Weekly Ukraine news digest (July 14-20)

Photo: http://stopdebankiers.eu 


This weekly news digest presents conclusions on the situation in the East of Ukraine. It also covers Ukraine’s economy, implementation of the reforms as well as trends of international support of Ukraine.

Situation in eastern Ukraine

On July 17, the international community commemorated the victims of the catastrophe of the flight MH17 that was shot down over the Donbas sky. According to the draft investigative report issued by Dutch experts and distributed to several individuals and organizations, the Malaysia Airlines jet was shot down by pro-Russian separatists with a surface-to-air missile, says CNN. International investigators have ample, undeniable evidence of Russia’s involvement in the case. The main task for now is to establish international tribunal by the decision of the UN Security Council. Russia is trying to prevent this from happening by all means. If the tribunal is created, the decision-making process might be slowed down but it will allow the MH17 tragedy to enter the international legal dimension.

In the ATO area, one of the heaviest shelling since signing of the Minsk agreements took place. Also, the crossing of the border by Russian mercenaries continued, and the OSCE SMM recorded the accumulation of heavy weapons. The militants said they will “wipe Avdiivka off the face of the earth together with its coke and chemical plant”. Their aggressive statements demonstrate Russia’s intentions to derail Minsk-2.

Statistics: killed soldiers – 10, wounded – 46.

Traditionally, the negotiations in the Normandy format come down to the parties calling one another to comply with the Minsk agreements. Meanwhile, the Ukrainian side is fulfilling the accord and has de facto finished the implementation of the 11th point, which concerns granting special status to Donetsk and Luhansk regions.

“Why does the world want so much to talk us into [granting] “special status” to ”DPR” and “LPR”? Only for it to stop being the “war” the guarantor countries have to bear responsibility for. The world wants it to become an “internal conflict” because it is tired and wants to get rid of the inconvenient topic. Isn’t it obvious that by pressuring Ukraine to introduce the changes to the Constitution the world is denying the right of Ukrainian people to self-determination? Isn’t it obvious that special status to Donbas in the Constitutions means legitimization of Russian troops and mercenaries on the Ukrainian territory? And their integration to Ukrainian politics is not only the end of Ukraine’s Europeans prospects, but also the end of Ukrainian state and the Kremlin’s success?”,  wittily pointed out Andriy Illarionov. “Trying to freeze the conflict in Donbas and take the Ukrainian question off agenda, the West is “working” with the only party, which, unlike Russia and DPR-LPR, can be exposed to its influence – Kyiv. In the meanwhile, the western partners have no other plan than Minsk-2”.

The statements, issued by Western officials and organizations, calling the Ukrainian authorities to unilateral compliance with the Minsk agreements became more common. In this way, Kyiv became a prisoner of its willingness to compromise and incapability to work out a roadmap and an action plan. “Ukraine is receiving economic compensation for its willingness to prevent a huge continental, possibly event the world, war by temporary loss of territories”, added Volodymyr Horbulin. But another question arises: what compensation will Ukraine receive for restriction of its sovereignty?

US and German officials supported the voting in the Verkhovna Rada. However, Oleksiy Pushkov, the head of the foreign-affairs committee in the State Duma, said the Petro Poroshenko’s amendments to the Ukrainian Constitution are far from the Minsk agreements.The leaders of the so-called “DPR” and “LPR” insist on the guarantees of special status to Donbas being included to the Main provisions of the Constitution of Ukraine, not to the Transitional ones as it is now.

As a result, “Donbas risks becoming a scarecrow no one wants to be responsible for”.“The situation came to a dead-end. Kremlin is pressuring by military means, killing more and more Ukrainians in the East. Threatens to renew full-scale hostilities. Poroshenko is afraid. The West is afraid. To save Ukraine, gang rape of the Ukrainian Constitution is being prepared. But it will not stop the war.”, concluded Yuriy Kasianov.

Reform implementation in Ukraine:  establishing legal framework

The continuation of establishing the legal framework was one of the main tendencies in the field of reforms. In particular, the laws in the field of law enforcement and anticorruption reforms, decentralization, establishing territorial communities, and administration (a package of 4 laws, worked out by the Ministry of Justice together with the representatives of the civil society and all the groups of the parliamentary coalition, that will ensure the transference of administrative services, currently provided by the state,  to local authorities and notaries),  a law on local elections ( will not be held in the occupied territories of Donbas and Crimea) were adopted. Also, the approved by Verkhovna Rada Law on the changes to the Law “On the Public Prosecutor’s Office” was signed. Certain progress has been made in the field of cancellation of parliamentary immunity – the deputies voted for the decree which determines the scheduling of the bill on cancellation of parliamentary immunity of judges and people’s deputies. At the same time, consideration and adoption of the law on state service is being slowed down, which will also have an impact on the anticorruption reform.

Law enforcement agencies reform is characterized by widening the functions of the body: adopted in the first reading bill on services and service centers of the Ministry of Internal Affairs presupposes reorganization of the corrupt interdistrict registration and examination departments and other bodies of the MIA. Also, the new patrol police are to appear in Zakarpattia (staff changes expected because of the events in Mukachevo).

Decentralization reform. A draft law “”On introduction of amendments into expansion of authorities of local self-government bodies and optimization of provision of administrative services” was adopted in the first reading. Local self-government bodies are to be vested with the following authorities: registration of the place of residence, keeping the register of territorial units. More than 35 future unified territorial communities in the regions of Ukraine have already forwarded the associated draft decisions.

Enlargement will increase the number of small businesses owners within each community, not to mention the county. This is a fertile ground for the formation of effective local economic and socio-political organizations and associations aiming to protect their own interests, solve urgent problems and influence the local governments, which will be responsible for the life of the community.

Anti-corruption reform is far from going at an acceptable pace. The formation of relevant bodies and expansion of their composition (the representatives of the publicity joined the composition of the National Commission on Corruption Prevention) occurred. However, even this insignificant activity is being prolonged. For three months already is the Supreme Council of Ukraine trying to elect its representative to work for the Commission.

Ukraine’s economy: a new prospect of cooperation with the West

Under current crisis circumstances, we need to build a new strategy of economic development. Therefore, the first Ukrainian-American Conference was held in Washington. Arseniy Yatseniuk stressed that it is important for the Ukraine’s government that American partners create new companies and jobs and develop infrastructure of Ukrainian cities. The government managed to convince one of the largest global companiesCargill to build a new terminal. Investments will amount to about $ 100 million. Also, the government agreed to establish a new energy hub (delivery of natural gas into LNG-terminals). The shared food policies will provide for the provision of prolonged and cheap loans with the purpose of developing of the agriculture and equipping it with the innovative American devices. High technologies and Ukrainian programmers, who occupy the leading positions in the world in IT area, constitute another area for investing in Ukraine (investments in Rozetka.ua). Ukraine and the USA also signed a Common Aviation Area Agreement (“Open Skies“). This agreement strengthens bilateral economic relations and boosts the civil aviation between the United States and Ukraine

The signing of a Free Trade Zone Agreement between Ukraine and Canada is another important step for Ukraine in the development of trade relations. It is assumed that as soon as the Agreement is ratified by both states, Canada will open 98% of the products manufactured on its markets for the Ukrainian exporters. The draft of FTA between Ukraine and Canada provides, among other things, the deepening of trade and economic cooperation especially in regard to the trade of industrial and agricultural goods, intellectual property protection, and regulation of public procurement. This Agreement should deepen Ukrainian-Canadian cooperation and increase bilateral investments. In the long-run perspective, this business agreement will serve as an opportunity for the Ukrainian companies to diversify trade flows and increase impetus on the modernization of Ukrainian companies to produce goods with high added value for export.

Experts from Oxford Analytics stress that the agreement with Canada is uniquely advantageous for Ukraine. In order to get existing quotas, Ukrainian producers will have to compete with other countries. The situation is slightly worsened by the differences existing in technical standards of Canada and EU. However, in the agreement on the FTA establishment, Canada commits to provide technical assistance. Simplified access to the Canadian market guarantees nothing, yet it gives hope for overall success.

With the loss of major markets, the government began to work hard to diversify trade partners. Decline in turnover in Ukraine negatively affects the level of economic development. Therefore, this year Ukrainian export to the EU fell by 34.4% compared to the same period last year. Given the conflict in the East, Ukraine has nothing to export to EU member states. The increase of export could only be possible by the promotion of creation and export of goods with high added value component. We currently see positive indicators only in three countries such as Malta, Slovenia and Latvia. However, the total volume of deliveries of Ukrainian goods to these countries is negligible, so these examples could hardly be called representative. The question of restoration of Ukrainian export still needs to be addressed.

International financial support: The agreement with EIB loans Ukrainian enterprises of; United States (willingness to allocate $1.5 billion for agriculture), EBRD ($300 million for gas).

Statistics: balance of foreign trade: 909 million. $; export / import with: -60 / 66%.

International support Ukraine: deepening international cooperation

European integration of Ukraine is gaining momentum. The first meeting of theCommittee on Association Ukraine-EU was held in Brussels. The issues of political, trade-economic and sector cooperation were discussed. The fulfillment of the Association Agreement, which provides a roadmap for the implementation of reforms in Ukraine, was also a subject of discussion. The participants focused on measures on implementation of the Action Plan on visa regime liberalization. On July 15, 2015 the meeting of the Senior Officials responsible for the visa-free dialogue Ukraine – EU took place. The preparations for carrying out the expert missions needed to measure the achieved progress were discussed.

Enhancing cooperation with the US (large-scale military trainings Rapid Trident – 2015 with the US Army; Armed Forces expansion plan preparation; sending of cars «Humvee» to Odessa, cooperation on constitutional reforms in Ukraine in regard to the decentralization; intensification of cooperation in the customs area), Great Britain (reformation of law enforcement and customs service of Ukraine; organization of joint business forum; cooperation in fighting Russian propaganda), Canada (humanitarian aid), Slovenia (increase of humanitarian security, support for European integration and visa-free regime for Ukraine), Ireland (meeting on July 16), Czech Republic (humanitarian aid under the program MEDEVAC).

Poland and the Netherlands decided to create Russian-language TV channel to counter Russian propaganda within the EU. The aim of the new project is “to provide access of Russian-speaking population of Eastern Europe to trustworthy and free information.”

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