In Ukraine, A Make Believe Politician Prepares For The Presidency
Ukraine. Remember them? They’re the guys who got Washington to crank up the volume on Russia back in 2014, when “our guy” Arseniy “Yats” Yatsenyuk was about to be election meddled into a post-Maidan Ukraine. Years later, Yats is gone, Petro Poroshenko “the chocolate king” is in charge, the International Monetary Fund is the caretaker government, really, and a comedic actor who plays a likable, anti-establishment school teacher-turned-president on TV is close to make his art his life.
Ukraine will be in the headlines again this weekend. It’s round one of their presidential elections and Volodymyr Zelenskiy, 41, is the man to beat out of a lineup of 39, 36 of which have no chance, including two who recently traveled to Moscow. Bad look, gentlemen.
In a recent online survey by Russian business daily Kommersant, 17.5% of the 17,000 respondents said they prefer Zelenskiy over Poroshenko (5.8%) and Ukraine’s near-mythical figure Yulia Tymoshenko (4.89%). Most said that neither of the top three candidates would mend fences between the old Soviet Union partners.
As a reminder of just how big a role Ukraine has played in the total collapse of the U.S. relationship with Russia, here are some reminders. In 2014, it is believed that Russians leaked a recorded telephone conversation between then-State Department official for Eurasian Affairs, Victoria Nuland and former U.S. Ambassador to Ukraine Geoffrey Pyatt discussing the Euro-Maidan protests. The conversation had Nuland talking about “Yats” being the best politician to lead Ukraine. And voila…Yats becomes the man to lead to Ukraine. Two years later, the U.S. would charge Russia with election meddling here.
Shortly after Yats takes over, Russia moves in on Crimea, a southeast peninsula that is home to Russia’s Black Sea Fleet. They own it now. The U.S. and Europe do not recognize this takeover and slapped sanctions on Russian individuals and companies there in the second quarter of 2014. Months later, the U.S. ratcheted up sanctions to go after Russia’s oil and gas, and financial institutions.
Sanctions have become stricter under President Trump, as Congress quickly moved to take advantage of the election meddling/collusion conspiracy at the time to lock in sanctions. Only then, beginning in August 2016, they were slightly more punitive and Ukraine was put on the backburner: election meddling and Russian support for Syria were the new top reasons for going after Vladimir Putin.
Zelenskiy’s move to round two, as near a certainty as whiskers on a cat, will bring Ukraine out from the cold for a while. But it is unlikely to move the needle on Russia.
This has more to do with Ukraine’s domestic politics, still mired in crony capitalism and corruption, and a referendum on Poroshenko’s IMF austerity plan.
“The IMF is not the key issue. The issue is broader — returning Ukraine to mainstream sensible economic policies, or sink back into cleptocratic populism,” says Jan Dehn, head of research for the Ashmore Group, a $74 billion emerging market fund manager in London holding Ukrainian bonds.
So far, neither Washington nor Brussels have commented on any candidate, though it is preferable to remain with Poroshenko despite lackluster success at rooting out corruption.
Zelenskiy is an actor. His only political experience comes from scripted television. Zelinskiy has no political party support in Kiev, setting the stage for Trump-like chaos should he be elected.
Worse yet, he has hinted that major policy decisions will be decided by acts of direct democracy, like referendums. Think President Obrador in Mexico and ex-Prime Minister Cameron and his Brexit vote.
The one thing that makes him palatable to Russians is that he speaks Russian and is not against the use of the language in Ukraine. Yats made Ukraine the only language used in the Ukrainian government once he took over, then quickly moved to embrace the U.S., setting the table for an ugly divorce with Russia.
Recent polls have Zelenskiy with 32.1% of intended votes, followed by Poroshenko (17.1%) and Tymoshenko (12.5%).
“Zelenskiy’s place on the second ballot is assured,” says Vladimir Signorelli, head of Bretton Woods Research, a big picture investment research firm in New Jersey. “Tymoshenko’s populist edge over the reluctant austerian Poroshenko may be too close to call.”
Political currents in Ukraine are about to make it a story again, though unless Zelenskiy manages an upset in April it is likely to be a short-lived story. Should Zelenskiy win, the Ukraine variable will return to Russia as it would be the most positive outcome, though nothing super exciting for the Kremlin. If Zelenskiy signaled for some sort of truce with Russia it could make some sanctions a moot point. If so, don’t wait for Washington to lift its sanctions, regardless of the winner.
The VanEck Russia ETF has never recovered since the annexation of Crimea in March 2014