UKRAINE: DAS KRAMER'S DISCUSSIONS OF DOMESTIC

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000686

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/23/2017
TAGS: PGOV PREL UP
SUBJECT: UKRAINE: DAS KRAMER'S DISCUSSIONS OF DOMESTIC
POLITICS

REF: A. KYIV 643


B. KYIV 648

C. KYIV 618

D. KYIV 666

E. KYIV 642

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


1. (C) Summary: In a wide range of conversations EUR DAS
David Kramer and NSC Director Adam Sterling conducted with
Ukrainian officials and commentators March 18-20, the
overriding theme in domestic politics was that all branches
of the government were consumed with the ongoing struggle for
political power, but that political alliances were beginning
to shift in an effort to break the impasse and maximize best
possible personal outcomes. Almost everyone said that early
Rada elections were unlikely, but the mere threat of them
kept players across the political spectrum devoting attention
and resources to strategizing accordingly, detracting from
the larger purpose of leading the country forward. Many
echoed the theme of a lack of strong, enlightened leaders in
or out of the government; the best that could be hoped for
was enough cooperation to bring stability while Ukrainians
wait out this period of political development.


2. (C) Comment. The subsequent developments March
21-23--Arseniy Yatsenyuk's confirmation as Foreign Minister,
Kinakh's departure from OU to join Yanukovych's Cabinet as
Economy Minister, raids against civic activist Yuri Lutsenko
and his allies (ref A-B, D-E) show the rapid movement of
developments in the days following Kramer and Sterling's
visit. Opinions remain split whether concrete cooperation
between Yushchenko and Yanukovych will emerge, as many
preferred, or whether Yanukovych's complete domination will
result, as per Tymoshenko. As usual, Tymoshenko seems ready
to continue fighting, but she may have fewer options. All
agreed that Regions would remain the dominant political force
for the time being, and that continual engagement of
Yanukovych and Regions, especially the more western-oriented
businessmen in the party, to keep them moving in a
pro-European direction was paramount. End summary and
comment.

No Shining Prince, Broad Coalition May Be the Best Answer
-------------- --------------


3. (C) One conclusion often repeated in various formulations
was that there were no real "good guys" left in the battle
for power. Highly-respected journalist Yuliya Mostova told
us that no one in the political leadership right now had any
vision; Yushchenko and Yanukovych were both weak leaders.
Political analysts Oleksiy Haran and Ihor Popov said that
this was a dangerous time. They argued that the optimism
following the signing of the Universal last August was gone;
Ukraine now faced a return to Kuchmaism and oligarchic
capitalism. Former FM Tarasyuk blamed the CabMin for
repeatedly backing away from implementing agreements made
with the President, while Defense Minister Hrytsenko said
Yushchenko and the "orange" team failed to take advantage of
two years in office to change the system of government. Even
Tymoshenko had no real strategy, said Hrytsenko, preferring
statements afterwards rather than effective work. We "need
to live through this phase, and see progress more slowly and
on a lower level."


4. (C) On a more positive note, all agreed that most key
players wanted broad cooperation and stability. Mostova said
that Regions oligarch Rinat Akhmetov had always wanted the
broad coalition with Yushchenko. Yanukovych was inclined
this way as well, but the hawks in his circle, like Chief of
Staff Lyovochkin and Justice Minister Lavrynovych, pushed for
continued conflict. Similarly, Yushchenko wanted peace, but
his Secretariat and party continued to fight. Rada
EuroIntegration Committee Chairwoman Propokovych (OU,
affiliated with ex-PM Yekhanurov) said there had to be some
cooperation with Regions. She thought that Regions faction
leader Raisa Bohatyreva understood this and might be ready to
cooperate. Haran and Budget Committee Chairman Volodymyr
Makeyenko (Regions) maintained that Regions' big businessmen,
including Akhmetov and Kluyev, wanted stability; a broad
coalition was the only way to achieve that stability.
Makeyenko claimed that Regions were prisoners to
counterproductive Communist and Socialist demands.


5. (C) Comment: Regions' complaints about its junior partners
are somewhat self-serving, since it chose not to conclude a
broad coalition with OU in August, as many expected, in order
to have more pliable junior partners. The CPU and SPU
continue to wield some leverage over Regions because,
according to the constitution, if one or the other junior
partner leaves the coalition before any other group joined,

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leaving the coalition with fewer than 226 MPs, the Yanukovych
government would have to resign and a new majority formed.
While a new Regions-dominated majority would be the most
likely outcome, the resulting Pandora's box could lead to an
(improbable) resurrection of the OU-BYuT-Socialist coalition
that collapsed stillborn in June 2006 or even new elections.
However, most observers see a broad coalition and the effort
to attract new members to the coalition as a Regions strategy
to either gain the 300 votes needed to change the
constitution (presumably with CPU support) or to jettison the
communists from the coalition while holding on to a solid
majority.

No One Sure When the Fighting Will Stop
--------------


6. (C) There was no agreement on a timeline for when
political developments will settle down. Most argued that
wanting cooperation and figuring out how to get there, and on
whose terms, were not the same thing. Presidential adviser
Rybachuk believed that the confrontation phase was climaxing;
fatigue, dropping ratings, and lack of advantage should lead
to calmer waters (note: the meeting with Rybachuk occurred
March 18, prior to the launch of a coordinated attack by the
prosecutor general's office and police March 19 against civic
activist Yuri Lutsenko and his allies, which Yushchenko
denounced as a "politically ordered" effort. End note). NGO
activist Popov said that he believed that Regions would
consolidate all power by early 2008, predicting half of OU
would join the majority because they were tired of being in
opposition. Regions' Makeyenko suggested the struggle would
continue through the next presidential election, predicted to
take place in late 2009 or early 2010, at which point the
country would be split between BYuT and Regions.

United Opposition is divided
--------------


7. (C) Opposition leader Tymoshenko remain focused on the
same plan since last fall, early elections and the removal of
the Yanukovych government. She argued that Yanukovych and
Moroz were not long-term partners but tactical allies in
extracting what they want from Yushchenko. Yanukovych was
stacking the Prosecutor's Office (PGO),and the government in
general, with Donetsk loyalists, and there was nothing
Yushchenko could do about it. Since Yushchenko and
Yanukovych could not work together, the President either
would lose all power or work with the opposition to force
early elections.


8. (C) Views in OU remain split, however, over the wisdom of
the path of confrontation. Tarasyuk stated that OU had taken
the political decision to work for early elections, even
though the legal conditions currently do not exist. However,
Prokopovych and even Tymoshenko herself acknowledged that the
Kinakh, Yekhanurov and Poroshenko groups in OU were not
comfortable with this strategy of working with the
opposition. Kinakh was the first to jump, agreeing March 22
to become Minister of Economy; his six MPs formally joined
the majority coalition March 23.

No Early Elections, but what if?
--------------


9. (C) Everyone but Tymoshenko agreed that there were no
legal grounds for holding new Rada elections this year and
there was no public will to go through another campaign.
Mostova said party lists would be the same as in 2006 were
new elections to be held. Rada Deputy Propokovych said new
elections would be unproductive: "this is life, you must deal
with what you have." Hrytsenko and Rybachuk said that
elections would not change the basic balance of political
forces or solve the stability issue. Similarly, NGO leader
Popov argued that although Regions feared a new Orange
Revolution, explaining their fixation on Tymoshenko and
Lutsenko as their strongest competitors, such concerns are
misplaced. There was no public will for more protests; it
was too soon for people to come out in the streets as in

2004.


10. (C) Despite the low likelihood of early elections, all
sides are clearly calculating how the past eight months have
affected political ratings. Mostova and academic Taran told
us that Regions was losing support to the radical Progressive
Socialist Vitrenko and the Communists (note: whom they viewed
as their competitors in 2006),and were trying to calculate
what plan of action would best give them a boost. Tymoshenko
believed that the Communists, inside the Regions-led
coalition, were losing support to Vitrenko, currently not
represented in the Rada. Both Tymoshenko and Propokovych
suggested that the Communists were considering leaving the

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coalition because the are worried about losing their
electorate.

Regions' Revanchist Reaction to Political Uncertainty
-------------- --------------


11. (C) Most interlocutors agreed that because of the
perceived political uncertainty surrounding current alliances
and future elections, Regions' Donetsk core was filling the
government with their own people and seeking other ways to
enhance their power. Mostova said that PM chief of staff
Lyovochkin had been placing his people in the tax
administration, PGO, and in the oblast administrations. In
addition, he had allocated a billion dollars for the courts
(i.e., to buy decisions). Mostova also alleged that while 12
of the 18 Constitutional Court judges in the fall of 2006
were deemed sympathetic to Yushchenko and Tymoshenko, that
number had dropped to five. Rybachuk said that corruption was
skyrocketing on VAT refunds (20% kickbacks demanded) and in
hostile takeovers (so-called "raiderstvo"),and the CabMin
team was still trying to take control of state arms firm
UkrSpetsExport and state banks to tap additional income
streams. Academic Haran told us that on March 19 Rybachuk
had been forced out as Board Chair of the State Savings Bank
(Oshadniy Bank) in favor of allies of DPM's Kluyev and
Azarov.

Engagement: Keeping Regions on the Straight and Narrow
-------------- --------------


12. (C) Our interlocutors also argued that the U.S. needed to
continue to reach out to Yanukovych to keep him focused on a
European course and to keep the pressure on him to deliver
results. Mostova suggested that the U.S. use Yanukovych's
need for acceptance to its advantage. In her view, the
Kremlin did not take Yanukovych seriously, which irritated
him. She argued that the U.S. needed to let the PM know
that we would not let him off the hook for actions like
trying to prevent Lutsenko from rallying in Kharkiv (ref C),
but that we would continue to work with him as long as he
gave reason to do so. Propokovych echoed this approach,
adding that the MCC program was a great way to get the
government to be productive. The knowledge that this money
could disappear if the Government did not produce results had
an effect; the Regions team needed to be reminded of the
conditionality, agreed Rybachuk. Many added that
underscoring the economic advantages of a market economy and
cooperating with the West, and emphasizing the economic
downsides of not doing so, could keep the powerful business
crowd in Regions, led by Akhmetov, pushing for moderate
domestic and foreign policies. Propokovych recommended that
the U.S. focus on Akhmetov and the big businessmen in
Regions, since they were already integrating into the West.


13. (C) Reaching out to the more productive members of
Yanukovych's team and encouraging the PM to turn to them
instead of to his more Soviet-minded colleagues was also
important. Mostova noted Yanukovych was not a strategic
thinker but could be taught. Rybachuk added that Yanukovych
was limited by his old Soviet psychology, was emotional, blew
up easily, and did not communicate well, but he had a
practical mentality. Foreign policy adviser Konstantin
Gryshchenko was widely praised as one of the smartest members
of Yanukovych's team, and also one of the few equipped to
engage westerners. Haran lamented that Gryshchenko had no
equivalent on the economic policy side, where the Cabinet
needed some talented minds. He said that in addition to
Gryshchenko, Lyovochkin was pushing for closer U.S. ties. In
contrast, several people warned about DPM Azarov. Mostova
said Azarov was dangerous; she called him very wealthy,
anti-Western, and anti-NATO. Taran added that Azarov was
widely acknowledged to be one of the two most corrupt members
of the Cabinet (note: see septel for the other, Fuel and
Energy Minister Boyko, who has ties to RosUkrEnergo).


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