Ukraine: Trends of the week Issue N. 8/15 April 19 – April 26, 2015

Political top trend:

The struggle with corruption in Ukraine turns into imitation

President of Ukraine has appointed an unknown 35-year-old lawyer Artem Sytnyk on the leading position of the newly created special anti-corruption body on April 16th. Ukraine's leaders sought to demonstrate to the international community their own anti-corruption activities and the ability of Ukrainian society to pass a test on democracy. The basis for this claim was to be transparent work of the tender committee for selection of the head of the National Anti-Corruption Bureau of Ukraine (NABU). However, his appointment as head was held against the backdrop of scandal involving hiding by Sytnyk his biographical data connections with former officials who are involved in corruption.

Analysis:      NABU head is a former Prosecutor of Kyiv region Artem Sytnyk. According to Sytnyk’s information in 2011 he retired from prosecution because of "disagreement with the policies of the Yanukovych regime ...". Prior to his appointment Sytnyk co-founded the law firm "Legal guarantees". The media distributed information that partner of "Legal guarantees" is a former First Deputy Attorney General, Attorney of Kyiv region by 2007 - Yuri Gaysinskiy. He was remembered that defended the interests of crime bosses and was involved in many corruption schemes. Gaysinskiy’s daughter - Oksana is married to the mayor of Kharkiv Gennady Kernes. His outspoken pro-Russian activities and corrupt acts are not the obstacle for him to remain as mayor. All attempts by law enforcement to bring him to justice have failed. After the appointment of a new head of NABU this trend will continue. The refusal of appointment to the post of NABU head an MP from Poroshenko Block - Viktor Chumak shows that the President himself and political heavyweights, consider NABU as hopeless special body that in the near future will not have the necessary powers to successful operation.

Forecast:      Fighting corruption among senior officials of Ukraine will remain the prerogative of the Prosecutor General's Office and the courts. In the current parliament NABU will not have enough power for effective actions. Any investigation of NABU will be legally vulnerable, particularly in their appeal to the courts. Law enforcement and judicial systems based on existing legislation will ignore system initiatives of NABU because this body is unconstitutional.

Conclusions:Fighting against corruption has been reduced to supposedly transparent procedure of the selection of candidates for the heading post of NABU. Appointment of Sytnyk shows that this figure is temporary and compromise between the centers of power in the government. Specifically written law for the creation of NABU does not give this body and its head real power. The Constitution of Ukraine does not include activities of such anti-corruption agency. The probability of amendments to the Constitution about NABU is very low. The main obstacle is the resistance of the current parliament, which is crowded by the representatives of previous government. A necessary condition for the successful operation of NABU is the reform of law enforcement and judicial systems.

Security top trend:

A wave of resonant murders organized by Russian special services continues in Ukraine

Loud assassinations of pro-Russian politicians and activists during last month aim to completely destabilize the socio-political situation in Ukraine and create the reason for the continued growth of anti-Ukrainian sentiment in Russia. Representatives of the Russian intelligence bloc have opened another front in the struggle against Ukrainian state that has political terror in its basis. 

Analysis:      News of the latest murder of anti-Ukrainian journalist and co-organizer of Antimaydan movement – Oles’ Buzina was almost immediately announced during the "hot line" with the Russian president and people. Putin said that in Ukraine series of murders has happened, cynically referring to the "effective" investigation of the murder of Boris Nemtsov. In the case of the Russian opposition leader assassination Putin rejected any possibility of his own intelligence services’ involvement in the murder. However, Russian special services undeniable involvement in the murders of Ukraine’s main Antimaydan movement organizers, including former deputy from the Party of Regions Oleg Kalashnikov again would prevent an objective investigation.

Forecast:      Destabilization of the situation in Ukraine through the assassination by the Russian special services and their agents representatives of "Yanukovych regime" will continue. Launched by Russian news campaign of "physical extermination of Kyiv authorities’ political opponents" will need new scenarios and thus victims. Russian leadership will continue to organize suicide and murder of pro-Russian politicians in Ukraine and initiate terrorist attacks with the highest number of victims. Putin, in his welcoming address to the Russians in celebration of May 9th will necessarily mention about the need to protect the Russian-speaking population in Ukraine, where political opponents are being killed and the victory over fascism is being ignored. This may actually be the start for a full-scale military operation.

Conclusions: Latest killings of the "second political row" of the previous government’s members point to the failure of law enforcement and intelligence agencies of Ukraine in confrontation with their Russian counterparts. Russia continues to systematically prepare the ground for a full-scale military operation in Ukraine under the reason of protection of the Russian-speaking population. These murders are beneficial just for propaganda claims of Russian leadership on the eve of the Victory Day celebration. In Ukraine today there is no political force that would be interested in the physical neutralization of opponents. On the contrary - the existence of political representatives of the Yanukovych’s regime is needed for their accusations and criticism of the socio-economic failures of the current government.

Financial top trend:

Ukrainian banking system continues to fall

The ongoing severe crisis of the banking system, which accompanies the process of redistribution of property and assets in Ukraine, makes any development of a domestic business in the country and attraction of foreign investments impossible against the backdrop of the ongoing war and default of the national economy risks.  

Analysis:      The losses of the banking system of Ukraine during the first quarter of 2015 in the volume of 80.9 billion UAH (about 3,6 billion USD), indicates a deep state of crisis of the banking sector of the country. Since 80% of net losses generated by insolvent banks, which are already operated by the interim administration, the state budget (through the Fund of guaranteed deposits) lays the burden of repayment of deposits in troubled banks to population. Freezing of working capital of business in Ukrainian banks, which received a temporary administration, is causing severe blow to national economy and its prospects for recovery from the current crisis. Refinancing of banks at an average interest rate of 33% makes bank loans for business unattractive and unrealistic to return.

Forecast:      In view of the launching of an interim administration in such a large banks as «VAB» and «Delta Bank", critical situation in the bank "Kievska Rus’”, the main task of the head of the NBU and the government is to stabilize the banking system and keeping it from further collapse. This course will continue to reduce the number of banks, leaving only large market players. One of the key points in this process is the exchange rate. If the capacity of the National Bank and the Government of keeping the hryvnia in the corridor of 22 - 24 UAH per 1 US dollar by the end of 2015 will be shown and the payment of fees through the Fund of guaranteed deposits to Ukrainian citizens in troubled banks will be made, a chance to start restoring trust in the banking system of Ukraine may appear in 2016. However, given the rapid approach of payments crisis and deep social and economic crisis that will end in a new political crisis, the chances of a stable exchange rate is low. Therefore, the banking system Ukraine will continue to fall further until the stabilization of the political and financial and economic fields of the country. Currently we are predicting next wave of Ukrainian banks elimination (for the period of November 2014 - February 2015, 15 banks had received an order for liquidation).   

Conclusions:  Confidence in the banking system of Ukraine, both within the country and on the outside is at its lowest level in the last decade of the banking system of the Ukrainian state. Responsibility for the destruction of the Ukrainian banking system primarily lies in equal parts on the head of the National Bank of Ukraine V.Hontareva (appointed by the President Poroshenko and is completely his protégé) and Prime Minister of Ukraine Arseniy Yatsenyuk. Optimization of the banking system of Ukraine under the agreements with the IMF was ineffectively made by the Ukrainian authorities due to the lack of a unified strategy and high level corruption. Such situation led to the rapid devaluation of the national currency and rapid impoverishment of most part of Ukraine’s population.

Roman Rukomeda

Bogdan Sumenko

                    

 

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