Kyiv, Ukraine. April 23. Famous comedian and political novice Volodymyr Zelensky has won the April 21, presidential run-off vote in Ukraine beating incumbent President Petro Poroshenko. Exit polls show voters favoring the 41 year-old Zelensky by 73% of the vote while the 53 year-old Poroshenko, who has been in power since 2014, receiving just under 25%. The latter conceded the election after exit polls were revealed and vowed to help Zelensky transition into the presidency by the end of next month.

World leaders, including President Donald Trump and Ukraine’s closest allies French President Macron, German Chancellor Merkel and Polish President Duda congratulated Zelensky on his big win. A Kremlin spokesman said they would hold off until official results were released. The Central Election Commission expects poll counting to be completed early in the week and results to be confirmed by May 1.

Zelensky’s campaign strategy

Zelensky ran on an anti-establishment platform that took advantage of Ukrainians’ cynicism toward their political class and discontent with a slow economic upturn and lingering corruption. While Poroshenko made successful strides to curb administrative graft during his five-year term, voters remained unhappy with what they perceived as rampant profiteering at the top of the political hierarchy and lack of fair play for ordinary citizens in a traditionally opaque and shady court system.

Throughout the campaign, Zelensky masterfully exploited his satirical movie character – a school teacher turned president – who rants against oligarchs and government corruption in the Netflix series “Servant of the People.” His campaign was remarkably unconventional by carefully avoiding public events and unscripted interactions with journalists. Instead, he relied heavily on his TV shows and social media channels – most notably Instagram, YouTube, and Telegram – to reach young voters and keep his virtual image intact.

Zelensky’s campaign content focused on differences with other candidates rather than on any concrete policy positions. While he gave outgoing president Poroshenko credit for bringing the country closer to Europe, Zelensky called on voters to break with the established government system but offered no plan forward of his own. He managed to win the presidential campaign without having revealed any details about his strategy for ending war in Donbass and returning Crimea, annexed by Russia in 2014. Having presented his core team of domestic political advisors only two days before the end of campaign, Zelensky failed to name top picks for key diplomatic, defense, and national security posts, all of which fall under the president’s direct constitutional purview.

Zelensky’s victory is the latest in a global trend of political outsiders harnessing TV and social media to displace unpopular political institutions. In his election night victory speech, he shot an arrow across the bow of Ukraine’s neighbors from the former Soviet Union who’ve tolerated authoritarian regimes with a message that toppling the establishment was “mission possible,” and it can be done anywhere.

Poroshenko’s international success taken for granted

Incumbent President Poroshenko, despite putting Ukraine onto a European political path, countering Russian pressure and turning around an economy bankrupted by his predecessor, found the electoral gap with Zelensky too wide to close. Throughout the campaign, he ran on his successful international record and questioned his rival’s lack of experience to take on the presidency. Especially, his ability to become commander-in-chief of the rebuilt and re-equipped armed forces at a time when conflict with Russia continues. In the end, Poroshenko became a victim of his own success – by isolating the war and keeping it off the mind of most Ukrainians, his opponent was able to focus the electorate’s attention on a narrative high on inequality and helplessness. Fixated on the international coalition he put together to punish Moscow for its alleged aggression in Ukraine’s east, Poroshenko’s intensity failed to connect with ordinary voters more concerned with higher utility tariffs and trying to make ends meet. Quoting Winston Churchill, who also lost an election during wartime, Poroshenko vowed on election night to “never give up” and to remain in politics to defend Ukraine’s democracy and sovereignty. He said his parliamentary party will be in opposition to Zelensky’s presidency.

What next?

The Central Election Commission has until May 1, to announce the official election results. Parliament decides the date of inauguration, which should take place no later than June 3, according to the constitution. Focus of the political elite during the interim will now shift to several priorities:

  1. Preparing for Parliamentary elections. The political class will now shift its focus onto the next popular vote scheduled for late October 2019. There is an expectation that Zelensky, in the early days of his presidency, may attempt to dismiss parliament by calling a snap election on the pretext that the existing majority coalition controlled by Poroshenko no longer exists. The move could give the new president a political advantage in bringing to power his “Servant of the People” political party. If triggered, the parliamentary snap election campaign, which lasts only 45 days could start as early as late May, with possible elections at the end of July or early August.

    However, Poroshenko holds key trump cards and could thwart Zelensky’s efforts by remaining in office long enough to trigger a constitutional clause preventing snap elections from being called 6-months prior to the expiration of parliament’s 5-year term. For Poroshenko, snap elections could also work in his favor, as his electorate remains mobilized and could improve his chances of capturing a larger share of parliamentary seats. The longer the election campaign, the more time splinter parties have to mobilize voters, thereby bringing smaller special-interest groups into parliament making it harder to negotiate legislative deals. It would appear at this point that Zelensky’s and Poroshenko’s interests are aligned. Watch for the political deal making in the coming weeks.

  2. New alliance with incumbent MPs. The change of presidential power will upset not only the formal, but also the informal decision-making hierarchy, particularly in the regions. Zelensky’s landslide election win could cause a large number of the 225 single-mandate parliamentarians to side with the new President in hopes of currying favor with him to fend off challenges to their constituency elections this fall. In Ukraine’s parliament, half of the 450-seat chamber is made up of single mandate parliamentary district seats, usually held by wealthy businessmen who control factories and provide the local electorate with jobs. The other half are elected proportionally, based on party lists. The single mandate MPs are a pragmatic bunch, focused less on party politics and more on getting state budget funds for capital improvements in their districts. Needless to say, there is also a large amount of abuse. Watch to see how many switch sides in the coming weeks to support Zelensky.

  3. Return of the fugitives. In the weeks before the run-off, investigative reporters exposed a number of ties between Zelensky and infamous Ukrainian oligarch Ihor Kolomoisky: currently living in Israel, in an attempt to shield himself from prosecution on corruption charges by various western governments. The oligarch’s popular “1+1” television studio gave significant free airtime to Zelensky in the run-up to the election causing many to speculate that he will owe Kolomoisky if the presidency is won. As part of the IMF’s financing, Poroshenko nationalized and bailed-out Kolomoisky’s bankrupt “PrivatBank” with $5.5 billion from taxpayers’ money. In the days before the run-off vote, Kyiv courts ruled the nationalization to be null and void. Many expect Kolomoisky to return to Ukraine, as a potential power broker, making every attempt to reassert his influence over the country’s politics in hopes of returning control over his business empire, which include banking, energy, media and mining.

    In addition, throughout the election campaign, Zelensky attracted a broad range of politicians to his cause, from disgruntled members of the “pro-European opposition” to old pro-Russian politicians seeking revenge. The make-up or indeed the principles around which Zelensky will form his team remain unclear. Watch to see how Zelensky balances on the one hand between the return of Kolomoisky and other fugitives, and on the other hand securing support from the IMF and EBRD, who insisted on bankrupting Kolomoisky’s bank to improve Ukraine’s fiscal balance sheet.

  4. National Security & Defense. Zelensky inherits a complicated and deadlocked conflict with Russia-backed rebels in Ukraine’s east. Days before the runoff, Russia restricted exports of coal, oil and petroleum products to Ukraine – all inexpensive and sensitive raw material imports for the economy. The Kremlin seems to hope the move will bring Zelensky to the bargaining table. Another issue on the agenda is Ukraine’s ten-year gas transit agreement with Gazprom, which ends this fall. Both the EU and Kremlin are putting pressure on Kyiv to extend the accord, details of which remain unclear. Thirdly, the Kremlin’s proxy in Ukraine Viktor Medvedchuk is holding out a carrot to Zelensky worth billions of dollars of Russian investment in exchange for a political deal in the war-torn Donetsk and Luhansk regions that would give them political autonomy within Ukraine’s borders. So far, Zelensky has remained silent on these issues only stating that he wants to reinvigorate the Minsk peace process and bring the US and UK into the Normandy contact group currently made up of France, Germany, Russia and Ukraine. While Ukraine’s presidency has significant national security and defense powers, many economic issues fall under the purview of the Prime Minister, currently a Poroshenko loyalist. Therefore, watch to see if these issues are pushed to the sidelines until autumn after a new parliament is elected and a new Prime Minister chosen. Zelensky has already hinted he wouldn’t mind seeing Poroshenko in government. While Kolomoisky has voiced his support for former Prime Minister Yulia Tymoshenko.

  5. International finance: Investors expect Zelensky to stay on course for critical international financial support programs due to large state debt payments scheduled for 2019-2020. Ukraine’s treasury has been able to raise funds through international capital markets to help finance its debt, but cooperation with the IFIs is critical for Ukraine to grow its financial reserves, preserve economic growth and attract foreign direct investment. Watch to see who Zelensky picks as his financial advisors as an indication of how closely he will follow the austerity measures proposed by IFIs.

Conclusion

With the presidential election over, Ukraine enters a period of fast-changing, behind the scenes domestic political developments that on the one hand, will accommodate the new political reality brought on by Zelensky while at the same time, preserve the stability of Ukraine’s ruling political and business elite. Kyiv is set to continue on its path of European economic integration and Zelensky says he wants to strengthen the domestic fight against corruption by taking politics out of the prosecutor’s office and strengthening anti-corruption courts. The success of these efforts depends in large part on financial support and cooperation from Ukraine’s closest allies in western capitals and international financial institutions.

Domestic political support for any economic deal with Russia remains low until progress is made on the issues of Donbass and Crimea. The Kremlin seems to understand that resolving the “Ukraine crisis,” is key to easing western sanctions against Russia, which could help it resolve some its own domestic economic problems. However, the Kremlin is trapped in its own interpretation of the situation, which differs considerably from that in Kyiv, preventing its proposals on Donbass from having any degree of pragmatism making them dead on arrival in Kyiv (and western capitals, as well). Concurrently, Moscow’s economic influence over Ukraine is declining. After suffering through five-years of what has felt like an economic blockade by Russia, Ukrainians have adapted and are now trading more with Europe, China and the Middle East than with Russia and other CIS countries. Labor migrants from Ukraine (about 4 million) whose livelihoods depend on Russia have also adapted perfectly well to working under the radar, amid greater government restrictions on their activities.

Companies doing business in the Ukrainian market should recognize that a period of political uncertainly and turbulence will last until Q4 of 2019 and into 2020, as the institutes of government power are reset and reshaped. Investment opportunities in Ukraine’s renewable energy, agricultural and IT sectors continue to drive the economic turnaround making the country less dependent on post-Soviet raw material trade routes. Deepening economic integration with Europe looks set to continue for the next five years amid hopes that Ukraine’s success could open the door for closer political cooperation with the EU in 2024.

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