UKRAINE: LOOKING TOWARD AND BEYOND THE MARCH

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 000520

SIPDIS

E.O. 12958: DECL: 02/07/2016
TAGS: PGOV
SUBJECT: UKRAINE: LOOKING TOWARD AND BEYOND THE MARCH
PARLIAMENTARY ELECTIONS

Classified By: Ambassador for reasons 1.4(a,b,d).


1. (C) Summary: A majority in the new Rada elected by the
March 26 parliamentary elections will select a new Prime
Minister, who will take the lead on forming a new Cabinet
(with the exception of Defense and Foreign Ministers). Poll
results have for months consistently suggested that at least
three parties or political blocs that make it past the
three-percent threshold will need to coalesce to form the
constitutionally-required Rada majority. Various
permutations are among the quite possible, but the leading
likelihood is for a pro-reform re-alliance of the Orange
Yushchenko-Tymoshenko-Socialist team to form. Such an
outcome would bode best for Ukraine's pace of Euro-Atlantic
integration, though it would potentially revisit clashing
economic philosophies on display in 2005. That likelihood
does not lead by much, however, and is far from guaranteed
given the still bad blood between the erstwhile Orange
Revolutionary comrades Yushchenko and Tymoshenko. Yushchenko
could find it easier, even if distasteful, to join
parliamentary forces with ex-PM and Party of Regions leader
Viktor Yanukovych, the candidate of the archenemy camp in the
2004 presidential elections. A deal with Regions would bring
in a government with which we could work, but which might
slow-track some Euro-Atlantic vectors.


2. (C) A less likely Tymoshenko-Yanukovych accommodation
would likely derail NATO aspirations, at least temporarily,
while an even less likely Yanukovych-led majority with no
Orange tint whatsoever would be a train wreck for Ukraine's
Euro-Atlantic goals. A final possible result to contemplate
would be stalemated negotiations and new elections, but that
would depend on a significant number of forces in the new
Rada seeing benefit from going through another election
process within two months. For our part, the U.S. should
continue to support democratic elections, to promote
reconciliation and cooperation among pro-reform elements, and
to push Euro-Atlantic integration of this pivotal country.
We shall have to await the election results and post-election
bargaining, however, before we will be able to judge
near-to-medium-term prospects for progress. End summary.

Constitutional reform requires Rada majority
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3. (C) Under constitutional reforms that came into effect
January 1, the Rada (parliament) elected March 26 will be
empowered to form a majority that will in turn take the lead
on selecting a Prime Minister (who will take the lead on
naming his/her Cabinet, with the exception of Defense and
Foreign Ministers, who will continue to be nominated by the
President). If most reputable current polling numbers remain
stable, it is highly likely that two of the top three parties
in the race will need to work together to form the new Rada
majority. The opposition Party of Regions led by Orange
Revolution loser and last Kuchma-era PM Viktor Yanukovych has
in the last several months been polling on average in the
range of 25-30 percent. President Yushchenko's People's
Union Our Ukraine (PUOU) lately has risen to around 20
percent. Support for ex-Orange PM Yuliya Tymoshenko's bloc
(BYuT) has been struggling in recent weeks to stay at 15
percent. Of the other parties likely to make it over the
3-percent threshold into parliament (Socialists, Communists,
Speaker Lytvyn),none appears likely to attract anywhere
close to 10 percent. A few other parties have a slim chance
to break 3 percent (ex-President Leonid Kravchuk's Ne Tak
bloc, radical Socialist Natalya Vitrenko's People's
Opposition bloc, and pro-democracy Pora-Reforms and Order
bloc),while a couple dozen others are even worse-positioned
to enter the 450-seat Rada.

Yushchenko in driver's seat...
--------------


4. (C) Given the personal and political dynamics involved, as
well as the still considerable power of the Presidency,
Yushchenko's PUOU is most likely one of the parties that
would be involved in a majority coalition-making deal. Of
the three party leaders, Yushchenko is less of an anathema
than Yanukovych and Tymoshenko in this three-way dynamic.
The mutual distrust between Tymoshenko and Yanukovych is
probably more of an obstacle than the negative feelings
either of them harbors toward Yushchenko. The relative
attractiveness of the parties in any coalition will depend on
how they do at the polls. Nonetheless, whether any of the
three will be able to come to an understanding with one or
the other will depend on their ability to put practical
politics over personal sentiments.

...but not by himself
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5. (C) It is important to note that, unless the numbers of
these three groups improve at the polls in March, any two
would still need to join with a third or fourth bloc to
achieve a majority. Moroz's Socialists and or Speaker
Lytvyn's bloc are the most likely to be brought into a
majority coalition, both because of their relative strength
at the polls and because of their relatively acceptable
ideologies. These parties' potential king-making role could
give them considerable influence in coalition talks.

Have we got a deal for you!
--------------


6. (C) A Yushchenko-Tymoshenko deal, despite the still
strongly felt falling-out, remains a real possibility. Such
a force would likely result in the greatest continuity in GOU
policies, both domestic and foreign. A Western-leaning,
Euro-Atlantic integrationist approach would continue.
Economic policies would also likely remain pro-reform, but an
important question would be the extent to which Tymoshenko
learned from the mistakes of her less-than-market-based
approaches she adopted during her stint as PM. Perhaps a
positive indication is that in her last weeks as PM she had
begun talking the talk of a more market-based approach to
resolving problems.


7. (C) The question of which party gets the Premiership and
the predominant influence over policies will to a great
extent be determined by the March vote results. The better
the showing of PUOU vis-a-vis BYuT, the more favorable an
environment for policy decisions we would like to see. For
instance, if PUOU were to take the Prime Ministry, the next
GOU would be less likely to pursue questionable policies such
as reprivatization.

Stranger things have happened...
--------------


8. (C) Perhaps the second most likely Rada coalition would
involve PUOU and Regions. If Yushchenko and Tymoshenko prove
unable to overcome their differences (perhaps because of a
Tymoshenko insistence on becoming PM),the strange bedfellows
combination of 2004's archenemies could be the result. There
is a precedent: the two signed a September 22, 2005 MOU that
led to the approval of PM Yekhanurov and lent renewed
legitimacy to Yanukovych and Regions after the elections
travesty of 2004. The March 2006 vote results, once again,
would be key in determining the two forces' relative
strengths. Were Regions to lead PUOU in the polls by 8% or
more, it may feel little reason to compromise on a candidate
for the PMship. Despite the pro-Russia stance of Yanukovych,
however, we would likely see a continued, albeit slower,
movement toward the West. Just as then-President Kuchma
found it in Ukraine's interest to have a "multi-vectored"
foreign policy, a GOU led by a strong Party of Regions
element would likely find it useful to maintain as much
leverage as possible against the influence of its
northeastern neighbor. Macroeconomic policies would likely
remain acceptable. The danger of a return to power of forces
keen on robbing the state on behalf of their and their
cronies' personal interests would have to be closely watched.

...but not stranger than this
--------------


9. (C) The least likely pairing among this threesome would be
Tymoshenko and Yanukovych. Overcoming mutual distrust and
personal distaste would be very difficult. However, were
both unable to reach a deal with Yushchenko and company, they
would be left to consider their mutual interests in regaining
influence over the government (whatever their conflicting
motivations). Such an outcome would be worst for U.S.
interests, as the Yushchenko team's pro-reform, pro-West
policies would be seriously derailed. Even if macroeconomic
policies did not suffer too much, the prospects of
market-oriented reform could be dimmer. Moreover,
significantly increased corruption would seriously affect
their impact. NATO membership would lose even lip service
support, while EU membership might remain a stated goal, but
would be less vigorously pursued.

The anti-Orange possibility
--------------


10. (C) Two other possibilities are worth mentioning. If
some opinion polls are to be believed, there is a potential
majority coalition that would involve Regions, but neither
Yushchenko nor Tymoshenko's blocs. While unlikely, the March
vote could result in a majority of Rada seats going to
Regions, Speaker Lytvyn's bloc, ex-President Kravchuk's Ne
Tak coalition, and radical Socialist Vitrenko's group. While
such a coalition would require bringing together a diverse
group, all but the last of these forces are driven more by a
hunger for power (and spoils) rather than ideology. The
attraction of an unspoiled anti-Orange coalition might drive
the groups together. And if Vitrenko and company do not make
it into the Rada, the more ideological Communists could
conceivably be convinced to join forces. Foreign policy
directions would turn even more toward Moscow. Even the
specter of a reversal of some civil society gains would
threaten, although most observers think that the civic
freedoms cat cannot be rebagged.

Doing it all over again?
--------------


11. (C) Finally, it is conceivable that the forces that make
it into the Rada in the March elections will not be able to
make the compromises necessary to form a majority.
Constitutionally, they have 30 days after taking their seats
to form a majority and 60 days after the divestiture of
powers of the Cabinet to appoint a new Cabinet. If they fail
to do so, the President, after consultations with the Rada
and Rada faction leadership, may dismiss the Rada, and new
elections are held within 60 days. Presumably, for this to
happen, significant forces would have to calculate that they
could do better in new elections.

U.S. approach should remain as is; we can calibrate later
-------------- --------------


12. (C) Our approach should be to continue to support
democratic elections in March. With the unlikely exception
of a majority coalition that excluded both Yushchenko's and
Tymoshenko's forces, the USG should be able to work with the
government put together by the majority that eventually
emerges. A Yushchenko-Tymoshenko alliance still would bode
best for reform prospects, and so we should continue to
encourage these pro-reform elements to work together.
Whatever government results, we will be seeking to promote
Euro-Atlantic integration of Ukraine. The March elections
will determine in the near-to-medium term the overall pace of
Ukraine's own progress, but, as we have seen over the past
year with a purely Orange government in place, progress is
unlikely to be simple, swift, smooth and steady no matter
what the results.


123. (U) Visit Kiev's classified website:
www.state.sgov.gov/p/eur/kiev.
HERBST