Friday, February 28, 2014

Ukraine's New Government Faces Myriad Crises - Stratfor



Ukraine's New Government Faces Myriad Crises

February 28, 2014 | 1945 GMT



People stand on an armored vehicle in front of the Ukrainian Parliament at a rally in Kiev on Feb. 27.

Ukraine has a new functional government, but the various challenges facing the country present an immediate threat to its survival. Ukraine's parliament voted in a new government Feb. 27, approving an entirely new Cabinet with former opposition leader Arseniy Yatsenyuk as prime minister. The new government fills the power vacuum left after former President Viktor Yanukovich was forced out of office and gives Ukraine a chance to address some extremely pressing issues plaguing the country. The new government probably will be unable to overcome the various crises spanning Ukraine's economic, security and political realms, and the new government likely will be short-lived in its current form. 


One of the most pressing problems for the country is its acute financial crisis, which has brought it very close to default. Yatsenyuk has said that the new government will do everything it can to avoid a default and, to that end, would look to the West for immediate financial assistance. A delegation from the International Monetary Fund is scheduled to arrive in Kiev next week, and some form of emergency financial assistance or a stabilization package from the international lender is probably forthcoming. 

Image: Ukraine

This likely will prevent a Ukrainian default in the short term, but the country's broader financial troubles will remain. Ukraine's coffers are quickly emptying, and its currency, the hryvnia, is reaching historic lows against the dollar. The suspension of a $15 billion loan from Russia, combined with a possible reversal of the natural gas discount that Moscow offered in December 2013, will make greater financial assistance necessary for Kiev. However, a larger bailout from the West would come with conditions -- namely, painful reforms that will be very difficult for the new government to carry out. Indeed, Yatsenyuk said that unpopular decisions must be taken in regard to cutting subsidies, tariffs and social programs and that passing such measures could prove "suicidal" to the government, but nevertheless they must be carried out. 

Security Worsens in Crimea

Another pressing problem facing the new government is the security situation in the country, which remains extremely volatile. On the same day as the government's appointment, pro-Russian activists occupied the regional parliament building in Simferopol, the capital of the autonomous republic of Crimea. Crimea has long been the most Russian-oriented region of Ukraine, serving as the base for Russia's Black Sea Fleet and populated by a majority of ethnic Russians. Employing the same tactics that the anti-government EuroMaidan movement used in Kiev, several hundred armed protesters seized the building and set up barricades around the premises, over which they hoisted Russian flags. While the Ukrainian government and several Western countries condemned the move, it is unlikely they are in a position -- legally or tactically -- to do much about it.

In the meantime, Russia has been making military moves in and around the Crimean peninsula. Russia is currently holding large-scale military drills in its Western Military District, which borders part of Ukraine, and Moscow has put its fighter jets in the region on alert. Russia has also reinforced its security positions on the peninsula, and reports surfaced Feb. 27 that Russian armored personnel carriers were en route to Simferopol before returning to Russia's military base in Sevastopol. Subsequently, gunmen reportedly surrounded and took Crimea's two main airports in Sevastopol and Simferopol on Feb. 28. Ukrainian officials have said that such moves are in violation of the leasing agreement Russia has with Ukraine on its military presence in Crimea and is technically an invasion of Ukraine. These moves, combined with the reported issuance of Russian passports across Crimea, are a clear message from Russia that it could choose to take over Crimea militarily -- something that is also likely beyond the Ukrainian government's control.  

Kiev's Limitations and Strengths

In addition to the immediate economic and security problems facing the new government, there is the issue of the make-up of the government itself. The current government was assembled in an interim capacity to serve the country until presidential elections are held May 25 and parliamentary elections take place later in the year, likely in the third quarter. Three of the parliament's parties -- the Party of Regions (both current members and former members who have declared themselves independent), the Ukrainian Democratic Alliance for Reform and the Communists -- are not represented, so the Cabinet is not representative of the parliament itself. In addition, the parliamentary mechanisms used to assemble this government were done without the proper legal steps. Therefore, the government does not have a strong mandate, given that it was not directly elected and that certain powers -- the least of which is Russia -- consider it to be illegitimate.

However, despite its many challenges, the government does have certain advantages. Because it is serving in an interim capacity, the government could have more leeway in passing some unpopular reforms that a more formal government would be unable to pass, especially given the immediate financial crisis facing the country. Furthermore, despite the growth of separatist rumblings in Crimea, this so far has not spread to other Russian-leaning regions in eastern Ukraine, though a rally scheduled for March 1 in Dnipropetrovsk will be key to watch for separatist sentiment.

It is notable that most parliament members from Yanukovich's Party of Regions have chosen to distance themselves from the deposed president and in fact voted overwhelmingly for the new government. It remains in their (and their oligarch backers') political and business interests to keep the country together, and the new government has so far made it clear that it will not go after most of the former ruling party, save Yanukovich and his inner circle, in exchange for their support. The Party of Regions also knows that, due to the fragility of this government, it could make a political comeback later this year as a result of the unpopular reforms needed in the more immediate term. But until that time, there will be extreme pressure on this new interim government, both internally and from Russia. 

Cell: 315-278-6890

No comments:

Post a Comment