Ukraine’s Leading Duo Make Show of Unity to Defuse Leak Scandal

(Bloomberg) -- Ukraine’s top politicians cemented a bond of mutual loyalty when the president rejected the resignation of his prime minister, who had offered to quit after being caught on tape criticizing his boss’s grasp of the economy.

The move to quash the scandal may strengthen confidence in the efforts of President Volodymyr Zelenskiy and his right-hand man, Premier Oleksiy Honcharuk, as they tackle challenges less than a year into their partnership.

They include healing an economy that plunged into recession after a 2014 revolution and mending ties with Russia following the Kremlin’s annexation of Crimea and support for a separatist rebellion in Ukraine’s east.

Zelenskiy acknowledged he had received Honcharuk’s resignation offer and noted it was “linked to the latest scandal and, let’s say, unpleasant situation.” The president said set a list of tasks for the cabinet and asked his premier to replace ministers that he considered “weak” but also said it wasn’t time to shake up the country.

“Society in general and I personally granted you and the government a high level of confidence. It seems to me you haven’t repaid that yet, and you have sufficient energy to do so,” Zelenskiy said in a statement. “It seems to me right if I give a chance to you and a chance to your cabinet.”

The comments from Honcharuk, a 35-year-old handpicked by the president to lead the economic overhaul, highlights a the youth of the less-than year-old administration. On the tapes, ministers and central bankers discussed their struggles in explaining the currency market and economic trends to the president.

‘Sort It Out’

At the same time, the scandal is relatively benign compared to leaks in Ukraine’s past that included politicians discussing corruption -- and even murder. And Zelenskiy, a former comedian who entered politics just a year ago, ran on his willingness to introduce change rather than his ability to understand the intricacies of monetary policy and financial engineering.

“We are one team,” Honcharuk said in parliament Friday after announcing his offer to resign. “We all got into parliament and into government to change the country thanks to this person, thanks to Volodymyr Zelenskiy.”

Even though Honcharuk is staying on, the leak has exposed the challenges that Zelenskiy faces at the head of a former Soviet country where billionaire oligarchs, Vladimir Putin, the European Union and the U.S. are wrangling for influence.

Ukraine’s currency, the hryvnia, fell to a two-month low against the dollar, taking this year’s decline to 2.1%. Last year, the currency was the world’s best performer with a 16% gain.

On the tape, a man with a voice that sounds like Honcharuk said Zelenskiy’s economic knowledge is limited and suggests illustrating the effects of a stronger hryvnia and slower inflation to the president through the price of a popular salad.

One Team

Honcharuk thanked Zelenskiy for his confidence after his offer was rejected. Earlier, in a Facebook post, he hailed the government’s achievements, including renewing a financial aid agreement with the International Monetary Fund and a natural-gas transit deal with Russia.

Those have come amid setbacks as well, including Zelenskiy’s involvement in the phone call at the center of the impeachment of U.S. President Donald Trump and a close relationship with Ukraine’s richest man, Igor Kolomoisky, who is fighting to take back control of the nation’s biggest bank after its nationalization and near collapse.

Honcharuk, a lawyer who led Zelenskiy’s economic team after the president won last year’s election, was appointed prime minister in August. Before that, he led an NGO aimed at improving the investment climate.

The premier flashed a confident smile when he and his ministers appeared in parliament for a weekly Q&A session Friday. He refused to answer questions, and dozens of lawmakers shouted “Shame on you!” as he left the assembly. But he made his allegiance clear.

“We all respect” Zelenskiy, “and for us it’s very important to have 100% trust inside the team,” Honcharuk told the assembly before leaving. “We are ready to do much more together with you, but for that we must be united.”

--With assistance from Marton Eder.

To contact the reporters on this story: Andrea Dudik in Prague at adudik@bloomberg.net;Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net;Daryna Krasnolutska in Kyiv at dkrasnolutsk@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andrea Dudik, Michael Winfrey

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