The political landscape in Ukraine during the first half of 1998 will be dominated by the March parliamentary elections, while during the second half of the year two events will dominate the political scene. First, the Verkhovna Rada will undergo a process of re-structuring into factions and interest groups. Second, the presidential election campaign will be launched for October 1999. The March 1998 elections will be the first to be held using a mixed election law, where 50 percent of candidates will be elected by majority vote and 50 percent of the seats will be allocated in proportion to the percentage of votes a political party receives above the 4 percent minimum barrier.
The 1994 elections had been held with an election law that was 100 percent majoritarian, which had produced a Verkhovna Rada with little political structure and one that possessed a large centrist lobby of varied interests and clans. It was difficult to pursue coherent policies or establish political majorities in favor of specific programs with such a Parliament. The new Verkhovna Rada is unlikely to have a left-wing lobby larger than the current one-third of seats it holds, despite the grave socio-economic crisis. The elections also are likely to lead to a Parliament that will be quickly elected (unlike the previous term, when seats were still being filled into 1995). This is important because those who are the first to sit in the Verkhovna Rada will elect the chairman, a crucial position that is able to influence the agenda and voting of Parliament (the 1994-1998 Verkhovna Rada was led by the head of the Socialist Party, Oleksander Moroz). In addition, a crisis could quickly erupt if Communist national deputies refuse to take the oath of loyalty to the Ukrainian state, as demanded by the 1996 Constitution. Upon refusing to take this oath, they will not be allowed to take their seats.
The 1998 Verkhovna Rada should be supportive of reform in view of the likelihood that the centrist "swamp," as it has been described, will be replaced by a far more structured Parliament with reformist election blocs providing factions in larger numbers. This is important also because the outcome of the parliamentary elections, together with the socio-economic situation, will influence the presidential elections the following year. The four declared candidates - Mr. Moroz, Yevhen Marchuk and Pavlo Lazarenko (both former prime ministers running on Social-Democratic platforms in the parliamentary elections), and President Leonid Kuchma - will be influenced in their choice of strategies and allies by the outcome of the 1998 elections. President Kuchma, currently completely trusted by only 10 percent of the population, is likely to be the front runner with Mr. Marchuk going into the second round. Economic Initial optimism expressed in the early part of 1997 about Ukrainian economic prospects has become decidedly more cautious. The International Monetary Fund had projected that the Ukrainian economy would continue to decline in 1997 with a fall of 3 percent in GDP, but then grow by 2 percent in 1998. This recovery now looks in doubt, although a 1 percent growth rate in 1998 may still be attainable.
By the middle of 1997 GDP was already some 7.5 percent lower than a year earlier. Ukraine has been unable to translate its macroeconomic stabilization into economic growth because of the slow pace of privatization and restructuring of industry, a growing trade deficit and problems of locating refinancing to cover current budget deficits and meet service payments on international debts. The slow pace of economic reform has led to greater pessimism within international financial institutions about Ukraine's ability, particularly during elections, to continue to push ahead with painful reform. Social problems are another difficulty that will plague Ukraine during election year - wage arrears is at $2.6 billion and official unemployment continues to rise, now at 600,000. Only Russia and Kazakstan within the CIS have trade surpluses of exports over imports; Ukraine remains the country with the highest deficit ($3.7 billion). Russia provides approximately half of Ukraine's imports, a figure that has remained stable since the 1980s and reflects the dominance of energy transfers. If Ukraine is successful in establishing Azerbaijan as its main energy supplier, the projected income derived from transit charges to European customers of Azeri oil are likely to cover Ukraine's annual cost of imported energy and thereby have a major influence upon reducing Ukraine's trade deficit.
The Russian share of Ukraine's export market shows a different declining trend, having dropped by half in 1987-1997, now standing at only 30 percent. Ukraine's energetic search for new markets in Latin America, the Arab world and Southeast Asia is an attempt to find new markets for Ukrainian exports in the face of a decline in trade with the CIS, which is likely to continue. Foreign and defense The formal public presentation of the GUAM (Georgia, Ukraine, Azerbaijan, Moldova) group as a sub-group of the Commonwealth of Independent States is an example of the direction in which the CIS is headed. The CIS already had three other sub-groups - the Russian/Belarusian union, the quadripartite Customs Union (Russia, Belarus, Kazakstan, Kyrgyzstan) and the Central Asian union (all the Central Asian states, excluding Turkmenistan). The GUAM group represents those states that have always sought to maintain Russia at a distance and opposed CIS supra-national structures. It is not ruled out that Uzbekistan, which increasingly has drawn closer to Ukraine within the CIS in its criticism of Russia, could also join GUAM.