PANEL: The Orange Revolution: A Year After
Paula Dobriansky, Taras Kuzio, Anders Aslund
American Enterprise Institute (AEI), Wash, D.C., Dec 2005

On December 3, 2004, following massive protests, the Supreme Court of
Ukraine officially annulled the second round results of the country’s
disputed presidential elections, widely reported to have been manipulated by
the government. In the rerun, Viktor Yushchenko, the hero of the “Orange
Revolution,” was elected. He was sworn in promising economic growth,
rapid integration into western political and economic structures, and an end
to corruption.

Widely celebrated in Ukraine as a “democratic breakthrough,” many are now
asking whether the regime has so far fulfilled the hopes and aspirations of
the Ukrainians. Can President Yushchenko overcome the difficult domestic
challenges, including the disappointing economic outlook and the dismissal
of his entire cabinet in September?

What are the prospects for the upcoming constitutional reforms and
parliamentary elections? These and other questions were discussed at a
December 5 AEI panel dedicated to the one-year anniversary of the Orange

As Thomas Jefferson once stated: “We are not to expect to be translated
from despotism to liberty in a featherbed.” Stable, prosperous, orderly
democracies are not something that can be created in short order and without
arduous toils. Modern history has shown that democratic transitions tend to
proceed gradually, haphazardly, with bumps and turns along the way.

After all, even the United States was not a model democracy one year after
its revolution. Most often, however, countries that have democratic
revolutions ultimately succeed in instituting liberty and rule of law.

When former secretary of state Colin Powell led the U.S. delegation to
Viktor Yushchenko’s inauguration, it was incredible to see the thousands
of people on the streets, all wearing orange caps and scarves. A sense of
palpable euphoria was everywhere. The Ukrainian people had finally
emerged as the stakeholders of their own future.

Shortly thereafter, Yushchenko traveled to the United States and spoke in
front of a joint session of Congress thanking the United States for its help
and support during the revolution. During his visit, Yushchenko met with
President George W. Bush and signed a strategic partnership agreement. Bush
congratulated Yushchenko for being an inspiration for those fighting for
freedom and liberty.

One year later, Ukrainians are still working on cementing their newly earned
democracy. Although much progress has been made, numerous issues have
arisen: the most dramatic being the breakup of the Orange Coalition in
September of this year. However, the positive signs of change are
everywhere. Today, Ukrainians have a sense of ownership in their country.
The development of civil society has been impressive: it has grown by leaps
and bounds. Democracy has unleashed creativity and innovation never before
thought possible.

Ukrainian leaders have also worked to promote democracy abroad and have
encouraged, as exemplified by signing the Borjomi Agreement with Georgia,
to democratize countries in the Caspian, Baltic, and Black Sea regions. The
Ukrainian government has also been committed to fighting terrorism, weapons
proliferation, trafficking in persons, and AIDS. Ukraine’s aspirations to
join NATO and the WTO will only come to fruition if tangible, progressive
steps are taken. There is no reason to believe they won’t be.

Although lingering problems remain–protectionist economic policies,
instability, and limited economic reform–we should all remember that no
country has made a transition from a communist system to one of democracy
with market reforms without some turmoil.

While the hurdles to progress may at times seem insurmountable, as we look
to Ukraine before the Orange Revolution, we can see great progress. The
United States stands ready to help Ukraine and the Ukrainian people to
achieve its goals and aspirations.
[2] TARAS KUZIO – George Washington University
As a precursor to the discussion, it must be noted that the future success
of the Orange Revolution in Ukraine depends on the reunification of the
Yushchenko-Yulia Tymoshenko coalition. The Orange Revolution in
Ukraine has yielded positive outcomes in several key areas. The first is
democratization and human rights. There has been a massive civic
empowerment of the population, in comparison to the Leonid Kuchma

It is estimated that half of Kyiv’s population took part in the protests
against the fraudulent elections last year, while nearly two-thirds of the
population of the country now feels that they can effectively stand up for
their right and freedoms, according to recent polls. During Kuchma’s regime,
these numbers were significantly lower across the board.

Another key benefit has been the constitutional reform, which has switched
Ukraine from a presidential to a parliamentary system of government. In the
experience of Eastern and Central European states, the parliamentary system
has fared better in promoting democracy and lessening the corruption and
authoritarian tendencies that are prevalent in presidential systems of the
members of the Commonwealth of Independent States.

In addition, this system encourages party growth and competitive party
politics, which will be displayed in the upcoming elections. The virtual
disappearance of the Communist Party and the complete collapse of the
pro-Kuchma centrist camp have been welcome developments.

Although there has not been a complete breakthrough, significant
improvements have been made in combating the pervasive corruption of the
Kuchma regime. The oligarchs are now emerging “out of the shadows” and
forming a more entrepreneurial class, which has already successfully
contributed in raising revenues by a third for the state budget through
increasingly effective collection of profit taxes.

The revolution has helped Ukraine to further disassociate itself from
Russia, as evidenced by a recent Freedom House report, and move in a
direction toward democracy rather than authoritarianism. In contrast to
Russia, Ukrainian civil society is being empowered rather than actively
restrained. This is evidenced by far broader freedom of speech, religious
tolerance, and ultimately the free elections that have happened in Ukraine
for the first time since 1993.

There have been, however, several glaring problems with the implementation
of some of the objectives of the Orange Revolution. Yushchenko has pursued
too broad of an agenda, not focusing enough on domestic matters, and has
thus emerged as more of a symbolic leader in the mold of Mikhail Gorbachev-
-popular abroad, unpopular at home. Why did Yushchenko need the wide
presidential prerogatives, if he did not intend to use them before the
change to the parliamentary system?

Part of Yushchenko’s inability to assert his power has been the “parallel
government”–involving the security chief Petro Poroshenko–that has
surfaced to assert its own private interests. The division and “betrayals”
has thus emerged as a key issue.

The allegations of corruption (although without evidence) within the
Yushchenko camp, the constant presence of the business elite around the
president, and the recent Yushchenko-Viktor Yanukovych pact have caused
the public opinion to sour and have precluded the effective progress of the
ideals of the Orange Revolution. Another key underachievement has been the
stalled reprivatization scheme, where the only success has been the sale of
the Kryvorizhstal plant, for which Tymoshenko must be properly credited.

For the Orange Revolution to attain its original ideals, Yushchenko and
Tymoshenko must be reunited. Furthermore, the reprivatization efforts must
continue, and high-level charges against the corrupt elements of the Kuchma
regime must be vigorously pursued.

So far, none of the senior officials have been charged. In fact, this
indicates that there has been no complete break with the former regime.
Thus, Yanukovych’s Regions of Ukraine have taken advantage of the
situation and are now in the lead for the March elections.
[3] ANDERS ASLUND – Carnegie Endowment for International Peace
With the Orange Revolution, the change to a parliamentary system from a
presidential system means that Ukraine has become more democratic. Yet in
spite of this positive development, economic policy in Ukraine over the past
year can be described as nothing short of disastrous.

The growth rate of the country was lowered by 1percent each month after the
revolution, with the result that Ukraine will have growth of only 3 percent
this year, compared to 12 percent last year. This is further demonstrated by
the fact that in August, GDP fell by 1.6 percent in comparison with August
last year. It is hard to imagine a worse economic policy than the one that
Tymoshenko pursued.

Why was the economic policy so flawed? In a word, reprivatization is the
prime cause of Ukraine’s current economic woes. Tymoshenko at one point
had discussed reprivatizing some 3,000 enterprises. In reaction to this,
investors stopped investing and producing much. Metallurgy and machine
building fell most dramatically, and investment in construction also fell.

Businessmen who looked to profit from reprivatization did not invest more
either, instead hoarding cash so that they could purchase the cheap property
that potentially would come to market. Thus, on average, while Ukraine had 9
percent growth per year over the past five years, the economy is now in

Furthermore, Tymoshenko’s government sharply increased social expenditures.
Prime Minister Yanukovych had doubled public pensions from the previous
year, and Ukraine now saw 16 percent of its GDP going towards public
pensions. In a normal country, public pension expenditures amount to 6 to 8
percent of GDP. In Ukraine, this figure currently stands at 14 percent of
GDP, which is the highest share of pensions to GDP in the world. The
government also increased public salaries by 57 percent.

As both of these policies cannot feasibly be reversed, one would expect
Ukraine to see a significant budget deficit. Yet this has not occurred, as
Ukraine has gotten rid of many low posts in the old tax system. Resulting in
sharply increased tax collection, this policy has now caused public revenue
to rise from 36 percent to 42 percent of GDP.

In the United States, this figure is about 30 percent. If taxes remain too
high, Ukraine cannot expect much economic growth in the future. Tymoshenko
also began to regulate the prices of oil, grain, and meat, with resulting
negative consequences for the economy. All in all, these disastrous economic
policies, coupled with little real economic reform, led to a terrible
economic situation.

As a result, Yushchenko sacked the government. Ukraine’s current prime
minister, Yuri Yekhanurov, is the complete opposite of Tymoshenko–pragmatic
rather than ideological, with a clear economic agenda which he knows how to
implement. Economic growth has thus returned–in September, growth was 3
percent, an upswing of 4.6 percent from one year to the other. This shows
that Ukraine’s economy has no big structural problems – just that business
had been afraid to operate under Tymoshenko.

This is further evidenced by the current flurry of mergers and acquisitions
activity in the country now, in the absence of any real structural reforms.
Foreign direct investment looks to increase as a result, but Ukraine still
has much to do–including reform of the civil and legal frameworks for
business and more financial regulation from its current minimal state.

What is Ukraine’s political outlook? Currently, there are three major
parties: the party of Yanukovych, a political machine that brought
substantial economic growth; the party of Tymoshenko, which has the
attraction of the leader and can represent any views, given the license of
her voters to change her views whenever she pleases; and the party of
Yushchenko, which has developed into a modern conservative party
emphasizing classical liberalism. As few outside of Tymoshenko’s own
party accept her, a reestablishment of the Orange Coalition looks unlikely.

Another major outcome of the Orange Revolution is that major polarization
between Ukraine and Russia is now likely. With Ukraine much more
democratic, while Russia has veered increasingly sharply towards
authoritarianism, Moscow’s leaders feel that the people can do little on
their own.

Consequently, whatever happens in Ukraine, through the eyes of leadership
in Moscow, is due to the manipulation of Ukraine’s leaders. Further, this
manipulation is of course pushed by Washington, so that anything happening
in Ukraine is perceived as ultimately the work of Washington. As such,
Ukraine is being pushed to the West strongly by Russia, and relations
between Russia and the United States look only to become increasingly
worse. -30-

AEI’s Ilya Bourtman and Diana Iskelov and research assistant
Igor Khrestin prepared this summary.

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