POLITICS CONTINUE TO TRUMP ECONOMICS IN UKRAINE

C O N F I D E N T I A L KYIV 002128 SIPDIS E.O. 12958: DECL: 10/23/2018 TAGS: PGOV PREL EFIN ECON ETRD UP SUBJECT: POLITICS CONTINUE TO TRUMP ECONOMICS IN UKRAINE REF: KYIV 2113 Classified By: Ambassador William Taylor for reasons 1.4 (b,d). Summary -------------- ¶1. (C) Continuing political turmoil threatens to hold up potential IMF assistance to Ukraine. On October 23, PM Tymoshenko's government submitted anti-crisis legislation, and demanded that any election legislation be shelved until emergency economic measures were in place. President Yushchenko's Our Ukraine allies continued to push a package that links anti-crisis legislation to funding for snap parliamentary elections. Regions contacts said they would not support the PM's proposals because they included "too many add-ons," and Regions has its own as-yet unpublished legislative plan. The Rada agreed to consider the three competing legislative packages, including the unpublished Regions plan, in its plenary session on October 24. Rada contacts said it would be "almost impossible" to pass anti-crisis legislation without personal agreement between Yushchenko and Tymoshenko, including a compromise on elections. End Summary. Another Day of Rada Inaction -------------- ¶2. (U) On October 23, PM Tymoshenko's government submitted a package of anti-crisis legislation to the Rada. From our initial read of the 70-page package it appears the legislation would provide liquidity support to the banking sector, increase government deposit guarantees, and provide financial support to the construction and mortgage sectors. The legislation would also seek new sources of government revenue by raising taxes on some products such as alcohol and new cars, and slow the minimum salary growth rate. ¶3. (C) BYuT MP Ostap Semarak told us that, while "no one has seen" President Yushchenko's legislation, he believed that the Cabinet's legislation was similar to Yushchenko's ideas, because both legislative packages came out of the Ministry of Finance's discussions with the IMF. BYuT MP Andriy Shkil told us that BYuT aims to seperate anti-crisis legislation from election legislation, a step that President Yushchenko and his supporters continue to oppose according to OU-PSD Deputy faction head Ruslan Knyazevych. Both Shkil and Semarak noted that BYuT likely does not have the votes to pass the PM's legislative initiative. ¶4. (C) Party of Regions has largely stayed out of the fight over whether anti-crisis legislation should or should not be linked to election funding and has let the Tymoshenko and Yushchenko camps remain in the spotlight. Regions contacts told us that they would not support the PM's anti-crisis legislation in its current form as it featured "too many add-ons," including what they characterized as an increase in property tax that would hurt all Ukrainians. Regions MP Vitaliy Hommutynik told us that Regions could support a much simpler set of anti-crisis legislation that reflected only those issues recommended by the IMF. Regions leader Viktor Yanukovych announced on October 22 that he had his own anti-crisis plan, but that the party would not yet make it public. In the afternoon plenary session on October 23, Regions successfully got their unpublished plan on the October 24 agenda. Tymoshenko, Yushchenko, Yanukovych and Elections -------------- --- ¶5. (C) People's Self-Defense (PSD) MP Oles Doniy told us that Rada factions are unlikely to reach agreement without Yushchenko and Tymoshenko personally compromising on the anti-crisis package and election dates, adding that the Rada had "ceased to be a decision-making body." He suggested that the most likely way out of the crisis was compromise on an election date sometime in late Winter or early Spring. Doniy said that Yushchenko could not give up on elections, because he has staked his political future on them. At the same time, Tymoshenko's inflexibility is hindering Yushchenko's ability to maneuver. ¶6. (C) Regions MP Vitaliy Makayenko told us that delaying elections would allow anti-crisis legislation to be passed, and that everyone "except Yushchenko" supported a delay. He said that Rada Speaker Arseniy Yatsenyuk benefits by staying in the Speaker's chair and receiving free, positive coverage that will increase his popularity. Meanwhile, he added, Tymoshenko wants to hold on to her PM seat "as long as she can" because "no one" will form a post-election coalition with BYuT. Finally, Makayenko said that Regions would like to see elections postponed because, as the opposition, they benefit from the ongoing political turmoil, and can use it to their benefit in upcoming presidential and Rada elections. He noted that Yanukovych may not take the PM slot in a new government, but rather remain a party leader and presidential candidate "not saddled" with the current economic crisis. Comment -------------- ¶7. (C) Pressure is building on Yushchenko and Tymonshenko to come to some sort of agreement to allow the Rada to enact the necessary anti-crisis legislation. However, their personal animosity continues to be a stumbling block to any agreement, even in the face of a potentially devastating economic crisis. With three competing anti-crisis legislative packages set for discussion on October 24, tomorrow's plenary session has the potential to provide the needed breakthrough if the President and PM are willing to compromise. TAYLOR