Presidential Cabinet

Economic News

22 Jul 2010
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The announcement of Ukraine's new ministerial line-up has revealed an anticipated shift in the balance of power towards the president - and away from the controversial re-privatisation process.

Many see the events of late September as therefore raising the curtain on a new, post-Orange revolution stabilisation stage in Ukrainian politics.

Certainly, Prime Minister Yuri Yekhanurov has vowed to re-establish economic stability, saying during his meeting with Russian President Vladimir Putin on September 30 that, "I would like to confirm my wish to end all the re-privatisation processes and to solve all the future disputes through negotiations."

In such circumstances, local observers are now watching with great interest the re-privatisation of Ukraine's largest steel mill, Kryvoriszhstal, scheduled for October 24.

The state property fund intends to resell a 98.02% stake in the steel producer with a starting price of UAH10bn ($2bn). The steel producer, with an output of 6m tonnes annually, was sold for just $800m in June last year to businessmen close to former president Leonid Kuchma.

Few analysts believe that the re-privatisation of Kryvoriszhstal can be called off, given its prominence in Yushchenko's political campaign last year. Moreover, the property fund has already signed a confidentiality agreement with seven potential bidders, who are rumoured to be Arcelor, Mittal Steel, Privatbank group, Germany's RSJ Erste, Russia's Severstal and EvrazHolding.

Meanwhile, with the re-appointment of the deputy prime minister, minister of foreign affairs, minister of internal affairs and minister of defence, the actual composition of the new government retains some shades of "orange".

Its revolutionary zeal, however, analysts say, has undeniably been dimmed by the purge of such firebrands as former deputy prime minister Mykola Tomenko, former minister of economy Serhiy Teriokhin and most importantly, the number one revolutionary and now one of the president's potential arch rivals, former prime minister Yulia Tymoshenko.

With the departure of these key figures, most of those retained on the new executive team are said to be loyal to President Viktor Yushchenko. According to the president's supporters, the Cabinet of Ministers will be under the effective guidance of an experienced administrator in Yekhanurov, who, despite his unquestionable allegiance to Yushechenko, appears to be a consensus figure enjoying broad political support.

However, the manner in which the votes were secured for him in parliament on September 22 has left a sour taste among many supporters.

President Yushchenko felt compelled to sign a co-operation pact with the opposition party leader and his former arch rival in last year's presidential election, Viktor Yanukovych, in exchange for some 50 votes for Yekhanurov, after the first failure to get Yekhanurov approved by the assembly.

Yet despite this controversial political compromise, local commentators remain largely positive towards Yekhanurov. One local analyst described him for OBG as "an enlightened official who is very familiar with the nuances of bureaucratic manoeuvring and does not often get into conflicts".

His detractors, however, argue that he will be a weak prime minister, enjoying little independence from the president. Some suggest that unlike Tymoshenko, Yekhanurov will be a cabinet prime minister, with all decisions made by the presidency from now on.

But at the same time, Yekhanurov is an experienced politician with a long economic background, having carried out an earlier programme of mass privatisation and served as then prime minister Yushchenko's first deputy from 1999 to 2001.

Analysts hope that during his less than six months in office before the elections scheduled for March 2006, Yekhanurov will help to bring an end to revolutionary excesses and political turbulence.

When appointing Arsenii Yatseniuk as the new minister for economy, Yekhanurov said he would like this ministry to boost Ukraine's chances of achieving the coveted market economy status by the end of this year and concluding membership talks with the World Trade Organisation (WTO).

Meanwhile, in contrast to the previous government, Yekhanurov has also singled out improvement of economic relations with Russia as another top priority.

On September 30, he flew to Moscow to meet Russian Prime Minister Mikhail Fradkov and President Putin.

The Russian president, who enjoyed a notoriously frosty relationship with ex-Ukrainian premier Tymoshenko, spoke highly of the new Ukrainian prime minister, whom he called "a very professional man capable of uniting his country during this difficult period for Ukraine's economy".

Yet although financial analysts welcome an improvement of trade relations with Russia, which is the main energy supplier to Ukraine, others fear a reversal in Ukraine's geopolitical posture.

With the EU having demonstrated a limited appetite for giving Ukraine any definite accession prospects, analysts argue, there is a risk of Moscow regaining its influence over the country.

President of the European Commission Jose Manuel Barroso sent another disappointing message on September 21, when he announced that the EU had no intention of assuming any additional obligations vis-à-vis Ukraine, limiting its co-operation to European Neighbourhood Policy programmes.

Georgian President Mikhail Saakashvili deplored the EU's lacklustre approach towards Ukraine, criticising Brussels for having failed to come up with a clear and consistent policy. Saakashvili argued that Ukraine needed some clear guarantees from Europe ahead of the March elections to help those in the country advocating the European policy agenda and reforms.

Unfortunately, analysts argue, Ukraine's European ambitions are faced with a difficult external environment. Just like Ukraine, the EU is experiencing its own identity crisis demonstrated by the recent German election debacle and the ongoing dispute over Turkey's accession talks.

Even with all the benefit of the doubt, salvaging the haughty ideals of the Orange revolution, under these circumstances, seems like an aspiration beyond the reach of the new caretaker government. Yet, in accepting the job, Prime Minister Yekhanurov did not appear to be accepting a poisoned chalice. His hope, it seems, is that the nation will judge him on the not necessarily immodest goal of simply getting Ukraine's slowing economy back on track.

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