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Ukraine: a counter revolution could be under way in Kiev

Flowers for Ukraine’s new prime minister, Volodymyr Groysman as President Poroshenko congratules him. Roman Pilipey/EPA

The Verkhovna Rada, Ukraine’s unruly parliament, voted on April 14 to accept the resignation of Arseniy Yatsenyuk, leader of the People’s Front party. The prime minister, who has been in post since the Euromaidan uprising in February 2014, reluctantly announced on April 10 that he intended to leave office.

President Petro Poroshenko’s eponymous parliamentary bloc narrowly approved the appointment of the current speaker of the parliament, Volodymyr Groysman, who has long been closely associated with the president, as Yatsenyuk’s successor. As horse trading took place in recent days over the ministerial line-up, it was unclear whether Groysman would garner the necessary 226 votes to be confirmed as prime minister, but he was finally approved with 257 votes to 50.

Why Yatsenyuk resigned

Yatsenyuk bitterly complained that he had been forced out of office by venal personal ambition which had generated what he termed an “artificial” political crisis. Yet, while Ukrainian politics is pathologically personalised and conducted with a large measure of cash-fuelled political trickery, the political crisis, as he surely knows, is very real.

Saying goodbye: Ukrainian prime minister Arseniy Yatsenyuk resigns. Sergey Dolzhenko/EPA

For a time, the undeclared “war” to defend “European values” against Russian-supplied proxies in the Ukrainian Donbas in the east of the country animated the hawkish Yatsenyuk’s People’s Party. It became known as the “war party”. But no amount of patriotic jingoism and cheerleading could disguise the reality that his armed forces had lost militarily on the battlefield, forcing the authorities to accept an unfavourable ceasefire. The pretence otherwise only made it harder to reach a lasting resolution to the conflict.

The Dutch “no” vote in a non-binding referendum on April 6 on whether the Netherlands should ratify a deal between the EU and Ukraine came as a shock to the “Euromaidan” revolutionaries who ousted the former president Viktor Yanukovych in 2014. The Dutch rejection of closer ties with Ukraine will puncture those revoutionaries’ idealism about the country’s rosy relations with Europe, but the “no” vote will have little or no material effect on Ukraine-EU relations.

As prime minister, Yatsenyuk had become a lightning rod for popular dissatisfaction. He was disliked both by that part of the electorate impoverished by austerity measures even more extreme than those demanded by the IMF – and among those frustrated by insufficient reform, particularly in the sphere of the rule of law. Declining living standards and a series of corruption scandals reduced Yatsenyuk’s poll rating to almost zero.

His government, although conflicted, appeared to pursue the interests of western capital and investors at the expense of Ukrainian business. The political crisis was triggered by the resignation in February of the Lithuanian-born economy minister, Aivaras Abromavicius who had failed to wrench control over state-owned companies from the state bureaucracy and associated business tycoons in order to free up their privatisation to western investors.

The return of the oligarchs

But even though the much vaunted de-oligarchisation policy was largely rhetorical, the deep economic crisis – GDP fell almost 10% in 2015 – hurt strategic companies owned by influential oligarchs. Despite the fact that the war and austerity-fuelled economic depression may have reached their nadir, the seriously wounded oligarchs have been prompted to protect their interests by re-entering the political fray.

In office, Yatsenyuk shielded Poroshenko from popular criticism, so it was notable that Mustafa Nayyem, the prominent journalist and MP for Poroshenko’s bloc in parliament, blamed the president personally for the Dutch “no” vote last week.

Nevertheless, in the context of a dysfunctional division of constitutional powers, Poroshenko wanted to consolidate power through the formation of a new coalition and government that he can better control. Since the beginning of April, his bloc has persuaded at least ten independent deputies to join its parliamentary faction. His plan was that, in coalition with the People’s Front, they would be able to form a new governing group with at least the necessary 226 votes. In the end an additional 31 deputies voted for Groysman to become prime minister.

However, in choosing to form a new coalition through recruiting individual deputies rather than whole parliamentary factions, as the constitution envisages, Poroshenko is repeating the sleight of hand that the disgraced former president Yanukovych used when he formed a compliant coalition government led by his Party of Regions after his election in 2010.

What to expect from Groysman

The Groysman-led coalition government is the first major political re-alignment since Euromaidan. It represents a push back against austerity, the IMF and America’s Ukraine policy. The foreign-born technocrats have been removed from the key economic ministries and replaced by figures from Ukrainian banking and industry.

Volodymyr Groysman in the Ukrainian parliament. Roman Pilipey/EPA

While the government can be expected to comply with the IMF’s basic conditions on fiscal and monetary policy, it will use its western sponsors’ fear of snap elections and the prolonged political instability to manoeuvre room for pro-growth policies intended to stabilise society.

We could see price reform in the energy sector to increase the profitability of key private, domestically owned companies and the privatisation of state-owned shareholdings to existing majority owners rather than foreign investors. Negotiations over who would fill the economy and energy ministerial portfolios were particularly sensitive.

The new government is likely to be more pragmatic and conciliatory than its predecessor. It might even be able to broaden its political base to countenance constitutional reform to resolve the simmering conflict in the Donbas along the lines envisaged in the Minsk II ceasefire agreement. Groysman’s cabinet includes a deputy prime minster responsible for the separatist-held territories. This could repair economic – if not political – relations with Moscow providing a much needed boost to the economy.

Porokshenko under pressure

Porokshenko is already under pressure from the Panama Papers for having used an offshore vehicle to facilitate the sale of his Roshen confectionary company, based in Groysman’s home town of Vinnytsa. He could now be accused of re-establishing the worst elements of Yanukovych’s rule, namely a “party of power” and “crony capitalism”.

It remains to be seen whether Poroshenko will be any more successful than Yanukovych in persuading his impoverished people that their interests coincide with the interests of the country’s rich political and commercial elites. Populist opposition parties, led by former prime minister Yuliya Tymoshenko and her Batkivshchina party, are likely to energetically campaign for early parliamentary elections.

The first sign of the new coalition’s brittleness could be a split in Poroshenko’s eponymous parliamentary faction. Should this occur, the president would be ever-more tempted to more formally ally with the successor to Yanukovych’s Party of Regions – known as the Opposition Bloc – as well as other oligarchic parties to prop up the new government. Opposition Bloc however might prefer snap elections and the chance to return to power.

We may have only witnessed the beginnings of a counter revolution in Kiev.

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