UKRAINE: NO SPLIT IN PARTY OF REGIONS EXPECTED -

C O N F I D E N T I A L SECTION 01 OF 04 KYIV 000756

SIPDIS

SIPDIS

STATE PLEASE PASS TO USTR FOR KLEIN/BURKHEAD

E.O. 12958: DECL: 04/15/2018
TAGS: PGOV PREL PINR UP
SUBJECT: UKRAINE: NO SPLIT IN PARTY OF REGIONS EXPECTED -
RESPONSE TO C-RE8-00445

REF: A. SECSTATE 28781

B. 2006 KYIV 04530

C. KYIV 00408

D. KYIV 00474

E. KYIV 00709

F. KYIV 00302

G. 2006 KYIV 4237

Classified By: Ambassador for reasons 1.4(b,d).


1. (C) Summary. Although tensions exist between the Akhmetov
and Yanukovych wings of the Party of Regions, the party shows
no immediate signs of splitting. Moreover, by taking a stand
against a NATO MAP for Ukraine at the Bucharest Summit and
playing on rumors of possible Rada elections in late 2008,
former Prime Minister Yanukovych has bolstered his position
as the only viable political leader and these issues may have
actually brought the party closer together. Although there
are nuanced views among members, the party is fairly united
in its opposition to NATO MAP now or membership in the
near-term. The moderates see closer cooperation with NATO as
part of moving toward Europe and the EU, but they also see
the issue of a MAP and future membership as unimportant and
divisive for the country. The most radical members oppose
MAP because it conflicts with their pro-Russian orientation,
but primarily all see a strong anti-NATO position as a way to
pick up 3-5 additional electoral points. In contrast, the
whole party backs WTO accession - 164 of the faction's 175
members supported ratification of the accession treaty on
April 10 -- because they see concrete economic advantages.
Moreover, the party retains strong voting discipline in
general. Rumors persist that Akhmetov will leave Regions to
join Presidential Secretariat Head Baloha in a new political
project - Akhmetov told us the two talk -- but Akhmetov does
not control enough of his faction to dictate a broad
coalition on his own terms and seems content to push a
scenario that would bring the entire party back into power.


2. (C) Comment. Regions' comparative loss to BYuT in the
2007 pre-term Rada elections may have worried party leaders
that its efforts to move into central Ukraine as a more
moderate, business-oriented party cost them support in the
east; the party is likely still trying to calculate its
strategy for upcoming presidential and Rada votes. The party
has always possessed a strong instinct for self-preservation,
and it is likely to band together as long as it perceives
external enemies, such as Tymoshenko. Regions' push,
especially from the Akhmetov wing, for a broad coalition
appears, at least for now, to mean the whole faction would
join the coalition, not that the moderates would depart. For
Akhmetov to leave Regions with only a percentage of the
faction would make him much weaker in negotiations with
President Yushchenko and Baloha than he is now with the
potential power of 175 MPs behind him. End summary and
comment

Regions: Several Factions, One Party
--------------


3. (C) It is hard to know exactly how the subfactions within
Regions are structured (ref B),but most observers see a
group of MPs led by oligarch Rinat Akhmetov and his
right-hand man Borys Kolesnikov, a second group led by former
PM Yanukovych, and then one or two other smaller groups.
Akhmetov is generally credited with controlling 30-40 percent
of the MPs in Regions' Rada faction. This group largely
consists of businessmen and other Akhmetov associates, many
of whom place great value on European integration as
benefiting their business interests, although they are less
positive about NATO except as a way to move closer to the EU.
In several conversations with the Ambassador, Kolesnikov has
made it clear that he and Azarov are on different teams. In
a March 7 meeting, Kolesnikov mentioned that he and Akhmetov
had explained their tax and rule of law policies to
Yanukovych and Azarov, trying to gain their support for
proposed reforms. However, Kolesnikov has been careful not
to criticize the other group too much. It was also
noteworthy that key members of the Akhmetov team distanced
themselves from the Severodonetsk 2 congress, a meeting on
February 28 in the same city where Regions led a separatism
conference during the Orange Revolution. Kolesnikov chose to
sit with the Donetsk delegation rather than taking a seat
on-stage and Akhmetov and NSDC Secretary Raisa Bohatyryova
did not show up at all. (Note. Akhmetov claimed he was
sick, but was later seen on TV attending a Shaktar soccer
match. End note.)


4. (C) Yanukovych is also generally credited with controlling

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a large portion of Regions MPs, but which other key Regions
members are in his group is unclear. Yanukovych loyalists
include Hanna Herman, Olena Lukash, and Anton Prykhodskiy.
In addition, the members of the 2006 Yanukovych Cabinet who
joined the party list for the 2007 pre-term elections are
generally associated with Yanukovych. Most of these MPs play
a low-key role in the party, with the exception of active
faction members Oleksandr Lavrynovych and Nestor Shufrych.
Some of the members of this faction are smart and somewhat
progressive, like Herman, and some are political thugs, like
Shufrych, but all seemed to have tied their wagon to
Yanukovych's political career. Yanukovych's control over the
faction may have been enhanced somewhat with the installation
of trusted assistant Serhiy Lyovochkin as deputy faction
leader with responsibility for running the faction
secretariat.

SIPDIS


5. (C) Two other key members of Regions who are harder to
place are Mykola Azarov and Andriy Klyuyev. Azarov is very
close to Moscow and generally described as the Kremlin's
advocate within the faction. Klyuyev has a long-standing
personal friendship with Yanukovych, but is younger and more
pragmatic than the former PM. Moreover, he is one of the
wealthiest members of Regions, which makes him more
independent. Klyuyev is often believed to have control over
a number of other MPs. In addition, there are a number of
prominent Regions faction members, mostly career politicians,
who are not explicitly linked to a specific subgroup, such as
Oleksandr Yefremov, Vasyl Khara, Mykhaylo Chechetov, and
Taras Chornovil.

No Split Imminent
--------------


6. (C) We are not aware of any formal plan to split Regions,
nor do we think it likely in the short term. The fact that
no one group or person controls a majority of MPs or wields
dominant power within the party is probably one of the
reasons the party has stuck together. Regions leaders are
cognizant of the fact that they wield more power as a single
party than either side would if they split in two, at least
in the short-term. Regions is also unlikely to split as long
as it benefits from remaining together as one of the two most
popular parties in the country. It also benefits from being
the only real alternative to BYuT at the moment. One example
of this tendency is the moderate Akhmetov wing's willingness
to back the strong anti-NATO line currently coming out of the
party.


7. (C) Rumors have been rampant in the Ukrainian press since
Presidential Secretariat Head Baloha formed his new political
movement (first called Great Ukraine, then United Center, see
ref C) that Akhmetov would depart the party to join Baloha in
backing Yushchenko for reelection. In addition, the decision
by Akhmetov ally Raisa Bohatyryova in December, 2007 to leave
the Rada at President Yushchenko's request to run the
National Security and Defense Council led many to believe
that her there was an impending alliance between Akhmetov,
Yushchenko, and Baloha. Akhmetov told the Ambassador that he
talks to the President's team, but he and Kolesnikov have
been clear in private meetings and in public that they have
no intention at the moment of leaving Regions to form a new
party or coalition (ref D). Akhmetov told the Ambassador
that although he saw the need for a new political party of
young pragmatists, he had no immediate plans to pursue this
goal. (Comment. Nor did it sound to PolOff like Akhmetov
was referring to Baloha's party, which appears to have been
created as a platform from which to run Yushchenko's
reelection campaign. Akhmetov stressed that a new party
could only be successful if it was not led by an established
politician like Baloha. End comment.)


8. (C) Akhmetov also told the Ambassador that he did not
think anyone should rush to change the current coalition and
government. He stressed that any sudden move to dismiss
Tymoshenko would only increase her popularity and lead to her
winning the presidency, an outcome he opposed. He also
underscored that his idea for a broad coalition included all
of Regions, not just part of it. Akhmetov said that he would
be pleased when the time came for a new coalition, and he
admitted that Regions and OU did not have many key
differences, but acknowledged that leadership ambitions have
kept them apart.

Regions Strategy for Presidential Elections Under Wraps
-------------- --------------


9. (C) Regions' strategy for the upcoming presidential

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elections is still unknown. Presumably, party leaders are
still debating whether Yanukovych will be their candidate.
His outspoken criticism of the government's request for a
NATO MAP at Bucharest has raised his profile and he still
comes in a close second in polls about whom people would vote
for president. This has made it hard for Regions to suggest
any alternative candidates.


10. (C) There are rumors that Yushchenko could become
Regions' nominee for president, but for now that remains
simply speculation. Even if Akhmetov believed that
Yushchenko is the best choice for president, he is unlikely
to leave Regions to become one of many voices within OU. If
Baloha's United Center gains momentum and credibility, maybe
Akhmetov would consider cooperating with them, but he is
probably much more comfortable trying to bring Yushchenko to
his side, rather than moving to the President's team.


11. (C) Moreover, relations and the overall level of
cooperation between Regions and OU-PSD are poor. There is a
high level of contact between the Presidential Secretariat
and Regions, but most in the President's Rada faction dislike
and distrust Regions. Those OU-PSD MPs who left OU to join
United Center are close to Baloha and therefore may favor a
broad coalition. Beyond this, we have no information about
specific collaboration. In fact, the most recent rumors in
the Rada are that Regions and BYuT are working to raise the
threshold to enter the Rada and to amend the constitution to
further weaken the presidency (ref E).

No to NATO
--------------


12. (C) Regions seized upon the letter sent by Yushchenko,
PM Tymoshenko, and Speaker Yatsenyuk requesting NATO MAP as
an opportunity to build electoral support and to hinder the
coalition's work. In fact, many MPs and politicians we spoke
with believed the latter goal was the primary motivation for
Regions to block the Rada's work for a month. Regions'
formal position on NATO is no discussion of membership
(including accepting MAP) until a national referendum is
held, but they often cater to strong anti-NATO sentiments in
their electoral base. In the run-up to and during the
Bucharest summit, Regions conducted a series of anti-NATO
rallies in Kyiv and other key cities, such as Donetsk and
Kharkiv. Following the summit a Regions demonstration was
held in front of the German Embassy to "thank" Berlin for
blocking MAP, much to the chagrin of our German colleagues.
Now that a decision to postpone MAP has been taken, it is
possible that Regions might be somewhat willing to let this
issue fade, at least until the next election cycle.


13. (C) The political fury surrounding NATO has seemed to
coalesce Regions to a large degree. In addition to giving
Yanukovych a prominent public platform, it has pushed even
moderate Regions members, like Herman and Inna Bohoslovska,
into openly anti-NATO positions. Moreover, the Akhmetov camp
has acquiesced to this strong anti-NATO grandstanding.
Akhmetov avoided directly answering the Ambassador's
questions about NATO and comments from close allies indicate
that his camp does not currently see any concrete benefit to
joining MAP. Irina Akimova, a new MP and head of Akhmetov's
in-house think tank, which played a key role in convincing
Akhmetov to push for WTO accession, argued strongly against
NATO membership as a priority for Ukraine right now at a
February 4 dinner with Congressman Wexler. She said that
NATO was not the proper impetus for encouraging democratic
and economic reforms and that Ukraine's goal should be closer
cooperation with and eventual membership in the EU. Akimova
dismissed the argument that NATO membership or even MAP would
help improve Ukraine's investor climate by increasing
stability, responding that rule of law and property rights
would be a better strategy (ref F). Kolesnikov made an even
more stringent anti-NATO argument to the Ambassador on March

7. He said that Regions understood the difference between
MAP and membership, but most Ukrainians did not, and he
indicated Regions would capitalize on that misunderstanding
and hold national protests against MAP during the Bucharest
summit, because receiving MAP would be divisive for the
country.


14. (C) There are certain members of Regions generally held
to be close to Moscow, such as Azarov and possibly Shufrych,
but beyond personal ties, we do not see the Kremlin exerting
strong influence or providing financial or other support to
Regions. The pro-Russian stances that Regions takes - on
language, NATO, the Holodomor, etc. - are aimed at a domestic
audience in eastern and southern Ukraine. This population is

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naturally predisposed to be pro-Russian, so there is a
merging of common interests with Moscow. However, we do not
believe Russia is dictating actions to Regions, which is too
independent to want to be under anyone else's influence.

Yes to WTO
--------------


15. (U) Regions has consistently supported WTO accession
since the Yanukovych government took office in 2006. Indeed,
under Yanukovych's leadership in 2006-2007, the GOU passed a
series of critical laws required for accession and, to a
large degree, did the heavy lifting to finalize accession
talks. Moreover, Regions accomplished all of this with two
coalition partners, the Communists and the Socialists, who
were ideologically opposed to accession.


16. (SBU) Regions' support for WTO accession did not change
noticeably since it went into opposition following September
2007 parliamentary elections. Yanukovych said publicly that
Regions would vote in favor of accession and that he had "no
doubt" that the protocol of accession would be ratified.
Given the strong party discipline within Regions, it was not
surprising that 164 out of 175 faction members voted for
accession on April 10.


17. (C) Some Regions MPs are less supportive of accession
than others, however. For example, Dmitriy Svyatash,
previously the deputy chairman of the Rada Banking and
Finance Committee, which oversaw the passage of several WTO
bills, expressed his concerns to EconOff in late 2006 that
accession might negatively affect the domestic automobile
industry (ref G). In the end, Svyatash managed to put
together a compromise draft law that only partially opened
the Ukrainian market to foreign used cars, yet went far
enough to satisfy WTO members. This example is meant to
demonstrate that the opposition of a few, individual Regions
MPs tends not be ideological but rather a concern for
particular domestic industries. These MPs, unlike their
colleagues in the Communist Party, tend to seek practical
steps to mitigate what they see as negative consequences of
accession, not block it altogether.


18. (SBU) It is almost certain that Akhmetov calculates WTO
membership to be in his business interest, and, indeed, it is
assumed that this calculation is what drove Regions to so
strongly support accession while in the government. Some
analysts have pointed to a 2006 study conducted by the Bureau
of Economic and Social Technologies (BEST),Akimova's think
tank, as the turning point for Regions' pro-WTO policy. The
study apparently found that Ukrainian industry in general,
and particularly companies owned by Akhmetov, would benefit
from accession, primarily from increased exports.

19. (SBU) Jock Mendoza-Wilson, Director of International and
Investor Relations for Akhmetov's System Capital Management
(SCM),confirmed to EconOff in December 2007 that SCM saw WTO
accession as a positive development for its businesses. WTO
accession was expected to increase foreign investment and
bolster exports, said Mendoza-Wilson. Mendoza-Wilson also
noted that an EU-Ukraine Free Trade Agreement (FTA) would
bring similar, positive benefits for SCM's businesses, which
suggests that Akhmetov will support the FTA negotiations as
well.


20. (U) Visit Embassy Kyiv's classified website:
www.state.sgov.gov/p/eur/kiev.
Taylor