Russia threatening more cut-offs and price hikes if Ukraine dares follow through on threats to cut murky middlemen out of the trade and raise transit tariffs. The outcome of the 2009 presidential campaign may hinge on whether Ukraine’s two rival Orange leaders can put aside their energy policy differences and maintain a united front More

PROXY WAR OVER PRIVATISATION CHIEF

Valentyna Semenyuk appeared to be heading out of office last week following a move by the new government to replace her as head of the State Property Fund with a loyalist committed to the ambitious Tymoshenko privatisation programme. However, Semenyuk received a reprieve in the form of a Presidential decree as Viktor Yushchenko moved to reassert his authority over his erstwhile Orange ally as the power struggle between the two entered a new phase More

ITALY’S INTESA SANPAOLO TO BUY PRAVEX BANK FOR EUR 504 MILLION

Intesa Sanpaolo, an Italian banking group, announced last week that it had agreed to pay EUR 504 million for 100% of Pravex Bank, the Ukrainian bank controlled by the family of Kyiv Mayor Leonid Chernovetskiy. The deal is expected to be finalised in the coming months following approval by the Italian and Ukrainian authorities More

UKRAINE’S OUTSTANDING OPIC DEBT: A BARRIER TO FOREIGN INVESTMENT

Amid all the fanfare that has accompanied the signing of a protocol which will bring Ukraine WTO membership, it is worth noting that a disagreement over a relatively small amount of money has made it impossible for Ukraine to enjoy the benefits of an obscure but extremely important agency of the United States government, the Overseas Private Investment Corporation (OPIC) More
 

News

KREMLIN ACID TEST FOR ORANGE UNITY

This month President Yushchenko and Prime Minister Tymoshenko will travel separately to Moscow for energy talks, with Russia threatening more cut-offs and price hikes if Ukraine dares follow through on threats to cut murky middlemen out of the trade and raise transit tariffs. The outcome of the 2009 presidential campaign may hinge on whether Ukraine’s two rival Orange leaders can put aside their energy policy differences and maintain a united front

Ever since the results of the September 2007 elections became clear, attention has switched from the much-hyped power struggle between Viktor Yushchenko and his arch-nemesis Yanukovych towards the struggle for Orange ascendancy. This new battle pitches the reforming crusader Yulia Tymoshenko against the more statesman-like and compromising President. It is a finely posed confrontation - Tymoshenko has the popularity, Yushchenko the gravitas as head of state.

Constitutional changes have rendered the details of the power-sharing relationship between the two Orange leaders somewhat ambiguous, while the wafer-thin nature of their combined parliamentary majority has made close co-operation an absolute must.

The apparent love-hate relationship between Yushchenko and Tymoshenko has become the central theme in Ukrainian politics and the main threat to the country’s continued Euro-Atlantic integration. Both crave the mantle of Orange Revolution torch-bearer and both claim to be championing Ukrainian national interests while integrating the country into the world community. There is much to unite them ideologically, but as natural competitors for the same Orange electorate Tymoshenko and Yushchenko have been on a political collision course for some years now, and it is only a matter of time before one of the two emerges triumphant.


Divide and conquer tactics


This is just the kind of situation in which Ukraine has been so historically vulnerable, and one which Moscow has time and again proved itself more than capable of exploiting. As is so often the case in unequal international relationships and colonial conquests, the ability to divide and conquer has long been Russia’s trump card in dealings with Ukraine. The weapon of choice these days is of course gas and despite the constant Kremlin claims to the contrary, there is clearly a political aspect to the energy wars of recent years.

True to form, Yushchenko has responded to recent Russian threats by preaching moderation and compromise, while Tymoshenko has called for the removal of opaque middlemen and threatened to respond in kind to any Russian price rises with a transit price hike of her own.


Compromise or confrontation?


Yushchenko’s approach has garnered the lowest prices for Russian gas in the region but failed to secure greater energy independence. In short, his position is one of suggesting that it is in the country’s interest to accept the Russian subsidy and all that comes with it. Worse still, his opposition to the removal of Gazprom front structure RosUkrEnergo has left the President wide open to yet more accusations that he has a personal interest in maintaining the trade as it currently stands. A President with approval ratings in single digits can rarely be so bold.

With industry insiders on all sides stating that it is only a matter of time before Ukraine pays the full market price for its energy supplies, Tymoshenko’s uncompromising approach is likely to prove a bitter but nevertheless very necessary medicine. As Ukraine enters the WTO and seeks to compete internationally, the economy will need to move away from the era of dirt cheap energy supplies and wasteful consumption. Furthermore, the international community will likely back the Prime Minister in her crusade to introduce a level of transparency into the gas trade.


Orange civil war


Tymoshenko has publicly stated that she will only consider running for president in 2009 if Yushchenko doesn’t back her reformist drive. Once this month’s meetings in Moscow have run their course, it should be clear to everyone if the two are capable of co-operating and leading the country together, or whether a breach is inevitable.

If the answer is negative, then March will mark the unofficial start of a presidential election campaign that some would argue actually began many months ago. In the short term an Orange civil war would be a major destabilising factor, but ultimately it would open the way for a final decision and offer voters the chance to back the leader who they feel best represents the ideals for which they risked so much in 2004.

Peter Dickinson
Business Ukraine
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