Bloomberg News

Ukrainians Vote as Yanukovych Poised to Control Parliament

October 28, 2012

Ukrainians are voting in parliamentary elections today, with President Viktor Yanukovych’s party set to retain control as support in his eastern heartland quells challenges from a world boxing champion and a jailed ex-premier.

The Party of Regions, which rules the former Soviet republic in coalition with the Communists, was predicted by opinion polls to lead by seven percentage points. Voting for the 450-seat Verkhovna Rada began at 8 a.m. local time and will end at 8 p.m., when the first exit polls will be published. Turnout at noon was 23.62 percent, according to Ukraine’s Central Electoral Commission.

Yanukovych, 62, who has roused ethnic Russians in the regions around his native Donetsk by bolstering the status of the Russian language, trumpets stability, economic expansion and this summer’s Euro 2012 soccer tournament among his party’s achievements. While graft has worsened, European ties have soured and growth may reverse in the second half of the year, opponents have struggled since former Prime Minister Yulia Tymoshenko was imprisoned in 2011.

The Party of Regions “remains likely to secure a majority,” Alex Brideau, an analyst at Eurasia Group in New York, wrote Oct. 25 in an e-mailed note. “If Regions can’t get a 226-seat majority on its own, it should be able to secure an alliance with either the Communist Party or individual deputies who defect from other factions.”

Bonds, Stocks

Ukraine’s foreign-currency bonds have returned 24 percent this year, the most after Venezuelan debt, according to JPMorgan Chase & Co. (JPM:US)’s EMBI Global Index, which gauges the yield difference relative to U.S. Treasuries.

Still, after expanding 5.2 percent last year and 4.7 percent in 2010, the economy will contract in the second half because of lower prices for steel, Ukraine’s main export earner, Erste Bank AG (EBS) and HSBC Holdings PLC (HSBA) have predicted.

The Ukrainian Equities Index (UX) is down 44 percent this year, more than any benchmark in the world, data compiled by Bloomberg show. The hryvnia, which has lost 1.1 percent against the dollar so far this year, rose 0.5 percent to 8.1325 on Oct. 26.

Since coming to power in 2010, Yanukovych’s relations with Ukraine’s two largest neighbors have deteriorated. The government is haggling over the price of natural gas with Russia, which supplies more than half of its fuel needs. A planned Association Agreement with the European Union has been delayed indefinitely because of Tymoshenko’s imprisonment for alleged abuse of office.

International Standards

Her case, which she says was engineered by the president to keep her off this week’s ballot, has boosted Yanukovych’s prospects. He denies involvement.

“We regret that the convictions of opposition leaders during trials that did not meet international standards are preventing them from standing in parliamentary elections,” U.S. Secretary of State Hillary Clinton and EU foreign affairs chief Catherine Ashton wrote Oct. 24 in the New York Times. (NYT:US)

The Party of Regions was backed by 23.3 percent of voters, compared with 16 percent for heavyweight titleholder Vitali Klitschko’s UDAR, 15.1 percent for Tymoshenko’s Batkivshchyna, and 10.1 percent for the communists, a poll by the Kiev-based Democratic Initiative Fund showed.

Twenty-four percent of voters were undecided, according to the Sept. 18 to Oct. 4 poll, whose margin of error was 2.2 percentage points.

‘Litmus Test’

The EU has called on Yanukovych and his government to conduct fair elections, calling them “a litmus test” of Ukraine’s democratic credentials.

“The record number of observers that have come here from North America, Europe and Central Asia for this event underscores the importance we as the international community place on Ukraine’s democratic progress,” the Organization for Security and Cooperation in Europe, the Council of Europe, the European Parliament and NATO said today in an e-mailed statement. “We hope to see the citizens of Ukraine participate fully in Sunday’s vote.”

Ukrainian Prime Minister Mykola Azarov said the ballot would be free and fair.

“Any tales that elections could be rigged are groundless,” Azarov said Oct. 26 in a statement on the Cabinet’s website.

The Batkivshchyna party joined forces with Arseniy Yatsenyuk’s Front Zmin in April. While the nationalist party Svoboda signed a coalition pact with them Oct. 19, Klitschko, whose party’s name means punch, hasn’t followed suit.

‘Roof Down’

“To sign any agreements before the elections is like building a house from the roof down,” Klitschko said Oct. 21 in the western region of Zakarpattya. “A coalition should be formed after entering parliament.”

Opposition politicians have sought to capitalize on worsening graft as Ukraine’s ranking in Transparency International’s Corruption Perceptions Index deteriorated to 152 from 134 under Yanukovych.

Making inroads into his core support, which in July cheered a Party of Regions-backed bill to make Russian a second official language in the eastern half and southern regions, may be tricky in the run-up to presidential elections in three years, according to Kostyantyn Dykan, an analyst at the Razumkov Center for Economic and Political studies.

“It all points to Yanukovych being the main candidate for 2015,” he said Oct. 25 by phone from Kiev. “The situation allows him to look to the future with optimism.”

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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