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### Viewing cable 10KYIV278, FORMER TYMOSHENKO INSIDER CALLS HER DESTRUCTIVE,

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
10KYIV278 | 2010-02-24 12:05 | 2010-12-01 21:30 | CONFIDENTIAL | Embassy Kyiv
Appears in these articles: www.spiegel.de

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    VZCZCXRO1951
    RR RUEHDBU RUEHSL
    DE RUEHKV #0278/01 0551205
    ZNY CCCCC ZZH
    R 241205Z FEB 10
    FM AMEMBASSY KYIV
    TO RUEHC/SECSTATE WASHDC 9371
    INFO RUCNCIS/CIS COLLECTIVE
    RUEHZG/NATO EU COLLECTIVE
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
    RHEHAAA/NSC WASHDC
    RHMFISS/DEPT OF ENERGY WASHINGTON DC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC

` `

    C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000278

    SIPDIS

    STATE FOR EUR/UMB AND EEB/OMA

    E.O. 12958: DECL: 02/23/2030
    TAGS: PGOV EFIN PINR ECON PREL UP
    SUBJECT: FORMER TYMOSHENKO INSIDER CALLS HER DESTRUCTIVE,
    WANTS HER OUT OF POWER

    Classified By: Ambassador John F. Tefft for Reasons 1.4 (b) and (d)

    ¶1. (C) Summary. In a damning indictment of Prime Minster
    Yuliya Tymoshenko and her lack of leadership, respected
    xxxxxxxxxxxx argued that Tymoshenko
    would continue to work against reform. To limit her
    destructiveness, xxxxxxxxxxxx argued for early parliamentary
    elections, which would help strengthen new leaders such as
    Tihipko and Yatsenyuk. He also expressed hope that the
    International Monetary Fund (IMF) would strictly hold Ukraine
    to its commitments to implement reform. xxxxxxxxxxxx appeared to
    deliver his message not in anger, but in sincere sorrow for
    the country and frustration at his inability to convince
    Tymoshenko to take advantage of the opportunity presented by
    the economic crisis for reform. Instead, xxxxxxxxxxxx said
    Tymoshenko wasted the opportunity in favor of populism and a
    simple desire for all-embracing power. End Summary.

    ----------------------------------
    Tymoshenko: Power-hungry Populist
    ----------------------------------

    ¶2. (C) During a meeting with the Ambassador on xxxxxxxxxxxx,
    accused Prime Minister Tymoshenko of wasting the opportunity
    for reform that came with the economic crisis. He believed
    that Tymoshenko would continue to work against reform, and
    that her argument would be that she and her government were
    able to make all domestic and international payments during
    the crisis without implementing what would amount to painful
    reforms for the public. In this sense, xxxxxxxxxxxx said the IMF
    program had actually harmed Ukraine. Neither the Ukrainian
    government nor the public suffered terribly from the crisis
    thanks to IMF money. As a result, support for change that
    would pull the economy out of crisis evaporated.

    ¶3. (C) xxxxxxxxxxxx said that it was an easy decision for
    Tymoshenko to do nothing to reform the economy. He was
    critical of her leadership skills and said that she made
    policy decisions without listening to considered advice. He
    found it difficult to understand Tymoshenko,s logic most of
    the time, except in the sense that her decisions were
    normally guided by &adventurous populism.8 She also was
    overly confident in her own decisions and believed everyone
    else is wrong. xxxxxxxxxxxx concluded that Tymoshenko simply
    wanted to consolidate power in her own hands. In her eyes,
    populism helped her do this; reform would not.xxxxxxxxxxxx
    own frustration with his inability to influence policy xxxxxxxxxxxx.

    --------------------------------------------- ----
    Pre-term Parliamentary Elections Best for Country
    --------------------------------------------- ----

    ¶4. (C) xxxxxxxxxxxx was certain that Tymoshenko would continue
    to act as a destructive force in &hard-core8 opposition to
    Yanukovych. As a result, he argued that pre-term
    parliamentary elections would be best for the country. He
    assumed BYuT and Our Ukraine would lose seats in Parliament
    with a pre-term election. It would also allow new voices,
    such as Serhiy Tihipko and Arseniy Yatsenyuk, to gain a
    stronger position. xxxxxxxxxxxx thought that the voters in the
    presidential election had shown that they wanted new leaders
    to come to power.

    ¶5. (C) Although elections would delay reform for a few more
    months, xxxxxxxxxxxx thought a new parliament would be more
    likely to implement reform. He understood that this could
    delay the return of the IMF to Ukraine; but, xxxxxxxxxxxx argued
    that the country could get through the next six months on its
    reserves, particularly if no new budget were adopted. The
    lack of a budget limited the government,s ability to spend,
    he said. In fact, xxxxxxxxxxxx argued that pushing the country
    into a deeper crisis could actually be a benefit because
    voters and the leaders would feel the need for change more
    acutely.

    Kyiv 00000278 002 of 003

    ----------------------------------
    xxxxxxxxxxxx Prescription For Reform
    ----------------------------------

    ¶6. (C) xxxxxxxxxxxx argued that in the 1990s and in 2000, when
    the economy was truly in crisis, Ukraine had made some
    positive changes that led to growth. Ukraine again had a
    unique opportunity to reform the structure of the government
    itself, to tackle corruption, and to implement economic
    reform that would put the country back on the path to growth.
    He agreed with the conditions contained in the IMF package
    for Ukraine, including gas price increases and pension
    reform, but said that the IMF should be stricter in forcing
    adherence. xxxxxxxxxxxx passed the Ambassador two documents,
    xxxxxxxxxxxx, outlining his reform priorities. The papers are
    copied below, paras 8 and 9.

    ---------
    Comment
    ---------

    ¶7. (C) xxxxxxxxxxxx appeared to deliver his message not in anger,
    but in sorrow for the country and in frustration at his
    inability to convince Tymoshenko to take advantage of the
    opportunity presented by the economic crisis for reform. His
    indictment of Tymoshenko was particularly damning xxxxxxxxxxxx,
    one of the few we have
    found in high-levels of government in Ukraine. It is
    unfortunate that Tymoshenko,s unwillingness to make the hard
    decisions has cost the country dearly, not only in terms of
    larger deficits, greater public debt, and declining GDP, but
    also in that she has driven out intelligent, xxxxxxxxxxxx.

    ----------------------
    Preventative Measures
    ----------------------

    ¶8. (U) Unofficial translation of xxxxxxxxxxxx ten preventative
    measures for Ukraine.

    ¶A. Government reform (functional structure). Eliminate
    six ministries; subordinate other government bodies to the
    ministries.
    ¶B. Increase the pension age: two years up for men; 3
    years up for women. Cancel the right of early retirement and
    length of service calculation when one year is counted as
    two. (Note: For every year of work, workers in hazardous
    sectors -- such as steel workers and miners -- receive credit
    for two years worked. AT the end of 20 years at work, for
    example, miners' pensions are calculated on the basis of
    having worked 40 years.)
    ¶C. Limit pensions for working pensioners.
    ¶D. Cancel special pensions -- these were distributed to
    high-level government officials, judges, scientists, or
    managers at state-owned firms and are higher than normal
    pensions.
    ¶E. Double gas prices for public consumption. Increase gas
    prices 50% for consumption by municipal heating companies.
    Increase electricity prices by 40%.
    ¶F. Grant the authority to set prices to public service
    providers (for 2 years); increase service prices
    simultaneously with gas prices.
    ¶G. Cancel the legislative provision banning communal
    service providers from cutting off or fining consumers for
    non-payment of communal services.
    ¶H. Increase excise duty for petrol by EUR 60 (Note: Not
    clear on what volume. end note.) Cancel preferential rates,
    increase vehicle owner taxes by 50%.
    ¶I. Keep the minimum subsistence-level payment unchanged
    but introduce extra payments for the needy.
    ¶J. Bind privileges and social payments to incomes: if
    incomes are high, privileges and social payments will be
    lower.

    --------------------------------------------- -
    Priority Reform Measures for the New Government

    --------------------------------------------- ----

    ¶9. (U) Below is xxxxxxxxxxxx paper on priority reform for the
    new government.

    Kyiv 00000278 003 of 003

    Pensions:
    ¶1. Pension age increase (currently pension age is 55 for
    women; 60 for men).
    ¶2. Abolish special pensions
    ¶3. Limit pensions to working pensioners
    ¶4. Set pension age for military to age 60.
    ¶5. Abolish norm of retirement prior to pension age.

    Energy Sector:
    ¶1. Imminent increase of gas prices for households 2 times;
    additional 50% increase on July 1. Cancel Government
    Resolution requiring Trade Unions' consent for gas price
    increase.
    ¶2. Immediate increase of gas price for heating entities
    50%; additional 30% by July 1.
    ¶3. Electricity tariff increase by 40%.
    ¶4. Privatization of all coal mines and cancelling of all
    subsidies to coal mining sector.

    Benefits:
    ¶1. Elimination of benefits for communal services,
    transportation, etc.
    ¶2. Elimination of government support for birth assistance,
    free meals and school books. (Families should pay.)

    Communal Services:
    ¶1. No new tax benefits.
    ¶2. Limit Single Tax Payers (STP) status.
    ¶3. Cancel special VAT regimes for rural areas.
    ¶4. Cancel VAT exemptions for pharmaceuticals.
    ¶5. Increase Excise tax for gasoline; increase auto-owners
    tax by 50%; unify excise tax.
    ¶6. Cancel double taxation treaty with Cyprus (today it is
    zero.)

    Rural Issues:
    ¶1. Cancel moratorium on land sales.
    ¶2. Ban subsidies for pork and chicken meat.

    Public Administration:
    ¶1. Reduce size of government to 14 ministries. One deputy
    prime minister. Abolish Minister of the Cabinet of Ministries
    position. Eliminate 6 ministries.
    ¶2. Subordinate all government entities to ministries (for
    instance, the Tax Administration, Customs Service, State
    Property Fund -- to MinFin.)
    ¶3. Limit extra payments to government officials.

    Other Social Funds
    ¶1. Temporary subordination to the government.
    ¶2. Cancel free tours for vacations.
    ¶3. Cancel any subsidies to businesses.
    ¶4. Unemployment subsidy payable only after minimum of 6
    months of employment.
    ¶5. Introduce sick leave payment at 70% of income, but not
    less than subsistence level.
    ¶6. Sick leave payment starting only from 3rd day of leave.
    ¶7. Money saved from above should go to the Pension Fund.

    Prices:
    ¶1. Increase prices for transport; cancel transport
    benefits.

    End xxxxxxxxxxxx.

    Tefft

`