C O N F I D E N T I A L SECTION 01 OF 03 KYIV 001843

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/30/2017
TAGS: PGOV PREL PINR UP
SUBJECT: UKRAINE: AKHMETOV WING OF REGIONS GEARS UP FOR
ELECTIONS


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


1. (C) Summary. In meetings with Party of Regions leaders
Raisa Bohatyreva and Borys Kolesnikov--both members of the
business-oriented wing of Regions dominated by oligarch Rinat
Akhmetov--it was clear that there was an ongoing and heated
debate within the party over strategies for the election, for
post-election coalition building, and longer term economic
policies. Even as both denied that there was any split in
the party, they talked about "us" and "them". They both
spoke of a wing of the party that wanted to see more moderate
positions on NATO and the Russian language and that was
pushing for a broad coalition with Our Ukraine. Both
suggested that First Deputy Prime Minister Azarov was a major
obstacle in moderating the party.


2. (C) Comment. Given Regions discipline and sense of
self-preservation, it is unlikely that this split will lead
to a formal rupture of the party, at least in the near term.
What it does indicate, however, is that there is a struggle
within Ukraine's most popular party for the future of the
party. The powerful Akhmetov, apparently supported by PM
Yanukovych, appears to have clear goals about what he wants
the party to be and do, but he does not seem able to dictate
unilaterally to the party. On the other side is Azarov, and
possibly Deputy PM Klyuyev, representing a number of other
personal/financial interests within the party and possibly
responding to outside pressure from the Kremlin. The
publishing of Regions' party list on or after August 4--and
who appears on it--will be a significant indicator of which
side is gaining the upper hand. It has been easier so far to
argue the merits of a fair election to the Akhmetov camp, but
it may be Klyuyev and Azarov, and most importantly Prime
Minister Yanukovych, who decide Regions' strategy. End
summary and comment.

Kolesnikov: Ukraine's Business Needs Radical Reforms
-------------- --------------

3. (C) In his July 27 meeting with Ambassador, Regions MP
Kolesnikov, Akhmetov's right-hand man, started off the
meeting denying that there were different groups within
Regions. There were differences of opinion, of course, but
he and Akhmetov hated it when the press and other political
forces exaggerated the split. He then launched into a long
discussion of what his "group" inside Regions
wanted--primarily a pragmatic government and accelerated
economic reforms. Akhmetov had hired McKinsey and Company to
prepare an economic platform for Ukraine based on
international standards. Originally Akhmetov had planned to
present the platform publicly this summer, but now he would
wait until October so his strategic vision would not be
muddied by the campaign. Their basic goals were to decrease
the role of the government in managing the economy and to
free up the flow of money in and out of Ukraine to facilitate
investment and savings. When Ambassador asked about likely
campaign platforms for Regions, Kolesnikov said that people
could talk about NATO or the EU, but if Azarov cannot explain
to people what Ukraine's comparative advantage in the world
market was, then Ukraine is in trouble. Kolesnikov believed
that not even the President's team was ready for truly
radical economic reform.


4. (C) Kolesnikov alluded to Azarov as the leader of the
other wing of Regions, although he was circumspect in his
criticism. He also admitted that Akhmetov, as well as he,
had considered carefully whether to run for the Rada again or
go back to business, saying that he did not enjoy
parliamentary work. In the end, neither wanted to damage
Regions' reputation and they had decided that to leave in the
face of short-term elections would be perceived as a show of
no confidence in the party; so for now it looked as if they
would stay.

We Want Our Ukraine, but They Want the Communists
-------------- --------------


5. (C) There was also a difference in terms of how the two
wings of Regions viewed election and coalition partners,
according to Kolesnikov. He thought that the Orange
Megabloc's stated intention to ally with BYuT had encouraged
some Regions leaders to be open to the participation of other
political forces, like the Socialist Party or the Social
Democratic Party (united), on the Regions list. In the end,
he thought Regions would take a few individuals, like
Emergencies Minister Shufrych and Deputy Justice Minister
Inna Bohoslovska--a Pinchuk political ally--and possibly
Economy Minister Kinakh, to whom Regions had a "moral
obligation," but that there would be no wholesale swallowing
of other parties. Bohatyreva (details below) echoed these

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comments, saying that while Bohoslovska's party Viche might
merge into Regions, Regions was not interested in seeing a
lot of politicians from the Socialist Party or the Social
Democratic Party (united) join their list, since their
reputations were tainted. However, they cautioned, some
Regions members wanted the new coalition to be the same as
the old--with the Communists and Socialists, should they
cross the three-percent barrier.


6. (C) Kolesnikov said the preference of his wing of Regions
was a a broad coalition with Our Ukraine--uniting liberal
parties made the most sense--but he left open the possibility
that another coalition with the Communists could happen.
Kolesnikov said that, in 2006, Akhmetov had resisted the
coalition with the Communists and Socialists until it seemed
the only choice. (Note. Yanukovych also has on many
occasions stated his strong preference for a coalition with
Yushchenko. End note.) Right now, according to Kolesnikov,
there were high-ranking Regions members conducting
negotiations with Our Ukraine, but because there was so much
distrust between the two groups, it would be hard to form a
coalition. OU had lost credibility with Regions when it used
Regions' proposal to form a coalition after the March 2006
elections as a bargaining chip to try to wring concessions
out of Tymoshenko. For its part, Regions never should have
signed the Universal unless it intended to fulfill it. A lot
would depend on what OU does in the next couple of weeks.

Kolesnikov's Election Strategy
--------------


7. (C) Kolesnikov said that Regions' political council would
meet July 30 to decide who would run the campaign and to
finalize the party list. He acknowledged that he was one
candidate to lead the campaign effort. (Note. In a July 24
meeting, Environment Minister Dzharty told Ambassador that he
too was a candidate to lead the election campaign, as he had
done in 2006. End note.) However, the list will remain
secret until the party's congress on August 4. His wing of

SIPDIS
the party, the "business component," was pushing hard to
reach out to businessmen in KYIV, Odesa, and even in Western
Ukraine to bring more business-oriented people into the party
and tilt the balance in their favor. In addition, such a
move would give Regions a little more of a national posture.


8. (C) In terms of campaign issues, NATO would probably come
up, although Kolesnikov preferred to see it kept quiet. He
said that non-bloc status was appealing for many in Regions,
and he implied he was one of that number, because it
protected relations with Russia, a strategic business
partner, while still allowing for the improvement of
relations with the West. Later, he said, in a couple of
years when things are calmer, the NATO issue could be
readdressed--via an education campaign and the natural
shifting of public opinion over time.

Bohatyreva: Regions is Running
--------------


9. (C) At a separate July 27 meeting, Regions faction leader
Bohatyreva told Ambassador that the decision had been made by
party leadership to participate in the elections. They were
now preparing for the August 4 congress and the campaign;
Yanukovych was on board with this plan. Regions campaign
would be centered on economic growth and social issues.


10. (C) Bohatyreva said Regions was not yet seriously
discussing post-election coalitions, but pragmatism suggested
that a broad coalition with OU was the best option for
stability. Regions was conducting ongoing talks with OU, and
sometimes with BYuT. The way to get to a broad coalition was
to focus on unifying issues--like economic policies--and
avoid divisive issues. However, she warned, Ukrainian
politics was often emotion-driven and if the election became
very tense, coalition building would be much harder. There
were some in Regions who would like the party to soften its
stance on NATO and the Russian language--but Regions will be
hemmed in by Vitrenko trying to win Regions voters with these
issues on one side and BYuT using these issues to try to
discredit Regions on the other. In addition, in such a short
timeframe, it would be hard to develop new platforms, so all
major parties would turn to populist slogans to try to win
voters.

Azarov Is Playing His Own Game
--------------


11. (C) Bohatyreva's true loyalites--to Akhmetov--and
rivalries--with Azarov and Klyuyev--within the party came out
most clearly when Ambassador asked her about her

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controversial resignation from the Tender Chamber. (Note.
The Tender Chamber is a civic organization that manages and
provides oversight of the government procurement process.
Bohatyreva stepped down as honorary president on July 12 amid
speculation that she was forced out by Azarov, who was
looking to funnel profits from kickbacks into his own
channels. End note.) Bohatyreva said that she had tried to
put an end to some of the corrupt schemes she saw, which
brought her into conflict with a number of ministers,
including Labor Minister Papiyev, EnergoAtom Head Derkach,
Energy Minister Boyko, and Health Minister Haidayiv, all of
whom she placed in Azarov's, and possibly Klyuyev's, circle.
She said Azarov pushed for control of the Tender Chamber, and
she was subsequently told to resign for the good of the
party. She also criticized the process Regions used to make
the 2006 party list, saying the process was subject to
similar machinations and charging that the new party list
could just be convoluted and nontransparent. In the end, she
concluded, all these Regions leaders looked for approval from
"a man who loves football"--a reference to Shakhter owner
Akhmetov--and she knows she is playing for the right team.


12. (U) Visit Embassy KYIV's classified website:
www.state.sgov.gov/p/eur/kiev.
Taylor