Sorting through Ukraine’s Post-Election Rhetoric: It’s Time for a Reality Check

Since the 26 March election, debate has begun anew on the ideologies, past actions and future programs of the leaders in the next parliament. Therefore, it may be useful to examine the most often repeated claims.

Since the victory of The Bloc of Yulia Tymoshenko (BYUT) over other “orange” blocs and parties in the 26 March election, debate has begun anew on the ideologies, past actions and future programs of the leaders of the three largest parties in the next parliament.  Many of the claims made from all quarters are either partially or fully suspect.   Therefore, it may be useful to examine the most often repeated claims. 

1.  The Party of Regions is pro-NATO, pro-Europe and pro-democracy. 

In spite of pro-European statements made in recent days, the parliamentary votes of the Party of Regions (PR) seem to suggest a decidedly different story.   In only October of 2005, the party voted loudly and with much fanfare against moving closer to NATO.  Throughout 2005, Regions voted repeatedly against WTO-related bills introduced by both the Tymoshenko and Yekhanurov governments, against measures to synchronize Ukraine’s food health and safety standards with the EU, against free-market reforms that would have opened up closed industries to competition, and against reforming customs rules to synchronize them with Western Europe and decrease smuggling. 

During the last week of the election campaign, Regions leader Viktor Yanukovich appeared on 1+1, where he praised Belarusian dictator Alyeksandr Lukashenka, saying that his victory in the recent presidential election was not attributable to a rigged election, but to the fact that Belarus was “developing better than Ukraine.”  He suggested that there should be less focus on democratic reform, and that Ukraine would be better off following Belarus’ form of development.   At the same time, he criticized Ukraine for tightening its border with Transnistria, and claimed that smuggling was not a problem in that Moldovan region.

2.  Yulia Tymoshenko destroyed the economy of Ukraine.

Although the Tymoshenko government made a number of missteps – in particular by attempting to control prices in some industries – placing blame solely on Tymshenko for Ukraine’s economic slowdown does not seem to stand up to scrutiny. 

The Tymoshenko government inherited from Viktor Yanukovich and the Party of Regions a $1 billion deficit (over 10% of GDP), created by uncontrolled and sudden monetary emissions in mid and late 2004.  These emissions were used to cover a doubling of pensions and large increases in state salaries that were not included in the budget, and created ballooning inflation.  The government also inherited state coffers that held far fewer revenues than were on record, and an economy that had been virtually halted by a revolution.

Within one month of coming into office, the Tymoshenko government overhauled the budget to reduce the deficit to below two percent of GDP.  Budget revenues also more than doubled during the Tymoshenko government – a figure confirmed even by one of the former prime minister’s fiercest critics, Anders Aslund.  Taxes decreased, although not nearly as much as had been hoped.  Inflation was kept in check, another fact praised by Aslund.  In order to improve the business climate, over 2,500 bureaucratic procedures were removed from the books and another 2,500 were identified for removal through parliamentary or presidential action. 

Although growth dropped significantly from February-August, by September, it had begun to rebound.  The figures for September – the month Tymoshenko was fired -- showed a growth of 3 percent.  Given the lag time associated with economic data, and the fact that the Yekhanurov government was not confirmed until the third week of the month, the figures cannot be attributable to political causes.  Instead, it is clear that the economy was turning the corner.

3.   The Party of Regions is better suited to create economic growth.

In 2004, official Ukrainian figures suggest that the economy grew by around 12%.  Although the figures are slightly suspect, there is no doubt that there was significant GDP growth during this time.

However, the economy of 2006 is nothing like the economy that existed in 2004.  In 2004, the country’s engine of growth – its metallurgical industry – benefited not only from high world prices for its products, but also from massive government subsidies on a number of levels.  Gas and oil was provided nearly for free to most large factories, contracts for goods were based on old barter-style, not free-market, principles.  Taxes were unnaturally low, non-existent, or simply unpaid. 

In short, it cost much less to produce in 2004 than it ever will again.   But, the state budget paid the price.  Despite overall economic growth, budget revenue was stagnant, and the government was unable to translate this GDP growth into programs benefiting the long-term advancement of the country.  Even if the Party of Regions takes the economic helm again, they will no longer have the mechanisms provided by a managed, non-free-market economy to create growth in certain sectors.  And they will be required to demonstrate that whatever growth occurs will benefit the average Ukrainian, and not only big business – something they could not do previously.

4.  Yulia Tymoshenko planned to reprivatize 3,000 companies.

During the revolution, Viktor Yushchenko stated more than once, “What was stolen from the people will be returned to them.”  In February of 2005, Tymoshenko responded to a reporter’s question about this issue by suggesting that there had been 3,000 complaints over the last ten years about improper privatization procedures.  The government would “look at” these complaints, she said.  She did not say they would reprivatize all of the companies concerned.

There is no doubt that Tymoshenko wanted to reprivatize far more than one company – Krivorizhstal.  Her statements on the issue often exacerbated the issue and frightened investors, and she would have been wiser to moderate her rhetoric.  But in reality, 3,000 reprivatizations were never an issue.  In April, Viktor Yushchenko stated that “around a dozen” companies would be reprivatized, and it seemed that this issue had been settled with that number.

5.  A coalition between Our Ukraine and Party of Regions will unite the country.

While some members (although certainly not all) of both OU and PR may welcome the move, supporters of the Yulia Tymoshenko Bloc, which placed first in 14 out of Ukraine’s 24 regions, would not.    Far from uniting Ukraine, an OU-PR union runs the risk of disillusioning and angering the majority of “orange” voters who chose Tymoshenko.  It further runs the risk of dooming President Yushchenko’s political career, as orange voters move further away from him, and “blue” voters remain with PR. 

Even more, the Tymoshenko Bloc handily won in Kirovohrad Oblast (33%), a historically Eastern-leaning region and generally the dividing line between “western-oriented” and “eastern-oriented” voters.  The victory shifts this line eastward.  Additionally, BYUT placed second with over 15% of votes in Eastern Ukraine’s Dnipropotrovsk region, and earned over 10% and second place finishes in two other Eastern regions, Kharkiv and Zaporizhia.   It is the strongest showing in Eastern Ukraine ever of a Western-oriented political bloc during a parliamentary election.  These figures should not be dismissed, and may represent the first slight thawing of the regional divide in the country. 

There are, of course, many more claims being made by all sides in the coalition talks.  And undoubtedly more will emerge.  It will be the job of the political forces involved in the negotiations to sort through the rhetoric and find a compromise honoring the votes cast on 26 March.  Should they do so, Ukraine will take one more step toward successfully consolidating its democracy.

By Tammy Lynch

Senior Fellow

Institute for the Study of Conflict, Ideology & Policy

Boston, Massachusetts, USA

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