Ukraine: Trends of the Week Issue No. 3/15 March 13 – March 20, 2015

Top political trend:

Ukraine's Parliament Has Defined the Status of the Occupied Donbas

The adoption of a special Law of local government in certain areas of Donbas, as well as the Law on the recognition of the Donbas territories such as occupied by Russia with an appeal to the UN and the EU to impose peacekeepers on the Donbas, means the formation of a clear Ukrainian policy towards Russia and Ukrainian areas on the territory of Donbas that are controlled by terrorists. Status of the occupied territories means full responsibility for their financing by the occupant’s side – Russian Federation. The scheme of the conflict resolution: the withdrawal of Russian troops – Kyiv’s return of control over the state border of Ukraine with Russia - local elections under Ukrainian legislation - introduction of a special status for part of the Donetsk and Lugansk regions.

Analysis:      Synchronized action against the adoption of laws on the Donbas from the opposition, Radical Party of Lyashko and "Batkivshchyna" led by Yulia Tymoshenko finally showed these forces as the main political Kremlin’s lobbyists in Ukraine. Policy of Ukrainian authorities towards actions of Russia in the Donbas is to continue military deterrence (without breaking Minsk agreement) and hold the contact line with the new political algorithm. Its key point – the acting status of the occupied territories until removal of Russian troops and regaining control over the state border of Ukraine and Russia.

Forecast:      The new law does not satisfy the leaders of the pro-Russian terrorist groups on Donbas, I.Plotnitskiy and A.Zaharchenko, as well as Russia, which, if necessary, by enforcement of this law will be forced to withdraw its troops (about 10 thousand people at the moment) from the territory of Donbas. For this reason, militant leaders, as well as official Russian authorities appealed to Ukraine to overturn new laws. Kyiv again is blamed for the failure of the Minsk agreements. This is the reason for the militants and Russia to avoid responsibility for failure to Minsk Agreements, in particular with regard to not withdrawal of heavy weapons, preventing the OSCE inspectors from monitoring the demilitarization process, ongoing shelling of Ukrainian troops, including ones with heavy weapons. This means that in the near future (2-3 weeks) the chance of launching new offensive actions by Russia and its controlled terrorists in the direction of Ukrainian Mariupil and Artemivsk are rather high.

Conclusion: Adopted by the Parliament new Law on special order of the local government in certain areas of Donbas does not determine the new borders of Ukraine and is merely determines the conditions for the implementation of such a special order for the local government - the local elections on the basis of the legislation of Ukraine and returning of full control of the border between Ukraine and Russia in the Lugansk and Donetsk regions. Terrorist leaders and Russia have completely rejected even the possibility of compliance with the newly adopted laws, which means either a fast beginning of a new wave of military confrontation, or new attempts of political bargaining over terms of introducing special conditions for the occupied territories.


Top security trend:

Russia is Getting Ready for the Spring Offensive in Ukraine

Considering the concentration of Russian troops on the border with Ukraine, their presence in the occupied territories and in the combat zone, as well as supplies of Russian weapons to terrorists, Russia relies on spring escalation of the situation. Another "demonstration of force» Russian leadership is going to coincide closer to the celebration of the 9th of May. By this date, it needs another victory in Ukraine. Such performance will be played before the citizens of Russia. The main actor in it is Vladimir Putin who will accuse Ukraine in fascism and will frighten Europe and blame the United States in a worldwide conspiracy against Russia.

Analysis:      Unlike Ukraine, no removal of heavy equipment and artillery from the line of contact by pro-Russian terrorists did not happen. Russia is daily increasing its military presence in the ATO area. Russia consistently carries out transfer of manpower and equipment to the territory of Ukraine – each day big groups of mercenaries are arriving from Russia, as well as regular military units of the armed forces of Russian Federation. The Russian military secret service representatives are coordinating and managing the forces of terrorists who actively pull together in these areas a considerable amount of heavy equipment. The truce is not respected - pro-Russian gangs on the occupied territories of Donetsk and Luhansk regions are violating the ceasefire regime each day.

Forecast:      The regrouping and concentration of Russian forces across the front line, as well as the activity of illegal armed groups on the occupied territories, indicate that in the near future active military actions will be renewed. In the coming weeks, all security providers in Ukraine shall get ready for possible provocations by the Russian special services, up to new attacks, terroristic acts and regular civilian casualties. In addition, in the near future Russia will command its terrorists to launch a new offensive against the Ukrainian positions. Although the most likely direction of attack is Mariupol, provocations and false attempts to break through are to be expected around the perimeter of the conventional boundaries.

Conclusion:Non-compliance of Minsk agreements demonstrated that Russia cannot be considered as trustful side of negotiations and is not really going to fulfill its obligations. The level of sanctions to be applied to Russia by the EU is not sufficient. Leading EU countries, Germany and France showed no ability to influence the position of Russia, whose leadership has successfully played on the contradictions within the EU. Russia's war against Ukraine demonstrated the lack of a common EU approach to the conflict, and the underestimation of the threat. The current level of development of military-technical and space technologies of  EU leading countries allows to track and record the movement of Russian troops in the occupied territories of Ukraine. Action (or rather the lack of them) in regards of the Russian-Ukrainian war indicate that the leading EU countries have taken a waiting position. Devitalized and broken system of international security has led to the fact that on the occupied by Russia territories of Ukraine now the critical mass of enemy personnel and enough arms for further offensive military actions is concentrated.


Top economy trend:

The price of saving the Ukrainian economy is growing

The Ukrainian government, according to opinion of prime minister, successfully reported about 100 days of its activity. However, the only success that can be considered is receiving of the IMF loan. Although this government’s success is also questionable since the IMF has just prolonged its activity and investment in Ukraine. The "factor of war" really affects the economy of Ukraine. However, for the government, every day becomes harder and harder to explain their failures and absence of results for Ukrainian population. The safety and endurance margin of the Ukrainian society is close to an end. But the government has still nothing to report.

Analysis:      The main message of government’s public report that was directed exclusively to international financial donors was the beginning of the fight against corruption. For the Ukrainian society situation has not changed. It is constantly being told that a major obstacle for economic reforms is the war with Russia. The “new” leadership of the country continues to successfully implement mechanisms for enrichment of the previous regime. Recent foreign exchange speculations of the National Bank and the government have gone unpunished. After the report of successful implementation of all anti-social demands of the IMF, the government is unable to provide the compensatory mechanisms for population. In return for the IMF loan, ordinary citizens have received rapid impoverishment and rising prices for all groups of goods. Increased utility tariffs already lead to an increasing of non-payments. Unemployment rises on the background of the depreciation of labor. Government’s statements about the indexation of salaries look like a manipulation over the population, increasing people’s dissatisfaction and feeding protest potential. The reform of the pension system is weak and ineffective. The reform the judicial system is not possible and it seems unprofitable for many internal players. The promise of security sector reform is reduced to the appeal for Ukrainian citizens to participate in the discussion of the design of road patrol car. At the moment - that's all that executive and legislative powers have to offer to society.

Forecast:      We are expecting the rise of the conflict and confrontation between the government and the parliament. The main complaints will be concentrated around mutual accusations in failure of economic reforms. Ukrainian society will be shown an imitation of reforms, and the failures on this way will be justified by the "factor of the war." There is a high probability of indicative dismissal of several ministers or their deputies in the economic bloc of the government. The Parliament will mainly focus on populism on the eve of local elections appointed on autumn 2015. The President will have more difficulties in getting support of being earlier pro-presidential political forces. For the adoption of reform laws there will be more difficult to collect even elementary majority of voices. The number of deputies-reformists in the parliament will rapidly decrease.

Conclusion:GivenIMF loan only delayed the rate of economic decline of Ukraine. International financial institutions are in no hurry to allocate money to Ukraine for holding promised economic reforms. While all the other investors and lenders are watching the IMF actions, no one is going to invest in Ukraine, which is in real state of war with Russia. The Ukrainian government has committed itself to carrying out "shock therapy" and is rather successful with it. However, the government has no understanding to what consequences it will lead. Due to the lack of a clear explanation of what is happening from the government, the population of Ukraine has begun to live in a present day without making any plans for the future. The resources withdrawn from the population to fight with Russia are almost exhausted.

Roman Rukomeda

Bogdan Sumenko

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