Her plane was commandeered by President Victor Yushchenko, just as she was about to depart on Oct. 2 for Moscow, where she ended up cutting a momentous natural gas deal with Russia. She remained dogged by her ‘90s gas-trade ties with former Prime Minister Pavlo Lazarenko, a convicted money launderer now serving a prison sentence in the United States.
And then Yushchenko on Oct. 8 dissolved parliament and called for a new parliamentary election in December. The president on national TV blamed Tymoshenko’s personal ambitions for ruining the democratic Orange coalition, which previously had a thin ruling margin.
“I hereby declare the activities of...parliament to be suspended and call an early parlimentary election,” Yushchenko said. “The vote will take place in a democratic and lawful fashion.”
Tymoshenko earlier summed up the endless battles in an emotional speech.
“In the name of doing battle with Tymoshenko, parliaments are being dismissed; democratic coalitions are being ruined, [Pavlo] Lazarenko is being imported … decrees are being prepared on the dismissal of parliament and appointment of a new prime minister … I think that instead of ruining the country, the president should issue a decree banning Tymoshenko,” she said on Sept. 29.
Tymoshenko returned home triumphantly from Moscow, where she appears to be the Kremlin’s current favorite, despite Russian Prime Minister Vladimir Putin’s denials. “Russia will support the Ukrainian people and respect their choice, regardless of what it is,” Putin said.
She announced securing a new gas deal with Moscow that calls for a gradual three-year transition from discount to market prices, although the exact costs will be negotiated later.
But the most important facet of the deal, if it proves to be true, is a transition in January to a more-transparent sales process for the import of Russian gas, the vital lifeline to Ukrainian industry.
She had trouble getting off the ground to Moscow, however. After the presidential plane developed engine trouble, Yushchenko ordered the plane reserved for Tymoshenko. The prime minister’s team had to scramble around to find a private Slovenian charter. Her Russian counterpart Putin called Yushchenko a “pickpocket” at a press conference after the duo emerged from a closed-door meeting. Rather than defending Ukraine’s head of state, Tymoshenko giggled, provoking criticism in the international media.
Aside from the insults, however, Putin and Tymoshenko delivered a seven-point memorandum that spells out the principles for natural gas relations between the two countries. It establishes direct relations between Russia’s Gazprom and Ukraine’s Naftohaz, cutting out middlemen companies that have been condemned for lack of transparency on the lucrative natural gas market.
The latest of these companies, RosUkrEnergo, was created by then-presidents Putin and Leonid Kuchma in July 2004, and is widely believed to have funded pro-Russian political projects in Ukraine, most prominently the Party of the Regions.
The company is half-owned by Russia’s Gazprom and Ukrainian billionaire Dmytro Firtash in conjunction with his partner, Ivan Fursin.
This year RosUkrEnergo has already accumulated a debt of $2.2 billion to Gazprom, which Tymoshenko has promised to repay with the sale of 11 billion cubic meters of gas in Ukraine’s underground storage facilities.
The memo also declares a three-year transition to “market, economically-viable and mutually-agreed upon prices” that Ukraine will pay for the fuel as well as the prices Ukraine will receive for transiting gas westward.
Yushchenko’s decision to send Tymoshenko to the Moscow talks was seen as a good move, even as the president and prime minister are reputedly not even on speaking terms with each other.
“President Yushchenko should think twice about whom he supports and ends up sending to the Kremlin for final price talks,” said Volodymyr Saprykin, director of energy programs at the Razumkov Center for Economic and Political Research think tank. “That person should at the very least be neutral and not irritate the Kremlin.”
Gazprom said that the market price for Europeans has already reached $500 per thousand cubic meters this month. Ukraine’s Naftohaz said it expects the price in 2009 to be between $250-300, up from the current $179.5 per thousand cubic meters.
At 55 billion cubic meters of gas imports every year, Ukraine’s tremendously energy inefficient economy could be stuck with a $16 billion price tag next year, out of a gross domestic product that is roughly $140 billion. The actual price is unlikely to be known until December after talks with Central Asian republics, experts said. The Tymoshenko government’s draft state budget for next year is based on a price of $250.
The finer points of the gas dealing aside, last week’s visit to Moscow helped Tymoshenko score some political points in her ongoing battle with Yushchenko. She was reported to have a private meeting with Russian President Dmitriy Medvedev to discuss her candidacy in the future presidential elections in Ukraine.
All the talk and body language suggests a U-turn in the Kremlin’s once-hostile attitude to Tymoshenko.
“The Russians are saying that they are ready to support the premier,” said Oleksandr Todiychuk, president of the Q Club, an international energy think tank based in Kyiv. “The president is being completely ignored while [ex-Prime Minister and Party of Regions leader Victor] Yanukovych has fallen out of favor.”
She was out of favor with the Kremlin for political as well as business reasons, dating back to her own gas trading days in the ‘90s. Her company, United Energy Systems of Ukraine, was also an intermediary that resold Russian gas to a third of Ukraine.
She reputedly made a fortune in this trade after obtaining a sweetheart contract from Lazarenko, the prime minister from 1996 to 1997.
Tymoshenko and Lazarenko remained political and business allies for years, before he fled abroad and landed in U.S. prison after being convicted of money laundering.
Yushchenko’s administration on Sept. 25 threatened to extradite Lazarenko to Ukraine. The implicit threat is that Lazarenko’s return will set the stage for sinking Tymoshenko politically through the airing of her dirty laundry from the gas-trading days.
Lazarenko’s bail was revoked in U.S. federal court last week, returning him to prison, where he will await re-sentencing on his 1999 conviction. His conviction on eight out of 14 charges was upheld on Sept. 26 by the U.S. Ninth Circuit Court of Appeals.
Estimates run as high as $1 billion for the amount he siphoned from Ukraine’s economy. He still faces a laundry list of serious charges in Ukraine from 2000, including involvement in murder conspiracy, extortion, fraud, embezzlement and abuse of office.
After news of Lazarenko’s possible return broke, it seemed to have played a role in pressuring Tymoshenko to restore the ruling Orange coalition. She said that she was prepared to make every concession to patch up her differences with Yushchenko’s Our Ukraine allies.
In order to deflect the president’s accusations that she sided with the Kremlin in the August Russian-Georgian war, on Oct. 3 Tymoshenko signed the joint European Union-Ukraine declaration to reaffirm Georgia’s territorial integrity, including the breakaway republics of Abkhazia and South Ossetia. Those places are now recognized as independent nations by Moscow.
Tymoshenko also conceded to ,another Yushchenko demand, with her parliamentary allies upholding the president’s veto on laws limiting his powers.
That legislation was passed on Sept. 2 by her Bloc of Yulia Tymoshenko deputies, together with the Party of the Regions and Communists in parliament.
But her concessions, by mid-week, failed to reunite the Orange coalition. The president announced on Oct. 8 that he was dissolving the parliament and demanded that the lawmakers amend this year’s budget to finance a new election in December.
He may regret his decision later, however.
The latest polls show that the Party of Regions and Tymoshenko’s own bloc would gain the most votes, up to 25 percent each, while the president’s bloc would barely make it over the three percent threshold required to get into