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Ukraine is in the grips of a gas crisis caused by Yulia Timoshenko's cabinet
The Ukrainian government is now being forced to take urgent measures to deal with it, whereas the president, Viktor Yushchenko, is trying to correct the mistakes of the executive branch and heal relations with Russian companies. Relations inside the ruling elite are dramatically deteriorating, which means Russian businessmen are becoming politically dependent on the outcome of the battle of government concepts between the two Ukrainian leaders. A decision was made to introduce price regulation in a bid to provide good conditions for the sowing campaign. After a telephone conversation between the Russian and Ukrainian presidents, Timoshenko tried to reach an agreement with Russian companies. The latter agreed to restrict prices until May 1. However, after this date, the decision to regulate prices was extended for another month without the consent of Russian companies. Timoshenko understood that her chances of securing another agreement were slim, although the political value of reducing petrol prices was indisputable. However, the premier underestimated Russian companies, as they reduced gas supplies, which led to the current fuel crisis. It is interesting that Timoshenko tried to assume the leadership in developing relations with Russian companies and Russia in general in the first stages of her premiership. After the Russian leader visited Ukraine, she began promoting the early implementation of the common economic space project, thereby allaying fears that the new Ukrainian leadership might renounce the integration projects of its predecessors. Russian business pinned hopes on Timoshenko's policy on the tender for the Krivorozhstal steel mill, which Russia's Severstal bid for. On Timoshenko's initiative, an intergovernmental commission was set up in Ukraine to develop relations with Russian business. In the beginning, the prime minister sought to develop a network of relations mostly depending on her as well as to present herself as an ally of Russia and the Russian business community. However, this whole plan to "rehabilitate" Timoshenko in the eyes of Russia began to fall apart quite quickly for one simple reason: Timoshenko's conflicts with Yushchenko's entourage, in particular, Pyotr Poroshenko, the head of the National Security and Defense Council, who forced her to pursue a tough and populist policy based on priority interests of potential voters. In essence, it is the factor of Timoshenko's tenability as a politician and a powerful person. The more popular her steps are, the more difficult it is to dismiss her. The sowing campaign, which to some extent dictates the soundness of her position, has resulted in a conflict with Russian companies. Timoshenko's plan to develop "exclusive" relations with Russia failed completely after her visit to Russia was canceled. But then Poroshenko soon visited Moscow to calm Russian officials over the delicate issue of the Black Sea Fleet. This is how the prerogative of improving Russian-Ukrainian relations was finally passed to Yushchenko and Poroshenko. The key problem facing the current Ukrainian leadership is that Yushchenko largely has to pursue a pro-Western policy. The latter includes market economy priorities, a favorable investment climate and equal rules for economic facilities. By contrast, Timoshenko, who was appointed prime minister following an agreement during the "orange revolution," is rather oriented inward the country, to populist moves. As a result, selective revision of the most controversial privatization deals has transformed into a populist re-privatization campaign (71% of Ukrainians support the idea). Hence the anti-market measure to regulate fuel prices during the sowing campaign. It is no coincidence that the prime minister's ratings are rising thanks to the government's recent decisions, in contrasts to Yushchenko's declining popularity. Ironically, both the West and Russia concur in their critical assessment of Timoshenko's economic policy. Russian and Western investors are interested in equal and stable rules of the game on the Ukrainian market, in less government regulation and a good investment climate. Meanwhile, the West is becoming increasingly critical of Ukraine's economic decisions. Yushchenko has to keep his government in check all the time, thereby "washing dirty linen in public." The president opposed the prime minister's idea of re-nationalizing Krivorozhstal, and criticized the government's policy in the fuel and energy sector, acknowledging the cabinet's miscalculations. And the offshoot of all this? Timoshenko is preventing Yushchenko from increasing his authority in international affairs, while Yushchenko is preventing Timoshenko from increasing her popularity inside the country. Therefore, the Ukrainian president has to keep his premier in line and move toward Russian business. On the one hand, this situation is advantageous for Russia, as it makes it easier for the country to uphold its interests. However, on the other hand, the conflict inside the Ukrainian leadership undermines the country's state system and deprives Russian business of guaranteed stability
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