Ukraine: Weekly Highlights February 22–28, 2016

Ukrainian Weekly Highlights February 22–28, 2016 from Digests & Analytics Ukraine

The Parliamentary coalition does not exist, does it? - The President's team is trying to remove the Prime Minister from the post - The scandal with the publication of the National Security and Defense Council meeting protocol - Visa-free regime is under threat - The NBU is barely managing to prevent the hryvnia exchange rate from falling- Protest rally in the Maidan is oven - The Prosecutor's Office does not want to get reformed - POWs and hostages exchange with the "republics" is unblocked - Ukraine extends its cooperation with NATO - The second anniversary of the occupation of the Crimea

The crisis in the higher echelons of power is escalating

President Poroshenko and his entourage keep trying to put own people into key positions in the Government, up to replacing the Prime Minister Yatsenyuk, using the reformatting of the coalition in the Verkhovna Rada based on the general dislike towards the Prime Minister. For that, various actions were undertaken, aimed at weakening of the position of the Prime Minister, who is backed up by the West as the only alternative to the concentration of the power in hands of the President.

At the meeting of the Parliamentary Committee on Defense a transcript of the meeting of the National Security and Defense Council from February 28, 2014 on the Russian occupation of the Crimea was declassified . The representative of the Main Intelligence Office informed the Committee that Russia was ready to attack in the east and north of Ukraine in early 2014.

Head of the "Batkivshchyna" party  Tymoshenko said that the declassification of such documents is contrary to the law and is a criminal offense. Nevertheless, the SBU and deputy head of the Verkhovna Rada Parubiy believe that there is no sensitive information in the transcript. Publication of the protocol for the public could not take place without the approval of Poroshenko, whose team is looking for ways to reduce the growth of the "Batkivshchyna" party's ratings and to remove the current Prime Minister from the office.

Former Deputy General Prosecutor Golomsha and Chief of the General Staff  Zamana stated that they also participated in the meeting and insisted on the introduction of the martial law and organization of the resistance to the aggressor, but their speeches were not included into the published text. The National Security Council continues to say that the protocol includes the texts of all the speeches and Golomsha and Zamana could not vote for any decisions, as they were not members of the National Security and Defense Council, and a bit later - that they did not speak at all. The experts drew attention to the absence of traces of the sewing-together in the submitted documents, suggesting that they were falsified. The document emphasizes the advantageous position of NSDC Secretary Turchinov (at that time the acting President, the head of the Verkhovna Rada of Ukraine), member of the "People's Front", whom the party may put forward as an alternative candidate for the post of the Prime Minister, without creating a new coalition.

Prime Minister Yatsenyuk in an interview to the Frankfurter Allgemeine German newspaper  sharply criticized the Poroshenko Bloc in the Verkhovna Rada. He believes that the majority of the Poroshenko Bloc , Samopomich and Batkivshchyna factions do not want to reform anything. However, Yatsenyuk claims that President Poroshenko is still his partner. Head of the  Poroshenko Bloc Lutsenko claims that the coalition no longer exists, and next week the talks will be held on the creation of a new coalition for the new Government. According to him, the faction is ready to propose a plan of joint actions of the Parliamentary majority and the Cabinet of Ministers. On Friday, the RBC-Ukraine agency published information about the voluntary resignation of Yatsenyuk, which caused panic in the offices of the authorities, however, the press service of the Head of the Government denied those rumors.

Head of the Verkhovna Rada Groisman believes in  the existence of the coalition "de jure" despite the withdrawal of the three factions, as the agreement still has 237 signatures under it. For the formal termination of the coalition agreement the deputies of the Radical Party faction should withdraw their signatures. In such a way the President is trying to secure the escape routes and not to dismiss the Parliament, which is his right, and not an obligation, but, nevertheless, it will reduce his already decreased  ratings.

In the nearest time it will become clear whether Poroshenko is able to create an alliance of factions who are interested in the change of the Prime Minister. The collapse of the coalition will almost inevitably lead to the early elections after which the People's Front party, according to all the polls, has not even the slightest chance to get into the Parliament.

In the event of early elections, the President's team attempt to participate with two projects - the "Petro Poroshenko Bloc” party and the Saakashvili movement - can lead to the collapse of the rating of the Presidential force, although some analysts believe that the combined result may be more significant. In the ranking, compiled from a survey of the Gorshenin Institute, “Samopomich” party ranks first, and according to the survey by the KIIS -  Poroshenko Bloc is in the 1st position. The survey results are completely different, which may indicate the custom-made research and attempt to manipulate the public opinion.

Unwillingness of all factions to change the members of the Central Election Commission, the term of the office of whom expired in June 2014, and to revise electoral legislation with the transition to the open lists and the exclusion of elections in majority districts can also indicate the preparation for the elections. The draft law on impeachment, which was introduced to the Parliament in December 2014, was also forgotten.

Visa-free regime with the EU under threat

President Poroshenko signed three laws from a "visa-free package". Signing of the Law on electronic declaration of income, to which the deputies introduced changes, contrary to the requirements of the EU at the last moment, was postponed until the end of the consultations with the European Commission. EU representative in Ukraine Tombinsky said that the amendments made do not give reasons to believe that the conditions, which the  road map for a visa-free regime contains, are fulfilled.

Media quoted the European officials that reported that a meeting of the European Commission on a visa-free regime is postponed until the referendum in the Netherlands on ratification of the Association Agreement between Ukraine and the EU. The EU leadership denied such information , but stressed that they did not specify the specific timing for the decision.

The National Bank is barely managing to prevent the hryvnia exchange rate from falling

The hryvnia rate balances at the level of the psychological marks of 27 UAH / $ and 30 USD / € due to the NBU regular currency  interventions. Since the beginning of the year, in the foreign exchange auctions, the NBU bought $ 66 million, sold - $ 239 million, the net sales of foreign currency amounted to $ 173 million. The National Bank is trying to stabilize the situation by withdrawing from the market the insolvent banks and conducting the stress tests for the second ten largest financial institutions.. Ukreximbank, Oschadbank and Privatbank are recognized as systemically important banks .

The National Bank published decrees, according to which access to the refinancing for the commercial banks will be simplified from April through providing them with new loans to repay the previous ones on the security of the government bonds and deposit certificates of the NBU. The capital adequacy ratio of the Ukrainian banks decreased below the set minimum of 10%, which, in turn, led to deterioration of other indicators of the banking system.

Chairman of the Council of the National Bank Association of Ukraine Shpek believes that it is impossible to ensure the economic growth without the abolition of currency restrictions . However, the world economic situation is unfavorable for Ukrainian exports, devaluation pressure on the currency market is very big, the future of the next IMF tranches is not defined, so the abolition of restrictions in the nearest time  is unlikely.

According to former First Deputy Finance Minister Umansky, termination of crediting by the IMF will not lead to the immediate financial catastrophe. The restructuring, carried out by Finance Minister Yaresko, was not previously discussed and will lead to excessive burden on the budget in a few years, and the approaches to the formation of the tax system of Yaresko and head of the Verhovna Rada Yuzhanina are equally incorrect and do not ensure a sustainable economic growth.

Fitch Ratings believes that early parliamentary elections will aggravate the political uncertainty and lead to the cancellation of the decision on allocation of new tranches from the IMF under the Extended financing program.

The protest rally on the Maidan is completed

The action of several patriotic organizations dedicated to the second anniversary of the execution of the Maidan activists, was over after the demolition of the last tent without a declaration of the court decision on the termination of the action. Among its participants were activists of the Maidan, the protest was supported by the citizens and businessmen dissatisfied with the policy of the authorities, as well as by the soldiers from the volunteer units and regular army.

Both branches of the Ukrainian authorities, forgetting about their contradictions, had taken a number of well-calculated actions to create a negative "image" of the action and its participants by any means, using the controlled media,  bloggers and "opinion leaders." Talks were held in the presidential administration with a number of combatant commanders , about which the other participants were not aware. The odious politicians and people with controversial reputation were put to work in the Coordinating Staff, almost everyone had access to the "free microphone" on the Maidan, among them there were also provocateurs. Some of the protesters under OUN battalion commander Kohanivsky comand attacked several branches of the Russian banks, which frightened the people of Kiev, who are afraid of the radical protests.

On February 21 at the St. Sophia Square, as a counterweight to the " veche" on the Maidan, a parallel rally in support of the policeman who shot the passenger of the persecuted car was held. In addition, Russian and local media controlled by the politicians close to the entourage of former President Yanukovych, actively promoted a topic of instability of the authorities and "people's wrath", which also became an indicator of the "custom action" for the population. These measures gave the results and the protest was not supported by the society at large, the participants failed to form a positive image of the event. However, the authorities did not dare to force the dispersal of the rally, the collisions were avoided, as the current and demobilized soldiers warned their former colleagues in the law enforcement agencies that the conflict could lead to casualties.

Once only the individual protesters remained on the Maidan , the authorities with the help of the people in camouflage uniforms under their control, which were identified as fighters of the "Kyiv-2" special police battalion, demolished the last remaining tent, and the protesters dispersed.

The authorities managed to extinguish the protests, but the public discontent with total impoverishment and restrictions of civil freedoms remained and can result in more organized actions. Sociologists polls show a record low level of trust in the authorities, more than 70% of respondents do not trust any of the country's leaders and authorities. More than 2/3 of Ukrainians are not ready to rise in prices and tariffs for the sake of reforms, more than 70% believe that the reforms are not carried out in the country, and the country is moving in the wrong direction. The action has shown that the political force, capable of systemic resistance, has not yet been formed in the society, but the request for its creation is very high.

The Prosecutor's Office does not want to change

The West made sure that the President is finally dismissing odious General Prosecutor Shokin. Poroshenko submitted to the Verkhovna Rada a representation on the resignation of Shokin, but the deputies did not find the time to consider it. In the event of his dismissal to his place may be offered the candidacy of his first deputy Sevruk.

Deputy General Prosecutor Sakvarelidze states that the General Prosecutor's Office initiated seven criminal proceedings concerning his group workers. Former Deputy General Prosecutor Kasko claims that deputy head of the Poroshenko Bloc parliamentary faction, President’s business partner, Kononenko was directly giving the  instructions to the General Prosecutor’s Office leadership regarding the important cases. A team of investigators, who investigated the case of the "diamond prosecutors" was actually removed from the process. The  Transparency International human rights organization said that the investigation of the crimes of former President Yanukovych and officials of his regime does not move. The EU is lifting the sanctions against former Health Minister Bogatyryova, and the General Prosecutor’s Office considers that there is nothing wrong with it, since they found no property belonging to her abroad. The case against former head of the Party of Regions faction in the Verkhovna Rada Efremov on the falsification of voting for the "Yanukovych dictatorial laws," is falling apart. Due to the delayed formation of the Investigation Bureau, the cases connected with the crimes on the Maidan are also stuck indefinitely.

The experts say that the President has no intention to reform the agency, moreover, there is a return to the days of former President Yanukovych, when the Prosecutor's Office was completely controlled by the Presidential Administration, and followed its instructions.

Minsk negotiations and the situation in the Donbass

During the talks in Minsk no significant results were achieved, the participants onlly managed to negotiate an exchange of seven Ukrainian citizens, including civilians, into the separatists and members of the illegal armed groups. The representative of Ukraine in the humanitarian talks subgroup Gerashchenko said that the process of the POW exchange was unblocked.

One of the participants in the talks from the Ukrainian side Bessmertny said that the OSCE police contingent can be deployed in the Donbass only after a full ceasefire regime is in work and the flow of weapons and ammunition from Russia is stopped .

Pro-Russian politician Medvedchuk - President Putin's godfather and one of the representatives of Ukraine in the Minsk talks - proposed to create in the occupied territory of the Donbass a "transitional government" of the self-proclaimed formations, which must be acceptable to both sides to the conflict. In fact, he insists on the implementation of the scenario of federalization and collapse of Ukraine, which was promoted by his movement "Ukrainian choice"  since 2012.

The situation in the conflict zone remains tense, the militants are continuously firing at the Ukrainian army positions in the area of ​​Horlivka, Donetsk, on Svetlodarsk ledge and in Mariupol direction, the Armed forces suffered casualties. According to media reports, in the occupied territory, the militants suffered much bigger losses, the OSCE recorded the evacuation of the bodies to Russia through the checkpoints at the border. The intelligence records the rotation of the Russian army units and the replacement of local militants by the Russian military.

Development of partnership relations with NATO

President Poroshenko signed a law on opening of the NATO Informational Office in Ukraine. Defense Minister Poltorak said that the launch of the reforms in the Ministry of Defence is scheduled for early March. A roadmap of the reforms with a monthly schedule of their execution and implementation was developed together with the NATO advisors.

The second anniversary of the occupation of the Crimea

On the eve of the second anniversary of the occupation of the peninsula by Russia, the experts and politicians sum up the results of the past period. Some Ukrainian companies and financial-industrial groups have already submitted claims against Russia to international courts on the facts of seizure of their property. The Prosecutor's Office of the Autonomous Republic of the Crimea reported that it records all the cases of seizure of the Ukrainian property to sue in international courts, the total damage is about 50 billion hryvnia. The politicians are making statements about own role at a time when the Crimea was captured by Russia. The civil society is discussing possible scenarios in the case, if the Ukrainian army resisted, and the country's leaders declared a martial law. The peninsula is officially recognized as the occupied territory. The blockade, which greatly complicates the supply of food, electricity and water remains. In 2014, the Verkhovna Rada adopted a law on the "Crimea" free economic zone , which still was not canceled, and it exempts the enterprise operating on the peninsula from paying taxes.

The President in recent months repeatedly stated that the strategy of de-occupation of the Crimea is ready , but it has not yet been published. Civil society activists and Eastern European politicians insist that the issue of sanctions against Russia should be connected with not only the implementation of the Minsk agreements, but also with the solution of the Crimean issue. The experts of the Maidan of Foreign Affairs and the leaders of the Crimean Tatar community presented own plan of liberation of the Crimea , one of the points of which is proclamation of the National Autonomy on the peninsula, but the Ukrainian authorities do not demonstrate any wish to use their work.