Roman Olearchyk in Kyiv -

With little hope in sight that his pro-democracy and Western integration agenda would be preserved, Ukraine's president made the most difficult and risky move of his presidency: he ousted a hostile governing coalition viewed by many as loyal to Moscow's interests and called for fresh elections.

While the situation in Kyiv remains volatile and his bold move is being challenged, President Viktor Yushchenko has taken the upper hand this time.

In the days during the Orange Revolution, massive street protests propelled Yushchenko into power by overturning a fraudulent presidential vote won of his nemesis, Viktor Yanukovych, and allowing the country's Supreme Court to call for a repeat vote, which Yushchenko triumphed in.

While most Ukrainians are disenchanted this time around and unlikely to show up on the streets in force, the embattled president does control the army this time – something that has provided vital in the past during times of political turmoil.

There is still hope the power struggle between president and prime minister will be settled peacefully by a speedy Constitutional Court ruling, or a compromise deal which would be in effect be a temporary ceasefire. But Ukraine's Constitutional Court is itself divided on party lines, raising the question of whether they will be able to pass a clear-cut ruling.

Use of the army and secret service to take control of the country, forcing Yanukovych's coalition out, could become necessary via an emergency presidential decree. Arrests of top politicians who refuse to abide by the controversial presidential order are also possible, political sources say, adding that they hope the coalition will back down.

Banana republic

Ironically, Ukraine within a year of its most democratic election and led by its "most democratic" leader in its turbulent history finds itself sliding toward something akin to a banana republic.

Ihor Koliushko, a former legal advisor to the president, was unsure if the current situation could be solved through a Constitutional Court ruling that clarifies unclear legislation. It may come down to brute force, he says.

"There is no constitution functioning here; the politicians are all doing what they want," he says.

Many legal experts questioned the constitutionality of the presidential order to dissolve parliament, by far Yushchenko's boldest move since being thrust into power by the pro-democracy Orange Revolution. But he had little choice, since eight months after being forced to accept Yanukovych as prime minister, Kyiv's president has found himself increasingly marginalized and his pro-Western agenda derailed.

Last summer's compromise agreement, in which Yushchenko agreed his rival's candidacy for premier, was intended to foster stability. But it was doomed from the beginning: vague political reforms adopted in the heat of the Orange Revolution have pitched Yushchenko and Yanukovych into a wrestling match for power.

The president repeatedly called for compromise and an end to the unconstitutional usurpation of his power. He pressed for the passage of bipartisan laws that would mend the vague constitutional items.

Yanukovych controls a coalition backed by big business interests, which are viewed by many as being loyal to Moscow. While they deny these claims, tycoons such as billionaire Rinat Akhmetov, the main businessman in the coalition, own industry that is dependent on Russian fuel imports. Analysts have suggested that Moscow has methodically hiked prices in recent years to keep them in check and loyal.

This cocktail coalition compromised of leftwing communists and tycoons is holding its own, refusing to abide by presidential decrees. On Tuesday morning, they flexed their muscle reinstating the notorious central election commission that was responsible for falsifying the 2004 presidential vote. The move is viewed as a severe threat to Yushchenko, but it could also strengthen his resolve.

Risky strategy

Even so, dissolving parliament is risky. Polls show that political allies of the president are not guaranteed a victory in a repeat vote. What's more, Yanukovych's coalition has threatened not to recognize repeat elections.

Yanukovych's camp is pressuring the cornered president, warning that repeat elections would revive east-west tensions in the country, possibly splitting Ukraine. It's a threat they last repeated during the Orange Revolution.

The escalating political paralysis has also put severe strains on still fragile democratic and state institutions. Little has been done to cleanup Ukraine's courts were salaries are low and financing squat. Higher paid judges get paid $1,000 per month; about the earnings of Kyiv taxi drivers.

And the troubling news is that the balance of power is being decided by this highly corrupt branch of government, which has increasingly found itself playing referee between power hungry political camps eager to stretch the country's hazy constitution for political gains. With so much in the hands of the courts, themselves notorious for issuing rulings to the highest bidder, the balance of power and future of Ukraine remains uncertain.

Kyiv's Constitutional Court has repeatedly failed to provide speedy rulings spelling out how much authority each leader should have. Politicians have accused each other of pressuring the court; rumours that judges are being bribed and pressured are rife.

Most agree, however, Ukraine's courts are not likely to solve this issue. "The political infighting has essentially put major reform related issues on the back burner as the political elite strive to solidify their power base in this constantly shifting and acrimonious environment," says Jorge Zukoski, president of the American Chamber of Commerce in Ukraine.

Sergiy Vlasenko, a high-profile litigation lawyer who played a big role in winning a 2004 Supreme Court ruling that made Yushchenko president said: "The judicial system in Ukraine is sick and needs immediate treatment. The sickness has gotten worse [since the Orange Revolution] due to the lack of reforms and destructive political infighting."

Vlasenko doubts Ukraine's Constitutional Court judges are capable of settling the conflict between the two Viktors. Having been appointed by divisive politicians, they too are locked in an impasse along party lines to solve the escalating constitutional crisis.

Investors are also feeling the pinch. Foreign investors continue to flock to Ukraine betting on long-term growth opportunities, but they are finding it increasingly difficult to defend their interests on the ground due to weak legislation and corrupt courts.

"Unfortunately, our members are reporting an upswing in difficulties," says Zukoski. "Many companies are complaining that the corruption has actually gotten worse. Many feel that the current chaotic political environment has emboldened civil servants to revert to their old habits."

Zukoski said most foreign investors sweep the problems under the rug. But two, Norwegian telecom Telenor and US agriculture giant Bunge, have publicly complained that feeble legislation and unfair courts have put their investments at risk.

Telenor has been caught up in a two-year legal battle with Moscow's Alfa Group over control of Ukraine's largest mobile telecommunications company, Kyivstar.

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