Groysman appointed Ukraine's new prime minister, clears first hurdle

Groysman appointed Ukraine's new prime minister, clears first hurdle
Volodymyr Groysman with Ukrainian President Petro Poroshenko.
By bne IntelliNews April 14, 2016

Ukraine's parliament on April 14 approved its speaker Volodymyr Groysman as prime minister at the head of a new cabinet which, stripped of some top reformers, must now regain the confidence of Western governments and donors after weeks of political crisis.

The new cabinet will "be intolerant of corruption ... [and] will do everything to ensure the stabilisation of the state", Groysman, 38, told the Verkhovna Rada national assembly, naming "efficient management and restoration of trust for authorities" as his immediate priorities.

Business got off to a shaky start, however, requiring three votes by the Rada to back the government's interim schedule of activities. But a key task of the day, the approval of a new cabinet, was accomplished. The most drastic change was the replacement of US-born Finance Minister Natalie Jaresko by Oleksandr Danylyuk, a former economic advisor to ex-president Viktor Yanukovych as well as the current President Petro Poroshenko.   

Another key reformer and darling of Western funding institutions, Lithuania-born Economy Minister Aivaras Abromavicius, was replaced by former central bank head Stepan Kubiv, who also serves as first deputy PM. Among key members of the old cabinet, Foreign Minister Pavlo Klimkin, Defence Minister Stepan Poltorak, as well as Interior Minister Arsen Avakov and Justice Minister Pavlo Petrenko, both allies of outgoing PM Arseniy Yatsenyuk, kept their jobs.

A former provincial mayor, Groysman served as Rada speaker from November 2014. Backed by 257 members of the 450-seat Verkhovna Rada, his promotion to PM followed Yatsenyuk's April 10 resignation. It also marks an end to intense recent negotiations between the main Rada factions about forming a new coalition after the last came unravelled in February.

However, Groysman's appointment was initially supported by only 206 lawmakers from the factions of Yatsenyuk and Poroshenko, which formed the new coalition, instead of the minimum 226 votes. The shortfall was made up by recruiting non-aligned lawmakers, members of a parliamentary group controlled by oligarch Ihor Kolomoisky, and another splinter group with ties to Poroshenko's team.

Meanwhile, Yulia Tymoshenko's Batkivshchyna (Fatherland) party, a member of the coalition until February, went into open opposition. "This is the first time in the Rada when democratic forces will be both in power and in the opposition," said Tymoshenko, adding that she had no trust in the new coalition: "Chairs swap places, not people."

Tymoshenko's faction and the Samopomich party faction of Lviv city mayor Andriy Sadovyi, preceded by Oleh Liashko's Radical Party in September, quit the coalition in protest at backroom dealing between the country's leaders and oligarchs to keep Yatsenyuk in power. The three factions refused to support Groysman, with Liashko branding the new PM a "card sharp".

In one of his shortest public statements ever, Yatsenyuk told the Rada that it had been an honour to serve Ukraine and its "strong people, who are fighting and winning".

"I would like to thank my opponents and enemies for you have made me stronger. I want to note that all together we have done a lot for our country and our people. But we should move forward," he added. In another apparent pre-agreed move, the Rada also voted to annul its earlier assessment of his government's work as unsatisfactory.

Addressing the assembly, Poroshenko said the new prime minister and cabinet should keep on the westward course.

"I'd like to send a message to the country and the world. The new government - like the previous one - will keep a steady course to European and Euro-Atlantic integration. None of the commas changed in the documents, which determine the bases of national and foreign policy," Poroshenko said.

The president also stressed "the imperative and uncontested need" to continue cooperation with the International Monetary Fund (IMF) and other international donors that provide financial support to Ukraine's reforms.

Despite Groysman's earlier pledge to continue reforms, Ukraine's creditors led by the IMF will evaluate the actions of the new leadership before resuming financing effectively suspended since September. The IMF has witheld $3.3bn in credits, while other large foreign credits are tied to its resumption of funding.

Also on April 14, the Rada approved Andriy Parubiy, a 45-year-old first deputy of Groysman and close Yatsenyuk associate as its new speaker. According to local media reports, the appointment was among the conditions of Yatsenyuk's resignation.

Who's who in the new government?

Volodymyr Groysman is Ukraine's new prime minister. From 2006 to February 2014 he was mayor of the southwestern city of Vinnytsia, and spent nine months in a dual capacity as deputy premier for regional policy and minister of regional development, construction and housing before he was made Rada speaker. He quickly earned himself a reputation for his even manner and ability to mediate in an assembly prone to turbulence and full-blown fist fights.

As a close associate of Poroshenko, Groysman's appointment has raised questions that he could make token reforms while preserving Ukraine's current balance of power and the influence of the oligarchs. In March, Groysman pledged to "flawlessly" ensure fulfilment of all of the country's obligations to the IMF and the EU. "This is essential for our reputation and for reforms," he said.

The new economy minister Stepan Kubiv, 54, was Poroshenko's official representative in the Rada. He now also holds the post of Groysman's first deputy. Kubiv, one of the former commanders of the Euromaidan anti-government protest in Kyiv in 2013-2014, was appointed governor of the National Bank of Ukraine after the overthrow of the country's pro-Russian ex-president Viktor Yanukovich.

Before this, he headed commercial banks including Western Ukrainian Commercial Bank and Kredobank and was elected to parliament from Tymoshenko's Batkivshchyna party.

Oleksandr Danylyuk, is a 41-year-old former investment manager who replaces market-friendly Jaresko as finance minister. He previously served as deputy head of Poroshenko's administration, as well as being a freelance advisor to Yanukovych before his ouster.

Danylyuk's experience in the Yanukovych administration could be regarded with suspicion by reformists and public activists, writes strategist Timothy Ash of Nomura International. However, "most people view Danylyuk as progressive and technocratic, albeit the contacts into former elites will raise concern as to whether he is the kind of person willing and able to undertake meaningful reform", Ash adds.

Moreover, many of Ukraine's leading economists did similar assignments to Danylyuk, and Poroshenko also served in the cabinet under Yanukovych.

Ihor Nasalyk, 53, a member of the Poroshenko Bloc parliamentary faction, was appointed energy minister. In 2002-2005, Nasalyk served as head of the Rada subcommittee on oil production and supply. "Given his relative obscurity, his nomination indicates he will follow in the footsteps of his predecessor in being fully loyal to the president's will in this critical economic sphere," the Concorde Capital brokerage in Kyiv writes.

Poroshenko Bloc lawmaker Taras Kutovy, 40, former head of the parliamentary committee on agrarian policy and land management, is the new agriculture minister. Kutovy already pledged to strengthen state support to farmers and complete the reform of agricultural sector tax regime. "I want to add some dynamics and change the emphasis on those I consider to be very important. This is support to farmers, finalisation of agriculture taxation," he said on April 14.

"He [Kutovy] built his career and wealth in the private sector. For Poroshenko and Groysman, it's critical to have an ally like Kutovy to oversee this critical economic sector for Ukraine," Concorde notes.

Some key members of the old cabinet remain, reportedly as part of Yatsenyuk's resignation deal: the former premier offered to resign on condition that Interior Minister Arsen Avakov and Justice Minister Pavlo Petrenko remain in their posts.

Azerbaijan-born Avakov, 52, Yatsenyuk's close associate, established the brand-new patrol police in Ukraine and led reforms in other police structures. "At the same time, critics say much reform is still needed in the police force, which serves the interest of oligarchs, particularly in the real estate business. Avakov will represent Yatsenyuk's interests in the cabinet," Concorde believes.

Petrenko, 36, was elected a deputy of the Kiev regional council six years ago, served as a member of the council's committee on law and order and fighting corruption. In September 2014, he became a founding member of the People's Front headed by Yatsenyuk.

Pavlo Klimkin remains foreign minister. The 48-year-old official, who served earlier as Ukraine's ambassador to Germany, was a sucessfull mediator between the Kyiv leadership and the country's Western backers over the past two years, especially with regard to Russia's annexation of Crimea and the Moscow-backed rebellion in Donbas.

"Since taking over in June 2014, he has performed a solid job in challenging the powerhouse of Russian diplomacy with the limited resources offered by his ministry," Concorde writes. "He has also prevented any diplomatic mishaps from harming Ukraine’s standing on the international stage. Between a Europe that is striving for peace at any price, and an aggressive Russia seeking to undermine Ukrainian sovereignty, Klimkin has provided a bridge of stability with his leadership."

Implementation of the political process in the breakaway territories of Donbas and growing diplomatic pressures of Germany and France over the issue will be one of Klimkin's biggest challenges within the next months. The Ukrainian government insist that securing stable security and international control over the Ukrainian-Russian border in Donbas should be the pre-condition for local elections in the region.