08-14 December 2014 Weekly Highlights by the “Digests & Analytics Ukraine” News Agency
The Parliament adopted the government’s program of action. 2015 state budget was immediately withdrawn from the Parliament for revision by the Cabinet. The IMF is not ready yet to grant the next tranche of the stand-by credit for Ukraine. "Silent regime" was announced in the Donbass. The US Congress adopted a bill to support Ukraine. President Poroshenko’s visit to Southeast Asia did not achieve the results expected.
The activities of the new Ukrainian government
Deputies of Verkhovna Rada approved the program of action of the government headed by the Prime Minister Yatsenyuk. The Cabinet received a mandate of trust for a year, and cannot be re-elected during this period.
The Ukrainian government has submitted 2015 draft state budget to the Verkhovna Rada and immediately withdrew it for revision. The draft ruthlessly cuts all social programs while taxes on income of oligarchs are not increased. Experts believe that the government program is a simple set of declarations and contains no drastic reforms needed to turn the economy in the growth direction. If such variant of the budget is adopted by deputies, it will lead to an increase in the tax and administrative burden, the destruction of small and medium-sized businesses, and to the growth of corruption and social tensions in the country.
Under pressure by lenders, Ukrainian authorities were forced to appoint foreign citizens as the ministers of health, finance and economy. Also, the former European Commissioner for Taxation Mr. Semeta was elected as Business Ombudsman, which will represent the interests of Ukrainian and foreign business community. There is a plan to appoint former Georgian citizen Mrs. Zghuladze as a Deputy Minister of Internal Affairs.
State of the economy, the negotiations with the IMF
The Ukrainian government has resumed talks with the IMF to increase the amount of the stand-by credit. The Fund is not yet ready to make the decision to grant the next tranche due to the lack of real reforms in the country. According to the IMF, Ukraine needs an additional $15 billion line of credit. Negotiations between President Poroshenko and the IMF about the implementation of the current program have ended without any valuable results. The mission will continue its work in early January, 2015.
The EU officials understand the financial problems of Ukraine and are ready to increase the volume of macro-financial assistance, which has reached € 1,61 billion, despite the belief that the IMF should be the main investor.
National Bank lowered the official rate of hryvnia (UAH) by 0.18 UAH/$ during last week down to 15.71 USD/$. This is a little more than 1%. Cash dollar rate in exchange offices is 16.35 UAH /$, but it is virtually impossible to find. NBU provides commercial banks with refinancing in the amount from 2 to 7 billion UAH on a daily basis. Money supply in November grew by 1.3% and reached 972 billion UAH. According to experts, the head of the NBU Gontareva has nothing to say to deputies who have demanded her report on the activities of the regulator of currency and monetary policy.
Rating agencies predict the shrinking of the Ukrainian economy by 8-8.5% by the end of the year, and these estimates aren’t changing. The fall of outdoor and media advertising sales by up to 20% indicates the real state of Ukrainian economy. Most experts expect the slowdown of the economy to continue for the entire 2015.
Radical reforms and liberation of small and medium-sized businesses of the tax burden could improve the situation. The population hopes for changes in government policies under the pressure of creditors and allies from the US and the EU. The government's inability to cope with the situation and its "tightening the screws" could lead to social explosion.
According to US Vice President Biden, Ukraine has no right to miss another chance to carry out reforms.
US support of Ukraine
The Senate and the US House of Representatives had adopted bills in support of Ukraine, which provide tougher sanctions against Russia, as well as financial and military assistance to Ukraine. President Obama can exercise a "technical veto" and not sign them, being concerned with further deterioration of relations with Russian Federation.
US Treasury Secretary Jack Lew is convinced that sanctions against Russia, together with the continued decline in oil prices, caused a double blow to Russian economy.
At a meeting of the Atlantic Council in Washington, US Ambassador to Ukraine Jeffrey Payette named the terms of Ukraine's accession to NATO. Those are the reforms and the will of the Ukrainian people. The NATO Headquarters have once again confirmed that the door to the Alliance is opened for Ukraine.
The "truce" in the Donbass
December 9th was declared as the "silent regime" start date, which was agreed by negotiating group consisting of Russian and Ukrainian militaries under the auspices of the OSCE. Massive attacks and shellings by militants have almost stopped. Fighting for the Donets’k airport, hostilities near Avdiyivka, Debaltseve, highway "Bahmutka", Stanitsa Lugahs’ka and Mariupil are still continuing. Ukrainian troops are not opening fire in response.
According to the General Staff, about 50 thousand Russian troops in the 40 battalion tactical groups are concentrated near the border of Ukraine, and about 10,000 troops are located on the territories controlled by terrorists of LPR and DPR. According to experts, illegal military formations have about 700 armored vehicles, half of which are tanks. Dozens of heavy armored vehicles, military trucks, oil tankers and air defence vehicles intrude into Ukraine through the uncontrolled state border day by day. Russian Foreign Ministry still does not recognize the presence of Russian troops on the territory of Ukraine.
Another Russian "humanitarian" convoy invaded Donbass. Ukrainian border guards and international observers aren’t allowed to check the contents of the trucks.
According to the President Poroshenko, the "ceasefire regime" allowed to strengthen the defenses and made possible the re-equipment of the army.
Leaders of Germany and the OSCE are satisfied with decreas of tensions in the conflict in the Donbass, and believe that only Minsk agreements could be the basis for a peaceful settlement.
The weekly report by the monitoring mission of the OSCE says that the buffer zone, to be created in the Donbas, remains insecure because militants are completely refusing to withdraw any heavy weapons or artillery.
Continuation of negotiations in the "Minsk format"
Despite the previously stated refusal to participate in the negotiations in Minsk in the Russia-Ukraine-OSCE format along with the militant leaders, the president of Ukraine decided to take part in them. Representatives of terrorist Donetsk and Luhansk "People's Republics" have repeatedly declared the need to postpone the start of the negotiations because of the required "coordination with the leaders". The date was deliberately delayed by the authoirities of the Russian Federation in the hope that the US Congress will not pass the bill on military support for Ukraine. President Poroshenko insists on the need for a peaceful solution in Donbass, on supplying electricity and heat to occupied regions, but does not mention the possibility and timing of the return of territories of the Donbass controlled by Russian forces and illegal armed units. According to experts, the participation of Ukraine in Minsk talks will help to legitimize terrorist "republics" and turn the Donbass into a “gray zone”, similar to Abkhazia and South Ossetia.
The New Cold War
Russian Air Forces constantly provoke NATO forces for active steps to intercept fighters and strategic bombers over the Baltic Sea and the Atlantic. The count of incidents comes to dozens. Some incidents show Russian aircrafts unsafely close to civil airliners.
Russia is conducting military exercises of the Strategic Missile Forces and preparing to combine Air Defenses, Air Forces and Military Space Forces into Air and Space Forces under the General Command.
According to the former head of NATO Mr. Rasmussen, the conflict between the Alliance and Russia may stretch for decades, and the war in Ukraine is unlikely to end soon.
President Poroshenko’s trip to Singapore and Australia
According to international observers and the media, the official visits of the President Poroshenko to the Southeast Asia countries have not yielded any significant results neither at the diplomatic, nor the financial area due the lack of proper preparation for the negotiations. Partners are unconfortable with establishing closer cooperation with Ukraine for the reasons of absence of real reforms and widespread corruption in Ukrainian authorities.
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