“Welcome to hell.”
That was acting Ukrainian Prime Minister Arseny Yatsenyuk’s greeting to fellow citizens when he was named in late February to hold the besieged and indebted country together until a new president could be elected.
But even with Saturday’s inauguration of billionaire “Chocolate King” Petro Poroshenko as head of state, the real suffering still lies ahead for Ukrainians.
The country’s currency, the hryvnia, has lost a third of its value this year. Huge swaths of territory in the south and east have been seized by pro-Russia gunmen. National bankruptcy has been averted only by emergency infusions of cash from Western countries, which will dry up unless Ukraine throws off its legacy of corruption.
Poroshenko, who ran on the slogan “Life in a New Way,” inherits a deeply divided nation a hair’s breadth from catastrophe and a system of government under fire from the Kremlin, which says it subverts the interests of the ethnic Russian eastern industrial belt to the desire of western Ukrainians to assimilate with the European Union.
Ukrainian politicians who have led the country through 23 years of post-Soviet independence have been chastised by their U.S. and European allies for failing to reform an economy dependent on state subsidies and for enriching a few oligarchs at the expense of the masses.
Poroshenko is one of those magnates, with a fortune estimated at $1.6 billion. He is also a familiar face in Ukraine’s tired political circles, having served governments on both sides of the divide between those who want to reorient the country toward Western values and those who believe Ukraine’s future is irrevocably entwined with Russia.
Those competing visions are at the root of the current crisis and the daunting task that Poroshenko has vowed to make his top priority: quelling the armed conflict in eastern Ukraine and reuniting the country after six months of upheaval.
Job 1 on Poroshenko’s to-do list will depend heavily on whether he and Russian President Vladimir Putin can compromise on the fundamental disagreements that underlie the escalating armed conflict.
Putin and Poroshenko talked briefly in Normandy, France, on Friday at ceremonies marking the 70th anniversary of the D-day landings that set the stage for Allied victory in World War II. Both expressed their commitment to end the fighting in Ukraine, which has claimed nearly 200 lives in recent weeks, and agreed that the only way out of the crisis is through peaceful negotiation, Putin spokesman Dmitry Peskov told the Kremlin news agency.
Poroshenko’s spokeswoman, Irina Friz, reported on her Facebook page that the leaders agreed to begin talks Sunday, when a Russian official will arrive in Ukraine. She said Poroshenko also told her that he was led to believe the Russian parliament would rescind its March authorization for Russian troop deployments in Ukraine and that Moscow’s armed forces would collaborate with Ukraine’s to seal their border in the conflict areas.
According to the Kremlin account, Putin told Poroshenko that there was now a window of opportunity because the Ukrainian leader “had no blood on his hands,” referring to the military operation launched by Ukraine’s interim leaders to recover territory seized by the separatists.
“There is huge meaning in that statement, and in Putin’s saying that he respects the new leader and is prepared to work with him,” said Anna Vassilieva, a professor of Russian and Ukrainian history and politics at the Monterey Institute of International Studies.
She describes Putin and Poroshenko as pragmatists who see the folly of continuing a civil war.
But bringing peace to the embattled areas of Ukraine is going to require major compromises in the objectives of both leaders, she said.
Putin and Poroshenko reportedly agreed that Ukrainian troops and the pro-Russia militants must “cease hostilities.” That is going to be hard for the Ukrainian leader to pull off, as compatriots worry that withdrawing now might mean losing the occupied territory to Russia or the rebels.
Putin doesn’t want to annex the occupied eastern regions of Ukraine as he did Crimea, Vassilieva said, as the broad rust belt between the Don and Dnieper rivers hosts obsolete and subsidy-dependent factories and hundreds of thousands of pensioners who would further burden Russia’s already struggling economy.
But Russia does need a reliable supply of the military and industrial hardware built in the Donbass region. And to ensure continued output of aircraft engines, missile guidance systems, pipeline pumps, railroad cars and other essential items will require significant economic support from Moscow, Vassilieva said.
The future of those mines and factories that are unprofitable for Ukraine but necessary to Russia is at the root of the conflict. Poroshenko’s predecessor, Viktor Yanukovich, was driven out of office in February by massive demonstrations against his decision to scrap an economic association agreement with the European Union. Even though full EU membership would be a years-long quest, it would at some point force Kiev to stop subsidizing the failing industries, putting hundreds of thousands out of work and halting production of the vital defense components for Russia.
Putin was seen as the force behind Yanukovich’s decision in November to forgo the European alliance, and the Kremlin rewarded him with a hefty discount on the price Ukraine paid for natural gas. That and other Russian inducements to keep the Ukrainian economy integrated with Russia’s were rescinded after the overthrow of Yanukovich.
Poroshenko promised during his presidential campaign to revive the EU association agreement soon after his swearing-in. But he has resisted western Ukrainians’ calls for alignment with NATO, warning that opposition by Russia and much of eastern Ukraine would lead to perpetual conflict.
Putin is a realist and likely to tolerate Kiev’s economic ties to the West in exchange for its commitment to remain militarily neutral, Vassilieva said.
Other analysts are less confident of a successful turnaround under Poroshenko.
“It’s a really terrible situation. He cannot win,” said Matthew Rojansky, head of the Wilson Center’s Kennan Institute. To do what he has to do to fix the economy, Rojansky said, Poroshenko will have to impose structural reforms “that will undermine his position with the people who brought him to power.”
Western allies demand, and Poroshenko has promised, “a full, systemic reboot of Ukraine,” with a transparent budget, accountability to international lenders and new parliamentary elections. The priority for Russia, however, is constitutional change to cede power from Kiev to the regions, where local governments would have control over economic and foreign policy, including the power to block entry to the EU or NATO.
“It is impossible for Poroshenko to come to any kind of modus vivendi with Russia and the oligarchs and the populations of southeast Ukraine unless they are given the kind of veto power that would be unacceptable to western Ukrainians,” Rojansky said. “It is truly an impossible situation.”