Last week saw Anatoliy Kinakh emerge as the new Economy Minister. An established figure with Orange credentials close to President Viktor Yushchenko, his appointment marks another unexpected change in the government's composition as it vacillates between pure blue to a blend of blue and orange.
Kinakh enters his new office with an established track record: he served twice as First Deputy Prime Minister in 1999 and 2005. From 2001 to 2002 he headed the government between the premierships of Yushchenko and Yanukovych.
During the Orange Revolution he threw his political weight behind President Viktor Yushchenko and was rewarded with a post of First Deputy to Yuliya Tymoshenko. Following her dismissal he was made Secretary of the Council for National Security and Defence.
It is clear that the decision to dismiss Volodomyr Makukha as Minister of Economy was not based on results. It is difficult to criticise the performance of the economy under his stewardship and even Yanukovych, who is at loggerheads with the current government, praised the economic successes scored during Makukha's term.
A very political decision
The decision, therefore, was very much political. The Prime Minister needed an influential personality from the Orange camp "on side" as a possible curtain-raiser for a new Blue-Orange truce, despite the very publicly staged Orange reunion against the Yanukovych's government. As always, it is hard to say what is actually happening behind the scenes as political horse-trading continues.
The President however has reacted sharply to his former ally's switch, suggesting that Kinakh was acting independently. It would therefore seem that Yanukovych has scored a minor victory by dividing the Orange camp.
While political wrangling continues, the important question is the implication this change will have on economic policy.
Based on his past record, Kinakh's likely direction is hard to predict. Even after he was dismissed as prime minister in 2002 he was not subjected to heavy criticism as is common in Ukraine. Indeed, he made no obvious mistakes, but neither did he manage to champion or implement any radical ideas. For some this translates into lack of initiative, for others cautiousness and reluctance to take determined steps.
A more enigmatic figure
Although the newly appointed Minister of Economy has yet to make a policy statement, one thing is sure: in his role as the Head of the Ukrainian Union of Industrialists and Entrepreneurs he will be in favour of the recent government initiative to strengthen the role of state-owned industrial sector as is being done in Russia.
Several weeks ago Deputy Prime Minister Andriy Kluyev announced that the government will seek UAH 20 billion in commercial bank loans to channel them into various investment projects linked to state owned enterprises. The budget includes what is effectively a subsidy in excess of UAH 2 billion for these enterprises to service interest on these loans. Kinakh is perhaps the most suitable person to oversee this process.
Pessimists however fear he may favour large industrialists through for example attempts to influence the National Bank of Ukraine (NBU) in the areas of exchange rate and monetary policy. He could also choose to reinstate tax privileges for certain industries, cross-subsidisation through energy discounts to enterprises and even by extending direct subsidies to certain industries.
Optimists argue that Kinakh has always been his own man and does not succumb to pressure very easily. Moreover, he will undoubtedly have more influence on Prime Minister Yanukovych than his predecessor. If so, he could act as a balancing force and voice of reason within a government that has yet to articulate a coherent and determined economic policy.
