Ukraine's leaders bicker as economy burns

Rearranging the deck chairs on the Titanic.

That's how many Ukrainian observers describe the very public, escalating power struggle between liberal president Viktor Yushchenko and his erstwhile ally in the Orange Revolution, the fiery populist prime minister, Yulia Tymoshenko.

To many observers, Ms. Tymoshenko and Mr. Yushchenko are already fighting presidential elections that are nearly a year away and are using their official positions mainly to undermine any decisions taken by the other. In recent weeks, both have issued statements blaming the other for the country's galloping financial crisis, which has seen the hryvna plunge in value by nearly 60 percent, Kiev's main stock market fall by 75 percent, and most banks cease lending or even returning depositors' cash.

Dirty political laundry on national TV

In an internal memo leaked to the Ukrainian media late last month, Ukraine's finance minister, Viktor Pynzenyk, warned that the 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."

Following the memo's publication, Yushchenko took to the airwaves 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 appeared on TV the next day to accuse the president of spreading "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."

Surveys show that nearly 85 percent of Ukrainians believe there is no government order in the country.

"It's a good thing when they compete in elections, but when they continue competing afterwards, it's disastrous," explains Vira Nanivska, president of the National Academy of Public Administration in Kiev. "It becomes impossible for needed decisions to be taken."

A revolution's bitter aftertaste

In 2004's Orange Revolution, Tymoshenko and Yushchenko worked together to defeat pro-Moscow 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 crowds before turning the stage over to the more measured and cerebral Yushchenko.

Following Yushchenko's election as president, the two quickly had a falling out. Within a year, Yushchenko dismissed her from the prime minister's job. Tymoshenko has since clawed her way back to power in parliamentary elections and now leads a fragile majority parliamentary coalition.

"There was a binary charisma between them that won the Orange Revolution, but which has now acquired an equally compelling explosive force," says Dmytro Vydrin, a member of Yushchenko's National Constitutional Council.

Political rumbles remain from gas dispute

Last month, Tymoshenko traveled to Moscow to sign a deal with Russian Prime Minister Vladimir Putin ending a two week pipeline dispute that had cut energy supplies to 18 European countries. But she was forced to agree to a near doubling of the price for gas. Yushchenko subsequently denounced the accord as a betrayal of Ukraine's national interests, and vowed to overturn it – a threat he later retracted under pressure from nervous Europeans.

Last week, Tymoshenko's parliamentary coalition voted to dismiss the governor of Ukraine's National Bank, a Yushchenko appointee whose job is to save the country's teetering banking system, even though there is no potential replacement on the horizon.

Tymoshenko, who earned a fortune peddling Russian gas to the Ukrainian market in the 1990s, is accused by Yushchenko's backers of selling out to Moscow in exchange for the Kremlin's political support in winning the presidency. Such heated rhetoric is not unusual in Kiev's current atmosphere, say experts, including Viktor Nebozhenko, director of Ukrainian Barometer, an independent think tank, and a former adviser to the prime minister. "Yushchenko is pursuing a scorched earth campaign to stop Tymoshenko, and even seems willing to take her down with him."

The prime minister has hurled similar invective, describing Yushchenko as a "state criminal," Mr. Nebozhenko says. "The competition between the two of them is highly personal, and deeply dangerous for the country."

A divided Ukraine heads to the polls

Few experts believe allegations that Tymoshenko is in Mr. Putin's pocket, but some say she may be angling for the Kremlin's support in the electoral battle to come. The logic lies in Ukraine's deep cultural split, in which the country's heavily Russified and pro-Moscow east and is pitted against its nationalistic and Europe-leaning west. The majority of eastern voters back the Russia-friendly Party of Regions, which led the pack with 22 percent support in a mid-December survey conducted by the independent Democratic Initiatives Foundation in Kiev. Tymoshenko follows with 14 percent, while Yushchenko has fallen into the realm of statistical error, with just 2.2 percent, according to the poll.

The trick for Tymoshenko, who has rolled up most of Yushchenko's "Orange" support, is to win votes in pro-Moscow eastern Ukraine, and for that she needs a nod from the Kremlin, says Vadim Karasyov, director of the independent Global Strategies Institute in Kiev. "The Kremlin wants to remove Yushchenko because he embodies the pro-Western and pro-NATO membership course for Ukraine," he says. "Tymoshenko has shown flexibility on the big geopolitical issues and, unlike Yanukovych, she can win votes all across Ukraine."

Sign of democracy or seeds of dictatorship?

Some observers worry that things might come to a head long before the presidential polls at the end of the year. "The Ukrainian state is in danger of losing control over the situation," says Andrei Yermolayev, director of the independent Sofia Center for Social and Political Studies in Kiev. "The gloves have come off, and each side is fighting for a monopoly of power. One possible outcome of this struggle is the emergence of an authoritarian regime in Kiev."

Other experts believe that after nearly two decades of independence from the USSR, democracy has become firmly entrenched as a means for Ukrainians to settle differences.

"If the economic situation gets really bad, the authorities will let steam out through new parliamentary elections," says Mr. Vydrin. "Because we are a democracy, we have this option to let the population channel their anger in peaceful and creative ways."