REGIONS-BYUT COALITION DEAL: WHY IT FELL APART

C O N F I D E N T I A L KYIV 002080

SIPDIS

E.O. 12958: DECL: 12/31/2018
TAGS: PGOV PREL UP
SUBJECT: REGIONS-BYUT COALITION DEAL: WHY IT FELL APART

Classified By: DCM James Pettit for reasons 1.4 (b,d).

SUMMARY
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1. (C) The Party of Regions and Prime Minister Tymoshenko's
party (BYuT) narrowly failed to form a majority coalition in
the Rada after the ruling coalition disintegrated on
September 3. They had agreed to a broad pro-European foreign
policy that included continued cooperation with NATO.
Ultimately, however, mistrust and fears that the other side
would fail to fulfill the coalition agreement sunk the deal.
An internal power struggle within Regions may have also
contributed to the agreement's failure. END SUMMARY.


NINETY-NINE PERCENT AGREED
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2. (C) In an October 16 meeting with the Ambassador, senior
Regions MP Andriy Kluyev said that Regions and BYuT had
agreed to form a majority coalition in the Rada in early
September. Personal negotiations between Tymoshenko and
former Prime Minister Yanukovych, with Kluyev as the
facilitator, had been ongoing since the summer. Kluyev said
there was "99% agreement" on the coalition agreement and
there were no outstanding contentious issues. The key goal
of the coalition would be political and economic stability in
order to raise standards of living. Although he offered no
details, Kluyev also said that the deal would have made next
year's presidential election so quiet "you would hardly know
it was happening."


3. (C) Kluyev emphasized that the populace was ready for a
Regions-BYuT coalition. He said that internal polls showed
seventy-nine percent of voters supported the creation of
their coalition instead of an election. Their constituencies
were also expecting such a tie-up because in many local and
regional councils BYuT-Regions coalitions already existed.



RUE, VANCO, AND FOREIGN POLICY NOT A PROBLEM
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4. (C) The coalition documents agreed to remove the shady gas
middleman RosUkrEnergo (RUE) and move to direct contracts
between state-run Naftohaz Ukrainiy and Russia's Gazprom.
Kluyev said that eliminating RUE was not a concession to
Tymoshenko, as he had publicly supported the removal of RUE
since he was Deputy Prime minister in 2007. Kluyev also said
that the coalition agreement would have reinstated Vanco's
contract to develop hydrocarbons in the Black Sea. The deal
would proceed at a slower pace than envisioned in the
original contract, but the entire agreement would have been
fulfilled. Kluyev described Tymoshenko as a "player" who
could find a way to sell Vanco to her constituents despite
previously canceling the project.


5. (C) Under the coalition agreement Ukrainian foreign policy
would focus on integrating into European economic and
political structures. Ukraine would follow the EU's lead on
Georgia and other conflicts in the Caucasus. Kluyev said
that cooperation with NATO would not change. The agreement
defined a "purely pragmatic, purely Ukrainian" policy on NATO
and allowed for NATO membership after a nationwide
referendum.


NO GUARANTOR EQUALS NO DEAL
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6. (C) Despite reaching an amicable coalition agreement and
cooperating on the September 2 legislation to weaken the
presidency, fear of betrayal on both sides ultimately doomed
the coalition deal. Kluyev said that frequent meetings
between Yanukovych and Tymoshenko had improved their
relationship. However, it was not enough to overcome seven
years of competition and mud-slinging. Kluyev said that
Yanukovych and Tymoshenko needed a guarantor who could ensure
both sides fulfilled the agreement, but lamented that there
was no such person in Ukraine.


7. (C) Kluyev said there still remained the chance of a
coalition with BYuT after the election. He maintained close
contact with Tymoshenko, whom he called an old friend, and
she remains open to an alliance. Kluyev cautioned, however,
that Regions needs to agree with BYuT to moderate the tone of
their campaigns to avoid jeopardizing a post-election
coalition.
OTHER DYNAMICS
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8. (C) Regions MP Taras Chornovil, who has announced he will
quit the party, in a meeting with Ambassador on October 14
described other factors that may have played a role in
undermining a Regions-BYuT coalition. Chornovil indicated
his decision to quit Regions was due to his disgust with the
continued infighting within the party. He said that a
faction within Regions associated with RUE, headed by Yuriy
Boyko, Serhiy Lyvochkin, and Hanna Herman, ultimately
convinced Yanukovych not to form a coalition with BYuT.
Chornovil said Lyvochkin and Hanna Herman have a monopoly on
all information reaching Yanukovych and convinced him that a
coalition with Yushchenko would be more secure. He noted
that ever since Boyko stepped up in 2006 and funded Regions'
Rada campaign when Akhmetov was unable to, RUE's influence
has been growing within the party. It is now more influential
than Akhmetov, who only controls ten to twelve deputies and
is no longer the main funder of the party. Chornovil said
that Regions would have to remove the RUE faction from the
party in order to form a coalition with BYuT -- because of
Tymoshenko's strident opposition to RUE's role in the gas
trade.


COMMENT
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9. (C) The outcome of a Regions-BYuT coalition would be to
minimize Yushchenko's role. Kluyev's hints of a quiet
presidential election under the coalition agreement probably
means the presidency would have been reduced to a figurehead
position not worth fighting for. If Regions and BYuT focus
their attacks on Yushchenko in the expected parliamentary
election, rather than each other, it would indicate that
there is a chance that a Regions-BYuT coalition could still
emerge in the next Rada.
TAYLOR