RUSSIA'S SOBER OUTLOOK ON UKRAINIAN PARLIAMENTARY

C O N F I D E N T I A L SECTION 01 OF 03 MOSCOW 005176 SIPDIS SIPDIS E.O. 12958: DECL: 10/25/2017 TAGS: PREL PINR ECON UK RS SUBJECT: RUSSIA'S SOBER OUTLOOK ON UKRAINIAN PARLIAMENTARY ELECTIONS REF: A. MOSCOW 4550 ¶B. MOSCOW 4932 ¶C. MOSCOW 5069 Classified By: POLITICAL M/C ALICE G. WELLS FOR REASONS 1.4 (B,D). ¶1. (C) Summary: Russia's official reaction to the results of the Ukrainian parliamentary elections and the likely formation of an orange coalition has been cool, but an MFA official and experts told us that Russia can hardly be satisfied with the developments. Even more worrisome for Russia is that the Yushchenko-Timoshenko coalition will lack a strong mandate, given only a two-vote advantage in the Rada, and pressing bilateral issues will likely remain unresolved for the foreseeable future. That said, analysts point out that PM Yanukovich "is no Kuchma," and as long as President Yushchenko is in office, the most Russia can hope for is stability in its bilateral relationship. On gas price negotiations, the MFA denied that politics will play a role, but experts uniformly said that Russia would be more "flexible" if Yanukovich remained as PM. End Summary. MFA: A Broad Coalition Would've Been Better for All... -------------- -------------- ¶2. (C) Noting that the coalition was not finalized and anything was possible in Ukraine, MFA Second CIS Department Deputy Director Yuriy Mordvintsev told us October 26 that Russia was preparing for an Orange coalition, with Yulia Timoshenko back in the prime minister position. Mordvintsev said Russia continues to believe that a wider coalition, involving PM Yanukovich's Party of Regions, would have been the best option for Ukraine and Russia. The MFA official argued that the recent parliamentary elections "did nothing" to address the deep divisions in the country, especially considering that an Orange coalition would have only a two-vote advantage in the Rada. Mordvintsev continued that an Orange-Blue coalition could have helped to repair the "schisms" in the society; otherwise, "one-half of the country will feel left out of the decision-making process and will continue to oppose the Yushchenko government." ¶3. (C) Mordvintsev argued that a broad coalition would have stimulated Russia-Ukraine bilateral ties as well. Reiterating the Russian position that the current political "crisis" in Ukraine has caused a stalemate in negotiations on a range of bilateral issues (ref a),Mordvintsev said an Orange coalition will mean the continuation of this stalemate. When asked about FM Lavrov's October 18-19 meetings with Ukrainian FM Yatsenuk in the Russian city of Belgorod, Mordvintsev agreed that bilateral discussions on border and other issues continue, but he was clearly worried that the formation of a weak Orange coalition and the general uncertainty in Ukrainian politics will prevent the discussions from turning into concrete results. "Today your negotiating partner is one person, the next day, it can be somebody else, and the next day yet another." ... But The Policies, Not the Person, Matter More -------------- -------------- ¶4. (C) Mordvintsev repeatedly noted that Russia will "clearly" not be happy if Yushchenko picks Yulia Timoshenko as his prime minister, recalling the "bad history" between Timoshenko and Russia. He added that Russia accepted "the strong possibility" that Timoshenko's appointment would lead to "even more friction" between the governments, at least in the short-term. However, Mordvintsev referred to Putin's recent comments that Russia will work with any Ukrainian government, regardless of its composition. Mordvintsev explained that Russia is ultimately more concerned about the policies and behavior of the new Ukrainian government than particular political figures. He asserted that Russia is mainly interested in developing transparent, stable, and mutually beneficial ties with Ukraine. "Gas Negotiations Are But One Example" -------------- ¶5. (C) Mordvintsev cited Russia's handling of gas supplies and gas prices negotiations as an example of Russia's pragmatic approach to Ukraine. He pointed out that Russia waited until the Ukrainian elections were over before announcing that Ukraine still owes $1.3 billion for the Russian gas supplies precisely to avoid the possibility that gas supplies would become an issue in the election campaign (ref B). However, he said the debt could not be ignored indefinitely. ¶6. (C) Referring to DPM Medvedev's statements regarding Russia's willingness to remove intermediary companies from MOSCOW 00005176 002 OF 003 the Russia-Ukraine gas relationship, Mordvintsev said Russia is willing to negotiate all of Ukraine's proposals (although he doubted Russia would take such a step). On gas price negotiations, Mordvintsev said the Ukraine will "naturally" have to pay more next year, as world prices continue to rise and Russia no longer subsidizes economies, but dismissed the notion that politics will play a role in the size of the increase. Experts Agree: Orange Coalition Means More Instability -------------- -------------- ¶7. (C) A number of experts agreed with the MFA that Russia can hardly be satisfied with the Ukrainian election results and the likely formation of an Orange coalition. CIS Institute Deputy Director Vladimir Zharikhin told us that the Yushchenko-Timoshenko coalition is clearly not the best outcome for Russia, but Russia at least would have preferred at least a strong Orange coalition. He claimed that, despite public comments from Lavrov and Putin to the contrary, the GOR is fully aware that pressing bilateral issues will remain unresolved until there is political stability. But Yanukovich Is No Kuchma... -------------- ¶8. (C) Experts note that although the GOR prefers Yanukovich over Timoshenko, Yanukovich "is certainly no Kuchma." Vitaliy Portnikov, journalist for Radio Free Europe/Radio Liberty, argued that Yushchenko is a "self-made man," who is not dependent on Russian political or financial support. Yushchenko is more focused on promoting Ukrainian national and Danetsk clan interests than Russian political and business interests in Ukraine. Institute of Strategic Assessments Director Sergey Oznobishov noted that Yanukovich is just as "corrupt and self-interested" as Yushchenko and Timoshenko. ...And Yushchenko Is the Real Problem for Russia -------------- - ¶9. (C) Council for External and Defense Policy Program Director Aleksandr Belkin added that ever since Yushchenko came to power, bilateral relations have soured. In stark contrast to his relationship with Kuchma, Putin does not find Yushchenko trustworthy, nor does he believe Yushchenko is even remotely interested in addressing Russian interests. Consequently, Putin is not interested in developing stronger relations with Yushchenko. Pragmatism Will Remain Basis of Relations -------------- ¶10. (C) Observers shared the opinion that strengthening economic ties will continue to be the focus of Russia's interest in Ukraine. Experts note that bilateral trade continues to increase and is expected to reach $30 billion by the end of the year. ¶11. (C) Analysts viewed DPM Medvedev's recent public statements that Russia would be willing to eliminate intermediary companies to facilitate Russian gas supplies to Ukraine as evidence of Russia's emphasis on establishing market relations with its western neighbor (ref C). Recalling that Medvedev's statements were in direct response to Timoshenko's claim that Russia insisted on the use of intermediary companies, Effective Policies Foundation Gleb Pavlovskiy noted that Russia aims to build more transparency into its relationship with Ukraine and wants to prevent Ukraine from playing with Russian gas transit to Europe. Pavlovskiy added that Russia does not trust Timoshenko, arguing that Timoshenko thrives off of enemies and conflicts, and Russia did not want to give her a victory in gas negotiations. ¶12. (C) However, analysts rejected statements from Russian officials that gas price negotiations will not be influenced by the composition of the Ukrainian government. They maintained that Russia would be "more flexible" on the terms of a gas deal, including on the rate of increase of prices and credits to offset the higher prices, if Yanukovich remained as PM. Comment -------------- ¶13. (C) Senior Russian officials, such as Putin and Lavrov, without fail accentuate the positive aspects of bilateral relations with Ukraine, but we are increasingly hearing only frustration from working-level MFA officials. Clearly, Russia wants to see Yanukovich, or someone of similar mold, MOSCOW 00005176 003 OF 003 in the PM position, but the GOR is already preparing for the worst. The key message from the Russians at this point is that Russia is prepared to work with any government, as long as it is stable and reliable. Ultimately, Ukrainian politics will never steer Ukraine too far away from Russia -- the strong bilateral trade and interdependency in the energy sector transcend current tensions in the bilateral relationship. Burns