Kiev street theater, treading close to reality.

Ukraine Shivers as Leaders Play Monopoly

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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With a new parliament elected last weekend, the Ukrainian political establishment has no more excuses for failing to make vital changes in economic regulation and the way the country is governed. Unfortunately, instead of a series of swift moves to avoid an economic meltdown, the winners have resorted to the tired political circus that has kept Ukraine on the edge of ruin in its 23 years of independence.

Kiev, the city I lived in for the last year of former President Viktor Yanukovych's disastrous rule and visited many times as the winter revolution unfolded, feels tired and depressed. It was not directly touched by the war in eastern Ukraine, where pro-Russian separatists now hold a large piece of territory, but many in the capital mourn dead friends or feel emotionally exhausted after watching part of their country ripped off by Moscow-backed thugs.

Streets and restaurants empty out earlier than they used to, shady characters gather on street corners, and many houses do not yet have central heating or hot water, though an icy crust coats the roads at night. Once-abundant advertising is replaced by patriotic slogans on downtown billboards, and U.S. dollars cannot be bought except on the black market, where the rate is about 10 percent higher than the official one.

These are results of the Russian aggression, but also of the government's inability to do anything but spend money from an International Monetary Fund aid package. "For months, it was all 'Wait till the war is over' or 'Wait till the elections run their course and we have a new cabinet,' " an official close to President Petro Poroshenko told me, speaking on condition of anonymity. "People in the government learned to walk faster down the corridors and sit longer in meetings, maybe even to think more, but as for efficiency, it just hasn't been there."

Now, to all intents and purposes, the war is finished. While Ukrainian officials still proclaim their country's sovereignty over the lost areas in the east -- and even over Crimea, whose citizens have voted overwhelmingly to join Russia -- insiders talk of an informal decision to leave those regions alone, cutting off social spending there and claiming no taxes from local business. While Ukraine will not recognize the elections rebels are preparing to hold in their parts of the Donetsk and Luhansk regions on Nov. 2, Kiev can do nothing to prevent them.

Ukraine is now a smaller country, which has allowed it to elect a seemingly more coherent parliament, dominated by parties that want the country eventually to join the European Union. To anyone familiar with their programs, a coalition of these forces might look like the easiest thing in the world, a much more natural union than, say, Germany's alliance of moderate right-wingers and social democrats. This, however, is Kiev, and the two biggest parties in the new parliament disagree on who won and, therefore, who should form the coalition.

The election was divided in two equal parts, the first involving a nationwide vote on party lists of candidates, the second consisting of direct votes for candidates from their constituents. Prime Minister Arseniy Yatsenyuk's Popular Front narrowly won the party-list vote, sending 64 people to the parliament and leaving Poroshenko's bloc in second place with 63 representatives. That was a surprise even to many seasoned insiders, who had thought their positions on the Poroshenko bloc's list meant safe seats in the parliament. Yatsenyuk, however, is a more experienced political operator than Poroshenko, and ran a stronger, better-organized campaign.

"The Popular Front political party, which won first place in the election, is obliged to start the process of building a coalition," Yatsenyuk announced today.

On the other hand, Poroshenko's bloc was more successful in fielding candidates in direct-constituency votes. The presidential party won 68 races to the Popular Front's 18. Yuriy Lutsenko, who led the Poroshenko bloc's party list, declared his party the real winner. "Self-infatuation and aggression in our allies' headquarters just won't fade," he said.

This bad blood is not conducive to coalition building, especially as the two leading parties now have their own drafts of a coalition agreement. Poroshenko's is 48 pages long, spelling out the most urgent economic and political reforms, while Yatsenyuk's is a three-page framework document that he insists is enough to start with.

There is really nothing of substance on which Poroshenko and Yatsenyuk disagree, but they will clash bitterly over the division of cabinet posts: Yatsenyuk wants all the key ones for his party, and Poroshenko will seek help from the third-strongest party, founded by Mayor Mayor Andriy Sadovy of Lviv, in trying to strike a balance. Sadovy relishes the role of kingmaker, and both Poroshenko's and Yatsenyuk's allies suspect him of harboring major ambitions for the next elections. Of course, both of them have such ambitions, too.

"It's as though our politicians can't stop playing Monopoly," said Sevgil Musayeva, editor of Ukraine's biggest news site, Pravda.com.ua. "They're just playing out their childhood ambitions."

In a country with just one solid source of revenue, the IMF aid, and a cold winter ahead if it cannot strike a deal with the Russian natural gas monopoly Gazprom, the games are as out of place as they could ever be. The finance minister, Oleksandr Shlapak, whom all sides consider the cabinet's most able official, warned on Tuesday that no more IMF money would come in until next year, despite the government's expectations of a $2.7 billion tranche. Perhaps when the money runs out, the political rivalries will be at least temporarily forgotten and the government will get down to much-needed cuts in energy subsidies and bloated social programs.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Toby Harshaw at tharshaw@bloomberg.net