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Under President Viktor Yanukovych, Ukraine has had its fair share of bad press for political persecution, corruption and suppression of human rights. Now the government is looking to further marginalise the opposition by changing election laws, though analysts argue the investment climate could benefit and the authorities are still deadly serious about reform and maintaining good relations with the West.

Despite noting a slide in political rights over the last year, even Freedom House - the vehemently pro-liberal democracy think-tank - credits Ukraine as an "electoral democracy", rating it on a par with Mexico and Turkey, and far ahead of any other former Soviet state in its "Freedom in the World 2011" survey. That's not to discount criticism of Yanukovych's regime. The government has been noted for its "putinisation" of Ukraine: the centralisation of power via changes to the constitution and court appointments, as well as pandering to its oligarch backers.

However, at the same time, much of the bad press is the result of the admirable rhetorical skills of the president's political rival, Yulia Tymoshenko. The leader of the opposition is currently fighting one of several criminal cases brought against her in the last few months, and a conviction would bar her from challenging for office in the future.

At the same time, in the face of dwindling approval ratings due to its economic reforms, tightening grip on power and a general weariness amongst the population of the political and business elite, Yanukovych's ruling Party of Regions is preparing changes to the electoral system that will likely marginalise the opposition further ahead of parliamentary elections set for October 2012. "It's common for governments to change the rules ahead of elections to suit their political goals," says Zenon Zawada of Phoenix Capital. "The goal... will be to introduce as many rules to the elections - while conforming to as many international standards as is pragmatic - that produce the results favourable in forming the next coalition government."

Under the proposed rules, half of the 2012 parliament will be chosen by single-winner, single-mandate districts, in which voters of a geographic district elect a single deputy to represent them. The other half will be determined by closed lists, in which voters choose a party to represent them. "While it's a negative development [that will] marginalise constructive voices in the opposition, the positive side is that it also marginalises the radical socialist elements to the benefit of Ukraine's investment climate," Zawada suggests. The same double-edged blade will also help suppress the nationalist Freedom party, which has helped stoke tensions in the country recently as it has benefitted from Ukrainians' frustration with the country's mainstream political figures.

At the same time, says Zawada, the new legislation looks likely to leave a loophole that would allow independent candidates to run, which could mobilise the country's entrepreneurs to build a significant force in the next parliament, with many having been spooked by legal cases perceived to pose a threat to unaffiliated and opposition business figures such as Viktor Pinchuk and Kostyantyn Zhevago.

With the legislation to oust partners in the government's current coalition, "the success of the Yanukovych administration in forming a parliamentary coalition would depend upon its ability to reach agreements with the newly elected entrepreneurs," Zawada says. "In introducing single mandates, the Yanukovych administration could be securing itself a loyal coalition government for three years, or quite the opposite, opening a potential Pandora's box of rivalry."

Reform-oriented

Meanwhile, Ivan Tchakarov of Renaissance Capital suggests he'd be surprised to see Yanukovych's government stray too far from Western norms.

While it's now abundantly clear that there is little love lost between the president and Russia's leading ideologues, Yanukovych appears to be following a blueprint originally rolled out in Moscow under the presidency of Vladimir Putin. That plan - formed in the wake of the collapse of the Soviet Union after Mikhail Gorbachev tried to reform the whole system at once - sees political power strengthened while the economy is reformed, which then acts as a base for further liberalisation across society. "To many who derided the Party of Regions as a mere stooge for Russia, it has offered some pleasant surprises," says Tchakarov. "It has not only shown an independent streak by spurning Russia's advances on joining the Customs Union and offering Naftogaz to Gazprom, it has also, in addition to the pension-reform bill, successfully passed a number of important, if imperfect, bills, including on the land cadastre, government procurement and corruption."

Without the natural resources with which Moscow is powered, Yanukovych needs outside support, and has turned to Europe. That means he must give European values and standards more than a cursory nod. "First, the Party of Regions has correctly anticipated a gradually increasing undercurrent in society that demands a fairer system, but understands that this will require some painful reforms. Second, the governing party is very sensitive to criticism from the West, and is therefore calibrating its policy accordingly," Tchakarov insists, having held a series of meetings with senior officials from Kyiv in July. "Finally, there is a core within the administration that is genuinely reform-oriented."