ГРОШОВІ БУЛЬБАШКИ: ВПЛИВ СВІТОВОЇ ФІНАНСОВОЇ КРИЗИ НА УКРАЇНУ

Katerina Malygina
First published at «Ukraine-Analysen №46» on October 28th 2008

http://www.laender-analysen.de/ukraine/pdf/UkraineAnalysen46.pdf

Донедавна українська політична еліта була сповнена надій, що світова фінансова криза країни не торкнеться. Це аргументувалося тим, що Україна не інтегрована у світовий фінансовий простір, як інші країни, оскільки її фондовий ринок не досить розвинений і його падіння не вплине на економіку країни.

Проте, ще в травні впливове рейтингове агенство Fitch, проаналізувавши 73 країни, поставило Україну на друге місце серед держав з найбільшим ризиком макроекономічної нестабільності. А ще в червні Всесвітній Банк вніс Україну у своїй доповіді «Фінансування Глобального Розвитку 2008» разом з Росією й Казахстаном у список країн, які ризикують більше всіх постраждати від світової фінансової кризи. Тенденції, які ми спостерігаємо з осені цього року, цілком підтверджують ці невтішні прогнози. Як таке могло статися, адже ще на початку року ріст ВВП очікувався на рівні 6-6,5%?

«ГРОШОВА ГОЛКА»
Власне вплив світових фінансових турбуленцій Україна почала відчувати ще в другій половині 2007 року. Але тоді їхній вплив не був негативним. У результаті іпотечної кризи в США американські та європейські фондові ринки падали впродовж липня-вересня. Однак, український фондовий ринок зазнав лише незначного падіння.

Фінансова криза не тільки не віджахнула іноземних інвесторів, але зробила український ринок більш привабливим для інвестицій у порівнянні з розвиненими країнами. В Україну хлинув потік спекулятивного капіталу. Український індекс ПФТС продовжував зростати до кінця року й досяг свого максимуму 15 січня в 1208 пунктів. Це дозволило вивести обсяг портфельних інвестицій в 2007 році на рівень у $5,7 млрд.

В Україну зненацька прийшли великі гроші: у другому півріччі 2007 року країна залучила в півтора раза більше прямих іноземних інвестицій (ПІІ), ніж у першому ($5,57 млрд. у порівнянні з $3,6 млрд.). Для порівняння обсяг ПІІ за весь 2006 рік склав $5,7 млрд.. За підсумками 2007 року Україна ввійшла в десятку найбільших одержувачів ПІІ. Звичайно, у порівнянні з лідерами Китаєм ($84 млрд.) і Росією ($22 млрд.) обсяги українських ПІІ здаються незначними, але для України майже $10 млрд. (близько 14% від ВВП) – це досить багато. Таких грошових надходжень не очікував навіть уряд. Наприкінці року він двічі змінював прогнози номінального ВВП – у вересні з 594 млрд. грн до 679 млрд. грн і в листопаді до 708,3 млрд. грн.

На початку 2008 року, разом з обвалом світових фондових ринків став падати й український індекс ПФТС. Його падіння було одним з найбільних у світі – майже на 80%. Відтік короткострокового капіталу не став серйозною загрозою для економіки країни, тому що дірку в платіжному балансі за перше півріччя 2008 року вдалося залатати істотним нарощуванням експорту, чому сприяв світовий рост попиту на сировинні ресурси. Так, світові ціни на сталь – основну статтю українського експорту – зросли з $210 за тонну на початку року до $296 у липні. Доходи від експорту в другому кварталі 2008 р. у порівнянні з першим зросли на $5 млрд. – тобто якраз на суму відсутніх портфельних інвестицій.

У результаті всіх перерахованих вище процесів Україна була практично «підсаджена на грошову голку». З одного боку, виторг від експорту за січень-серпень 2008 р. склав рекордні $47 млрд. (за аналогічний період в 2007 р. – $31,5 млрд.). З іншого боку, продовжилося стрімке зростання ПІІ – $8 млрд. за січень-серпень 2008 р. При цьому, більша частина цих грошей (47,3%) вкладалася у фінансовий і банківський сектори, які активно розвивалися й обіцяли надприбутки.

Економіка країни виявилася ще не готовою до таких потужних грошових вливань, що призвело до невідповідності між попитом та пропозицією всередині країни й розкручуванню інфляційної спіралі. За даними Держкомстату, у травні рівень інфляції в Україні був найвищим серед країн СНД – 31%. Дії НБУ з обмеження грошової маси мали наслідком зменшення ліквідності комерційних банків і подорожчання кредитів.
Водночас збільшилися бюджетні соціальні виплати й компенсації втрачених заощаджень громадян, що зменшувало фінансові ресурси економіки країни й збільшувало споживчі настрої серед населення. Видатки населення за І півріччя 2008 року в порівнянні з аналогічним періодом попереднього року виросли на 41%.

Ріст споживчих настроїв задовольнявся різким ростом імпорту, чому сприяла девальвація долара стосовно гривні в другому кварталі 2008 року. 22 травня Національний банк України (НБУ) зміцнив гривню, встановивши офіційний курс 4,85 грн/$. Однак, незважаючи на всі дії НБУ й уряду дефіциту торгового балансу в першому півріччі 2008 р. уникнути не вдалося, він досяг $8 млрд.

Таким чином, Україна не зуміла впоратися з величезними обсягами грошей, що прийшли в економіку країни за останній рік. Українська політична еліта перебувала в стані ейфорії й продовжувала роздавати соціальні виплати. Гроші пішли не на модернізацію економіки, а на «проїдання» і кредитування імпорту. Зміна ж зовнішніх обставин у вересні цього року серйозно збільшила ризик дефолту в Україні.

«ГРОШОВА БУЛЬБАШКА»
Уразливість української економіки сьогодні обумовлена високими обсягами зовнішнього боргу, слабостями фінансової системи, залежністю від припливу іноземного капіталу й твердою прив’язкою гривні до долара.

Небезпечних розмірів досягла зовнішня заборгованість України, яка всього за рік виросла на $35 млрд. З $100 млрд. зовнішнього боргу на сьогоднішній день $30 млрд. повинні бути виплачені впродовж 2008-2009 років. Колишні плани рефінансувати короткострокові борги довгостроковими стали практично не здійсненні, оскільки світові проблеми з ліквідністю суттєво обмежують доступ українських банків до зовнішніх кредитів. Fitch Ratings вже заявило про подвійне скорочення світових темпів росту кредитування (з 16% в 2007 р. до 7%). До того ж, час «дешевих кредитів» минув. Зниження рейтингів України кількома ведучими рейтинговими агенствами (25 вересня Fitch, 21 жовтня Moody’s, 24 жовтня Standard & Poor’s) означає, що відсотки, під якими будуть видаватися позики українським банкам, суттєво зростуть. Таким чином, навіть якщо Україна візьме кредити, за них доведеться дорого сплачувати в майбутньому, а це автоматично продовжує смугу кризи для економіки України в цілому. На внутрішні джерела фінансування також не варто розраховувати, тому що довіра до банків з боку населення після накладення НБУ мораторію на дострокове зняття депозитів похитнулося. Недарма, було ухвалене рішення поповнити Фонд гарантування внесків фізичних осіб на 1 млрд грн у вигляді кредиту й підняти суму відшкодування депозитів громадянам з 50 тис грн до 100 тис грн. Але не варто розраховувати, що ці дії повернуть довіру до банків в умовах глобальної фінансової кризи.

Погашення боргу за рахунок валютних резервів НБУ теж проблематично. Резерви тануть на очах. Тільки за жовтень вони скоротилися на $3 млрд. до $34,6 млрд (для порівняння у вересні вони зменшилися на $534 млн. грн). Більша частина валютних резервів пішла в жовтні на підтримку курсу гривні. Можна припустити, що й надалі істотні видатки НБУ будуть пов’язані з антидевальваційними заходами.

Ситуація в банківському секторі ускладнюється ще тим, що майже 52% загальних кредитів і 60% роздрібних кредитів складають кредити в іноземній валюті. Останні, з одного боку, не забезпечені адекватними доходами позичальників. З іншого боку, збереження високих темпів інфляції й девальвація гривні будуть мати негативний вплив на спроможність населення виплачувати свої боргові зобов’язання. У результаті якість активів банків істотно падає. Щоб уникнути такої ситуації, НБУ вирішив заборонити банкам кредитувати населення в іноземній валюті й збільшувати кредитні портфелі.

На фоні обмеженої ліквідності також буде рости дефіцит платіжного балансу. В умовах, коли світова фінансова криза загрожує перейти в економічну, природно очікувати суттєвого вповільнення приросту іноземних інвестицій. До того ж, довіра іноземних інвесторів була підірвана численним падінням рейтингів.

Високий попит на сировинні ресурси теж виявився короткочасним. Відсутність попиту на світових ринках позначилася зниженням валютних надходжень в країну від експорту продукції. Всі металургійні підприємства України скоротили у жовтні своє виробництво в порівнянні з липнем на 67 %. Через відсутність замовлень в Україні на сьогодні з 36 працюючих домен зупинені 17.

Як це не парадоксально, але одним з головних джерел прибутків у бюджет в цьому році стала Державна митна служба: річний план був перевиконаний вже за 9 місяців, а митні збори досягли 75,6 млрд грн (для порівняння обсяг перерахувань Держмитслужби в 2006 – 37,8 млрд. грн, в 2007 – 54,1 млрд грн). Однак, доходи від мита стали знижуватися, оскільки вже в жовтні зменшився приблизно на 50% імпорт.

Реальним джерелом коштів могла б стати приватизація. Незважаючи на те, що план приватизації цього року був виконаний тільки на 4%, за розрахунками уряду вже зараз можна було б оперативно виручити 2 млрд грн в результаті продажу обленерго. Однак експерти заперечують, в період фінансової кризи, коли активи дешевшають, держава не повинна нічого приватизувати.

Таким чином, ресурсно-фінансова база економіки зменшується. У цьому році Україна була залежна від великих грошових надходжень. Однак колишні фінансові джерела на сьогоднішній день істотно поменшали. Не дивно, що зараз шукаються будь-які шляхи залучення коштів в Україну й поповнення бюджету, такі як, наприклад, кредит МВФ. Очевидно, Україні дійсно загрожує серйозна фінансова й економічна криза.

Divided nation is its own worst enemy in countering Russia

by David Marples, Special to Kyiv Post
Sep 03 2008, 23:31

Russia’s recognition of South Ossetia and Abkhazia as independent nations may signal the demise of Georgia. It also raises serious questions about future relations with Ukraine.

That threat cannot be dismissed as fanciful or far­fetched as in the past. Russia’s foreign policy in what it calls its “near abroad” has changed dramatically in the past month. Borders are no longer sacrosanct, and Russia has not hesitated to use its monopoly of gas supplies to Ukraine as a political weapon in the past. Ukraine is not blind to the new situation, but it is, in many respects, unprepared for the different forms of potential conflict.

The critical area is Crimea and, in particular, the port of Sevastopol. When Ukrainian president Viktor Yushchenko refused to extend the lease on the port to the Russian Black Sea fleet beyond 2017, he ignited a new conflict with the northern neighbor. Yushchenko has also demanded that the annual rent Russia pays for its two bases, $98 million, be increased significantly.

Last month in Sevastopol, there was a substantial protest of ethnic Russian members of the Russian Bloc, the most powerful political party on the peninsula. Led by Vladimir Tyunin, they were demanding that Crimea become part of the Russian Federation.

That demand is hardly new. In the early 1990s, former Crimean president Yuri Meshkov ignited a similar movement and promised a referendum on the issue. The Ukrainian government acted firmly to quell the separatists and abolished the post of Crimean president.

Rumors abound that Russia is issuing passports to the majority group of ethnic Russians, just as it did to South Ossetians and Abkhazians in Georgia. Prominent Russian statespersons, including Moscow Mayor Yuri Luzhkov, frequently visit Sevastopol and demand that it be returned to Russia.

Added to the mix are the Crimean Tatars, deported by Josef Stalin in 1944-­45, but permitted to return under Gorbachev and now comprising about one­sixth of the population. The relationship between the Tatars and the government in Kyiv is amicable, but relations with Russians who own most of the former Tatar lands and property are volatile.

In 2004, when the Orange Revolution took place, eventually bringing Yushchenko into office, two regions of Ukraine – Donetsk and Luhansk – threatened to leave Ukraine with support from Russia. The two regions, centers of the coal, steel and chemicals industries, provided overwhelming support to the candidacy of former prime minister Viktor Yanukovych. They have large populations of ethnic Russians comprising majorities in the major cities.

Since the population as a whole is Russian speaking, there is no ethnic tension. But the Regions Party, which dominates eastern Ukraine, has a radically different perception of the country than the Orange parties currently in office. It is backed by Ukraine’s richest and most powerful oligarch, Rinat Akhmetov, and supports warm relations with Russia and close ties with the European Union, while strongly opposing Ukraine’s request to join NATO and Yushchenko’s support for Georgia.

After Russia’s brutal defeat of Georgian forces, both Yushchenko and Prime Minister Yulia Tymoshenko visited the Donbas (to Donetsk and Luhansk respectively). They were not co­ordinated visits, but the timing seemed notable. Both leaders wished to ensure that they have a voice in a formerly hostile voting area.

Today, the key issue is the territorial integrity of Ukraine. Prime Minister Vladimir Putin and President Dmitry Medvedev have indicated that they are prepared to revise formerly recognized borders. The Russian government is willing to support and sow disaffection in eastern Ukraine and Crimea, as well as in the Prydnistrova region of Moldova.

However, Ukraine tends to be its own worst enemy. Though its government has requested NATO membership, most residents oppose it. The Regions Party insists that no membership can take place without a referendum, the result of which hitherto has been a foregone conclusion.

Despite two recent elections, the Ukrainian parliament is so badly divided that it could not even pass the 2008 budget before the summer recess. Yushchenko has undermined every reform initiative of Tymoshenko. In turn, the ruling Orange coalition’s majority is down to two seats.

Perhaps most revealing of Ukraine’s predicament is the low standing in the polls of the president and his party. A poll conducted between Aug. 8 and 24 found that, had a parliamentary election been held at that time, 23.4 percent of respondents would have backed the Tymoshenko Bloc and 20.3 per cent the Regions Party. Yushchenko’s Our Ukraine and People’s Self­Defense Coalition and the Communists had 4.6 percent.

In terms of the popularity of the potential presidential candidates for the 2010 election, Tymoshenko leads with 24 per cent, followed by Yanukovych with 20. Yushchenko’s 7 percent makes him the least popular leader in Europe at a time when Ukraine’s economy is as strong as it has ever been.

Ukraine’s politicians need to focus on priorities. A coalition government to ensure internal unity seems to be a logical first step. Yushchenko cannot lead Ukraine without public support as the country enters its 18th and most critical year of independence.

RUSSIA AND UKRAINE DISPUTE OVER SEVASTOPOL

David Marples

At the entrance to Sevastopol harbor a giant monument commemorates the city’s attainment of “hero” status during the Second World War. Closer to the shore one sees a blue-yellow Ukrainian flag surrounded by the Russian tricolor, which flies from all the taller buildings. Sevastopol, it appears, has an identity crisis and is claimed by two countries: Ukraine, its present owner, and Russia, its former one.

The city was founded by Empress Catherine II in 1783 following Russia’s southern expansion and annexation of the Crimean peninsula. By the mid-19th century it was the site of the most serious European conflict in several decades, when Britain, France, and Turkey joined forces against Russia and laid siege to the great port for more than a year. In the nearby suburb of Balaklava, a suicidal British attack based on misunderstood orders is remembered as the “charge of the Light Brigade.”

Russia was defeated in this war, Sevastopol fell, and for the next fourteen years Russia was not allowed to construct any fortifications or bases in the area of the Black Sea. Under Alexander II, Russia eventually renounced this treaty.

During the Second World War, German and Romanian forces also laid siege to the port, which resisted staunchly. Stalin was to reward the city for its endurance but was incensed at what he perceived as collaboration by the Crimean Tatars and later in the war he deported them en masse to the east. Only in the 1980s were they permitted to return.

The history of the great port, in short, is one of violence and conflict. Virtually every corner has a monument or dedication to one of the wars it endured.

In 1954, to mark the 300th anniversary of the so-called Treaty of Friendship between Ukraine and Russia at Pereyaslav–the goal was to prevent Bohdan Khmelnytsky’s Cossack army from being overrun by the Poles–Soviet leader Nikita Khrushchev made Ukraine a gift of the Crimean peninsula. Ostensibly that gift also included Sevastopol. When Ukraine became independent in 1991, it also laid claim to the city as well as the Soviet Black Sea fleet. Russia demurred and serious conflict ensued.

In May 1997 that dispute was resolved temporarily by a Treaty of Friendship and Cooperation between Russia and Ukraine that seemed comprehensive. The fleet by then was already divided–Russia had 83% of the warships–and the Russians agreed on a 20-year lease of three main harbors and two airstrips for a payment of about $100 million. The treaty stated expressly that Sevastopol belonged to Ukraine.

Many Russian leaders have never accepted the loss of Catherine’s port. In early June, Moscow mayor Yuri Luzhkov demanded the withdrawal of Crimea and the city of Sevastopol from Ukraine and their transferal to Russia. His comments, which earned him a ban from traveling to Ukraine, followed a statement from the Russian parliament that Ukraine’s potential entry into NATO would terminate the 1997 Friendship Treaty. Ukraine is concerned also about territorial violations in exercises involving the sailors. The latter are also housed thanks to subsidies from Moscow.

On June 24, a spokesperson for the Ukrainian Foreign Ministry, clearly following directions from President Viktor Yushchenko, declared that the lease on Sevastopol would not be renewed and the Russian Fleet must leave the city by May 29, 2017.

There is another dispute concerning the possible expansion of the Russian fleet. At its peak in the 1980s the Black Sea Fleet had over 630 warships and submarines with a maximum of 70,000 sailors and other personnel. Today the fleet is a shadow of its former self with 35 warships and 11,000 personnel. Russia would like to increase those figures respectively to 100 and 25,000, which it claims is permissible by the terms of the 1997 treaty. The Ukrainian Foreign Ministry, on the other hand, claims that no increase in warships is allowed.

From Ukraine’s perspective it is illogical to raise the size of the Russian fleet prior to its withdrawal in less than nine years’ time. Russia claims the fleet is vital to its national interests. It pays for the lease through the cancellation of Ukraine’s energy debts and would likely demand immediate payment were the fleet ejected. It has begun construction of a new naval base on the eastern seaboard at Novorossiisk but the location is less ideal and lacks the spacious harbors of Sevastopol.

The city itself is composed predominantly of ethnic Russians (over 70%) and is virtually 100% Russian speaking. It was a closed city during the Soviet period and close to a weapons base, the remains of which are visible on the hillside overlooking the port. In elections it has consistently backed the pro-Russian Regions Party led by Viktor Yanukovych.

The problem has no easy solution. Sevastopol is a cradle of Russian imperial ambitions and of Russian “military glory.” It was founded by Russia. But legally Crimea, though autonomous, is Ukrainian. And Ukraine’s strategic interests–at least as long as Yushchenko remains president–are with the West and NATO, membership of which is anticipated in the near future.

Under such circumstances, implicitly at least, the Russian Black Sea Fleet would form a part of a hostile military bloc and occupy the same port as the smaller Ukrainian Black Sea Fleet. Could it be evicted physically if the Russian government refuses to remove? While Ukraine remains outside NATO it seems unlikely. It seems equally implausible that the two countries would go to war over the status of the city and its fleet. But time is running out for a solution.

(This article appeared originally in the EDMONTON JOURNAL, 28 June 2008)

Yushchenko Visits Canada leaving Political Crisis at Home

David Marples

Ukrainian president Viktor Yushchenko has been visiting Canada this week. During the visit he addressed Parliament, which was expected to recognize the 1932-33 Ukraine Famine as an act of genocide on 28 May.

However, he left behind in Ukraine a growing row with his Prime Minister Yulia Tymoshenko over the privatization of property and the distribution of authority between the office of the president and that of his former Orange ally.

Tymoshenko has made plain her desire to provide compensation for those citizens whose deposits in the former Soviet Savings Bank were rendered worthless by the collapse of the Soviet Union in 1991. She intends to do this by privatizing a number of key companies, chief of which is the Odesa Portside Plant (OPZ), which produces ammonia and nitrogen fertilizer. The Prime Minister proposed to sell the plant at an auction, and then use the funds accrued to compensate investors and sponsor social programs. Such measures would presumably raise her popularity with the public on the eve of new presidential elections, which will take place late in 2009 or early in 2010.

The Prime Minister’s other key declared task was to remove the intermediary company in Ukraine’s discussions of gas questions with Russia: RosUkrEnergo.

Yushchenko, who hosted an energy summit this week in Kyiv, has stood in the way of both projects, most notably by opposing Tymoshenko’s plans to install her own candidate, Andrii Portnoy, as head of the State Property Fund. In early February, the Prime Minister suspended the Fund’s leader Valentyna Semenyuk and appointed Portnoy in her place. Yushchenko issued a legal appeal against the firing, which was duly turned down by the Constitutional Court. Ultimately, both the president and Prime Minister threatened to use force to back up their candidates. In addition, the Prosecutor-General, following the president’s instructions, has filed a criminal case against Portnoy for trying to privatize state property illegally.

These events have been accompanied by another conflict concerning amendments to the Ukrainian Constitution. It is no secret that Tymoshenko would prefer that more power be given to the Parliament. She has assured Yushchenko that he would be allowed to extend his term in office, albeit with weakened authority. Yushchenko has accused Tymoshenko and leader of the Social Democratic Party Viktor Medvedchuk of causing a political crisis through surreptitious changes to the Constitution, without broad public debate. The Constitutional Council appointed by the president, meanwhile, has reportedly completed its own draft of a revised Constitution that would bring about power sharing while setting up a second chamber, the Senate, which would appoint key officials nominated by the president.

Some supporters of the president accuse Tymoshenko of a naked grab for power that would see her as the main figure in Ukrainian politics. Yet neither Yushchenko nor Tymoshenko have any support from the largest parliamentary faction, the Regions Party of Ukraine, led by their old nemesis and former Prime Minister Viktor Yanukovych.

Critics of Yushchenko complain that the president has no clearly delineated policy other than to remain in office, and that he has floundered, moving from one crisis to another and unable to put together a solid band of support in the Parliament. An April poll suggests that were a presidential election to be held at that time, the main contest would be between Tymoshenko and Yanukovych (both have the support of over 20% of the electorate), with Yushchenko a distant third at around 8%. Our Ukraine, Yushchenko’s political party, similarly commands only 8% support and won only one province in the 2007 parliamentary election. Such standings render Yushchenko a likely one-term president.

The president, however, is fighting resolutely. He has admonished Tymoshenko for unanticipated high rates of inflation in the country and ordered the Cabinet to come up with a viable economic plan. He has sent the Presidential Guard to patrol the State Property Fund, and he has declared the Odesa Portside Plant to be an object of vital strategic interest that cannot be subjected to privatization. He has dissolved Parliament twice since 2006, and it seems only a matter of time before he dismisses Tymoshenko for a second time (her first Cabinet in 2005 lasted for only nine months). At that point the confrontation would become an open contest for the presidency.

Yet none of these measures really address the main question, which is how Ukraine can bring about the sort of stable government it had under former president Leonid Kuchma in 1994-2004. Ironically, the much more democratic and far less corrupt regime established through the Orange Revolution has been mired by political in-fighting and power struggles, largely between the presidency and the Prime Minister’s office.

A version of this article appeared in the Edmonton Journal on 25 May.

Ukraine between Elections: Out of the Blue?

FRIDE Backgrounder

Balazs Jarabik

Four months after parliamentary elections Ukraine has seemingly slipped back into business as usual. The opposition is obstructing the work of the parliament, Russia has threatened Ukraine with rockets, and with cutting off its gas supply over alleged debts, and the extremely narrow Orange majority strains everyday thanks to battles between the Orange Government and the Orange Presidential Administration.

Nevertheless, the three constitutional leaders signed a letter in January asking NATO to provide a Membership Action Plan (MAP) for Ukraine at its Bucharest summit in April, initiating public debate on the issue of NATO membership for the first time. Ukraine was admitted to the WTO on February 5, thereby creating the best framework so far for the process of European integration while also improving the prospects for more foreign investment. Last, but not least the Tymoshenko government has moved to tackle corruption by targeting VAT refunds and customs operations, which lack transparency, and trying to remove RosUkrEnergo from gas dealings between Russia and Ukraine – although there are few indications of long-promised judicial and constitutional reform.

Conversely, the Yulia Tymoshenko Blok (BYuT) is placing its own sponsors in positions of power. Although divided on the issue of MAP, most Western diplomats lack genuinely positive intentions with regard to the Ukrainian request. The question remains unanswered of whether Tymoshenko has a serious plan to move Ukraine forward, or is merely implementing a series of populist measures intended to boost her rating before the upcoming presidential elections in 2009?

Getting used to braids and new ideas?

Ukrainians take their time to act. The new Ukrainian parliament first assembled on November 23, almost two months after the elections. The deal to hold new elections in September was negotiated by Viktor Baloha, Chief of Staff at the Presidential Secretariat and Ivan Pliushch, the Head of the National Security Council with their main negotiating partner in the Party of the Regions, Rinat Akhmetov, who is also Ukraine’s richest man. Many believed that the same group made a deal for a post-election grand coalition.

But then the elections came. BYuT’ss results gave the Orange forces yet another chance to lead Ukraine “out of the Blue”. The new speaker, the “polite young technocrat” Arseny Yatsenyuk was elected on December 4, while Prime Minister Tymoshenko was confirmed by an open vote on December 18 on the second attempt. However the everyday turmoil in the parliament has sent a strong signal that Prime Minister Tymoshenko has a majority of only two from the renewed “Orange Coalition”, while even in the Cabinet not all ministers are following her guidance.

The Presidential Secretariat, which has become a powerful institution under Viktor Baloga, returning to Kuchma-style policy making, is providing a constant policy and administrative “alternative” to the Cabinet. The same kind of tug-of-war, which previously existed between the two Viktors and led to early elections, is now developing between the Orange President and the Orange Government. This time, however, Yuschenko has a more direct influence as his party, Our Ukraine-Peoples’ Self Defense (NUNS), is in the ruling coalition. In addition, the President nominates the ministers of defence and foreign affairs , while Yuriy Melnyk, the only member of the Yanukovych cabinet who continues to serve under Tymoshenko, has also been installed by the Presidential Secretariat. Seemingly Yuschenko has been building up a kind of “de facto grand coalition” with the Party of Regions outside the parliament. Raisa Bogatyrova, a prominent member of PRU was named as secretary of the National Security and Defense Council (NSDC) . These cadres are effectively backed by the Prosecutor General Medvedko, who maintained his position after the government tried to call him back into parliament thanks to NUNS being divided on this issue.

The strategy of the Presidential Secretariat seems intended to give time to the government, while also designing clear opposing tactics and strategies to slow down Tymoshenko’s drive and determination. President Yushchenko came up with a package of bills aimed at diminishing the role of the Prime Minister and the government, and made Moscow his first visit after the elections .

Nevertheless, the agenda of the second Tymoshenko government looks similar to that of the first. Given that there were not too many achievements from previous reforms, perhaps there is no need for new ideas, but rather to implement the old ones. There is a debate over whether Tymoshenko has a real plan, as she is often seen carrying a green dossier which she frequently quotes with journalists or at Cabinet meetings. She certainly has determination, though. There are several economic, social and anti-corruption initiatives outlined by the new government such as the “Tymoshenko Transparency Initiative” (TTI), the “Contract with Investors”, “Contraband, Stop”, the new Council of Foreign and Domestic Advisors, and the rather controversial compensation programme. All these make great headlines but only time will tell whether these steps suffice to put Ukraine on the reform track, or whether they will be used simply to further boost Tymoshenko’s popularity, especially in Eastern Ukraine.
Besides the “alternative” offered by the Presidential Secretariat, obstruction from the opposition and a less-than-overwhelming majority, inflation might be the most serious enemy of the Tymoshenko government. According to last year’s official figures consumer prices rose by 16.6 percent. If its 2005 tenure is anything to go by, no price controls or export controls can be expected from the new government , however, and the new compensation program, worth $1.2 billion, may push inflation even higher this year. If pessimistic scenarios are confirmed this would be more likely to lead to the downfall of the government than any actions of the Presidential Secretariat or obstruction from the parliamentary opposition.
At least under the TTI the government has taken initial steps to tackle corruption, targeting customs as well as the previous government’s practice of selling value-added tax refunds to exporters at a “commission” of 20–30 percent, and especially the gas trade with Russia. Removing the intermediary RosUkrEnergo, and its half-owned Ukrainian subsidiary, UkrGazEnergo, which is serving to siphon money to a number of prominent Russians and Ukrainians, is a popular goal, but there are others who claim Tymoshenko may want to let her own sponsors take a slice of this lucrative pie. Although the removal may not be opposed by the Kremlin, as this would mean higher gas prices, there has so far been no debate within the government over liberalising the domestic gas market. Without such a move it will be hard to save the Ukrainian state oil and gas corporation, Naftogaz Ukrainy, which is on the verge of bankruptcy.

Beside the compensation program the question of privatisation remains another grey area. Notably, the first Tymoshenko government’s re-privatisation policy met with the harsh criticism from foreign experts in 2005. The new Ukrainian government published a list of 19 state-owned companies slated for privatisation this year, with a total value estimated at $5 billion . Sensibly, the new government has abandoned its predecessor’s tactic of selling very small posts, instead offering large majority posts in three major companies, including Ukrtelecom, Ukraine’s old fixed-line monopoly. The new government also intends to adopt the necessary legislation to facilitate land trade. Nevertheless, Yushchenko immediately asked Tymoshenko to drop her privatisation plan for 2008, arguing that a law to make privatisation more transparent should be passed first.

Speed and determination made the new government’s start impressive, although plans are still vague to reform the constitution and judiciary, the two single biggest issues prior to the elections. Without these the Orange agenda cannot be completed. This is especially true given that the Tymoshenko government could build such a reform initiative on the election platform, where both NUNS and the PRU campaigned extensively with reform promises in both areas.

The reform drive of the new government might be overshadowed by Tymoshenko’s efforts to increase her popularity rating nationwide. Targeting Eastern Ukraine seems to be a long-term strategy, which has already borne some fruit in the 2007 parliamentary elections as BYuT was able to attract new voters in the East. The announcement of the compensation policy in Dnipropetrovs’k and Yulia’s campaign meetings conducted in Russian in the East signals this effort. This nationwide outreach is in stark contrast to the President’s rather Kuchma-like policy-making or the PRU’s obstructionist approach. Nevertheless, the Paul Manafort-led effort to polish the image of the PRU has had some positive impacts as it accepted the election results and has set up a shadow government to monitor governmental activities,. Nevertheless, there are indications that the financier Rinat Akhmetov is moving closer to the president by preparing a new political party, GART, allegedly to be headed by the Chief of Staff of the Presidential Administration, Baloga. That would mean that Doneck drops Viktor Yanukovych as unelectable in 2009 and moves to back Yuschenko against Tymoshenko.

The two coalition partners have divided the Cabinet posts, so that BYuT controls the economy while NUNS retains foreign policy, security, and culture. A certain structural balance of power between the President and the Prime Minister meanwhile seems to be emerging out of their persistent power struggle. In Dnipropetrovs’k on January 14th Tymoshenko made it clear that she is happy to carry on as Prime Minister, but she may consider running for President “if the Cabinet is limited by certain restrictions, if they start putting forward certain conditions”. Moreover, she hinted at the possibility of a coalition between BYuT and PRU. Thus, this new power clash between the President and the Prime Minister may continue longer than was expected after the elections. Tymoshenko is likely to decide later whether 2009 will see one or two Orange presidential candidates, in accordance with which position offers the stronger influence.

Integration: glass half empty, half full

Immediate post-election expectations pointed towards the continuation of pro-European rhetoric, while rather symbolic and small steps towards integration were taken. Such an approach would be feasible save for the fact that the EU is not willing to give prospective membership to Ukraine. Moreover, such foreign policy “stagnation” will not be opposed by the majority of Ukrainians until the economy is stronger.

It was rather surprising, therefore, that on January 18 President Yushchenko, Prime Minister Tymoshenko and Speaker of Parliament Yatsenyuk made public a joint letter to NATO Secretary General Jaap de Hoop Scheffer declaring Ukraine’s readiness to advance on a Membership Action Plan (MAP) with NATO and requesting a decision on the matter from the Alliance at its Bucharest summit in early April. As a rationale the Presidential Secretariat argued that the intensified dialogue of 2004-2007 had been fully utilised and had almost exhausted its potential. Many Western diplomats would disagree with this assessment, if only behind the scenes.

While there is a consensus between the new government and the Presidential Secretariat over NATO membership, the declared commitment has not been reflected in the deeds of the government or the President himself. A referendum on NATO has been the Achilles heel of the request, although the Presidential Secretariat communicated this could have a consultative nature only). In fact the latest opinion polls suggest a sharp increase from about 20 percent to 31 percent in favour. This increase probably owes something to the absence of an anti-NATO campaign, which was a remarkable achievement of the 2007 parliamentary elections among all political parties. Moreover, the article in Profile magazine by Taras Chornovil, one of the prominent members of the PRU, signalled that any future government would accept the MAP for the sake of continuity in foreign and defence policy. The reaction of Russia’s President Putin in his annual press conference, warning that Russia would target NATO military bases in Ukraine with its rockets, is perceived to be only the beginning in the run-up to presidential elections in March. It may prove useful for Ukrainian pro-NATO campaigners, as it is likely that the more Russia beats its chest, the more Ukrainian support towards NATO will increase.

More serious problems include the Annual Target Plan for 2008, which is yet to be approved, the less-than-impressive track record of the “Intensified Dialogue”, and the President’s nomination of Yuri Yekhanurov, instead of Anatoly Hritsenko, as defence minister. These provide evidence of a lack of proper management, and the necessary actions towards NATO on the part of the Ukrainian political elite. Western countries are divided on the issue because of these factors and concerns over regional stability (read: Russia). The social democrat-led Federal Ministry of Foreign Affairs of Germany, in particular, is trying to convince the Ukrainian elite as well its Western partners that it is too early for MAP.

With so many divisions both within Ukraine and in the West, this remains a classic case of the glass being half empty or half full. With the aforementioned letter Ukraine at least managed to raise the issue within NATO and likely succeeded in opening a door to NATO accession in the long term. The West must, however, be aware of the sensitivity of the Ukrainian elite and the delicate details of the NATO question within Ukraine and thereby make a decision about the MAP in order to keep Ukraine firmly on the Euro-Atlantic integration track.

The situation with other integration processes is different from the overly-politicised NATO issue. Admission to the World Trade Organisation, at the meeting of the WTO General Council, which has been the biggest integration success story of the post-Orange Revolution period, went almost unnoticed in Ukraine. One reason for this is that Ukrainians waited twelve years for this integration process to complete itself, as the country began the application process in 1993. This symbolical last touch , according to Hrihory Nemyria, the Deputy Prime Minister for European and International Integration, reflects the Tymoshenko government’s efforts to reach out to foreign investors. The first foreign trip of Prime Minister Tymoshenko was to Brussels, where she confirmed that her main priority in terms of integration would be foreign investment, and offered cooperation with the EU on European energy security in order to ensure alternative energy supplies from Russia. The focus on foreign investment was confirmed in a big meeting with investors in Kyiv. Proving that the new government has a plan and backing, several studies were published including one by the Washington-based Rand Corporation’s International Security and Defense Policy Center which was co-authored by the Nemirya-headed Kyiv-based Center for European and International Studies (CEIS).

Tymoshenko’s Brussels trip signaled greater cooperation with the EU, as this represents yet another point of competition with the President, bringing more openness, more contacts and more exchanges. Meanwhile despite Ukraine officially disliking it, the European Neighbourhood Policy Instrument has been an effective mechanism for imposing conditionality and opening many new socialisation channels. The visa facilitation agreement, along with the proposal of opening community programmes, energy integration and increasing people-to-people contacts, are placing Ukraine ahead of other ENP countries and making it a testing ground for this policy. However, the EU must increase its incentives as a challenge to the entire elite, utilising the current positives and this new, competitive integration environment in Ukraine. In contrast to the highly politicised NATO issue, Ukrainian bureaucrats actually run the EU process, while politicians have to catch up with the technical process. Negotiations on a new enhanced agreement are being held and the talks on “deep free trade” will be launched by the visit of Commissioner Mandelson in February 2008. As one high-level EU diplomat put it, Ukraine is aware that the EU cannot provide membership status at this moment, but it acts as if it were unaware; while the EU is aware that Ukraine does not like the ENP, but acts as if it were oblivious to the fact. Indeed, as there is not much talk about either the membership perspective or the Neighborhood Policy, the technical process of integration might be moving faster than ever.

Conclusions: Cherchez la femme

Although Ukraine’s politics remains driven by the same three strong personalities, Prime Minister Tymoshenko is so far keeping the public policy process firmly in hand through a series of new initiatives. Her government has made an impressive start. With so many much-publicised campaigns against corruption, and the WTO negotiations completed, creating room for foreign investment within just a few weeks, the implication is that an initial plan, at the very least, did exist. However, with efforts to boost her popularity nationwide also firing on all pistons, the ultimate question is when will these two dynamics, one for reforms and the other for popularity, come into conflict.

Nevertheless, the second Tymoshenko government seems much more modern than the reactive policy-making of President Yuschenko or the obstructionist opposition led by Viktor Yanukovych. So far Ukraine, between the 2007 parliamentary and 2009 presidential elections, is about the cherhez la femme… High inflation, which some predictions put at 19 percent for this year, may kill all these plans. Although the new framework of the Orange President and the Orange Prime Minister seem to act as balancing counterweights for each other’s power, the impressive reform drive might be scuppered by the thus far absent plans for reform of the judiciary and the constitution.

Nevertheless, the Tymoshenko government seems to be pushing the international integration process forward more than any other previous government. The hotly debated issue of NATO membership makes the glass seem half empty or half full, depending on who you ask, and the West must remember that policy making and the taking of any serious decisions takes time in Ukraine. Without the most serious incentive, the promise of EU membership, the most strategically important country in Eastern Europe will continue to hover between East and West. However, the increasing aggressiveness of Russia, along with slowly but surely implemented technical integration processes to the WTO (completed) and to the EU (underway), will further convince the majority of Ukrainians that dropping anchor in a Western harbor is still better than acting as a buffer state. The Ukrainian elite must understand that it is time to back up pro-European rhetoric with concrete actions and also make the case for Europeanisation at home as well as in the West.

The election campaign in Ukraine is already underway

Ukraine takes a decisive step closer to parliamentary elections after 155 Verkhovna Rada deputies surrender their mandates.

By Ilya Khineyko

On June 15 the Verkhovna Rada of Ukraine of the 5th session ceased to exist. By the morning of that day, 151 deputies from Our Ukraine and the Tymoshenko bloc had submitted their resignation papers to Oleksandr Moroz, bringing the total number of parliamentarians below the necessary quorum of 300. Later that same day, four more resignations were announced.
The de-facto dissolution of the Verkhovna Rada was carried out through the resignations of opposition deputies in accordance with the May 27 agreement of the Big Three, which ended the two-months-long political crisis in Ukraine. It happened in spite of the obstructionist maneuvers on the part of Oleksandr Moroz, who stands to lose most from the dissolution of the current parliament. Also, many rank-and-file opposition deputies were extremely reluctant to relinquish their mandates. As Ukrains’ka Pravda reports, before the resignations list was read out loud at the Verkhovna Rada session, “many MPs [had] asked not to have their names put in the top ten of the list because in the event that dissolution of parliament fails they would never have a chance to return to the Verkhovna Rada.”

Update: Who is behind the leaked protocol on Russian-Ukrainian energy trade? The Ekonomichna Pravda version.

On June 7, Ekonomichna Pravda (EP), the business spin-off of Ukrains’ka Pravda, published an article entitled “Gas Subversion,” which seeks to refute most of the claims made in the Glavred piece discussed in our previous posting. While confirming the authenticity of the leaked document, citing some anonymous insider sources from the Naftogaz of Ukraine, the EP journalist disputes the main message of the Glavred article – namely, that the Ukrainian authorities are about to make serious concessions to Moscow, bringing the country’s energy system under control of the Kremlin.

A “Hot” Summer for Russian-Ukrainian Relations

By Ilya Khineyko

It seems that the two neighbors do not have much time for each other at the moment. Russia is trying to deflect criticism over her stance in international affairs and human rights record at the G-8 summit in Germany. Meanwhile, Ukraine is at the beginning of a new election campaign and trying to recover from a prolonged political crisis. That is why Viktor Yushchenko’s insistence that “Ukraine has not done anything to complicate Ukrainian-Russian relations” is slightly surprising. However, given recent developments an escalation of tensions between the two countries does indeed seem probable.

UKRAINE CONSTITUTIONAL CRISIS DEEPENS

David Marples

The bewildering series of events in Ukraine over the past two months have led to a compromise between the two main factions: the office of the president led by Viktor Yushchenko and the Parliament led by Prime Minister Viktor Yanukovich. A third figure, Speaker of the Parliament Oleksandr Moroz, also added his signature to the new agreement. However, most analysts concur that the real struggle is yet to come.

Confessions of an Ethnic Russian

By Ilya Khineyko

It has become commonplace to point out that many Russians in Ukraine, and other post-Soviet republics for that matter, are clinging to the Soviet past. However, despite the lack of loyalty to the respective newly independent countries in which they reside, there is little attachment to the current Russian Federation. A number of scholars have argued that the persistence of Soviet identity is rooted in the historic experience of Russians who suffered a loss of identity following the USSR’s own ‘nationalizing’ project aimed at creating a Soviet people. This factor helps to explain why ethnic Russians in the republics did not rush en masse to save the USSR in 1991. However, it cannot account for the absence of ethnic Russian mobilization in the post-Soviet period. The text below helps to shed light on this issue. As an emotional invective, evidently written by an ethnic Russian, it represents an attempt to explain how ethnic Russians feel about their status and perspectives in Ukraine as well as their relationship with Russia. Whether the opinions of the anonymous author of this internet posting are indicative of a broader societal trend remains an open question. However, it does provide an interesting insight into the psychology of this relationship.