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Photographer: Tomohiro Ohsumi

New Leadership, Same Old Ukraine

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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When he resigned on Sunday, Ukrainian Prime Minister Arseniy Yatsenyuk said he was proud of his government's achievements. They will, he predicted, be appreciated in due time. That may be so, but just now he is one of Ukraine's most despised men, someone who failed to make the country more European but instead made deals with oligarchs and corrupt bureaucrats.

His resignation to give way for an ally of President Petro Poroshenko won't, however, make Ukraine any more governable.

Yatsenyuk's departure was only a matter of time. In February, he barely survived a no-confidence vote in parliament, and a burly legislator tried physically to carry him off the dais as he hung on to the lectern. His party, the Popular Front, defies its name by not even showing up in recent polls for lack of voter support.

Under Yatsenyuk, the Ukrainian economy has moved from sharp recession to stagnation. The tax system is still oppressive, property rights uncertain, bureaucrats greedy and the middle class impoverished. Despite tiny quarter-on-quarter output growth at the end of last year, the Ukrainian retail sector was still shrinking in February, 2016. These are not the kind of results Ukrainians wanted from their 2014 "Revolution of dignity."

Poroshenko has known for a while that Yatsenyuk wouldn't last. The parliamentary coalition that served as the basis for Yatsenyuk's cabinet had started falling apart last year, with smaller parties seeking distance from the prime minister's toxic unelectability, especially following accusations of corruption leveled against the prime minister by former Georgian President Mikheil Saakashvili, now governor of Odessa. Admitting no new coalition could be formed was, however, unacceptable to Poroshenko: He would then have to disband the parliament.

An early election would extend the political crisis by months and almost certainly scupper fresh installments of aid from the International Monetary Fund. The IMF has lately halted disbursements because of the political uncertainty. "Once there is more clarity about the status of the government, we'll look forward to engage with the authorities on policies to strengthen and transform Ukraine," fund spokesman William Murray said last month.

Besides, an early election would probably result in a defeat for Poroshenko's own party. According to a March 16 poll by KMIS, one of the more respected polling organizations in Ukraine, the party, which now holds 29 percent of the seats in parliament, would only win less than 6 percent of the vote. Besides, a Saakashvili-backed new "Movement for Purification" could deal the Poroshenko party an unpleasant surprise if it stepped up its criticism of the president, not just the prime minister.

Poroshenko's attempts to get out of this losing situation have been frantic and seemingly desperate. He has suggested some exotic replacements for Yatsenyuk, such as former Swedish Foreign Minister Carl Bildt and former Slovak Finance Minister Ivan Miklos, to U.S. Vice President Joe Biden, seen in Kiev as the current leadership's fairy godmother. Then, the candidacy of U.S.-born Finance Minister Natalie Jaresko was dangled before the Washington allies. Jaresko took this seriously enough to write a lengthy Facebook post on March 22, saying she would be willing to form a "technocratic," "depoliticized" government of "nobody's people."

Jaresko won't get the chance. The presidential party has put forward Volodymyr Groysman, a long-time Poroshenko associate and, most recently, parliament speaker, as Yatsenyuk's replacement. Yatsenyuk's Popular Front will be the only party joining forces with the Poroshenko bloc this time around: This is the only chance for the party to retain some influence and the price Yatsenyuk appears to have exacted for getting out of the way and letting Poroshenko appoint his man.

U.S. officials have sought to balance Poroshenko, an ambitious, impatient, imperious leader, with other figures. That tactic has apparently failed. Poroshenko has never stopped pushing Groysman; all his other proposals may have been decoys.

Groysman is not much of an independent politician: He has always ridden Poroshenko's coattails, both as governor of Vinnitsa, where Poroshenko's confectionery empire has its base, and as speaker. What's known of his economic program isn't encouraging: Vox Ukraine, the independent Kiev think tank run by some of the country's top economists, have described it as alarmingly populist. Groysman's pronouncements on strengthening agriculture, building roads and fighting corruption while strengthening social support are little different from Yatsenyuk's intentions, and often are misguided.

The seeming openness of the Ukrainian political debate -- the top figures in Kiev have Facebook accounts and are happy to pour their hearts out -- may be endearing, but all the important events still take place in back rooms, and personal loyalty and business connections go further than patriotic considerations. As a result of the political crisis, Ukraine is not getting a better prime minister -- it's getting a more politically beholden one. A president who would be unable to repeat his 2014 landslide victory -- and who is yet to answer convincingly why he set up a tax-free offshore structure to prepare his business for sale -- is consolidating power. He is also doing his best to prevent an election that would have radically changed the political landscape. 

Victoria Nuland, the assistant secretary of state who has been the Obama administration's point person on Ukraine, acknowledged in March 15 testimony before the U.S. Senate Foreign Relations Committee: 

Ukraine's European future is put at risk as much by enemies within as by external forces. The oligarchs and kleptocrats who controlled Ukraine for decades know their business model will be broken if Maidan reformers succeed in 2016. They are fighting back with a vengeance, using all the levers of the old system: their control of the media, state owned enterprises, Rada deputies, the courts and the political machinery, while holding old loyalties and threats over the heads of decision-makers to block change.

Yet Nuland expressed hope that 2016 would become a "turning point year for Ukraine's sovereignty and European future" if it went for "clean leadership; justice; an end to zero-sum politics and backroom deals; and public institutions that serve Ukraine's citizens rather than impoverishing or exploiting them." That is not what's happening so far. Poroshenko is making it clear that he will exhaust his capacity for holding on to power before any serious change is allowed to take place. For all its outward displays of democracy, Poroshenko's Ukraine is increasingly just another post-Soviet state defined by the greed and ambition of its rulers.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net