: :inin Kyiv (EET)

Weekly Highlights: December 29, 2014 – January 4, 2015

The country’s leaders held a press conferences at the end of the year. Corruption schemes in the energy sector lead to surrender of national interests. The law on state budget and related laws took effect. The TV channel “Inter” broadcasted a New Year’s show with the participation of artists, known for calling for the separation of the Crimea and the Donbass. Ukraine is fencing off the Donbas and Crimea.

Yearly press conference of the Ukrainian leadership

The President, Prime Minister and the head of the National Bank of Ukraine held the end-of-the-year press conference. Peace talks with representatives of terrorists and Russia and brokered by France, Germany and Kazakhstan are going to be held as a way to solve the problem of the liberation of the occupied territories of the Donbass and the Crimea. However, peace talks mean preservation of the conflict by the  Abkhaz type. Ukraine continues to supply electricity and gas to the occupied territories. The cost of servicing these areas is estimated at $ 1 billion per year. All relations with Russia are politicized. Ukraine can not cope with internal and external problems without help from international financial organizations. The war is a barrier to investments in Ukraine. The heaviest burden on the budget is the military.  Cutting down on import volumes and import substitution are needed to stabilize the economic situation and lower the hryvnia exchange rate. According to the Prime Minister, corruption could be defeated by reducing regulatory bodies, increasing the liability for corruption, implementation of the proposed by government laws and raising wages of government officials.
The head of the NBU Gontareva held a press conference instead of reporting to the Parliament. She believes that the main reason for the fall of the financial market in 2014 is the economic imbalances accumulated by the previous leadership of the country and the NBU. In her opinion, the National Bank is not required to maintain the exchange rate. The devaluation of the hryvnia is a reflection of the state of the economy. Ukraine has not developed its import substitution, so the balance of payments will deteriorate. Since the beginning of the year, nearly 30% of deposits were withdrawn. National Bank financed the government and Naftogaz by up to 40% of budget revenues. There are eight systemic banks in the country and among them is the failing of Delta-Bank, which might not get saved even with nationalization.
In general, the country’s leadership did not give answers to the most pressing issues of concern to society, which casts doubt on execution of radical reforms. A drop in ratings of confidence in the government and its actions is projected.

Ukraine’s energy concessions

The situation in the energy sector continues to be challenging. Russia won another victory on the energy front by taking advantage of corruption at the highest levels of Ukrainian authorities, and even stronger tied Ukraine to its energy resources.
Due to the power shortage in the energy system, Ukraine signed an agreement for the purchase of electricity from Russia with the condition of uninterrupted power supply to the Crimea. Thus with the help of combination of multiple moves, Russia solved the problem of blackouts at the Crimean military bases.
The total imported power does not make Ukrainian energy system deficit-free (the contract is for 1,500 MW and the deficit reached 5,500 MW). In addition, the purchase price of imports is below wholesale prices of Ukrainian energy, which allows owners of the regional energy companies, which sell electricity to final consumers at a fixed price, to obtain additional profit. Starting January 1, 2015, the wholesale price of electricity has increased due to the devaluation of the hryvnia.
A Donetsk businessman, who participated in raider attacks and is close to the entourage of the former President Yanukovych, was appointed as a director of the largest power generating state company. Electricity exports abroad by enterprises belonging to the oligarch Akhmetov are continuing.
Fuel stocks at thermal power plants fell to a critical level after the corruption scandal with the supply of South African coal, the capture of mines by pro-Russian rebels in the eastern Donbass, and the sabotage of deliveries of the already mined coal from the mines in the territory controlled by Ukraine. This served as an excuse for government to purchase coal in Russia. President Poroshenko expressed the willingness to buy coal from state-owned enterprises, located in the occupied territory, citing the need to pay salaries to miners.
Experts suspect that coal, shipped by Akhmetov from their mines in the Lugansk region to Russia, can be delivered to Ukraine under the disguise of imports. Coal from Kazakhstan, for the supply of which presidents Poroshenko and Nazarbayev agreed, might be produced at mines owned by Russian oligarch Deripaska.
The only positive event last week was the signing of an agreement between “Energoatom” and the US company Westinghouse to increase the supply of nuclear fuel for Ukrainian nuclear power plants. Russia has already warned that this could threaten nuclear safety in Ukraine due to a requirements mismatch for the quality of the nuclear fuel delivered from the US.

Budget and related laws take effect

President Poroshenko signed the Law on State Budget of Ukraine for 2015 and the majority of the laws adopted during the last session of the Verkhovna Rada.
The collection of military tax of 1.5% of the wages and incomes of individuals has been extended until the end of hostilities.
The provisions of the Tax Code on the taxation of residential property, tax increase on passive income, tax on cars with large engine capacity and increase the excise tax came into effect.
The laws expanding the powers of the National Security Council and the abolition of non-aligned status of Ukraine came to force. President Poroshenko said that the decision to join NATO will be made within five or six years after reforming the country by NATO and EU standards.
Legislation to raise import duties may enter into force only after the agreement with the European Commission and other WTO member countries. Experts believe that the law could cause an international scandal and the abolition of preferences for Ukrainian goods supplied to the EU.

The scandal surrounding the New Year broadcasts of Russian media content by Ukrainian TV channels

Almost half of the New Year’s Eve programming on Ukrainian TV channels was filled with Russian shows. The TV channel “Inter” aired a show with artists, who are denied entry to Ukraine because of their support of separatism and calls for the annexation of the Crimea and the Donbass.
National Council for Radio and Television together with the Security Service and the National Security Council will consider the situation with a Christmas broadcast. Head of the council said that the channel can be denied a license solely as a result of a court decision. Despite the loud statements by the Presidential Administration and the Secretary of the National Security Council Turchinov about banning TV channel “Inter”, a legal framework for the withdrawal of a television broadcasting license in such cases is not available.

A wave of terror attacks in Ukraine is rising

Terrorist acts in Ukraine are commited daily. An unknown person threw a grenade near a shopping center in Dnipropetrovsk region. In Odessa, a device detonated near an office of a coordination center for helping ATO soldiers. A railway bombing occurred during transportation of fuel tanks. National Guard started patrolling the streets of Odessa.
SBU and security forces detain terrorists throughout the country and at checkpoints, prevent attempts by sabotage and reconnaissance groups to infiltrate territory controlled by Ukraine .

Ukraine is fencing off Donbas and Crimea

Ukraine completely blocked traffic through the checkpoint “Chongar” to the occupied Crimea. There are two crossing points at the administrative border available only to personal transport.
Ukraine creates a buffer zone around controlled by militants areas of Donbass. There will be seven transport corridors with customs and border control for entry into the “Republic”, reinforced with support by military. At the request of the Secretary of the NSDC Turchinov, corridors will be closed in the event of attacks in the 30-kilometer zone around them.

Problems of involuntaroly displaced people and the population of the occupied Donbass

OSCE monitoring mission has recorded new casualties among civilians as a result of shelling of residential areas. According to the UN, the number of victims of war in the Donbass exceeded 4770 people.
Officially registered number of temporary migrants from the combat zone in the Donbas and Crimea reached 823 thousand. The Cabinet of Ministers extended the registration window for migrants for obtaining social benefits until February 1, 2015.

Russia builds up an “army of New Russia”

Russian troops and their subordinate militias are trying to take control of the armed “Cossacks” forces and “militia” to create an “army of New Russia” under a unified russian command. Groups refusing subordination are destroyed. Most roadblocks are taken over by Russian soldiers. An arrival of Chechen mercenaries, “Kadyrovites”, to Ukrainian territory has been recorded.
Diofferent militant groups in the Donbas are clashing with the use of artillery and armored vehicles. Battles of LPR militants against “Cossaks” happened in Krasny Luch and Stakhanov in the Luhansk region after the liquidation by pro-Russian forces of a militant nicknamed “Batman”.

The situation on the line of fighting

After a relatively quiet week, militant attacks on Ukrainian positions became more frequent. The most intense clashes are recorded in the of Donetsk airport area, Peski, area of the “Bahmutka” road, Stanytsya Luganska, Schastya, near Popasna, in Debaltseve, Mar’inka, Telmanovskiy area and the surrounding area of Mariupol. Ukrainian army takes casualties almost daily.
In a regular report, OSCE monitoring mission stated worsening of the situation in the conflict zone in the Donbass.
Meeting in Lugansk between General Staff officers of Ukraine and Russia in the presence of a representative of the OSCE was inconclusive, as well as the negotiations with the militants on the establishment of “silent regimen”.
Deployment of personnel and military equipment replenishment of Russian troops in the occupied territory of Donbass occurs with removed insignia. Their advances to leading positions under the guise of local “militia” is recorded at many points of the confrontation line.

Dmitry Tymchuk

Reserve officer, director of the NGO Center for Military and Political Research, Coordinator of “Information Resistance” (hereinafter “IR”) – a non-governmental project that aims to counteract external threats to the informational space of Ukraine in the main areas of military, economic, and energy, as well as the sphere of informational security.

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