UKRAINE: PRESIDENTIAL SECRETARIAT AND OU-PSD

C O N F I D E N T I A L SECTION 01 OF 04 KYIV 002634 SIPDIS SIPDIS E.O. 12958: DECL: 10/17/2017 TAGS: PGOV PREL UP SUBJECT: UKRAINE: PRESIDENTIAL SECRETARIAT AND OU-PSD PROMOTE THIRD WAY KYIV 00002634 001.2 OF 004 Classified By: Ambassador for reasons 1.4(b,d). ¶1. (C) Summary. Leader of Our Ukraine-People's Self-Defense Bloc Yuriy Lutsenko and Deputy Head of the Presidential Secretariat Roman Bezsmertniy told the Ambassador in separate SIPDIS meetings October 16 that OU-PSD and President Yushchenko would support an orange coalition and Tymoshenko to be Prime Minister; however, the end goal for their team was a "technical" government, led neither by Tymoshenko or Yanukovych, but by someone neutral, such as Presidential Chief of Staff Baloha. They both described variations of the same plan, where Tymoshenko would become prime minister, serve briefly, and then be removed for failing to achieve key goals. With a deadlock in the Rada -- neither BYuT nor Regions would be able to form a new coalition without OU-PSD -- the President's team would suggest a technocratic PM and Cabinet, backed by a loose configuration of OU-PSD, Regions, and Lytvyn Bloc. This arrangement would be temporary, one to two years, while the constitution was rewritten to clarify the power structure in Ukraine. Then there would be new elections. Former presidential spokesman and new MP for OU-PSD Irina Gerashchenko told us that her bloc is solidly behind Tymoshenko and the orange coalition. Perhaps a sign that this is now the official plan, President Yushchenko on October 16 endorsed the orange coalition agreement between OU-PSD and BYuT. ¶2. (C) Comment. Lutsenko and Bezsmertniy's plan, although very complicated, could work, but underscores how unstable Ukraine's government is likely to be for the next six to twelve months. Moreover, the success of the strategy is based on the other parties reacting as the Presidential Secretariat has calculated they will. The first test will be SIPDIS whether the Secretariat and OU-PSD can convince the few holdouts in OU, such as former PM Yekhanurov and NSDC Secretary Plyushch, to vote for Tymoshenko as PM despite SIPDIS their outspoken opposition to her. The President's team is also gambling that Regions' threat to not take their seats is a bluff and that Regions will wait quietly in the opposition until OU-PSD is ready for stage two. Finally, Lytvyn Bloc could still swing events. As Bezsmertniy told the Ambassador, if Lytvyn is willing to formally join the orange bloc, that would significantly strengthen Tymoshenko's position and give her government some staying power. On the other hand, if he openly allied with Regions, that might persuade some opponents within OU-PSD and BYuT to switch sides and join a new broad coalition. Finally, Gerashchenko's comments highlight the fact that this new strategy may come as a surprise for many within OU-PSD, suggesting once again that these political intrigues could in the end split the President's party. End summary and comment. Lutsenko: Our Two-Step Plan -------------- ¶3. (C) OU-PSD leader Lutsenko, looking much more relaxed and confident than the last time we saw him, told the Ambassador October 16 that finally the President had approved a plan for government formation, which would take place in two stages. First, the orange coalition agreement will be signed and Tymoshenko will be confirmed as Prime Minister. Lutsenko was confident that Tymoshenko will get all 228 votes from BYuT and OU-PSD, plus maybe 10-20 votes from the Lytvyn Bloc. He acknowledged that there are seven or eight people in OU who hate Tymoshenko -- including Yuriy Yekhanurov, Ivan Plyushch, Volodymyr Stelmakh, and Valeriy Borysov -- but he believed that they will all do what the President says; Yushchenko had said directly to Lutsenko on October 15 that he would instruct them to vote for Tymoshenko. Of course, Regions would try to interfere. Deputy Prime Minister Andriy Klyuyev had offered Lutsenko 20 million (he did not say whether it was hryvnia or dollars) to stay silent about his coalition preferences, so he could just imagine how much money was being thrown at MPs to encourage them to defect. ¶4. (C) Tymoshenko would then have two-three months as prime minister to produce results. If she let economists like Viktor Pynzenyk and Serhiy Terokhin run economic reform, then maybe she would actually accomplish something. However, Lutsenko had his doubts. He thought her economic ideas -- renationalizing all heating and energy companies, repaying the 130 billion hryvnia (about 26 billion USD) from defunct Soviet Sberbank (Oshchadbank in Ukrainian) to investors in only two years, releasing all conscripted soldiers on January 1, 2008 -- showed that she was little better than a communist. Most likely, she will fail. ¶5. (C) Step two will be to remove Tymoshenko. Then, at that point, presented with a situation where there are not enough MPs to support a BYuT prime minister or a Regions prime KYIV 00002634 002.2 OF 004 minister, because OU-PSD will make sure their votes properly split between the two sides, Lutsenko and the President will propose a "technocratic, apolitical, and temporary" government. Lutsenko said that because the constitution does not require a new coalition to be formed if the previous one falls apart, Yushchenko can decide to allow the Rada to continue without a formal majority. This will allow OU-PSD to cooperate with Regions without having to formally go into coalition together. Lutsenko did not say who the Prime Minister would be in this scenario, but named some others who might make good ministers, including Volodymyr Radchenko as Interior Minister and Roman Shpek as Economy Minister. This temporary, technocratic prime minister would have to be subject to a law banning him, or possibly the whole technocratic cabinet, from running for president in the next election, so that people would understand that this was not a power grab but a serious effort to implement some policies. Regions Will Go Along in the End -------------- ¶6. (C) Lutsenko believed Regions would cooperate with this scenario because people like Akhmetov and Kolesnikov wanted a functioning government. Regions was already offering to give OU-PSD everything they want to back Yanukovych as PM. In the end, Akhmetov and Kolesnikov knew Yanukovych's political career was coming to an end and they would agree to cooperation without Yanukovych as PM. He added that it would be helpful for the West to weigh in with Akhmetov and reassure him that being in the opposition was not the end of the world. In addition, according to Lutsenko, Yushchenko was still considering giving the Speakership to Regions for someone like Raisa Bohatyreva so that Regions felt it had something to show its electorate. ¶7. (C) Lutsenko argued that this was the only workable plan for forming a government. To go straight to a Regions coalition with Baloha as PM would be political suicide for OU-PSD. Their voters expected them to at least try a coalition with BYuT. He said he was confident that he and OU leader Kyrylenko controlled 40 MPs in the OU-PSD faction, so they could block a broad coalition with Regions and Lytvyn Bloc. ¶8. (C) Once the temporary government was in place, they would start work on a new constitution. Lutsenko said that the main goal was to clarify whether Ukraine was a parliamentary system or presidential. His own view was that if Yushchenko wanted to be reelected, he would have to choose a parliamentary system where the president was elected by the parliament and was more ceremonial. Lutsenko was sure that Yushchenko would never again win a competitive election. (Note. On October 16, longtime Yushchenko adviser Oleh Rybachuk told the Ambassador that he, Bezsmertniy, and Vitaliy Haiduk have all bluntly warned the President that he will not be reelected. End note.) In this form of government, Lutsenko would want governors and raion heads to be popularly elected to break the vertical of power from the president's office over local self-government. Lutsenko's Personal Ambition to Run Kyiv -------------- ¶9. (C) As for his own future, Lutsenko wanted to be in charge of Kyiv; this was the only way where he could tangibly demonstrate that he was serious about reform, fighting corruption, and implementing change. One of the 12 laws that OU-PSD now wanted passed before the prime minister's confirmation vote would separate the positions of mayor of Kyiv and head of the Kyiv city administration (which has the same status as an oblast governor). Most of the power for city administration would be transferred to the administration head and the mayor would become ceremonial. If this law was not passed right away, Lutsenko would take a deputy prime minister position under Tymoshenko until the law was approved. He said that he will also work with OU to form a new, unified political party in order to prevent the development of a two-party system. Bezsmertniy Tells a Similar Tale -------------- ¶10. (C) Presidential Administration Deputy Head and Our Ukraine political insider Roman Bezsmertniy told a similar story to the Ambassador October 16 -- Tymoshenko might get her chance to lead an orange coalition government, but it would probably be unstable and short-lived. When the orange coalition collapsed, Presidential Administration head Baloha would end up as a technocratic Prime Minister for the next year, as the President and political leaders turned to KYIV 00002634 003.2 OF 004 constitutional reform. Sketching out the numbers with one of his multiple color pencils, Bezsmertniy put 228 votes in the orange column versus 222 votes for a combined Regions/Communist/Lytvyn Bloc force. In his view, a three vote majority was a serious margin for Europe, but not for Ukraine. He noted that Lytvyn had a key role to play -- if he threw in his lot with orange, then they would have a 248 seat majority and the game would be over. However, Bezsmertniy thought it far more likely that Lytvyn would watch and wait, and after a vote was taken on a Tymoshenko premiership, he would move to the Regions-led opposition, where he felt more comfortable. ¶11. (C) Bezsmertniy dismissed a broad coalition as impossible since Tymoshenko controlled more than 150 seats. If faced with a broad coalition, she could refuse to accept BYuT's seats in the new Rada. In his view, any conflict between Our Ukraine and BYuT could trigger this situation; Tymoshenko's assurances to the Ambassador and others that she would stay in the Rada and play by the rules no matter what would be forgotten. Bezsmertniy said that OU-PSD had made itself a hostage to Tymoshenko and it was no longer an independent force. Bezsmertniy noted that three OU-PSD members -- NSDC Secretary Plyushch, former PM Yekhanurov, and former Kyiv Deputy Mayor (and Yekhanurov loyalist) Borysov -- had refused to sign the new orange coalition agreement, bringing the total number of seats supporting orange to just 225, one short of a majority. He said that these three were working for a broad coalition, but he was dismissive of them. In his view, a broad coalition could easily have been established if the Socialists had made it across the 3-percent threshold and into the Rada; the orange coalition would have been denied and the game would have been over, leaving Regions in the decision-maker's seat. Similarly, if Lytvyn turned to orange, then the game would be over -- this was the negative scenario for Regions who would then have no choice but to start to destroy the Rada. ¶12. (C) Once Baloha became a technocratic PM, according to Bezsmertniy, the President would be in the driver's seat -- his involvement gives all sides hope and keeps them in the game. Tymoshenko could possibly be given something like the Kyiv Mayor's job. The five key figures in politics right now were Baloha (working with Yushchenko),NSDC Secretary Plyushch, Regions financier Rinat Akhmetov, PM Yanukovych, and Tymoshenko. Reforming Constitution is Key, Other Policies Less Important -------------- -------------- ¶13. (C) Bezsmertniy suggested that the new government, whatever color and form, would be temporary in nature -- both PM and Speaker. It would only exist for the year while constitutional reform was debated and decided. Obviously neither Tymoshenko nor Yanukovych wanted to be a "temporary" PM and Lytvyn didn't want to be a "temporary" Speaker. However, it was the job of President Yushchenko, backed by the international community, to develop new rules of the game and then to hold a new election based on those. Otherwise, Bezsmertniy predicted a long negotiation process resulting in a "surrogate" government taking power. In the current set-up, neither side was able to let the other side work and this was a dead-end for the country. Only constitutional change could get the country out of this situation. ¶14. (C) Bezsmertniy was skeptical that the "technocratic government," in power for the year while Yushchenko pursued constitutional reform, would accomplish much in terms of policy; constitutional reform would take up 90 percent of the President's time, giving him only about 10 percent of his time to spend on policy. Bezsmertniy downplayed the importance of WTO, NATO and EU membership for Ukraine, arguing that the country needed to focus on its own complicated development. He said that tough issues like natural gas supplies from Russian would be more easily managed with one Ukrainian center of power. Yushchenko would take care of the issue, and the Kremlin would be happy to deal with the President as the Ukrainian government. Bezsmertniy acknowledged that the NSDC was "nearly discredited," predicting that some kind of higher council would need to be established in the new constitution in order to coordinate the activities of all of the state bodies. Inside OU -------------- ¶15. (C) Bezsmertniy concluded with several comments on the Our Ukraine party organization. He acknowledged that although the party leader is Yushchenko, the management of the whole structure was controlled by Baloha. For the party KYIV 00002634 004.2 OF 004 to function, serious resources were needed and only Baloha was in a position to provide those. Baloha's next task was to unify the party, and as executive manager, he needed to make Kyrylenko his political counselor and Lutsenko the faction leader. In Bezsmertniy's view, the party organization in the field was dead. He said that Yanukovych and Tymoshenko had done well in the last election because of their strong party organizations and this was why he needed to help Baloha strengthen OU's internal structure. This was the task ahead. Interestingly, Bezsmertniy, who was one of the leaders of the presidential administration group working on a new constitution earlier this year, told the Ambassador that he would no longer be involved in this process. Gerashchenko: A New Voice in OU -------------- ¶16. (C) Irina Gerashchenko, former Yushchenko press secretary and current head of Unian wire service, is eager to take her seat in the new Rada and support an orange coalition, she told us October 16. She said that she was part of the new group of young, ideological parliamentarians joining the OU-PSD faction. In total, she said, they were 25 percent of the faction and they were solidly behind an orange government. She stressed that she was a firm supporter of the President -- she joined the bloc on Yushchenko's quota -- but what the Presidential Secretariat said does not always equal what the bloc thinks. She dismissed the threat of Yekhanurov and his allies undermining Tymoshenko's confirmation as unlikely. ¶17. (C) Gerashchenko also thought Regions would take their seats; to not do so would lead to another election where they would fare even more poorly than last time. The orange coalition would offer them a law on the opposition that would give them key Rada committees, including Budget and Free Speech. The door was open to Lytvyn, but she warned that the former Speaker does not control all of his MPs. (Note. A charge we have heard from many interlocutors, who point to the multiple key financiers of his campaign as proof. End note.) OU, Gerashchenko admitted, had lost depth and talent in the past couple of years and needed to rebuild. ¶18. (U) Visit Embassy Kyiv's classified website: www.state.sgov.gov/p/eur/kiev. Taylor