7 June 2010

By Richard Balmforth

KIEV, June 7 (Reuters) - The speed with which Viktor Yanukovich has
consolidated his power, stitched up a strategic deal with Russia and
ended Ukraine's long romance with NATO has taken his opponents and many
in the West by surprise.

But although he has coasted through his first days in office with
remarkable ease, the president is far from proving he can breathe life
into the shattered Ukrainian economy, critics say.

Just as Yanukovich chalked up his 100-day milestone last week, breezily
promising prosperity and the growth of a competitive economy, the
International Monetary Fund weighed in with a reality check.

Unconvinced by the government's budget revenue figures, it said it would
send a fresh mission to Kiev this week. The IMF wants to check the books
again before it considers giving the nod to a new, multi-billion-dollar
bail-out programme, regarded as vital for the country's economic
recovery. An influential Ukrainian weekly Dzerkalo Tyzhdnya pulled no
punches.

Yanukovich's five-year economic programme, it said, was an
evasively-worded product of "tunnel vision" which offered no reforms for
an economy ridden by corruption, malpractice and protectionism -- and
which shrank by 15 percent in 2009.

"The President and his team came to power naked and barefoot as far as
understanding what new direction to take for the country and how to
implement it," an editorial said.

TIGHTENING GRIP

Even Yanukovich's critics acknowledge, though, that since taking office
in February he has acted with remarkable speed to end the political
paralysis of the previous administration.

A pro-Yanukovich majority dominates parliament. He has installed allies
in key administrative regions and in the top echelons of the military,
intelligence and diplomatic services.

The "Orange Revolution" opposition is in disarray, with his old rival,
former prime minister Yulia Tymoshenko, finding it hard to establish
acceptance as its natural leader.

Crucially for him, he has kept on side with the big business lobby in
Ukraine and specifically with powerful wealthy backers, like steel
magnate Rinat Akhmetov, who bankrolled his campaign.

After a deal with Russia last April to secure cheaper gas in exchange
for letting it keep its navy in a Ukrainian port until 2042, Yanukovich
gave another gift to Moscow by finally unhitching Ukraine from pursuit
of NATO membership.

Reversing a 2003 policy goal which was ardently taken up by his
pro-Western predecessor, Viktor Yushchenko, he declared that NATO
membership was now off the agenda.

Ukraine would pursue a "non-bloc" course while keeping integration into
the Europe mainstream a top priority, he said.

His sharpest critics -- Tymoshenko in the lead -- say Yanukovich is
gambling recklessly with the national interest in his dealings with
Russia, on whom Ukraine relies heavily for energy imports.

Others say his advisers, representing Akhmetov and others, cannily know
where to draw the line and he has indeed prudently stepped back from
taking Russia's line in some sensitive issues.

On language rights for instance, he has rejected some pressure from
Moscow to make Russian a state language in Ukraine and, while a
mother-tongue Russian speaker himself, doggedly delivers public speeches
in Ukrainian.

And, even though he has ditched pursuit of NATO membership, parliament
has given the go-ahead to Ukrainian participation in NATO-led naval
exercises in the Black Sea.

MOSCOW UPS DEMANDS

But Moscow -- apparently sensing an historic opportunity -- seems to be
pressing for greater strategic penetration into Ukrainian markets for
Russian big business.

A proposal by Russian Prime Minister Vladimir Putin for a merger between
Russian energy giant Gazprom and Ukraine's crisis-ridden state holding
Naftogaz has been coolly received by the Yanukovich camp, although it
remains on the table.

"With breathtaking naivety, he assumed that if Ukraine gave Russia
everything it reasonably could ask for, the pressure would stop," said
James Sherr, head of the Russian and Eurasian programme at the
London-based Chatham House.

"Instead, Russian pressure has intensified. We see this with the
Naftogaz-Gazprom merger proposal. We see it with demands to acquire more
and more assets in Ukraine's energy system and the pressure on the gas
transit system," he said in an interview with the Kyiv Post.

Meanwhile, Yanukovich has failed to make his mark with the European
Union -- even though he has assured Brussels that his priority is for
Ukraine to join the bloc one day, Sherr argued.

As things stand now, Ukraine's sick economy hardly qualifies it for EU
membership. Yanukovich's critics say there is no sign that things are
about to change soon.

Ukraine's liberal intelligentsia too is alarmed at what it sees as
growing authoritarianism in Yanukovich's leadership.

Its mass media, which gained huge freedoms under Yushchenko's rule, is
complaining increasingly of pressure -- mainly from their own oligarch
owners who back Yanukovich.

Referring to the danger of "creeping authoritarianism", political
commentator Vladimir Fesenko said: "We may very soon arrive at a
Ukrainian model of managed democracy."

"Yanukovich in his 100 days has built a clearly coordinated system, but
this system will not serve the people," Yanukovich's old enemy,
Tymoshenko, told a news conference. "It will be a country not for the
people and not one that has a clear pro-Europe perspective." (Additional
reporting by Natalya Zinets and Yuri Kulikov)

(Writing by Richard Balmforth; Editing by Mark Heinrich)