Ukraine's dangerous game

Tymoshenko isn`t complaining. "You are never popular when you ask a sick person to undergo surgery," she says. "But what has to be done, has to be done. Cooperating with the IMF requires a serious budget policy for any country...

As Ukrainian Prime Minister Yulia Tymoshenko rushes out of her Kyiv office to greet me, her tight handshake and tense smile make it clear that she didn`t get to be the most powerful woman east of Berlin by being a soft character.

This is a tough day for her and an important time for Ukraine. Later she will speak before parliament to defend controversial new budget measures demanded by the International Monetary Fund (IMF) in exchange for unblocking a badly needed financial rescue package. The amount at stake is relatively small, a $1.8 billion second installment of a $16.4 billion loan. But without the IMF, there is little hope Ukraine will regain enough market confidence to roll over the $40 billion in bank loans and bonds coming due this year. By mid-April, Tymoshenko needs to push pension reform and higher gas tariffs through the legislature - hardly a comfortable position for a leading candidate in the presidential elections expected on Oct. 25.

The 2005 Orange Revolution made Tymoshenko an international media icon. With her fiery rhetoric and political savvy - not to mention her stunning looks and famously distinctive braids - she seemed destined to be the face of the post-Soviet world`s new wave of democratic revolution.

Four years later, it`s not so easy to be Yulia Tymoshenko. The adoring crowds in Independence Square are a distant memory. She feels under fire from all corners, most of all from her former Orange Revolution ally, President Viktor Yushchenko. She was late for our coffee conversation because she first needed to focus on this morning`s attacks from the president, who accused her in parliament of running the economy into the ground. She is careful to avoid any explicit reference to him, but notes "I am not here to please everybody." In attempting to manage Ukraine out of a crisis while attending to both her country`s desire to rejoin Europe and its fear of an increasingly expansionist Russia, it`s becoming more and more difficult to please anybody.

The global recession is turning conventional wisdom upside-down as even the IMF now calls for large deficit-spending policies (for advanced economies, at least). One might think the conditions imposed on Ukraine, where unemployment is rising fast and salary delays are now widespread, are too strict and socially painful. The hardship in turn could encourage political radicals and the pro-Russia Party of Regions of former Prime Minister Viktor Yanukovych.

But Tymoshenko isn`t complaining. "You are never popular when you ask a sick person to undergo surgery," she says. "But what has to be done, has to be done. Cooperating with the IMF requires a serious budget policy for any country. It`s never easy. But it`s a guarantee of stability."

The political challenges Tymoshenko faces as she struggles with Ukraine`s financial crisis might be treacherous, but the subject matter, at least, is familiar. She received a typical Soviet-era education as an "economist-cyberneticist" -- Soviet-speak for management -- in Dnepropetrovsk, the mostly Russian-speaking eastern Ukrainian town where she was born in 1960. She started her career as an "economy engineer" at a local machine-building plant during the Gorbachev years. With the demise of the Soviet Union and national independence, she was quick to seize the opportunities of the new era. During the 1990s, she was a top manager at Ukrainian Petrol and United Energy Systems of Ukraine and is understood to have made a fortune at that time.

It was a tough, unsparing environment to prosper in, to say the least. Tymoshenko has come a long way from then. It is especially ironic that this businesswoman turned anti-Russian revolutionary is now disparaged by Yushchenko as a thinly disguised Russian pawn.

Not that dealing with Russia has gotten any easier. Russian Prime Minister Vladimir Putin did not like Tymoshenko`s recent deal with the European Union on the modernization of Ukraine`s gas infrastructure, and Moscow is holding up a $5 billion loan to Ukraine to mark its dissatisfaction.

"All this crossfire shows what I really stand for is our own national interest," she says. Then she is quick to add: "The Russians worry that we are trying to privatize our pipelines by stealth, but that`s not the case and would be illegal. We have to reassure them on that."

Tymoshenko returns frequently to the challenges presented by Ukraine`s position between Russia and the European Union. "There is no doubt we want to join the EU. At least 60 percent of our public opinion favors this option, and we are now closer to this goal than, say, one year ago. This policy must be the essence of all our actions," she says. But, she warns, it cannot succeed by confronting Moscow or ignoring its concerns.

This is balance-of-power politics of the post-Soviet, post-Georgia-war variety. To her critics, it looks a bit like squaring the circle. To her, it`s simply a matter of recognizing reality. "I try to defend our interests so that we can find a balance in our relations both with the EU and Russia," Tymoshenko explains, meaning she wants her country to get into the EU without giving the impression of antagonizing Russia.

Could the same strategy apply to Ukraine`s relations with NATO? Here the prime minister sighs for a split second: "There, it`s more complex." It`s not so much that she is frightened by Georgia`s experience, something she never mentions though it`s clearly on her mind. While recognizing it would be "uncomfortable" for Ukraine to remain "in a void, outside all existing security systems," she still sees several "political barriers" between Kiev and NATO.

Although famous for her sharp tongue, Tymoshenko is treading carefully these days. The first problem she sees is that barely 25 percent of Ukrainians favor joining NATO. "Even the president accepts we need to hold a referendum on this," she acknowledges.

The second "problem" is rather a carefully managed swipe at those Europeans cozying up a bit too much to Russia -- especially Germany and Italy, one suspects. In Tymoshenko`s own words, "There is no unanimity in the EU on Ukraine`s joining NATO as we have not yet witnessed a favorable attitude in every country."

As Tymoshenko goes on, one cannot help but notice her trying to contain her anger when she feels misunderstood in her actions and purpose. She laughs softly at my attempts at humor, but when she finds my questions misjudge her intentions, she bursts out: "It`s not fair to say that!"

In the same spirit, she reserves her harshest criticism for the G-20`s grandstanding on protectionism: "Everybody is pursuing some stronger or weaker form of protectionism. Some people create hurdles for foreign participation in tenders; others withdraw capital or create tariff and nontariff obstacles to goods. All this proves damaging to us all. But lofty declarations will not prevent it; we need effective rules," she says.

At the moment, Tymoshenko narrowly trails Yanukovych in opinion polls but remains far more popular than Yushchenko, whose support has fallen to the single digits. Nonetheless, she remains a controversial figure. In an identity-obsessed Ukraine that declared independence six times over the last 90 years, even her family origins fuel much debate. She grew up speaking Russian and perfected her Ukrainian only after she moved to politics in her 30s. Through a spokeswoman, she also "doesn`t comment" on rumors that part of her family comes from Armenia. It`s hard to imagine her receiving the kind of voter acceptance enjoyed by Barack Obama and Nicolas Sarkozy with their foreign-born fathers.

Despite the sometimes harsh treatment from her constituents and the media, Tymoshenko`s national pride and attention to the everyday lives of Ukraine`s citizens remain intense. I experienced it myself when I mentioned in a story that Kiev stores were having a serious shortage of salt. Ukrainian TV had previously aired stories on locals hoarding salt in anticipation of inflation and salary cuts. I was called soon after by an angry Tymoshenko spokesperson: "It`s media speculation, nothing true. Did you try to buy salt in Kiev? I did last night: I found it. Immediately."

Why all this fuss over one anecdote in a foreign reporter`s story? Tymoshenko has learned over the years that with countries -- as with their leaders -- image is everything.

By Federico Fubini, Foreign Policy

Federico Fubini is a journalist for Italy`s Corriere Della Sera newspaper

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