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Euro Revolution in Ukraine



The situation in Ukraine has turned from very tense to revolutionary. Indeed, the opposition to President Viktor Yanukovych is calling for his resignation and labeling their cause a "Euro Revolution." On Sunday, December 1, hundreds of thousands of protesters seized control of a major public square in Kiev. With power thus lying in the streets, the next few days are likely to be decisive. Fortunately, Yanukovych has not yet declared a state of emergency, but it is doubtful whether he can restore control. While the democratic opposition seems set to take over, Yanukovych's own camp appears unready to apply harsh methods to suppress their protests. It is difficult to see any way out for Yanukovych.

On November 29, Yanukovych was supposed to sign the European Association Agreement in Vilnius, but, partly because of pressure from Russia, he failed to sign any document whatsoever in spite of good will from the European Union (EU). The opposition instantly cried treason and is asking for his impeachment and the sacking of the government under Prime Minister Mykola Azarov.

The situation took a turn for the worse at 4:00 a.m. on November 30, when riot police cleaned out 300 demonstrators legally holding the fort at the Independence Square. Thirty-five were injured and 31 detained, although no demonstrator is even accused of having resisted. The official reason for the cleansing of the square was to raise a Christmas tree. Yanukovych lamented the violence, without really blaming the police, while the minister of interior apologized for having used excessive force.

Three developments then occurred simultaneously. First, the opposition called for massive peaceful demonstrations and had hundreds of thousands of people out in the street on Sunday, and they succeeded in retaking Independence Square. The main slogans are now "The boar (Yanukovych) to the (Christmas) tree!" "Down with the gang!" "We do not forgive!" and "Revolution!" Interestingly, the EU ambassador and nine ambassadors from EU countries (notably, Poland, the Netherlands, the Czech Republic, Sweden, and Finland) joined the demonstration, clearly on orders from their capitals. The United States, the European Union, and various EU countries have condemned the violent action against peaceful and legal demonstrators. Major demonstrators are continuing in 29 big cities in Ukraine. Nobody loves the European Union more than the Ukrainians.

Second, Yanukovych's chief of staff, Serhiy Lyovochkin, resigned, but Yanukovych refused to accept his resignation. Perhaps a score of senior pro-Yanukovych parliamentarians, including several former ministers, are defecting to the opposition. Interestingly, two senior defectors belong to the camp of Dmytro Firtash, the second most important oligarch in the Yanukovych camp. Yanukovych's party has only 207 seats out of 442 seats in the parliament, but it is usually supported by 32 communists and 35 non-affiliated parliamentarians. The opposition has 168 seats. He thus may lose control over the parliament, which is exceedingly flexible and opportunistic, always adjusting to the wind. The special forces of the Ministry of Interior in Lviv in western Ukraine refused orders to clean out demonstrators. On Monday, December 2, the regime seemed to try to calm down its own supporters.

Third, the authorities have brought in a large number of hooligans, young men in masks and helmets. They attacked the riot police outside of the presidential administration building with a bulldozer and cobblestones. Despite their large numbers and full gear, the police made no resistance. It looked absurd on web television. Thirty journalists and 50 riot policemen were injured. Opposition leaders Petro Poroshenko and Vitaliy Klichko went to the scene and made clear that these were not their people. Similar events took place at the storming of the Kiev City Council and the attack on the Lenin monument. The opposition leaders, however, did occupy the headquarters of the trade unions.

There are five evident leaders of the opposition standing together. They include the three party leaders. Klichko stands out as the leading presidential candidate; Arseniy Yatseniuk offers operative instructions; the nationalist Oleh Tyahnybok keeps quiet, but he is present. Former Minister of Interior Yuri Lutsenko, who was the agitator of the Orange Revolution, is the revolutionary leader. Poroshenko, a big businessman and former minister, seems the most resourceful organizer. His television channel covers the euro revolution in the same fashion as it covered the Orange Revolution. In the background, former Prime Minister Yulia Tymoshenko's statements are read out from prison, where she is serving a sentence following her conviction in 2011 of politically motivated charges that she abused her power. These are highly experienced politicians. Their policy seems clear and united: General strike until Azarov and Yanukovych go. Block Kiev and all its administrative buildings, but do not storm them! The action must remain peaceful! Ukraine must join Europe!

The regime needs to act fast. On Monday morning, the parliamentary speaker Volodymyr Rybak invited the leaders of opposition factions in the parliament for talks. They left quickly, arguing that they had nothing to talk about until the Azarov government had resigned and political repression ended. They notably insisted that Tymoshenko be released, as the European Union had earlier called on the government to do as part of the accession deal.

There are reports of movements of interior troops from the south being sent to Kiev, but if Yanukovych were to declare a state of emergency, he might lose his parliamentary majority. If he does not call for an emergency, he is not likely to be able to restore his control. On Sunday, the Minister of Interior warned of the specters of Libya and Tunisia.

Curiously, Ukraine is supposed to host the annual meeting of the Organization for Security and Cooperation in Europe (OSCE) in Kiev on December 5–6. Can this important human rights organization really hold such a meeting with foreign ministers from the whole of Europe, including Russia? Yanukovych can hardly use force before or during this meeting.

The main way out of the current crisis is for the regime to be ousted through defections from its ranks and for a roundtable negotiation to resolve the issues, as was the case during the Orange Revolution in December 2004. The revolution leaders are more experienced and more decisive than they were then, however. They already know how to take power, and one important lesson they learned has been to act fast and hard but peacefully. Therefore, they have now blocked the work of the government. Apparently, they want to force Yanukovych to sacrifice the Azarov government first and then negotiate his own departure. The demise of the Azarov government would naturally lead to the dissolution of the undemocratically elected parliament and new elections within three months. One worry is that the opposition may not be able to control its young hotheads. The greater concern is that the highly criminal Yanukovych regime will unleash serious violence, since it has nowhere to go but to prison if it falls.

Once again as in 2004, the European Union is likely to provide mediation services. It can offer former Polish President Alexander Kwasniewski, EU Commissioner Stefan Fule, Swedish Foreign Minister Carl Bildt, and Polish Foreign Minister Radek Sikorski as possible mediators. All these senior politicians know Ukraine and all the current actors. Russia on the contrary would be left outside again.

Economically, nothing good is likely to happen for a few months. Realistically, no effective government is to be expected for the next 3 to 4 months, and that hiatus might last for much longer. The following economic consequences appear likely:

1. A general strike of 2 to 3 weeks will certainly hurt the economy, which was already set to contract by one percent this year.

2. State revenues are bound to underperform, since tax collection in Ukraine has been very tough, and it is now set to ease. Meanwhile expenditures will rise as cost control eases. The total expected budget deficit for 2013 is already 8 percent of GDP according to JP Morgan.

3. Naturally, until a new government has emerged, Ukrainian bond yields will rise and Ukraine will be excluded from international financial markets, which will lead to further reserve losses. The few stocks that are still traded are likely to sink.

4. Russia has no reason to give any concession under these circumstances, since no Ukrainian government will be able to credibly promise anything. The expected Russian financing is unlikely to materialize.

5. It would be surprising if this would not lead to a run on the banks and on the currency. The result would be both devaluation and substantial bank failures. Defaults on bonds of state-owned companies such as Naftogaz would be natural consequences.

In the end, when Ukraine has got a government with some legitimacy, the European Union and the International Monetary Fund will have to get into fervent crisis management.

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