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KIEV, Ukraine – As the global financial crisis intensifies, some journalists have begun placing bets on which country is likely to crack first and dissolve into anarchy. If you’re into that sort of thing, the smart money might be on Ukraine, a nation with a government that was borderline dysfunctional and an economy that was unsustainable even before the financial firestorm hit.
Ukraine’s economy has gone into a nosedive, its banking system is paralyzed and millions of people have lost their livelihoods in recent months. Everyone has a story of a lost job, overdue loans or life savings frozen in inaccessible bank accounts.
One man, a laid-off Kiev construction worker, says he has sent his family to live with relatives in the countryside, assuming that at least there will be something to eat. That’s a chilling echo from the depths of Ukrainian history.
But it’s the political drama that keeps grabbing everyone’s attention. Apparently oblivious to the galloping crisis, the former heroes of the Orange Revolution, Prime Minister Yulia Tymoshenko and President Viktor Yushchenko, are locked in a bureaucratic trench war that only one of them will survive. Any anti-crisis measure taken by one is immediately contradicted by the other: Presidential appointees are struck down by the Tymoshenko-led parliament, while regional leaders across the sprawling and deeply divided former Soviet country of 50 million increasingly take local economic matters into their own hands.
“It’s a war of all against all,” says Dmytro Vydrin, an independent deputy of the Supreme Rada, Ukraine’s parliament. “Our best hope at this point is that chaos will win out over ill-intentions, because the worst thing will be if one group wins and establishes a monopoly of power.”
Yushchenko and Tymoshenko are jockeying for position in advance of presidential elections, due by the end of 2009. Few doubt that the fiery, ambitious Tymoshenko wants to be president, and many believe she has the makings of a Ukrainian version of Russia’s tough leader, Vladimir Putin.
“Tymoshenko is the only Ukrainian leader with real charisma, and the drive to take and mold power for her own purposes,” says Viktor Nebozhenko, a sociologist and former adviser to Tymoshenko. “She’s very strong, she can make people do what she wants, and she looks very likely to win.”
But the showdown might come much sooner than anyone expects. Experts warn that default on Ukraine’s $105 billion foreign debt is imminent, despite an emergency loan of $16.4 billion obtained from the International Monetary Fund last autumn.
The national currency, the Gryvna, has lost 50 percent of its value since last summer, driving up the cost of imports and rapidly inflating the U.S. dollar-denoted debts held by most Ukrainian companies.
As a result of January’s gas accord with Russia, Ukraine’s energy-intensive economy will now have to pay $360 per thousand cubic meters of gas, roughly double last year’s price. The vast eastern Ukrainian steel and chemical mills that account for a third of the country’s GDP are reporting massive slowdowns, and many of these Soviet-era industries may not survive the shock of increased energy costs.
About 1 million of Ukraine’s 20 million workers are currently unemployed, but millions more have reportedly been forced to take wage cuts, shorter hours or unpaid leave. Many experts are predicting mass social protests will erupt in coming months as the situation grows intolerable.
In a 24-page internal memo leaked to the Ukrainian media, Finance Minister Viktor Pynzenyk warned in late January that Ukraine’s economy is on the verge of collapse: “We have entered an extremely serious and deep crisis. Ukraine’s [economic] situation is the worst in the world.”
Publication of that sobering assessment served only to intensify the mutual death-grip between the president and prime minister. Yushchenko took to the airwaves in late January to blame it all on the “populism” of Tymoshenko, whose 2009 budget incurs a huge deficit to pay public sector wages, pensions and other social obligations. As a result of her “irresponsibility,” Yushchenko charged, “salaries, pensions and stipends will no longer be paid … all this can bring about a social catastrophe.”
Tymoshenko snapped back the next day: “The so-called televised address to the nation of Yushchenko is a mixture of falsehood, panic and hysteria. Everyone can see that the president is not the kind of leader they need when Ukraine is reeling under the blows of the global economic crisis.”
It wasn’t always like this. During the Orange Revolution in 2004, Tymoshenko and Yushchenko worked together to defeat a Russian-backed attempt to rig presidential elections in favor of the eastern-Ukraine based leader Viktor Yanukovych.
During weeks of protests in Kiev’s freezing main square, it was usually Tymoshenko, a passionate orator, who would warm up the crowd before turning the stage over to the more measured and cerebral Yushchenko. But following Yushchenko’s election as president, the two quickly fell out, and within a year Yushchenko dismissed her from the prime minister’s job.
In three parliamentary elections since then, Tymoshenko has clawed her way back to power mainly by wresting votes away from Yushchenko’s supporters. She now heads the government as leader of a fragile majority coalition.
Some observers fear that Ukraine may be facing its “1993 moment,” a reference to the extended post-Soviet battle between Russia’s left-wing parliament and Western-backed President Boris Yeltsin, which ended with pro-Kremlin troops and tanks dispersing the legislature amid a bloody mini-civil war in Moscow. Yeltsin used his victory to rewrite Russia’s constitution to vest the lion’s share of power in the Kremlin, and reducing the new parliament, the Duma, to little more than a talking-shop.
Yeltsin’s successor, Putin, was subsequently able to establish a virtual dictatorship in Russia without – until recently – altering a single word of that constitution.
By contrast, Ukraine has muddled through its repeated post-Soviet crises with a working division of powers between parliament and president – both elected in genuinely contested polls – and a relatively independent court system. This is partly due to the country’s profound cultural split between the heavily “Russified” industrial east and the nationalistic, Ukrainian-speaking agrarian west.
The relative balance of forces between them has created permanent political gridlock, but arguably prevented either side from seizing complete control. An attempt to rig 2004 presidential elections in favor of Yanukovych led to the Orange Revolution, which ultimately brought the Western-leaning Yushchenko to power, pledging to put Ukraine on a fast-track to join NATO and integrate with Europe.
But public opinion surveys show that about two-thirds of Ukrainians oppose joining NATO, and Moscow has warned that Kiev will cross a “red line” if it invites the Western military alliance into the heartland of the former Soviet Union.
The ongoing popularity of Yanukovych’s pro-Moscow Party of Regions illustrates the hold Russia still has on much of Ukraine’s electorate. According to a December poll by the Kiev-based Democratic Initiatives Foundation, Yanukovych is Ukraine’s leading politician,¬†with 22.3 percent support. Tymoshenko follows with 14 percent, while Yushchenko has fallen to just 2.2 percent.
In January, Tymoshenko flew to Moscow and sealed a gas accord with Putin, ending a two-week shutdown that had left 18 European nations – literally – out in the cold. But Tymoshenko’s enemies claim that, during several hours of private talks with Putin, she made a separate deal for Kremlin support in her upcoming presidential bid, allegedly agreeing to shelve Ukraine’s NATO aspirations in return for help in winning votes in eastern Ukraine.
That’s presumably what Yushchenko’s chief of staff, Roman Bezsmertny, was referring to when he told journalists: “Yulia Tymoshenko’s current policies show that she is hooked by Russian secret services, which makes her resort to actions that threaten Ukraine’s national security.”
Vadim Karasyov, director of the independent Global Strategies Institute in Kiev, says, “Yulia understands that the United States is very far away and preoccupied with its own problems, and Russia is very close at hand. She’s just being practical.”
As the crisis intensifies, it seems increasingly likely that the final showdown may come as early as this spring, and it may not take the form of an electoral contest. Social unrest is mounting, especially in the eastern industrial regions, where the steel mills, chemical factories and coal mines that produce 30 percent of Ukraine’s gross domestic product are grinding to a halt.
But discontent is also palpable among the middle class in Kiev – erstwhile ardent backers of the Orange Revolution – who are suddenly finding that the ATM machines have stopped dispensing cash, the service sector jobs are evaporating and the West has lost interest in Ukraine’s fate.
“Middle class disillusionment is extremely dangerous, because these are the people most capable of self-organization,” says sociologist Nebozhenko. “Things are coming apart very fast, and I’m afraid this is all headed for a settlement in the streets.”‚ÄÉ
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