UKRAINE: SCENESETTER FOR OPPOSITION LEADER

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000467 SIPDIS SIPDIS NSC - STERLING, OVP - FISHEL, DEPT - EUR/UMB E.O. 12958: DECL: 02/22/2017 TAGS: PGOV PREL UP SUBJECT: UKRAINE: SCENESETTER FOR OPPOSITION LEADER TYMOSHENKO'S FEB 25-MAR 3 VISIT TO U.S. Classified By: Ambassador for reasons 1.4(a,b,d). ¶1. (C) Summary: Opposition leader Yuliya Tymoshenko arrives in the U.S. at a time when the feuding and deal-making between Ukraine's three major political forces is hamstringing policy-making and legislating. The struggle between President Yushchenko and PM Yanukovych for political dominance and the right to define national security and foreign policy has continued. After months of quiescence, Tymoshenko has returned to the ring as an active player, first making a one-time tactical voting deal with Yanukovych in January, now trying to forge a more strategic bond with Yushchenko/Our Ukraine (OU). Tymoshenko's bloc (BYuT) holds the power to be the spoiler by playing the President and PM for her tactical advantage. Tymoshenko's end goal remains early parliamentary elections and a return to power. Amidst talk of deal-making from all camps, and distrust on all sides, the political forces are also focused on how the Constitutional Court will weigh in on a myriad of questions about how the political system should function. In spite of the political maneuvering, the primary gains of the Orange Revolution in societal attitudes, freedom of the press, and foreign and security policy remain intact. ¶2. (C) Messages/Themes: --Tymoshenko needs to hear from us that it is important for Ukraine's future that she act like a statesman in opposition and support national interests, not to be seen as only pursuing tactical advantage and a return to power. --The Yanukovych team will be the dominant force for at least the next six months, if not longer, and our goal should be to encourage good policy choices and constructive cooperation between key players to move the country forward. She can play a responsible role promoting good policy choices or she can pursue tactical political advantage. --Tymoshenko often voices her support for tougher market reforms and NATO membership to western audiences, but chooses more populist themes at home; it will be important to encourage her to voice the same national interest messages in Ukraine and back up her words with actions. --Tymoshenko should use her opposition pulpit to offer constructive alternatives to current government positions and to encourage compromise on key issues in order to ensure that the interests of her voters -- and Ukraine as a whole -- are advanced. For example, Tymoshenko could be encouraged to be a more active proponent of energy efficiency and foreign investment in domestic off-shore exploration to reduce dependency on Russian gas. End summary and comment. Viktor and Viktor - how about Yuliya? -------------- ¶3. (C) The dynamic between Yushchenko and Yanukovych, as the institutions of the presidency and premiership/cabinet struggled to define power and influence under the new rules of post-constitutional reform which came into play in 2006, was the key political factor in Ukrainian politics from August 2006 to January 2007, with Yanukovych playing the consistently winning hand. After appointing Yanukovych PM in August, Yushchenko essentially ignored Tymoshenko, whose ratings consistently double his own, and focused nearly all his attention on reaching a modus vivendi with Yanukovych. Tymoshenko made him pay in January, when BYuT joined the coalition in overriding Yushchenko's veto on the new Cabinet of Ministers law which makes additional inroads on presidential authorities. While Tymoshenko had tactical horse-trading reasons for the vote, along with an eye towards an eventual return as premier, she also clearly intended it as a wake-up call to Yushchenko, and a reminder that he depended on her to make the power of his veto, one of his few tools of influence left, stick. Getting back into the game, productively or not -------------- -- ¶4. (C) The CabMin vote handed Yanukovych a crucial victory and weakened Tymoshenko's claim to be the only political leader to have stayed true to the spirit of the Maidan, demonstrating her willingness to deal with Regions on dubious legislation in her pursuit of tactical advantage. But it apparently also served as the intended wake-up call to Yushchenko, as he and OU finally engaged Tymoshenko and BYuT to work as a joint opposition to the Regions-led coalition. Tymoshenko's strategy remains focused on creating conditions in which Yushchenko could dismiss the Rada and call new KYIV 00000467 002 OF 003 elections, which she feels confident would strengthen her and return a BYuT-OU alliance to office. ¶5. (C) Nevertheless, Yushchenko's aversion to confrontation, her own aggressive street-fighter tactical instincts, and their mutual distrust and different agendas, are likely to complicate hopes for effective renewed cooperation. Moreover, Tymoshenko and OU are still trying to come to terms with what it means to be a successful and functioning opposition, especially with no national elections scheduled for three years. BYuT does enjoy significant representation at the local and regional government level, both on councils and as mayors, especially in central and western Ukraine, which gives her political leverage to push for changes outside of Kyiv. ¶6. (C) In Washington, she needs to hear that it is important for Ukraine's future that she take the high road and act like a statesman in opposition, support national interests, and help achieve results beneficial to the country, not only pursue tactical advantage with an eye solely on returning to power. It is not clear Tymoshenko fully understands the constructive role an engaged opposition in a democracy can play, nor how achieving results even while out of power could advance her political fortunes. Tymoshenko should use her popularity and pulpit to offer alternatives to current government positions and pursue constructive compromise on key issues to move Ukraine forward. NATO, MAP, and a possible referendum -------------- ¶7. (C) One issue which Tymoshenko has studiously avoided domestically, though not in speeches and op-eds abroad or private conversations, is Ukraine's national security interests and Euro-Atlantic aspirations. While Yushchenko/OU too avoided NATO as an issue in the 2006 election cycle, that changed after the elections. PM Yanukovych has set the current government policy as supportive of cooperation with NATO, but not actively pursuing membership via a Membership Action Plan (MAP). While Yanukovych acknowledges the need for a public information campaign on NATO, he/Regions has not taken an active role. A potential wild card in the medium future is a signature-based drive to hold a referendum on NATO and Single Economic Space (Yushchenko has appealed elements of the outdated 1991 law on refenda to the Constitutional Court, buying time). Given the current lack of public support for NATO (roughly 25 percent),such a vote would fail. Tymoshenko should be encouraged to demonstrate her statesman-like role by speaking more often to Ukraine's strategic direction and place in the world, and not only in economic terms (eventual EU membership, energy independence). Russia and the Gas Relationship -------------- ¶8. (C) Relations with Russia, always complex, feature energy issues as the dominant factor, not to Ukraine's advantage. The Yanukovych Government managed to conclude a positive price deal for the 2007 winter season soon after coming to power ($130/thousand cubic meters of national gas),though at what cost to other national interests remains unclear. Russia clearly wants to take control of Ukrainian infrastructure, and they may have a Trojan Horse ally in Fuel and Energy Minister Boyko, a founder of the nontransparent RosUkrEnergo (RUE) middleman mechanism. The GOU has floated ideas of forming a consortium with Russia to build expanded gas pipeline capacity to Europe, but has so far stopped short of allowing Russia any role in owning or managing the existing Ukrainian gas pipeline network. ¶9. (C) Befitting her roots in the gas sector, the former "Gas Princess" Tymoshenko has taken a leading role in Rada criticism of government deals with Russia, both in 2006 and ¶2007. At BYuT's initiative, the Rada overwhelmingly approved a ban February 6 on the sale, transfer, or rental of Ukraine's energy infrastructure (namely pipelines) to anyone (but clearly aimed at Russian parties). She often speaks of bringing greater transparency and openness to the energy sector but has initiated no action in the Rada in support of this goal. Tymoshenko could be encouraged to be a more active proponent of energy efficiency and foreign investment in domestic off-shore exploration to reduce dependency on Russian gas. Pushing on Market Economics, investment climate -------------- -- KYIV 00000467 003 OF 003 ¶10. (C) Ukraine's economy has performed well since the March 2006 elections, with GDP growth near 7 percent and increased consumption spurred by rising social pension and wage levels. As opposition leader, Tymoshenko's comments on the 2007 budget did little to dispel the notion that she is a populist on economic policy, an image that arose during her stint as PM, when she raised social spending, advocated price controls on sugar, meet, and gasoline, and pushed "reprivatizing" former state enterprises sold at cut-rate prices to well-connected old-order oligarchs. She winces at the term "reprivatization" and may better understand its deleterious impact on the investment climate toward the end of her PM tenure. Tymoshenko does cast a useful critical voice on current GOU-proposed policies that may favor oligarchs rather than promote Ukraine's overall economic health, as well as on the shadowy nature of current energy supply arrangements. ¶11. (C) Her Washington meetings give us an opportunity to push Tymoshenko to play a constructive role to achieve agreed-on goals of increased economic integration with Europe and the world, as well as policies that enhance the business and investment environment for U.S. and Ukrainian businesses alike. We can also encourage Tymoshenko to build on one of her real accomplishments as PM in 2005, which was improving the government's tax and customs policies to eliminate a significant element of corruption and smuggling, and simplifying business registration procedures. ¶12. (U) Visit Embassy Kyiv's classified website: www.state.sgov.gov/p/eur/kiev. Taylor