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...
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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
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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

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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
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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,

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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