base Document le-Z l?lleCl U/le/lti Page 69 OT 154 Zb/l Exhibit FF base Document le-Z l?lleCl U/le/lti Page 9U OT 154 1BO10-PJM POLITICAL PRESENTATION-000001 LL) base Document le-Z l?lleCl U/le/lti Page 91 OT 154 1BO10-PJM POLITICAL PRESENTATION-000002 case Document le-Z l?lleCl U/le/lt? Page HZ OT 154 Zb/4 MEMORANDUM To: Rinat Akhmetov From: . Paul Manafort Date: June 9, 2005 Subject: Executive Summary This Report summarizes the results of the National Demographic Survey and Political Audit that were conducted in April and May. The Report presents an analysis of the ?ndings of the Survey and Audit; the development of a strategic framework for the 2006 elections and; the recommendations for achieving these electoral goals. Also set out in the full reports are timeframes for the key decisions that must be taken upon the acceptance of the analysis. 1) EXECUTIVE SUMMARY The successful presidential campaign of Victor Yushchenko was framed around the theme of ?reform" and the ?need for a change?. He was able to ride the tide of anger and frustration on the part of the Ukrainian electorate to victory notwithstanding the relative economic prosperity that the country was experiencing. In analyzing the election results, too much emphasis has been placed on the regional divide of the Russian-speaking enclaves of the East and South and the Ukrainian regions of the center and west. Yushchenko?s victory was primarily conceived on the populist foundation of ?time for a change?, the need to ?end corruption?, the demand to end favoritism and the creation of a government that was based on the right of the people to control their government. A careful analysis of the election results, as viewed through the ?ndings of our survey, clearly shows that the Ukrainian public, including key elements of the electorate that comprised the core of the Yushchenko victory, while saying that they wanted to look to the west were not demanding a dramatic philosophical change in the role of government. What the electorate was demanding was a change in the way in which governing is conducted and the application of law that is equal for all. not just a few chosen ones. Given the popularity of the Yushchenko Government, the unpopularity of the Party of Regions throughout most of Ukraine. the negative appeal of the leader of the Party and the issue agenda of the electorate, the range of options is signi?cantly limited. However, these limited options do present us with some solid opportunities. In analyzing the popularity of the various Ukrainian political parties, the most obvious fact is that the President?s popularity is clearly transferred to his party, Our Ukraine. 1BO10-PJM POLITICAL PRESENTATION-000002 case uocument 1'05-2 l?lleCl U/le/lt? Page 95 OT 154 Zb/b Signi?cant in our survey is the fact that notwithstanding the personal appeal of Prime Minister, Julia Timoshenko and her job approval, her Party Bloc has not bene?ted signi?cantly. The Socialist Partyis virtually the only party in a position to take advantage of the/any erosion in the popularity of the governing parties. Its success will depend on how it constructs its strategy and communicates its message- Notwithstanding this positioning, the Socialist Party does not appear to appreciate the opportunity or be organized to reap any of the bene?ts of it. In its current form there are dramatic limitations to the upside potential of the Party of Regions to attract new voters beyond its regional and ethnic base in the timeframe necessary. The National Survey tested the appeal of Yanukovich as a candidate for Prime Minister in 2006. An overwhelming majority said that they would not like to see Yanukovich as Prime Minister ever again. This vieWpoint is consistent throughout the country with a plurality of voters in my region saying ?no? to his candidacy. Consequently, the ability of Yanukovich to help lead a campaign against the current administration will not only fail, but it will never gain any traction. Additionally. it carries the potential to destroy the Party of Regions if he is presented as its leader in the elections. 2) REC OMMEDATIONS Reorganizing the Party of Regions must begin with the replacement of the Leader of the Party. A replacement program to select a new Party Leader must occur immediately. The means by which the change occurs is just as critical to the success of the replacement as is the identity of the successor. The candidate should be from the South or Southeast regions and ideally have limited association with the previous government. Organizational re-structuring of the Party of Regions must also occur. The restructuring will focus on: I. the training of the regional political leaders, 2. infusing leadership with updated political methods. communications tools and materials to work with party leaders and voters, 3. the development of a program of new ideas to offer a credible alternative to the voters, and 4. the revising of the image of the Party. Beyond reorganizing the regional of?ces, a focus needs to be placed on improving the communications between the Party Central HQ and the regions and the regional of?ces IQ 1BO10-PJM POLITICAL PRESENTATION-000001 base Document le-Z l?lleCl U/le/lti Page 94 OT 154 Zb lb . and the voters. The training program will include development of materials on all necessary political organizing and voter contact and training of the leadership on how to effectively use the materials. 3) DEVELOPING THE ELECTORAL STRATEGY FOR THE PARLIAMENTARY ELECTIONS Even accomplishing the objectives of the re-structuring of the organization and image of the Party, it will be near impossible to conduct a national campaign to capture control of the Parliament based primarily on the Party of Regions political appeal. The Report presents three options for an election strategy: 0 Building a Minority Coalition Option 0 Running Alone Option 0 The ?Big Deal? Coalition Some of these options seem more realistic to achieve than others but in assessing the seemingly impossibility of accomplishing these objectives it is important to realize that the impossible can come true if planned correctly, executed and ?nanced ef?ciently and promoted correctly. . All of the options presented should be thoroughly considered. The decisions on the core recommendations must in the next few weeks in order that we may embark on the ?Re- organization Phase? as discussed in the full document. 1BO10-PJM POLITICAL PRESENTATION-000005 UVCI base Document le-Z l?lleCl U/le/lti Page 9b OT 154 Zb/ 1301 O-PJM POLITICAL PRESENTATION-000006 base uocument 1'05-2 l?lleCl U/le/lt? Page 9b OT 154 1BO10-PJM POLITICAL PRESENTATION-000007 case Document le-Z l?lleCl U/le/lb Page 9/ OT 154 . I. Overview The purpose of this Report is to set out the ?ndings from the Benchmark demographic survey that was conducted in May, 2005 and the Audit of the Ukraine political scene that was conducted in April and May of this year. The assignment was to identify the current state of the electorate as relates to the new Administration and to their priorities and expectations and analyze the relative state of capabilities of the Party of Regions as a viable force to contest the Parliamentary elections of 2006. This document is meant to provide a road map for activity over the course of the next 3 months. This road map needs to focus on what needs to be done in order to be a viable participant in the 2006 elections. The studies had no presuppositions as to the issues, priorities. or even the political vehicles and leaders that need to be central to any successful efforts. The framework of this Report will present our ?ndings in a building block format. It shall ?rst analyze the priorities of the electorate, its expectations of the new Government, its perceptions of the key Governing Coalition Parties and leaders. With this analysis in place, the Report will then turn to an analysis of the Party of Regions as a viable political force, credible opposition party and potential electoral challenger. . With the framework in place, the Report will discuss several strategic options for the remainder of 2006 and the actions that will be required to construct a credible political force and several options to create a ?winning coalition" in the Parliamentary elections. In this section, the Report will identify the foundation for the political program, several options on building a coalition and what needs to be done to make those options viable, and ?nally a timetable to do what is necessary to be credible in 2006. These recommendations will incorporate plans for training of leaders, media strategy and how to use the RADA legislative sessions to enhance the political strategy. 1BO10-PJM POLITICAL Findings 6f Surveys and Political Audit 1BO10-PJM POLITICAL PRESENTATION-000009 base Document lb5-Z l?lleCl U/le/lti Page 96 OT 154 thSU base uocument 1'05-2 l?lleCl U/le/lt? Page 99 OT 154 2'06]. 1801 O-PJM POLITICAL PRESENTATION-000010 case Document 155-2 l?lleG U/IZb/lb Page OT 154 PagelLJiFF beZ 11. Findings of the Natiogal Demograghic Su_rvey and Political AIM I. The Reason for Yushchenko?s Election The successful presidential campaign of Victor Yushchenko was framed around the theme of ?reform? and the ?need for a change?. He was able to ride the tide of anger and frustration on the part of the Ukrainian electorate to victory notwithstanding the relative economic prosperity that the country was experiencing. Normally, the candidate of an incumbent party presiding over a strong economy with optimistic forecasts of future growth and investment can expect to be elected handily. For the electorate to reject such a candidate, powerful forces need to be at work. Yushchenko?s victory was even more incredible when one analyzes the relative disorganization of the coalition managing the campaign and the lack of any consistent election program other than ?throw the bums out?. In fact, there was little idealogical cohesion among the disparate parties enveloped under the umbrella of the ?Orange Revolution?. In analyzing the election results, too much emphasis has been placed on the regional divide of the Russian?speaking enclaves of the East and South and the Ukrainian regions of the center and west. In fact, even those electoral breaks can be seen to be driven by whether the region was represented by the Kuchma Government or not a part of the governing elite. Yushchenko?s victory was entirely conceived on the populist foundation of ?time for a change?, the need to ?end corruption". the demand to end favoritism and the creation of a government that was based on the right of the people to control government. A careful analysis of the election results, as viewed through the ?ndings of our survey, clearly shows that the Ukrainian public, including key elements of the electorate that comprised the core of the Yushchenko victory, while saying that they wanted to look to the west were not demanding a dramatic philosophical change in the role of government. In fact. strong segments of the Yushchenko electorate have the same views on the role of government as those sections that supported Yanukovitch. What the electorate was demanding was a change in the way in which governing-is conducted and the application of law that is equal for all, not just a few chosen ones. The attraction to the US and Europe was based more on the desire for freedoms of those places more th_an on any philosophical The significance of this finding is that the only successful strategy to compete against the Yushchenko Coalition cannot be constructed on a foundation of competing regions. The only way for the losers in the Presidential race to improve their standing in the 2006 Parliamentary elections is to build a strategy that expands the demand for reform and demonstrates that the current Government is acting in the same fashion as its predecessor and is not delivering on its campaign promises. notwithstanding its rhetoric. One must seek to out-reform the reformers. 1BO10-PJM POLITICAL PRESENTATION-000011 case Document lbL?-Z l?lleG U/le/lb Page OT 154 Pageluar beS In developing this strategy, the program must be built block by block. Currently, such claims would fail, even though they are true. This is because the public has not yet become disillusioned with the new Government nor has the opposition enunciated its views on reform. The good news is that the ?elites? of Ukaine and the region are beginning to question the ability of the current government to accomplish its goals and they will be useful and necessary tools to any successful effort. 2. The Priorities of the Ukraine Electorate Today Before constructing any campaign plan it is important to know what the people of Ukraine want from its Government. The mood today is very optimistic. Today, Ukrainians have a very positive attitude about the direction of the country. 59% of the people believe the country is heading in the right direction with only 26% saying wrong direction. Every region of the country, except the South, believes this to be true with the positive views being strongest in Kyiv(75%) and in the When analyzed demographically, there are no signi?cant differences based on age, gender or education. Only when viewed on a class basis does a slight difference emerge with 60% of Middle Class and a Working Class believing the direction is right while only 49% of the Poor believe this to be true. Other than the poor, only the ethnic Russian segment holds a differing vieWpoint with 36% saying right direction and 47% saying wrong direction. It is important to note that when viewed through the party identi?cation prism, those who associate with the Party of Regions differing from all other parties in believing the country is heading in the wrong direction. Believing the country is headed in the right direction, the electorate we polled also believes that in the next 6 months life in the Ukraine is going to get better and that their personal situation will also improve. This expectation is fundamental to the political strategy that we will need to develop, the social and economic program we promote and the timing in which we surface the program. The public is very clear on how they expect to see a better life. It is because they believe that with a fundamental change in the framework of society the government will be better able to create an economic, social and legal environment that will improve their lives. The national survey found an overwhelming expectation by the Ukrainian voters that their new government demonstrate a deep and abiding commitment to creating a rule of law for Ukraine and to ensure that Ukraine remains a uni?ed nation. This attitude drives their expectations. Creating a ?rule of law" for Ukraine is universally viewed as the most important priority for the government with virtually no difference in the level of importance attached to this priority based on geography, age, education level, or socio- economic status. Again, it is important to note that only Russian nationals, voters in the South and Krym, Donetskaya and Luganskaya Oblasts, and Party of Region supporters have a disproportionate response to the priorities expressed by the rest of the electorate. This will be important when we analyze our election prospects and opporttmities. 1801 O-PJM POLITICAL PRESENTATION-000012 ease Document lbl?-Z l?lleG U/le/lb Page OT 154 PagelLJiFF be4 Within this atmosphere, the voters expect and are demanding that Government focus on policies that ?strengthen their personal ?nancial situation?, which they de?ne as keeping prices stable while keeping unemployment low and raising their standard of living (meaning wages and pensions). These are micro-economic expectations-issues that drive their daily lives. The public is n_ot focused on macro-economic issues such as re- privatization or trade or the ?scal policy of the new administration. Our national survey presented voters with 15 different options for government to focus its economic policies. The voters ?xated on 2 speci?c issues raising the standard of living and preventing unemployment from increasing. These two policies were viewed as the top priorities in every region of the country and among almost every segment of the electorate. The only notable exception was in Kyiv where the voters were very emphatic that the number one priority must be to ?crack down on corruption?- The signi?cance of this ?nding must be factored into our strategy. The people are focused on pocketbook issues but the media centered in Kyiv will be feeling the pressure of voters with a different agenda. corruption. We will need to be sensitive to the reform motivation that the elites will believe. because of where they live. is the most important issue. To do so will require us to be credible on reform in Kyiv but outside the capital, to stress solutions which are responsive to the real issues that motivate the public - wages and jobs. 3) Expectations Game It is in this context that it is important to understand the role that the public expects out of its government. When offered the choice between a government that acts primarily as an engine to power the economy or one that must make sure that the people's basic needs are met, 37% chose the safety net while only 17% selected the engine for the economy role. 43% were not certain. The signi?cance of this ?nding is that even though the electorate wants to look westward because they believe that doing so will enhance economic opportunity, they are not prepared to have economic polices that do not stress the ?safety net? role of government. So, when the Prime Minister promotes policies that are more socialistic than capitalistic it is playing well with the electorate even though it may diminish interest by westemers to invest in Ukraine. We will need to navigate between these very sharp differences as we structure our campaign strategy. Yushehenko is using rhetoric that is popular in the West while allowing the Prime Minister to execute policies that are inconsistent with his rhetoric but popular with voters. This will eventually result in Western criticism of the administrations economic policies. We can use this criticism to note the growing lack of con?dence in the Yushehenko/Tymoshenko administration and draw conclusions that their governance, not their policies, is causing a loss of western investment resulting in a negative impact on the growth of the Ukrainian economy. 1BO10-PJM POLITICAL PRESENTATION-000012 case Document lblS-Z l?lleG Ulle/lb Page OT 154 Pagelunr beb This same dichotomy can be seen in?uencing the decisions of this Government on the issue of ?re-privati7ation". While western governments are pressuring Yushchenko to re?'ain from any such policy, a clear majority of Ukrainian supporters of ?Our Ukraine? and the ?Tymoshenko Bloc? support such a program. This dilemma will create tensions in whichever block loses. If Yushchenko follows his announced policy to work with the current owners and not to re-tender or nationalize, a segment of his base will be disappointed. If he follows the direction of the Prime Minister and the State Property Commisioner Semcnyuk and recaptures the properties, the West will abandon him. From a political perspective, we should seek to drive this wedge between him and his base. The nationalistic tendency of the electorate is further demonstrated in the response to the issue of Kryvorizhstal. 56% of Ukrainians believe that the steel mill should be re- nalionalized while only 20% believe the current owners should be allowed to pay more to keep the asset and just 8% want a re-tender of the asset. Only in the east is there a plurality that favors the current owners being allowed to keep the asset Thus, when the Prime Minister and State Property Commissioner Speak to national assets belonging under government control, they are ?nding a receptive audience in the electorate. This popular support creates a real tension between the populist politics of the Prime Minister and Yushchenko?s campaign commitments to build a market economy. This is another clear example of the electorate?s motivation in December 2004. They wanted a change in leadership more than a change in policy. It re-enforces the notion that the 2004 election was about cleaning out a system more than changing the philosophical underpinnings of the system. Further con?ict inside the administration will ultimately undermine the publics support for this administration. This fact is critical to the creation of a campaign strategy for the 2006 Parliamentary elections. The pulse of the electorate is for reform but the heart of the electorate still yearns for a socialistic state that will protect them. This yearning creates a significant challenge to develop a winning election strategy while at the same time not dismissing the desire to look westward because the two goals westemization of Ukraine and a state control of the economy - are at odds with each other. The balance needs to be one that demonstrates sensitivity to the plight of the people while offering the hope of building an economy that will attract western investment. This balance can be found more easily in the rhetoric of a campaign rather than in the management of a Government. President Yushchenko is currently experiencing this pressure, while the Prime Minister is playing more to the politics of the populace with little concern for the inconsistencies or even the dilemma facing the President. In fact, it can be postulated that she has made a political calculation that this tension is the foundation upon which she shall carve her independence from the President while serving at his pleasure. At the point the tension becomes too intense. she will leave or be ?red and claim that the President is violating his commitments to the Orange Revolution. It is not an unwise strategy for her. 1801 O-PJM POLITICAL PRESENTATION-000011 case Document 155-2 l?lleG U/IZb/lt? Page 1U4 OT 154 beb 4. The National Leaders Perspective in Contrast The electorate has de?nite views on its political leaders. The intensity is strong and the approval attitudes are clearly delineating by the images established in the 2004 Presidential campaign. The positive ratings for the current leaders of the government, in contrast to the very negative ratings for the leadership of the previous government, are dramatic. The Chart on the following page captures this contrast dramatically. The current administration is still enjoying a signi?cant honeymoon with the electorate. No Never Heard Name . Qatar/93.1315 Olexander Mom: 57% 30% 13% Sviatoslav Piskum 14% 48% 35% 3% Petro Poroshenko 29% 37% 31% 3% Viktor Medvedchuk 12% 68% 20% 1% Vladimir Putin 53% 33% 15% Leonid Kuchma 6% 86% 8% Boris Koloesnikov 9% 38% 43% 1% Rina! Aluuctuv 12?16 43?26 34% 1 1?16 Victor Pinchuk 7% 51% 34% 8% Sergei Tyhipko 15% 50% 32% 3% Victor Yanukovich 31% 60% 8% Yulia Tymoshenko 67% 26% 8% Viktor Yushchenko 70% 22% 8% As is demonstrated by the chart, the most popular political ?gures are the President, the Prime Minister and the Speaker of the RADA. They are overwhelming popular across all segments of the electorate, showing decent support even in the heartland of the regions that originally opposed the Orange Revolution. The most unpopular politicians are those who were central to the previous government - President Kuchma, Viktor Medvedchuk, and Victor Yanukovich. The impact of the 1BO10-PJM POLITICAL case Document 155-2 l?lleG Ulle/lb Page lUb OT 154 PagelLJiFF th?/ Presidential election is still very strong. The public views the previous leaders as failures and bad people. Voters don?t just disagree with their past policies - they dislike them personally. The signi?cance of these lopsided numbers is what complicates the creation of a strategy for the lead up to the parliamentary elections. The most dif?cult time is going to be the remainder of 2005 because the electorate, with such strong support for the President and Prime Minister and such strong rejection of the leaders of the past, will give the current Administration the bene?t of the doubt in any debate with the leaders of the past. These ratings provide the Government with the latitude to do things that might have been totally unacceptable if taken by President Kuchma. The best example of this is the arrest of Boris Kolesnikov. Because Kolesnikov is a leader of the Party of Regions, his human rights and the treatment that he has received are not negatively impacting the image of the Government. In fact, 38% of the electorate believes the government was justi?ed and 42% have no opinion. The only region where the Government is viewed as being unjusti?ed is where the Party of Regions is strongest - the South. Even in the East and Southeast, public opinion is equally divided on the issue of political persecution. Kolesnikov has effectively become a symbol of the past regime. Because of Kolesnikov?s connection to the previous Government, the electorate is taking the position that the Yushenko admininstration was right. This trust in the decision- making of the Government on issues of human rights was totally absent in judging the Kuchma Administration. Even when expressing the belief that President Yushehenko personally approved the arrest (41% of voters) or that Prime Minister Tymoshenko approved it does not create an issue of political reprisal. Kuchma would have been cruci?ed in the media, both inside Ukraine and in the West, if he had treated a prominent leader of the opposition the way that Kolesnikov has been treated. The trust in the decision-making process of the Yushchenko Government creates great latitude to use the Government in an abusive way to advantage themselves for the upcoming elections. Many injustices will be tolerated by the electorate in the name of ?ghting corruption. While the strong approval ratings of the Government provide them with enormous discretionary authority to act, the attitudes toward the opposition create an equivalent restraint on their ability to respond, notwithstanding the correctness of their criticism. The intensity of the negative ratings remove the ability to credibly challenge the actions of the Government, even when they are as blatantly abusive as the treatment of Kolesnikov. This is especially problematic when the opposition leader is viewed by the electorate as a part of the corrupt past. In creating a strategy to oppose the actions of the Yushchenko Administration the messengers are as important as the message. If those who attack the Government are associated visibly with the previous regime, their message will be ignored, regardless of the merits of the message. 10 1BO10-PJM POLITICAL case Document lblS-Z l?lleG Ulle/lb Page lUb OT 154 Pagelunr beb This is most dramatically obvious in analyzing the electoral attitudes towards Victor Yanukovich. His ratings are among the most negative image ratings in the country. Not only do 60% of the electorate have an unfavorable opinion of him, the intensity of that view is overwhelming with 37% saying they strongly dislike him. These negatives are pervasive throughout the country. There is very little difference based on gender, age. education or perceived socio-economic class. 52% of rural voters strongly dislike him and 70% of rural voters hold these feelings. (When analyzed against the image of the Party of Regions, Yanukovich is a net 6% worse than the party. This will be discussed in further detail later in this paper.) With this level of disapproval, Yanukovich has no ability to drive a message. Any efforts to build a credible platform in opposition, to develop policy positions or legislative initiatives or lead a parliamentary campaign will never get off the ground. People will not accept any criticism if it is being spoken by Yanukovich. The feelings about President Kuchma are even worse. Thus, the construction of any plan for 2005 must be built around someone or some entity that is not associated with any of the leaders of the previous Government, especially Victor Yanukovich. The people have given on his role in Government and it is not going to change in this political cycle. President Yushchenko and Prime Minister Tymoshenko enjoy the exact opposite luxury. While his approval ratings will drop over time, the President is still bene?ting from the halo effect of his election. 70% of the electorate view him favorably. In areas of the country that he carried in the election his support is overwhelming - 84% of Kyiv, 90% in the West and 88% in the Center. Only in the South is his support below 50%. There is no gender gap and no age gap. The only signi?cant break is between ethnic Ukrainians (80% favor) and ethnic Russians (45% favor). His favorable image is driving his job approval. 66% of the electorate approve of thejob he is doing. The pro?le of hisjob approval follows that of his favorable image. The chart below rates the President on the key performance criteria that will be important in creating a Parliamentary campaign against his Government next year. 11 1BO10-PJM POLITICAL PRESENTATION-000017 case Document 155-2 l?lleG U/le/lb Page lU/ OT 154 Pagelunr ZDUU Yushehenko Job Performance Series Not a Good job Unsure Good job Creating a strong economic policy for the Ukraine 57% 27% 17% Providing a ?vision" for the future of the Ukraine 65% 20% 15% Creating a strong foreign policy for the Ukraine 68% 19% 12% Understanding the needs of people like me 55% 24% 21% Privatizing industry in the Ukraine 48% 37% 16% Ending corruption 64% 19% 17% Caring about the majority of Ukrainian people 56% 25% 20% The chart shows that the support of his performance is high and the disapproval is very low - too low to mount a credible campaign in opposition. However. the voters who are unsure on his job performance become the basis of whether such a campaign can be successful. There is enough uncertainty to create hope in opposition. The key to a successful election campaign is to focus on the right messages and have the right messengers. Analyzing the series of questions an interesting ?ndingjumps out. When the President is rated on themes of the Orange Revolution - vision for the future. ending corruption, caring about the people his ratings are strong. When rated on actual performance - privatizing industry, creating a strong economic policy his numbers drop. People are starting to see the disconnect between promises and performances and therein lies the opportunity to mount a successful effort next year. As time goes on and the Government continues to drift in the execution of its policies, the impatience of the public will begin to show. It must be assumed that even as this occurs that the President will be able to maintain his personal appeal. This is because he has already achieved his most important accomplishment as far as the electorate is concerned be vanquished the evil empire. However, his job approval will deteriorate if his Governments performance does not meet the expectations of the public to create a rule of law and to strengthen the personal ?nancial situation of the citizens. As it does deteriorate the opportunity will grow. It will be our role to focus public attention on these issues. Analyzing the pro?le and job approval of Prime Minister Tymoshenko shows a similar electorate rating. She is very popular as a personality (67% approve of her) and her job 12 1BO10-PJM POLITICAL case Document lblS-Z l?lleG Ulle/lb Page lUt? OT 154 Pagelunr ZDBU approval follows her favorable image. She, too, will suffer a deterioration from a lack of performance. The question is how we bring attention to the failing policies. In normal circumstances it is through the methodical promotion of a strategic message. The environment is right to raise already high expectations for the current government. Once the public becomes disillusioned we can begin to drive a more negative message. While it is too soon for such a message because the electorate is not ready to say that the job is not being done, there clearly is a message which we can organize and be prepared to promote. The biggest challenge is not the message. The biggest problem is the lack of a messenger. 5. Analysis of the Political Parties Having an appealing message is critical to a successful challenge of an incumbent Government. But, more important is having a credible messenger or conversely having an opponent who is not credible and therefore unable to promote its message. The 2004 Presidential election was a classic example of both factors. The Kuchma Government was a discredited and wholly unpopular regime. Notwithstanding the fact that the economy was growing at a level which should have been suf?cient to ensure a successful campaign for whoever carried the banner of the Administration, the candidate of the Kuchma campaign never gained traction on any set of issues. In fact, the principal base-of support for Yanukovich?s candidacy was from the establishment that had everything to lose if he lost. The support was not personal to Yanukovich. It was not driven by ideology. It was not rewarding competency. Rather, the principal basis of the overwhelming support for Yanukovich was founded in self-preservation of power and economic interest. Consequently, as the campaign heated up, the electorate that was not directly advantaged by the Kuchma Government was not listening to the message of Yanukovich. The success of the economic program which should have ensured his election never resonated with the public. Yanukovich?s designation as the candidate of the Administration poisoned his appeal as much as the dioxin poisoned the body of Yushchenko. The Party of the Regions, being associated as the party of Yanukovich, was similarly poisoned. appeal never broadened beyond the geographical limits of its genesis in the South. This limitation still exists today and must be addressed if it is going to be the vessel that is used to mount the 2006 Parliamentary campaign. The mirror opposite is re?ected in the images of the parties of the President and Prime Minister. This is evident from the chart below which chronicles the ?ndings of the National Survey. 13 1801 O-PJM POLITICAL PRESENTATION-000015 case Document 155-2 l?lleG Ulle/lb Page OT 154 PagelLJiFF No Never My Favorable Unfavorable 921M Heard Of Our Ukraine 63% 22% 15% 0% Socialist Party of Ukraine 49% 31% 21% 0% Communist Party of Ukraine 17% 68% l6% 0% United Socialist Democratic Party 17% 58% 24% l% Peoples Party of Ukraine (former Agrarian Party) 20% 30% 41% 8% Yulia Tymoshenko Bloc 61% 26% 13% 0% People?s Democratic Party- Party Of lndustrialists and Entrepreneurs 27% 28% 39% 6% Rukha 1 6% 45% 36% 2% Party of the Regions 25% 50% 24% 2% This chart reveals several important clues to the capabilities of the parties to do theirjob in attracting voters next year. The most obvious fact is that the President's popularity is clearly transferred to his party. Our Ukraine. In fact, it is the only party which maintains a truly ?national support base" in the country. With the exception of the South region. Our Ukraine receives a plurality of the vote in every other region of the country. It dominates in the Center and West where it receives over 50% of the vote and is very strong among rural men, the middle class, and voters who see corruption as the major issue facing Ukraine. Clearly, the party which is an extension of the President and not one that has historical strength has the credibility to be an effective messenger for the campaign themes to be advanced by the President as he seeks a Parliamentary majority. The good news from our standpoint is that because of the extremely close association of the President and the Party, as his job approval numbers decline, which they will, the appeal of the Party will be atlected. Given the favorable image of the President, which we can expect to remain high even as hisjob approval diminishes, it will be important to our strategy that we de- link the President from the candidates representing Our Ukraine _i_n_t_h_e election. This strategy will be developed as we get closer to the election period and events are more de?nitively set out. For now, it is suf?cient to understand that this will be a key objective of our political campaign strategy. An equally important objective of our campaign will be to de-link the Prime Minister from the President. Signi?cant in our survey is the fact that notwithstanding the personal 14 1BO10-PJM POLITICAL case Document lbl?-Z l?lleG U/le/lb Page llU OT 154 PagelLJiFF ZDBZ appeal of the Prime Minister and her job approval, her Party Block has not bene?ted. This is because the President is getting the bene?t of the success and it is translating to his Party. Tymoshenko de?nitely understands this; it is the principal reason why she is setting out differences on important issues with the President - like re-privatization, price controls, attacking Russian oil tycoons. On all of these issues Tymoshenko is speaking in favor of the position that the polls indicate are popularly embraced by the voters. She is trying to position herself as the guardian of the public interest and force Yushchenko to either embrace her initiatives or be seen as an obstacle. Wisely, the Prime Minister is not trying to draw rigid differences yet. Rather, she is setting the table and preparing for a moment, if it comes, when she can summarize the differences and position herself as the true guardian of the Orange Revolution. Her challenge is daunting. Her party has not gained much more appeal than it had at the time of the Presidential election. While she is seen as an important member of the ruling body of the Orange Revolution, Yushchenko is gaining the major national benefit in Party support. Tymoshenko Bloc Tymosh'enko?s bloc is regionally based most of her Party support found in the Center region and Kyiv. Her ballot strength drops dramatically in the South, Southeast, and East. Demographically, her support is centered around 18-39 women, women living in rural areas, part-time workers, and voters who want government to focus on improving social services. Clearly, her personal popularity is not contributing to ballot strength of the Bloc, unlike the impact that Yushchenko?s popularity is having on his party?s ballot strength. In fact, from Yushchenko?s standpoint today, Tymoshenko brings little to the electoral coalition in attracting voters that Yushchenko does not already have. Even among voters who have a favorable impression of her and her job performance, only l6% of them prefer her party to Our Ukraine while 56% of those voters would chose Our Ukraine over the Tymoshenko Bloc. The conclusion is that she brings very little to Yushchenko that he cannot get on his own. This will be an important fact in devising our strategy and our options. Socialist Party Of all of the other political parties not withstanding the new election rules, the one positioned to do well in the 2006 elections if it constructs the right strategy is the Socialist Party. Aside from Our Ukraine and the Tymoshenko Bloc, the Socialist Party is the only other political party in Ukraine that has a positive favorable to unfavorable ratio among the voters (48% favorable, 31% unfavorable). While the current ballot strength of the Party is quite limited overall, the party does have a signi?cant geographic base among voters in certain regions. In particular, in Kyiv it 15 1BO10-PJM POLITICAL PRESENTATION-000021 case Document lbl?-Z l?lleG U/le/lb Page OT 154 ZDBS polls 17% of the voters, just below that of the Tymoshenko Bloc. Over 60% of Our Ukraine and Tymoshenko Bloc voters indicate that they have a favorable impression of the Socialist Party. This fact indicates that as support for the Government erodes, the Socialist Party is in a position to take advantage of the erosion. Its success will depend on how it constructs its strategy and communicates its message. Currently, the fact that the popularity of its leader and the favorable image of the Socialist Party are not driving ballot indicates that two important facts. First, the Party?s voter base is supporting Our Ukraine and to a lesser extent the Tymoshenko Bloc because they are viewed as more credible governing parties. The second fact is that this is true because the Socialist Party has not de?ned itself as a credible alternative. This is the challenge of their election strategy. If they construct a credible program and articulate it, they can bene?t with an increased share of the ballot. The Socialist Party?s standing and opportunities are in clear contrast to the current position of the Party of Regions. The Party of Regions is suffering from its association with the Kuchma regime and the leadership of Victor Yanukovich. llowever, notwithstanding the negative impact of these two associations, the Party remains a viable political force and has the capacity to play a signi?cant role in the upcoming Parliamentary elections. Unlike the Socialist Party, though, the Party of Regions has more limited opportunities and much less room for error as it devises its political strategy. Party of Regions The Party of Regions currently receives 16% of the vote in the upcoming Parliamentary election which places it second to Our Ukraine and just above the Bloc. The reason it does better on the ballot than the Socialist Party, despite a less favorable image, is because the Party of Regions has a homogeneous base that is not a part of the Governing coalition. This base is narrowly de?ned that is distinguishable both demographically and geographically. The fundamental base of support for the Party is found almost exclusively among voters of Russian ethnicity. This fact signi?cantly narrows the ballot strength to a narrow regional base of support. This base is found in the South and Southeast where 30% of voters indicate they would vote for Party of Regions candidates. The Party of Regions support almost falls off the charts outside of these two regions. It gets barely 2% in Kyiv and only 6% in the Center. Among Ukrainian nationals, the Party image is fairly negative with 25% having a favorable image and 50% having an unfavorable view, while 49% of ethnic Russians view the Party favorably. This fact is what limits the upside potential of the Party of Regions to attract new voters outside of its regional and ethnic base. and Donetskaya drive the Party of Regions? favorable image. Urban voters are a bit more favorable to the Party than rural voters Only 22% of self-identi?ed ?working class? voters view the Party favorably, compared with 24% of the ?poor?. 16 1BO10-PJM POLITICAL PRESENTATION-000022 case 1 51: Document lbl?-Z l?lleG Ulle/lt? Page 112 OT 154 Pageluar Zb94 Among the reasons for this high unfavorable rating is the belief by a majority of voters that the Pam of Regions does not understand the needs of ?people like us?. On this issue there is a signi?cant gender gap with 60% of men believing the Party does not understand their needs, and 49% of women. Also, there is an age gap - the younger the voter, the more likely they feel that the Party does not understand their needs. Among the classes. 64% of the middle class, 53% of the working class and 46% of the poor hold this View. When asked which description best represents the Party of Regions in their minds, a plurality of voters said corruption, while 21% said ?party of the oligarchs?. The most favorable ?ndings were 13% saying strong leadership and 10% saying ?party of the working people?. These latter two descriptions are what is driving the 25% favorable image of the Party which is translating into a 16% ballot share. The Yanukovich Limitation With Victor Yanukovich as the Party Leader. the prospects for the Party of Regions diminish even more. Even though Yanukovich ran for President as the leader of a coalition that was broader than the Party of Regions, his net impact on the prospects of the Party of Regions to grow is not good. He has no positive coattail effect. In fact. his impact is a net negative on the Party. While Yanukovich has a- higher favorable rating than the Party of Regions more favorable), his negative rating is 100% higher than the Party. More importantly, in the areas that will be important to the Party to attract new voters, Yanukovich?s negatives are much higher 16% more unfavorable in the Center region, 10% more unfavorable in the Southeast, 10% more unfavorable among rural voters, 14% more among clerical workers, 11% more among the poor, and 13% more among Ukrainian nationals.) Yanukovich is limiting almost any opportunity for the Party of Regions to grow its voter support as the job approval ratings of the governing coalition diminish with the failure to ful?ll the expectations of the voters. The National Survey tested the appeal of Yanukovich as a candidate for Prime Minister in 2006. An overwhelming majority said that they would not like to see Yanukovich as Prime Minister ever again. This viCWpoint is consistent throughout the country with a plurality of voters in egery region saying ?no? to his candidacy. Incredibly, 72% of rural voters and 59% of urban voters totally reject his candidacy. Among ethnics the story is worse with 72% of Ukrainians and 40% of Russians saying they would never support his candidacy. Even among voters who have a favorable impression of Yanukovich only 67% would like to see him run for Prime Minister and only a small percentage of them say that would vote for him if he ran. 17 1BO10-PJM POLITICAL PRESENTATION-000022 case Document 155-2 l?lleG Ulle/lt? Page 115 OT 154 Pagelunr The intensity of these feelings is very strong. Consequently, the ability of Yanukovich to . help lead a campaign against the current administration will not only fail, but it will never gain any traction. His leadership into the campaign would probable signal the death knell of the Party and Coalition that he leads. Except for his limited base, few would pay any attention to his message, simply writing him off as a discredited, corrupt representative of the past. Any attacks on the failures of the Yushchenko Government would never resonate and therefore have little impact of attracting voters. If a credible alternative force were to emerge (like the Socialist Party), even the current base of support could move off the Party of Regions because the intensity of the ballot support is not as intense as the opposition to the current Government. So, if an alternative, credible opposition Party emerged, it could easily attract a signi?cant portion of the 13% of the ballot that the Party of Regions is getting in our National Survey. The prospects for many of the other parties currently represented in the RADA are equally as dim. The views of the electorate towards them are quite negative, especially for the Communist Party, the United Socialist Democratic Party and the Rukh Party. The ability of these parties to grow beyond their base is very limited. Many of the smaller parties could su?'er a failure to reach the threshold of 3% required to elect representatives to the next RADA. Par_tx Supmrt for Parliamentary Elections . Our Ukraine - 40% Party of the Regions - l6% Tymoshenko Bloc - 13% Socialist Party of Ukraine - 5% Communist Party of Ukraine - 3% USDP 2% People's Party of Ukraine - 1% Rukh - 0% Other political party - Would not vote - 5% Refused - 2% Undecided - l4% While this ballot breakdown probably represents the nadir of the Party of Regions prospects, the ability to grow its support cannot be assumed to be a natural consequence of the erosion of support for the Governing Coalition Parties, given the current feelings about the Party of Regions and 'its Leader. Waging a winning campaign will have to be founded on a creative strategy that incorporates a variety of options into the campaign plan. These options will be explored in a preliminary manner later in this Report. 18 1BO10-PJM POLITICAL PRESENTATION-000024 case Document lbl?-Z l?lleG U/le/lb Page 114 OT 154 PagelLJiFF 6. Analysis of the Organizational Structure of the Party of Regions The history of the Party of Regions re?ects a fusing of various regional political factions coming together in order to govern. The glue to the historical fusions was the parties in power seeking to cement their control of government. Ideology was secondary to maintaining power as a motivating in?uence. While the history is instructive, it is not necessary to delve into those events for the purposes of this audit. The party ceased to be a relevant issue when Viktor Yushchenko was elected President. At that moment, the raison d?etre holding the Party together vanished. This fact is signi?cant in that the means to maintain control and in?uence over the Party membership has been materially altered. The basis for the Party?s historical growth at the grassroots level was directly related to its ability to dispense favors. The ability of the Party to award jobs and to provide bene?ts emanated from the of?ce of Governor of the Oblasts and control of the national Government in Kyiv. Party platforms mattered little to the attraction of members. As a consequence. when the core factor in attracting members was eliminated with the loss of Yanukovich, the Party?s ability to grow and even to manage itself was signi?cantly damaged. Another relevant factor that is fundamental to the efforts to create a viable political party is the bifurcation of the management of the Party between Kyiv and the regions (mainly Donetsk). This was most evident in the management of the Yanukovich Presidential campaign and that management style continues today. The Party?s central headquarters is currently staffed by about 100 people but due to irregular funding the number has been diminishing. The management plan adopted at the Annual Party Congress held in March of2005 called for the ?mding of a plan to employ 3-5 staffers at each regional level and 1-2 people at each city and district level. All regional chapters and local organizations are supposed to be ?nanced both from the central HQ and through local ?nancial resources. RADA deputies are unof?cially funded by the Party. The central office of the Party is in Kyiv where most important meetings are held The national leadership works there. Most of the communication between the central IIQ and the regions is done telephonically. The leadership of the Party is elected. annually at the Party Congress which is the supreme body of governance for the Party. Its leadership is organized around a Chairman and Executive Committee. The structure of the current Executive Committee is as follows: 1BO10-PJM POLITICAL case Document lbl?-Z l?lleG U/le/lb Page 11b OT 154 Department of Organizational and Political Work Department of Strategic Planning, Public Relations, and Technologies Department of International Cooperation Department of lntemal Policy Department of Finance The current committee is mostly Donetsk based. Its members. as elected in March at the Party Congress, are: Victor Yanukovich - Chairman of the Party of Regions since April 2003 Raisa Bogatyreva - Chairwoman of ?Ukrainian Regions? fraction in Verhovna Rada 0 Vladimir Rybak - Deputy Chairman of the Party of Regions and Chairman of the Political Council Nikolai Azarov - Chairs the Political Council of the Party of Regions Vasilyi Georgievich Djarty - First Deputy Chairman of Political Executive Committee. Party of Regions 0 Andrey Klyuev - First Deputy Chairman, Party of Regions, Secretary of Political Council of the Party 0 Sergei Larin - Chief of Staff for. Political Executive Committee, Party of Regions Stanislav Valerianovich Skubashevsky - Head of Department of Organizational Operations, Party of Regions 0 Boris Kolesnikov Head of Donetsk chapter of the Party of Regions Anatolyi Bliznyuk ?Acting Head of Donetsk Chapter of the Party of Regions 0 Tatiana Bakhteeva Head of a Department of the Party of Regions? Political Council The RADA deputies faction currently consists of 35 members of which 29 were elected in ?single mandate districts? which will be abolished in the new Parliamentary elections of 2006 (meaning that all will be on a Party List). According to Party records, the breakdown of current party membership and organization by region is as follows: 20 1BO10-PJM POLITICAL case 1 51: Document 1?11ec1 Ulle/lb Page 11b OT 154 Pagelunr 21396 . Party Branch Membership Number of party 1 Number of organizations of city field level and district level organizations 1 Crimea 22,090 268 490 Republican Branch 2 Dnipropetrovs'k 41,345 66 612 Branch 3 Donets'k Branch 287,235 429 4,483 4 Zhytomyr Branch 18,416 610 825 5 19,002 175 280 Branch 6 Luhans'k Branch 54,156 217 446 7 Mykolayiv Branch 14,301 257 555 8 Odessa Branch 26,969 254 542 9 Poltava Branch 15,769 381 501 10 Kharkiv Branch 33,910 1 279 1,297 11 chastopol' City 3,935 i 6 92 Branch 1 12 Transcarpathia 7,061 i 244 571 Branch . . 13 Ivano-Frankivs'k 2,675 69 1 15 Branch 14 Kyiv Branch 7,203 234 475 15 Kirovohrad 15,661 342 1,379 Branch 16 Kyiv City Branch 39,845 1 1 451 17 L'viv Branch 2930 74 1,628 18 Kherson Branch 4979 79 483 19 Chemivtsi Branch 6211 1 47 166 20 Branch 14,446 286 969 21 Volyn Branch 2,751 209 284 22 Rivne Branch 5,998 27 165 23 6,303 I 203 423 24 Ternopil' Branch 2,902 1 03 190 25 Khmel'nyts'kyy 19,136 617 837 Branch - 26 Cherkasy Branch 6,541 ?69 173 27 Chemihiv Branch 4,072 23 210 Total; 685,842 5,579 18,642 From the political audit that was conducted, this organizational chart is not real and in its current condition cannot be relied upon to construct a Parliamentary campaign. 21 1BO10-PJM POLITICAL PRESENTATION-00002 case Document lbl?-Z l?lleG U/le/lb Page 11/ OT 154 ZDBB From a review of the Party records, the self described Party base is comprised of the . following groupings: I Ethnic Russians or mixed Russian-Ukrainians. used to living in traditional Russian-Ukrainian cultural and language environment. 0 People of the industrially-developed eastern, southern, and central areas of the country who are concerned with unfair distribution of the budget in favor of the western regions of Ukraine 0 Workers of former large state enterprises and their family members I Representatives of former nomenclature Representatives of older generations (not communist fanatics), war participants and veterans, afraid of revival of Bender nationalism and Crimean-Tatar lslamism. Citizens of the Donetsk Ohlast, where signi?cant positive changes in economic/ social spheres and industry became evident during the years of Yanukovich?s premiership. When checked against the ?ndings of the National Survey, these descriptions hold up. 'lhe relevance of the composition is the self-limiting aspect of the leaders own description. The pro?le of the Party generally can be summarized as: Speaks Russian or mixed Russian?Ukrainian at home Middle aged and older people Middle and low income pe0ple Dissatis?ed with Yushchenko and his policies Afraid of Ukraine becoming a NATO member Population from eastem and southern regions who are not happy with the new order. 7. Management Problems Confronting the Party of Regions Today The current status of the Party is organizational disarray. This disorganization emanates from the National HQ and re?ects much of the disfunctionality that was exhibited in the Yanukovich campaign. Several political forces were working for Yanukovich during the election. During the campaign, the Party of the Regions could rely on the administrative resources of the Prime Minister, which were represented, first of all, by governors and heads of district administrations who reported personally to Yanukovich. These peOple usually ?lled the posts not only of heads of Yanukovich?s regional and district campaign HQs. but also the heads of regional and local branches of the Party of Regions. Yanukovich also had access to the team of President Kuchma, mainly represented by of?cials of the federal level and people from political and business groups supporting the president, particularly the Dnepropetrovsk group (Pinchuk). 22 1BO10-PJM POLITICAL case Document lbL?-Z l?lleG Ulle/lt? Page 116 OT 154 Yanukovich also drew support from the Kyiv group of Medvedchuk and the Social- Democratic Party (united). Thus, the Party of the Regions was moved aside from the actual decision-making process during the election campaign as a result of coalition agreements between the top people (Yanukovich and Kuchma, Medvedchuk and other ?supporters.) activists were used mostly in common work and the Party received a paltry amount of ?nancing. As a result, the Party of the Regions took a back seat and did not take an active part in working on the campaign strategy. The party was ?nanced through Yanukovich-friendly oblast administrations, and never had a say in strategic or tactical campaign decisions. The party was called when some campaign work had to be done, and was assigned with delivery of campaign materials, posters, newspapers, organizing meetings, etc. But the real decisions were made at Yanukovieh HQ, and poor decisions were ample. There was no regional targeting. Thousands of campaign materials were sent to the oblasts that had no Party of Regions organizations at all. while very few campaign materials were sent to the best oblast party organizations that had excellent structure and could have delivered greater result. As a result, the Party did not seize the opportunity to develop as a larger political organization during the campaign. It failed to put together a quali?ed staff and train them and failed to build reliable organizational structures. A number of activists and rank-and- ?le party members feel today that they were betrayed and mistreated by the party leadership. Without the formal trappings of administration power, the party has little ability to develop policy alternatives that can shape the future debate. As would be expected, most of Yanukovich?s tactical supporters immediately dissociated themselves from him after his defeat. This left Yanukovich with his key Donetsk supporters who worked with him in Kyiv. Most of these individuals were elected to the Executive Council in March. The relevant fact is that the Party did not grow and the lifeblood of the organization has been withdrawn - the patronage emanating from the Oblast Governors. With the loss of jobs and a shrinking treasury, the ability of the Party HQ to maintain the loyalty of the Party Membership has greatly reduced. Coupled with the negative image of the Leadership of the Party and the failure of that leadership to organize an ef?cient regional and local structure. the Party is on the verge of disintegration. This will occur ?rst in the weakest regions and eventually work its way into the stronger regions. In order to stem this erosion a comprehensive rehabilitation program must be initiated. This program should be factored into a Parliamentary election plan, meaning whether the goal is compete regionally in coalition with others or to seek to build a national party for the 2006 elections. 23 1BO10-PJM POLITICAL case lblS-Z l?lleG U/le/lt? Page 119 OT 154 PagelL?-?F ZbUl . The requirements to build such a Party will be discussed in the portion of this report that focuses on strategy and recommendations. 24 1BO10-PJM POLITICAL Framework for Strategy for 2006 Elections .. 1BO10-PJM POLITICAL 000031 case Document lblS-Z l?lleG U/le/lt? Page OT 154 PagelL?-?F case Document lblS-Z l?lleG U/le/lt? Page 1Z1 OT 154 PagelL?-?F 1BO10-PJM POLITICAL PRESENTATION-000032 case Document lbl?-Z l?lleG Ulle/lt? Page 122 OT 154 Pagelunr Framework fer Developmegt of the StrategLfor 2006 Elections I. Options for Campaign Strategy The analysis of the state of the Party of Regions organizationally, as well as its voter appeal, limits the options available to us as we prepare the campaign strategy for the 2006 Parliamentary elections. Given the popularity of Yushchenko Government, the unpopularity of the Party of Regions throughout most of Ukraine, the negative appeal of the leader of the Party and the issue agenda of the electorate, the range of options is signi?cantly limited. Factoring in the organizational de?ciencies of the Party of Regions creates even more limitations. These organizational limitations need to be addressed immediately in order to calibrate the allocation of resources of the campaign. All of the options will require the Party to understand what it has to offer and develop the skill sets necessary to deliver what it needs to do in order to be relevant in the campaign. Given this fact, we shall ?rst address what needs to be done to modernize the Party?s capabilities and put it in a position to compete effectively. 2. Reorganizing the Party of Regions A. Replacement ol'the Leader ofthe Party Before addressing what needs to be done to improve the organizational capabilities it is necessary to address the leadership factor. From the analysis set out in the previous section of this Report, the answer to the problem is clear - Victor Yanukovich must be replaced. He is an impenetrable obstacle to success. He shuts down the ability of the Party to improve or change its image. His presence removes almost all options of uniting in coalition with other parties to build an opposition coalition. His management style is anathema to building a grassroots organization. IIis negative image signi?cantly affects the ability to promote the messages necessary to attract disgruntled voters who have lost faith in the Orange Revolution. His background and record will completely block the effective dissemination of the campaign messages. His voter appeal reduces the Party to a very limited regional presence that is ethnically based with little room for growth. Even with the removal of Yanukovich the task of re-building the image of the Party of Regions will be challenging. appeal is only marginally more attractive as the analysis has demonstrated. However, with his removal a campaign can be organized to manifest a change in the image and message of the Party. His removal provides the impetus and 25 1BO10-PJM POLITICAL PRESENTATION-000032 case Document lbL?-Z l?lleG Ulle/lt? Page 125 OT 154 ZbUb interest to grab the attention of the electorate and to signal that the Party of Regions has recognized its main problem and moved to remedy the matter. The means by which Yanukovich is removed, who replaces him and how we promote the change are vital to the successful transition. The planning is critical and must be undertaken carefully. The change in leadership is not a desired objective. It is a fundamental requirement. Failure to make the change will put us on a course of trying to minimize the speed of the erosion of support and credibility. But, the fact that the base will erode further is inevitable without the change of leadership. Delay in making the change will also signi?cantly limit our options. The longer it takes to effectuate the change, the more difficult it will be to change the image in time to have the greatest impact on the election. In replacing Yanukovich, the successor?s pro?le is relevant. There are 2 important considerations that should be factored into the decision process. First is the background of the individual and second is where the individual is from. A New Leadership Pro?le The background issue should focus on whether the replacement is a current political activist and leader or a prominent Ukrainian with limited historical connection to the Kuchma Administration or even the Party of Regions. The merits of such a pro?le are obvious in trying to build a new image. Having a ?gure with strong economic credentials can be more valuable than having a leader with. political credibility. The political credibility can be built in the campaign. But, given the importance of the economic issues to the electorate and where we can expect the Yushchenko Administration to have vulnerabilities, such a pro?le can be very valuable in rebuilding the image of the Party. It should be noted that a business pro?le should only be considered if that individual is not connected to a company that is a target of rc-privatization. Ultimately, the re-privatization issue will be resolved, and most likely before the 2006 elections. However, the timing of that resolution does not comport with the timing of when we need to make the change. The change must occur immediately. Re-privatization will take time to implement, even with an agreement between the Government and businesses reached in the next month. The geographical issue should also be considered, although it is not as vital as the pro?le. Given that the base of the current Party appeal is geographically limited, the two considerations are to try to expand the appeal or to play to where the current strength is located. An important in?uence on this choice is whether the campaign strategy is going to be national in scope or an association with other regional parties to be a national in?uence. The discussion on this point will follow in this Report. The recommendation that will be made later in this paper is to build a regional strategy. The rationale will be presented in the relevant section of the Report. 26 1BO10-PJM POLITICAL PRESENTATION-000031 case Document lbl?-Z l?lleCl U/le/lt? Page 124 OT 154 Pagelunr ZbUb Given this regional strategy, it is recommended that the replacement candidate come from the region where the Party?s support is based, either the South or Southeast. Recommendation: A replacement program of the Party Leader must occur immediately. The means by which the change occurs is critical to the success of the replacement as is the identity of the successor. The candidate should be from the South or Southeast regions and ideally have limited association with the previous government. If the Party of the Regions cannot reform its own organization why do we believe we can convince the voters that they can deliver on their top priority reforming government. B. Organizational Re-structuring Even considering all of its current dif?culties, the Party of Regions remains a powerful and organized political force in Ukraine. The problem is that as it is currently constituted and with the direction it is presently heading, its relevancy and attraction will rapidly disintegrate without a major overhaul organizational. The Party has one of the more developed regional party structures in Ukraine. It exists in every oblast with some semblance of staf?ng throughout the structure. In varying degrees of efficiency, the Party still maintains of?ces, communications, and quali?ed personnel. We must build on our core capabilities ?rst. With strategic guidance from the national headquarters, the organizational effort can double as it unfolds into a campaign structure. The main dif?culty confronting the restructuring of the Party is the shortage of time to accomplish the priorities essential to run a credible Parliamentary election campaign. The efforts which must be implemented this year include: 1. the identifying training of the regional political leaders. 2. infusing leadership with updated political methods, communications tools and materials to work with party leaders and voters, 3. the development of a program of new ideas to offer a credible alternative to the voters, and 4. the revising of the image of the Party. The ?rst requirement is to identify the areas where we need to build the organizational structure to compete in the Parliamentary core concept to our strategy is that we are going to build the best regional Party operation for this election cycle. We will build a more national Party capability in 2006 after the elections From the audit that we conducted, we have identi?ed 11 regional organizations with strong potential. They still have active leadership, infrastructure support (of?ces, telephones, vehicles. and a certain number of the members who work and get salaries, 27 1BO10-PJM POLITICAL case Document lbl?-Z l?lleG U/le/lb Page le OT 154 PagelLJiFF and are ready to start aggressive political activities). Those regions are Crimea, Dnipropetrovsk, Donetsk, Zhytomyr, Luhansk, Mykolayiv, Odessa, Poltava, Kharkiv, and Sevastopol City. These 1] regions coincide with the areas that we are prioritizing our efforts from a strategy standpoint based on the National Survey. The likelihood of developing our training and resource allocation beyond these 11 areas is remote for this Parliamentary election. We will maintain a connection to the other 16 organizations because there is no need to dismiss them. However, ?nancial planning, candidate recruitment, resource allocation and most other organizational efforts will center on building the best Party operations and communications structure possible. It will be in these I 1 regions that the predominant representation of the Party of Regions in the new RADA will come from. The political audit found that 8 organizations have medium potential with active leadership, infrastructure support. and personnel, but are hesitant to support the party in the framework of the current situation. Additionally, the audit determined that there are 8 party organizations with very little potential. They are run by former regional administrative leaders who have been dismissed by the new government and, following their dismissal, have lost interest in the party?s activities or are afraid of working in the party. However, these areas still have some assets. From a priority standpoint, the 1 1 regional organizations should receive the initial emphasis of the training and re-structuring. Whether we need to penetrate any deeper into the other regions will be dependent on what is required to re-organize the targeted regions. This activity can commence even while the Leader question is being resolved. The training and restructuring will look at a series of issues, including the current state of ?nancial and organization capabilities, identi?cation of regional and local political operatives, training of those operatives, development of a system to revise the communication program from the regional HQ to the local levels and tie more directly into the national Headquarters. ln structuring any deals with other Parties to organize an election coalition, the strength of thesell regions will be what the Party of Regions brings to the table. While we will function and build regionally we must act and be perceived as a national party. Beyond reorganizing the regional of?ces, a focus needs to be placed on improving the communications between the Party Central HQ and the regional of?ces and the voters. The training program will include development of materials on all necessary political organizing and voter contact and training of the leadership on how to effectively use the materials. 28 1BO10-PJM POLITICAL PRESENTATION-0000M case Document 155-2 l?lleG U/IZb/lt? Page le OT 154 ZbUt? This component of the program will include: 1. Activation of the Patty?s activities (various regional and local conferences, seminars and trainings) so that the proposals to develop the new program and platform of the Party come from the grassroots level, 2. A National Conference to prepare the agenda for a new National Party Congress, which will assemble the best 50-100 people nationally. widely publicized as ?different people using different approaches and creative thinking to revive the Party and make it closer to the people. and establishing communication links between grassroots organizations and ordinary people, 3. A media campaign presenting these regional and local conferences as signs of the revival, 4. A new National Congress 500 to 1000 people, held in October, that will adopt the new agenda, program of the party, platform of the party. and approve the block strategy of preparation for the elections. It will attract attention of Ukrainian and western mass media, 5. A massive information campaign following the Congress. showing that it is not a Regional. but a NATIONAL party offering new strategic solutions for the country, including new regional people from all around Ukraine. Obviously, given the ll regions focus, the national nature of this media strategy is meant to convey a national presence even though we are not financing and building such an entity for this election, 6. Another National Congress (as required by the law) to approve of the party coalition lists that produce the of?cial party list. While changing the method of operations and training the personnel, it will be necessary to review the central components of our Party Platform and to modernize it to re?ect the needs of the upcoming legislative session and Parliamentary campaign. The regional conferences and Party Congresses noted above will be the means by which we update our platform and make it more voter-responsive. In a similar vein, it is necessary to organize an opposition research program to track the legislative record of the Government and identify the broken promises and abuses of power. Additionally, we will need to develop a system for composing the party list that is consistent with where we are applying our resources and where we are depending on the coalition members to produce. The system must include the criteria and procedures used in forming this list. and how our selections process serves the needs to form a wider coalition. With this new restructuring program, we will then be in position to promote the ?new? Party of Regions new leadership, new platform, new look, new image. A media blitz, fashioned off a western model, will be implemented in the Fall to promote this new image. It is a central component of the Parliamentary election plan because it begins the re-positioning necessary to make the Party of Regions more acceptable to the electorate. 29 1BO10-PJM POLITICAL PRESENTATION-000037 case Document lbl?-Z l?lleG U/IZb/lb Page 12/ OT 154 PagelLJiFF ZDUB . 3. Developing the Electoral Strategy for the Parliamentary Elections Even accomplishing the objectives of the re-structuring of the organization and image of the Party, it will be near impossible to conduct a national campaign to capture control of the Parliament based primarily on the Party of Regions political appeal. As the Survey research has clearly demonstrated, the upside potential for the Party outside of its base areas is very limited. Even with a new image, there is not enough time to credibly persuade the voters in other regions of Ukraine that the new Party of Regions is ?the real thing", especially with the enormous pepularity levels of the current Administration. This recognition demands a piecemeal strategy to electing enough RADA members to be a real force in the new Parliament. There are 3 real options to be considered. All have certain attractions and disadvantages. Incorporated in all 3 options is the new method of electing Parliamentarians. Under the new law, Parliamentarians are elected off of a national slate approved by the Party subject to a pro rata allocation a?er attaining the qualifying threshold of 3% of the total vote cast. While this may not seem like a very high threshold, only 4 parties currently meet that threshold in our national Survey with a full quarter of the electorate saying they are uncertain how they will vote. This undecided number is enough to give Our Ukraine an absolute majority. More likely, if the Our Ukraine and Tymoshenko coalition holds, . the undecided will give the coalition a majority government. In any event, dependent on the state of the economy, our ability to shake the voter's con?dence in the economic performance of the Govemment is dependent on the successful retooling of the Party of Regions image leading to a successful agreement with other parties to run as a team, increases chances of attaining majority control are theorctorically in play. More likely, a strong Minority Coalition can be elected and would be strong enough to protect interests and avoid the continued settling of political scores. A. Buildinga Minorig? Coalition Option This option envisions attracting enough partners to form a credible Opposition Slate to run against the current Governing Coalition. It assumes that the current members maintain their commitment to run as a team. This assumption is not a ?sure" thing but for purposes of this Option, it is treated as a given. The Goal would be to use the Party of Regions strength in the South and Southeast as the foundation. Then, we will need to identify opportunistic partnerships with lesser parties who may have dif?culty reaching the 3 percent threshold on their own. The presumption is that with ?nancial support and some political voter assistance by the Party of Regions that smaller parties? electoral chances would be enhanced and in so doing add to the RADA members in opposition led by the Party of Regions. 1BO10-PJM POLITICAL PRESENTATION-000038 case Document lbl?-Z l?lleG U/le/lb Page 126 OT 154 PagelLJiFF ZblU This Option will require close co-operation between the members of the coalition and ?nancial and training resources dedicated to assisting the members. The risks are that after the election successful members could bolt the Party. Even if successful, the Option assumes that the Party of Regions is in the minority. If there is a signi?cant erosion of the base of the Governing Coalition, the prospects for gaining some foothold in the Governing Coalition is possible. This outcome will require a deal being struck with most of the smaller parties, and probably riding the appeal of the Socialist Party, especially given the fact that the Socialist Party is the only other favorably viewed political party. This could change but in all likelihood will still be the same later this year. The key question regarding the Socialist Party is can they get their act together to advantage itself of its reputation and would it be willing to become a part of such an arrangement? B. Running Alone Option This Option assumes that the Party is not attractive to any potential coalition partner and must run alone. This Option will not dramatically alter the plan called for in the re- organization of the party structure and image. However, instead of spreading some of the ?nancial resources to other groups, the money and e??orts are focused in the 11 targeted regions and geared to get our percentage number up. Given the revised election laws, getting a large percentage of the vote in one region will have the same result of getting a more spread out vote throughout the country. The regionally disproportional vote is not relevant, only the absolute percentage against the ?eld. By concentrating considerable resources where the image is already strong and framing the campaign in such a way that it will produce a high turnout locally for the Party of Regions, the Party can emerge as the strongest opposition party and be in a position to build off the work in 2005 leading to the next Presidential election. C. The ?Big Deal Coalition In analyzing all options, there is a Iongshot option that should not be ignored, making a deal with President Yushchenko and running as a member of his coalition. The principal argument in support of this deal is that the only Party in the Country which has something to offer in a deal with Our Ukraine is the Party of Regions. It is the only Party whose support is unattainable by Our Ukraine. The pro?le of the two political parties creates the most uni?ed ticket of candidates, regionally and ethnically. By creating such a coalition, the Our Ukraine Party will ensure its majority position in the Government and can lay claim to a willingness to forget the past, unite the country and move forward in partnership to build a stable society founded on the rule of law and a market economy. 31 1BO10-PJM POLITICAL PRESENTATION-000035 case Document l?lleO Ulle/lt? Page 129 OT 154 Pagelunr While such a coalition would seem, on first blush, to be dif?cult for the Party of Regions to deliver its voter base given the philosophical differences, upon closer analysis it is very doable. As has been discussed earlier, the real glue to the Party of Regions over the past 5 years has been its ability to guarantee its members that they would have access to the bene?ts of controlling the reins of government. The Party has never been held together by an ideological philosophy. It has always been opportunistic in what it is offering its members. This deal is totally consistent with that history. The fact that the deal is with the enemy is not as troubling to our base as it will be to Yushchenko?s base. They are much more idealistic. The case will have to be made by the President that the coalition ensures the ultimate success of the revolution by making the Party of Regions ?an orange party? and keeping control of the key mechanisms of power in the hands of the original leaders of the revolution. He can also point to the purging of the corrupt elements of the Party Leadership, as represented by Yanukovich. as completing the defeat of the old regime and with this new partnership ensuring that those old elements will never have an opportunity to return to power. While it is likely that some of the base support of Our Ukraine will never accept such a deal, most of it would follow Yushchenko. Coupled with the voter base delivered by the Party of Regions, even with this erosion, the coalition could ?nd itself to be a Majority Coalition without any other parties. This Option is the most rewarding for the Party of Regions and its principal backers. It gives the Party a seat at the governing table at a time when it is not ready to be the majority partner. It provides safety for the assets of the principal backers of the Party of Regions by virtue of membership in the Government. It provides the Party of Regions the public platform and time that it needs to mature its new generation of leaders and finally it positions the Party to take over control of the Government during the course of the next election. For Yushchenko. he gets credit with Ukraine and the world for uniting his country and he gets the political support he needs to complete his reforms of government and the economy. These accomplishments will create his place in history. While the ability to strike this deal is a long-shot, the bene?ts that accrue to the Party of Regions are well worth the effort. Of the 3 Options, this is one that guarantees what we are looking for. It should be thoroughly explored. 4. Timetable Each of the elements of this program has its own schedule. They interact with each other but must be pursued independently given the time constraints of getting everything done in the time required. 32 1BO10-PJM POLITICAL PRESENTATION-0000M case Document lbl?-Z l?lleG Ulle/lt? Page 15U OT 154 The overall political plan for the actual Parliamentary elections will be constructed based on a National Survey that will measure in a more meaningful time frame the voter attitudes on the Administration and the completion of the re-organization of the Party of the Regions. The creation of an election coalition does not need to be determined until we are in the next phase of the strategy although the groundwork for all options, including the ?nancial commitments and identi?cation of potential partners should be on?going. A. The Rc-organizalion Phase This is the next phase into which we are entering. During this phase, we must complete the change of leadership of the Party of Regions, begin the training of party operatives, organize the communications program for the Party of Regions, develop the policy program with the regional leadership and identify a legislative strategy for the Fall. All of this activity must be completed by September 15. It is anticipated that. as this phase is concluding. we will conduct another National Survey to measure the impact of the re-organization efforts on the Party?s appeal and image and to update the research on voter opinions of the Governing Coalition. By this time, the halo effect of the election will be gone and people will be making judgments on the performance and competence of the Government. This information will be critical to the main objectives of the next phase. B. The Deal Making Phase This is when ?nalize how .we will go into the Parliamentary elections. The key actions to be taken during this phase revolve around where we are going to compete actively, with whom we will seek partnership, the creation of the National list and the build-out of the communications and image-building effort for the new Party. The national Congress and regional congresses will occur during this time period. All of this activity must be completed by the beginning of the election period which will be some time in November. Once we have completed these actions, we will do the ?nal National Survey. It will measure public reaction to our nominees, our election partners, and our new image. Our General Election Campaign Strategy and tactical plan will be developed from this Survey. At the completion of this Phase, we are into the Parliamentary Elections. 33 1BO10-PJM POLITICAL PRESENTATION-000041 case Document lbl?-Z l?lleG U/le/lt? Page 15]. OT 154 Pagelunr Zb15 . C. The Parliamentary Elections This Phase is the elections phase. The management of the campaign, the strategy of the campaign and the tactical application of the resources of the campaign will be driven by a campaign plan that is written off of the Deal Phase survey. We will update our strategy based on tracking polls that will be conducted on a weekly basis for the purpose of ?ne tuning where we are spending our time and resources based on how the campaign is resonating with the public. Based on who our coalition partners are, we will have an active international component to the campaign to ensure that we avoid the pitfalls that impacted the Yanukovich campaign. The strategy behind the international efforts will be set out in the Campaign Strategy Plan. This Phase is completed on Election Day. If we successfully implement our plan, there will be no need for an unanticipated round of elections!! 34 1BO10-PJM POLITICAL PRESENTATION-000041 a: :1 case Document 1535-2 l?lleG U/IZb/ltj Page 152 OT 154 Pagelunr Zbl4 1BO10-PJM POLITICAL PRESENTATION-000043 case Document lb5-Z l?lleG U/IZb/ltj Page 155 OT 154 Pagelunr 1BO10-PJM POLITICAL PRESENTATION-000044 case Document lbl?-Z l?lleG Ulle/lt? Page 154 OT 154 PagelUl-?F tea-e? IV. Summary This document re?ects considerable research and analysis of the ?ndings of that research. However, politics is as much an an as a science and the successful application of the recommendations of this plan will require considerable attention to detail and timing. The core recommendations of this document are very big decisions. Taking Yanukovich out of power is not going to be easy but is absolutely necessary for any successful implementation of the strategy. If he remains in power, the Party of Regions will be buried in this election. Removing him and replacing him with a new face creates opportunity. But ?nding the new face will not be easy. The pro?le must be someone credible but not connected to the old regime. Getting someone to take this position may be as dif?cult as identifying that person. Building a new organization in the time required will require identifying party leaders, getting them to commit to a program of training and politics during the summer period and motivating them to work very hard during a phase when the likelihood for success will not be very apparent to the uneducated participant. Finally, cutting a deal with President Yushehenko (as the preferred partner) will most likely be the most difficult task. But, the benefit of such a deal guarantees that one day, in the not too distant future, we will govern Ukraine again. In assessing the seemingly impossibility of accomplishing these objectives it is important to realize that the seemingly impossible can come true if planned correctly, executed and ?nanced efficiently and promoted correctly. To those who say this is too much of a long shot, I would simply refer them to Kyiv and ask this simple question: ?One year ago today, who would have ever forecast that the President of Ukraine would be Victor Yushchenko?? The impossible may seem like a dream, but dreams do come true! 35 1BO10-PJM POLITICAL