UKRAINE: COALITION TOGETHER FOR NOW, BUT

C O N F I D E N T I A L SECTION 01 OF 04 KYIV 000960 SIPDIS E.O. 12958: DECL: 05/21/2018 TAGS: PGOV PREL PINR UP SUBJECT: UKRAINE: COALITION TOGETHER FOR NOW, BUT ALTERNATIVES IN THE WINGS REF: A. KYIV 00954 ¶B. KYIV 00873 KYIV 00000960 001.2 OF 004 Classified By: Ambassador for reasons 1.4(b,d). ¶1. (C) Summary. For now, Ukraine's fragile coalition is holding itself together -- barely-- for a variety of reasons and in spite of the public bickering and threats, and could continue to muddle along for weeks or months. All parties are reluctant to return to expensive and time-consuming new elections, both orange parties are suffering from dropping ratings in the polls, and there is no agreed upon alternative coalition/government in the wings. However, should intra-coalition relations continue downhill there are a number of ways this could play out. A formal decision to terminate the coalition would result in an acting government and could evolve in one of several directions. If enough Our Ukraine deputies would agree, it is possible that a new broad coalition could be formed with Regions and the Lytvyn Bloc, although it is an open question as to whether Yanukovych could reclaim the premiership. Another alternative might be a technocratic solution, with no new coalition and a new government approved by a situational majority of MPs, apparently a favorite of Presidential Chief of Staff Baloha but quite possibly unconstitutional. More radical solutions would be the holding of new elections or agreement on a new constitution. ¶2. (C) The most likely scenario in the short term is that the coalition will somehow manage to stick together and sporadically accomplish items in the Rada and Cabinet. President Yushchenko and Prime Minister Tymoshenko continue to insist that they are committed to the current coalition, in spite of their constant sniping in the press, and Tymoshenko's BYuT and the Cabinet have made several concessions since May 16 to try to ease tensions. Moreover, voting in the Rada on May 16 and 20 shows that the coalition can get its act together when it needs to, although it sometimes needs outside support to get bills passed. However, the refusal by some in OU-PSD to support all of BYuT's anti-inflation laws on May 16 after they promised to do so, the announcement that the Prosecutor General is filing criminal charges against the BYuT-nominated head of the State Property Fund, the harsh public battle over Vanco, Yushchenko's strongly worded accusations May 17-18 that Tymoshenko had violated the coalition agreement, and Tymoshenko's equally strongly-worded May 20 rebuttals, suggest the coalition could still crack under pressure. End summary and comment. Muddling Through -------------- ¶3. (C) There are a number of incentives for the coalition to stick it out for at least a few more months. Neither side seems prepared for early elections and there are political and legal impediments to any of the other scenarios outlined below. In addition, there seems to be a sense from political observers, which was also echoed to us by Regions MPs Lyovochkin and Kolesnikov, that Yushchenko does not want Tymoshenko to leave office until her ratings have dropped sufficiently to hurt a future bid for the presidency, the consensus being that once she is back in the opposition, her ratings will not fall farther. Lyovochkin told us that it could take a few more months to see her ratings drop into the low teens. Deputy Head of the Presidential Secretariat Chaliy predicted to the Ambassador on May 20 that the May 25 Kyiv mayoral election would be Tymoshenko's first big defeat. He added that this loss, the declining economic situation, and her inability to get Regions' support, would cause her political star to fall. (Note. Reliable polls are somewhat hard to come by in Kyiv, but there has been no noticeable drop in Tymoshenko's ratings, which hover in the 23-26% range, since she became PM in December 2007. In contrast, Yanukovych's numbers may be seeing an up-tick, rising above 25%. End note.) For the opposite reason, Tymoshenko may want to stay in office while she fights inflation and rising prices to protect her image. ¶4. (C) Another sign that the coalition might hold it together is that the Rada managed to pass legislation on May 16 and ¶20. On May 16, the coalition passed the CabMin law and the law amending customs tariffs (in the first reading),although the latter only with Regions' help. On May 20, the Rada passed in the first reading the Labor Code, a WTO law on fish, a WTO law on veterinary medicine, and the tender chamber law -- in three of the four votes, the coalition had enough votes alone, although other factions voted for some of them as well (the tender chamber law would have failed without the Communists). There may also be a few left on KYIV 00000960 002.2 OF 004 both sides who see keeping the democratic coalition together as important for achieving goals, such as NATO MAP, increased foreign investment, Euro 2012 preparations, and a free trade agreement with the EU. The Mechanics - The Range of Possible Changes -------------- ¶5. (C) Before any alternative scenarios could take place, one team or the other would have to officially end the old coalition or force a scenario that calls for the Rada to be dismissed. One faction can withdraw from the coalition agreement if a majority of MPs agree to it -- this would mean 37 OU-PSD MPs, which for now is still an uncertain number. A simple majority in the Rada can vote no confidence in the government, which results in its dismissal, which may also lead to the end of the coalition. Regions has been frank in its readiness for a broad coalition, given the right circumstances, which presumably involves a return of Viktor Yanukovych to the premiership. We believe that Presidential Secretariat Head Baloha is still trying to devise a situation in which there is no formal coalition, just a situational majority with some sort of technocratic government, possibly with himself or Speaker Yatsenyuk as PM, although it is not clear how to legally reach this goal. Should BYuT want to change the status quo, it could either go into opposition or once again resign en masse, depriving the Rada of its quorum. The other possible route for change is constitutional reform -- if any draft is passed, it is likely to involve some sort of early elections and/or dramatic redistribution of power. Terminating the Old Coalition -------------- ¶6. (C) The most straightforward way for the current coalition to collapse would be for at least half of one of the two factions to vote to withdraw from the coalition. The departing faction must give 10 days notice to its coalition partner, according to the old Rada rules of procedure, after which the Speaker announces the MPs who are departing from the coalition and their names are printed in Holos Ukrainy. If the remaining MPs in the coalition number fewer than 226, the coalition is terminated. In the present case, OU-PSD is more likely to withdraw, which would mean 37 MPs would have to vote to empower the faction to leave the coalition. We do not believe that Presidential Chief of Staff Baloha -- one of the main proponents of an alternative coalition -- currently has 37 supporters, but there is growing frustration within OU-PSD. Chaliy admitted that it was "very difficult to get to 37." Rada rules say that if a coalition is terminated, the Rada can terminate the authority of the ministers from the party that left the coalition, but it does not say they must. ¶7. (C) The other possible way to terminate the coalition could be via a no confidence vote in the Cabinet. Article 87 of the constitution says that the President or 150 MPs can initiate a vote of no confidence in the government -- a simple majority (226) in favor results in the automatic resignation of the PM and all ministers. Regions alone, with its 175 deputies, could introduce a resolution calling for a vote of no confidence. This option is also mentioned in the Rada rules of procedure and is clarified in the new CabMin law. Neither the constitution, the CabMin law, nor Rada rules specify that this automatically means the termination of the coalition, but given that a no-confidence vote could only pass with the support of at least some OU-PSD MPs, such an outcome is likely. Broad Coalition -------------- ¶8. (C) Should the current coalition collapse, Regions MPs have repeatedly confirmed to us that they are still hopeful that a new coalition will be formed between their faction and OU-PSD. Regions oligarch Akhmetov told the Ambassador on March 3 that eventually he wanted to see this outcome, Yanukovych confirmed to DAS Merkel on April 18 that they had been working for a broad coalition since March 2006, and Lyovochkin told us on May 13 that they all expected sooner or later that the President and his faction would be ready to reformat the ruling coalition. Lyovochkin also said that he thought someone might soon register a no confidence resolution, but he was coy about which faction might initiate the action, implying it could be Regions to give OU-PSD political cover. ¶9. (C) However, deciding who will be PM, and to a lesser degree Speaker, is probably one of the key issues holding back a broad coalition. Lyovochkin confirmed to us that KYIV 00000960 003.2 OF 004 Yanukovych would expect to be PM if a new coalition was formed. However, Yushchenko and OU-PSD are likely looking for a scenario with a PM who would not be such a political liability for them and who would be more cooperative, and Chaliy admitted to the Ambassador that "what to do with Yanukovych" was a big stumbling block. He added that he was sure that one condition Yushchenko would demand of a new prime minister would be support for NATO MAP. Speaker Yatsenyuk and Defense Minister Yekhanurov's names get thrown around occasionally as possible "neutral" candidates, who both sides might accept. (Note. Yatsenyuk was also the consensus candidate for Foreign Minister in March 2007, ending a Regions-OU dispute. End note.) A complicating factor could be the role Lytvyn Bloc might play in a new coalition. Both Regions and OU-PSD may want Lytvyn Bloc in the coalition as a moderating factor, and if not all 72 OU-PSD MPs agree to the new coalition, they will need Lytvyn Bloc for stability, and possibly to form the coalition at all (since 175 Regions deputies plus 37 OU deputies would only equal 212 seats and 226 are needed for a majority). Presumably, in exchange for joining a coalition, Lytvyn Bloc would hope to return Lytvyn to the Speaker's chair, but between OU-PSD and Regions, whichever did not get the premiership would probably want to run the Rada. It seems that Yushchenko and most of OU-PSD would hesitate to move toward this variant until these key issues are resolved. In addition, they are probably concerned about their image being further damaged by formally joining efforts with its former opponents, especially with presidential elections and a certain Tymoshenko candidacy on the horizon in early 2010. Technocratic/Acting Government -------------- ¶10. (C) It appears that the preferred option for the Presidential Secretariat is probably a technocratic government backed by a situational majority, which wouldn't have to deal with Yanukovych as PM or explain a broad coalition to Yushchenko's electorate. Article 83 of the constitution says that the Rada must form a new coalition within 30 days of the termination of the previous coalition, and article 90.2 says the President has the right to disband the Rada if this does not happen. However, the constitution does not say Yushchenko "must" disband the Rada and the President is constrained by article 90.4 that says the powers of a Rada elected in pre-term elections cannot be terminated for a year. This leaves open the possibility of a situational majority rather than a formal coalition with some sort of technocratic government. We heard a lot of talk of this from the Presidential Secretariat and others in the winter, and Baloha may hope that he could be named acting PM -- Yatsenyuk and Yekhanurov's names also come up in this context. Chaliy said this could be the option they push following a no confidence vote on Tymoshenko. ¶11. (C) However, this path is constitutionally dubious and not covered in the constitution or Rada rules, a problem Chaliy admitted to the Ambassador when he noted that this would probably be on the "edge of legality." Technically, Tymoshenko should remain as acting PM until a new PM is confirmed in the Rada. Since coalitions name the PM, it is not clear through what mechanism a PM could be named without a coalition. Ukrainian politicians are skilled at reading between the lines and exploiting loopholes, so we cannot rule out this scenario. However, it would require Regions or BYuT to join OU to vote for the new PM, so negotiations would still have to occur. Early Elections -------------- ¶12. (C) There are several ways to disband the Rada. Yushchenko could take advantage of article 90 of the constitution if there is no new coalition within 30 days or no new government within 60 days. In addition, there is now the precedent, after the spring 2007 political crisis, that 151 MPs resigning also causes the Rada to disband. However, given article 90's restriction on holding pre-term elections more often than once a year, no matter how the early elections were brought about, no vote could be held before October 1, 2008. This means, should Yushchenko disband the Rada or 151 MPs resign, MPs would continue in acting capacity until the new election. ¶13. (C) Moreover, there is also election fatigue among all the parties. Lyovochkin told us May 13 that no one wanted new elections -- most likely because of both cost and general popular disgust with national politicians. OU-PSD are worried that falling ratings would shrink their new faction even more. Political analysts say that even BYuT is taking a KYIV 00000960 004.2 OF 004 hit in its ratings, although once again there is not enough good published polling data to back this up. Moreover, many are looking to the May 25 Kyiv mayoral and city council elections as a bellwether for national elections, so the outcome may influence how the major players view a new Rada election. For example, CVU head Ihor Popov predicted BYuT would do poorly on May 25, which could drop their results in a new national election from 5-15 percentage points. ¶14. (C) However, reservations about new elections have not quieted speculation and accusations that others are plotting to bring them about. On May 17, Baloha accused BYuT of working for pre-term elections by the end of the year. Yanukovych said that Regions will not initiate new elections, but is ready for them, should they happen. Yatsenyuk said that if the coalition can't fix itself quickly, he thinks early elections are likely. New Constitution -------------- ¶15. (C) The final path to significant governmental change would be the adoption of constitutional amendments or a new constitution, which could occur with or without early elections. All three parties have constitutional drafts in play. BYuT legal adviser Zadorozhniy said the drafts from BYuT and Regions are very similar in that they move Ukraine toward a purely parliamentary system and the two parties are in talks on future cooperation (ref B),although Regions has publicly stated that it is not cooperating with BYuT on a joint draft. Chaliy told the Ambassador that he thought this scenario was impossible because an alliance with Regions was "abhorrent" to Tymoshenko and Akhmetov opposed the idea as well. ¶16. (C) BYuT did not introduce its constitutional draft in the Rada the week of May 12 as Tymoshenko had publicly threatened to do. Zadorozhniy had confirmed to us privately that they planned to do so, but presumably they could do this at any time. If Tymoshenko is serious about instituting her proposed constitution by the end of the year, she will need to act soon since the process takes time. As Zadorozhniy pointed out, once the draft is registered with the Rada, they need to establish a commission to review the draft and come to a consensus. Then 226 votes are required to send it to the Constitutional Court to ensure that it complies with all requirements in the current constitution. When the CC approves the draft, it goes back to the Rada for another 226 vote approving the text. If this is done by the end of the spring session, the second vote of 300 MPs can take place in the fall, allowing the constitution to be approved this year. However, there are only four more weeks of plenary left in the spring session, with July 11 the final date for voting. Interestingly, the Venice Commission reported that the only draft constitution it has received so far is from the Presidential Secretariat. (Note. Venice Commission approval is not required, but it gives constitutional reform a stamp of legitimacy and European approval. The Venice Commission offered opinions on constitutional drafts in 1996 and 2004. End note.) ¶17. (C) If any constitutional draft is adopted, it will include transitional language that lays out when the new constitution comes into effect and under what circumstances. For example, Tymoshenko has said that she would be willing to include transitional provisions extending Yushchenko's current term in office until 2013, albeit with reduced powers. Neither Yushchenko nor Yanukovych have indicated how or when they see their drafts coming into effect. Many believe that any new constitution will come with new Rada elections, as parties try to maximize their advantage in the new system. ¶18. (U) Visit Embassy Kyiv's classified website: www.state.sgov.gov/p/eur/kiev. Taylor