Ukraine Politics: Hitting an Inflection Point

The Ukrainian crisis has reached an inflection point – with Ukrainian elections past and a reform-minded government about to be announced, a new Republican majority in the US House of Representatives, and the Minsk Memorandum in tatters, Putin’s Russia now faces a choice of whether to respect Ukraine’s clear choice for reform or to ramp up the battle for Ukraine further. Three things to look for in the coming weeks: i) can the Republican-controlled House start to lead the West in a more proactive response to Russian aggression? ii) How committed is Ukraine to reforms? iii) How will Russia react to its economic troubles, Ukraine’s continued turn to the West, and the Republican House?

Fight or Flight: When will Russia’s economic troubles bite?
With oil and the ruble continuing to slide and a myriad of other economic problems starting to emerge, the question is: when will the negative economic effects translate into geopolitical reprieve for Ukraine? Perhaps it is a broad failing of the analyst community, expecting that a negative economic progression of events will dissuade Russia from further aggression. The recent ramp-up of attacks and deaths in eastern Ukraine – despite more oil and ruble weakness in the two weeks since Ukraine’s election – heralds a looming increase of hostilities rather than a real de-escalation. On the other hand, the multitude of economic hurdles facing Russia will, at some point, reach a breaking point (whether with households, oligarchs and big business, or SMEs). Whether Russia heeds the economic warning signs and chooses to revise its policy towards Ukraine with the view of getting the West to soften sanctions is another story altogether.
Nevertheless, the US and Europe should be seeking viable ways to allow Putin to save face and at the same time to allow him portray whatever solution may come as a Victory for Russia. Finding a resolution that meets those criteria and at the same time is acceptable to the people of Ukraine will be a significant hurdle.

A reform-minded coalition: Yatseniuk to return as PM
Domestically, negotiations over a parliamentary coalition are ongoing and an agreement establishing the coalition could be signed as early as this week; as of Monday, 5 parties are involved in the talks (People’s Front, Petro Poroshenko Bloc, Self-Reliance Party, Radical Party, and Batkivshchyna – only the Opposition Bloc has not been invited to take part in the formation of government) and are awaiting the announcement of the final vote results. Talk of ministerial appointments has mostly been speculative in nature thus far, but Arseniy Yatseniuk is a lock for PM – his strong working relationship in the past with IFIs bodes well for the continued support of the international community and should be a positive signal to the international investment community.
Yatseniuk’s People’s Front and President Petro Poroshenko’s eponymous political party will form the nucleus of the coalition, but with around 214 MPs between them at the moment (while vote counts continue and “self-nominated” candidates seek the highest bidder among established political forces) the two will need support from other parliamentary groupings, both to establish a working coalition of 226+ MPs and to reach towards the constitutional majority threshold of 300+ MPs. The former will not be an issue; the latter will require broader political consensus and is less likely.
Even if the various political forces put pen to paper and announce a constitutional majority it will be fragile at best; the differing political backgrounds of MPs within any given party means voting discipline may be fleeting. Less impactful constitutional changes are, in our view, likely, while the prospects for pushing through more contentious issues are less assured. 
Nonetheless, this sitting of parliament looks more than capable of pushing reforms and we do not expect the parliamentary majority and coalition to experience serious problems.

Bellwethers of Reform – New Personalities
Once the election results are announced, Ukraine’s new parliament will be comprised of both new faces/reformers and old faces/representatives of big business. And while the former group of reform-minded individuals seem to be in the majority at the moment, barriers and hurdles remain, and finding the political resolve to move Ukraine forward through the reforms will be no simple matter.
There are a few notable individuals entering parliament, first-time MPs that have distinguished themselves as reform crusaders in the past. These individuals – of which we’ve singled out three – can act as leading indicators of Ukraine’s reform progress and should be kept on radar screens; if these individuals were to falter or publically signal their opposition to the government’s actions it may be the first sign of the resurgence of the old rules of the game.

Hanna Hopko
32 year-old civic activist, journalist, ecology advocate, and PhD in social communications, active in the fight against corruption in healthcare (Source: Global Shapers Community, an initiative of the World Economic Forum). Ran in the No1 position on the party ticket of Self-Reliance, Lviv Mayor Andriy Sadoviy’s political force, which placed 3rd in the elections with 11% of the popular vote. Ms. Hopko could be part of a lobby for Mr. Sadoviy, but her past actions and reputation suggest she would likely speak out or exit politics altogether if reforms falter and corruption remains entrenched.

Serhiy Leshchenko, Mustafa Nayyem
An investigative and political journalist, Leshchenko is deputy editor-in-chief of the influential and respected online news and analysis site Ukrayinska Pravda. Mustafa Nayyem is an Afghan-born Ukrainian investigative and political journalist, and a frequent contributor to Ukrayinska Pravda and Hromadske TV, a new online media outlet. Nayyem is also considered to be the instigator of the initial Euromaidan protests, having called Ukrainians out onto Independence Square after the Yanukovych administration reneged on a promise to sign the EU Association Agreement. Both journalists ran in the top-20 on the party list for the Petro Poroshenko Bloc. During the election campaign, Leshchenko and Nayyem came out aggressively against MP candidates they saw as corrupt, even within their own party, the Petro Poroshenko Bloc. Whether that was pre-election populism or a public re-affirmation and announcement that their anti-corruption crusade will extend into their term as parliamentarians remains to be seen.

Internationally, the Republicans’ victory in the US mid-term elections last week and their renewed control over the House of Representatives has the potential to be a turning point.

US Republicans take control of the House
Look for Republicans to table bills that would enable the US to provide more concrete military and defense support, potentially even lethal military support. Two bills likely to be put forward are the Ukraine Security Assistance Act of 2014 (“neutralize the military-support advantage that separatist rebels are using to target civilian and military aircraft in eastern Ukraine,” and “provide adequate and necessary assistance to protect Ukrainian democracy and sovereignty”) and the Ukraine Freedom Support Act of 2014, which would designate Ukraine as a major non-NATO ally and potentially clear to path to the provision of lethal military assistance.
Nevertheless, we caution that the simple re-emergence of a Republican majority in the House does not foreshadow military support for Ukraine – getting the two bills signed into law will still require broad bi-partisan support to sway President Obama’s views on the matter.

Russia continues to undermine global security organizations
Meanwhile, Russia has continued to delegitimize international security institutions that were established for the express purpose of conflict prevention. The UN Security Council was stalled long ago by virtue of Russia’s veto and transformed into little more than a battleground of speeches for the US and Russian Ambassadors. Now, the OSCE is coming under fire – for now largely from local Ukrainian sources – for allegedly promoting a Russian point of view or remaining so neutral as to neutralize itself as a body of any moral authority.

По материалам: spadvisors