UKRAINE: BALOHA CASTS COALITION IN NEGATIVE LIGHT

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 001087

SIPDIS

E.O. 12958: DECL: 06/05/2018
TAGS: PGOV PREL PINR UP
SUBJECT: UKRAINE: BALOHA CASTS COALITION IN NEGATIVE LIGHT

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


1. (C) Summary. Head of the Presidential Secretariat Viktor
Baloha told the Ambassador on June 3 that the coalition was
struggling forward and would continue to work together, but
that they were nearing the breaking point. He criticized
Tymoshenko for being unconstructive and populist, with
policies that could collapse the economy. He said that
President Yushchenko and Prime Minister Tymoshenko had agreed
during a June 2 meeting that the PM, and the coalition, would
be "on a short leash, " where Yushchenko and Rada Speaker
Yatsenyuk would have to agree ahead of time to all CabMin
decisions. Baloha said that if Tymoshenko stuck to this
agreement, things would move forward. If not, the
President's team would consider alternatives, and he promised
the Ambassador would be the first to know if and how the
coalition was going to be reformatted.


2. (C) Comment. Although Baloha's ostensible message was
that the coalition was still finding ways to work together,
it was clear he was laying the groundwork to be able to
justify a shake-up down the road by claiming that Yushchenko
had done his best but that Tymoshenko did not honor her
promises. The more the Ambassador probed about the details
of this new agreement between President and PM, the less
Baloha sounded like he wanted it to work. Still in question
are to what degree Baloha speaks for Yushchenko and what
alternatives the two leaders have. Since losing the Kyiv
elections on May 25, Tymoshenko has been more conciliatory in
her actions (although not her public comments),agreeing to
swear in Yushchenko's Constitutional Court nominees and
backing away from immediate constitutional reform. We assess
that it is in her interest to stick it out in the government
until the fall, which gives her time to fight inflation and
shore up her slowly dropping ratings and doesn't put her in
the opposition too far in advance of next year's presidential
race. For Yushchenko's part, he is unlikely to make a move
until he has an alternative path forward worked out, which
could take some time. End summary and comment.

Criticizing Tymoshenko
--------------


3. (C) Baloha, who had requested the meeting, said he wanted
to update the Ambassador on the current state of affairs
within the coalition and government. He said there had been
changes and there would be more changes in the near future,
although he did not specify what kind. Baloha then switched
tracks, saying that he had set a trap for Tymoshenko back in
January to test her. It was then that Yushchenko nominated
three new Constitutional Court judges to replace the three
who had been removed, and Baloha had watched closely to see
when the Rada would confirm the nominees. Tymoshenko opposed
the nominations and blocked the confirmation, only allowing
it to finally go forward on June 3 and only when she finally
acknowledged she was defeated. However, instead of admitting
her defeat quietly, she fought against it, sending alleged
ally Viktor Medvedchuk to opposition leader Yanukovych four
times over the weekend asking Regions to blockade the Rada on
June 3 to prevent the judges from being sworn in. Baloha
knew this, he said, because he talked to Yanukovych
frequently and the opposition leader had told him everything.



4. (C) Turning to the Kyiv elections, Baloha termed them a
victory. He said they had opposed early elections from the
beginning and warned Tymoshenko not to hold them, but she
wanted them and then she lost. If she had united around
candidate Vitaliy Klychko, they might have won, but she
refused and the Presidential Secretariat backed no one.
(Note. Many believe that tacitly the Secretariat backed
Chernovetskiy through their refusal to back anyone else. End
note.)


5. (C) Baloha said that the economy was in crisis, including
Ukraine's international image and its investment climate. He
said that the government's program was populist and would
lead to economic collapse if implemented. That was why
Yushchenko had canceled Tymoshenko's privatization program.
If a privatization program is passed, the revenues won't all
go to social spending, but will rather be reinvested in
Ukrainian infrastructure and other needs. He also said that
if a good privatization program is adopted, it will not
matter who the head of the State Property Fund is.

And Questioning Viability of Coalition
--------------


6. (C) Baloha said that they had exhausted all their
patience. If Tymoshenko decides to run for president, she
will be removed as PM. Any mistakes she makes will be

KYIV 00001087 002.2 OF 002


catastrophic for her and "we won't help her in anything." He
said the fact that the coalition passed a privatization
program in the first reading on June 3 showed that the
coalition was stable. (Note. The Rada also passed, among
others, amendments to the budget and a flawed version of the
Customs Tariff law needed for WTO. End Note.) However, they
were nearing the point of no return. The PM and her
political force were making unacceptable comments -- the
presidential team would not respond in kind, but if she did
not honor her commitments, he couldn't say what would happen
next. Baloha then told the Ambassador that Yushchenko and
Tymoshenko had met on June 2 and agreed that all CabMin
decisions should be passed only after agreement from the
President and Rada Speaker Yatsenyuk. Baloha described this
as the PM "on a leash that was short and shrinking." He
added that the coalition was also on a short leash, adding
"less democracy is good" in that respect. If Tymoshenko
adheres to this agreement, everything will be okay. If she
does not, Baloha promised that they would "push the red
button" on the coalition. The choice was harmony or a new
coalition, and Tymoshenko understood this now. Baloha said
they were back to a situation like when Yanukovych was PM,
and if the presidential side made any more concessions, it
would be ruined. (Comment. Baloha's statements are a little
disingenuous given that the Presidential Secretariat is far
more aggressive now than it was when Yanukovych was PM and
Tymoshenko has tried to be more cooperative. End comment.)


7. (C) Despite the agreement, Baloha said, it will be hard
for the President and PM to move forward together.
Constructive work, he argued, now depends more on Tymoshenko
than on Yushchenko , because she holds the cards to
cooperation. When the Ambassador asked what the alternative
would be to the current coalition, Baloha said that the
Ambassador would be the first to know if the coalition was
being terminated, but he would not offer details of what he
saw for the future. He did say that early Rada elections
would only happen if the President deemed them necessary, not
simply because Tymoshenko wanted them. In response to the
Ambassador's question, Baloha clarified that Yanukovych was
not part of any agreement between Yushchenko and Tymoshenko.
He said Yanukovych understands the situation well and knows
he is in a good position sitting on the sidelines. Baloha
wrapped up the conversation saying that "processes" were
underway that had a negative impact on the coalition, and
that if these processes evolve further, the coalition will
collapse.


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