Publication: Monitor Volume: 7 Issue: 15

On January 19, Ukrainian President Leonid Kuchma fired the embattled Deputy Premier Yulia Tymoshenko, the controversial energy entrepreneur who turned energy industry reformer a year ago. Officially, Tymoshenko was fired on request from Prosecutor General Mykhaylo Potebenko, who complained to Kuchma that her remaining in government would complicate the investigation against her. Tymoshenko is officially charged with smuggling Russian gas and forgery in 1995-1997, when she headed the private company United Energy Systems of Ukraine (UESU) (see the Monitor, January 17). In a television interview, Kuchma–criticizing her performance in government–said that Potebenko’s request was not the only reason for her dismissal. It might also have been provoked by the media allegations that Tymoshenko might be behind the ongoing “tape scandal,” in which Ukrainian top officials are implicated (see the Monitor, December 5, 13, 2000). Potebenko indirectly confirmed those allegations in an interview on January 19.

The Ukrainian constitution prescribes that the president dismiss ministers on request from the premier, but makes no mention of similar requests from the prosecutor general. Kuchma, unlike pro-Western Premier Viktor Yushchenko, has never been satisfied with Tymoshenko’s performance and did not ask for Yushchenko’s consent to dismiss her. It is interesting to note that several hours before the decree was issued, Yushchenko’s cabinet of ministers had approved Tymoshenko’s coal industry reforms program. At the cabinet meeting, Yushchenko lashed out at Fuel and Energy Minister Serhy Yermilov, Tymoshenko’s main opponent in government of her energy policies. Yushchenko told Yermilov that the coal sector would be reformed, no matter whose personal or corporate interests might be foiled.

With her reforms, which were aimed at opening up the energy industry (a hotbed of official corruption), Tymoshenko trod on a great many toes. The interests of several well-connected businessmen in politics were damaged last year, when she banned barter payments–eliminating many shadow schemes–and subordinated the energy market to the government. Similar reforms in the coal sector would also damage the powerful Donetsk “clan,” which controls mines and several steelworks in eastern Ukraine. For whatever it is worth, Tymoshenko herself reportedly profited from shadow energy schemes in the mid-1990s, when UESU was patronized by then Premier Pavlo Lazarenko. After Lazarenko’s dismissal in 1997, UESU was edged out of the market. Though she was promoting market openness, Tymoshenko might have had her private interests in mind as well: If the “oligarchs” controlling big chunks of the market lost some of them as a result of the reforms, UESU could jump back in.

Regardless of this, it is in the economy’s best interest to open the market, eliminate barter and privatize transparently. Improved electricity payments would decrease Ukraine’s dependency on Russian gas for power stations. If Tymoshenko’s policies are quashed, spheres of influence on the market might be redistributed, which might in turn damage the ailing energy industry. The IMF, Ukraine’s main international creditor, apparently did not look favorably on Tymoshenko’s dismissal. Ukraine’s IMF representative, Henri Ghesquiere, in commenting on it, noted that reforms in the energy are key to resolving the problem of economic growth.

Tymoshenko announced that she will not leave politics and will support Yushchenko’s government, as long as it continues the energy policy she launched. At the same time, she would join ranks with the opposition. This will inevitably complicate relations between Kuchma and Yushchenko, and weaken both. Kuchma’s pro-presidential majority in the Rada (parliament), created last February, disappeared after Tymoshenko’s dismissal. Motherland, the faction which supports her, withdrew its support for Kuchma on January 18, siding instead with the left-wing and right-wing oppositions against the pro-Kuchma centrists, and blocking two bills crucial to implementing last year’s constitutional referendum. Motherland will most likely suffer the fate of Lazarenko’s Hromada, which fled to the opposition after Lazarenko’s dismissal, but broke up after Lazarenko fled Ukraine in 1999 (Ukrainska pravda, January 18, UT-1, Inter TV, January 19; Korrespondent.net, Proua.com, January 20; STB TV, January 21; see the Monitor, November 21, 29, 2000).