Ukraine’s new parliament convenes in blizzard of crises

Ukraine's new parliament convenes today with the country in effect at war with Russia, Crimea annexed by Moscow, pro-Kremlin separatists controlling swathes of the industrial east, and the economy facing collapse as winter takes hold.

The deputies confront a crisis that is daunting and dangerous in many new ways, but some elements will be familiar: fears for the unity of the nascent government, and rows of faces associated with the old regime of Viktor Yanukovich.

One of the first pieces of business will be the presentation of a coalition deal between five parties, which pledge to slash corruption and launch Ukraine on a path towards integration with the European Union.

President Petro Poroshenko wants Ukraine to be ready to join the EU and hold a referendum on Nato membership in six years, a target that seems wildly optimistic, notwithstanding major reservations within the alliances themselves.

The coalition, led by the parties of Poroshenko and Prime Minister-elect Arseniy Yatsenyuk, is committed to a pro-western policy path, reintegrating Crimea into Ukraine and defeating the insurgency in Donetsk and Luhansk provinces, while decentralising considerable power to regions all over the country.

The five-party coalition should be the most stable and powerful pro-western administration Ukraine has ever had, enjoying a two-thirds majority in parliament which it could use to change the constitution, including electoral laws that give national and local business elites huge influence at the ballot box. Its first task, however, will be to hold together a collapsing economy.

“Ukraine is in a vicious financial crisis. Threatened constantly by Russian military aggression, the country faces a financial meltdown within the next four months,” economist Anders Aslund wrote last week.

“At the end of October, its international reserves fell to $12.6 billion (€10.1 billion), below the threshold considered critical for solvency. The hryvnia exchange rate is falling exponentially. As a consequence, most of Ukraine’s banks are collapsing. The public debt is skyrocketing and is likely to double to about 80 per cent of GDP [gross domestic product] this year. Inflation is set to rise to 24 per cent this year and then surge further.”

Coal shortage

On top of security, economic, banking and currency crises, Ukraine has been easing its latest gas dispute with Moscow while handling an acute coal shortage: many of the eastern coalfields are in the conflict zone, and mines working under rebel control are sending fuel not to Ukraine’s heating plants, but over the nearby border to Russia. A cold winter could badly rattle the new government.

There will be no respite in the coming months, but only major international help can keep Ukraine afloat long enough to stabilise and reform.

Kiev urgently requires another tranche of aid from a $27 billion (€21.7 billion) package agreed with the International Monetary Fund and other lenders, but analysts fear that package may now be some $10 billion (€8 billion) short of what Ukraine really needs.

The IMF, along with the EU, the United States and Russia, will closely watch the work of the new parliament for signs of what has changed in Ukraine, amid suspicions that old, destructive habits have not been shed.

Some analysts savaged the draft coalition deal, with Aslund calling it a “bureaucratic laundry list” that “contains no strategy and . . . focuses on no primary goals”.

“This is not a reform programme but an old-style bureaucratic Soviet document for the preservation of the old system. Such a conservative document will never bring reform,” he said.

The “Maidan” revolution that ousted Yanukovich in February wanted to sweep away the corrupt and incompetent political elite, and Ukraine’s new leaders are viewed with suspicion by millions of compatriots who question their appetite for radical change.

They doubt that the diverse five-party coalition will hold together, that maverick figures in its ranks will maintain discipline, and that new alliances of politicians, tycoons, anti-corruption activists and military men will share priorities.

“There still seem to be strong oligarchic interests represented even within the pro-EU parties, so there are conflicting business interests at work,” said Tim Ash, head of emerging markets research at Standard Bank in London.

“The Maidan supporters want radical reform, and a big anti-corruption drive. Other established business interests are less eager to go back to a re-privatisation or lustration agenda, as that could prove quite disruptive to business.”

The strongest opposition to the pro-EU majority’s plans will come from former allies of Yanukovich and ex-members of his Regions Party, which dominated Ukrainian politics until the revolution.

They heaped all the blame for the uprising and its bloody conclusion on the protesters and on Yanukovich personally, and reconvened in a new party called Opposition Bloc.

It studiously avoids criticism of Russia or its annexation of Crimea and refuses to acknowledge its obvious role in the insurgency, while lambasting Ukraine’s new leaders for mishandling its many-pronged crisis and for allegedly ignoring the interests of people in largely Russian-speaking areas.

Scepticism

Opposition Bloc came fourth in last month’s parliamentary election with more than 9 per cent of votes, faring well in southern and eastern Ukraine, where turnout was lowest and scepticism about the country’s turn away from Russia is strongest. Formally “independent” politicians with links to the party won dozens of so-called single-mandate constituencies. They include figures with alleged ties to the separatists and more than 60 deputies who backed Yanukovich’s infamous “dictatorship laws”, which inflamed the revolution last January and steeled protesters’ determination to bring him down.