A Paler Shade of Orange

Economic News

22 Jul 2010
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Ukrainian voters went to the polls on Sunday for the third time in three years in an effort to end the political stagnation that has plagued the country since the Orange Revolution in late 2004.

President Viktor Yushchenko called early elections in the hope of breaking the deadlock that has disillusioned many Ukrainians and deepened the divide between the Russian-leaning east (represented by Prime Minister Viktor Yanukovych's Party of Regions, or "the Blue side") and the European-oriented west, led by the fractious Orange Team of President Viktor Yushchenko and Yulia Tymoshenko.

As expected, Yanukovych's Party of Regions (PR) came away with the most votes (34%), but its victory margin was smaller than many predicted. Opposition leader Yulia Tymoshenko's Bloc (BYuT) won 31%, a 9% increase from March 2006 that surprised many observers and suggests voters' growing frustration with the ruling coalition's and the President's inability to tackle corruption and economic malaise. The Our Ukraine/National Defence Bloc (NU/NS), which includes President Yushchenko's party, achieved 14%, the same proportion it received in 2006 when it also came in a distant third.

The Socialist Party of Ukraine (CPU), whose leader Olexandr Moroz cut a deal in summer 2006 with Party of Regions that allowed the Blue forces to create a ruling coalition, will not pass the 3% threshold. A key figure in the Orange Revolution, Moroz's defection to the Blue side infuriated his party's rank and file and placed its future in question. The Socialists' failure to cross the threshold will ensure that a BYuT-NU/NS coalition has a majority of seats.

The Communist Party of Ukraine (KPU), a reliable coalition partner for PR, has passed the threshold with 5%, as has the bloc of former Parliament Speaker Volodomyr Lytvyn (4%). Lytvyn was once a close ally of former President Leonid Kuchma and should be considered a wild card whose allegiance is unclear and almost certainly for sale. However, with the Socialists' failure to cross the threshold, no party will play kingmaker in coalition politics.

Despite pre-election concerns about the accuracy of the voter lists, the observation mission from the Organisation for Security and Co-operation in Europe declared the election "open and competitive" and mostly in line with "standards for democratic elections". Voter participation was 62%, slightly less than the 67% who voted in March 2006.

Questions still linger about delays in reporting the vote count from eastern Ukraine and Crimea, both PR strongholds. While few observers expected the wide-scale election fraud that precipitated the Orange Revolution, domestic watchers are still keeping a close eye on attempts to influence the make-up of the parliamentary coalition by "helping" marginal parties cross the threshold especially in the East, where PR controls most of the local election commissions. Both NU/NS and BYuT have called for investigations into potential fraud in Donetsk, Crimea, Odessa and Luhansk. However, having achieved an Orange majority, the winning parties are likely to push to have the election certified quickly.

In the event an Orange Coalition, composed of BYuT and NU/NS, is formed in parliament as the parties agreed even before the election, expect Tymoshenko to become prime minister, a position she held after the Orange Revolution and subsequently lost when President Yushchenko dissolved his cabinet amid accusations of incompetence in late 2005. Tymoshenko's tenure was characterised by in-fighting among the former allies and Yushchenko's refusal to agree to her re-assuming the position after her party came in second (to PR) in the March 2006 elections delayed the signing of coalition agreement for three months.

Ideological positions in Ukraine are fluid and always subject to revision based on financial considerations, but many of the personal and policy conflicts that beset the post-revolution Orange government remain unresolved. The charismatic Tymoshenko is often accused of appealing to populism and is feared by many in the business community for her commitment to stalling and/or re-evaluating shady privatisations that have enriched powerful figures in all parties. Nevertheless, an Orange Coalition is likely to push Ukraine along the path toward European integration and greater cooperation with NATO, the latter of which will be opposed by the Russia-leaning PR and its Communist allies. Perhaps coincidentally, Russia announced that gas supplies would be reduced if Ukraine did not settle its $13.5bn debt with Gazprom by the end of October.

Despite (or perhaps, because of) the political stagnation, Ukraine's economy has continued to attract foreign investment and has enjoyed double-digit GDP growth over the last two years. Agriculture, energy and software development have attracted the attention of foreigners who can stomach the lack of transparency and the country's tenuous relationship with the rule of law. Oligarch-driven development in Kiev provides evidence that plenty of Ukrainians are doing well enough to purchase Bentleys and other luxury brands. On the other hand, there is also a wealth of evidence to suggest that outside the centres of Kiev and Donetsk, most Ukrainians have not benefited from political and economic development.

Among ordinary people, dissatisfaction and frustration with the direction of the country runs high and Ukrainians are dour about their own economic situation. The Spring 2007 Pew Global Attitudes Project survey showed that 88% of Ukrainians say that things in the country are headed in the wrong direction and 77% cite economic problems as the biggest problem facing their family. Ukrainians, who have become cynical about politicians who promise to "throw bandits in jail," still perceive high levels of corruption among their public officials and politicians, according to Transparency International's 2007 Corruption Perception Index, which rates Ukraine 118th out of 180 countries.

Regardless of whether Orange or Blue forces take control of parliament, ongoing geographical, economic and personal divisions will continue to shape Ukraine's political environment. In 2004, Ukrainians inspired the world when they took to the icy streets in defiance of a dictator. Now, the world watches as Ukrainians do the hard, dirty work of building a genuine democracy.

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