YUSHCHENKO DEFEATED?

Ukraine’s liberal Premier Viktor Yushchenko looks as close to retirement as he ever has done since his appointment in December 1999. In interviews with journalists over last week he made it clear that he is morally ready to quit. Yushchenko has almost singlehandedly tried to eliminate the shadow schemes in the fuel industry, on which his powerful opponents–oligarchs entrenched in Kyiv and the East-Ukrainian industrial clans–are set to continue building their political and economic clout. He had hoped for support from President Leonid Kuchma, who is seemingly giving him the cold shoulder. He is losing the battle.

Yushchenko has long been in conflict with Kuchma over the controversial deputy premier, Yulia Tymoshenko. Kuchma wants Tymoshenko sacked on the basis of embezzlement allegations tying her to the fugitive ex-Premier Pavlo Lazarenko. But Tymoshenko is a key figure in Yushchenko’s plan to make the fuel industry “transparent.” On November 20, Tymoshenko declared war on the coal barons. She threatened to clamp down on the well-connected shadow dealers from Donetsk, who barter the cheap coal from the mines, which the state subsidizes but the dealers control, to the steelworks, which the dealers also control, thereby evading taxation and ruining the coal industry.

Tymoshenko’s announcement, coincidentally or otherwise, coincided with a campaign launched against her in the pro-presidential media controlled by the United Social Democratic Party (USDP)–an organization close to the energy oligarchs. On November 21, Inter TV reported an explosion at the dacha of former Coal Industry Minister Serhy Tulub, in which no one was injured. Secretary of Security and Defense Council Yevhen Marchuk, who is among Tymoshenko’s sworn opponents, connected the event to developments in the energy industry. On November 24, “Kievskie vedomosti,” a newspaper reportedly controlled by the USDP oligarch Hryhory Surkis, speculated on Tymoshenko’s possible involvement in the incident. Tulub, one of the Donetsk industrial elite, retired in June over differences with Tymoshenko.

On November 21, Prosecutor General Mykhaylo Potebenko announced that criminal charges would soon be brought against Tymoshenko. He alleged that Tymoshenko, who headed the wholesale gas trading company United Energy Systems of Ukraine in 1995-1997, was involved in illegal gas trade schemes allegedly also involving the Russian Defense Ministry. Tymoshenko’s husband, Oleksandr, who has already been behind the bars since August, was denied an appeal his attorneys filed on November 21 to cancel his arrest warrant (see the Monitor, September 7). Oleksandr Tymoshenko is suspected of having bribed Lazarenko, but the court apparently lacks sufficient evidence to indict him.

On November 22, the State Tax Administration blocked the accounts of the pro-government newspaper “Vecherny vesti,” which is Tymoshenko’s mouthpiece. This is not the first case in which the Ukrainian powers-that-be have used the tax authorities to silence unwanted media. It is interesting that Tax Administration chief Mykola Azarov has been one of the most vocal critics of Yushchenko and Tymoshenko. Media speculation has it that Azarov would like to replace Yushchenko.

Despite such pressure, Yushchenko insists on keeping Tymoshenko on his team. In a newspaper interview last week he said that he would prefer to sack several ministers who have “disappointed” him–in particular, Tulub’s successor, Fuel and Energy Minister Serhy Yermilov, who is known to disagree with Tymoshenko on the energy policy. In the same interview, Yushchenko admitted that he did not expect such an opposition to the reforms when he launched them almost a year ago.

In this struggle for power, President Kuchma has apparently placed his lot with Yushchenko’s opponents. This dooms Yushchenko’s reform effort to failure. Kuchma’s recent criticism of Yushchenko’s recent gas negotiations in Moscow may be the last straw. Speaking in Turkey on November 24, Kuchma slammed the agreement to pay for Russian gas in cash, which Yushchenko reportedly reached with Premier Mikhail Kasyanov on November 18. Kuchma described it as “the biggest mistake the government made in recent years” and argued that Ukrainian manufacturers would lose Russian markets because of it. In the past, Kyiv bartered food and machinery for Russian gas. Now, however, Moscow wants either cash or stakes in Ukrainian enterprises as payment, flatly refusing to take Ukrainian products. One of the main goals of Yushchenko and Tymoshenko’s reforms was to eliminate barter schemes to be able to pay for the Russian gas in cash.

According to a leak from the presidential administration, reported by the media on November 24, Yushchenko tried a radical means to defend his course. Reportedly, he sent to Kuchma a letter threatening to quit if certain ministers are not sacked, the State Tax Administration is not subordinated to him, and the campaign against his government in the pro-presidential media does not stop. On November 25, Kuchma’s spokesman Oleksandr Martynenko denied those reports, but Yushchenko himself refused to either deny or confirm them (Inter, November 21; UNIAN, November 23, 24; Kievskie vedomosti, November 24; Ukrainska pravda, Zerkalo nedeli, November 25; STB TV, November 21, 23, 26; see the Monitor, June 26, July 11, November 21).

The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of senior analysts Jonas Bernstein, Vladimir Socor, Stephen Foye, and analysts Ilya Malyakin, Oleg Varfolomeyev and Ilias Bogatyrev. If you have any questions regarding the content of the Monitor, please contact the foundation. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at pubs@jamestown.org, by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4516 43rd Street NW, Washington DC 20016. Unauthorized reproduction or redistribution of the Monitor is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation Site Maintenance by Johnny Flash Productions