Ukraine: Trends of the week Issue N. 9/15 April 27 – May 10, 2015

Political top trend:

Russia provokes a new wave of oligarch’s war in Ukraine by the Firtash case in Vienna

The current president/oligarch Poroshenko has made every effort to ensure that the Austrian court refused to extradite the oligarch Dmitry Firtash in the US. Law enforcement authorities in Austria did not receive from Ukrainian colleagues any materials of corruption activity of Firtash in Ukraine. His supposedly sensational statement about the agreements of Tymoshenko’s exclusion from political struggle on the eve of the last presidential elections in 2014 undoubtedly written under the dictation of the Kremlin and were intended to strengthen the social tensions in Ukrainian society.

Analysis:      The situation around Firtash today demonstrated the failure of law enforcement bodies of Ukraine to resist the old corrupted system of power and dependence of their representatives from oligarch who, being outside of Ukraine is able to influence the political processes in it. President of Ukraine abstained from commenting statements of Firtash. But almost immediately after that appeared public activity peak of Tymoshenko. Almost all TV channels controlled by Ukrainian oligarchs were involved in this. Did not stay aside even President Poroshenko’s television channel (Channel 5), which showed on May 7th extended interview Tymoshenko.

Forecast:      It mostly seems that Firtash will be quite limited in his confessions expressed in Austrian court. Ordered the Kremlin campaign to discredit the current leadership of Ukraine will be continued in the Ukrainian media controlled by Firtash and other pro-Russian owners. Some oligarchs will try to distance themselves from Poroshenko. There is a high probability of unexpected tandems appearing until recently fighting with each other oligarchs. Tymoshenko will surely try to use this new political chance for her. It is expected that in the Ukrainian media will appear rumors about possible Tymoshenko’s appointment to high government posts. After falling ratings of Yatsenyuk’s "Popular  Front", Tymoshenko’s "Batkivshchyna" will try to take away part of its electorate. Local elections will be a test for Tymoshenko and the ability to return to "big politics".

Conclusions:Russia is the one that gains the most from Firtash’s favorable statements about the existence of non-public arrangements for senior government positions in Ukraine, especially against the backdrop of growing distrust from Ukrainian society to the members of the current government. On Firtash’s example the leadership of Russia demonstrated to the EU and the US that it can affect any and all current Ukrainian politicians in the government and the majority of oligarchs who became rich on cooperation with Russia, especially in the gas sector. Given the instinct of self-preservation, Firtash actually fulfilled the Kremlin’s instruction and revived political "project of Tymoshenko", further lowering the rating of trust to the President Poroshenko.

 

 

Security top trend:

ThecampaignofRightSectorsdiscredithasbeenlaunchedinUkraine 

Since the end of last month the leadership of Ukraine has artificially initiated the conflict over the activities of the party "Right Sector" and its Volunteer Corps, involved in the confrontation with pro-Russian terrorist groups in the East of the country. The current government, which is engaged in the restoration of the "Yanukovych’s system", through law enforcement and leadership of Ukrainian military forces, is trying to create the image of "Right Sector" as uncontrolled armed political force.

Analysis:      Conflict around the activity of "Right Sector" came after the appearance on public the information about blocking by Armed Forces military base of Volunteer Corps "Right Sector", located in the Dnipropetrovs’k region. The leadership of Armed Forces denied this information, saying that there are some training of highly mobile airborne troops of the Armed Forces of Ukraine is going on in the region. Representatives of the General Staff recalled that all armed groups in Ukraine should be legal and obey the Armed Forces of Ukraine or other state security forces. However, the ATO command accused the "third party" in the conflict, without specifying who it is. The campaign to discredit the “Right Sector” continued after May 4th, when a number of policemen were killed in Kyiv after the robbery. The leadership of the Interior Ministry immediately informed that the arrested persons for murder, except arsenal of weapons had stripes of "Right Sector".

Forecast:      Since the reform of law enforcement and judicial inaction by the current leadership of Ukraine is a long and almost impossible prospect, the campaign to discredit political party "Right Sector" will gain momentum. Russian special services will definitely take advantage of this situation hiding their terroristic activity after the camouflage of the “Right Sector”. We shall expect resonance (in the sense of the present law enforcement) investigations and revelations of involvement of representatives of the "Right Sector" in illegal activity in the form of: identifying the depots of weapons, incitement to overthrow "the regime of Poroshenko," and so on.

Conclusions:  On the example of "Right Sector" the process of "Central authorities against Ukrainian volunteer battalions" has started in Ukraine. Among falling ratings of trust to all without exception political forces represented in the current Parliament, a number of "Right Sector" supporters is growing in Ukraine. On the eve of the local elections (planned for October this year) growth in popularity of this political force provokes authority on the use of black PR-technologies taken from the previous leadership of Ukraine. The most extensive in the country representation system of "Right Sector" at the regional level is of great concern to authorities. In the situation of catastrophic mistrust in society to law enforcement and its representatives on the ground, people turn their views to “Right Sector”. Lack of reform of the judicial system and law enforcement forces brings focus on society associations, whose representatives have real combat experience fighting the Russian aggressor and are not involved in the corruption of the old government.

 

Economic top trend:

Ukrainian economy continues the phase of falling  

The rapid collapse of Ukraine's economy with inefficient government policies to reform the tax and regulatory systems, and failure to attract large-scale foreign investment creates the foundation for the acute social and political crisis, the first signs of which can already be in autumn 2015.

Analysis:      The conflict in the east of Ukraine and Russia has a serious negative impact on the economy of the state. The updated forecast according to the World Bank specialists predicts fall of Ukrainian GDP in 2015 to 7.5% (previously 2.3%). In late 2014 forecasts of fall were at 1.2%. Currently, the annual rate of decline of basic industries in Ukraine remains at over 20%.   

Forecast:      By the end of 2015 there will be a fall in all sectors of economy of Ukraine. The least impact of the crisis will be on the agriculture. The reduction in domestic consumption by 15-20% in 2015 with growth of annual inflation to 60% would mean a significant curtailment of domestic consumer activism. By the end of the tax and regulatory reform (currently taking place very slowly) and stabilization of the banking, financial and economic sectors, the domestic business in Ukraine will not invest in development. For foreign investors the key indicator remains the end of fighting in eastern Ukraine and searches by the West at least a temporary agreement with Russia.

Conclusions: The reduction of GDP on 7.5% and the annual inflation rate at 60% considering the sharp devaluation of the national currency, the absence of any increase in social benefits and wages, as well as multiple prices rising for utilities will mean rapid growth of poverty in Ukraine. This will create ideal conditions for new attempts of revolution and change of power against the background of the large number of war veterans from fighting with Russia, uncontrolled weapons in the hands of the population, and the Kremlin that continues active work to destabilize the internal situation in Ukraine. Under such conditions, the only chance for Ukrainian state and people - direct control by the West on accelerated conduction of domestic economic reforms through their representatives in the Ukrainian government, as well as rapid qualitative improvement of Ukrainian Army specialists as well as weapons for effective containment of Russian terrorists in the east.  

Roman Rukomeda

Bogdan Sumenko

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