24/02/2015 Ukraine: Daily Highlights -The negotiations between “Normandy Four" Foreign Ministers in Paris ended without any results

24/02/2015 Daily Highlights by the "Digests & Analytics - Ukraine" News Agency

Topics of the day

The negotiations between “Normandy Four" Foreign Ministers in Paris ended without any results. Heavy fighting continues near Mariupol. Gazprom threatens to terminate natural gas transit through Ukraine.

Key Events of Ukraine

• President Poroshenko signed the law "Ensuring the right to a fair trial," which defines the main directions to reform the judicial system.
• The Prime Minister Yatsenyuk dismissed the head of the State Fiscal Service and two deputies for the duration of the official probe into bribery and corruption.
• The government plans to reduce pensions to working pensioners and stop paying special pensions to MPs, government officials, prosecutors and judges.
• The Selection Commission did not appoint the head of Ukrzaliznytsia out of the three current candidates. New round of selection will be held on March 3. There are total 11 earlier pre-quilified candidates for this post.
• Naftogaz refused to make a gas prepayment to Gazprom until there is an assurance on the part of the latter of full contractual compliance and adherence to the tripartite Brussels protocol. Gazprom continues supplying gas to the territory occupied by militants and threatenes to abandon the gas transit through Ukraine when the gas pipeline to Turkey is completed.
• Sales of gasoline at Ukrainian gas stations declined by one third compared to January 2014.
• The Fitch Ratings lowered the ratings for Naftogaz and other major Ukrainian companies to a "junk" level SS, whihch is indicative of the potential failure by Ukraine to meet its obligations in national and foreign currencies.
• Starting February 23, the weighted average of the hryvnia will be indexed on a trade date, rather than on a valuation date.
• The NBU slightly strengthened the hryvnia against major currencies: 28.29 UAH/USD (-0.06 UAH), 31.96 UAH/EUR (-0,07 UAH), 4.58 UAH/ 10 RUR (-0.01 UAH).

Ukraine at War

• According to the OSCE monitoring mission, members of the Armed Forces from Ukraine, Russia and the illegal armed units representing LNR and DNR agreed on the  separation line. The OSCE expects a data submission by all the parties to the conflict on withdrawal of heavy weapons in accordance with the Minsk Agreement. According to eyewitnesses’ reports, the rebels camouflage heavy equipment in residential areas near the separation line. The Ukrainian side has no confirmation of withdrawal of heavy weapons by the militants.
  There are continuing mass deliveries of heavy equipment and ammunition to the territory under the control of insurgents from Russia. Russian troops and rebels under Russian control are engaged in regrouping and improvemnet of combat readiness as well as in continuing attacks on Ukrainian positions along the front line.
  Heavy fighting rages in Shirokino, near Mariupol. According to media reports, the militants seized two villages in the buffer zone.
• Four more Ukrainian servicemen released from captivity.
• The Verkhovna Rada deputy Deydey has disappeared in a war zone.
• According to the Donetsk Regional State Administration, the damage from military operations is estimated at about 3 billion UAH, about 10 thousand infrastructure objects have been damaged or destroyed.

Ukraine and the World

• The meeting between the Foreign Ministers of “Normandy Four" in Paris ended without significant results. Problems of continuing military operations in the regions of Debaltseve and Mariupol remained unresolved. The Russian Foreign Minister Lavrov left the talks before their completion.
• The UK is sending military instructors to Ukraine in March. The supply of weapons is being discussed, although only non-lethal weapons are currently being considered.

The Trends

• According to the experts of the Intensive Care Reform package, a sharp drop in the foreign exchange market could have been avoided, however the demand for foreign currency was driven by the opaque refinancing, the bloated budget expenditures, and the coverage of budget deficit and the loss of state enterprises through the emission of government bonds. The free currency rate is not feasable in the unstable economic situation and continuing military operations. The fundamental reasons for the hryvnia fall are not resolved, since Ukraine's economy is import-dependent, and there is a monopoly of raw materials. The stabilization of hryvna rate can only be reached through liberalization of the tax policy, easing conditions for bussiness development, passing the transparent and balanced state budget and the continuing IMF support.