In the Ukraine, Freedom's Bitter Fruit

Deepening political rivalries and the familiar specter of corruption threaten the gains of last year's Orange Revolution

By Jason Bush

Less than a year ago, the world watched transfixed as the "Orange Revolution" unfolded on the streets of Kiev and other Ukrainian cities. The ultimate election victory of opposition leader Viktor Yushchenko received approval worldwide. Many had high hopes of a radical new start for Ukraine: Yushchenko had campaigned in favor of Western-style reforms and membership in the EU, and against the pervasive corruption of the previous regime.

But just look at the state of the Orange Revolution today. On Sept. 8, Yushchenko sacked his entire government -- the latest twist in a political crisis that has dramatically exposed the divisions at the very top of the new regime. Yushchenko was forced to take such drastic action after a key ally, Presidential Chief of Staff Oleksandr Zinchenko, resigned Sept. 3 in protest over alleged corruption among other senior figures.


  At root, the crisis reflects a bitter fight between two of Yushchenko's most powerful subordinates. One faction is led by Yulia Tymoshenko, Prime Minister of the outgoing government and the chief organizer and inspirer of last year's successful street protests. The other faction is headed by Petro Poroshenko, head of Yushchenko's Security and Defense Council until corruption allegations forced him to resign his post on Thursday. A leading businessman and media magnate, Poroshenko had given Yushchenko extremely valuable support.

The rivals have been sniping at each other for months. But the conflict got out of hand amid political maneuvering in advance of next March's parliamentary elections. Whereas Poroshenko is a leading figure in Our Ukraine, the major pro-Yushchenko political organization, Tymoshenko leads a separate political party called Motherland. The parties have failed to unite, not least because Tymoshenko has long harbored major political ambitions of her own.

A charismatic and wily populist, Tymoshenko has seen her popularity rating mushroom since the Orange Revolution propelled her to the premiership. She can also take pleasure in the latest turn of events. Outside the government, she will have greater freedom to exercise her talent for crusading rhetoric, boosting her chances during next year's parliamentary elections.


  Tymoshenko says that she still wants to work with Yushchenko. But the loss of his popular sidekick from the government comes as a cruel blow to the Ukrainian President, and could further bog down the pace of economic reforms.

Yushchenko has appointed Yuri Yekhanurov, a loyal regional governor, as his acting Prime Minister. But onlookers view him as little more than a stopgap. Finding a candidate capable of reuniting the government and its parliamentary backers will be no easy task. Some have suggested Volodymyr Lytvyn, the authoritative speaker of Parliament. But he has links with the old regime of President Leonid Kuchma, which could make him vulnerable to attacks from the ever-opportunistic Tymoshenko.

The governmental crisis is only the latest problem to hit Yushchenko's presidency. His attempts to revise corrupt privatization deals undertaken by his predecessor have also caused widespread confusion -- thanks in no small part to the conflict within his team and the populist rhetoric of his unruly Prime Minister, Tymoshenko. Partly as a result of the widespread uncertainty facing business, Ukraine's economic growth has plummeted: Whereas GDP grew by 12% in 2004, annualized growth in the first half of this year amounted to just 4%.


  This is not exactly what investors in Ukraine had been hoping for following the euphoric triumph of last year's revolution. Maybe the sacking of the government constitutes just the kind of dramatic gesture needed to kick the stalled revolution back into gear.

But unless Yushchenko can somehow restore discipline among his associates and put the reform process firmly back on track, the Orange Revolution could -- like the great revolutions of the past -- end up devouring its children.

Bush is a correspondent for BusinessWeek in Moscow

Before it's here, it's on the Bloomberg Terminal.