Yanukovych wins - sort of

February 8, 2010

With 88.12% of the ballots counted in Ukraine's February 7 presidential elections, opposition candidate from Party of the Regions Viktor Yanukovich is ahead in the race, having garnered 48.59% of the votes. Prime Minister Yulia Tymoshenko has currently received 45.76%. The number of 'against all' ballots reached 4.46% while 1.18% of ballots are void.

All exit polls predicted a Yanukovych victory by marging 3-5% with most nearer the 5% mark. This makes the closeness of the race a surprise. All the more so for Party of the Regions, who yesterday said unpublished polls they had commissioned all last week gave them a 10-15% lead of Tymoshenko.

Moreover, the vote has shifted towards Tymoshenko all night, with Yanukovych boasting an 8% lead over his archrival with 25% of the votes counted, but this whittling down gradually to the current margin - if this was a real race, we would be betting on the more athletic Tymoshenko's end sprint.

VTB Capital's Aleksandra Evtifyeva writes: "The latest numbers suggest that Yanukovich is heading towards victory. While we believe the gap might narrow further as western parts of Ukraine traditionally vote more in favour of Timoshenko, the current 2.8% lead is unlikely to contract too much.

According Foyil Capital's Ismail Safaraliyev, "what makes the count interesting is that three regions of the country have surprisingly low percentage of counted votes for this time of the day. Crimea is only at 54%, whereas Luhansk and Sumy at 73% and 77% respectively and this leaves a room for end of the day surprise although it is quite slim given strong voter base of Mr. Yanukovych in the East and South of Ukraine."

The surprising closeness of the final result makes some sort of court action on the part of Tymoshenko is likely, according to analysts. According to Evtifyeva, "the narrow gap increases the chances of possible legal action from either of the candidates, but we do not expect them to change the final results in a dramatic fashion. The attitude of the Ukrainian electorate towards the current political situation suggests that there is only a very low chance of mass protests.

Dragon Capital's Viktor Luhovyk agrees: "Reports from the Tymoshenko camp indicate her party will seek to appeal election results in as many eastern and southern constituencies (i.e. Yanukovych's turf) as possible. However, prospects for overturning Yanukovych's likely victory, given the consensus view expressed by election observers, currently look slim. Moreover, a majority of CEC members are said to be loyal to PoR. "

But while mass protests are ruled out, the power struggle is far from over, with most analysts expecting turbulence in the hours and days to come, and the battle to shift first to the courts, and then to the parliament. "With such a hard fight being fought by the candidates, newsflows around the presidential election in Ukraine is likely to be rather volatile in the coming nearest days," says Rencap's Anastasiya Golovach. "Tymoshenko has already called on her supporters to keep on fighting, she is also expected to challenge the results in court. Yanukovich has already announced his plans as president to dismiss Tymoshenko."

"Tymoshenko has already indicated that she will not step down from her post, and if elected Mr. Yanukovych cannot really fire her as well," says Foyil's Safaraliyev. "She will have to step down through the motion in Parliament and one can expect the post-presidential battlefield to shift to Rada walls."

If Yanukovych does hang on to his lead and attempted court actions by Tymoshenko fail to bear fruit, analysts see the new president will start cobbling together a new coalition to oust Tymoshenko from he current post of prime minister, obviating the need for additional parliamentary elections. According to Alfa's Oleh Yuzefovych,"he will try to form a new coalition among the existing parties rather than call fresh parliamentary elections. The results of such elections would be unpredictable given his small margin over Tymoshenko and the strong showing of new politicians in the first round."

"To form a new coalition," says Yuzefoych, "Yanukovych will technically need to persuade the majority of MPs in the pro-Yushchenko NUNS faction to join the new coalition. Parliamentary voting between the first and second rounds showed this is feasible, as 40% of the required 50% of the NUNS faction voted with pro-Yanukovych parties. We think Yulia Tymoshenko will provide a formidable opposition, which should keep the new political structure in balance," he predicts.

Not all analysts however believe in the ability of the current Rada composition to support a stable majority, and hold parliamentary elections this year for likely. "After dismissing the government, Yanukovych and the Party of Regions would have a minimum 60 days to complete talks and approve a fresh government, after which Yanukovych would be given the right to call elections to parliament. We believe the ability of the Party of Regions to consolidate a formal (and working) new coalition is limited, and we continue to believe the likeliest development is an early parliamentary election, to be held at the earliest in May," writes BG Capital analysts in a research note.