Inside Ukraine 16 June, 2016 â„–58
16 June, 2016
Сontent THE GOVERNMENT POLICY................................................................ 1 The reintegration policy for the occupied and uncontrolled territories: can there be an alternative to the Minsk agreements?............................................................ 1 The Ministry of Temporarily Occupied Territories and Internally Displaced Persons: will it manage to prove its effectiveness?................................................. 2 The Government’s priority – restoration of the territories affected by the conflict and temporary occupation........................................................................................... 3 The Long-Term Reintegration Plan Regarding Uncontrolled Territories............. 5
ECONOMIC ANALYSIS......................................................................... 6 The National Bank temporarily eases currency restrictions. Will it be possible to maintain the FX rate?.............................................................. 6
ENERGY POLICY.................................................................................. 9 Increase in energy tariffs for the population deprives it of incentives to support the energy reform......................................................................................................... 9
POLITICAL COMPETITION................................................................. 13 The balance of power in Parliament: results of the political season.................. 13
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THE GOVERNMENT POLICY
The reintegration policy for the occupied and uncontrolled territories: can there be an alternative to the Minsk agreements? Under the conditions of pressure from the Western partners in respect of unconditional implementation of the Minsk agreements by Ukraine and statements about their non-alternative character, Ukraine needs to develop a “Plan B� on the reintegration of certain territories of Donetsk and Lugansk regions. At the same time, despite numerous statements of representatives from different political forces, including those made by persons within the president’s circle, on the impossibility and risky nature of reintegration based on the Minsk agreements towards Ukraine and the security of the whole region, Kyiv did not manage to offer an alternative scenario and Inside Ukraine 58
develop the respective policy. Instead, all the activities of the authorities formally responsible for this area are aimed primarily at raising funds from the international donors for restoration of the liberated territories of Donetsk and Lugansk regions. The start of the discussion on the previously tabooed reintegration topic is observed Herewith, now there are discussions started to be held within the society on the previously tabooed topic of possible reintegration of temporarily uncontrolled territories, which is a positive aspect. There are also certain positive signs of change of the state rhetoric concerning the uncontrolled territories, in particular, a shift from radical condemnation of Russian aggression to a search of ways for reintegration of the temporarily occupied or uncontrolled territories. 1
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Ukraine for the Affairs of Crimean Tatars at the Administration of President of Ukraine, and his candidacy was recommended by the Majlis.
The Ministry of Temporarily Occupied Territories and Internally Displaced Persons: will it manage to prove its effectiveness? The authority being formally responsible for the development of reintegration policy is the Ministry of Temporarily Occupied Territories and Internally Displaced Persons, which was established in late April through the merger of the State Agency for Donbas Restoration and the State Service on the Issues of the Autonomous Republic of Crimea and the city of Sevastopol. Currently, the Ministry with its staff of 105 persons is going through a development stage. Vadym Chernysh, previously working as the head of the State Agency for Donbas Restoration, was appointed as a Minister. A week later, another native of Oleksandriya city in Kirovograd region (the Minister originates from the same city) Serhiy Zlakoman, previously working as the Director of “Kirovohradpresgrupa”, became Deputy Minister – Chief of Staff. Georgiy Tuka, previously working as Chairman of the Luhansk Regional State Administration, became the Deputy Minister. Crimean Tatars are represented in the management of the Ministry by the first Deputy Minister Yusuf Kurchi, who previously worked as the Head of the Department of Support of Activities of the Commissioner of the President of 2
According to the information published by the Deputy Minister Georgiy Tuka, in the near future the Ministry will initiate the establishment of three regional bodies: one will work in Luhansk, Kharkiv and Dnipropetrovsk regions, the second one – in Donetsk and Zaporizhia regions, and the third one – in Kherson region that directly borders with Crimea. So far, the Ministry has no website, information on its current activities is published only at Facebook social network page. The first attempt to approve the Regulation on the Ministry on June 8 at the session of the Cabinet of Ministers was unsuccessful. According to the Draft Regulation, the Ministry is the principal executive authority providing formation and implementation of the state policy in a number of areas: zz concerning the Autonomous Republic of Crimea and the city of Sevastopol (temporarily occupied parts of the territory of Ukraine). The ultimate goal is the reintegration of the temporarily occupied territories into a single constitutional space of Ukraine; zz concerning the certain areas of Donetsk and Luhansk regions, where the authorities and local government temporarily do not exercise their powers (uncontrolled territory). The ultimate goal is the reintegration of the specified territories and their populations into a single constitutional space of Ukraine; zz as regards IDPs to facilitate the enforcement of their rights and freedoms and to create conditions for the voluntary return of such persons to an abandoned place of residence (reintegration) or integration at the new place of residence; Inside Ukraine 58
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zz as regards the humanitarian aid to the civilian population during the armed conflicts; zz in the sphere of peacebuilding; zz in the sphere of restoration and development of Donetsk and Luhansk regions.
Under the current circumstances, there is a number of questions as to whether the newly established Ministry will be able to prove its efficiency. Thus, according to the mentioned draft Regulation, the list of Ministry’s activities include the issues from almost all spheres of the state activities in the context of uncontrolled and occupied territories: infrastructure and housing and construction sector, trade and economic sphere (transportation of goods), social sector (pensions, financial aid, providing housing), education, enforcement of rights and freedoms etc. In addition, none of the Ministry’s representatives is a member of the contact groups within the Minsk process, where the issues in the competence of the Ministry are being discussed and approved. Therefore, this raises questions about the institutional capacity of the newly established Ministry to solve the wide range of such issues. An alternative approach could be the appointment of the Vice Prime Minister for the occupied territories and IDPs that under his authority could coordinate the work of all the central authorities to fulfill these tasks. The institutional capacity of the newly established Ministry raises the questions According to the distribution of issues within the competence of the Government leadership, the issues of the Autonomous Republic of Crimea and the city of Sevastopol, as well as the protection of rights and freedoms of Ukrainian citizens residing in the temporary occupied territories Inside Ukraine 58
are the responsibility of the Vice Prime Minister of Ukraine – Minister of Regional Development, Construction and Housing Hennadiy Zubko. At the same time, considering the previous experience of cooperation, Hennadiy Zubko and Vadym Chernysh have conflict relationship that will not facilitate their further joint work in the Government in the context of reintegration.
The Government’s priority – restoration of the territories affected by the conflict and temporary occupation The government objectives, presented in the Plan of Priority Actions for 2016 and approved by the decree № 418-p of the Cabinet of Ministers on May 27, 2016, cover only the informational reintegration of temporary occupied territories and reintegration of IDPs. At the same time, the document determines that the priority activity of the Ministry for temporarily occupied territories and IDPs is the coordination of actions in the preparation of projects for the restoration of eastern regions of Ukraine and IDPs support. With this purpose, the work on the establishment of the Multi-Partner Trust Fund is being carried out. The establishment of this fund as one of the financial modalities is envisaged by the report of the joint mission of the EU, UN and World Bank 3
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“Ukraine Recovery and Peacebuilding Assessment”. It is considered that such a step should provide a rapid funds raising from international partners and will facilitate the coordination of all actions to restore peace and the implementation of projects not covered by the budget or credit financing. The government considers the restoration of eastern regions affected by the conflict as the main task of newly established Ministry To run the Multi-Partner Trust Fund, it is planned to establish the Council on recovery and peacebuilding that will be headed by the Vice PM of Ukraine – Minister of Regional Development, Construction and Housing. The Council will act as a collegial body providing a comprehensive and coherent coordination as well as planning of measures aimed at restoring 4
and building peace. Within the Council’s composition, it is also planned to establish the Joint National Committee of the Multi-Partner Trust Fund that will be headed by the Minister for occupied territories and IDPs and will deal with the resource mobilization, distribution of funds and programs’ approval. According to preliminary estimates, the reconstruction of facilities in immediate need amounts to UAH 5.8 bln (UAH 1.73 bln and UAH 4 bln for Donetsk and Luhansk regions respectively). However, the exact figures will be known after the State Target Program “Recovery and Peacebuilding in Eastern Regions of Ukraine” is expected to be approved by the end of 2016. Currently, the government is looking for the ways to restore the economic ties with the uncontrolled and occupied territories
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It may be expected that restoration of legal movement of goods and cargo across the contact line in Donbas and administrative border with Crimea will be increasingly promoted in the nearest time. On one hand, the Ministry of Temporary Occupied Territories is charged with drafting regulation of the Cabinet of Ministers “On the Order of moving cargo and goods into and out of the Anti-Terrorist Operation Zone�. On the other hand, this is confirmed with a statement made by the Deputy Minister Georgiy Tuka on expediency of restoring economic ties with the uncontrolled territory. Moreover, Deputy Minister Yusuf Kurchi said that there was a need for alternatives to a trade blockade of Crimea as it had failed to deliver necessary results.
The Long-Term Reintegration Plan Regarding Uncontrolled Territories Nowadays, the Government has neither the reintegration strategy on temporarily occupied territories nor the engagement strategy with citizens residing in these areas. At the same time, the Government is searching for the ways of economic reintegration of these territories. Consequently, the Government continues treating conflict settlement as reintegration of territories and economic facilities rather than of citizens residing there.
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De-occupation should be the first step towards the reintegration The de-occupation strategy should be the first step in reintegrating uncontrolled and occupied territories. It should be noted that, unlike the liberated territories, DPR and LPR have been institutionalized in their territories since the conflict broke out. The quasi-state entities continue elaborating a legal framework based on the Soviet of Russian legislation. Therefore, a political and practical gap is increasing between the controlled and uncontrolled territories. The normal process of reintegration can take 5-7 years Thus, reintegration cannot be fulfilled within a year despite the Western pressure. It may take 5–7 years and include gradual implementation of police, judicial and other reforms which have been conducted in the government-controlled territories. In this regard, it is necessary that each central executive body should analyze the situation within their sphere of responsibility in the uncontrolled territories, elaborate a reform plan for these territories, train civil servants (predominantly among IDPs) who will perform their duties in reintegrated territories in the future and calculate financial support to achieve these goals.
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ECONOMIC ANALYSIS
The National Bank temporarily eases currency restrictions. Will it be possible to maintain the FX rate? In early June, the National Bank eased a number of administrative restrictions that were introduced earlier in the FX market in order to overcome the panic and reduce the rate of a sharp devaluation of the hryvnia. The reason for such a decision was the stabilization of the situation in the monetary and foreign exchange markets. The changes concern primarily private individuals, but the improvements are also positive for businesses. The NBU increased cash withdrawal limits for individuals, allowed the companies to withdraw dividends, and reduced daily rate for the sale of foreign exchange receipts. The main tasks of innovations are the improvement of business conditions, the restoration of 6
confidence in the banking system, and the fight against the black currency market. The changes are temporary and will be valid for the upcoming three months – from 9 June till 14 September. The NBU increased cash withdrawal limits for individuals, allowed the companies to withdraw dividends, and reduced daily rate for the sale of foreign exchange receipts. The FX restrictions that were introduced by the NBU over the past two years played a positive role in the fight against devaluation, but they significantly complicated the work of companies engaged in foreign economic activities and worsened public access to currency. The active development of a shadow currency market and the suspension of domestic crediting and flow of Inside Ukraine 58
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FDI became some kind of response to the administrative restrictions. The restrictions’ removal is temporary and will be valid for the upcoming three months – from 9 June till 14 September. Having taken the situation in the FX market under control, the NBU was in no hurry to remove the previously imposed restrictions and was cancelling them very slowly. The main reason was the risk of uncontrolled growth in demand for the currency and the threat of another wave of devaluation. The proposed FX relief that became valid on June 9, 2016, was the most radical over the past year. The main innovations: zz Limits on the purchase of currency in exchange offices increased (from UAH 6 000 to UAH 12 000); zz Banks and other financial institutions will be able to change the FX rate during one day; zz It is also allowed to set different rates of purchase and sale of foreign currency in exchange offices of the same bank located at different locations; zz During the cash transactions on the currency conversation, the banks are allowed to use their own commercial rate rather than the official rate of the National Bank; zz Currency withdrawal limit increased – now the cash in foreign currency can be withdrawn from the accounts in the amount of UAH 100 000 per day instead of UAH 50 000 per day; zz Restrictions on cash withdrawal in national currency from ATMs and banks’ cash desks Inside Ukraine 58
were fully removed (previously it amounted to UAH 500 000 per day). The NBU lifted a ban on dividends withdrawal, however it set monthly limits zz A ban on withdrawal of dividends abroad is lifted, but monthly limits are set. Within one calendar month, a person can withdraw dividends abroad only within the limit of a total amount that does not exceed the greater of the following limit values – USD1 mln or 10% of total dividends to be returned abroad. This innovation covers not only the current dividends but also those acquired in 2014–2015. zz The demand for the compulsory sale of foreign currency earnings for exporters downgraded from 75% to 65%.
Given the high level of hidden demand for currency on the part of the population and businesses, there was a risk that the removal of restrictions could lead to a sharp increase in the demand for currency. However, preliminary results of the restrictions’ removal did not lead to sharp fluctuations in the FX market. In particular, bank depositors did not rush to withdraw their currency deposits. Thus, the introduced changes will help to strengthen the FX rate at UAH 25/ USD1. The proposed innovations will help to strengthen the FX rate at UAH 25/ USD 1 However, the market expects the continuation of the removal of restrictions and the liberalization of the currency legislation. In particular, the complete removal of restrictions on foreign currency deposits and foreign currency purchase through bank cash desks are the pressing 7
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issues. The proposed reliefs are unlikely to significantly contribute to the reduction of shadow foreign exchange transactions, as currently the currency purchase operations through the bank cash desks are taxed with extra fees (pension and military charges). The NBU also upheld the restrictions on the receipt of goods by prepayment under foreign economic contracts within 90 days. For the companies that import goods from distant countries (Australia, South America), the abolition of this rule is very important. The continuation of the removal of restrictions after the end of 3-month period will depend on
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the situation of the FX market and the dynamics of the inflow of foreign currency into the Ukrainian market. The risks also include a deterioration of ascending price dynamics for raw materials in the world markets, an increase of seasonal demand for currency in autumn, and the need to carry out payments on foreign debt. The market expects the continuation of the removal of restrictions and the liberalization of the currency legislation
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ENERGY POLICY
Increase in energy tariffs for the population deprives it of incentives to support the energy reform In the last two years, the increase in energy tariffs for the population became another example of demonstrative government reporting on reforms before the IMF and other international donors. At the same time, the significant modernization of energy infrastructure and the improvement of the quality of services rendered to citizens of Ukraine never happened. The energy reform has become a “hostage” of officials’ international commitments undertaken on behalf of the state. Therefore, it rapidly loses its attractiveness for its key participants – average consumers who are forced to worsen their welfare to pay for the utilities. Inside Ukraine 58
Thus, the Letter of Intent of Ukraine to the IMF dated July 21, 2015, states that “We have taken bold measures to advance much needed reforms, including in the energy sector, by adopting a new gas sector law and increased gas and central heating retail prices by 285 percent and 67 percent, respectively. These are important first steps toward reaching cost recovery based on international market prices and thus eliminating the large losses in the state-owned gas company Naftogaz, while at the same time increasing significant allocations for social assistance programs”. Social standards in Ukraine depend on its international commitments Under Article 11 of the Law of Ukraine «On Natural Gas Market» starting from October 1, 2015, retail prices for natural gas for the needs 9
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of the population are to be set by entrusting the subjects of natural gas market with specific obligations, in accordance with the respective decision of the Cabinet of Ministers of Ukraine. Paragraph 13 of the Regulation on entrusting such duties, approved by Government Resolution #758 dated October 01, 2015, established the boundary retail price for natural gas for household consumers from May 1, 2016, to March 31, 2017, (inclusive) at the rate of UAH 6,879 for 1 cubic meter. In April 2014, similar retail prices amounted to UAH 1,182 (in the case of gas meters presence) and UAH 1,299 (in the case of gas meters absence) for 1 cubic meter (Resolution of the NERC #420 dated April 03, 2014). Thus, the price increased by almost 5 times. Over the last two years, gas prices increased by almost five times According to Resolution of the National Commission for State Regulation of Energy and Public Utilities (NCSREPU) #220 dated February 26, 2015, the minimum electricity tariffs (for the volume consumed not exceeding 100 kW∙h of
electricity per month (inclusive) will be increasing until March 01, 2017. By that time, they will amount 90 kopiykas for 1 kW∙h, while as of April 01, 2015, they were set at the rate of 36,6 kopiykas for 1 kW∙h. The maximum tariff in April 2015 amounted to140,7 kopiykas for 1 kW∙h, and by March 2017 it will increase to 168 kopiykas for 1 kW∙h. In addition, the above changes in prices for gas and electricity resulted in an increase in tariffs for central heating and central hot water supply. The gas price takes up to 72% of the tariffs structure and electricity – up to 7%. Gas price is crucial for the utility prices rate in Ukraine In the Kyivenergo example, the tariff for central heating increased to UAH 16.14 for 1 square meter per month within the heating period (in the absence of house and apartment metering devices of thermal energy). In June 2014, the same tariff did not exceed UAH 9,22 for 1 square meter. Similar tariffs growth rates (by almost two times) were set in respect to central hot water supply services.
ACCORDING TO THE NCSREPU DATA, THE DYNAMICS OF THE INCREASE IN TARIFFS WILL BE AS FOLLOWS: Average growth in tariffs for electricity sold to the population in proportion to the preceding tariff
150
+26%
120 90 60
+45,2%
30
51,2
+23%
+23%
+26% 97,28
kop. kW∙h
62,8
77,3
kop. kW∙h
01.09.2015
01.03.2016
01.09.2016
122,77 kop. kW∙h
kop. kW∙h
kop. kW∙h
0 01.04.2015
10
01.03.2017
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Moreover, NCSREPU approved a decision on another increase of tariffs for heat energy and central heating for the population by two times starting from July 1, 2016. If we compare the above tariff growth rates with growth rates of real incomes, it reveals that the dynamics of the latter are more than modest. According to the State Statistics Committee, the average nominal wage of full-time employees of enterprises, institutions, and organizations as of December 2015 sums to 5230 UAH. In 12 months of 2015, the growth of its size (versus December 2014) sums to 30.4%. At the same time, such a wage in April 2016 already amounts to 4895 UAH. In this regard, it should also be considered that the population solvency depends on the inflation level – 43.3% at the end of 2015 (according to NBU) and the unemployment rate – 1.7 million people in the fourth quarter of 2015. (referring to the State Statistics Committee). The rapid growth of energy tariffs destroys social standards for Ukrainian citizens Comparing the cost structure of households in terms of payment for housing, water, electricity, gas, and other fuels, in 2014, an average family had been spending up to 10% of its budget on such needs. In quarter IV of 2015, the SSC identified the growth of spending on goods and services in general by 26.4%, compared to the same period in 2014. The deterioration of financial support for the population has exacerbated the dynamics of debt accumulation. According to the State Statistics Committee, household indebtness at the end of December 2015 totaled 8.8 billion UAH, and a medium indebtedness period for all kinds of housing services comes up to 2.1 months. Indebtedness of the population by the end of April 2016 has already exceeded 10.5 billion UAH, in Inside Ukraine 58
particular central heating debts and hot water supply debts - 6.3 billion, electricity debts - 2.8 billion, and central water supply and sanitation debts - 1.6 billion UAH. Energy resources arrears - the State Budget losses The arrest of accounts of Ukraine’s leading companies, Kyivenergo and Energoatom, can be considered as a manifestation of the payments crisis. The government’s measures on repaying the restructured debt and making current payments for housing services and energy and establishing the subsidies system prove their ineffectiveness in resolving the current situation. The main risks to further deregulation of energy tariff policy for the population can be considered as follows: zz noncompliance of tariff policy with measures on increasing the population’s solvency; zz the lack of effective and transparent mechanism for prices formation with the particioation of civil society representatives; zz nonoptimal price formula for gas extracted in Ukraine – binding of the imported natural gas price to German gas hub (NCG), the predictive value of the natural gas transportation from the German gas hub (NCG) to a virtual outlet in Slovakia pursuant to the act of the government #758 dated November 1, 2015; zz non-transparent mechanism of refinancing the energy sector due to the increase in tariffs; zz increase in the population that needs subsidies for paying for the energy supply services; 11
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zz reduction of both subsidized gas consumption rates and electricity consumption rates for preferential tariff; zz low level of accounting the energy sources utilization, in particular lack of control devices aimed at determining objective consumption rates; zz unstable work of energy companies in terms of financial and corporate management; zz use of situational approaches by the government in order to solve complex issues in the energy sector through introducing state budget revenues from increased fiscal pressure on energy companies, resulting in increase of the cost of their products and services; zz preservance of actual monopoly of Naftogaz at the gas market of Ukraine; zz slow pace of the energy sector reforming in general and the lack substantial progress in liberalizing energy markets in accordance with the EU Third Energy Package.
Thus, the state’s population, in fact, found itself in a situation of economic crisis whereby the
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state budget and the energy sector issues are resolved without taking into account their interests. Unless energy companies enhance their service quality, supply stability, and transparency, communication between the government and citizens as well as citizens and energy services providers remains ineffective. Therefore, there can be no question of public support for energy reforms that adversely affect living standards. The use of this approach in the future by the government poses a threat to the non-fulfillment of mutual obligations of consumers and suppliers of energy services and the failure of energy reform objectives as well as the social protests. Aggressive tariff policy of the Government can lead to rupture of the energy reform As a solution to the problem, the state energy policy should become transparent with broad involvement of citizens in the determination of tariffs level for energy resources. The key component of tariff policy should become a real liberalization of energy markets, when a consumer will have an opportunity to choose the supplier and the latter will have to constantly prove his competitiveness.
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POLITICAL COMPETITION
The balance of power in Parliament: results of the political season BPP-Solidarity: “we stay here for a long time” In the first half of 2016, Petro Poroshenko managed to take total control over executive power and established de facto a regime of a presidential republic. In pursuit of power consolidation, the president in a masterly way exploits the corruption-weakened institutions and members of the BPP-Solidarity fraction that push through necessary decisions by means of informal policy and clientelism. For instance, Yuriy Lutsenko was appointed as Prosecutor General in violation of parliamentary regulations and Arseniy Yatsenyuk was substituted for Volodymyr Hroysman by a de jure null and void parliamentary coalition. Inside Ukraine 58
President concentrates the power s by means of informal policy and clientelism At a time when the possibility of a full-scale war has lost its urgency, the priority demands for the public remain the fight against corruption, punishment of the guilty in the crimes of the Yanukovych regime, and economic recovery. Little progress has been made in these areas. The situation is aggravating, as Poroshenko ignores the people’s demands for deoligarchization, speeding up reforms, and the establishment of justice in the crimes committed during the Revolution of Dignity. These structural factors of instability are complicated with the political opposition that is anxious for the largest monopolization of power since Euromaidan and Poroshenko’s personal responsibility for all spheres of state administration. Instead of counting on civil society leaders, technocrats, and volunteers, Poroshenko’s team is compromised by former members of the Party of Regions and oligarchs. As the pres13
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ident considers the country a large enterprise, he faces decreased public support at the end of this political season. According to various surveys, Poroshenko and his party have lower ranking than Yulia Tymoshenko and the Opposition Bloc. The President’s entourage continues to use the rental system and receive mega-profits from state monopolies Thus, under current circumstances, the President can stick to one of the following courses: 1. Establishment of authoritarianism 2. Reform implementation 3. Early elections 4. Social explosion
The People’s front: “Yatseniuk is the president” After the resignation of Yatseniuk as the PM, the People’s Front (PF) has lost significant influence on informal policy that had been providing access to the resources of state monopolies. Since the Cabinet of Ministers was reshuffled, the PF has increased its representation in the new government and secured two key ministerial positions – Minister of Justice and Minister of Interior, as well as some first deputy ministerial positions and in the Prosecutor General’s Office. The interests of PF key stakeholders are lobbied in the energy sphere, natural resources exploitation, the military-industrial complex, and agriculture, etc. Yatsenyuk’s absence in public policy allows him to restore his personal political ranking and focus on PF internal issues and future presidential elections. PF does not experience significant resource limitations or derogation of corporate interests PF remains the most important forced parliamentary partner of BPP. The latter adopts none 14
of the decisions without consultation with Yatseniuk. On occasion, the PF demonstrates its position and emphasizes its significance in important issues, for instance, during the vote for constitutional amendments on decentralization. Arseniy Yatsenyuk’s resignation opened new opportunities in terms of political competition for PF
Opposition Bloc: “the votes in exchange for political guarantees” The Opposition Bloc (OB) votes for many important presidential initiatives in exchange for business advantages or immunity from lustration. There are rumours that the OB is ready to support constitutional amendments on decentralization in exchange for the law on elections in non-controlled areas of Donbas to favour Rinat Akhmetov. Such a situational alliance secures the political survival of ex-members of the Party of Regions and provides an additional strength for the collation. Opposition Bloc can support the constitutional amendments on decentralization in exchange for the law on elections in Donbas On May 27, 2016, the OB held a long-awaited party congress where they resolved several personnel issues and agreed on nominees in constituencies. Borys Kolesnikov and Yuriy Boyko were elected OB co-chairs. In addition, Yuriy Boyko, Yuriy Vorapayev, Oleksandr Kasyanyuk, Serhiy Larin, Serhiy Lyovochkin, Vadym Novinskyi, and Oleksandr Puzanov entered the OB executive committee. Moreover, Nataliia Korolevska and Oleksiy Bilyi were elected chairpersons of the control and auditing commission. Lyovochkin and Akhmetov divided spheres of influence in governing bodies and basic regions mitigating a two-year long personal conflict. Inside Ukraine 58
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The composition of the executive committee and management of Opposition bloc consolidated the interests of the major shareholders of the project – Akhmetov, Firtash and Kolesnikov The party is also preparing for the founding congress of opposition forces scheduled for September 2016. According to available data, the OB will put emphasis on the issues of high tariffs, economic recovery, stopping the war, and particularly protecting traditional values of the canonical Orthodox Church. It should be noted that the Kharkiv branch has fallen out of the current OB structure. In particular, Mykhailo Dobkin is increasingly alienated, while Yevhen Murayev (influential player in the Kharkiv region and owner of the News One TV Channel) has already left the OB. According to some data, he is developing a new political project with Vadym Rabinovych in far-left spectrum.
Batkivshchyna: “either elections or nothing” Currently, the “Batkivshchyna” party is perhaps the only political force that rapidly strengthened its electoral positions. Many sociological companies confirm the tendency of the growth of Tymoshenko’s party ratings. Largely, the growth is caused by the exchange of Nadia Savchenko as well as the populist and aggressive statements of Yulia Tymoshenko towards Poroshenko. Sociologists observe the tendency of rating growth for Yulia Tymoshenko and Batkivshchyna party The biggest miscalculation of Yulia Tymoshenko is her refusal to participate in the formation of the new coalition. As a result, Yulia TymoshenInside Ukraine 58
ko lost any leverage of influence on the government, coalition, and law enforcement bodies. “Batkivshchyna” made a bet on undermining the political situation and believed that the withdrawal of Radical party, Samopomich, and its faction would lead to early parliamentary elections. However, the early elections did not happen, and Yulia Tymoshenko failed to convert political ratings. Thus, “Batkivshchyna” finally became an opposition to Poroshenko and focuses the party activities on the protection of the rights of farmers and peasants raising important issues of social justice, tariff policy, and protection. Valentyn Nalyvaychenko is in charge of anti-corruption issues in the party. “Batkivshchyna” also pays significant attention to the party work and the development of primary party organizations, trainings for deputies. On May 31, the party held a closed party congress, at which important personnel and organizational issues were discussed and candidates for deputies were nominated. “Batkivshchyna” will continue to build its electoral muscles, simultaneously establishing a considerable number of unpleasant moments for the Presidential Administration. The role of such a political ram will be played by Nadia Savchenko, who makes resonant statements at odds with the official President’s policy and undermines the presidential authority as the “main peacemaker of Ukraine ”. Nadia Savchenko creates problems for president Poroshenko In political terms, Yulia Tymoshenko maintains quite close contact with Viktor Medvedchuk, who is the main communicator with the Kremlin in Donbas issues. In the near future, there will be a situational forming of political alliances designed to prevent Poroshenko’s monopolization of power in Ukraine and the restoration of Rinat Akhmetov’s influence in the uncontrolled territories of Donbas. 15
16 June, 2016
Radical party of Lyashko: “just business” The faction of the Radical party of Oleh Lyashko (RPL) as regards the issue of government reshuffle took a strategy similar to the Batkivshchyna. In the talks with the Presidential office, Oleh Lyashko wanted to be Parliament’s speaker and put forward the excessive demands as regards the RPL’s quota in the new government. Without waiting for the announcement of early parliamentary elections, the Radicals went into opposition to the government, and Lyashko began to sharply criticize the President and his entourage headed by Igor Kononenko because of corruption and offshore scandals. The possible reputational blow to be faced by Lyashko in the near future is the publication of the so-called “black bookkeeping of the Party of Regions” of 2010–2013. Many experts are certain that at that times, the project of Oleh Lyashko was intended to become a spoiler for the united opposition and thus was financed by the Yanukovych administration. Oleg Lyashko criticizes the president and coalition more than others Oleh Lyashko continues to maintain his ratings. raising the interest of Ihor Kolomoyskyi and Rinat Akhmetov. At the same time, there is no tendency for the increase of RPL supporters seen, as one of the main competitors is Mikheil Saakashvili. Oleh Lyashko categorically opposes the vote for the constitutional amendments on decentralization that envisage the special order of local self-governance in Donbas. There is a coordination of actions between Oleh Lyashko and Yulia Tymoshenko’s faction on certain issues in the Parliament.
nocratic government led by Natalia Yaresko or a political one with Andriy Sadovyi. However, in the times of political turbulence and the need to make unpopular decisions, Samopomich refused to take responsibility and withdrew from the negotiations. As a result, the government was formed without Samopomich, and in the issues of principle, such as the judicial reform or the appointment of the new Prosecutor General, there was more and more conflict situations between Oleh Bereziuk’s faction and the Presidential administration observed. Samopomich had an opportunity to form a technocratic government led by Natalia Yaresko Samopomich party positions itself as a pro-European systemic opposition that also irritates the representatives of BPP and Poroshenko’s office. Due to a balanced and prudent position, Samopomich ratings remain at a level of 10–13% that gives a good chance for Andriy Sadovyi’s presidential start. However, after a scandal in Lviv with the Hrybovychi landfill, Sadovyi is under severe pressure from political opponents who demanded his removal from duties and the conduction of an accident investigation. Regardless of how the accident will be investigated and whether the perpetrators will be punished, this scandal was a negative blow to the reputation of the Samopomich leader. In addition, it is likely that the fire at the landfill will be used by Poroshenko’s administration in its own purposes – to establish a political control over the Samopomich faction in order to collect votes for the decentralization and special status for Donbas. The fire at landfill caused a great reputation blow for the Samopomich leader
“The long game” of Samopomich During the government crisis, the Samopomich faction had an opportunity to form a tech16
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The aim of the publication is to provide objective information on current political events in Ukraine and thorough analysis of major tendencies in domestic politics. Such analysis will assist in setting priorities in the process of implementing reforms in Ukraine and in evaluating quality of state decisions from the viewpoint of their impact and sustainability. Special attention is paid to evaluation of political competition in Ukraine and ability of key political players to address challenges. Š 2016 International Centre for Policy Studies (ICPS) If citing please give reference on the ICPS Responsible for the project: Olena Zakharova Team of ICPS experts: Vasyl Filipchuk, Vasyl Povoroznyk, Vadym Perebyinis, Anatoliy Oktysyuk.
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