Publication: Monitor Volume: 5 Issue: 152

On July 31, Ukrainian President Leonid Kuchma fired First Deputy Premier Volodymyr Kuratchenko, a representative of eastern Ukraine’s industrial lobby. Kuratchenko’s dismissal followed his open disagreement with the course of reforms and their coordination with international financial institutions, in particular the International Monetary Fund (IMF). The case of Kuratchenko shows that the government of Premier Valery Pustovoytenko is serious about pursuing its policy of market transformation, opposition to which is still strong among the Soviet-bred elite.

During the Cabinet of Ministers meeting on July 28, Kuratchenko–who was responsible for the energy sector in the government–quite unexpectedly stood up to the premier in defending his subordinate, Energy Minister Ivan Plachkov. Pustovoytenko, who reprimanded Plachkov for not ensuring timely supplies of fuel to power stations, promptly asked Kuchma to sack the rebellious deputy. The majority of the cabinet supported Kuratchenko in this, a sign of Pustovoytenko gradually losing control over the government. The government, to prevent a negative international reaction, hurried to issue an official statement confirming its dedication to reforms. Later in the meeting, Kuratchenko went as far as to suggest that Ukraine should revise the course of reforms, increase the regulatory function of the government, return to long-term economic planning (a distinctive feature of the Soviet economy), review relations with international lenders, and postpone payment of foreign debts. This statement from the government’s No. 2 was particularly untimely given that the IMF and World Bank missions were in Kyiv discussing conditions of further disbursement of loans with Ukrainian leaders. Kuchma needs foreign loans, especially now, to maintain a relative financial stability before the October presidential elections. Kuratchenko’s statement was not his opinion alone. This former governor of one of Ukraine’s most industrialized regions–Zaporizhzhya–voiced a growing dissatisfaction with the government policies of a significant portion of the strong heavy industry lobby–“Red directors.” The captains of Ukraine’s numerous outdated Soviet-era industrial giants, which are losing competitiveness in the market environment, are anxious about the government increasing tax pressure to meet the IMF requirements on improving fiscal discipline.

It is significant that Kuchma has refrained from explaining to the public the reasons behind Kuratchenko’s dismissal. To do so in these circumstances would be to publicly defend market reforms and the IMF, which are unpopular with those numerous electors who–aged, impoverished and swayed by leftist slogans–see in the market transition the source of the current economic hardships (UNIAN, InfoBank, Eastern Economist Daily (Kyiv), Ukrainian Television, STB-TV, July 28-August 2).

[The Monitor continues the series of profiles of Ukrainian presidential candidates in this year’s October election.]