An Assessment of the Yanukovych Government in Ukraine
"During the last two years, Ukraine has really gone through a tremendous metamorphosis," said Anders Åslund, senior fellow at the Institute for International Economics and former Title VIII-supported research scholar at the Kennan Institute. Speaking at a 13 November 2006 noon discussion at the Kennan Institute, Åslund gave an overview of these changes, and gave his assessment of the government of Ukrainian Prime Minister Viktor Yanukovych, who was installed in August 2006 after an unsuccessful run for president in December 2004.
Åslund began by outlining the legacy of the Orange Revolution, and explaining the great changes that have taken place in Ukrainian society since 2004. He said that the main slogans of the Maidan had to do with freedom, democracy, and justice—not economic or social themes—and that these are the areas in which Ukraine has seen real changes. "The nice thing about life is that you get what you ask for," he said.
According to Åslund, the immediate and striking effect of the Orange Revolution is the development of a free media in Ukraine. Freedom of the press has expanded a great deal, and the media has become more diverse as well, with a rise in the overall quality of reporting, he said. As a result, there is more information available on the activities of various actors on the political scene. "Ukraine has become a country with scandals [happening] all the time," he said.
Democracy and the democratic process in Ukraine have also become stronger, according to Åslund. The March 2006 parliamentary elections were widely perceived as fair, and the constitutional reforms passed during the Orange Revolution worked as they were intended to, he said. Five parties cleared the three percent threshold necessary to enter parliament, and the proportional system of voting prevented oligarchs from buying their seats in single-mandate districts.
In the area of judicial reform, Åslund praised the reforms brought into effect as part of the package of constitutional changes passed during the Orange Revolution. He said that there were two primary achievements in the Ukrainian system of justice. "One is that a new Supreme Court and [a new] Constitutional Court have been formed, which have a nice balance of appointees among them," he said. "And the other big change that has happened in Ukraine, as you can see in Transparency International, is that corruption in Ukraine has fallen very sharply, ... while corruption has increased in Russia," he added. More remains to be done in this sector, he cautioned, but judicial reforms and instituting the rule of law are long-term processes.
The ultimate result of the parliamentary elections, according to Åslund, is that the oligarchs are back, but in a relatively benign way. The oligarchs are still powerful, he said, but now they are entering into alliances with different politicians; they are not controlled by the president's office, as they were under Kuchma. Economic and political power is diffused within Ukrainian society, he said. System Capital Management, led by Ukraine's richest man Rinat Akhmetov and associated with Yanukovych's Party of Regions, has a regional rival in the Industrial Union of Donbas, which, like SCM is based in Donetsk. Dnipropetrovsk-based Interpipe, associated with Viktor Pinchuk, is in competition with Ihor Kolomoisky's Privat group. In political terms, there is a rough balance between the West and Center of the country, and the East and South. There is also a balance of power between the president, the parliament, and the constitutional court.
The basic economic policy of the Yanukovych government is one that is friendly to big business, according to Åslund. The government is growth-oriented, meaning that it sees economic growth as its primary goal, and fiscally conservative. It also supports Ukraine's entry into the World Trade Organization, which will help Ukraine facilitate a free-trade agreement with the European Union. This step may take place by February 2007, Åslund said. He also said that the moratorium on reprivatization will improve the investment climate, and the liberalization of the market for agricultural land will modernize the economy.
At the same time, Åslund noted that corruption in the part of government responsible for the economy is a big problem. The unequal distribution of Value Added Tax (VAT) refunds by the Finance Ministry is a clear example of corruption, he claimed. The ban on grain exports is also aimed to benefit private interests, he said, as it will allow one company to become the primary exporter of Ukrainian grain while benefiting from high world prices. Finally, a third example of corruption Åslund cited is the opaque way in which Ukraine imports oil and gas from Russia, which is overseen by the Ministry of Energy.
One difference between these corrupt schemes and those of the Kuchma era, according to Åslund, is that these current examples are much more well-publicized. The first step to fighting corruption, he said, is establishing transparency. The way Ukraine and Ukrainian society responds to these examples of corruption will be a test of its democracy, said Åslund, adding that, in his opinion, Ukrainian democracy is established enough that these schemes will not succeed.