Ukrainian Weekly Highlights March 28 - April,3, 2016

Ukrainian Weekly Highlights March 28 – April 3, 2016 from Digests & Analytics Ukraine

Presidential team is ganging up a parliamentary coalition – General Prosecutor Shokin is dismissed – The Party of Regions is going to get a revenge – "The Amber Front" – Ukraine will do without Russian natural gas – E-procurement system is launched – Fighting escalates in Donbas – The "Savchenko List" – Ukraine as part of the global nuclear safety system – New flash point is Nagorno-Karabakh – The “Panama Papers”

President Poroshenko’s Team is ganging up a new parliamentary coalition

According to the victrious statements of President Poroshenko and his team, a new parliamentary coalition should have been launched on Monday, but the head of Batkivshchyna party at the conciliatory council meeting set a number of strict conditions regarding the adoption of 18 draft laws before the signing of the coalition agreement by her faction’s MPs. The presidential team was not ready for such development, and Poroshenko went to the United States without the result that was expected by the donor countries. The US leaders reminded Poroshenko that the granting of $1 billion loan guarantee to Ukraine depended on the ability of the authorities to overcome the parliamentary and governmental crises and appoint a new prime minister.

Presidential Administration decided to "attract" to the two main factions the MPs excluded from other factions, or the so-called "tushki." Civil society sees this as the return to the methods used by the Party of Regions and former President Yanukovych in the Parliament of the previous convocation.

Transition of the deputies from one faction to another was directly prohibited by the Constitutional Court decision in 2008, but the founders of the new coalition are not afraid of such contradictions. On his return from the US, Poroshenko once again demanded from the Verkhovna Rada to create the coalition during the next plenary week, at the same time a new government will be formed and a Prime Minister appointed. Poroshenko Block has only one candidate for the post, Parliament Speaker Groisman, fully controlled by the President. However, the numbership of the new coalition is unlikely to be sufficient to adopt the basic laws, judging from the discipline of the MPs. And if someone from the People’s Front faction refuses to sign the agreement, the existence of the coalition will be under threat again. During the current plenary week, MPs almost did not work, and most of the proposed draft laws were not considered.

General Prosecutor Shokin is dismissed

Verkhovna Rada sacked General Prosecutor Shokin. Shokin himself did not attend the meeting of the Parliament and did not report on the results of his work. His first deputy Sevruk will be acting General Prosecutor. Before the resignation, Shokin managed to sign an order to dismiss his deputy Sakvarelidze appointed to the Prosecutor General's Office to implement reforms. The Prosecutor's office in Odessa detained Sakvarelidze’s Deputy Modebadze, who held his post for less than a month, "on bribe charges." Reprisals are underway against the prosecutors who spoke against the "system." The apartment of Shokin’s former Deputy Kasko was seized, and prosecutors opened several criminal cases against Sakvarelidze. The investigators of the case against the so-called "diamond prosecutors” were transferred to other positions and thus removed from the investigation.

Despite the assurances from the Head of the Presidential Administration Lozhkin that Sakvarelidze’s would soon return to work at the General Prosecutor's Office, Sakvarelidze does not see his place in the GPO without its radical restructuring.

Poroshenko pretended that he was unaware of the current developments and that no one coordinated these actions with him. However, experts agree that the actions of the General Prosecutor's Office management are inspired by the President and aim to clean the agency from unwanted employees and put into the General Prosecutor’s position a person completely controlled by Poroshenko. According to the information released by a Poroshenko Bloc MP Leshchenko, a department serving the interests of the President and his entourage and performing their tasks was created within the General Prosecutor's Office structure.

Several MPs state that Poroshenko will introduce to the Parliament the candidacy of the current Deputy General Prosecutor Sevruk who is ready to fulfill any wishes of the President and his team,

Fight against corruption

Korchak, former assistant professor at the Academy of the Prosecutor's Office of Ukraine, was elected Head of the National Agency for the Prevention of Corruption. Another anti-corruption structure was created to control the public servants’ income on the European Commission's demand.

Most Ukrainians believe that the fight against corruption is not taking place, the Government imitates such fight, and the entire power system is based on the corrupt relations. The civil society’s attempts to influence the system are opposed. A striking example of this was the seizure of documents by the investigators from the General Prosecutor's Office from the Anti-Corruption Center, funded by grants from international organizations.

The New York Times in an editorial wrote that Ukraine has made no progress in fighting corruption. Instead of the dismissed General Prosecutor Shokin, his "friend" Sevruk, acting General Prosecutor, continues the same policy. The IMF and the US should not "throw the money with a shovel into a swamp of corruption." To start the restructuting efforts, it is necessary to select a new General Prosecutor at a public competition. The situation will not change until the Parliament and the President agree to engage the real fighters against corruption and to conduct a serious judicial reform.

President Poroshenko called the The New York Times article about corruption in the higher echelons of Ukrainian government an "element of a hybrid war" against the country. Later, Poroshenko said that his words were misinterpreted.

"The Amber Front"

Illegal extraction of amber in the Rivne region has reached critical scale. Thousands of people are involved in amber mining. Profitability is reportedly thousands percent.

According to MP Gerashchenko, the problem can only be solved by force. Social activists and MPs state that the illegal extraction is covered by the law enforcement officials, and the cash flows into the pockets of local and Kyiv officials.

On March 31, during clashes of the law enforcement officers with the illegal miners, seven policemen were injured. National Police Chief Dekanoidze requires an urgent meeting of the National Security and Defense Council to resolve the issue.

The inability to solve the problem demonstrates that this corruption scheme is beneficial to the representatives of the upper echelons of power. Poroshenko in July 2015 asked security forces to eliminate the illegal mining, yet it continues, and its scale is constantly growing. The National Police stressed that the multi-million dollar business is still not regulated legislatively, resultiung in the state losing billions of hryvnia in revenues.

Party of Regions is going to get a revenge

The General Prosecutor's Office closed the criminal case for inciting ethnic hatred against the former head of the Party of Regions faction in the Verkhovna Rada Yefremov. The court returned his interntional passport to former Justice Minister Lavrynovych, accused of the embezzlement of public funds.

Odious Judge Chaus of Dniprovsky District Court of Kyiv overturned the decision to put Ivanyushchenko, the closest partner and accomplice in crime of former President Yanukovych, on the wanted list. The General Prosecutor's Office said it appealed the decision. Head of Special Investigations Office Horbatyuk believes that such decision gives grounds for criminal prosecution of the judge. Interior Minister Avakov says that the former ally of President Yanukovych Ivanyushchenko is still on the wanted list.

Opposition Bloc MPs submitted a bill on granting to the "inter-territorial association of Donbas" additional powers besides those stipulated in the law on the special status "of certain areas of the Donetsk and Luhansk regions." The bill stands no chance of being adopted; however, if the elections in the occupied territories of Donbas are held, the former Party of Regions sees its leaders Akhmetov and Boyko as leaders of the occupied regions, and a powerful group under the full Russian control will be organized in the Parliament.

Decisions of the courts and the Prosecutor's Office could not be made without the consent of the President and his Administration.

NACB: Better luck next time

The very first high-profile arrest to be made by the National Anti-Corruption Bureau turned into an epic fail. A judge, caught on a bribe, started shooting and was able to escape from the special forces. The clumsy attempts of the President’s Press Secretary Tseholko to present the incident as a victory were met with a storm of indignation in social networks, where users reminded about the level of salaries in the office and its zero efficiency. The judge himself appeared in front of the Verkhovna Rada, where after a speech he was detained by the Bureau.

In response to public complaints, the NACB announced the completion of the investigation of a number of cases, in particular the one regarding the corruption pressure of Naftogaz chairman Pasishnyk on the Minister of Economic Development Abromavicius.

A year without the Russian gas

The government postponed the increase of residential natural gas tariffs by 50% till the end of the heating season. "Market" price was one of the reference points of the memorandum, agreed with the IMF. Naftogaz, at the end of 2015, reported a loss of UAH25 billion. The goal of the IMF is to turn the gas monopoly into a profitable enterprise.

As part of the agreement with the EBRD, and under the new law on the natural gas market, Naftogaz presented its proposals for establishing a separate public company to act as the gas transmission system operator in accordance with the requirements of the EU Third Energy Package.

Stockholm arbitration started the consideration of the claim of Naftogaz to Gazprom. The date of the Gazprom counterclaim for gas arrears under the contract with the "take or pay" clause has not yet been announced.

Since the end of 2015, Naftogaz did bot buy fuel from Gazprom, and has no plans to resume the purchases after April 1. The Russian government canceled the natural gas "discount" for Ukraine. At the same time, the price on the European spot market is lower than the one proposed by Gazprom. With the planned injection of 17 billion m3 of natural gas into underground reservoirs, Naftogaz expects to completely cover all needs by importing gas from Europe.

Executives of major state-owned companies complain about small salaries

Top managers of the largest state-owned enterprises and companies complain about low wages and demand an increase to a "competitive level." They insist that for managing multi-billion dollar assets they are being paid the equivalent of one to three thousand dollars. The government managed to push through a decision on competitive selection for posts and on contracts signed with top management, under which they receive small salaries plus substantial performance bonuses. However, in a country which holds the last place in Europe in terms of welfare, top officials’ income will exceed the payments to the poor by 300 times or more, which corresponds to the third world social system. At the same time, Ukraine is one of the most resource-rich countries.

"The Savchenko List "

Poroshenko approved sanctions against the persons included in the "Savchenko list." He called on the US and the EU to join them. Some experts believe that the Savchenko list allows some of the persons included in it to evade responsibility under Ukrainian law, because they are citizens of Ukraine, even though they are listed as Russian citizens.

The army and the consolidation of defense

President Poroshenko appointed Lieutenant-General Popko, former commander of the anti-terrorist operation, Chief of the Land Forces.

Lt. Gen. Voronchenko, who commanded the ATO forces in the Luhansk region before becoming the deputy commander of the coastal defense fleet, was appointed commander of the Naval Forces of Ukraine. He replaced Admiral Hayduk, whose actions were constantly criticized.

President Poroshenko signed a decree on the terms of conscription for military service in 2016. The first draft will take place from May 5 to June 30, the second in October and November. The issue of the additional period of the seventh wave of partial mobilization and the number of conscripts has not yet been resolved. According to statements of the Minister of Defense, 18,000 soldiers were hired to serve on a contract basis from the beginning of the year, so it will be necessary to draft just a few thousand conscripts. The sixth wave of mobilization was almost disrupted, after which the Ministry of Defense counts on the contract army.

During his trip to Washington, Poroshenko received assurances on the allocation for Ukraine of $335 million for military training and supplies of non-lethal weapons that will also strengthen the country's defense capability. The greatest concern among American politicians is caused by the possibility of embezzlement of the allocated funds by the Ukrainian officials, so the biggest part of the aid will be directed to pay for services and equipment provided by American companies.

New e-procurement system

State-owned enterprises have switched to the ProZorro system of electronic procurement. Despite the obvious flaws (possibility to define tender conditions to suit a particular participant), according to most experts, the system will help save significant budget funds.

Donbas under full Russian control

The number of armed clashes in the Donetsk region increased dramatically. Industrial area of Avdiyivka remains the epicenter of the fighting. The militants shelled Shyrokyne, Maryinka, Zaitseve and Mayorsk, attacks on the positions at the Svetlodarsk salient continue. The militants actively used armored vehicles and heavy artillery, against the Ukrainian army, the use of MLRS Grad has been reported. Fighting continues for the industrial area of Avdiyivka and the village of Zaytseve, Ukrainian army suffers losses. Doznes of militants were killed and wounded, but the area remains under the control of the Armed Forces of Ukraine.

German newpaper Bild published an article that became an information bomb. It contains links to documents, according to which in Donbas, Russia is pursuing a policy of transforming the occupied region into a formation entirely controlled from Moscow. "Authorities" of the self-proclaimed "republics" do not have the slightest influence on the process, all decisions are taken at the level of the Russian government under the direct supervision of President Putin.

To manage the region, Russia set up an interdepartmental group, the meetings of which were held in strict secrecy. The group meetings were attended by a representative of DTEK energy holding owned by oligarch Akhmetov. A few days later, the press service of the holding company tried to dissociate it from their colleague, calling him a consultant.

The decision to institutionalize the "republics" and to grant them state support was made by Russia in the autumn of 2014, which makes all "Minsk agreements" null and void.

Severance of diplomatic relations with Russia

A number of the Verkhovna Rada MPs initiated a decision to break the diplomatic relations with Russia. Experts believe that the Parliament is not competent to adopt such decision, and it will be void.

Poroshenko claimed that it was impossible to break the relations, as this would terminate the Minsk agreements, however, the Protocol on establishing the diplomatic relations of 1992 suggests otherwise. In this case, it would be possible to transfer the representation of Ukraine’s interests to the Embassy of a friendly country, while the consulates would continue to work as usual. The decision to cancel the protocol may be made by the President.

Observers pointed out that Poroshenko’s statement could have been affected by the decision of the Russian court to extend the seizure of property of the Lipetsk confectionery factory owned by the President.

Ukraine in the system of international nuclear safety

US President Obama at the Nuclear Security Conference said that Ukraine avoided danger by getting rid of its stocks of weapons-grade uranium. He admitted that Russian President Putin delays the nuclear disarmament process.

President Poroshenko urged the international community not to allow the delivery of nuclear weapons to Crimea. According to him, nuclear states must provide effective guarantees to the countries that abandoned their nuclear weapons due to the fact that Russia had violated the Budapest Memorandum and carried out aggression against Ukraine.

The new flash point is Nagorno-Karabakh

In the Caucasus, the conflict flared up again over the Nagorno-Karabakh border region between Azerbaijan and Armenia. Heavy artillery, MLRS and tanks are being used in fighting. It was reported of dozens of dead and wounded soldiers on both sides. Turkey supported Azerbaijan in the conflict.

Azerbaijan, after advancing for a few kilometers, offered a truce and began securing the captured territories. At the moment, the conflict in Nagorno-Karabakh is not beneficial for Russia, which spends considerable resources to maintain its contingent in Syria and in Donbas. It is also disadvantageous for Armenia, the army of which is much weaker than the army of Azerbaijan. China also wants to be sure of the functioning of the "New Silk Road" to Europe, so the stability of the region is critical for it. It is possible to assume that the conflict was inspired by the Azerbaijani leadership at the most convenient time. For Ukraine, the lesson is that liberating occupied territories without the use of military force in the current international environment is impossible. On the other hand, success of the military campaign opens up new opportunities for a country that liberates its territory.

The “Panama Papers”

German newspaper Süddeutsche Zeitung obtained the correspondence of the largest Panamanian offshore companies registrar, Mossack Fonseca. The investigation was called the "Panama Papers". The newspaper shared that information with the International Consortium of Investigative Journalists. The correspondence contains the dossiers of 150 politicians who have used offshore companies to evade taxes. Among them are President Poroshenko and the people from his entourage, Batkivshchyna Party leader Tymoshenko, and son of former Prime Minister Azarov. It also contains the materials on Russian President Putin and the officials of his regime, who laundered $2 billion, and on Syrian President Assad. The publication may result in major political disruptions in many countries.

Ukrainain TV program “Skhemy” showed a piece on the offshore companies owned by President Poroshenko, which were not included in his declaration. The company managing the corporate business of Roshen was registered in Panama. Its goal, according to the representative of the international auditing company, is to avoid Ukrainian taxation. The offshore company was registered at the time of the heaviest fighting in the Ilovaysk pocket and negotiations in Minsk. The program asks what is more important to Poroshenko: state interests or his own income.

The pro-government bloggers responded with comments like "this is what everybody does." In the light of the fight against corruption, which Poroshenko mentions constantly, including during his last visit to the United States, his actions are corrupt, and in any Western country they would result in impeachment. However, there is no such law in Ukraine.