KUCHMA AND KRAVCHUK ON ECONOMIC AND POLITICAL

C O N F I D E N T I A L KYIV 002212 E.O. 12958: DECL: 11/07/2018 TAGS: PGOV PREL PINR UP SUBJECT: KUCHMA AND KRAVCHUK ON ECONOMIC AND POLITICAL CRISES Classified By: Ambassador William Taylor, reasons 1.4 (b/d). Summary -------------- ¶1. (C) Ambassador recently sounded out former Presidents Kuchma and Kravchuk on Ukraine's dual economic and political crises. Kuchma worries most about the potential for large-scale unemployment in the metal, mining, chemical and construction sectors. Kravchuk's focus is more on the political fallout. The worse the economy gets, the better for the Party of Regions. Kravchuk, while expressing sympathy for Yushchenko's "sensitive nature," lamented his disengagement on substance and his willingness to defer to Presidential Secretariat Head Baloha. Both Kuchma and Kravchuk regard early elections as undesirable. However, given continuing enmity between Yushchenko and Tymoshenko, Kuchma believed early elections might offer the best chance for a stable future coalition. Kravchuk worried that an electoral sweep by Regions would derail Ukraine's Euro-Atlantic integration. End Summary. Kuchma: Focus on Economic Crisis -------------- ¶2. (C) Ambassador called separately on former Presidents Leonid Kuchma and Leonid Kravchuk recently to get their views on Ukraine's current economic and political crises. Kuchma, from the well-appointed offices of his foundation in Central Kyiv, focused on the economic situation. He lamented that before the current economic crisis hit, Tymoshenko and Yushchenko had ignored warnings of tough times to come. Ukraine's debt -- public and private - had mushroomed, and was at unsustainable levels. Given its large export sector, Ukraine was highly vulnerable to the international financial/economic crisis, particularly in such sectors as metallurgy, machine building, and chemicals. Demand for Ukraine's steel, for example, has been declining in China, India and other markets. The construction sector was grinding to a halt. Kuchma predicted that over the next quarter there would be numerous bankruptcies. He lamented that, unlike Russia, Ukraine does not have a stabilization fund to fall back on. ¶3. (C) While now is not the time for snap elections, Kuchma said, the deep distrust between Tymoshenko and Yushchenko meant that early elections might be "the best way out." Kuchma suggested that Regions leader Yanuykovych backed out of a possible coalition with Tymoshenko's Bloc (BYuT) after he concluded that BYuT might make inroads with voters in the East if it joined with Regions. Wary of Medvedev -------------- ¶4. (C) Turning to foreign policy, Kuchma said that Russian President Medvedev's talk of Russian prerogatives in the former Soviet space was unacceptable: "they are not talking about mutually beneficial relations but about a zone of special interest." Ukraine has large exports to Russia and needs "strategic relations" with Moscow, but not at the cost of Ukraine's sovereignty. Kuchma said the EU had been too soft on Russia over Georgia. He attributed this to Europe's over-reliance on Russian gas supplies. Kravchuk: Party of Regions Would Gain From Snap Elections -------------- -------------- ¶5. (C) Kravchuk said he could not comprehend Yushchenko's push for early elections. Yushchenko's Our Ukraine was down in the polls to the point that it might not enter the next Rada. Meanwhile, Party of Regions was poised to make major gains. "The worse things get, the better it is for Regions," Kravchuk said. Regions Oligarch Rinat Akhmetov and his ally, Presidential Secretariat head Baloha, had convinced Yushchenko to push forward on the elections. Akhmetov, Kravchuk said, had convinced Yushchenko that Regions would support Yushchenko in Presidential elections. Yushchenko was deluded if he believed Regions would honor any such commitment. Yushchenko's unpopularity in the East make it impossible for Regions to do it. A new government under Regions would mean a GOU "subordinate to Russia," Kravchuk said. If Regions wins early parliamentary elections they will go on to capture the Presidency too, Kravchuk predicted. They will also win local elections. This will set back the course of Ukraine's integration into Euro-Atlantic institutions. ¶6. (C) Yushchenko is a "prisoner of his inner circle," Kravchuk said. Secretariat head Baloha is in league with Akhmetov and Regions Donbass boss Kolesnikov. The President is "sensitive, subject to influence," Kravchuk said. He said Yushchenko was notable for his love of Ukraine's history, language and culture, but as a politician, he is deeply flawed. Baloha plays to Yushchenko's vision of himself as an essential President. The public is aware of the extent to which Yushchenko defers to Baloha and it weakens Yushchenko further. Yushchenko wants to avoid responsibility and, like many flawed leaders, only wants to hear "pleasant things." If Baloha and Akhmetov were to get control of the state apparatus, they would turn the Ukrainian government into "a bazaar," Kravchuk concluded. TAYLOR