KYIV – While attention for most of the first half of May remained focused on combating the coronavirus pandemic and on the commemoration of the 75th anniversary of the end of World War II in Europe, there have been other important developments in Ukraine that deserve to be noted.
The most significant was the adoption by the Verkhovna Rada on May 13 of the bitterly contested and consequently long-delayed critical banking law that prevents the return of nationalized banks to their former owners. That removed the last remaining hurdle for the country to receive am estimated $5 billion stand-by deal from the International Monetary Fund (IMF) to help offset the effects of the coronavirus pandemic and its devastating impact on Ukraine’s fragile economy.
The other precondition had been the removal of the moratorium on opening the country’s land market to privatization, which had been in effect since 2001. It was finally removed at the end of March at the same historic session of the Parliament at which the banking bill had been adopted in its first reading.
The banking law become known as the “anti-Kolomoisky” bill after the notorious billionaire oligarch Ihor Kolomoisky, who has been seeking to recover Ukraine’s largest bank, PrivatBank. It was nationalized in 2016 after he and his business partner Hennadiy Boholyubov allegedly embezzled $5.5 billion from it. The new legislation, insisted on by the IMF, was designed to ensure that Mr. Kolomoisky and others believed to have bankrupted banks won’t have them returned or receive compensation at the taxpayers’ expense.
Mr. Kolomoisky and his allies, notably in this case Yulia Tymoshenko and her Batkivshchyna party, but also including a sizeable group within President Volodymyr Zelenskyy’s own majority faction, Servant of the People, fought a strong rearguard action to torpedo the bill. Placing their own vested financial and political interests first, within days they produced over 16,500 amendments aimed at stalling the process. However, President Zelenskyy’s choice for Rada chairman, Dmytro Razumkov, and his parliamentary colleagues found a way to counter the filibustering scheme and to fast-track the Parliament’s work.
Nevertheless, given the high stakes involved and behind-the-scenes dealing, the outcome remained in doubt until the very last moment. According to Ukraine Business News, on the eve of the vote, Nick Piazza of SP Advisors warned in a note to investors that Ukraine was “facing a decisive moment.” The renewal of cooperation with the IMF and other international financial institutions “is the only way for the country to muddle through the crisis at a reasonable cost. The plan to fund the huge fiscal deficit is largely based on the availability of funds from external lenders,” he wrote.
Signalling the seriousness of the vote, President Zelenskyy was present when it occurred and was seen applauding when the result was known. In the end, 270 deputies supported the bill, with 226 required for it to be adopted as law. Only 200 deputies from Mr. Zelenskyy’s faction, of the 231 who were present, backed it, together with 23 from former President Petro Poroshenko’s European Solidarity, 18 from rock-singer Svyatoslav Vakachurk’s Voice Party, and independent lawmakers. Ms. Tymoshenko and her faction, together with the pro-Russian Opposition Bloc – for Life, voted against.
Does this and the recent voting on the land reform bill suggest a new potential reconfiguration of political forces in the Verkhovna Rada? It is still too early to say, and much will depend on the strategy and tactics that Mr. Zelenskyy will choose to employ at this juncture.
The role of former Georgian president – and now, once again, controversial Ukrainian politician – Mikheil Saakashvili could be crucial. It is still not clear why President Zelenskyy had unexpectedly decided in recent weeks to co-opt this headstrong and seemingly intractable figure into his inner team. And he persisted in aligning himself with Mr. Saakashvili despite not only the powerful foes the Georgian has made within the Ukrainian oligarchic set-up and the political elite, but also the considerable resistance he has generated from within the Servant of the People party.
Some observers believe that the president is gambling that Mr. Saakashvili, who still actively promotes and retains in many quarters the image of an uncompromising reformer and opponent of corruption, is what is needed for the sake of appearances or to actually re-energize the flagging reform effort, or both. Some also note that Mr. Saakashvili could also be useful later on as a scapegoat to deflect attention away from Mr. Zelenskyy if things do not improve.
Last month, President Zelenskyy tried to appoint the Georgian fireband as deputy prime minister responsible for reform. This was a rather bizarre idea, considering that such a ministry did not exist and would immediately have implicitly undermined the responsibilities of the newly appointed prime minister, Denys Shmyhal, not to mention bring Mr. Saakashvili face to face again with his political foe from the Poroshenko era, Minister of Internal Affairs Arsen Avakov.
The move turned into a fiasco because not enough national deputies in the Parliament, including within Zelenskyy’s own faction, were prepared to accept Mr. Saakashvili. Eventually, on 7 May, the president appointed Mr. Saakashvili as head of the country’s National Reform Council, a body that seems so far to have existed only on paper.
For the ambitious Georgian to make any real difference, he will need to be empowered practically and backed up, regardless of the risks that are entailed. All depends on the will and motives of the president.
Mr. Zelenskyy says he doesn’t expect to see the results of Mr. Saakashvili’s appointment immediately, but only after a few months. “This will primarily mean deregulation in the business environment and reform of the customs service,” as well as attracting investors, he told the media on May 9.
The situation is certainly difficult. Even the IMF has indicated that its patience and confidence, given the various ambiguous signs emanating from Ukraine in the last few months, is also limited.
At the beginning of March, Kyiv was still expecting to receive, as Mr. Zelenskyy told the Rada, up to $8 billion from the IMF. But on May 7, IMF spokesperson Gerry Rice confirmed that negotiations between the IMF and Kyiv are now aimed not at securing a three-year Extended Fund Facility (EFF) for Ukraine, but at achieving the conditions for launching a Stand-By Arrangement (SBA), which provides for smaller volumes and will last for 18 months. The amount of funding under the new SBA has not yet been announced.
Lisa Yasko, a deputy from Servant of the People and head of the Ukrainian delegation to the Parliamentary Assembly of the Council of Europe, told the Atlantic Council on May 12 that she is “cautiously optimistic.” In her view, Mr. Saakashvili “has the potential to make a positive contribution rather than serving as a destructive influence as some skeptics might argue.” But, “a lot will depend on attitudes among the Cabinet of Ministers and members of Parliament.”
Certainly, much will now depend on the unlikely combination of the experienced former Georgian president and the current inexperienced Ukrainian one managing to work in tandem.