CEPI Ukraine Watch

Week of December 5-December 12

Photo: CreativeCommons/ Trey Ratcliff

15. 12. 2014
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This is the latest in a series of CEPI weekly digest of notable local and international news and analyses covering the Ukraine crisis, all available in English. The CEPI Ukraine Watch focuses on domestic politics, reforms, energy and security developments. Published at www.cepolicy.org

 

Novaya Gazeta has reported that Russia has abandoned the idea of the eastern regions of Ukraine becoming independent, and is trying to push them back under the Kyiv control, under any terms of autonomy.

Novoe Vremja has concluded that new government will either get serious about reforms, or it will be swept.  The newly elected MP Serhiy Leshchenko has shared his “humiliating” 10 days parliamentaryexperience. On December 6, hundreds of people stormed the Regional State Administration building in Vinnytsia, President Poroshenko hometown. LIGABusinessInform is trying to find out what happened.

Different interests of different groups are fuelling the struggle for coal supply imports, Insider reports.Ukrayinska Pravda has interviewed Prosecutor General Vitaly Yarema (2nd part of interview here).

Verkhovna Rada endorsed government program. Insider has reported that some coalition deputies refused to vote for it since it does not take into account entire paragraphs of the coalition agreement. Rada has endorsed the document only after President Poroshenko has interfered. Glavcom’s analysis analyses Ukraine’s triumvirate, Insider is offering own insight about the forming power relations.

David Stern of BBC writes that Ukraine underplays role of far right in conflict while not buying the Russian line either. Anton Shekhovtsov explains how cronyism exploits Ukrainian neo-NazisLevy Bereg has interviewed Andriy Biletsky, newly elected MP and commander of Azov Battalion.

US Congress has passed Ukraine Freedom Support Act of 2014 – after some changes. In particular, the provision on granting Ukraine the major non-NATO Ally status was removed from the document, while the wording on sanctions against Russia was amended. The Act provides for the allocation of $350 million in military support to Ukraine, including in the form of defensive arms supplies as well as supporting its energy industries and civil society. Under the procedure, for the document to be finally approved, it has to be signed by President Obama. Russian Foreign Ministry criticised a bill on Ukraine, saying Washington was doing its utmost to “destroy the carcass of cooperation” between the two countries. The bill authorizes the Obama administration to impose new sanctions on Russia’s state arms exporter Rosobornexport and state-controlled natural gas producer Gazprom if it determines that Russia is withholding significant natural gas supplies from NATO members or from Ukraine, Georgia and Moldova.

1. POLITICAL DEVELOPMENT

Rada has revoted leading positions in committees: Resolution to remove former members of the Party of Regions who voted for so called “dictatorial laws” from leading positions in Rada committees was adopted by deputies.

Poroshenko Bloc proposes parliament criminalize call to disobedience: MP Iryna Friz (BPP) has proposed criminalizing the call to disobedience and refusal by law enforcement officers and military personnel to fulfil a lawful superior order. The bill retains the possibility of avoiding liability in cases of calls related unlawful superior orders that are contrary to the Constitution of Ukraine.

President Poroshenko visited Australia: Australian PM Tony Abbott and President Poroshenko have discussed a broad agenda, including cooperation in the energy sector – the possibility to use Australian uranium at Ukrainian nuclear power plants and coal deliveries to Ukraine. Abbott announced the decision to provide the Ukrainian Armed Forces with assistance worth over $2 million.

Yuriy Kosiuk leaving the post of first deputy head of the Presidential Administration: Kosiuk was dismissed under order of President Poroshenko.

Radicals demand resignation of Zaporizhia mayor: Several hundred Zaporizhia residents led by the leader of the Radical Party Oleh Liashko and a group of Radical Party parliamentarians walked into a session room at the Zaporizhia City Council while the council was in session, to demand the resignation of the city’s mayor Oleksandr Sin.

Verkhovna Rada urges Kremlin to release Savchenko: Verkhovna Rada has approved an address to the Russian leadership demanding that Ukrainian pilot and parliamentarian Nadia Savchenko and all other Ukrainian hostages are released.

2. SECURITY UPDATE

Over 1,250 Ukrainian servicemen killed in hostilities in Donbas – Poroshenko: The combat activities in eastern Ukraine have claimed the lives of 1,252 Ukrainian servicemen, President Poroshenko has said. A total of 192 Ukrainian servicemen have been since a ceasefire was declared there in September, General Staff Chief Viktor Muzhenko said.

French President Francois Hollande met with Russia’s Vladimir Putin: “I very much hope that in the near future we will have a final cease-fire agreement”, Putin said after meeting. “Without a fully-implemented truce, it is difficult to picture Ukraine as a territorially integral country, and Russia, as is well-known, supports the territorial integrity of Ukraine,” Putin has said. Prior to the meeting, Ukrainian President Poroshenko had spoken to Hollande on phone.

No Minsk talks were confirmed – but December 11 was the first day in Donbas without casualties.  It started with Ukraine’s military suspends combat operations on ‘Day of Silence’. The militants violated the silence regime in Donbas 22 times on December 10, ATO press center has informed. Three Ukrainian soldiers were killed and eight wounded in attacks by pro-Russian separatists, a military spokesman said on December 11.

Russian Foreign Minister Lavrov said on Friday: “A chance emerged to establish peace in Ukraine. With difficulties, but a ceasefire, a truce has been established.  The economic restoration of Donbas, establishing political dialogue that should eventually lead to a constitutional reform.” OSCE admitted that the shelling has abated in the past five days.

Donetsk regional governor orders transfer of three district administration centers to territory under Ukrainian control.

Ukrainian, Russian border guards preparing ‘road map’ to stabilize situation on shared border.

Twenty-two suspects in Maidan shooting probe on wanted list, 13 others to be declared wanted – PGO: Prosecutor general claimed that Kyiv had received no substantial explanation why a Ukrainian request that Interpol put seven former top Ukrainian officials, including ex-president Viktor Yanukovych, on its wanted list, remained unsatisfied. Kyiv Post writes that various Ukrainian law enforcement agencies are pointing fingers at each other as they squirm to avoid responsibility for the apparent failure.

Canada to offer Ukraine military aid outside of NATO: Canada, operating independently of NATO, will provide additional military assistance that will help Ukraine defend itself from Russia. The aid stops short of providing lethal equipment such as weapons. Canada may supply Ukraine with weapons, if other NATO members agree.

Ukraine to sue Russia for breach of counter-terror convention – Yatseniuk: Ukraine has launched the procedure for filing a lawsuit with the UN International Court of Justice, accusing Russia of breaching a counter-terrorism convention, PM Yatseniuk said.

Initial lustration wave covers almost 140 at PGO, first deputy public prosecutor being investigated: The Prosecutor General Office is investigating if the First Deputy General Prosecutor Mykola Herasymiuk is eligible for dismissal under the law on lustration. Prosecutor General Yerema said that Anatoliy Danylenko, the deputy prosecutor general of Ukraine, did not violate the law. Prosecutor General informed that that a total of 138 employees of PGO were dismissed under lustration law. Another 300 persons will go under lustration in the second wave.

241 Ukrainian troops and volunteers were killed in the battle of Ilovaisk, which took place in late August and has been one of the bloodiest battles of the eastern Ukrainian conflict.

Explosion jolts Odesa business center housing volunteer station supporting army fighters: The explosion targeted a volunteer center assisting servicemen involved in the anti-terrorist operation in eastern Ukraine.

Ukraine sets up international secretariat on security, civilian cooperation with NATO.

Kyiv plans to resume TV broadcasting in militants-held areas of Donbas.

Chechen ‘death’ unit fighting with rebels in eastern Ukraine: Hundreds of fighters from the Russian republic of Chechnya have joined the insurgents in East Ukraine.

Russian military forces leave Kherson region – Border Service

Ninth humanitarian convoy arrived in Donbas: more than 50 trucks have moved towards Donetsk and another 80 towards Luhansk. Spot Report by the OM at the Russian checkpoints of Gukovo and Donetsk can be read here.

Rada to vote on cancellation of non-bloc status of Ukraine next plenary week – speaker: Verkhovna Rada will vote on the cancellation of the non-bloc status of Ukraine next plenary week, the speaker Volodymyr Hroisman said.

Militants free 964 Ukrainian soldiers – SBU: another 684 Ukrainian servicemen are still being held by militants, and 1,664 remain listed as missing. The Kyiv authorities are holding only 223 members of illegal armed groups operating in the east of the country. SBU Chief Nalyvaichenko said that businessman Serhiy Kurchenko, who fled Ukraine in February, is involved in financing terrorism in the Donbas.

Defense Ministry wants UAH 50 bln budget in 2015: Ukrainian Armed Forces should be reached 250,000 people next year.

Poland to send Ukrainian army assistance worth 3 million euro – Deschytsia: including physical and technical assistance.

Council of Europe constitutional experts to co-operate with Ukraine on improving lustration law, adopt interim opinion: the Venice Commission also recommended removing the responsibility for carrying out lustration from the Ministry of Justice and entrusting it to a specifically created independent commission. Kyiv Post writes about the topic.

UN Office for the Coordination of Humanitarian AffairsUkraine Situation report No.21 as of 12 December 2014.

Ex-Georgian deputy interior minister Ekaterina Zguladze gets Ukrainian citizenship, post in Ukrainian Interior Ministry: President Petro Poroshenko has signed a Decree on granting Ukrainian citizenship to Ekaterina Zguladze who may be appointed to the post of the First Deputy Minister of the Interior. Zguladze helped to carry out law enforcement reforms under former Georgian President Saakashvili.

3. ECONOMY & REFORM EFFORTS

Prime Minister Yatseniuk presented government’s action program: Ukraine’s membership in the European Union is the ultimate goal of the incumbent government, PM said.  According to the program, a new economic model envisages radical cutting of the state sector expenses by 10%, reduction of the number of taxes from 22 to 9 and gradual reduction of the unified social tax to 15 percent, as well as two-year tax vacations for small and  medium-size business, economy de-monopolization and trade expansion.  The government plans to reduce the number of supervisory bodies that oversee businesses from 56 to 28, limit the number of their functions from 1032 to 680. Up to 5% of total GDP in Ukraine should be spent on the country’s national security and defence.

The government sets the task of launching free trade zone negotiations with such countries as Canada, Turkey, Israel, the Gulf States, West Africa and some others. The Cabinet of Ministers of Ukraine has drawn up a draft law on the reduction of a list of facilities in state ownership which are not subject to privatization from 1,500 items to 300. The government’s legislative program will provide for a package of new anti-corruption laws.

The government will raise prices and tariffs for all kinds of energy to an economically reasonable level. 15,000 new state standards will be introduced in compliance with the Association Agreement with the EU. The Cabinet of Ministers will also work on implementing an electronic government and propose a new law on civil service. The rules for accreditation and licensing of universities need to be changed. The full text of government action program can be read here.

Finance Ministry draws up austerity plan with half a trillion hryvnias in cuts: Recommendations for changes in legislation prepared by the Ministry of Finance of Ukraine aimed at slashing budget spending have been published on the Internet, ZN.UA reported on Thursday. The Ministry of Finance suggests amending the legislation governing the humanitarian sphere, public administration, pension payments, social security and the activities of prosecutors and the army. Save around UAH 4.3 billion should come by increasing the retirement age for men and women to 65 years, plans to limit pension payments for working pensioners to 90% of the pension amount, but not lower than minimum cost of living for persons who have lost the ability to work.  Ministry intends to recalculate pension amounts based on percentage of the contributions transferred to the Pension Fund of Ukraine rather than the amount of wages. It is planned to freeze the minimal wage, out of which contributions are paid and pension are set, at the level of 2014.

The Verkhovna Rada has endorsed the government’s action program by 269 votes. Ukrainian constitution stipulates that the Rada cannot challenge the government within one year after the endorsement of its action program.

IMF to visit Kiev for bailout talks: IMF mission will visit Kiev from December 9 to 18 for talks with the new government. IMF believes that an additional $15 billion should be allocated to Ukraine within weeks to avoid financial collapse, Financial Times has reported. The additional cash needed would come on top of the $17 billion IMF rescue announced in April and due to last until 2016. Kiev wants the IMF  to expand its $17 billion bailout package due to worsened economic outlook,economy minister Aivaras Abromavicius said. Ukrainian PM warns of default risk, calls for more Western help. The financial situation is difficult, but there is no threat of default now, Ukraine’s Minister of Finance Natalie Jaresko has assured in an interview with the Focus. International lenders will help Ukraine ride out its economic turmoil provided that the government pushes through reforms,a senior official of the EBRD have saidIMF First Deputy Managing Director David Lipton is in Kyivthis week.

Yatseniuk calls for increase in quotas on Ukrainian agricultural products on EU market: Yatseniuk said it was important to raise a question of increasing quotas on Ukrainian agricultural products supplied to the EU markets, since Ukraine has used almost all agricultural quotas with respect to Ukrainian agricultural products that are supplied to the EU countries.

State Statistics Service has reported drop in Ukraine’s GDP in Q3, 2014 to 5.3%: Ukraine’s real gross domestic product in the third quarter of 2014 declined by 5.3% year-on-year, whereas in the second quarter the drop was 4.7% and in the first quarter it was 1.1%, the State Statistics Service reported on Wednesday.

State budget gets UAH 404 mln from sale of three 25% stakes in power companies – SPF: The national budget of Ukraine has received UAH 404.2 million from the of 25% stakes in PJSC Vinnytsiaoblenergo, PJSC Chernivtsioblenergo and PJSC Zakarpattiaoblenergo in November 2013.

Nearly UAH 8 bln to be invested in European Wall project: The European Wall project to reinforce the Ukrainian border with Russia, will be implemented in four years and about UAH 8 billion will be invested in it.

Ukraine calls on tender to sell three 3G licenses: The National Commission for Communications and IT Regulation on Tuesday announced a tender to sell 3G licenses.

Full-scale health insurance will be introduced in Ukraine: Kyiv aims to cancel bureaucratic and corrupt system of registration of medicines and medical goods. Government intends to cancel the procedure of registration of medicines and medical goods, which passed registration and were licensed in the EU, the United States, Canada, Australia, and Japan. Government also intends towithdraw the system of public procurement from the scope of responsibility of the Health Ministry and purchase medicines through the UN system and a number of international organizations. The new state drugs procurement scheme via international organizations will start working in early 2015. Health Minister Kvitashvili said that the agency which would have functions of state procurement from the Health Ministry could start operating from January 1, 2016.

Czech Senate approves EU-Ukraine Association Agreement – Foreign Ministry: Czech senators have approved Association Agreement between Ukraine and the EU. Croatia ratifies EU-Ukraine Association Agreement: On Friday, the Croatian parliament ratified the Association Agreement between Ukraine and the European Union.

Former European Taxation Commissioner appointed Business Ombudsman for Ukraine’s Anti-Corruption Initiative: the position was established under a Memorandum of Understanding between the Ukrainian government, international organizations, including the EBRD and the OECD, and the following Ukrainian business associations: the American Chamber of Commerce in Ukraine, the European Business Association, the Federation of Ukrainian Employers, the Ukrainian Chamber of Commerce and Industry and the Ukrainian League of Industrialists and Entrepreneurs.

Sweden allocates $664,000 as aid to Ukraine: Sweden has signed an agreement with the United Nations Office for the Coordination of Humanitarian Affairs to provide $664,000 as humanitarian assistance to Ukraine.

Poroshenko must lead decentralization process– Yatseniuk: The President of Ukraine Petro Poroshenko must lead the decentralization process since decentralization can only be implemented through the introduction of amendments to the Constitution of Ukraine, Arseniy Yatseniuk has stated.

Total amount of Ukraine’s lawsuits against Russia exceeds $1 trillion: The total amount of the international lawsuits filed by Ukraine against Russia now exceeds $1 trillion, Ukrainian Prime Minister Arseniy Yatseniuk said. At the same time Ukraine servicing $3 bln debt to Russia: Ukraine is making payments on the $3 billion in debt it owes Russia, while Russia sends $5 mln to UN World Food Programme for assistance to Ukraine.

Performance of Ukraine’s agriculture sector in 2014: Ukraine’s grain harvest this year surpassed experts’ expectations, reaching 57.2 million tons, an increase of 13.6 percent from last year, despite the loss of agricultural land in Crimea and part of the Donbas.

Revenues of Ukraine’s consolidated budget from Donbas 72.8 percent down in January-November: Revenues of Ukraine’s consolidated budget from Donetsk and Luhansk region due to hostilities fell by 72.8 percent in January-November 2014 year-over-year. The national budget of Ukraine in January-November 2014 was short of 6.8 percent of revenues compared to the target for this period, according State Treasury Service of Ukraine.

4. ENERGY UPDATE

Ukraine may import up to 1.5 gigawatts of Russian electricity: Ukraine’s government has allowed state company Ukrinterenergo to import electricity from Russia. Minister Volodymyr Demchyshyn said that Ukraine was in the final stage of negotiations on the import up to 1.5 gigawatts of Russian electricity.  Based on government decision, Ukraine can now import electricity from neighbouring countries.

PGO raids Energoatom, Skhidny Mining and Centrenergo: Prosecutor General’s Office conducted raids at three energy and fuel companies – National Nuclear Generating Company Energoatom, Skhidny Mining and Centrenergo.

Ukraine begins importing gas from Russia, gas reserves in UGSF falls by more than 20%: Ukraine began importing natural gas from Russia on December 9. The natural gas reserves have fallen by more than 20 percent since the heating season. Ukraine may buy up to 5 bcm of gas from Russia as part of ‘winter package. On Thursday, Ukrtransgaz said that Russian gas supplies were stable.

Ukraine needs to buy at least 4 bcm of Russian gas to ensure transit – Russia: Ukraine needs to buy at least 4 bcm of Russian gas to ensure transit of Russian gas to Europe. Gazprom CEO Miller has said that there is a high risk of gas supplies to Europe via Ukraine being disrupted.

Ukraine prolongs emergency measures on power market for another month: This regime gives extra opportunities to the National Commission of Ukraine for Energy and Housing and Utilities Services Regulation in setting tariffs and making calculations, and to the energy system operator, Ukrenergo, in fulfilling its technical functions of transmitting and using energy capacities.

Ukraine to join UCTE European energy system in 2017 plans to launch two new reactors in 2018: The Ukrainian power grid is to be fully integrated into the European energy system in 2017. The premier noted that it had been decided to complete two reactors at Khmelnytsky nuclear power plant and launch them in 2018.

Coal transportation in ATO area resumed – Ukrzaliznytsia: Coal transportation in the ATO area has been resumed. Ukraine coal production in November is down almost by half. The coal mining enterprises reduced coal output by 43.7% – to 4.1 million tonnes, against 7.3 million tonnes in November 2013.

Naftogaz ‘needs to be privatised’: Dmytro Shymkiv, the president’s deputy chief of staff called for state energy company Naftogaz to be privatised, and for commercial gas pricing to replace costly public subsidies. Tender to attract investors for Ukrainian GTS will be announced in 2015. The creation of two public joint-stock companies, Main Gas Pipelines of Ukraine, and Underground Gas Storage Facilities, is also planned for 2015. The government envisages the complete modernization of the Ukrainian gas transport system by 2020. It has also announced that it plans to complete the full financial recovery of Naftogaz by 2017.

Medvedev – gas compromise with Ukraine possible: Beginning in the 1990s, Russia delivered gas to Ukraine at reduced prices, effectively “gifting” Ukraine more than $80 billion, Medvedev said. “Only relatively recently have we moved to civilized methods for determining the price,” he said. Medvedev believes that Russian and Ukraine still have a chance to settle their dispute over the gas price in negotiations.

Energy Community Secretariat’s statement on distortions to the gas market legal framework in Ukraine: The Energy Community Secretariat recalls that the recently adopted Decrees of the Cabinet of Ministers which remove the possibility of private companies to buy and transport gas from any supplier other than Naftogaz distort the part of the gas market already liberalized in Ukraine in favour of the state incumbent Naftogaz. The Decrees violate Energy Community law and the Secretariat insists on their immediate removal. As reported earlier, the Cabinet of Ministers obliged large gas consumers to buy gas exclusively from Naftogaz during the period from December 1, 2014 to February 28, 2015.

Nadra Ukrainy wins court case against company related to ‘Yanukovych family’: Nadra Ukrainy won a court case to regain its stake in the Sakhalin gas field, which was unlawfully expropriated in favor of company Golden Derrick associated with the former Energy Minister Edward Stavitski.

Ukraine in 11 months cuts gas transit to Europe by 25 percent: Ukraine in January-November 2014 reduced natural gas transit to Europe by 25 percent compared to the same period of 2013, to 58 billion cubic meters.

Ukraine saves $500 mln by importing gas from Europe: Ukraine has saved $500 million by sourcing gas supplies from Europe over the last six months, after Russia almost doubled its price for gas for Ukraine in April 2014, PM Yatseniuk said.

EBRD to lend Ukraine $200 mln for upgrading gas pipelines: EBRD will lend Ukraine $200 million for the upgrading of the Urengoy-Pomary-Uzhgorod gas pipeline, which supplies Russian gas to Europe. Ukraine has already signed agreement with EIB for EUR150 million loan to finance the modernization of the Urengoy-Pomary-Uzhgorod pipeline.

Naftogaz sees Russian gas price falling by Q1 2015: The price of Russian gas supplies to Ukraine may fall to less than $340 per 1,000 cubic metres in the first quarter of next year from $375 in the fourth quarter of 2014 due to the sharp fall in oil prices, the head of Ukrainian state energy firm Naftogaz Andriy Kobolev said on Friday. Kobolev also said that it was considered that gas price for households would be increased 3-5 times.

The serious change in the situation in the EU-Ukraine-Russia gas triangle requires reforms both in Ukraine and Europe, Agata Loskot-Strachota said in Kyiv, presenting the publication from the Brussels’ Bruegel “Rebalancing the EU-Russia-Ukraine gas relationship ”

5. VISEGRAD NEWS AND VIEWS

Czech FM: I cannot control President Zeman, but he does not shape our foreign policy
EU should be ready for more sanctions against Russia – Polish PM
Коморовский: Страны «Вышеградской группы» сблизили свои позиции относительно поддержки Украины
Interview with Mikulas Dzurinda with Hromadske TV
Transformation of Know-How for Small and Mid-Size Businesses in Georgia, Moldova and Ukraine 

Noteworthy Resources

UN Development programm: Impact of the conflict in Luhansk and Donetsk oblasts on the Social and Economic infrastructure (Summary)
Lustration law yields meager results
SPECIAL REPORT-How a 29-year-old Ukrainian made a killing on Russian gas
EU considers tightening ban on energy, tourism in Crimea
Iana Dreyer, Nicu PopescuDo sanctions against Russia work?
EU may have to drop sanctions on ex-Ukraine officials
Olexander Motsyk, Ukraine’s Ambassador to the U.S.: Why Ukraine is rethinking NATO relationship

Interviews

Interview with Semen Semenchenko (Kostyantyn Hrishyn), newly elected MP and commander of Donbas Battalion
Interview with leader of Samopomich faction in the Verkhovna Rada Oleg Berezyuk
Interview with Donetsk Mayor Alexander Lukyanchenko

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