All the President’s Men in a Deja-vu Ukrainian Cabinet

A new pro-Yanukovych majority in parliament appointed its cabinet on March 11. Prime Minister, Mykola Azarov’s, cabinet, numbering 29 ministers, is the largest in Europe after Belarus. It looks very much like the cabinet of the then-Prime Minister Yanukovych in 2006-2007. Azarov’s cabinet is dominated by representatives of Yanukovych’s native Donetsk Region and by one party, Yanukovych’s Party of Regions (PRU). The communists and the centrists from Speaker Volodymyr Lytvyn’s bloc, who joined the PRU in a new parliamentary majority, are assigned only secondary roles. Most key ministers are either leading businessmen, or are linked to specific oligarchs. It will not be easy for a handful of reformers and technocrats in this cabinet to conduct badly needed reform.

The Russian-born Azarov, like Yanukovych, started his career in Donetsk. In the mid-1990’s he founded Ukraine’s tax service and was its first head. Azarov’s tax service was often used under the then-President Leonid Kuchma to muzzle free media and businesses linked to the opposition. As first deputy prime minister, and finance minister under Prime Minister Yanukovych in 2002-2004 and 2006-2007, Azarov was often criticized for his Soviet-style leadership and accused of stifling free enterprise. He is also one of the PRU’s founding fathers.

Azarov’s cabinet includes as many as seven deputy prime ministers, which is probably a record for Ukraine: six of them represent the PRU. These include Azarov’s first deputy, Andry Klyuyev, a businessman from Donetsk who served as deputy prime minister for energy in Yanukovych’s cabinets; Donetsk-based businessman Borys Kolesnykov, linked to the steel tycoon Rinat Akhmetov; Volodymyr Semynozhenko, who served as deputy prime minister in 1999-2001 and, like Azarov, was among the PRU’s founders; agricultural deputy prime minister, Viktor Slauta, who served in the same position in Yanukovych’s cabinets; and Viktor Tykhonov, a former chairman of Luhansk Region council, who was one of the organizers of the November 2004 Severodonetsk anti-Orange Revolution gathering by pro-Russian politicians. Azarov’s deputy for security, Volodymyr Syvkovych, is a businessman and a former KGB operative who, as chairman of the parliamentary committee which looked into former President Viktor Yushchenko’s 2004 mysterious poisoning, was the first to publicly question Yushchenko’s claims that he had been deliberately poisoned by his rivals (ProUA, March 11; Zerkalo Nedeli, March 13).

Among other key figures representing the PRU and its oligarchs are Industry Minister, Dmytro Kolesnykov, a protégé of Akhmetov; Fuel and Energy Minister, Yury Boyko, who served in the same position in 2006-2007 and made RosUkrEnergo, a joint venture of Gazprom and energy and chemical tycoon, Dmytro Firtash, the intermediary in gas trade with Russia; Ukrainian Security Service (SBU) Chief, Valery Khoroshkovsky, a media mogul linked to Firtash; Interior Minister Anatoly Mogilev, a former Crimean police chief known for conflicts with the indigenous Tatar population; and Foreign Minister, Kostyantyn Hryshchenko, the former Ambassador to Russia.

Deputy Prime Minister for the Economy, Serhy Tyhypko, the businessman who came third in the January presidential election with a 13 percent share of the vote, is probably the only dedicated reformer in Azarov’s cabinet. On the one hand he is a liberal who owes his popularity with the middle class to his economic reform program, while being a politician independent of the PRU and its oligarchs. Tyhypko is interested in pursuing market reforms, but he is also an obvious scapegoat should the reforms fail. Tyhypko was among the founders of Ukraine’s largest private bank, Privatbank, in the early 1990’s. His first post in government in 1997 was the same as now, and he was one of the very few liberal economists in several cabinets in the late 1990’s. He served as central bank governor in 2002-2004, and in 2004 he managed the headquarters of the then-presidential candidate Yanukovych. From 2005-2008, Tyhypko developed his banking and insurance businesses.

A potential ally of Tyhypko is Finance Minister Fedir Yaroshenko, a classic technocrat and a protégé of Azarov. He and Azarov have worked together since 1997, when Yaroshenko became Azarov’s first deputy in the tax service. In 2002-2004 he served as deputy finance minister. Due to Yaroshenko’s professional qualities and apolitical image, he was also hired by the PRU’s rivals, the cabinet of Yulia Tymoshenko, where he served as deputy tax chief from 2008 to 2010. Yaroshenko’s background (he managed poultry farms in Donetsk Region in the 1980’s and 1990’s) suggests that he may have interests in the food industry, but he has no direct links to any large industrial business, and is less prone to depend on oligarchs (www.file.liga.net, March 12).

Azarov’s cabinet should be more stable than most of its predecessors, since it is essentially a cabinet of one party and, unlike most cabinets after 2004, it has presidential backing. However, Azarov is no reformer, as Tyhypko pointed out in one of his very first interviews as Azarov’s deputy (www.kontrakty.ua, March 12). The businessmen behind the PRU will expect the cabinet to further their interests. This may hinder reform and make it difficult for Azarov and Tyhypko to persuade international lenders to issue loans, which Ukraine badly needs to fill a budget hole which is estimated at over 10 percent of GDP, and to compensate for a 15 percent GDP plunge in 2009.