McLARTY UKRAINE UPDATE: As Zelenskiy wins, another campaign begins

April 23, 2019

KEY POINTS:

As expected, comedian Volodymyr Zelenskiy defeated incumbent Petro Poroshenko in Ukraine’s presidential election on April 21.
While Zelenskiy will enter office in a month with a clear mandate to fight corruption, his policy positions are largely undefined beyond continuing the path of post-Maidan reforms in the country. His choice of advisors will be key for this political neophyte.
The Ukrainian political landscape will continue to be uncertain until October’s parliamentary elections, after which a full government will form.

On April 21, Ukrainian voters decisively elected comedian and political novice Volodymyr Zelenskiy as the country’s sixth president since 1991. Zelenskiy enjoyed a clear lead over incumbent Petro Poroshenko going into Sunday’s runoff, and he earned 73% of the votes cast to Poroshenko’s 27%. With turnout at 62% of eligible voters, Zelenskiy will come into office with a clear mandate from the electorate after his inauguration on May 28. More than anything, this was a united vote for change and a vote to tackle Ukraine’s greatest obstacle to economic growth, corruption. The vote also showed the erosion of the East-West divide that had previously influenced Ukrainian politics, along with barely any support for either pro-Russian or extreme nationalist positions.

During a campaign which was light on policy substance but full of flair – and a highly-publicized presidential debate – Zelenskiy gave a few indications of his policy positions in key areas. In addition to fighting corruption, he or his advisors have said Zelenskiy will seek to continue Ukraine’s IMF program, maintain the central bank’s independence, continue overhauling the country’s health care system, and work toward creating a transparent land market – all important considerations for companies engaged in Ukraine. Zelenskiy and his advisors have also advocated for bringing the US and the UK into the Normandy format to resolve the war in eastern Ukraine, and for holding referenda on NATO and EU membership while maintaining support for Euro-Atlantic integration broadly.

During the later weeks of the campaign, noted reformers Oleksandr Danylyuk (former finance minister), Aivaras Abramovicius (former economy minister), and Sergei Leshchenko (investigative journalist-turned-MP) emerged as Zelenskiy supporters and advisors. Zelenskiy likewise unveiled his broader team and their respective mandates on the eve of the presidential debate. Zelenskiy has presented a well-rounded team of experts (even if, for the most part, light on political experience), yet the Ukrainian system is not purely presidential: only a few cabinet positions are appointed by the president (foreign affairs, defense, procuracy), with the rest of the government to form following parliamentary (Rada) elections, which are currently scheduled for October 27, 2019. Prime Minister Volodymyr Groysman, who has been in office since 2016, is expected to remain in his post until then. He has pledged to pass more legislation during this six-month interim period, though the considerable backlog of draft laws before the Rada could make this difficult to implement in practice.

However, Zelenskiy and his team have expressed a desire to move the Rada elections earlier to capitalize on their substantial victory at the polls– a move likely to receive little support from the current Rada. If the elections hold for late October, the Zelenskiy Administration will have had 5 months in office during which his large mandate will surely decrease when confronted with the realities of governing. The sooner the Rada elections are held, the more likely his movement will gain a sizable share of seats. At the same time, we can expect a broader realignment of parties vying for Rada representation following Zelenskiy’s large margin of victory, to potentially include some new coalitions as well as familiar faces in the Ukrainian political scene. Will current PM Groysman chart a political course independent of Poroshenko in his campaign for the new Rada? How will former PMs Yuliya Tymoshenko and Arseniy Yatsenyuk, as well as Maidan reformists, position themselves vis-à-vis Zelenskiy? Will Poroshenko, who led a confectionary empire prior to his presidential run in 2014 in the wake of the Maidan revolution, return to business, or continue to be active in politics? Finally, how much, if any, influence will oligarch and alleged Zelenskiy backer Ihor Kolomoiskiy wield in Ukraine’s new political landscape? Historically, personalities have proven more important than policy platforms in shaping Ukrainian political parties, and Zelenskiy’s victory suggests this will continue to be the case as we enter the next campaign season almost immediately.

In short, Zelenskiy’s landslide win is only the first of two crucial elections for Ukraine this year. This means that uncertainty will remain until the full government is formed following the Rada elections. This uncertainty will be magnified by the lack of deep policy positions and political experience of Zelenskiy and his team. Such a situation could prompt Russia to test the new administration early on, whether through heightened military activities in eastern Ukraine or other measures. With little experience in Washington or Brussels, Zelenskiy will be relying on his team to get these key relationships off on the right foot. If Zelenskiy proves willing and able to tackle corruption (particularly in the courts), this will be welcome news not only for Ukraine’s citizens, but also for investors in Ukraine, the IMF, the EU, and the US.