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 KYIV 00000756 002 OF 004 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 KYIV 00000756 003 OF 004 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 KYIV 00000756 004 OF 004 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