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Resignation of Ukraine Minister: A Looming Crisis or a Push for Change

By Peter Voitsekhovsky, Research Director, U.S.-Ukraine Foundation
February 12, 2016

At a press conference on February 3, Aivaras Abromavicius, Ukraine's minister of economic development and trade, announced his resignation as an act of protest against undue interference and influence from officials close to President Poroshenko. He said he had no desire "to be a cover or a puppet for covert corruption" in the hands of old-time rent-seekers. Later, he also said that he would no longer serve in the government headed by Prime Minister Yatseniuk.

Since his appointment in December 2014, Abromavicius was seen as an exemplary reformer in the government. He was one of the three distinguished foreigners who accepted Ukrainian citizenship when invited to spearhead the country's reforms. Notably, his predecessor Pavlo Sheremeta had resigned with similar complaints after only six months in office. Also, Mr. Abromavicius became the fifth minister in the current cabinet to announce his resignation over the last few months. Four others who had made resignation statements earlier actually continued to work in their positions waiting for the resignations to be accepted.

Minister Abromavicius delivered real reform results for Ukraine. He and his team made strides implementing tough but necessary economic reforms.  With his resignation we hope that those efforts will be able to continue. We believe it's important that Ukraine's leaders set aside their differences, put the vested interests that have hindered the country's progress for decades - put that all in the past, and press forward on these same vital reforms.

....  John Kirby, Assistant Secretary for Public Affairs, U.S. Department of State

Mr. Abromavicius' announcement received instant reaction from foreign states. In a rare diplomatic development, ambassadors of nine major countries (G7 plus two EU states) published a joint statement. It praised Abromavicius record as a reformer and called on Ukraine's leaders to "put the vested interests that have hindered the country's progress for decades squarely in the past, and press forward on vital reforms." Similar statements followed from IMF Chief Christine Lagarde and, on behalf of the U.S. Government, from Assistant Secretary of State John Kirby.

"Mr. Abromavicius on the position of economy minister of Ukraine carried out a range of efficient and fundamental reforms to ensure attractiveness for direct investments to Ukraine, to make the improvements as much as he could, and I would like to a pay tribute to his efforts. His recent announcement on resignation raises concerns."  
.... Christine Lagarde, IMF Managing Director

The Cabinet of Ministers held an urgent meeting on February 4 to emphasize its unity and unanimity in moving on with the reforms. The four ministers who had previously announced their resignations were persuaded to revoke those statements, and some bloggers called it "the resurrection of zombie ministers."

The scandal brought an outburst of public indignation. Mustafa Nayyem, Ukraine's celebrated journalist and civic activist, remarked: "They seem to pretend that nothing really happened; they seem to think that a joint statement from nine ambassadors is just another post on Facebook... But there are signs of a forthcoming big reload. The new Maidan will not take place on the streets; it will be carried out by the angry new politicians who had been pushed to make reforms, but then got their hands tied up by [the old politicians'] reluctance to give up rent-seeking practices."

Thus, the scandal aggravated a conflict in the Rada among multiple factions and groups. Within the leading faction - the Poroshenko Bloc - a minority of "angry new politicians" poured out resentment against Ihor Kononenko, the key culprit in Abromavicius' accusations. Kononenko - a personal buddy and a long-time business partner of Petro Poroshenko - became known as "the grey cardinal of the party of power", a mastermind of shadow influences and rent-seeking deals. But only a handful of the MPs supported the demand for Kononenko to resign from his seat in the Rada.

More importantly, the collisions within the Rada in the aftermath of the minister's resignation reveal that a majority coalition is no longer in place. Three out of the five factions that made up the coalition now insist on Prime Minister Yatseniuk's resignation and on getting a new cabinet formed. On the other hand, Yatseniuk's faction, the People's Front, firmly vetoes that option. Unless they find a common ground, this will mean a deadlocked legislature and a need for new elections.

Prime Minister Yatseniuk is scheduled to deliver his annual report to the Rada on February 16. That day is expected to decide the fate of Yatseniuk's cabinet.

A text message that triggered the avalanche

But what exactly triggered the minister's outrage and resignation? According to Serhiy Leshchenko, Rada's eminent "new angry politician", the text messages which Abromavicius received on his smartphone reveal the "purulent abscess of cronyist rent-seeking." In short, Kononenko's team was pressing the minister to accept the appointment of a deputy minister they had chosen for him - so that the appointee would act as their trusted "cash flow overseer."  

The minister did not fully realize where he was getting himself into while obtaining his position. Being an idealistic person, he could not expect such pressure from the officials. The international community should pressure the leadership of Ukraine, the President, the Parliament, the Prime Minister more than ever to actually fight this corruption. Because they are going to fight it only under pressure.

....Olena Trehub, a senior staff member for Minister Abromavicius

I know that this concept - smotriashchiy in the original - has been difficult to understand for some researchers at Washington-based think tanks. The term itself is rooted in the underworld of organized crime and was borrowed into the lingo of post-Soviet crony capitalism. A cash flow overseer, in this particular instance, is supposed to control the rent-seeking machine that strips a potentially profitable state-owned company of its profits -like the Naftogaz or the UkrGasVydobuvannya. The machine uses a variety of methods, from private intermediaries that are allowed to resale the company's products with a huge profit margin - to private contractors that supply their services on extremely favorable terms. According to Serhiy Leshchenko, the appointment of a smotriashchiy to Abromavicius' office was going to be the price for informal allegiance of twenty nominally "independent" Rada members - because some of them would be the beneficiaries of that machine. This group of legislators is comprised of former allies of Yanukovych; their faction is now registered under the name of the Will of People (Volia Narodu).

Abromavichius made a great service to the future generations of Ukraine as he planted a detonator under the edifice of  corruption and produced a resonant blow.

.... Serhiy Leshchenko, Deputy of the Verkhovna Rada; an investigative journalist

Government ministers before Abromavicius were forced to accept such rules of the game, claims Leshchenko. Minister Abromavicius started a great reform by bluntly breaking the "omerta" rather than quietly refusing to be involved.

Scale of crisis

Although this crisis was triggered by a conflict between Minister Abromavicius and Ihor Kononenko's team, its roots obviously go much deeper, and its scale is getting broader. Currently, the crisis is no longer perceived as simply a "Kononenko-gate"; instead, it is discussed as a crisis of legitimacy of the post-Maidan political leadership.

Abromavicius resignation lays bare Ukraine's continuing failure, two years after the "Maidan" uprising, to curb corruption and establish the rule of law.

....Financial Times Editorial. February 7, 2015

According to Gallup World Poll, President Poroshenko's approval rate plummeted in one year from 47% to 17%. Prime Minister Yatseniuk's approval rate is now near 1%, and only 8% of Ukrainians still have confidence in the government at large. Arseniy Yatseniuk is willing to explain that as an inevitable fate of "kamikaze" reformers. He also blames the legislators in the Rada who solemnly signed the coalition agreement about a year ago - but carried out only "about 30%" of that agreement.

But Serhiy Datsiuk, a well-known political philosopher, believes that the real problem is different. He points out that the coalition agreement visible to the public was different from an informal consensus established between the government and business tycoons. In other words, Yatseniuk lost public support because he was seen as a part of the perpetuating system of corruption. That system is driven by its own logic: if you refuse from a rent-seeking opportunity, another tycoon will take it. This may explain why the nearest circles around both Yatseniuk and Poroshenko are now implicated in acts of corrupt cronyist rent-seeking. 

The essence of this political crisis is the fact that the ruling class destroys the country, and they know it, and they are afraid of it, but their mercantile instinct is stronger than their consciousness.

.... Serhiy Datsiuk, political philosopher

Pavlo Sheremeta, the economy minister who resigned under similar pressure before Abromavicius, does not feel that the reformers are losing their battle to rent-seekers. The rent-seekers are deeply entrenched and have great financial resources, and fighting them from inside the system may in fact be harder, he says. This is why he thinks it is a positive development when such struggle is revealed to the public view.

A new Cabinet and, maybe, a new Rada?

President Poroshenko is expected to play the decisive role in resolving the current crisis. According to a number of influential analysts, Poroshenko has long been interested in getting rid of Yatseniuk. At first, Yatseniuk was an unwanted rival; then he became an inconvenient partner. However, in Poroshenko's political calculus, it may be preferable to keep the weakened Yatseniuk in place, under a tight control, rather than launch a risky gambit of selecting a new prime minister at this time. It would be easier to vote Yatseniuk out than to find a consensus about his replacement. Yet, many predict that Poroshenko will initiate the Rada vote to replace Yatseniuk as soon as he finds a suitable candidacy that would be sure to win.

A great benefit from this "Kononenko-gate"scandal for the country is that it develops the tools and skills of pressure for the voters to use in influencing the behavior of government officials and institutions regarding a whole range of issues.

.... Yevgeny Kuzmenko, political observer

Like Poroshenko, international donors would not like to see this crisis evolve into early parliamentary elections. Some fear that a new election would slow down the reforms, and that the composition of the new Rada would not be any better, and possibly worse. On the other hand, there are obvious signs that the political class already anticipates an early election. There is a feeling that it will soon become too costly for the president to keep this parliament under control with traditional fiefs and spoils, and then a new election will be imminent. But that would be a good development, all in all, because elections are the democratic way to resolve conflicts and grievances. Also, elections are the best tool to cultivate political responsibility -- for those who get elected as well as for those who vote.


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