A NEW UKRAINE PRIME MINISTER AND THE GOVERNMENT FORMATION

A new Prime Minister has been appointed and a new government has been formed in Ukraine. The allocation of seats in the Presidium and committees of the Verkhovna Rada are already known. From this it is possible to make some conclusions, which are relevant for businesses (in terms of a decision-making system that is being formed and the impact of key personalities on the process):

  • With a strong role of the Office of the President of Ukraine (OP), the Prime Minister and the government are supposed to be mere executors of the Office’s policies:
    • Without the Parliament’s support, a Prime Minister depends on a President and can easily become a political bargaining chip, which creates some risks for businesses in terms of communication with public stakeholders;
    • Thus, dualism/division of power – the conflict between a President and a Prime Minister traditionally observed in Ukraine – is going to be eliminated (probably temporary). Decisions on key appointments will be made in the OP.
  • Horizontal ties are likely to become more important: heads of the departments within the OP and presidential advisers have a significant influence on the decision-making process, compared to those of ministers and their deputies. It is necessary to establish dialogue with structures and individuals from the OP supervising certain areas of the government’s activities.
  • The Ukrainian President’s team has full control over the Parliament:
    • Sluha Narodu («Servant of the people») has a majority (254 out of 450 votes) in the new Rada. Party representatives run 19 Parliament committees out of 23;
    • Holos («Voice») led by Svyatoslav Vakarchuk, as well as most non-affiliated deputies are likely to become the presidential party’s satellites in the Parliament and, if necessary, can ensure a constitutional majority (more than 300 votes).
  • The team of President Zelensky is heterogeneous, which may result in conflicts between different interest groups inside of it:
    • Certain deputies of «Sluha narodu» are influenced by businessman Ihor Kolomoyskyi and Minister of Internal Affairs Arsen Avakov;
    • The struggle for control over its own fraction will become one of the key challenges for the President’s team for the following months.The fact that the President’s team is heterogeneous should be taken into account when communicating with deputies.

The appointment of the government ends President Zelensky’s political «honeymoon». This autumn he will have to face a number of challenges:

    • Settlement of the Donbas conflict (a key challenge in terms of President Zelensky’s electoral promises).
    • Going through the heating season taking into account the unsettled conflict with Russia over transit and export of natural gas to Ukraine.
    • A launch of the land market and preparation for the next stage of state property privatization.
    • Building relations with Ukraine’s institutional creditors (the IMF, the World Bank, etc.), achieving a balanced budget and national currency stability.

Other economic and regulatory challenges will be outweighed by the problems listed above. However, the projects that deal with government digitalization and investment attraction will remain the focus of attention of the President’s Office:

    • These projects may alleviate/draw attention from the possible struggles of Volodymyr Zelensky’s team in more difficult and complex matters (gas supplies, the Donbas conflict, etc.), as well as show the effectiveness of the new government in the implementation of reforms.
    • Businesses may take advantage of this interest to make a statement of their positions on relevant regulatory initiatives in the context of the above-mentioned priorities.

Taking into consideration the Prime Minister’s personality, we should also note the increasing influence of international business associations (the European Business Association, the US Chamber of Commerce, etc.). Their political weight is growing not only in terms of launching certain regulatory or economic initiatives, but also in relation to their promotion (formal or semi – formal procedures may be introduced to negotiate certain initiatives with foreign or Ukrainian business associations). Thus, business associations are becoming a more efficient way to promote business initiatives.

To read the full report on the new Ukrainian Prime Minister and Government by Interel Global Partnership Member, Kesarev, click here.