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June 5, 2008

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Reference ID Created Released Classification Origin
08KYIV1087 2008-06-05 14:37 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv

DE RUEHKV #1087/01 1571437
P 051437Z JUN 08

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 001087 
E.O. 12958: DECL: 06/05/2018 
Classified By: Ambassador for reasons 1.4(b,d). 
1. (C) Summary.  Head of the Presidential Secretariat Viktor 
Baloha told the Ambassador on June 3 that the coalition was 
struggling forward and would continue to work together, but 
that they were nearing the breaking point.  He criticized 
Tymoshenko for being unconstructive and populist, with 
policies that could collapse the economy.  He said that 
President Yushchenko and Prime Minister Tymoshenko had agreed 
during a June 2 meeting that the PM, and the coalition, would 
be "on a short leash, " where Yushchenko and Rada Speaker 
Yatsenyuk would have to agree ahead of time to all CabMin 
decisions.  Baloha said that if Tymoshenko stuck to this 
agreement, things would move forward.  If not, the 
President's team would consider alternatives, and he promised 
the Ambassador would be the first to know if and how the 
coalition was going to be reformatted. 
2. (C) Comment.  Although Baloha's ostensible message was 
that the coalition was still finding ways to work together, 
it was clear he was laying the groundwork to be able to 
justify a shake-up down the road by claiming that Yushchenko 
had done his best but that Tymoshenko did not honor her 
promises.  The more the Ambassador probed about the details 
of this new agreement between President and PM, the less 
Baloha sounded like he wanted it to work.  Still in question 
are to what degree Baloha speaks for Yushchenko and what 
alternatives the two leaders have.  Since losing the Kyiv 
elections on May 25, Tymoshenko has been more conciliatory in 
her actions (although not her public comments), agreeing to 
swear in Yushchenko's Constitutional Court nominees and 
backing away from immediate constitutional reform.  We assess 
that it is in her interest to stick it out in the government 
until the fall, which gives her time to fight inflation and 
shore up her slowly dropping ratings and doesn't put her in 
the opposition too far in advance of next year's presidential 
race.   For Yushchenko's part, he is unlikely to make a move 
until he has an alternative path forward worked out, which 
could take some time.  End summary and comment. 
Criticizing Tymoshenko 
3. (C) Baloha, who had requested the meeting, said he wanted 
to update the Ambassador on the current state of affairs 
within the coalition and government.  He said there had been 
changes and there would be more changes in the near future, 
although he did not specify what kind.  Baloha then switched 
tracks, saying that he had set a trap for Tymoshenko back in 
January to test her.  It was then that Yushchenko nominated 
three new Constitutional Court judges to replace the three 
who had been removed, and Baloha had watched closely to see 
when the Rada would confirm the nominees.  Tymoshenko opposed 
the nominations and blocked the confirmation, only allowing 
it to finally go forward on June 3 and only when she finally 
acknowledged she was defeated.  However, instead of admitting 
her defeat quietly, she fought against it, sending alleged 
ally Viktor Medvedchuk to opposition leader Yanukovych four 
times over the weekend asking Regions to blockade the Rada on 
June 3 to prevent the judges from being sworn in.  Baloha 
knew this, he said, because he talked to Yanukovych 
frequently and the opposition leader had told him everything. 
4. (C) Turning to the Kyiv elections, Baloha termed them a 
victory.  He said they had opposed early elections from the 
beginning and warned Tymoshenko not to hold them, but she 
wanted them and then she lost.  If she had united around 
candidate Vitaliy Klychko, they might have won, but she 
refused and the Presidential Secretariat backed no one. 
(Note.  Many believe that tacitly the Secretariat backed 
Chernovetskiy through their refusal to back anyone else.  End 
5. (C) Baloha said that the economy was in crisis, including 
Ukraine's international image and its investment climate.  He 
said that the government's program was populist and would 
lead to economic collapse if implemented.  That was why 
Yushchenko had canceled Tymoshenko's privatization program. 
If a privatization program is passed, the revenues won't all 
go to social spending, but will rather be reinvested in 
Ukrainian infrastructure and other needs. He also said that 
if a good privatization program is adopted, it will not 
matter who the head of the State Property Fund is. 
And Questioning Viability of Coalition 
6. (C) Baloha said that they had exhausted all their 
patience.  If Tymoshenko decides to run for president, she 
will be removed as PM.  Any mistakes she makes will be 
KYIV 00001087  002.2 OF 002 
catastrophic for her and "we won't help her in anything."  He 
said the fact that the coalition passed a privatization 
program in the first reading on June 3 showed that the 
coalition was stable.  (Note.  The Rada also passed, among 
others, amendments to the budget and a flawed version of the 
Customs Tariff law needed for WTO.
  End Note.)  However, they 
were nearing the point of no return.  The PM and her 
political force were making unacceptable comments -- the 
presidential team would not respond in kind, but if she did 
not honor her commitments, he couldn't say what would happen 
next.  Baloha then told the Ambassador that Yushchenko and 
Tymoshenko had met on June 2 and agreed that all CabMin 
decisions should be passed only after agreement from the 
President and Rada Speaker Yatsenyuk.  Baloha described this 
as the PM "on a leash that was short and shrinking."  He 
added that the coalition was also on a short leash, adding 
"less democracy is good" in that respect.  If Tymoshenko 
adheres to this agreement, everything will be okay.  If she 
does not, Baloha promised that they would "push the red 
button" on the coalition.  The choice was harmony or a new 
coalition, and Tymoshenko understood this now.  Baloha said 
they were back to a situation like when Yanukovych was PM, 
and if the presidential side made any more concessions, it 
would be ruined.  (Comment.  Baloha's statements are a little 
disingenuous given that the Presidential Secretariat is far 
more aggressive now than it was when Yanukovych was PM and 
Tymoshenko has tried to be more cooperative.  End comment.) 
7. (C) Despite the agreement, Baloha said, it will be hard 
for the President and PM to move forward together. 
Constructive work, he argued, now depends more on Tymoshenko 
than on Yushchenko , because she holds the cards to 
cooperation.  When the Ambassador asked what the alternative 
would be to the current coalition, Baloha said that the 
Ambassador would be the first to know if the coalition was 
being terminated, but he would not offer details of what he 
saw for the future.  He did say that early Rada elections 
would only happen if the President deemed them necessary, not 
simply because Tymoshenko wanted them.  In response to the 
Ambassador's question, Baloha clarified that Yanukovych was 
not part of any agreement between Yushchenko and Tymoshenko. 
He said Yanukovych understands the situation well and knows 
he is in a good position sitting on the sidelines.  Baloha 
wrapped up the conversation saying that "processes" were 
underway that had a negative impact on the coalition, and 
that if these processes evolve further, the coalition will 
8. (U) Visit Embassy Kyiv's classified website: 




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