The Blue Counterrevolution: The First Year of President Viktor Yanukovych

Viktor Yanukovych’s first year as President of Ukraine has been tantamount to a counterrevolution. His initial actions have been almost complete departures from the policies of his predecessor, Viktor Yushchenko, who led the Orange Revolution in 2004. Yanukovych has effectively ignored his campaign pledges of fixing the economy, raising quality of life and taming corruption, but instead has focused on building a strong partnership with Russia. The sudden reversal of course has caught the West off-guard seeing as most have predicted Yanukovych to be considerably less pro-Russian since his loss in 2004.¹ Even though Yanukovych has lost little time in moving closer towards Russia, he has already rebuked several of the more ambitious Russian efforts to bring Ukraine into its orbit. In fact, it is highly unlikely that warm relations with Russia will persist throughout his first term. Tensions have already mounted over the energy agreements between the two countries—agreements that are at the heart of Russo-Ukrainian relations.

The refusal of Yanukovych and his Prime Minister, Mykola Azarov, to merge the Ukrainian owned Naftogaz with Russian owned Gazprom show that Western fears of Russian envelopment are mostly unfounded. Indeed, international attention solely on Ukrainian foreign policy has resulted in many losing focus on the broader aims of Viktor Yanukovych. With each passing month it becomes clearer that Viktor Yanukovych is not a second Dmitry Medvedev out to do Vladimir Putin’s bidding; he is becoming ever more like Alexander Lukashenka, the President of Belarus widely dubbed “the last dictator in Europe.” It is a telling sign of Yanukovych’s intentions that the Constitutional Court has ruled that the hallmark reform legislation of the Orange Revolution-the curbing of presidential powers- is unconstitutional. ²

Domestic Policies: Glory to the Party of Regions!³

Viktor Yanukovych and his Donetsk team are acutely aware of their rather limited political capital; Yanukovych won the election with a razor thin margin and has the support of only a minority of the Ukrainian population. In addition, his party had to violate the constitution to form a governing coalition in the Parliament.⁴ An executive administration standing on a shaky foundation in a country prone to frequent upheaval in the legislative branch has little prospect for success. Hence, Yanukovych’s team has wasted little time in strengthening the Party of Regions’ (the President’s party) grasp of power in regional and municipal governments while attacking the already fractured opposition.

A slew of legal changes made it more difficult for opposition parties to unite and register for the recent fall regional elections.⁵ In addition, NGOs and the press have felt crackdowns. The staunchly pro-Western Channel 5 has lost its broadcasting rights while the pro- Yanukovych Inter channel has seen its media share balloon.⁶ More portentous are the reports of opposition politicians being investigated by the Ukrainian security services and threatened with prosecution.⁷ Due to the sensational nature of Ukrainian politics, it is hard to determine if there is any evidence to these claims. While it may be unlikely that the self-proclaimed leader of the opposition, Yulia Tymoshenko, is in any danger of a politically motivated arrest, several business rivals of Yanukovych’s team have faced pressure from the SBU, the Ukrainian successor organization to the KGB. ⁸

Even though Yanukovych has lost little time in moving closer towards Russia, he has already rebuked several of the more ambitious Russian efforts to bring Ukraine into its orbit.

Yanukovych’s detractors enjoy poking fun at his frequent gaffes, and portray him as a man of limited mental abilities, going as far as to label him a “vegetable.”⁹ He may not know how to spell the word professor (he wrote in “proffesor” for his occupation on an election qualifying form)¹⁰, but he has succeeded where none have previously, by taming a traditionally rambunctious political milieu. Ukraine’s nineteen years of independence have been defined by constantly reoccurring protests and snap elections, as one coalition after another ceased to function.¹¹

It is a testament to the success of the Party of Regions that the opposition has been relegated to publicity stunts like the one seen during the ratification of the Kharkiv agreement. ¹² The opposition is powerless to stop legislation in the parliament, called the Verkhovna Rada, because the ruling coalition has unconstitutionally poached individual members of parliament to swell its ranks¹³; thus enabling it to bypass opposition parliamentary delaying tactics. Moreover, the Party of Regions has made gains in the regional elections held on October 31st, further cementing its hold on power.

Considerable emphasis has been put on the upcoming Euro 2012 soccer tournament. The right to cohost the tournament with Poland was considered a major Viktory for Viktor Yushchenko in 2007 when the decision was announced. Since then, Ukraine has faced questions regarding the readiness of the country to host the tournament.¹⁴ Fears mounted that the bid would be given instead to either Hungry or Germany¹⁵, and in response Yanukovych pledged to ensure that the tournament will go as planned.

To that end, Ukraine has witnessed unprecedented improvements to its airports, roads and hotels, many of which have not seen major improvements since the collapse of the Soviet Union.¹⁶ The tournament serves the dual purpose of uniting the entire populace while giving Yanukovych the opportunity to further showcase his accomplishments both in the domestic and the foreign arena.

The Euro 2012 is the most visible example of Yanukovych’s aim to portray himself as a tough, can-do modernizer who is also of the people. His 60th birthday was honored by a major TV station with a sixty minute sycophantic tribute that resembled the minor cults of personalities that have emerged in Central Asian states.¹⁷ Such publicity campaigns seek to hide the fact that Yanukovych is a man deeply fearful for his life; he lives in a heavily guarded compound outside the city, traveling daily in a long cortege of bulletproof cars that hold up traffic for hours. ¹⁸

He has also surrounded himself with loyal Donetsk cronies that are given exclusive rights to all the government contracts, such as the Euro 2012 tenders. The head of the SBU, Valerii Khoroshkovskiy, is married to the chief shareholder of the Inter media conglomerate mentioned earlier and is also a key player in UkrTransGas— a murky third party at the heart of the European natural gas market.¹⁹ Yanukovych and his team are using the presidential office as a means to place themselves and their oligarch backers at the top of the Ukrainian economy.

Although he has secured the political front, Yanukovych’s Achilles’s heel is the economy. Running under the auspices of being the pro-business candidate, Yanukovych needs to turn around the economy if he is to remain in power. Ukraine’s economy contracted by 15.1 percent last year and was on the verge of a default. Most of the steel and heavy machinery industries that make up the bulk of the Ukrainian industry are uncompetitive and rely on subsidized gas prices.

The gas deal with Russia should somewhat help prop up the industries, but it also places caps on the amount of gas that can be bought at discounted rates; after 30 billion cubic meters the price returns to market levels. ²⁰ The energy agreement also does not shield the average consumer; utility rates increased by 50% over the summer, in part to satisfy criteria for the $15 billion dollar IMF loan. Azarov has publicly stated that he wished to negotiate an additional agreement with Russia to lower the consumer price but such an agreement would entail the merger of Gazprom and Naftogaz, something that Yanukovych has so far opposed. ²¹

For all the talk of economic reform and combating corruption, Yanukovych has offered few ideas on how to make good on his promise to improve the standard of living. He is heavily reliant on the support of oligarchs, whose primary interests are access to subsidized natural gas for heavy industries and easy credit. So crucial is the access to easy credit for the likes of Roman Akhmetov and Dmytro Firtash that the oligarchs voiced their displeasure at Yanukovych for failing to secure a loan from Russia and called on him to get one from the IMF. ²²

The IMF loan comes with conditions that are already hurting the average Ukrainian, but Yanukovych is not about to alienate his chief source of support.²³ The example underscores his chief weakness: Yanukovych can go about limiting press freedoms and cementing his grip on power only if the economy performs well enough to placate the weary populace. If the economic situation does not improve, his heavy-handed tactics will not keep the opposition at bay indefinitely.

Relations with Russia: A Brotherly Union! ²⁴

As stated earlier, repairing relations with Russia has been at the cornerstone of Ukrainian foreign policy since Yanukovych assumed office as president. Yanukovych’s first action as president and his most significant to date was the Kharkiv agreement²⁵. Under the deal, Ukraine would receive a discount on gas prices in exchange for the right to use Crimea as a base for the Russian Black Sea Fleet until at least 2042. The agreement was reached virtually overnight and hastily ratified in the Rada amid fistfights on the floor, smoke grenades, the egging of the Rada speaker and the draping of a huge Ukrainian flag over the seats of the opposition; giving the entire proceeding a very phantasmagorical feel.²⁶ Since then the two countries have embarked on a dizzying spree of signing ceremonies and mutual pledges in almost every imaginable sphere.

There are talks of unifying the aerospace²⁷ and naval industries²⁸ to make them more competitive on the world market; cooperation on nuclear energy²⁹; the writing of a joint history textbook³⁰, a prospect far more controversial than one might think; there is speculation that the various Orthodox churches in Ukraine will unify under the Moscow patriarch³¹; there are even rumors circulating that a secret agreement over the fate of neighboring Moldova was signed earlier this year. ³² For all the pomp and circumstance and public reaffirmations of “brotherly” bonds, there has been no real push to make any of the aforementioned plans a reality. If the later rumor is almost certainly nothing more than an opposition fabrication to stir up fear, even the supposedly serious proposals of an aeronautical consortium have stalled.

Viktor Yanukovych needs cheap Russian gas to prop up the country’s economy and the industries of his oligarch supporters, he also needs good relations with Russia to keep his pro-Russian electorate happy. The later goal can be achieved with domestic policies such as institutionalizing Russian as a second official language³³, or removing the Yushchenko era changes to the school curriculum that glorified Nazi collaborators as Ukrainian freedom fighters. In turn, this means that Yanukovych has no personal need for greater integration with Russia. Any sort of economic, social or especially political, integration would threaten his autonomy and interests. This can be seen by his adamant refusal for a merger between Gazprom and Naftogaz. ³⁴

All of this points to a relationship that will not stand the test of time. In fact, there are signs that the honeymoon period is already over. Ukrainian oligarchs are disappointed with the terms of the gas agreement and there are calls for a renegotiation on the price. So far Vladimir Putin has stated that Russia has already paid ‘too high a price’ for the Russian Black Sea Fleet and has given Ukraine generous gas subsidies.³⁵

Russia wishes to acquire Naftogaz or at the very least secure the transit infrastructure in Ukraine. Yanukovych has called against such an acquisition and is only willing to entertain talks of a merger based on equal terms.³⁶ Ukraine is also seeking direct ownership of natural gas mining sites along with investment for infrastructure improvement.³⁷ In particular, Yanukovych is seeking Western assistance in modernizing the country’s gas infrastructure, something Moscow opposes.

Victor Yanukovych needs cheap Russian gas to prop up the country’s economy and the industries of his oligarch supporters, he also needs good relations with Russia to keep his pro-Russian electorate happy.

Ukraine has made no effort to move forward on talks of consolidating the naval or aeronautical industries and even talks of nuclear energy cooperation have so far yielded scant results.³⁸ All three industries were to form consortiums that were to improve the competitiveness of the respected firms on the world market. Ukraine is willing to sign an aeronautical consortium only on terms that benefit its Antonov factory and that would allow Ukraine to get cheaper parts from Russia; it is not actually interested in forming a new jointly owned corporation. It is even less open to any sort of naval building agreement.

With nuclear energy cooperation there has been more progress since it is under the general umbrella of crucial energy talks: Russia is to build a new plant in Ukraine to process uranium in exchange for becoming the sole provider of nuclear fuel for Ukrainian reactors.³⁹ The later point has been a bone of contention and it is unclear at this time if the talks will bear fruit.

In terms of broader geopolitical alignment, the decision to continue to sell arms to Georgia⁴⁰ and the agreement to ship Venezuelan oil to Belarus⁴¹, clearly show that Yanukovych does not plan on being a puppet of the Kremlin. Ukraine has so far refused to recognize either South Ossetia or Abkhazia⁴² and has publicly reiterated that it has no intentions of joining the Collective Security Treaty Organization (CSTO)⁴³.

Ukraine has also voiced concerns regarding Russia’s plans of building the South Stream gas pipeline that would bypass Ukraine and reduce its transit clout.⁴⁴ Heretofore, Vladimir Putin’s visits to Yanukovych’s Ukraine have been occasions of great pomp and circumstance and have resulted in ambitious albeit platitudinous agreements; it is a telling sign that his last visit amounted to little more than a signing of previously reached agreements in a much more subdued atmosphere.⁴⁵Continued on Next Page »