Election authorities in Ukraine recently officially named TV star, comedian, and political novice Volodymyr Zelenskiy as the new president.
The official results of the April 21 run-off vote indicated that Zelenskiy defeated incumbent President Petro Poroshenko by winning 73 percent of the run-off vote.
Major factors for the win included the Europe-wide anti-establishment mood and Zelenskiy’s promise to fight corruption, improve business conditions, and “reunite” his country by getting Russian President Vladimir Putin out of the occupied Donbas region.
Two weeks ago, Putin signed a decree simplifying the procedure for issuing Russian passports to residents of the Donbas. The occupation has been a huge drain on the Russian treasury, and there are also reasons to assert that some pension funds of the Russian people were used to finance the illegal invasion.
Putin’s measure will expedite Russian citizenship applications from Ukrainians (most of them ethnic Russians living in the part of the Ukraine controlled by the Russian-backed separatists) who, to become Russian citizens, will be required to swear allegiance to “Mother Russia.” Putin later added that Russia could simplify such procedure for all citizens of Ukraine to acquire Russian citizenship.
Russia’s decree understandably irked Zelenskiy, who responded “a Russian passport actually provides ... the right to be arrested for peaceful protest ... to have no free and competitive elections ... to completely forget about the natural human rights and freedoms.”
He added that Ukrainian citizenship means freedom, dignity and honour: “This is what we have defended and will defend. Ukraine will not give up its mission to serve as an example of democracy for the post-Soviet countries. And part of this mission will be to provide protection, asylum and Ukrainian citizenship to all who are ready to fight for freedom. We will provide asylum and assistance to anyone ... who is ready to fight alongside for our and your freedom.”
What about the market perceptions in Europe of a Zelenskiy presidency?
According to Timothy Ash, senior emerging markets sovereign strategist for Bluebay Asset Management, markets are taking the Zelenskiy win well. The elections were free and fair. Outgoing President Poroshenko is offering to help with a smooth transition of power. Western governments favour the new president and will provide assistance in critical areas like the Minsk peace process and relations with the IMF.
Ukraine’s macro backstop is much better these days, with much smaller twin deficits (2-3 percent of GDP), lower public sector debt, a stable currency, over ($US)20 billion in foreign exchange reserves at the central bank, and respected technocrats at both the bank and the ministry of foreign affairs.
Ash recommends watching five indicators closely:
First, whether or not Zelenskiy pushes for early parliamentary elections. Some want him to translate his landslide win to a majority in the Rada parliament. However, that’s technically difficult given the timing—early Rada elections are not permitted six months before they are due to be held, in this case October 27, so providing only a matter of days for these to be called. The deadline for calling early parliamentary elections is all but gone—unless Poroshenko wants to do Zelenskiy a favour by calling early polls, which seems unlikely.
Second, how is Zelenskiy going to interact with the Rada and the council of ministers? He can only nominate a few ministers to the government, including the ministers of defence, foreign affairs and head of the national security council.
He is unable to bring down the government without a motion of no confidence winning majority support in the Rada—but only one such vote is permitted per Rada term and it’s already been used. Barring that, it would require a constitutional majority which Zelenskiy would likely struggle to command.
He must work with the existing cabinet and parliament until October at least, but there could be mass defections from existing parliamentary blocks to Zelenskiy’s Servant of the People party.
Third, it will be important to see details of whom Zelesnkiy nominates in key positions, including his head of administration, foreign minister, defence minister, and head of the national security council. These nominations might be influenced by Western allies.
Fourth, how will the Zelenskiy presidency interact with oligarchs, particularly the ex-owner of Privatbank, Igor Kolomoisky, who could have influence over Zelenskiy. The issue of Privatbank could be a deal breaker for the IMF, unless it is resolved in a manner consistent with good governance and international best practices
Fifth, the relationship with Russia. Zelenskiy has suggested new perspectives in trying to secure peace with Russia, but will never “sell out” to Russia. He’ll have plenty of choice of experienced individuals to serve as foreign minister, and will receive good support from Western governments. Putin, like many others, is no doubt attempting to analyse exactly what a Zelenskiy presidency will mean.
Overall, Ukrainian voters have again shown the world what free and fair elections can achieve in terms of peaceful democratic change.
