UKRAINE: WAITING FOR YUSHCHENKO: LACK OF COALITION

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001773

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/05/2016
TAGS: PREL PGOV PARM UP
SUBJECT: UKRAINE: WAITING FOR YUSHCHENKO: LACK OF COALITION
CLARITY CONTINUES

REF: KIEV 1711

Classified By: Political Counselor Aubrey Carlson, reasons 1.4 (b,d)


1. (C) Summary: While much of Ukraine takes off the first
week in May between the May Day and Victory in Europe
holidays, work on possible Rada majority coalition policy
agreements inched forward, even as the question remained open
as to which coalition, if any, would ultimately emerge. In
May 3-4 meetings with PolOff, proponents of Orange and
Orange-Blue coalitions agreed on two things: 1) it would come
down to a decision by President Yushchenko; and 2) Yushchenko
traditionally agonizes, Hamlet-like, until the last possible
moment to make any important decision. Mykola Katerynchuk,
head of the Our Ukraine (OU) party Executive Committee and of
the OU coalition negotiating team for economic issues,
frankly acknowledged OU's weaknesses, strongly advocated the
Orange option, but did not rule out Yushchenko deciding to
partner with Yanukovych's "Blue" Party of Regions, even
though such a decision would have calamitous political
consequences for Our Ukraine in his view. Volodymyr
Makeyenko, a long-time Rada MP who defected from Our Ukraine
to Regions in 2004 and helped negotiate the September 2005
memo of understanding between OU and Regions, called current
negotiations between erstwhile Orange partners OU, Yuliya
Tymoshenko's Bloc (BYuT) and the Socialist Party of Ukraine
(SPU) "mere theater"; he predicted an OU-Regions coalition
would emerge in late June, perhaps June 22. Vira Nanivska,
head of the International Centre for Policy Studies (ICPS)
and a strong proponent of platform-based political parties
over personalities, told us she had been consulting with both
OU and Regions on policy proposals and favored an OU-Regions
coalition, even though she believed the OU-BYuT-SPU coalition
would emerge first. She noted that the emergence of an
Orange coalition would allow Regions time to prove it had
adopted a newfound responsible approach to politics as a
constructive opposition force, prior to returning to
government, likely in coalition with OU. She did not rule
out eventual formation of a hybrid force she dubbed "Our
Regions" as a counterweight to Tymoshenko's populism. End
summary.

Katerynchuk: deep Orange, but wary
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2. (C) Based on Tymoshenko's identification of Katerynchuk as
an Our Ukraine figure likely to leave the party if OU went
into coalition with Regions (reftel),we met with Katerynchuk
May 3 to discuss coalition possibilities and OU
organizational problems. Katerynchuk explained that, from
the founding of the People's Union Our Ukraine political
party in early 2005 (as opposed to the Our Ukraine electoral
bloc that formed in late 2005 to run in the March 2006
parliamentary and local elections),there were two competing
visions of party development: a European-style modern
political party and a pro-presidential "technical project."
Katerynchuk had favored the former; party elders had decided
on the latter, "and the results were crystal clear on March
26," when OU stumbled to a disappointing third-place showing
far behind Regions and BYuT. OU now needed to learn the
harsh lessons and rebuild itself based on the more modern
approach, said Katerynchuk.


3. (C) A firm Orange coalition advocate, Katerynchuk believed
OU could not ignore "the will of the Ukrainian people" who
had delivered a majority of seats March 26 to the major
Maidan (i.e., Orange Revolution) parties -- OU, BYuT, and
SPU. These parties agreed on Ukraine's strategic direction:
democratization of governmental institutions; granting
society a clear voice in governance; and a European identity.
While he acknowledged there was convergence on economic
policy between OU and Regions, differences on more
fundamental issues remained. Katerynchuk claimed that recent
local OU-Regions alliances in the Kiev City Council and
Zakarpattya Oblast Council were not done deals, and that the
OU leadership would not finalize such coalitions; the search
for common ground with BYuT and SPU would continue.


4. (C) Katerynchuk squirmed uneasily when asked what would
happen to OU if Yushchenko ultimately were to decide to go
into coalition with Regions rather than BYuT and SPU. He
made no attempt to deny the possibility, acknowledged not all
OU members/voters would stay with Yushchenko, and said that
"we -- Yushchenko and Our Ukraine -- would face a tough
second round" in the 2009 presidential elections, presumably
against Tymoshenko. (Note: Katerynchuk's phrasing indicated
no immediate plans to abandon OU, contrary to Tymoshenko's
prediction in reftel, were Our Ukraine to ally with Regions
to form a majority coalition.)


5. (C) On the timing of coalition formation, Katerynchuk

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suggested that the coalition would be announced on the last
day possible, or perhaps "29 instead of 30 days" after the
opening of the new Rada. The "real" coalition negotiations,
he suggested, would only begin once the Rada convened.
(Note: Katerynchuk is the OU lead representative for
coalition talks on economic policy issues with BYuT and the
SPU, but as of May 4, he was still gathering input and
suggestions from Ukrainian experts; see below.) Katerynchuk
also left the door open for an extended delay in forming the
new government, noting there was nothing in the Constitution
that obliged Yushchenko to dismiss the Rada if no government
were formed within 60 days; Yushchenko merely had the right
to do so.

Makeyenko: Hamlet-like Yushchenko will choose Regions
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6. (C) Regions MP Volodymyr Makeyenko described to us May 4 a
growing mood among his fellow party MPs against continued
warfare with their political opponents; hard opposition would
be bad for (their own personal) business(es),and bad for
Ukraine as well. As one of only six MPs-elect left from the
original Soviet Ukrainian Rada that voted for sovereignty in
1990 and independence in 1991, he had taken the floor at the
latest Regions' Congress to describe how the nationalist Rukh
party and the Communist Party had worked together despite all
their differences to take the country forward; he had
advocated that now was the time for Regions and OU to do
likewise. Many newly-elected MPs from eastern Ukraine
(Regions' stronghold) expressed concern over "how a deal with
Yushchenko would play in (far eastern) Luhansk," but
Makeyenko said Regions' future lay in compromise, not further
confrontation.


7. (C) The key now was, of course, Yushchenko himself.
Yushchenko would wait until the very last moment possible to
make a decision on a coalition, a behavior pattern dating
from his time as head of the National Bank, when Makeyenko
was a bank owner and faced similar indecision and dithering
by Yushchenko. Makeyenko dismissed the current negotiations
between OU-BYuT-SPU as mere theater, akin to the working
groups Yushchenko would set up at the Bank for bankers to
engage his underlings to come up with draft decisions to
resolve various crises. Even after well-considered proposals
had been worked out, Yushchenko would still delay a decision,
listen to everyone, and finally make up his own mind at the
last possible moment, with disaster looming.


8. (C) A similar dynamic was now in play, said Makeyenko, who
suggested Yushchenko was also delaying government formation
to milk as much out of the current RosUkrEnergo gas deal as
possible and tie the hands of the incoming coalition.
Yushchenko would eventually cut the deal with Regions, he
predicted, because Yushchenko would realize "the only way he
could win re-election in 2009 and beat Tymoshenko is with
Regions' support." Regions would support Yushchenko because
it was clear Donetsk alone could not secure its own
presidential victor, and Yushchenko was a more dependable,
stable "roof" as President than Tymoshenko.


9. (C) While Makeyenko, a former Our Ukraine MP from
Chernihiv who defected to Regions in 2004, had been
instrumental in negotiating the September 2005 Memorandum of
Understanding between Our Ukraine and Regions that ensured PM
Yekhanurov was confirmed (and also boosted Regions'
legitimacy as a political force),he said that this time
around, "Donetsk is completely in charge." Makeyenko
predicted an OU-Regions coalition would emerge "on the 30th
day" after the Rada convened, based on a deal cut by
Yushchenko and Yanukovych; since the Rada would most likely
convene on May 23, his prediction for a coalition
announcement was June 22.

Nanivska: Regions serious on policy; a future "Our Regions"?
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10. (C) Vira Nanivska, head of the International Centre for
Policy Studies (ICPS) and a respected former World Bank
executive who returned to Ukraine to push for platform and
policy-based politics on the ground in Ukraine, is personally
close to many figures in Our Ukraine, to whom she has been
giving free advice for years. (Note: As we were talking May
3, Katerynchuk called Nanivska, pleading for her assistance
in bringing order to the process of turning expert advice
into economic policy proposals for OU to use in a coalition
agreement.)


11. (C) Nanivska claimed Regions was taking the most
systematic and serious approach to putting together detailed
and coherent policy platforms for coalition negotiations and
the next Rada session. She acknowledged having been

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approached by Regions, noting that, unlike Our Ukraine or
BYuT, Regions signed contracts and paid for advice. She
would conduct a "tutorial" session for Regions' financier
Rinat Akhmetov May 5 on a seven-point approach to
institutionalizing an anti-corruption agenda based on
European norms. Akhmetov knew that corruption was the weak
point of Regions and that Regions needed to appear serious
and actively embrace European standards if it were to return
government. (Note: Nanivska thus confirmed one of
Tymoshenko's other comments in reftel, that Regions was
engaging/romancing leading think tanks. ICPS' latest policy
bulletin clearly favors an OU-Regions coalition as the best
way to carry the country forward on economic policy issues.)


12. (SBU) Nanivska predicted that an OU-BYuT-SPU coalition
would form first. She sensed in her discussions with
Regions leaders that they were preparing to go into
opposition in the Rada -- but as a constructive opposition,
not a hard-line one. In embracing a more modern,
policy-based agenda and engaging responsibly in politics,
rather than seeking confrontation, Regions could improve its
reputation among skeptics in Ukraine and the West and lay the
groundwork for a return to government, presuming the Orange
coalition would fall apart. An OU-Regions coalition should
not be seen as a threat even by strong supporters of the
Orange Revolution such as herself, as long as Regions
continued to advocate the right policies and practices.
Looking ahead, she mused that such an alliance, which she
dubbed "Nashi Rehioni" ("Our Regions"),might well prove to
be an enduring new force in Ukrainian politics, balanced
against a more populist force led by Tymoshenko.


13. (U) Visit Embassy Kiev's classified website at
www.state.sgov.gov/p/eur/kiev.
Gwaltney