Ukrainian Weekly Highlights March 14-20, 2016

Ukrainian Weekly Highlights March 14-20, 2016 from Digests & Analytics Ukraine

The Verkhovna Rada wants to change the Parliament regulations – Hryvnia is still unstable – the Constitutional Court allowed the Parliament to change the Constitution at any time – Cybersecurity strategy – Government crisis continues – State-owned companies operate inefficiently – Crackdown of LGBT festival in Lviv – Criminal amber business – Anniversary of the Russian annexation of Crimea – Hopes for a visa-free regime – Sanctions and the Savchenko list – Withdrawal of the Russian troops from Syria and war in Donbas

The Rada decided to get rid of rigid regulations

The Ukrainian Parliament approved the recommendations of the European Parliament, according to which media access will be denied to the meeting of the conciliation board. An institute of the parliamentary bailiffs will be introduced to maintain the order in the session hall. The recommendations suggested to change a legislative procedure of laws adoption by a simple majority of deputies in the hall, the minimum quorum should be established taking into account the international practices. It is planned to adopt a law on the status of the parliamentary opposition, to reduce the number of committees to 20, and to revise the working schedule.

Parliament Deputy Speaker Syroyid said Parliament Speaker Groisman violated the regulations in 80% of votes. The authorities and the MPs want to minimize their responsibility for their inactivity and absence during votes, and will be able to "promote" the necessary decisions in the backstage mode. During the parliamentary and governmental crisis, the MPs are barely visiting the Parliament meetings.

Government crisis continues

President Poroshenko continues his attempts to dismiss Prime Minister Yatsenyuk. Head of the Poroshenko Bloc in Parliament Lutsenko said that the faction had nominated to the Prime Minister post current Finance Minister Yaresko, whose task would be forming a new "technocratic" Cabinet. However, the relevant committee of the Parliament declined the vote on Yatsenyuk’s dismissal, since a month ago his resignation was not supported by the majority. The issue can only be reconsidered at the next session of the Verkhovna Rada, which will open on September 6. The Prime Minister himself named the creation of a new coalition that would form the new government to be a condition for his resignation. The initiative of the Poroshenko Bloc is supported by neither the Prime Minister’s People's Front faction, nor by the Samopomich faction. Samopomich leader Sadovyi refused to become a Prime Minister, as he does not have sufficient support in the Parliament.

According to observers and political experts, Poroshenko’s objective is to promote the current Parliament Speaker Groisman, who is under his complete control, to the post of the Prime Minister at any cost.

If an agreement on the new composition of the Cabinet is not reached, the remaining factions could block the Parliament’s work, leading to early parliamentary elections.

President, Prime Minister and Parliament Speaker are opposed to early parliamentary elections, but in fact the coalition has been non-existent for over a month now, because the Batkivshchyna and Samopomich factions left the coalition on February 18. Groisman continues to insist on the existence of the coalition, since the Radical Party deputies have not personally withdrawn their signatures.

Calling new elections is the right, but not a duty of the President, so most of the experts predict the collapse of the Parliament’s work.

An survey conducted by the Razumkov Center showed that 52% of Ukrainians support the early elections to the Verkhovna Rada.

Constitutional Court allowed the Parliament to change the Constitution at any time

The Constitutional Court allowed to the vote for the changes to the Constitution to take place at any "next session" of the Verkhovna Rada. The consideration of the issue by the Constitutional Court was initiated by the Petro Poroshenko Bloc MPs in connection with the inability of the constitutional majority to adopt the amendments to the main law within the allotted timeframe.

The Court made a gift to President Poroshenko, recognizing that the decision to amend the Constitution may be adopted by the Verkhovna Rada during any next session after the voting in the first reading. Professor of the Kyiv Mohyla Academy Musiyaka, one of the authors of the Constitution, states that by making such decision, the Constitutional Court is contradicting itself, since its decision on the same matter was adopted in 2002. Similarly, the Constitutional Court in 2010 supported Yanukovych’s the constitutional coup by adopting a decision contrary to its ruling made in 2005.

Experts believe that this decision destroys the entire justice system. Free interpretation of the Constitution calls into question the mandatory implementation of any legislative act. The Constitutional Court has demonstrated that it is completely controlled by the President and is not an independent tribunal, and that the situation today is the same as it was in 2010. Journalists have repeatedly reported that the judges of the Constitutional Court are living beyond their means, which indicates that they are being bribed by the current government.

Hryvnia is still unstable

The refusal to implement reforms and the failure to resolve the government crisis indefinitely postponed the next tranche of the IMF loan, without which, according to experts, the financial system could collapse. The economy does not show any growth, despite a slight increase in prices at the traditional Ukrainian commodity markets. In the situation of instability, businesses and banks are beginning to buy up foreign currency. After strengthening in the first week of February to 25.3 UAH/$, the hryvnia exchange rate fell by the middle of the week to more than 27 UAH/$, but slightly strengthened to 26.2 UAH/$ after the sale by the National Bank of the record amount of foreign currency. The IMF continues to monitor the situation in Ukraine and waints for the government crisis to be over to continue cooperation.

NBU head Hontareva, in an interview to TV Channel 5 said that Ukrainians should monitor the contents of their refrigerator, and not the dollar rate. According to her, the country should go by with import substitution, since the cost of local products is much lower. The experts point out that Hontareva’s rhetoric is similar to that of the Head of the Russian Central Bank Nabiullina and the Russian leadership.

Such statements do not strengthen the trust of Ukrainians in the banking system, so the instability of the currency and the financial markets will undoubtedly persist.

State-owned companies are inefficient

The Government heard a report on the activities of the 17 largest state-run companies. According to the report, their taxes accounted for nearly 10% of the budget. The profits of the hundred largest companies in 2015 amounted to about UAH2.4 billion (less than $100 million), in contrast to 2014, which they finished with a loss of UAH7.4 billion.

The Ministry of Economic Development reported that only six state-owned companies underwent an audit for 2014, while 10 signed contracts for the audit and the rest sabotaged the inspection or prohibited access to the auditors. At 25 enterprises where the State Financial Inspection conducted checks, major financial irregularities were found.

Prime Minister said that such enterprises are used to plunder public funds, and various financial and industrial groups are trying to take under control their directors and management. Prime Minister sees privatization as the only way to increase tax collection and reduce the burden on the budget. The government sent a bill to the Parliament regarding the reduction of the number of enterprises that cannot be privatized.

Cybersecurity Strategy

President Poroshenko approved the NSDC decision of January 27 on the implementation of the cybersecurity strategy. Internet community representatives argue that this would limit the basic rights of citizens to receive information in a situation where the martial law regime has not been introduced in the country.

Hopes for a visa-free regime

The Cabinet of Ministers, after lengthy consultations with the President, nominated two candidates for the positions in the National Agency for the Prevention of Corruption. In this way, 4 out of 5 members were elected, which allows the Agency to start working. However, the officials were unable to elect the Chairman of the Agency.

The Verkhovna Rada finally adopted a law on the electronic declarations of income with the presidential amendments. The President reached a compromise with the MPs, who demanded to postpone the implementation of these declarations till 2017, offering them instead a "softer" revenue accounting scheme which allows not to include into the declaration the incomes of some relatives. Nevertheless, the European Parliament agreed to consider this law and the election of NAPC members as a fulfillment of the conditions for granting Ukraine a visa-free regime.

European Commission President Juncker and President of the European Council Tusk expressed confidence that in April, visa liberalization will be granted to Ukraine. A "visa-free regime" provides for visa-free travel to the Schengen countries for tourist purposes; for all other purposes, including employment and obtaining of residence permits, visa will be required.

The anniversary of the Russian annexation of Crimea

On March 18, the day of the signing of the Act of accession of Crimea to the Russian Federation in 2014 by President Putin, he paid a visit to Crimea. Ukrainian Foreign Ministry expressed the protest regarding such visit, but it did not affect Putin's decision.

International organizations, including the UN Security Council, condemned the occupation of Crimea. European and American leaders confirmed that sanctions against Russia would not be lifted until the full de-occupation. According to Ukrainian and foreign analysts, resolving the problem of the peninsula will be delayed for a long time. Russia turns it into a military base, moving troops and weapons there, including those capable of carrying nuclear weapons. Thus, the balance of power in the Black Sea region has dramatically changed in favor of Russia, which led to the reaction of the Eastern European countries and NATO, which also strengthened their military groups. In the occupied territory, the rights of its indigenous population, the Crimean Tatars, and of Ukrainians who did not accept the aggression, are being violated .

Ukraine has not yet presented a strategy for recover the peninsula, despite the loud statements of the President. The law on the "Crimean free economic area" is still in force, under which companies located in the occupied territories do not pay taxes. Poroshenko keeps saying everywhere that the peninsula can be liberated via negotiations. The de-occupation strategy presented by non-governmental organizations was not considered by the leadership of the country.

LGBT "Festival of Equality" dispersed in Lviv

Lviv city council called it inexpedient to hold an LGBT festival due to the public outrage, and the court banned the event. The crowd threw stones at the participants, after which they were forced to evacuate.

Amnesty International and the US ambassador condemned the behavior of the attackers, and Mayor of Lviv Sadovyi believes that the city has suffered reputational losses .

Some observers consider the holding of the LGBT festival in Lviv before the referendum in the Netherlands on the ratification of the Association Agreement with the EU a provocation with a calculated effect.

Criminal amber business

In the village of Yelno, Rivne region, a skirmish between illegal amber miners took place. Despite the statements made by President Poroshenko on curbing the unauthorized extraction, thousands of people are involved in this business, which is "covered" by law enforcement officials. The ecology of the region suffers irreparable damage. Most of the amber is being smuggled abroad, where its price is many times higher than the amounts offered to the miners by the resellers.

Local authorities said they could not stop this business on their own. Head of the regional administration Chugunnikov asked to deploy in the region the National Guard units.

The SBU detained a number of local police officers covering the illegal extraction, but the situation in the region remains almost unchanged, and the illegal business continues.

Sanctions against Russia and a Savchenko list

US President Barack Obama in a telephone conversation with the Russian President Vladimir Putin insisted on the implementation by Russia of the Minsk agreements, withdrawal of the Russian troops from Donbas and the granting to the OSCE of access to the Ukrainian-Russian border. At the summit of the EU foreign ministers, the basic principles of the policy regarding the Russian Federation were adopted . Most of the European leaders state that the sanctions against Russia would be prolonged until the complete fulfillment of the Minsk agreements and the de-occupation of Crimea. At the same time, Hungary and Italy do not want to automatically renew the sanctions, and Serbia said it would not join them, since Russia is its partner.

On the anniversary of the occupation of Crimea, Canada expanded the sanctions to include the Russian banks, the defense industry enterprises and the Crimean ports, as well as two individuals.

Ukraine handed over to the EU a proposal to create a "Savchenko List" to impose the sanctions against 44 Russian citizens and 2 Ukrainians, which does not include the main culprit, the Russian President Putin. President of the European Parliament Schulz is skeptical about the possibility of introducing sanctions against Putin. In Russia, the existence of such list is denied, the court is preparing to announce the verdict against Savchenko, some Ukrainian MPs and activists were not allowed to the Russian Federation, and the criminal case is resumed against Savchenko’s sister.

Withdrawal of the Russian troops from Syria and war in Donbas

In Donbas, fighting continues in the area of ​​the Horlivka-Donetsk route, where militants are trying to recapture the strategically important high ground on the outskirts of Avdeevka. Daily clashes take place on the outskirts of Horlivka and Svetlodarsk ledge. The militants are increasingly using heavy artillery and tanks. The arrival of the OSCE observers stops the shooting for some time, which then resumes with the renewed vigor.

Russia continues to move troops, equipment and fuel to the occupied territory, deploying field hospitals manned by Russian doctors. Intelligence Office published a list of commanders of the "DNR" and "LNR" army corps consisting entirely of the Russian officers, which suggests that the Russian regular army is fighting against Ukraine in Donbas.

Following the announcement by the Russian President Putin of the withdrawal of troops from Syria, part of the Russian military personnel was transferred to Donbas. This suggests that Russia continues preparation for the offensive in late spring.