Mending Bridges

Economic News

22 Jul 2010
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With the country officially entering the campaign period for the March 2006 parliamentary elections, the focus within Ukrainian politics is once again on division.



While there has been fresh speculation about the reunification of the Orange camp, a gulf still separates the western and eastern parts of the country.



Touching on this when he spoke two weeks ago to students from key cities in the east and west, President Viktor Yushchenko reiterated his desire to represent the whole country.



"When we stood on the Independence Square," he said, invoking the memory of the scene of last year's Orange Revolution, "along with demanding freedom, honest polls and honest vote counting, we strongly supported also one more issue. Ukraine as a single whole - east and west are together... I say, friends, irrespective of which flag you stand under, let us sit down at a round table and sign a declaration for the sake of Ukraine."



Yet despite this conciliatory rhetoric, the most recent polls show that public opinion in the industrial east and the more agrarian west has not shifted much since last year's presidential elections.



The poll results conducted at the beginning of November by the Razumkov Centre showed that only 5.1% of voters from the east would support President Yushchenko's party, compared to some 24.3% in the west.



By the same token, only 1.1% of the voters polled in the west would support the Party of the Regions, the parliamentary bloc headed by defeated presidential candidate Viktor Yanukovych, compared to the 34.1% support his party enjoys in the eastern part of Ukraine.



The division goes back further than recent electoral battles, however. Unlike the eastern part of Ukraine, the western part of the country spent 300 years under Polish and then Austro-Hungarian rule, and was not fully integrated into the Soviet Union until 1939.



The western part of Ukraine has a stronger allegiance to the Ukrainian language and the Greek Catholic church. In the east, on the other hand, the Russian language and Christian Orthodoxy predominates.



Nonetheless, as Oleh Dubina, former vice-premier under Prime Minister Anatoly Kinakh and currently the general manager of Dneprodzerzhinsk steel processing factory in the eastern part of Ukraine, recently told OBG, "These regional divisions are for the most part artificially engineered and part of a political theatre that takes part in Ukraine every time the country goes to the polls... In our country you reap what you sow. If politicians incite divisiveness and play on peoples' cultural and language affinities, we will indeed continue to see a divided Ukraine."



However, while deploring President Yushchenko's inability to unite the country, like many others, Dubina credited the Orange Revolution with waking people up from a deep slumber.



"What we witness today is a clash of two ideologies," he continued. "Yet people have finally realised that they need to take their lives into their own hands."



Elsewhere in the regions, the mood encountered by OBG among the managers of top industrial enterprises recently was one of resignation, despite deep disproval of the policies enacted by the former government of Prime Minister Yulya Tymoshenko.



Sergey Glushko, chairman of the board at Ukrtatnafta, one of the two top oil refineries in Ukraine, told OBG during an interview in Kremenchuk that Tymoshenko's policies had not been thought through and have now backfired.



"Tymoshenko thought that by lifting duties on imported petrol, she could force the local Russian owners of Ukrainian oil refineries to lower their prices. What she did not realise was that Russian producers could withhold their supplies entirely and sell the same oil at higher world market prices," Glushko explained.



Consequently, the volume of oil supplies to Ukrtatnafta were reduced by 30%, and according to Glushko the new government desperately needs to reverse this ill-conceived policy to save the country's oil refining business.



Similar complaints of disruptive policies were also expressed by some steel makers, car producers and machine builders interviewed by OBG last week in the eastern part of Ukraine.



Meanwhile, President Yushchenko has readily acknowledged the damage done by the previous government. Speaking to students two weeks ago he stated that the trend of slowing growth in industrial production had been a direct reaction by investors to Tymoshenko's policies.



"Let us look at the decision, made quite abruptly, to totally liberalise the customs regime," Yushchenko said. "Our oil market is now 30% made up of products produced abroad. Now it is not profitable to import oil to Ukraine."



Despite the clear criticism addressed towards the former revolutionary hero, the president has not excluded the possibility of co-operation after the elections.



The president's chief of staff, Oleh Rybachuk, said during an interview with OBG on November 25 that the reunification of the Orange camp was, indeed, unavoidable.



"Although there are egos and personal feelings involved", he said, "when we talk about the country's future, our values and our vision are very similar."



According to Rybachuk, the main bone of contention within the Orange camp was economic policy and the lack of consistency.



Commenting on the process of reprivatisation, one of Tymoshenko's most controversial policy areas, Rybachuk assured that the sale of Kryvorizhstal was the last reprivatisation "that was initiated by the Ukrainian authorities".



Yet, while the confidence is slowly being restored among the investors, with the new government of Yurii Yekhanurov laying down a more coherent and less disruptive policy line, all investors are aware of the temporary nature of the current caretaker government. Many investment plans, according to industry managers interviewed by OBG last week, are still up in the air awaiting the political showdown in March parliamentary elections.



With the country moving to a parliamentary-presidential constitutional model and no single party commanding a clear majority, very few analysts can offer a prediction on the political outcome of March elections.



One thing is clear though - many bridges will need to be mended to erect a new grand coalition, capable of uniting the east and the west of the country, while offering fresh hope to those 500,000 people who braved the cold winter in November last year on the Independence Square in Kiev only to see the Orange camp crumble in an acrimonious divorce, nine months later.



Meanwhile, with the political campaign gathering steam the acrimony, analysts predict, is only likely to intensify. Yet, despite the Orange split, the main battle is once again expected to be fought between the blue and orange forces - the east and the west of the country. As the two ideologies clash again, Ukraine, it seems, is entering the second, and hopefully the final act of the Orange Revolution.

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