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
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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
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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
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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
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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