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Friday, February 12, 2010

Yanukovych Is Back

Why his victory may actually be good news for Ukraine.

By Owen Matthews | Newsweek Web Exclusive
Feb 10, 2010

Bad news first: Viktor Yanukovych, the winner of last Sunday’s presidential election in Ukraine, is a notoriously inarticulate twice-convicted felon who is backed by a clique of powerful businessmen with alleged mafia ties. He's also the candidate backed by Moscow in the 2004 presidential election, annulled after Ukraine's Supreme Court found the Yanukovych campaign guilty of massive vote-rigging.

Yet Yanukovych's victory may actually be good news for Ukraine. For starters, he would have to try hard to do worse than his predecessor, Viktor Yushchenko, under whose rule Ukraine's economy shrank by 15 percent. Yushchenko spent much of his presidential term feuding with former allies like Yulia Tymoshenko, the loser of Sunday's presidential vote. Worse, in his last months in office, Yushchenko splurged on a series of populist spending promises—including a 20 percent hike in pensions—that pumped Ukraine's budget deficit to 4 percent of GDP. As a result, the IMF suspended a badly needed bailout package until after the election. Yanukovych at least warned voters that austerity was coming and has a decent chance of getting the IMF money flowing again.

But perhaps just as important as basic economic competence is the fact that Yanukovych will certainly have better relations with Russia.

Cold Warriors may wring their hands at the prospect of increased Russian influence, but from the point of view of Ukraine itself, that is a good thing. From the 2004 Orange Revolution onward, Yushchenko seemed to take perverse pleasure in jerking Moscow's chain. He declared the man-made famines of 1930–32, which killed millions of Ukrainians, a genocide perpetrated by the Russians, and sent negotiators to talks with Gazprom who insisted on speaking to their Russian counterparts through a Russian-Ukrainian interpreter, though the two languages are easily mutually comprehensible. In the aftermath of the 2008 Russian invasion of Georgia, tensions ran so high that the Ukrainian Security Service began preparing for a possible Russian invasion of the Ukrainian Black Sea peninsula of Crimea.

Irritating Moscow may have played well with a hard core of Ukrainian nationalists concentrated in the west of the country, but it did Ukraine as a whole no good at all. The gas cutoffs of 2006 and 2007 that followed Ukraine's failures to pay for its gas supplies (and badly damaged its reputation as a secure transit country) are just the most obvious examples. Endless tension with Russia increased the political risk for foreign investors and depressed the economy.

That in turn meant that Ukraine failed dismally to diversify away from rust-belt Soviet industries like steel and aluminum production, which it badly needs to do if it's to have any hope of real economic recovery.

Making nice with Moscow is certainly no panacea for Ukraine's ills.

But by putting an end to Yushchenko's talk of joining NATO, Yanukovych will remove a major irritant in Moscow-Kiev relations. More, you can be sure that many NATO members themselves are breathing a sly sigh of relief at Yanukovych's victory. Ukraine's aspiration to join NATO was warmly backed by the Bush administration but by few others. Indeed, by 2009 almost all members, other than the former Soviet-bloc states like Poland, were lobbying hard against it as a pointless obstacle to normalizing relations with Russia. The reality was that even at the height of Yushchenko's popularity, membership in NATO was never supported by more than a third of Ukraine's population anyway. In canning NATO, Yanukovych isn't so much caving to Russian pressure as acknowledging the deep and long standing ambivalence of ordinary Ukrainians to joining the club.

The European Union, on the other hand, is a different matter. Russia has expressed no strong opposition to Ukraine's pro-European noises—unlike its hysterical anti-NATO position—and even the beginnings of a serious attempt to become an official candidate for the EU would do wonders for Ukraine's credit rating and investment prospects. All candidates in Ukraine's presidential election, including Yanukovych, claimed to be in favor of joining the EU—an important indicator of the country's general direction. And the EU still stands willing and ready to engage on issues like fiscal discipline, corporate governance, and all the nuts and bolts of a functional state.

But right now the likelihood of EU membership is still vanishingly remote—while the likelihood of a full-scale economic collapse is very real and immediate. Reversing Ukraine's steep fiscal nosedive before the country defaults on its debts is Yanukovych's most urgent problem. He may even turn to Moscow to cover some of the expected $37 billion shortfall. But the point is that before Ukraine can seriously aspire to fly, it has to patch up the gaping holes in its airframe. Yanukovych may well be in a better position to do that than anyone else in Ukrainian politics—if only because he's not burdened with an adversarial relationship with Russia.

After the disasters of the Yushchenko period, the bar for successful governance in Kiev has been set pretty low. His criminal record and shady backers aside, if Yanukovych shows just basic competence at running Ukraine's government, he will already be doing better than his predecessors. By this point most Ukrainian voters are almost past caring who governs them—as long as someone does without risking war with Russia, economic collapse, or losing heat in midwinter.

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