Fights, Fury, But No Solutions

It only took two days of brawls in parliament and bare-breasted protests for Ukraine to return to the exact same place it was before the elections, with the reappointment of the Soviet-era politician Mykola Azarov as prime minister.

Azarov's return clears the way for the formation of a new government (ministers are directly appointed by the president), which is expected within the next couple of days. So far, it seems the plan is to continue with the same programme of stability that got Ukraine into its current predicament.

But a revitalised opposition could prove a wild card in the political calculations, and could result in giving President Viktor Yanukovych and the ruling Party of Regions a rough(er) time after two years of smooth sailing.

Unruly opposition

The over two million Ukrainians who voted for the right-wing Svoboda party, partly for the patriotism and partly as a rejection of traditional politicking, certainly got their money's worth. On their first day, the party wore “Free Political Prisoners” jumpers, raised a rumpusover the practice of voting for absent parliamentarians, and turned up the heat for two deputies that dared to “betray” the opposition by changing their faction to non-aligned.

The resulting fisticuffs in parliament were embarrassing, but no doubt many of those watching felt some satisfaction, or were at least entertained. A naked protest by activist group FEMEN outside parliament added to the theatrics.

The nationalist party also took a tough stance on the marginal if deeply divisive language issue, fiercely criticising the use of non-state language (i.e. Russian) within the halls of the legislature. At one point, Svoboda deputy Iryna Farion asked Azarov why he spoke such poor Ukrainian, saying that, as a teacher, she could only identify two reasons: politically motivated prejudice or lack of intellectual faculties.

An argument can be made that the lack of personal voting which allowed controversial legislation to be rammed through by just several dozen deputies, and the widespread practice of changing parties that helped President Viktor Yanukovych build a coalition the previous time around, did more to make a mockery of the institution (although not in such a media-friendly manner as photographs of grown men engaged in playground rough-housing).

But the real question is whether this grandstanding will amount to anything. On the one hand it will be good to see a more energised, although perhaps not quite so belligerent, opposition. Compared to the previous rubber-stamp version, it looks like this assembly will at least have more debate, even if a pro-presidential coalition pushes through its desired laws in the end. It could even revive hopes that change is possible amongst a largely disillusioned population.

On the other hand, Svoboda has a dark side that should have its fellow opposition partners – the United Opposition-Batkivschyna led by Arseniy Yatseniuk and UDAR, headed by world famous boxer Vitaliy Klitschko – seriously worried.

In December members of Svoboda attacked and tear-gassed participants of a peaceful demonstration in support of a gay community and human rights rally in Kyiv. Although initially denied by the party spokesperson, Svoboda's official website later boasted: “Thanks to the five nationalists, the sabbath of 50 perverts was broken up.”

Others are also worried about the potentially negative consequences of a tough stance on the use of Ukrainian. According to political analyst Volodymyr Fesenko, this goes against the principle of tolerance that has so far characterised parliament, and galvanises voters in the country's east and south in anti-opposition sentiment, in addition to radicalising some Party of Regions or Communist deputies.

Whatever the effects within Ukraine, association with a party that is deemed fascist, anti-Semitic and homophobic will sap sympathy for the opposition's plight in Europe.

On December 13th, the European Parliament passed a resolution stating that “racist, anti-Semitic and xenophobic views go against the European Union’s fundamental values and principles and it appeals to pro-democratic parties in the Ukrainian parliament not to associate with, endorse or form coalitions with this party.”

Whether the United Opposition and UDAR act upon this, at the risk of losing an increasingly popular and possibly crucial partner in their anti-Yanukovych coalition in exchange for unclear and uncertain support from the EU, remains to be seen.

No vision

Meanwhile, new ideas or policies to solve the country's problems among Ukraine's ruling elite are conspicuous by their absence. The choice of Azarov in itself looks to be an attempt at maintaining stability in an increasingly uncertain environment.

Indeed, the country is teetering on the edge of recession (the economy contracted in the third quarter of 2012, a trend likely to continue until mid-2013), and is facing mounting external debt redemptions. Next year, Ukraine will have to repay around 10 billion US dollars, with some 6 billion dollars going to the International Monetary Fund alone.

But the fund's planned visit on December 7th was delayed, officially waiting for a government to be formed and causing speculation that the real purpose was to create positive spin ahead of a major sovereign debt issue. This seems unlikely with two ratings downgrades, although talks with the international lender on setting up a new programme will also be difficult – Azarov has repeatedly vowed not to raise gas prices for households, a key condition for loans to return.

Similarly, the national bank does not look keen on meeting the other major demand of letting the national currency float. Devaluation fears are currently at a high, but instead of gradually loosening the strings, the central bank is pushing for ever more administrative measures to keep the hyrvnia under control, including a proposed 10 per cent tax on the sale of foreign denominations. This policy has caused national reserves to plunge from their historic high of 39 billion US dollars in May 2011 to 25.4 billion dollars at the end of November.

While preferring a predictably stable decline to outright chaos, businesses are unimpressed. In a note to investors, Kyiv-based investment bank ICU deplored the fact that both Azarov and Volodymyr Rybak, the new speaker of parliament, are over 60 and representative of the old, Soviet style of administration.

Commenting on the developments, Timothy Ash of Standard Bank was quoted by the Financial Times as saying: “I am in Ukraine at the moment and things feel even worse than I thought.” But perhaps nowhere is the lack of a clear and effective strategy visible as in the energy sector – arguably the key sector for Ukraine, both from an economic and a geopolitical perspective.

While most of Ukraine's neighbours have managed to renegotiate their contracts with Russia's Gazprom, the state-owned gas monopolist continues to stonewall its biggest client of all. Granted, Ukraine does not benefit from the support of the EU, which launched a price-fixing investigation against Gazprom in September.

As a result, its only solution is reducing gas consumption, even at risk of huge fines from a “take or pay” clause in the contract. Indeed, Yanukovych announced Kyiv will reduce state consumption from around 40 billion cubic meters last year to 27 billion in 2013. Next year, he hopes consumption will fall to 18 billion, replaced by imports of cheaper gas from Germany and alternative sources.

The bulk of the shortfall, however, will be made up by growing imports by Ostchem, an intermediary controlled by billionaire Dmytro Firtash, which is set to buy 8 billion cubic metres next year.

Yet no other project highlights the current disarray as well as the planned 1.1 billion-dollar construction of a liquified natural gas terminal. Meant to help the country diversify its supplies, the deal was signed last month with a Spanish lawyer who did not have the authority to sign the agreement. In fact, the company he supposedly represented said they did not know him.

Luckily, the authorities have announced they will hire PR-firm APCO Worldwide Inc. for 330,000 US dollars to consult and assist in improving the project's image. Because this is Ukraine's biggest problem right now: image.

Jakub Parusinski is an editor at the English-language weekly Kyiv Post.