UKRAINE: COALITION TEETERING, BUT ALTERNATIVES

C O N F I D E N T I A L SECTION 01 OF 04 KYIV 000902

SIPDIS

E.O. 12958: DECL: 05/13/2018
TAGS: PGOV PREL PINR UP
SUBJECT: UKRAINE: COALITION TEETERING, BUT ALTERNATIVES
STILL UNCLEAR


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


1. (C) Summary. Cracks in the coalition appeared to widen
May 12-13 as the two sides faced off in the Rada and in
public comments from President Yushchenko and Prime Minister
Tymoshenko. Privately, Tymoshenko told the Ambassador that
coalition was de facto dead, because the President had set
his sights on destroying her politically. To this end, he
was trying to make inflation worse and blaming her -- as a
result, her popularity ratings were dropping. The PM
admitted that she was negotiating with Regions, as well as
some in OU-PSD, to try to build support for her proposed
constitutional reforms to move Ukraine toward a parliamentary
system (that would give the PM more power at the expense of
the President). After a May 12 Coordinating Council meeting
in the Rada, during which BYuT and OU-PSD leaders traded
mutual recriminations, BYuT blockaded the rostrum and
Speaker's dais on the morning of May 13. Although Speaker
Yatsenyuk opened the session from the floor, the blockade
prevented Yushchenko from giving his annual address to the
parliament. Instead, Yushchenko went to the press and
criticized the Government and BYuT for breaking the agreement
to hold his speech and not engaging in serious economic work;
however, he also noted that the coalition had not yet "gone
beyond the breaking point." In a subsequent televised speech
by the PM and in conversations in the Rada halls, the
official reason for the blockade was a demand for immediate
passage of three anti-inflationary laws, which Tymoshenko
said Yushchenko and OU-PSD were refusing to support.
However, some in BYuT suggested that the real motivation was
concern that Yushchenko planned to nominate and have sworn in
three new Constitutional Court judges to fill long-standing
vacancies on the presidential quota, which would give the
Presidential Secretariat greater influence on the Court to
block the PM's constitutional reforms. (Note. The CC's
current judges were present in the Rada balcony. End note).
OU-PSD MPs told us that BYuT was just trying to blackmail the
President to gain the upper-hand rather than work through the
established rules of the coalition. Meanwhile, grinning
Regions MPs confided that they were waiting for Tymoshenko's
dismissal so they could get on with forming a broad
coalition. In their public comments after the failed Rada
session, Yushchenko and Tymoshenko blamed each other for the
current stalemate, but both indicated that they were
committed to the democratic coalition and saw no alternatives.


2. (C) Comment. It is clear that these political games,
which have gone on all year, will continue in the near term
as the major players position themselves for either upcoming
presidential elections or a new parliamentary system or even
the possible formation of a new coalition. However, over the
longer term Ukraine may be merely transitioning through an
awkward stage on the road to democracy. All sides threaten
and posture, but none so far has shown the capability or
willingness to manipulate the system completely in its favor,
which is why the Rada has managed to limp along in its work.
It also appears that there are no better alternatives right
now to the current coalition -- Regions is openly negotiating
with both Tymoshenko and Yushchenko, but it does not sound
like anyone has proposed an acceptable option. Yushchenko
may want to dump Tymoshenko, but he does not want to suffer
the electoral wrath for having destroyed the orange
coalition, and he would prefer a new coalition without
Yanukovych as Prime Minister. Tymoshenko too must show she
made every effort to keep the government together. As the
2009/2010 presidential elections draw closer, especially if
Tymoshenko takes a beating in the public polls, short-term
calculations may change, but the current political circus is
a distraction from the pro-European and pro-market path that
all three major parties endorse as their longer-term goal.
End summary and comment.

Tymoshenko: The President is Trying to Destroy Me
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3. (C) A resolute Tymoshenko told the Ambassador on May 12
that the coalition de facto no longer existed. She said that
Yushchenko has done everything he could to collapse the
coalition, and she underscored that she believed it was the
President who was the main problem, not Chief of Staff
Baloha. She said that her team had patiently endured this
behavior for four months, but now they were seeing a drastic
drop in both Yushchenko's and her ratings. She said that
this was Yushchenko's main goal, to lower her ratings before
the 2010 presidential elections, but she did not understand
his strategy because he had zero chance of winning
reelection. He was doing everything he could to make
inflation worse and then blaming the government for it. She
listed the ways in which she believed Yushchenko was
exacerbating inflation. First, the NBU's monetary policy --

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the President's orders had stopped the NBU from adjusting the
exchange rate, as a result experts said the exchange rate was
adding 12% to Ukraine's inflation. (Note. She cited IMF,
EBRD, World Bank, and Anders Aslund, although only the last
to our knowledge has blamed the NBU alone. End note.)
Moreover, governors were obligated to regulate pricing
policy, but were not doing so on the President's orders. She
believed she had a matter of weeks left before the coalition
split, and it would definitely not live until 2010.
Tymoshenko said that Yushchenko's end goal was a broad
coalition with Regions. She doubted it would be possible to
achieve MAP at the NATO Ministerial in December anymore, and
even if they did, who would implement it -- Yanukovych?, she
asked rhetorically.


4. (C) The PM argued that all sides, regardless of the
ongoing political crisis, believed that the constitution
needed to be amended. Her amendments would introduce a
parliamentary form of government. Her team wanted major
changes to the judiciary to make courts independent, as well
as changes to local government and the Constitutional Court.
In her draft, the President would be directly elected in
2010, would retain the veto and the right to dismiss the
Rada, be commander in chief, coordinate foreign policy, chair
the NSDC, and be the guarantor of the constitution. He would
lose the power to appoint the Defense and Foreign Ministers,
governors and raion heads, and judges, and he could no longer
cancel Cabinet decisions. She said that she hoped half of
OU-PSD would support her draft and acknowledged that BYuT was
in negotiations with Regions for support as well. The PM
underscored that cooperation with Regions on the constitution
did not presage a coalition between the two, which she said
would be impossible for ideological reasons. Tymoshenko said
that they will table their constitutional amendments soon and
hold the first vote quickly (on sending the draft to the
Constitutional Court). She couldn't exclude the possibly
that the President would use the introduction of her
constitutional draft to ruin the coalition. Tymoshenko said
that she had reached out to Presidential Secretariat Head
Baloha on the constitutional amendments, but Baloha had
suggested that she sit down with his deputy Pukshin and read
through the constitution. She had been willing to do that,
even though she considered the suggestion demeaning for
protocol reasons, but then Pukshin had become unavailable.
The PM believed that if she moved forward on constitutional
changes, Yushchenko might also try to destroy the
Constitutional Court. (Note. We heard this story from BYuT
MPs in the Rada as well, see below. End note.) In this
case, she could not rule out impeachment proceedings. This
would be a shameful end to the democratic forces. Meanwhile,
the irony was if the situation was left as is, in the next
month or so, the democratic forces would each be inviting in
Regions. She knew that the President was courting Akhmetov;
she had been working with Yanukovych to gain support for
constitutional changes. "It's absurd," she sighed.


5. (C) In response to the Ambassador's question about early
presidential elections, Tymoshenko said she personally had
proposed postponing the presidential elections until 2013 to
allow the new constitution to come into force. But
Yushchenko's team opposed this idea -- they were convinced
they needed to fight to expand the President's powers, even
though she thought this was completely unrealistic. She said
that if Yushchenko kept stoking inflation, not only could he
not win the next presidential election, but she would not be
able to win either. She bemoaned the fact that even though
inflation was a global problem, in most countries,
governments worked with the opposition to mitigate
inflation's effects, but in Ukraine the President was using
inflation to drive apart his own coalition. Tymoshenko said
she did not understand why the President had created the
current situation -- he was a dying politician and he was
trying to drag her down with him. She said that democracy
was suffering in the region and meanwhile Russia was engaged
in "abnormal activities" in Crimea. Many of the processes he
had set in motion were irreversible and she did not know the
right way to come out of this or what she could offer
Yushchenko to end the current war. The PM suggested
organizing a private roundtable with serious European
politicians whom the President respected. They could explain
to Yushchenko that he needs to cooperate with the Cabinet.

In the Rada: BYuT Blockades, Rumors Swirl
--------------


6. (SBU) With the diplomatic and press balconies packed on
May 13 in anticipation of Yushchenko's annual address to the
Rada (postponed several times over the past few months for
political reasons),observers were instead treated to BYuT
blocking the rostrum, the President's seat, and the Speaker's

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dais. Speaker Yatsenyuk eventually entered the session hall
from behind the Speaker's dais, opened the session without
the aid of a microphone, registered 256 MPs in the hall
(OU-PSD, Regions, Lytvyn Bloc),and recessed the Rada for the
morning. He then met with Yushchenko, Tymoshenko, and BYuT
MPs in his office, according to press reports. The
Coordinating Council also met again in the afternoon, but MPs
from Regions and OU-PSD told the press that no compromise was
reached.


7. (C) In the halls, MPs from different factions offered
their take on the situation. The first explanation for the
stand-off was the ongoing dispute between the Prime Minister
and the President over the head of the State Property Fund
(SPF),with BYuT demanding that current official head
Semenyuk be removed by the Rada before the President spoke.
However, BYuT faction head Ivan Kyrylenko told the press that
there was actually a dispute over three anti-inflationary
bills submitted by BYuT. The faction either wanted the bills
approved before Yushchenko's speech or a gentlemen's
agreement to approve them immediately afterwards. However,
BYuT MP Ostap Semerak told us that the anti-inflationary
measures were just a pretext. BYuT's real motivation was
concern that Yushchenko planned to introduce three new
nominees to the Constitutional Court and demand their swift
confirmation -- all three new judges would be allied with
Baloha and thus could block Tymoshenko's constitutional
reform. (Note. This tracks with what Tymoshenko told the
Ambassador about being concerned that Yushchenko might tinker
with the Constitutional Court. We did see most of the 15
sitting judges in the visitor's balcony in the Rada today,
although they could have been there to hear the speech. End
note.)


8. (C) OU-PSD MP Iryna Herashchenko told us that the blockade
was political blackmail. BYuT wanted to demonstrate its
power and push its constitutional reforms. She said that her
faction was trying to work constructively with its coalition
partner, but BYuT kept working outside the coalition
agreement. For example, she said OU-PSD also believed
constitutional reform should go through the Rada, but first
the draft should be agreed to by the coalition council. In
addition, her faction wanted a consultative referendum to
demonstrate popular support for the new constitution. OU-PSD
also supported removing Semenyuk from the SPF, but wanted a
discussion of replacements within the coalition, rather than
BYuT insisting on its preselected candidate.


9. (C) Regions MPs looked very pleased with the turn of
events. Close Yanukovych ally Serhiy Lyovochkin told the
Ambassador that they were happy to be in the position where
Tymoshenko and Yushchenko were both trying to woo them. He
thought that soon a resolution of no confidence in the
current government might be introduced in the Rada and if it
was, he expected it to pass. Lyovochkin said that everyone
was tired of elections and that Regions would push for a
broad coalition with Lytvyn Bloc and part of Our Ukraine. He
added, however, that Yushchenko was probably waiting until
Tymoshenko's ratings dropped down to around 14 percent
before agreeing to let her go. MPs Hanna Herman and Taras
Chornovil repeated to us the idea that there would be a new
coalition, with Chornovil adding that he thought Tymoshenko
would be gone this summer.

He Said, She Said
--------------


10. (SBU) Instead of his formal address in the Rada, an
irritated, but under control Yushchenko made brief remarks to
the press from another room in the Rada building, which were
broadcast on Rada TV. He stressed the danger of high
inflation for the country and criticized the government for
playing with the constitution when it should be solving this
problem. He also said that an agreement had been reached the
previous day that he would give his address and then the Rada
would adopt the anti-inflationary measures --- therefore he
believed BYuT had ulterior motives for blocking the Rada.
However, he underscored that there would be no early
elections or changes to the coalition and said the coalition
had not yet reached the breaking point. He said the current
coalition and government had an obligation to the voters to
stick together and get to work. Yushchenko said their main
priorities should be: anti-inflation measures, urgent
budgetary amendments, urgent agricultural measures, and
analysis of the situation in Nafothaz. He also said that
constitutional amendments should be drafted in his National
Constitutional Council, then submitted to the Rada for
discussion and approval.


11. (SBU) A more visibly angry Tymoshenko then gave her own

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remarks to the press from the same podium. She said that her
political force had blocked the rostrum because the Rada had
refused to consider the anti-inflation bills. Tymoshenko
noted that they had also been waiting four months for the
Rada to examine the bill on lifting deputies' perks. She
accused the President's team of playing politics with the
welfare of the Ukrainian people. Specifically, she accused
five unnamed regional governors of sabotaging the Cabinet's
efforts to combat inflation and said they would consider
these governors' actions at the May 14 CabMin meeting.
(Note. The press later reported that the Cabinet had called
the governors of Volyn, Kherson, Cherkasy, Zaporizhzhya, and
Lviv, and the head of the Crimean government to the CabMin
meeting. End note.) Tymoshenko made the same points she had
made to the Ambassador regarding constitutional reform -- all
sides believed it necessary because the current government
system causes chaos. She closed with the same firm message
as Yushchenko that there is no alternative to the democratic
coalition and that the government and Rada would continue to
work together.


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