Viktor Yanukovych has won the Ukrainian presidential election, leading by a 3 ppt margin with 86% of the votes counted. Yanukovych received 48.5% vs. 45.8% for Tymoshenko. All six exit polls give Yanukovych a 3-5 ppt advantage. We think this is a solid lead that will prevent Tymoshenko from claiming electoral fraud and staging street protests.

Yanukovych’s win means that he will try to form a new coalition among the existing parties rather than call fresh parliamentary elections. The results of such elections would be unpredictable given his small margin over Tymoshenko and the strong showing of new politicians in the first round. A new parliamentary coalition means that a new cabinet will replace Tymoshenko’s government. We foresee a quick transfer of power through a new coalition rather than fresh elections or protracted fighting between Tymoshenko’s government and the new president, as we believe that the consolidation of the president’s and government’s powers will result in a quick and efficient decision-making process.

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