New Government of Oleksiy Honcharuk: risks, opportunities and major groups of influence

The new government of Oleksiy Honcharuk shall address a number of complex political and economic issues. First, it has to ensure high GDP growth and increase investment attractiveness. Second, carry out structural reforms in the agricultural, energy and social sectors. Apart from unpopular decisions, it will be necessary to fulfil the President’s populist demands – reduce tariffs and increase the well-being of citizens. Therefore, the government will balance doing the political splits. On the one hand, reforms and the IMF loan program need to be implemented. On the other hand, it will be obliged to work on ratings of Volodymyr Zelenskyi and take into account the commercial interests of the main oligarchs – Viktor Pinchuk and Ihor Kolomoiskyi. If Honcharuk’s team fails, the government will be resigned.

Despite the political stability and a mono-coalition in Parliament, the government of Oleksiy Honcharuk may become the epicentre of a new oligarchic war unleashed by Ihor Kolomoiskyi and the President’s Office against Rinat Akhmetov, Petro Poroshenko and Viktor Medvedchuk. Akhmetov, Medvedchuk and Poroshenko have many internal contradictions, but under external threat, they could join forces and stand as a united front against Zelenskyi’s team. Agrarian barons, land lords and local latifundists who are opposed to the opening of the land market may be allies of the offended oligarchs. The new oligarchic war would inevitably affect the economic situation, as well as the stability of the government whose legitimacy can be undermined by oligarchic channels, as well as protests or the “Maidans”.  The energy crisis with Russia may be the second factor of instability. It is unknown how the new government would negotiate with the Kremlin on gas supplies, and whether it would negotiate at all. Aggravation of the situation around Avakov who does not want the reduction of his powers, may be the third factor of instability. Therefore, he blackmails Volodymyr Zelenskyi and the mono-coalition, in which Avakov has a rather influential group.

Major risks for the new government:

  • Very high public expectations for changes and improvements in well-being.
  • A new oligarchic war initiated by Ihor Kolomoiskyi against his oligarchic opponents.
  • Mass protests that may be organized for the money of the oligarchs being against the authorities (on land reform, “special status” for ORDLO etc.).
  • Strong political dependence of Prime Minister Oleksiy Honcharuk on the President’s Office and the so-called “Shadow Cabinet of Ministers” headed by one of the oligarchs.
  • The government will serve for the interests of oligarchs who assist and cooperate with Volodymyr
  • The government may work for the PR of the President, rather than for structural and profound reforms.
  • Governments may change often as it happened in the term of President Leonid Kuchma.
  • The President’s Office may destroy or reload the institute of state secretaries in the ministries responsible for the administrative apparatus and bureaucracy.

 

Despite a number of potential risks and problems, the new government has every chance of success. There is still a high level of trust in the new government team in Ukrainian society, business and among Western partners. Western donors are ready to assist and advise the government on key reform areas. The new ministers appear to be professionals and experienced managers. Even oligarchs delegated to the government not just their political nominees, but some of their best top-managers and affiliated experts.

Compared to the previous government of Volodymyr Groysman, Oleksiy Honcharuk’s Cabinet has far fewer official millionaires and ministers with millions in cash. According to the monitoring of E-declarations on the NACP website, Honcharuk’s government includes only three official dollar millionaires – Arsen Avakov, Dmytro Dubilet and Volodymyr Borodianskyi. There are also interesting facts in the E-declarations of Ukrainian ministers, e.g. the Minister of Finance Oksana Markarova declared the elite horse of the Hanover breed, while the Minister for Foreign Affairs Vadym Prystaiko declared five apartments and a loan for almost EUR 50 thousand in the Bank of Belgium.

Key positive factors for the new government:

  • Reduced number of ministries and Vice Prime Minister positions in government, which may minimize managerial conflicts and improve manageability.
  • Despite the oligarchic quota principle of personnel appointments, most ministers are professionals and technocrats.
  • Duplication and intersection of functions between the ministries are minimized.
  • The government will operate in a climate of political stability.
  • Parliament’s mono-coalition will provide the government with all the necessary legislative decisions.
  • The new government has the confidence of business, society and foreign partners.