PARTY OF REGIONS GEARS UP TO OPPOSE NEW COALITION

C O N F I D E N T I A L KYIV 002440 SIPDIS E.O. 12958: DECL: 12/31/2018 TAGS: PGOV PREL UP SUBJECT: PARTY OF REGIONS GEARS UP TO OPPOSE NEW COALITION Classified By: Political Counselor Colin Cleary for reasons 1.4 (b,d). SUMMARY -------------- ¶1. (C) Opposition Party of Regions appears resigned to the new three faction coalition led by PM Tymoshenko's bloc, announced December 9. Regions contacts note that even if the parties are able to sign a coalition agreement, they lack a solid voting majority in the Rada. Regions MPs expressed little remorse over the failure of their party to come to an agreement with BYuT. Oligarch Dmitriy Firtash (main Ukrainian owner of gas intermediary RosUkrEnergo) reportedly prevailed on Regions leader Yanukovych to scuttle a prospective coalition deal with BYuT at the last minute, seeking an alliance with President Yushchenko instead. Regions MPs underline a major advantage in remaining in opposition: avoiding blame -- and responsibility -- for Ukraine's worsening economic situation. Yanukovych has announced he will give the new coalition 100 days to tackle the economic crisis before organizing rallies against the government. This conveys opposition to -- but also tacit acceptance of -- the new coalition. End Summary. COALITION, WHAT COALITION? -------------- ¶2. (C) Former Prime Minister and Regions head Viktor Yanukovych has made contradictory comments to the press about the new coalition announced December 9, consisting of Prime Minister Tymoshenko's bloc (BYuT),Our Ukraine-People's Self Defense (OU-PSD) and Rada Speaker Lytvyn's bloc. Yanukovych at first stated that the new coalition did not yet exist because the required paperwork had not been filed in the Rada. He later said that Regions would give the newly formed coalition 100 days to tackle Ukraine's economic crisis before calling on voters to stage mass rallies against the government. ¶3. (C) Regions Deputy Faction leader Hanna Herman dismissed as a political stunt Rada Speaker Lytvyn's announcement on December 9 that BYuT, OU-PSD, and the Lytvyn Bloc had formed a majority coalition. She underlined to us that the coalition would not be officially formed until the paperwork is filed in the Rada. Herman added that she has serious doubts that OU-PSD will be able to overcome its own internal divisions to form a coalition with anyone. She noted that OU-PSD's paralysis was one of the reasons Regions had renewed negotiations to form a coalition with BYuT, despite being "betrayed" by Tymoshenko in September. ¶4. (C) Head of Regions' youth movement and MP Vitaliy Khomotinnik told us that Lytvyn's premature coalition announcement was a tactic to pressure Yushchenko into supporting a renewed alliance with Tymoshenko. He said that Yushchenko risks losing what little support he has left by undermining a renewed orange coalition. Outspoken Regions MP Nestor Shufrych told us that, as one of the authors of the current constitution, he believes BYuT, OU-PSD, and the Lytvyn Bloc have satisfied the legal requirements needed to form a coalition. He said Regions' position as an opposition party forced them to attack the new coalition on any front possible, including the legality of its formation. Shufrych predicted that Regions would soon acknowledge the coalition's existence and focus on offering alternatives to its economic recovery efforts. FIRTASH SCUTTLED DEAL WITH BYUT -------------- ¶5. (C) Regions Deputy faction leader and MP Volodomyr Makiyenko told us that Regions and BYuT had finalized a coalition agreement December 8. He said that opposition from the grouping within Regions associated with businessman Dmitriy Firtash (majority Ukrainian owner of natural gas intermediary RosUkrEnergo (RUE)) ultimately scuttled the deal. Makiyenko underlined that Firtash is afraid that Tymoshenko will be able to remove RUE from the natural gas trade between Russia and Ukraine. Makiyenko said that the RUE group in Regions demanded the Prime Minister's chair as the price for its acquiescence to the coalition, knowing that Tymoshenko staying as Prime Minister was a prerequisite to any deal with BYuT. ¶6. (C) Shufrych agreed that Firtash was responsible for stopping the deal with BYuT. He said that just before the deal was to be signed, Firtash convinced Yanukovych to put off signing the agreement for three days. Shufrych said Firtash claimed to be close to a deal with Yushchenko that would appoint Regions MP and Firtash ally Yuriy Boyko as Prime Minister. Shufrych told us that many in Regions were skeptical of Yushchenko's ability to deliver the support of the OU-PSD faction for any deal the President negotiated on their behalf. In the end, according to Shufrych, Firtash's delay allowed OU-PSD MPs afraid of a deal between Regions and BYuT to gain the upper hand in their bloc and negotiate a deal with Tymoshenko. REGIONS WINS BY LOSING? -------------- ¶7. (C) Regions failure to form a coalition with BYuT will benefit the party in the long term, according to Regions MP Yuriy Miroshnychenko. He said that now it will be clear to the Ukrainian electorate who is responsible if the economic situation worsens. Khomotinnik predicted that the new coalition would not last through the spring and that its collapse would strengthen Regions as voters looked for a party with a proven track record on the economy. Makiyenko told us that not signing a coalition with BYuT was a "blessing." With the economic situation getting significantly worse over the next three to four months, Regions would now escape blame, although he admitted that even if Regions controlled the government there was little they could do in the short run to halt the crisis. Makiyenko predicted that by spring, voters would "beg for a Regions led government." COMMENT -------------- ¶8. (C) Regions deputies did not express feelings of betrayal toward BYuT, as they had over Regions' previous failed coalition negotiations with BYuT in September. Regions MPs acknowledged that divisions within their party were largely to blame for failing to close the deal. Yanukovych's announcement that he would give the new coalition a hundred days before organizing protests, while a statement of opposition, was also an implicit recognition of the new formation. PETTIT