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FTR #826 Bringing It All Back Home, Ukrainian Style, Part 2

Dave Emory’s entire life­time of work is avail­able on a flash drive that can be obtained here. The new drive is a 32-gigabyte drive that is current as of the programs and articles posted by 10/02/2014. The new drive (available for a tax-deductible contribution of $65.00 or more) contains FTR #812.  (The previous flash drive was current through the end of May of 2012 and contained FTR #748.)

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This program was recorded in one, 60-minute segment.  

Insignia on Azov soldiers' helmets

This description contains material not included in the original program.

Introduction:  In FTR #824, we noted the decisive role played by the Ukrainian diaspora in the events unfolding in Eastern Europe. Dating to policies implemented by the Austro-Hungarian Empire and perpetuated during the rise of fascism, the Second World War and the Cold War, the Ukrainian diaspora has driven the course of events there and in countries contributing to the crisis.

(We have covered the ascension of the OUN/B heirs in the Ukraine in a number of programs: FTR #’s 777778779780781782, 783784794800803804, 808811817818824.)

Individuals and institutions are returning to Ukraine from abroad, with president Petro Poroshenko implementing a legal gambit to permit foreign nationals to assume cabinet positions in his new government. In particular, Poroshenko expressed the desire to incorporate citizens of the U.S., Georgia and Lithuania in Ukraine’s government.

14th Waffen SS troops inspected by Himmler. The division's veterans honored, and were honored by, Svoboda's leader.

In short order, Ukrainian/American State Department Officer Natalie Jaresko, Lithuanian-born U.S. citizen Airvas Abramovicius and Georgian Aleksandre Kvitashvili assumed the posts of finance minister, economic and development and trade minister and health minister respectively. All three were educated in the United States.

The appointments come as Ukraine is on the verge of defaulting on a $17bn IMF loan. (Ukrainian bonds are underwritten by–you guessed it–the U.S. taxpayer.)

Poroshenko also wanted foreign nationals to staff the Ukrainian federal police–the equivalent of our FBI. In that context, it is interesting and alarming that he is granting citizenship to members of the Nazi Azov Battalion. Will they help to staff the Ukrainian federal police?

People from the “punisher” battalions–Azov is one of them–are in Washington D.C. lobbying Congress for military aid. They are being assisted in this effort by the UCCA, the largest OUN/B front organization in the United States. (The day this program was recorded, the bill passed Congress.)

This comes amidst calls by some of the punisher battalion commanders to openly invade Russian territory.

The Ukrainian lobbyists have intitmated that Americans should be willing to “die for Ukraine.” Azov commander and member of parliament Andrei Biletsky is pushing for Ukraine to develop nuclear weapons.

At the same time that this is going on, an adviser to the head of the SBU (Ukraine’s federal intelligence service) has admitted that there are no Russian combat units in Ukraine.

The program concludes with discussion of a new “Ministry of Information Policy,” run by Yuriy Stets, a producer on a TV station owned by Poroshenko. Critics have labeled it “The Ministry of Truth,” after the state run propaganda bureau in George Orwell’s 1984. Stets has served as the PR person for Ukraine’s National Guard, to which the punisher battalions belong!

Azov battalion's insignia: Do YOU think they should have nuclear weapons?

It appears that accurate information about Ukraine will be even harder to come by in the future. (We highlighted the Orwellian coverage of Ukraine being disseminated in the U.S., comparing our media and those of Ukraine with Orwell’s Ministry of Truth.)

Program Highlights Include: Natalie Jaresko’s close connections to the US Agency for International Development (which is very close to U.S. intelligence); Jaresko’s apparently corrupt behavior at a fund she managed; allegations of forced prostitution within the Ukrainian military; Petro Poroshenko’s role as an advocate for privatization of state assets while serving as Victor Yanukovich’s Economy Minister (the corruption and economic incompetence of the Yanukovich government was the ostensible cause of the Maidan coup); Natalie Jaresko’s efforts on behalf of the Yuschenko government, which was instrumental in bringing the OUN/B Ukrainian diaspora back home.

1a. Supplementing information in FTR #824, we note that the Ukrainian diaspora is returning home, BIG TIME! Petro Poroshenko has wasted no time in the inclusion of Ukrainains from abroad into his cabinet. Former U.S. State Department officer and Ukrainian-American Natalie Jaresko has been appointed as the Minister of Finance.

She oversaw a U.S. Agency for International Development-linked fund prior to her appointment. (U.S. AID has strong links to U.S. intelligence.)

“Ukraine’s Made-in-U.S.A. Finance Minister” by Robert Parry; Consortium News; 12/5/2014.

Ukraine’s new Finance Minister Natalie Jaresko, a former U.S. State Department officer who was granted Ukrainian citizenship only this week, headed a U.S. government-funded investment project for Ukraine that involved substantial insider dealings, including $1 million-plus fees to a management company that she also controlled.

Jaresko served as president and chief executive officer of Western NIS Enterprise Fund (WNISEF), which was created by the U.S. Agency for International Development (U.S. AID) with $150 million to spur business activity in Ukraine. She also was cofounder and managing partner of Horizon Capital which managed WNISEF’s investments at a rate of 2 to 2.5 percent of committed capital, fees exceeding $1 million in recent years, according to WNISEF’s 2012 annual report.

The growth of that insider dealing at the U.S.-taxpayer-funded WNISEF is further underscored by the number of paragraphs committed to listing the “related party transactions,” i.e., potential conflicts of interest, between an early annual report from 2003 and the one a decade later.

In the 2003 report, the “related party transactions” were summed up in two paragraphs, with the major item a $189,700 payment to a struggling computer management company where WNISEF had an investment.

In the 2012 report, the section on “related party transactions” covered some two pages and included not only the management fees to Jaresko’s Horizon Capital ($1,037,603 in 2011 and $1,023,689 in 2012) but also WNISEF’s co-investments in projects with the Emerging Europe Growth Fund [EEGF], where Jaresko was founding partner and chief executive officer. Jaresko’s Horizon Capital also managed EEGF.

From 2007 to 2011, WNISEF co-invested $4.25 million with EEGF in Kerameya LLC, a Ukrainian brick manufacturer, and WNISEF sold EEGF 15.63 percent of Moldova’s Fincombank for $5 million, the report said. It also listed extensive exchanges of personnel and equipment between WNISEF and Horizon Capital.

Though it’s difficult for an outsider to ascertain the relative merits of these insider deals, they could reflect negatively on Jaresko’s role as Ukraine’s new finance minister given the country’s reputation for corruption and cronyism, a principal argument for the U.S.-backed “regime change” that ousted elected President Viktor Yanukovych last February.

Declining Investments

Based on the data from WNISEF’s 2012 annual report, it also appeared that the U.S. taxpayers had lost about one-third of their investment in WNISEF, with the fund’s balance at $98,074,030, compared to the initial U.S. government grant of $150 million.

Given the collapsing Ukrainian economy since the Feb. 22 coup, the value of the fund is likely to have slipped even further. (Efforts to get more recent data from WNISEF’s and Horizon Capital’s Web sites were impossible Friday because the sites were down.)

Beyond the long list of “related party transactions” in the annual report, there also have been vague allegations of improprieties involving Jaresko from one company insider, her ex-husband, Ihor Figlus. But his whistle-blowing was shut down by a court order issued at Jaresko’s insistence.

John Helmer, a longtime foreign correspondent in Russia, disclosed the outlines of this dispute in an article examining Jaresko’s history as a recipient of U.S. AID’s largesse and how it enabled her to become an investment banker via WNISEF, Horizon Capital and Emerging Europe Growth Fund.

Helmer wrote: “Exactly what happened when Jaresko left the State Department to go into her government-paid business in Ukraine has been spelled out by her ex-husband in papers filed in the Chancery Court of Delaware in 2012 and 2013. …

“Without Figlus and without the US Government, Jaresko would not have had an investment business in Ukraine. The money to finance the business, and their partnership stakes, turns out to have been loaned to Figlus and Jaresko from Washington.”

According to Helmer’s article, Figlus had reviewed company records in 2011 and concluded that some loans were “improper,” but he lacked the money to investigate so he turned to Mark Rachkevych, a reporter for the Kyiv Post, and gave him information to investigate the propriety of the loans.

“When Jaresko realized the beans were spilling, she sent Figlus a reminder that he had signed a non-disclosure agreement” and secured a temporary injunction in Delaware on behalf of Horizon Capital and EEGF to prevent Figlus from further revealing company secrets, Helmer wrote.

“It hasn’t been rare for American spouses to go into the asset management business in the former Soviet Union, and make profits underwritten by the US Government with information supplied from their US Government positions or contacts,” Helmer continued. “It is exceptional for them to fall out over the loot.”

Jaresko, who served in the U.S. Embassy in Kiev after the collapse of the Soviet Union, has said that Western NIS Enterprise Fund was “funded by the U.S. government to invest in small and medium-sized businesses in Ukraine and Moldova – in essence, to ‘kick-start’ the private equity industry in the region.”

While the ultimate success of that U.S.-funded endeavor may still be unknown, it is clear that the U.S. AID money did “kick-start” Jaresko’s career in equity investments and put her on the path that has now taken her to the job of Ukraine’s new finance minister. Ukrainian President Petro Poroshenko cited her experience in these investment fields to explain his unusual decision to bring in an American to run Ukraine’s finances and grant her citizenship.

A Big Investment

The substantial U.S. government sum invested in Jaresko’s WNISEF-based equity fund also sheds new light on how it was possible for Assistant Secretary of State for European Affairs Victoria Nuland to tally up U.S. spending on Ukraine since it became independent in 1991 and reach the astounding figure of “more than $5 billion,” which she announced to a meeting of U.S.-Ukrainian business leaders last December as she was pushing for “regime change” in Kiev.

The figure was so high that it surprised some of Nuland’s State Department colleagues. Several months later – after a U.S.-backed coup had overthrown Yanukovych and pitched Ukraine into a nasty civil war – Under Secretary of State for Public Affairs Richard Stengel cited the $5 billion figure as “ludicrous” Russian disinformation after hearing the number on Russia’s RT network.

Stengel, a former Time magazine editor, didn’t seem to know that the figure had come from a fellow senior State Department official.

Nuland’s “more than $5 billion” figure did seem high, even if one counted the many millions of dollars spent over the past couple of decades by U.S. AID (which puts its contributions to Ukraine at $1.8 billion) and the U.S.-funded National Endowment for Democracy, which has financed hundreds of projects for supporting Ukrainian political activists, media operatives and non-governmental organizations.

But if one looks at the $150 million largesse bestowed on Natalie Jaresko, you can begin to understand the old adage that a hundred million dollars here and a hundred million dollars there soon adds up to real money.

Those payments over more than two decades to various people and entities in Ukraine also constitute a major investment in Ukrainian operatives who are now inclined to do the U.S. government’s bidding.

1b. More about Natalie Jaresko:

She oversaw a U.S. Agency for International Development-linked fund prior to her appointment. (U.S. AID has strong links to U.S. intelligence.) Note, as well, that she was part of Viktor Yuschenko’s team when he married OUN/B operative Ykaterina Chumachenko. As discussed in FTR #781, Yuschenko whitewashed Ukraine’s World War II history, tricking out the Bandera forces as heroes.

“Meet and Greet Natalie Jaresko, US Government Employee, Ukraine Finance Minister” by John Helmer [posted by Yves Smith]; Naked Capitalism; 12/4/2014.

The new finance minister of Ukraine, Natalie Jaresko, may have replaced her US citizenship with Ukrainian at the start of this week, but her employer continued to be the US Government, long after she claims she left the State Department. US court and other records reveal that Jaresko has been the co-owner of a management company and Ukrainian investment funds registered in the state of Delaware, dependent for her salary and for investment funds on a $150 million grant from the US Agency for International Development. The US records reveal that according to Jaresko’s former husband, she is culpable in financial misconduct.

Natalie Jaresko was appointed on Monday, and approved by a vote of the Verkhovna Rada on Tuesday evening. A presidential tweet and an announcement from the office of President Petro Poroshenko say a decree has been signed granting Jaresko Ukrainian citizenship to qualify her to take office. The legality of the decree was challenged today by the head of Poroshenko’s bloc in parliament, Yury Lutsenko.

For the record of Jaresko’s predecessor at the Finance Ministry in Kiev, Alexander Shlapak, click.

On Tuesday at the State Department, spokesman Marie Harf was asked: “apparently a U.S. national has been appointed finance minister. Has Washington something to do with this appointment?” Harf replied: “No, this is a choice for the Ukrainian people and their elect [sic] representatives. This is their decision. Certainly, I don’t think we had anything to do with it at all… the Ukrainian people and their representatives are able to pick whoever they want to be part of their government. That’s the beauty of how this process works.”

Jaresko was born into the Ukrainian émigré community of Chicago, taking her name from her father John Jaresko. Her brother, also named John, has been active in Ukrainian movements and received a medal in 2010 from then President Victor Yushchenko. At the time, sister Natalie was an appointee of Yushchenko’s Foreign Investors Advisory Council and the Advisory Board of the Ukrainian Center for Promotion of Foreign Investment. Yushchenko had given her the St. Olga medal in 2003.

Older sister, Katherine, married a Ukrainian, as did Natalie, who is 49. In 1989 Natalie Jaresko married Ihor Figlus, and took his name until their marriage ended in divorce in 2010.

For a study of the influence in Kiev of Kateryna Chumachenko and other Ukrainian-American women employed by the State Department, including Jaresko, read this. Chumachenko (below 2nd from left, with President George Bush in 2005) is the second wife of Victor Yushchenko, the Ukrainian President between 2005 and 2010.

Figlus was at the US Embassy in Kiev, when Natalie was posted there.

Figlus went on to run the American Chamber of Commerce in Ukraine. He then took charge of the Western NIS Enterprise Fund (WNISEF). According to the career resume Natalie has issued, she was “a cofounder of Horizon Capital and has served as its Managing Partner since March 2006, simultaneously serving as President and CEO of Western NIS Enterprise Fund (WNISEF), a position she has held since February 2001. Prior to joining WNISEF, Jaresko worked at the U.S. Department of State. From 1992 to 1995, she served as the First Chief of the Economic Section of the U.S. Embassy in Ukraine, and before that, she served in various economic positions at the State Department in Washington, DC.”

Since Jareshko and Figlus divorced, he has been airbrushed out of the business history she has portrayed as the basis of her experience, and of her prepping to be the new finance minister of Ukraine. Horizon Capital’s website lists as its founders Jaresko, two Americans (with Harvard degrees and Chicago backgrounds like Jaresko; below 1 and 2) and a Canadian-Ukrainian (3).

According to a recent Ukrainian community paper from Chicago, “Jaresko has worked more than 20 years in Ukraine as a venture capitalist, bringing countless foreign investments to Ukraine.” Counting the countless, Jaresko has disclosed that the kickoff fund WNISEF was “funded by the U.S. government to invest in small and medium-sized businesses in Ukraine and Moldova – in essence, to “kick-start” the private equity industry in the region. We began investing in this region in 1995, and have invested $122 million over the past 12 years in 30 businesses in a wide variety of sectors. Based on our team’s ability to successfully navigate this business environment, our track record, and Ukraine’s promising economic environment, we founded Horizon Capital in 2006.”

The US Government money has come from the US Agency for International Development (USAID). Reports promised by the website on the impact of its funding operations in Ukraine and Moldova between 1997 and 2005 are missing. The financial report for WNISEF for 2003, the first publicly available, reveals that a USAID grant to the fund amounted to $150 million, with a letter of credit commitment of $141.7 million; $113.6 million had been disbursed by the end of 2003. Asset value was dropping that year, while management salaries, business travel and other expenses were rising. The fund was lossmaking — $4.3 million in the red in 2002, $5.1 million lost in 2003.

The latest available report from WNISEF is for 2012. It can be read here. Invested asset value in 2012, though up on 2003, was falling from the year before, 2011. Investment income for 2012 came to $1.2 million, down 43% on the previous year. The management kept helping itself to more pay, but cut business travel. Still, the bottom line was a loss of $6.4 million, compared to a gain in 2011 of $401,662.

Horizon Capital says WNISEF was “the cornerstone limited partner in EEGF” – that’s Emerging Europe Growth Fund, LP. Its portfolio is reported here. Emerging Europe Growth Fund II, L.P. is what Jaresko’s group calls “a follow-on fund expanding on the success of Emerging Europe Growth Fund, L.P. (EEGF), a $132 million fund raised in 2006 with a similar investment strategy. Investors include European and U.S. fund-of-funds, banks, private pension funds, university endowments, family offices, and high net worth individuals. EEGF II typically invests $15-40 million in each of its portfolio companies, including expansion, buy-out and selective early stage opportunities.” Tinkoff Credit Systems of Russia is (maybe was) its lead portfolio asset.

The success Horizon Capital claims for its funds appears not to have been reported in the lossmaking years, 2003, 2004, 2005, 2006, 2008, 2009, 2010, and 2012. In the only two years which Jaresko managed in the black, 2007 and 2011, the net gains reported were $1.8 million and $401,662, respectively. On the asset side the annual reports are dominated by USAID’s outlay of $150 million. If other investors subscribed funds, they appear to have lost them.

When Jaresko was asked about the investment performance, she has said: “we are very pleased with both the investment pipeline and the exit environment, and believe 2006 will be a very good vintage for our investors.” The audited report for 2006 indicates there was a net investment loss of $5.3 million.

According to remarks published in Kiev by Timothy Ash, an analyst at Standard Chartered bank London, Jaresko is “very well-prepared, highly experienced and tough as nails, she brings with her the unique ability to pick up the phone and reach virtually any decision maker in Washington without any introduction necessary; they know her – and they trust her.” Ash also says: “she fits the bill as an international expert, clean, and likely to be a radical thinker – able to think outside the box in terms of ideas. Ukrainian speaker, and has been resident in Ukraine for years so knows how things work, or rather don’t work.”

Interviewed by telephone, Ash said he did not know the US Government was financing Jaresko’s investment fund. “The US does do that”, he conceded. Asked for what he knows of the success of her investment portfolio and experience, Ash said he lacked details. “She’s been in the country [Ukraine] for twenty years… I don’t know anything about the success [of the investment firm].” To be a finance minister, Ash added, “you don’t necessarily have to be a finance ministry person.”

“She is extremely well qualified for this position – no doubt at all and any reasonable person reading this CV would say the same. Did a career in politics, not finance, make UK Chancellor George Osborne qualified for his position, or even Gordon Brown before him.” Asked what Ash means by characterizing Jaresko as “clean”, and what he knows about her links to the Ukrainian oligarchs, he said: “I don’t think she’s aligned with any oligarch.”

What exposure does his bank have to Ukraine at the moment? Ash replies: “given UK regulatory requirements I do not have access to that information…perhaps you would like to be aware that I have ‘Underweight’ recommendations on both Ukraine and Russia – so if you are trying to imply something inappropriate there, I would not bother.”

The one link to a Ukrainian oligarch in Jaresko’s public record is with Victor Pinchuk, for whom she has been a regular participant at his Yalta European Strategy (YES) meetings and speaker at other functions Pinchuk has sponsored.

What Jaresko has had to say publicly this year is not much. In May 2014, speaking to the German Marshall Fund of Washington she talked up “competitiveness” and “infrastructure” in Ukraine, but omitted to identify the impact of civil war on the investment case. The following month, in June 2014, speaking in Stockholm, Jaresko said “what you see in the newspapers is a small, small part of the reality, the reality is much richer, the opportunities much greater, the real change much deeper than anyone could read about in the newspaper.” Again, no mention of civil war.

For details of the performance of Horizon Capital’s funds in 2013, Tatiana Bega, the firm’s investment relations spokesman in Kiev, was asked to clarify whether the registered ownership of Horizon Capital is Ukrainian; what the value is of the funds currently under management; how profitable the firm is currently; and what “portfolio investments you have made which you consider to have been successful”. There has been no reply. In January of this year Jaresko placed an authorized version of her career success in the Ukraine edition of Forbes, which can be read here. The reporter, Yelena Shkarlova, omitted to check Jaresko’s audited reports to verify what she was told.

Exactly what happened when Jaresko left the State Department to go into her government-paid business in Ukraine has been spelled out by her ex-husband in papers filed in the Chancery Court of Delaware in 2012 and 2013. A judgement by Vice Chancellor Donald Parsons, confirming the facts, can be read here. Without Figlus and without the US Government, Jaresko would not have had an investment business in Ukraine. The money to finance the business,and their partnership stakes, turns out to have been loaned to Figlus and Jaresko from Washington.

According to the judge, “Plaintiff Emerging Europe Growth Fund, L.P. (“EEGF”or the “Partnership”) is a Delaware limited partnership formed to make equity and debt financing investments in privately held companies in Ukraine and Moldova. Plaintiff Horizon Capital GP, LLC (“HCG” or the “General Partner”, and collectively with EEGF, “Plaintiffs”) is a Delaware limited liability company and the general partner of EEGF. Defendant Ihor Figlus (“Figlus” or “Defendant”) is a limited partner of EEGF. Figlus previously was married to non-party Natalie A. Jaresko. Jaresko is a co-founder of HCG and is the chief executive officer of EEGF….Figlus and Jaresko married in 1989. In February 2006, the couple jointly invested $150,000 in EEGF. Later that year, in September, they invested an additional $1.1 million in EEGF. Figlus and Jaresko divorced in 2010. They currently hold their interests in EEGF jointly, pending a settlement of their assets.”

The court has found that in January 2011, after the divorce, Figlus discovered he owed money as a co-signatory with Jaresko of loan agreements with which their positions in the funds had been financed. Judge Parsons’s narrative: “He requested information regarding EEGF and several loans Figlus and Jaresko had secured from HCG affiliate Horizon Capital Associates, LLC (“HCA”) to finance the couple‘s investment commitments to EEGF (the “loans”).”

By September of 2011, after Figlus (right) has testified that he had read the documents provided by his wife’s associates, he concluded that the loans were “ improper”. That allegation he was unable to resolve with Jaresko, so Figlus turned to the Kyiv Post, a local English-language newspaper, and its reporter, Mark Rachkevych. According to the court record, “because he had no money to investigate the Loans, Figlus decided to inform Rachkevych of his suspicions and have Rachkevych investigate the propriety of the Loans. Over the next five months, Figlus and Rachkevych engaged in video conversations regarding EEGF.”

When Jaresko realized the beans were spilling, she sent Figlus a reminder that he had signed a non-disclosure agreement. Jaresko then enforced this with “a cease and desist letter to Figlus on behalf of EEGF demanding that he immediately discontinue disclosing confidential information regarding EEGF.” Because Figlus wasn’t deterred, Jaresko went to court in Delaware in October 2012, and got a temporary injunction prohibiting Figlus from disclosing any more.

Jaresko’s purpose, he now alleges, was not only to silence Figlus, but to strip him of his stake in their business partnership. “The record should be clear,” according to the judge, “that the parties to the agreement in question truly were sophisticated and operated on a level playing field. In this case, we have the unusual circumstance that a divorce settlement is proceeding contemporaneously with this lawsuit. Figlus‘s ex-wife is a founder of the Partnership and an officer of the General Partner, both Plaintiffs in this action. Figlus avers that he offered to resolve the case and to strictly comply with the Confidentiality Provision but that Plaintiffs insisted on pursuing the action at his expense to dispossess him of his interest in the Partnership to the benefit of his ex-wife. At this stage, of course, these are merely allegations and I express no opinion as to the truth of any of Defendant‘s allegations.”

The newspaper in Kiev was silenced, and there is no sign in its archive that Rachkevych, still a reporter for the Post, has recovered his investigative interest in Figlus, Jaresko, or Horizon Capital. . . .

2. As Anders Aslund of the pro-austerity Peter­son Insti­tute sug­gested in the Wall Street Jour­nal recently, pri­va­tiz­ing Ukraine’s assets is, itself, one of the cures for cor­rup­tion. So are cuts in pub­lic spend­ing and dereg­u­la­tion.

 The Petetr­son Insti­tute is basi­cally a mouth­piece for the inter­na­tional oli­garchs that want to see a world run by finance and bil­lion­aires. It’s going to be impor­tant to keep in mind that gut­ting the Ukrain­ian pub­lic sec­tor, slash­ing pub­lic spend­ing, dereg­u­lat­ing busi­ness, and gen­er­ally sell­ing off the state assets to the oli­garchs and inter­na­tional investors is prob­a­bly going to be the tem­plate for the offi­cial “anti-corruption” cam­paigns going forard. Are cor­rupt oli­garchs cor­rupt­ing your gov­ern­ment? Why not sell off state assets to them to end the corruption.

“Ukraine’s Enemy Within” by Anders ÅslundThe Wall Street Jour­nal; 10/01/2014.

Exter­nal threats to Ukraine from Rus­sia have dom­i­nated the news for months, but as that sit­u­a­tion starts to sta­bi­lize the coun­try will need to con­front an old, inter­nal enemy: cor­rup­tion. Trans­parency Inter­na­tional ranks Ukraine 144 out of 177 coun­tries on its corruption-perception index. Cor­rup­tion was at the heart of pop­u­lar dis­con­tent with the deposed regime of Vik­tor Yanukovych, and wide­spread graft helps explain why the econ­omy stalled in 2012 and 2013. Kiev must tackle this prob­lem urgently, even as its lead­ers con­front Russia’s ter­ri­to­r­ial ambitions.

The scale of the graft under the pre­vi­ous admin­is­tra­tion, if the alle­ga­tions turn out to be true, is breath­tak­ing. Prime Min­is­ter Arseniy Yat­senyuk has accused the Yanukovych regime of steal­ing $37 bil­lion from the state—equal to one-fifth of Ukraine’s GDP in 2013—during its four years in power.

This cor­rup­tion is said to have taken sev­eral forms. The Yanukovych admin­is­tra­tion was allegedly able to buy nat­ural gas at low, state-controlled prices and then resell it at mar­ket prices that could be as much as eight times higher. Volodymyr Groys­man, Ukraine’s cur­rent deputy prime min­is­ter, has said that gas worth $2.5 bil­lion was sold this way.

Infra­struc­ture projects have also come under sus­pi­cion. In August 2008, for exam­ple, the city of Lviv was accept­ing ten­ders for a foot­ball sta­dium to host the 2012 Euro­pean cham­pi­onships. Alpine, an Aus­trian com­pany, placed a bid at $191 mil­lion, accord­ing to com­pany records, but it was rejected since the request was for pro­pos­als of up to $116 mil­lion. In the end, the con­struc­tion of the sta­dium was awarded to Donetsk-based Altkom, accord­ing to the Ukrain­ska Pravda. The total cost came in at $370 mil­lion, accord­ing to gov­ern­ment doc­u­ments. The Euro­pean Invest­ment Bank, which had intended to con­tribute to the financ­ing of the sta­dium, with­drew in protest.

Cleans­ing Ukraine of its cor­rup­tion will require sev­eral inter­re­lated mea­sures. In this regard, Esto­nia and Geor­gia have shown the way.To begin with, the state needs to limit its reg­u­la­tory role by abol­ish­ing or merg­ing many state agen­cies. Min­i­miz­ing state inter­fer­ence in the economy—whether by pri­va­tiz­ing state-owned assets or cut­ting regulations—reduces oppor­tu­ni­ties for cor­rup­tion in the first place.

The gov­ern­ment should also cut pub­lic expen­di­tures, and cor­rupted sub­si­dies must be elim­i­nated. The dereg­u­la­tion of gas and elec­tric­ity prices in this case must be seen as a mat­ter of com­bat­ing cor­rup­tion, not as a social issue. The poor can be given tar­geted cash com­pen­sa­tion instead. The tax sys­tem also needs to be sim­pli­fied and the tax police abol­ished, to shield tax­pay­ers from law­less per­se­cu­tion. Ukraine has recently adopted a law on pub­lic pro­cure­ment requir­ing open pub­lic ten­ders, and vot­ers should demand their lead­ers fol­low that law to the letter.

Offi­cials also must focus on deliv­er­ing reli­able rule of law. This should entail the cre­ation of an inde­pen­dent com­mis­sion scru­ti­niz­ing all the top judges and pros­e­cu­tors in Ukraine and dis­miss­ing those found to have engaged in graft.

By sign­ing the Asso­ci­a­tion Agree­ment with the Euro­pean Union, Ukraine has com­mit­ted itself to adopt­ing hun­dreds of reform laws, while the EU has com­mit­ted itself to pro­vid­ing sub­stan­tial tech­ni­cal assis­tance in draw­ing up new laws and reor­ga­niz­ing state agen­cies. That deal is on hold for now, but Brus­sels and Kiev can still find ways to move for­ward. Those parts of the agree­ment that tar­get cor­rup­tion, for exam­ple, should be a pri­or­ity; as should build­ing a strong and inde­pen­dent judi­cial system.

The Ukrain­ian peo­ple have made a choice for Europe. If they stick with it and pur­sue reform with deter­mi­na­tion, they will have their best chance to clean out the Augean sta­bles of a long-corrupt system.

3a. So is pri­va­ti­za­tion, gut­ting state spend­ing, and dereg­u­la­tion (the ol’ eco­nomic shock doc­tine) the kind of “rad­i­cal” “out­side the box” think­ing we should expect?

Con­sider that this was the same plan Petro Poroshenko had back in 2012 when he was Vic­tor Yanukovich’s eco­nomic mini­ster:

“Ukraine Set to Pri­va­tize Hun­dreds of State Firms: Paper”; Reuters.com; 9/26/2012.

The Ukrain­ian gov­ern­ment has drafted a law that paves the way for the pri­va­ti­za­tion of hun­dreds of state-owned com­pa­nies pre­vi­ously con­sid­ered strate­gic, Kommersant-Ukraine news­pa­per reported on Wednes­day cit­ing a leaked draft document.

Ukrain­ian Econ­omy Min­is­ter Petro Poroshenko said this week the gov­ern­ment planned to remove about 1,200 enter­prises from the list of strate­gic assets that can­not be pri­va­tized, Ukrain­ian media reported, but did not name any.

Accord­ing to Kom­m­er­sant, the draft law lifts the ban on pri­va­tiz­ing numer­ous coal mines, oil and gas pipelines, grain silos and other indus­trial assets.

The sell-off could pro­vide extra bud­get rev­enues for the cash-strapped for­mer Soviet repub­lic and also harks back to 1990s moves that freed up busi­ness and drove devel­op­ment of the Euro­pean Union’s east­ern mem­ber states.

“Should the new list pass through the Rada (par­lia­ment), it might pave the way for a new round of mas­sive pri­va­ti­za­tion in Ukraine,” VTB Cap­i­tal said in a note on Wednesday.

“Car­ry­ing out the process in a trans­par­ent and com­pet­i­tive way would pro­vide a sig­nif­i­cant boost to the state bud­get in the com­ing years, and to the over­all finan­cial position.”

But, since Pres­i­dent Vik­tor Yanukovich’s elec­tion in early 2010, many pri­va­ti­za­tion auc­tions have been won by his campaign’s main finan­cial back­ers, indus­tri­al­ists Rinat Akhme­tov and Dmytro Firtash.

Com­pa­nies close to Akhme­tov, in par­tic­u­lar, have pur­chased stakes in a num­ber of elec­tric power com­pa­nies while Firtash’s group has won most auc­tions for regional gas dis­tri­b­u­tion companies.

“…Exam­ples of pri­va­ti­za­tion in Ukraine sug­gest that such (trans­par­ent and com­pet­i­tive) con­di­tions are not always met in a way that max­i­mizes the ben­e­fits for the state,” VTB Cap­i­tal said.

3b. To the surprise of no one aware of Ukraine’s dire economic straits, Ukraine is at the brink of financial collapse. It is altogether unlikely that the privatization/slash spending catechism will avert this.

As discussed in previous shows on Ukraine, the U.S. taxpayer is on the hook for Ukraine’s debt.

“IMF Warns Ukraine Bailout at Risk of Collapse” by Peter Spiegel and Roman Olearchyk; Finan­cial Times; 12/9/2014.

The Inter­na­tional Mon­e­tary Fund has iden­ti­fied a $15bn short­fall in its bailout for war-torn Ukraine and warned west­ern gov­ern­ments the gap will need to be filled within weeks to avoid finan­cial collapse.

The IMF’s cal­cu­la­tions lay bare the per­ilous state of Ukraine’s econ­omy and hint at the finan­cial bur­den of prop­ping up Kiev as it bat­tles Russian-backed sep­a­ratist rebels in its east­ern regions.

The addi­tional cash needed would come on top of the $17bn IMF res­cue announced in April and due to last until 2016. Senior west­ern offi­cials involved in the talks said there is only tepid sup­port for such a size­able increase at a time Kiev has dragged its feet over the eco­nomic and admin­is­tra­tive reforms required by the programme.

“It’s not going to be easy,” said one offi­cial involved in the talks. “There’s not that much money out there.”

With­out addi­tional aid, Kiev would have to mas­sively slash its bud­get or be forced to default on its sov­er­eign debt oblig­a­tions. Since the bailout pro­gramme began in April, Ukraine has received $8.2bn in fund­ing from the IMF and other inter­na­tional creditors.

Pierre Moscovici, the EU eco­nom­ics chief, said the Euro­pean Com­mis­sion was weigh­ing a third res­cue pro­gramme on top of the €1.6bn ($2bn) it has already com­mit­ted to Kiev; the Ukrain­ian gov­ern­ment has requested an addi­tional €2bn from Brussels.

But Pier Carlo Padoan, the Ital­ian finance min­is­ter who chaired a dis­cus­sion of Ukraine’s finan­cial sit­u­a­tion at a meet­ing of his EU coun­ter­parts on Tues­day, said EU resources should only be mobilised if Kiev made a “stronger effort” towards imple­ment­ing reforms.

At a meet­ing of his cab­i­net in Kiev, Ukraine’s prime min­is­ter, Arseniy Yat­se­niuk, insisted his gov­ern­ment was pre­pared to put in place unpop­u­lar mea­sures, includ­ing deep cuts in spend­ing, a crack­down on the mas­sive shadow econ­omy and moves to dereg­u­late the country’s uncom­pet­i­tive economy.

Under IMF rules, the fund can­not dis­trib­ute aid unless it has cer­tainty a donor coun­try can meet its financ­ing oblig­a­tions for the next 12 months, mean­ing the fund is unlikely to be able to send any addi­tional cash to Kiev until the $15bn gap is closed.

The scale of the prob­lem became clearer last week after Ukraine’s cen­tral bank revealed its for­eign cur­rency reserves had dropped from $16.3bn in May to just $9bn in Novem­ber. The data also showed the value of its gold reserves had dropped by nearly half over the same period. A per­son with direct knowl­edge of the cen­tral bank’s pol­icy said part of the drop had been due to large-scale gold sales.

Accord­ing to two peo­ple who attended the EU meet­ing, con­cern over Ukrain­ian finances has become so severe that Wolf­gang Schäu­ble, the Ger­man finance min­is­ter, said he had called his Russ­ian coun­ter­part, Anton Silu­anov, to ask him to roll over a $3bn loan the Krem­lin made to Kiev last year.

George Osborne, the UK finance min­is­ter, expressed sur­prise at the request, atten­dees said, say­ing the EU was now ask­ing for help from Rus­sia at the same time it was sanc­tion­ing the Krem­lin for its actions in Ukraine.

 4. Poroshenko wanted to appoint nationals of the USA, Georgia and Lithuania to cabinet positions and has wasted no time. Note that Aivaras Abromavicius, the new economic development and trade minister and the minister of health from Georgia, Aleksandre Kvitashvili, were educated in the United States.

“Foreign-Born Ministers in Ukraine’s New Cabinet”; BBC News; 12/5/2014.

. . . . Aivaras Abromavicius, economic development and trade minister

Aivaras Abromavicius is a Lithuanian-born specialist in emerging markets investment. He graduated from Concordia University in Wisconsin, USA, with a BA in international business.

In 1996, Mr Abromavicius started his career at Hansabank, a major bank operating in the Baltic states, which then became part of the Swedbank group, where he was appointed head of equities in 1998. He then worked for three years as head of trading at Brunswick Emerging Markets, a consultancy.

In 2002, he joined East Capital, a global investment fund which specializes in emerging markets. There, he was part of a portfolio management team for Eastern Europe.

Aleksandre Kvitashvili, health minister

Aleksandre Kvitashvili is an experienced health official from Georgia. He studied history at Tbilisi State University and in 1993 received a masters degree in public management from the Robert Wagner Graduate School of Public Service in New York. After briefly working in the US, he returned to Georgia. There, he worked for the UN Development Program and several healthcare-related organizations.

In 2008-10, he was minister of labour, health and social protection under President Saakashvili. In August 2010, Mr Kvitashvili resigned to become rector of Tbilisi State University, a post which he held until August 2013.

“I’ve been working on reforms in Ukraine for the past three months, but my love for this country has a much longer history,” he said after his appointment on 2 December. . . .

5. Nazi members of the Azov Battalion are being granted citizenship by Poroshenko.

“Poroshenko Grants Belarussian Neo-Nazi Ukrainian Citizenship” by Halya Coynash; Politics and Human Rights; 12/8/2014.

When people are risking, often sacrificing, their lives for their country, quibbles about questionable neo-Nazi views may be out of place.  This is not the case where they are fighting for another country, and Ukrainian President Petro Poroshenko’s decision to grant Sergei  Korotkykh, a fairly notorious Russian/Belarusian neo-Nazi, Ukrainian citizenship cannot fail to raise eyebrows.

The President’s website informs that on Dec 5 Poroshenko handed an internal passport “to Belarusian Sergei Korotkykh who has been fighting in the Azov battalion since it was created and is the commander of reconnaissance. The President thanked Sergei Korotkykh for his courageous, dedicated service”.  He also announced that the Defence Ministry, together with the Interior Ministry, is preparing a number of submissions to grant Ukrainian citizenship to fighters “who selflessly defend the country’s sovereignty and territorial integrity”.

The courage and commitment of volunteer fighters of the Azov battalion have been demonstrated in military action over recent months and in their defence of Mariupol, and gratitude and recognition of their bravery are certainly warranted.  The battalion, however, is known just as much because of the pronounced neo-Nazi views of its commanders and at least some of its members.

Those views are shared by the foreign nationals who have joined Azov, including Sergei Korotkykh.

According to an original report on the UNIAN website, Korotkykh [known as ‘Malyuta’] is a Belarusian far-right radical with a formidable neo-Nazi background.  He was formerly on the political council of the National-Socialist Society, many of whose members were later convicted of racially or politically motivated murders. . . .

6. Commanders of some of the “Punisher Battalions” are among the Ukrainians lobbying the Senate for aid, including military aid. Some of them are also threatening to invade Russian territory and suggesting that Americans should be ready to die for Ukraine.

“Ukraine Punisher Commanders in DC Now to Ask Warren and McCain for More Guns” by George Eliason; OpEdNews.com; 11/18/2014. 

 Within a few days the Senate Foreign Relations Committee is going to meet with Ukraine’s best and brightest. They are coming to ask for money, weapons, and start lobbying for direct intervention. The thought that the halls of the US Congress can be sullied with this kind of people treading on its floors is beyond my imagination. You don’t need to care about Ukraine on this issue. American moral authority and the well being (electability) of some good Congressmen that only hear the propaganda might be at stake. Please take the time to read through and if this is not acceptable tell your Senator why.

A few days ago Vadim Troyan, a Battalion Azov deputy commander was appointed Kiev Oblast(Region) Police Chief. Azov Battalion is one of the punisher battalions responsible for rape, kidnapping, and murder of civilians across Donbass. Vadim Troyan has earned some of Ukraine’s highest medals in the process.

At their base city of Mariupol just during the month of October 2014 the police department had to report over 200 rapes committed by Azov and the Ukrainian National Guard in a public meeting held at the city police department. According to local residents in Mariupol which is a city of over 500,000; people are constantly going missing.

Young girls are being dragged away in broad daylight and some are never seen again. Azov battalion is taking men off the street that are never returned. In the last week of October twenty people were reported missing.

Andrey Biletsky is also Arseni Yatsenyuk’s choice as a parliamentarian in Ukraine’s National Rada (Senate). In fact, all the supposedly democratic Euro-Maidan leaders have chosen radical neo nazi representatives for Senate seats. Biletsky has sworn he will drive a vote on Ukraine’s nuclear status. If successful, Ukraine will strive to develop nuclear arms. Sergey Melnichuk (battalion commander Aydar) was Oleg Lyashko’s choice for a Rada seat.

In the interview with Foreign Policy, the Azov commander Biletsky (now Ukrainian Senator) states:

“Unfortunately, among the Ukrainian people today there are a lot of ‘Russians’ (by their mentality, not their blood), ‘kikes,’ ‘Americans,’ ‘Europeans’ (of the democratic-liberal European Union), ‘Arabs,’ ‘Chinese’ and so forth, but there is not much specifically Ukrainian…It’s unclear how much time and effort will be needed to eradicate these dangerous viruses from our people.”

The battalion’s political platform supports the system of government devised by the Ukrainian nationalists of the 1930s and 1940s.

Really look at the description of a “Russian” and see if there is anything familiar here. American democracy is no different to them than Donbas people. This point needs to hit home in light of what they are doing.

Andrey Teteruk

Andrey Teteruk the Commander of Myrotvorets (peacemaker) is also one of Yatsenyuks choices that is taking a Senate seat.

Andrei Teteruk who ran for lawmaker on People’s Front election list plans to attend parliamentary plenary meetings with weapons. “I hope I will not use it,” Teteruk said.

Myrotvorets (peacemaker battalion) is another punisher battalion. In Teteruk’s own words Peacemaker” is a police battalion. “Our task is to restore order in liberated settlements, clean from criminals, weapons. We did a good job in Dzerzhinsk; performed police functions, investigated, who supported separatists in the city.”

“I’m against solving problems by using weapons. With all that I’m a military man, run a military unit, but I was in Kosovo and saw the conflicts that were solved with weapons, it led to the fact that entire villages were cut out, from the oldest to the youngest. The war makes dirty both sides.”

Although honesty is a respectable quality every person in Donbass has been branded a separatist. Teteruk’s job as a punisher battalion commander is no different than the last part of his quote- to destroy entire villages from the oldest to the youngest.

Yuri Bereza

Yuri Bereza is the Commander of Ihor Kolomoisky’s Dneipr 1. You guessed it Yuri Bereza is also now a Senator. What makes this clown a great pick for Maidan leaders to get behind is:

Today, we are ready not just to defend [Ukraine], but to invade the Russian Federation, break into it with reconnaissance detachments and sabotage groups,” said Bereza.

Although I didn’t mention him by name I wrote about Bereza’s most notable accomplishment to date. In a hacked correspondence reacting to the remains of 37 civilians found in Dnipropetrovsk, Ukrainian Rada, Deputy Oleg Pankevich questions Igor Kolomoisky’s sanity. Kolomoisky, one of the leading Jewish leaders in Europe, has his own Dnipr Battalion in the Donbass war.

According to Kolimoisky’s assistant Boris Filatov, they are just Neo-nazi animals. Kolomoisky’s Dnipr battalion is replete with swastikas and Neo-nazi mercenaries from Ukraine and other countries. Among his more notable accomplishments, Kolimoisky funded and planned the Odessa Trade House Massacre last spring. Kolomoisky has a new Nazi problem. Of the 37 civilians that were found tortured, mutilated and killed in this instance, 19 were Jewish. Thats why Pankevich called it a mini-holocaust.

Yuri Bereza is a new Ukrainian Senator who now has medals for torture and murder of innocent people.

Semen Semenchenko

I have written extensively about Sementchenko’s Donbass Battalion. Sementchenko is also a new Ukrainian Senator. His battalion accused him of running when the fighting started. When they were under attack he refused to deliver weapons his men did not have. He told his deputy commander to leave because” they are just meat anyway.” Semenchenko’s battalion has been responsible for a lot of horror done to civilians in Donbass. This man is an animal.

UCCA Lobbying

The ultra-nationalist Ukrainian Congressional Committee of America (UCCA) has been lobbying the US Congress to give weapons to Ukraine. The men listed above are the representatives the Diaspora community chose as representative of their ideal of a Ukrainian nationalist in the mold of Stepan Bandera.

The United Nations (UN) recently released a report on the human rights situation in Ukraine, accusing the volunteer battalions of violating international humanitarian laws.

The date they chose falls on Ukraine Day celebrations to insure they get the turnout needed to show the Senate Foreign Relations Committee that these men deserve American dollars, weapons, and training.

This excerpt is from nationalist volunteer effort:

“As I’m sure you know, these three Magi are not only our lovely commanders of the volunteer battalions Donbas, Myrotvorets, and Dnipro-1, they are also newly-baked parliamentarians from Samopomich and Narodny Front. And they are in DC this week to meet with congressmen and military officials and talk about how to defend Ukraine. At this very moment, Russia is training a 30 000 army in the occupied eastern territories and stuffing the region with its weapons, and Semenchenko asks for OUR HELP!”

“Remember, Ukraine is not only defending itself, but also peace in Europe, and the alliance between the US and its biggest friend, Europe, as well as international law.”

Considering that they want the US to attack Russia, should we thank them now or later?

What else does the Ukrainian emigres want from the US Congress?

Former Ukrainian Foreign Minister Voldymyr Ogrizko on Shuster Live (largest Ukrainian talk show)“‘Americans must be willing to die for Ukraine, because the former Soviet republic, fighting with Russia, defends the values of the Western world. And they are willing to die in Iraq or Afghanistan? If they are really talking about their values, they must be willing to die in Ukraine. Today we protect their valuables. This and our values. We protect their lives and their blood ,( He is talking about America )’ – said Ogryzko. He expressed the hope that the results of the elections in the US will bring Ukraine support.”

What Else Should the Senate Foreign Relations Committee Know?

Recently on the Ukrainian investigative program Groshi. which I was shocked to learn was still on the air after the coup did a program on prostitution in the Ukrainian army.

At first blush, I would agree that doesn’t sound like much except the commanders are forcing conscripts to act as prostitutes. The commanders are collecting 600 hryvna per outing and supposedly giving the conscript the equivalent of $4. Bear in mind that the conscript cannot refuse the order.

The conscript age in Ukraine is now 16 years old. Other soldiers or officers have their choice between a boy or a girl, man or woman. How is this not sanctioned rape within the armed forces? Will the US Congress support this? . . . .

7. An adviser to the head of the Ukrainian intelligence service has admitted that there are no Russian units in Ukraine.

“Ukraine 2nd Day of Heavy Fighting | Kiev Shells Sports Facility Killing Children and ADMITS NO RUSSIAN TROOPS PRESENT I” by George Eliason; OpEdNews.com; 11/7/2014.

In an interview with Gromadske.TV, Markian Lubkivsky, the adviser to the head of the SBU (the Ukrainian version of the CIA) stated there are NO RUSSIAN TROOPS ON UKRANIAN SOIL! This unexpected announcement came as he fumbled with reporters’ questions on the subject. According to his statement, he said the SBU counted about 5000 Russian nationals, but not Russian soldiers in Donetsk and Lugansk Peoples Republics.

He further clarified that there were no organized Russian units in Donbass. The SBU thinks there are representatives of the Russian FSB (Russian CIA) and mentors who provide training and organization that grew the Novorussia army quickly in its fight with Ukraine.

He went on further to state that the SBU estimates the armies of Donetsk and Lugansk Peoples Republics are about 20-25 thousand strong.

This confession will sting the Kiev government, that has repeatedly told its allies that Russia is attacking. Daily on Ukrainian news, official stories declare that Ukrainian security forces are fighting Russian armed forces. As part of the propaganda, Ukrainians are told that the Ukrainian army is defeating companies of Russian paratroopers, Spetz Natz Group Alpha (the Russian version of Navy SEALS), and all sorts of special forces. If you were an average Ukrainian what would you think?

The reporter doing the interview, ultra-nationalist Natasha Stanko may not survive the line of questioning she started. Earlier I reported on her tweet celebrating the punisher battalion Aydar murdering Ukrainian troops that refused to kill civilians. She thought that was funny. . . .

8. As though the sit­u­a­tion in Ukraine wasn’t Orwellian enough, Poroshenko has created a federal ministry critics are comparing to “The Ministry of Truth” from George Orwell’s 1984.  Note that the ministry will be headed by Yuriy Stets, the former PR person for the Ukrainian National Guard, to which the punisher battalions belong! Stets is a former employee of a TV station owned by Poroshenko.

“Ukraine Just Cre­ated Its Own Ver­sion of Orwell’s ‘Min­istry of Truth’” by Christo­pher Miller; Mash­able; 12/2/2014.

The Ukraine gov­ern­ment has estab­lished a depart­ment that crit­ics are call­ing the “Min­istry of Truth” — bor­row­ing a term from George Orwell’s clas­sic dystopian novel 1984.

Offi­cially called the Min­istry of Infor­ma­tion Pol­icy, the new office will be headed by Yuriy Stets, head of the Infor­ma­tion Secu­rity Depart­ment of the National Guard of Ukraine. A close ally to Pres­i­dent Petro Poroshenko, Stets was for­merly chief pro­ducer of the TV chan­nel that Poroshenko sill owns.

While its main objec­tive appears to be con­fronting Russia’s for­mi­da­ble pro­pa­ganda machine, the Min­istry is likely to also restrict free speech and inhibit jour­nal­ists’ work — par­tic­u­larly in war-torn east­ern Ukraine, accord­ing to observers.

At a demon­stra­tion out­side par­lia­ment, Ukrain­ian jour­nal­ists decried the new min­istry, which deputies approved in the Verk­hovna Rada late on Tues­day, along with the rest of the country’s Cab­i­net of Ministers.

About 40 jour­nal­ists and activists from Ukrain­ian watch­dog groups Chesno (Hon­est) and Stop Cen­sor­ship! held posters that read “Hello, Big Brother.” They urged law­mak­ers enter­ing the par­lia­ment ahead of Tuesday’s ses­sion to vote against appoint­ing Stets as its head.

The cre­ation of the min­istry comes on the heels of crit­i­cal reports from jour­nal­ists and rights groups about its use of con­tro­ver­sial weapons in east­ern Ukraine, as well as pos­si­ble war crimes com­mit­ted by its armed forces.

Ukraine’s gov­ern­ment is clearly frus­trated with by its lack of suc­cess in dis­sem­i­nat­ing its mes­sages. “You must under­stand, we are being killed by [Russ­ian] guns as well as their pro­pa­ganda,” a top secu­rity offi­cial told Mash­able when explain­ing why he sup­ported the cre­ation of the ministry.

A report released last month by The Inter­preterweb­site describes just how Russ­ian pro­pa­ganda works, and how effec­tively it is being used as a weapon of the Krem­lin. The report out­lines a “hybrid war” that com­bines dis­in­for­ma­tion “to sow con­fu­sion via con­spir­acy the­o­ries and pro­lif­er­ate false­hoods” with “covert and small-scale mil­i­tary operations.”

Still, there are some in the gov­ern­ment who do not endorse the min­istry. A senior offi­cial in the Pres­i­den­tial Admin­is­tra­tion, who spoke anony­mously because he feared reper­cus­sions from offi­cials for talk­ing to a jour­nal­ist, said he was “very con­cerned” about the min­istry and how it would be used.

“Hon­estly, I’m not sure such a min­istry is needed,” the offi­cial said, adding that oth­ers inside the admin­is­tra­tion have also ques­tioned the move.

“The way to fight Russ­ian pro­pa­ganda is with hon­estly and trans­parency, not try­ing to beat Rus­sia at its own game.”

The Min­istry of Infor­ma­tion Pol­icy was pushed through with lit­tle notice and even less debate on the par­lia­ment floor. That could be because the pres­i­dent him­self pushed the con­cept on mem­bers of his party, the largest fac­tion in par­lia­ment, and has great sway over the rul­ing coalition.

Deputies whom Mash­able spoke with ahead of the par­lia­ment ses­sion on Tues­day said Poroshenko per­son­ally urged them to sup­port the min­istry in a tense last-minute meet­ing called late Mon­day night.

For­mer inves­tiga­tive jour­nal­ist turned law­maker Ser­hiy Leshchenko, who was elected in last month’s vote on the ticket of the president’s party, was present at the meet­ing. He says Poroshenko “was very seri­ous” about con­firm­ing Stets the fol­low­ing day in parliament.

Oksana Roma­niuk, direc­tor of local media watch­dog Insti­tute of Mass Infor­ma­tion and Ukraine rep­re­sen­ta­tive for Reporters With­out Bor­ders, toldMash­able that “the gov­ern­ment wants to con­trol the media’s mes­sages first, and sec­ond, they want to con­trol access to the messages.”

Details on how the min­istry will oper­ate are murky. No doc­u­ments were made avail­able to the pub­lic or deputies, and Stets did not reply to Mashable’s requests for com­ment. But Roma­niuk fears the gov­ern­ment has given itself “carte blanche.”

Reporters With­out Bor­derssaid it “firmly opposes” the infor­ma­tion min­istry. “Putting the gov­ern­ment in charge of ‘infor­ma­tion pol­icy’ would be major ret­ro­grade step that would open the way to grave excesses,” said Christophe Deloire, the watch­dog organization’s secretary-general.

“Dear team Poroshenko, the pur­suit of absolute power in this coun­try means a final career,” Tatyana Niko­laenko, chief edi­tor at Ukraine’s Insider mag­a­zine, wrote on Face­book. “If you cre­ate this ‘Min­istry of Truth’ the president’s rat­ing will col­lapse as quickly as it rose in the win­ter of this year.”

She added: “You can not win the infor­ma­tion war [against Rus­sia] with it, because with the cre­ation of the Min­istry you’ll give Russ­ian pro­pa­ganda end­less ref­er­ences to [Nazi Min­is­ter of Pro­pa­ganda Joseph] Goebbels and Orwell.”

But Kiev sees the cre­ation of the min­istry as a nec­es­sary move to fight Russia’s inces­sant pro­pa­ganda, which has been par­tic­u­larly suc­cess­ful over the course of the ongo­ing crisis.

The con­cept was first floated on Sun­day, when Inte­rior Min­istry advi­sor Anton Herashchenko men­tioned it in a poston Face­book. In it, he men­tioned the need to counter the Russ­ian message.

“There is an idea to cre­ate the struc­ture of the Cab­i­net of Min­is­ters Min­istry of Infor­ma­tion Pol­icy, whose main task is the pro­tec­tion of Ukraine’s infor­ma­tion space of the Russ­ian pro­pa­ganda and counter-propaganda in Rus­sia, in the tem­porar­ily occu­pied ter­ri­to­ries of Crimea and [east­ern Ukraine]. This issue is long over­due and I would even say too late,” Herashchenko wrote.

Stets relayed his thoughts on the new min­istry in his own Face­book poston Monday.

“I see it this way: dif­fer­ent states with dif­fer­ent his­tor­i­cal and cul­tural expe­ri­ences in times of cri­sis came to need to cre­ate a body of exec­u­tive power that would con­trol and man­age the infor­ma­tion secu­rity of the coun­try,” Stets wrote.

Accord­ing to Stets, none of the cur­rent state struc­tures could effi­ciently han­dle those tasks.

“The infor­ma­tion and com­mu­ni­ca­tions space remain unco­or­di­nated now, full of con­tra­dic­tions and influ­ence of for­eign agents, and under con­di­tions of geopo­lit­i­cal wars becomes a weak part of the coun­try, a sub­ject of enemy attacks,” he added.

 9. The day this program was recorded, Congress rewarded the UCCA and their punisher battalion lobbyists by giving the green light to lethal military aid to Ukraine. Note that two members of the Nazi Azov Battalion were killed the very day the bill passed Congress.

“Ukraine Cheers US Vote for Military Aid, Russia Outraged” by Eric Randolph [Agence France Presse]; Yahoo News; 12/12/2014.

Ukraine on Friday welcomed a US bill that would allow Washington to provide lethal military assistance to the embattled country, but Russia expressed outrage at the “openly

The bill — passed late on Thursday and due to get final approval in Congress on Friday before being sent to US President Barack Obama — opens the way for up to $350 million (280 million euros’) worth of US military hardware to be sent to Ukraine, which has been fighting an eight-month war against Kremlin-backed separatists in its east.

It also threatens fresh sanctions against Russia, whose economy is crumbling under previous rounds of Western sanctions and a collapse in oil prices.

Russia’s foreign ministry said the new US legislation put a “powerful bomb” under US-Russia bilateral ties.

“The openly confrontational nature of the Ukraine Freedom Support Act approved by both houses of the US Congress without debate and proper voting cannot cause anything but deep regret,” said ministry spokesman Alexander Lukashevich.

“US legislators are following in the footsteps of the Barack Obama administration by showing great zeal in destroying the framework of cooperation,” he said.

Kiev lawmakers, though, hailed the US move as a “historic decision”. They have long been pressing the West to provide military support to their beleaguered army, but have so far received only non-lethal equipment. . . .

. . . . US lawmakers, however, appeared determined to force Obama’s hand against Russia. Senators added a clause in the bill that would grant “major non-NATO ally” status to Ukraine, along with pro-Western Georgia and Moldova.

Russia is concerned at what it sees as NATO’s creeping umbrella along its western borders.

Ukraine and the West accuse Russia of sending regular troops to back separatists in eastern Ukraine in a conflict that has claimed more than 4,300 lives since it broke out in April. . . .

. . . . Underlining his [Poroshenko’s] concerns, there were reports on Friday that two volunteer fighters with the pro-Kiev “Azov regiment” and two rebels were killed in Pavlopil, 70 kilometres (45 miles) south of the main rebel stronghold of Donetsk.

“They were ambushed. Their car was blown up by a landmine,” Azov spokesman Oleksandr Alferov told AFP. He added that the two rebels were killed in an ensuing firefight. . . .

 

 

Discussion

30 comments for “FTR #826 Bringing It All Back Home, Ukrainian Style, Part 2”

  1. “Azov is just one of more than 50 volunteer groups fighting in the east, the vast majority of which are not extremist, yet it seems to enjoy special backing from some top officials”. And therein lies the problem:

    BBC News
    Ukraine underplays role of far right in conflict
    By David Stern, Kiev
    13 December 2014 Last updated at 03:38 ET

    Ever since Ukraine’s February revolution, the Kremlin has characterised the new leaders in Kiev as a “fascist junta” made up of neo-Nazis and anti-Semites, set on persecuting, if not eradicating, the Russian-speaking population.

    This is demonstrably false. Far-right parties failed to pass a 5% percent barrier to enter parliament, although if they had banded together, and not split their vote, they would have probably slipped past the threshold.

    Only one government minister has links to nationalist parties – though he is in no way a neo-Nazi or fascist. And the speaker of parliament, Volodymyr Groysman, is Jewish. He has the third most powerful position in the country after the president and prime minister.

    But Ukrainian officials and many in the media err to the other extreme. They claim that Ukrainian politics are completely fascist-free. This, too, is plain wrong.

    As a result, the question of the presence of the far-right in Ukraine remains a highly sensitive issue, one which top officials and the media shy away from. No-one wants to provide fuel to the Russian propaganda machine.

    But this blanket denial also has its dangers, since it allows the ultra-nationalists to fly under the radar. Many Ukrainians are unaware that they exist, or even what a neo-Nazi or fascist actually is, or what they stand for.

    Controversial ‘patriot’

    This hyper-sensitivity and stonewalling were on full display after President Petro Poroshenko presented a Ukrainian passport to someone who, according to human rights activists, is a “Belarusian neo-Nazi”.

    The Ukrainian leader handed out medals on 5 December to fighters who had tenaciously defended the main airport in the eastern region of Donetsk from being taken over by Russian-backed separatists.

    Among the recipients was Serhiy Korotkykh, a Belarusian national, to whom Mr Poroshenko awarded Ukrainian citizenship, praising his “courageous and selfless service”.

    The president’s website showed a photo of Mr Poroshenko patting the shoulder of the Belarusian, who was clad in military fatigues.

    Experts who follow the far right have strongly objected to President Poroshenko’s decision.

    They say Mr Korotkykh was a member of the far-right Russian National Unity party and also a founding member of the neo-Nazi National Socialist Society (NSS) in Russia.

    According to Ukrainian academic Anton Shekhovtsov, the NSS’s main goal “is to prepare for a race war”.

    Mr Shekhovtsov said the Belarusian had been charged for involvement in a bombing in central Moscow in 2007, and was detained in 2013 in the Belarusian capital Minsk for allegedly stabbing an anti-fascist activist. He was later released for lack of evidence.

    Even though the details involved accusations rather than facts, if true they were damning, said human rights activist Halya Coynash.

    Top Ukrainian officials then rejected as defamatory any claims that Mr Korotkykh had neo-Nazi ties.

    “Counter-intelligence has no information that could prevent him from receiving Ukrainian citizenship,” said Valentyn Nalyvaychenko, the head of Ukraine’s security services.

    Nevertheless, the fact is, neo-Nazis are indeed a fixture in Ukraine’s new political landscape, albeit in small numbers.

    Azov Battalion

    As Mr Korotkykh’s case demonstrates, the ultra-nationalists have proven to be effective and dedicated fighters in the brutal war in the east against Russian-backed separatists and Russian forces, whose numbers also include a large contingent from Russia’s far right.

    As a result, they have achieved a level of acceptance, even though most Ukrainians are unfamiliar with their actual beliefs.

    The volunteer Azov Battalion is a case in point.

    Run by the extremist Patriot of Ukraine organisation, which considers Jews and other minorities “sub-human” and calls for a white, Christian crusade against them, it sports three Nazi symbols on its insignia: a modified Wolf’s Hook, a black sun (or “Hakensonne”) and the title Black Corps, which was used by the Waffen SS.

    Azov is just one of more than 50 volunteer groups fighting in the east, the vast majority of which are not extremist, yet it seems to enjoy special backing from some top officials:

    * Interior Minister Arsen Avakov and his deputy Anton Gerashchenko actively supported the parliament candidacy of Andriy Biletsky, the Azov and Patriot of Ukraine commander
    * Vadim Troyan, another top Azov official and Patriot of Ukraine member, was recently named police chief for the Kiev region
    * Mr Korotkykh is also an Azov member

    Ukraine’s media has been noticeably silent on this subject.

    Recently, prominent newspaper and online publication Left Bank published an extensive interview with Mr Troyan, in which the journalists asked no questions at all about his neo-Nazi past or political views.

    And after the Unian news agency reported the presidential ceremony under the headline, “Poroshenko awarded Belarusian neo-Nazi with Ukrainian passport”, it was soon replaced with an article that air-brushed out the accusations of extremism.

    Unian’s editors have declined to comment on the two pieces.

    Ukraine’s public is grossly under-informed about this. The question is, why doesn’t anyone want to tell them?

    Translation: it’s not that the entire Kiev government is filled with neo-Nazis, it’s just that the relatively small number neo-Nazis that do exist seem to be getting special treatment from the existing power structure and accumulating power and no one seems to be telling the Ukrainian public about this. Crypto-blatant-fascism. Isn’t the modern age awesome?

    Still, you have to hope that the characterization of Ukraine’s populace as being largely clueless about the far right nature of these groups is really true. At the same time, you also have to wonder what the public response could be if the populace ever learns about the post-Maidan neo-Nazi special treatment during a period when the nation is undergoing a historic “pivot” towards the EU. You really got to wonder, especially with everything else going on.

    Posted by Pterrafractyl | December 13, 2014, 5:40 pm
  2. @Pterrafractyl–

    Textbook “modified limited hangout” dished up by the BBC.

    The story completely ignores:

    a)The presence of Nazis and fascists, including Azov veterans, as parliamentarians from the parties of so-called “respectable” politicians like Poroshenko and Yatsenyuk.

    b)The continuity from the OUN/B of the WWII era, embodied by Roman Svarych, Yaroslav Stetsko’s personal secretary in the early 1980’s. Svarych was the Minister of Justice under both Timoshenko governments and Victor Yuschenko’s, as well. He is an adviser to Poroshenko. Svarych and Stetsko’s widow Slava Stetsko founded the Ukrainian National Congress, which wielded profound influence in Ukraine long before Maidan.

    Victor Yuschenko’s “Orange Revolution” institutionalized the historical memory of the OUN and whitewashed the WWII history of Ukraine. His wife–Ykaterina Chumachenko–was a key OUN/B operative and Ronald Reagan’s former Deputy Director of Public Liaison.

    c) The domination of key ministries by Svoboda and Pravy Sektor people in the transitional government and for some time thereafter. Their influence is very much present in Ukraine today.

    d) Among the most notable aspects of the Nazification of Ukraine is the naming of Bandera and Roman Shukhevych as Heroes of the Ukraine by the “moderate” Yuschenko, “moderate” Poroshenko’s naming of the anniversary of the founding of the Shukhevych-led UPA as a national holiday and the naming of civic institutions (streets, airports, etc.) for people like Bandera. The kicker is the renaming of a street in the Lvov district after the Nachtigall Battalion (Einsatzgruppe Nachtigall).

    It is not surprising that MSM in the West would cover-up the decisive influence of ABN, OUN/B, Gehlen types in the post-World War II world.

    Hell, they were in decisive positions of government in the U.S.!

    They also wielded decisive influence in the intelligence services of U.S., U.K., the Federal Republic of Germany and elsewhere.

    All’s well that’s Orwell.

    Best,

    Dave

    Posted by Dave Emory | December 13, 2014, 9:38 pm
  3. @Dave: it’s notable that it’s a BBC article about how the Ukrainian media is obscuring the neo-Nazis being embraced by the Kiev government itself itself downplays the extent of the neo-Nazi infestation it’s trying to expose while, at the same time, is one of the only articles in the Western media talking about this at all. It’s a limited hangout about a limited hangout!

    It would be nice if the signs of the times weren’t unpleasant riddles wrapped in unfortunate enigmas.

    Posted by Pterrafractyl | December 14, 2014, 6:22 pm
  4. If you thought gerrymandering is scary, check this out: “Among the most startling proposals are to reduce the number of MPs from 450 to 150, reduce obligatory schooling from 11 to 9 years, and abolish the constitutional guarantees of free education and medicine, as well as abolishing a constitutional norm prohibiting closure of existing institutions (such as schools and hospitals)”. Yes, fire 2/3 of Ukraine’s elected MPs and gut education, because democracy is just too expensive. That’s the recommendation from Ukraine’s new finance minister:

    Business News Europe
    New Ukraine finance minister drafts sweeping welfare cuts
    bne IntelliNews
    December 12, 2014

    In order to put the country back on a sound financial footing, Ukraine’s finance ministry is proposing sweeping cuts, from cutting the years of mandatory schooling, to firing two-thirds of MPs, to hiking the pension age.

    According to leaked documents drawn up by the finance ministry, the new government, voted in on December 2, is readying sweeping reform of the entire budget sector.

    The 120 pages of proposals outline changes to the constitution and legislation to reduce the state’s spending obligations to the order of UAH496bn (€24bn), much of which remains in fact chronically unfunded. The proposals would drastically cut back the remnants of the Soviet cradle-to-grave welfare state.

    Among the most startling proposals are to reduce the number of MPs from 450 to 150, reduce obligatory schooling from 11 to 9 years, and abolish the constitutional guarantees of free education and medicine, as well as abolishing a constitutional norm prohibiting closure of existing institutions (such as schools and hospitals).

    Perhaps most controversially, the finance ministry is proposing to raise the pension age for both men and women to 65, from currently 57 for women and 62 for men, canceling pension indexation for inflation, and slashing all travel benefits (such as free travel for pensioners).

    New Finance Minister Natalie Jaresko, a US-born investment banker who was a surprise appointment to the post on December 2, said that it was “too early to talk about concrete figures,” but that it would be necessary to “review the existing benefits provided to large groups of the population in favour of aid targeted at people who really need it”.

    Jaresko also in the interview denied reports that Ukraine was close to default. “We are not in a state of default and also not in pre-default state. This question is not even being considered in the government. But no one is hiding that the situation is very serious – Ukraine needs urgent stabilisation of the financial system in particular the banking sector,” she said.

    So let’s see…

    New Finance Minister Natalie Jaresko, a US-born investment banker who was a surprise appointment to the post on December 2, said that it was “too early to talk about concrete figures,” but that it would be necessary to “review the existing benefits provided to large groups of the population in favour of aid targeted at people who really need it”.

    “We are not in a state of default and also not in pre-default state. This question is not even being considered in the government. But no one is hiding that the situation is very serious – Ukraine needs urgent stabilisation of the financial system in particular the banking sector,”

    Well, at least we know who the people are that “really need” Ukraine’s precious state assistance. Congrats banksters.

    Posted by Pterrafractyl | December 15, 2014, 1:09 pm
  5. It appears that Chevron is getting out of Ukraine:

    Oilprice.com
    Abandoned Chevron gas project deals blow to Ukraine energy

    Chevron’s move to pull out of a $10 billion gas deal in Ukraine is only the latest in a series of investment setbacks resulting in much less certainty for Ukraine’s energy security.
    By Nick Cunningham,

    December 16, 2014

    Ukraine’s bid to rid itself of its dependence on Russian energy just took a huge hit.

    Chevron announced that it was pulling out of a deal that it made with the Ukrainian government to develop shale gas in western Ukraine. The $10 billion deal was signed before the ouster of former Ukrainian President Viktor Yanukovych.

    Chevron indicated that it was unsatisfied with the tax regime in Ukraine, after the post-Yanukovych government raised energy taxes. “We have just terminated that PSA (product sharing agreement),” said Peter Clark, Chevron’s country manager in Ukraine, according to Kyiv Post. “When it was signed, things had to be done, but not all of them got done.”

    The deal with Chevron was signed in November 2013, and called for Chevron to invest $350 million over the first two to three years to develop Ukraine’s Olesska field in the western part of the country. The agreement kept open the possibility of ramping up investments to $10 billion over the course of Chevron’s 50-year lease. The Olesska field was expected to produce 10 billion cubic meters of gas each year when it was up and running.

    But Chevron insisted that it would only move forward if the Ukrainian government simplified a series of tax laws. With no action from Kyiv, Chevron has decided it cannot move forward, and informed the Ukrainian government on December 15 of its intention to pull out of the deal.

    The move is only the latest in a series of investment setbacks for multinational oil companies in Ukraine. In June 2014, Royal Dutch Shell decided to suspend operations on its Yuzivska field, located in eastern Ukraine due to the violence between the Ukrainian government and Russian separatists. The Yuzivska field is an 8,000 square kilometer located in Donetsk, an eastern province that has seen most of the violence in 2014. Shell decided to take a “time out” in order to protect its personnel.

    And in March, ExxonMobil had to put on ice ambitious plans to develop offshore gas fields in the Black Sea after Russia annexed Crimea. The Skifska project was expected to have amounted to a $12 billion investment that could have seen 8 to 10 billion cubic meters of natural gas produced beginning in 2017. The annexation of Crimea now puts the Skifska reserves, estimated to be in the range of 3 trillion cubic feet, in disputed territory.

    Chevron was thought to be better situated than Shell since its concession was located in the west, far from the fighting. Energy analysts predicted that that Chevron’s deal could be one of the few major gas projects that would be able to survive the crisis with Russia.

    According to Chevron, Ukraine’s unfriendly tax regime did more to kill off the Olesska project than a brewing civil war in the east has. Still, Chevron’s Peter Clark says that the deal is not entirely dead yet, and the company is still working with the Ukrainian government to see if they can agree on a way forward.

    While this is obviously awful news for Ukraine’s fiscal woes, keep in mind this statement by Chevron’s Peter Clark:


    According to Chevron, Ukraine’s unfriendly tax regime did more to kill off the Olesska project than a brewing civil war in the east has. Still, Chevron’s Peter Clark says that the deal is not entirely dead yet, and the company is still working with the Ukrainian government to see if they can agree on a way forward.

    So who knows, maybe something will be worked out since it’s apparent that all Chevron wants is more tax incentives from this impoverished, war torn country that desperately needs the cash. Where there’s a will, there’s a way, at least when it comes to making the rich richer and the poor poorer:

    Kyiv Post
    New economy minister stands for austerity, deregulation, privatization
    Dec. 15, 2014, 3:54 p.m. | Ukraine — by Brian Bonner, Ivan Verstyuk

    Ukraine’s newly appointed Economy Minister Aivaras Abromavicius, 38, clearly signaled his conservative direction during a Dec. 13 interview with the Kyiv Post. “The role of the state in the economy should be decreased,” Abromavicius said.

    A former citizen of Lithuania, Abromavicius quit his job at East Capital, a Swedish asset management firm that claims to have provided a 1,542 percent return on investments in 2000-2010, >to take the job that Pavlo Sheremeta quit in September, citing an onerous bureaucracy and vested business interests that resisted any reforms.

    Abromavicius also expects to encounter big resistance, but hopes to stay longer than Sheremeta, who left the job after six months.

    “I expect resistance as well and I understand where the resistance is going to come from,” he says. “But I want to push. Ukraine has no way out.”

    While Abromavicius didn’t say where the resistance would come from, he didn’t have to specify. Ukraine’s state bureaucrats and oligarchs have teamed up with corrupt politicians in Ukraine throughout 23 years of independence to perpetuate a graft-ridden, Soviet-style system that has kept millions of Ukrainians impoverished and prompted millions of others to flee the nation. Those who stayed have engineered two revolutions in a decade to advance the nation’s democracy and economy.

    Abromavicius said he’s coming into public office without any compromising personal ties. “I’m very happy I don’t know any of Ukrainian oligarchs personally,” he says.

    While he is determined to succeed, he wants to do it on his terms. If he fails, “it’s not the end of the world for me personally. I will go back to what I know best, which is investment activities.”

    Ukraine spends Hr 140-150 billion of taxpayers’ money on public procurement annually. Bringing transparency and efficiency to these deals could cut the figure by some Hr 30 billion – nearly $2 billion. “That’s a lot of money,” he says, especially for an economy that may shrink to as little as $150 billion in gross domestic product this year.

    Moreover, the nation’s public expenditures are 56 percent of GDP. He says the new government wants to cut the state’s share of spending 10 percentage points.

    A good start would be the state-owned Naftogaz, which sucks up 7 to 9 percent of the nation’s GDP — much of it on non-transparent schemes that epitomize Ukraine’s corrupt ways. Every month, the nation pays up to $1 billion to plug Naftogaz’s finances.

    “We cannot feed Naftogaz at the expense of Ukraine,” he said, noting that Ukraine should start charging market prices for energy while helping the poorest consumers cope with the price increases.

    Abromavicius says that large-scale privatization is necessary, but will have to wait for better economic times.

    “The public sector is 3,300 state-owned companies, 1.1 million people employed – and billions of dollars of losses and indebtedness,” he explains. “The state is a horrible owner of the assets.”

    Those assets should be sold after auditing them by the Big Four, a super-league of globe’s biggest audit firms that includes Deloitte, EY, KPMG and PricewaterhouseCoopers.

    Stakes in public companies will be placed on the international exchanges, while some will be also traded on the Ukrainian stock market. “My view is that Ukraine should have a strong local stock exchange. Obviously, we need to change the laws, need to work in the Securities Commission slightly different than before,” the minister explains.

    “There are going to be no re-privatizations,” Abromavicius adds. “This idea was a big mistake of the Orange Revolution. Only one asset should have been reprivatized – Kryvorizhstal – and that already happened.”

    Meanwhile, he hopes to stimulate private pension funds, a rather novel concept for Ukrainians, to supplement the nation’s simultaneously burdensome (17 percent of GDP) and paltry state pension for retirees (average payment of only $110 monthly). The private savings will create a long-term investment base that will be contributing to the development of business.

    Deregulation will also help, especially for the small and medium businesses whose share in the country’s economy remains low by Western standards.

    An exports promotion strategy includes discussions with the European Union authorities over quotas applied to the Ukrainian goods under the free trade agreement coming into effect in 2016.

    “We need the trade representative offices,” Abromavicius explains. “China has 5,000 people in Moscow working only on trade promotion. All these big embassies of the Netherlands or Germany – all they do is trade promotion. And, certainly, you shouldn’t have a 65-year-old guy promoting IT goods.”

    The former asset manager is looking for a circle of experts to work at the Economy Ministry to make it more productive. He thinks government can get by with fewer, but better-paid employees – in the order of $2,000 monthly to reduce incentives for corruption.

    “Dmytro Shymkiv’s team at the Presidential Administration is working on that. They plan to submit some laws to allow salary sponsorship from a separate fund. The basic idea is that you get private and corporate sponsors to that fund,” he said.

    Uhhh…wait, did he just say “Dmytro Shymkiv’s team at the Presidential Administration is working on that. They plan to submit some laws to allow salary sponsorship from a separate fund. The basic idea is that you get private and corporate sponsors to that fund“?!? Yes, it looks like Ukraine’s new privatizer-in-chief is pushing corporate sponsorships for public salaries as a mechanism for reducing public corruption.

    Well, it is what it is. And who knows, maybe after Chevron works out a new tax-incentive deal they’ll sponsor some government salaries in exchange. It’s all part of the international community’s pro-business modernization agenda for Ukraine, where the quid pro quo status quo is finally getting the upgrade it needs to not just survive but thrive in the 21st century.

    Posted by Pterrafractyl | December 16, 2014, 8:34 pm
  6. Following the loosening of gun ownership laws in Russia last month, it looks like Ukraine might have a plan of its own:

    Kyiv Post
    Draft bill in parliament suggests relaxing rules for gun ownership in Ukraine (INFOGRAPHIC)

    Dec. 22, 2014, 12:30 p.m.

    There is a growing move in Ukraine’s new parliament to relax rules on gun ownership in Ukraine, and even allow license-free ownership of some types of weapons. A draft bill suggesting new rules of ownership was filed to parliament on Dec. 10 by a cross-faction group of 31 deputies.

    The main point of this bill are spelled out in Article 4. This is its unofficial translation. The full text in Ukrainian, as well as accompanying documents, can be found here.

    The following categories of civil weapons and ammunition are allowed for circulation and ownership by individuals, business entities and shooting sports organizations in Ukraine:

    1. The first category is air guns of caliber 4.5 mm with a muzzle velocity of 100 meters per second, and weapons fit for using flobert ammunition of caliber up to 4.5 mm.

    2. The second category long-barrel smooth bore firearms, gas guns, air guns of caliber over 4.5 mm and with muzzle velocity over 100 meter per second, guns fit for using flobert ammunition over 4.5 mm and ammunition for it;

    3. The third category is long-barrel rifles, hybrid firearms and ammunition for it.

    4. The fourth category is handgun and ammunition for it, short-smoothbore firearms designed for shooting ammunition powered by elastic elements with lesser lethal effect, and ammunition for it.

    The weapons of the first category, as well as other inert and deactivated weapons, are allowed for free civil circulation.

    The weapons of the second, third and fourth category may be allowed for limited civil circulation, determined by this bill. Citizens of Ukraine may acquire ownership rights to the civil weapons of the second, third and fourth category, as well as ammunition and components of ammunition if they posses a license to own the weapons, which can be obtained separately for each category of civilian weapons, except the first category.

    More guns for Ukraine, at least if the law passes. Some groups are likely to be pleased.

    Posted by Pterrafractyl | December 22, 2014, 11:01 am
  7. Over a month ago, Kiev began implementing a new strategy in the civil war: cut off East Ukraine’s pensions and social services entirely:

    Cash cut to Ukraine rebel areas in risky strategy
    By PETER LEONARD and BALINT SZLANKO
    Nov. 25, 2014 3:20 PM EST

    DONETSK, Ukraine (AP) — For hours, small crowds in Donetsk huddle hopefully in the cold around cash machines that never get filled, as artillery rumbles in the distance.

    Money is running short in the rebel heartland since the government announced this month that it will suspend banking services as it piles on the pressure. Almost all ATMs have stopped working and the remainder are expected to stop operating over the next two weeks.

    The move is part of Ukraine’s plan to suffocate its separatist foe, now that its costly military campaign has foundered. Authorities say they are also withdrawing all state services from rebel areas, although hospital and school workers in the rebel stronghold of Donetsk say it has been a while since they last saw funding anyhow.

    Yet if the government of President Petro Poroshenko hopes to turn people in eastern Ukraine against the separatist leadership, evidence on the ground suggests the strategy may only be hardening their resolve.

    “What Poroshenko is saying to us is: ‘You are no longer Ukrainians. You won’t get pensions, you won’t get social payments. When you croak, then we’ll stop this war against you,'” said Donetsk retiree Georgy Sharov. “But I don’t want to go to Ukraine and beg for their mercy.”

    The lines have typically formed in front of cash machines belonging to state savings bank Oshchadbank, which handles pensions and social support payments.

    “Even they don’t always have money,” said Donetsk resident Sergei Smotovsky, standing outside a branch of the bank. “The worst thing is that not only can you not get social payments. You can’t even withdraw money that you earned, your salary.”

    Even though cash machines don’t work, account-holders wait from early morning until lunchtime in the hope that bank workers will top them up, but the doors to the banks often remain firmly shut.

    Despite the unremitting fighting taking place across Donetsk and Luhansk, the two regions affected by the armed separatist conflict, large supermarkets are still reasonably stocked.

    Supplies come from other parts of Ukraine and customers often use bank cards to pay for shopping. Ukraine’s government is now about to block bank cards, cutting off another means of sustenance.

    Hard-pressed recipients of state benefits have for months turned expectantly to the rebel government for cash. Crowds of pensioners and single mothers assemble daily before the separatist headquarters. When anybody in the crowd becomes especially vocal, one of the gunmen guarding the building rushes to bundle them away, accusing them of being “provocateurs.”

    The brunt of the rage, however, is still directed at the Ukrainian government.

    “Ukraine says Donetsk is Ukrainian territory, and yet they came here with tanks and weapons instead of paying pensions properly,” said Donetsk retiree Anatoly Visly. “I am a disabled veteran and I haven’t received my pension for three months.”

    Many pensioners have re-registered in towns outside rebel zones, meaning payments have still accrued to their accounts. The challenge for those people will now become making the monthly trip to banks in government-controlled areas, which can be costly and difficult, especially for the most infirm.

    Prospects for the rebels to set up a welfare system any time soon are bleak.

    Anna Kharzhevskaya, an official with the rebel social affairs and labor ministry, said separatist authorities have only a crude notion of how many people are eligible for social payments.

    Ukraine’s government has been blocking access to state records and is trying to spirit away hard copies of databases still in rebel-held areas, Kharzhevskaya said.

    Separatist authorities say militiamen are under instructions to stop any unsanctioned removals of government records by Ukrainian authorities.

    Without a properly functioning tax system in place, there is no immediately obvious and transparent way for money to be raised. As a result, Kharzhevskaya said she could not estimate when her department would begin paying regular pensions.

    Note that, according to the article below, the cut off pensioner accounts are reportedly still accruing value. Pensioners just won’t be able to access those accounts unless they can leave the rebel-controlled regions or the war ends. And they don’t starve to death first:

    USA Today
    Retirees starve in rebel-held eastern Ukraine
    Tatyana Goryachova and Hal Foster , Special for USA TODAY 4:15 p.m. EST December 25, 2014

    DONETSK, Ukraine — Retirees in Donetsk, the largest city in eastern Ukraine held by pro-Russian separatists, are dying of hunger because their pensions have been cut off by the national government, rebel officials and residents say.

    Though Ukraine has not publicly discussed starvation deaths, it acknowledges there is a humanitarian crisis in the eastern region because of the conflict and blames the separatists and Russia for supporting the rebels.

    The government cut off pensions this month to people in all areas of eastern Ukraine controlled by separatists to undercut support for pro-Russian rebels.

    The number of starvation deaths in Donetsk is hard to pin down, largely because the conflict between Ukraine and separatist forces has crippled government functions in the east, including medical and coroners’ offices that record causes of deaths.

    The siege of the city that began in August has led to 40% of the city’s 1 million people fleeing.

    Dmitry Ponomarenko, pastor of the City of Light Protestant church, said he believes the starvation toll is in the hundreds, perhaps thousands. His assessment is based largely on accounts from parishioners and 300 seniors who come to his church daily for a free meal. In one month, they reported more than 100 starvation deaths of pensioners in Donetsk, he said.

    The Ukrainian Independent Information Agency, citing aid workers, reported that 22 seniors in Donetsk, mostly single men, died of hunger in September.

    The average Ukrainian pension is meager — $107 a month — but it can be the difference between life and death for many.

    A number of aid groups are fighting hunger in Donetsk and other cities in the war zone, including the United Nations Food Program and the charitable foundation of Rinat Akhmetov, Ukraine’s richest man, who fled to Kiev when separatists threatened to kill him. These efforts are sporadic and limited to a few thousand people at a time. They don’t come anywhere near replacing the pensions.

    The separatists and Russia have decried the pension cutoff as inhumane. Kiev says rebels and criminals have taken much of the money it sends to the eastern region.

    The cutoff, announced Nov. 5, means payments will no longer “be stolen by pro-Russian bandits,” Prime Minister Arseniy Yatsenyuk said.

    Donetsk’s mayor in exile, Alexander Lukyanchenko, who fled to Kiev in August after receiving separatist death threats, has criticized the government for the cutoff.

    The only way for residents of neighboring Donetsk and Luhansk provinces to get their pensions back is to go to a city outside the war zone to re-register for benefits. Many retirees lack the health or money to travel so far from their homes, Lukyanchenko said.

    Yatsenyuk, the prime minister, said the pensions the government withholds are accruing for the beneficiaries and will be paid once the eastern region is free of separatist control.

    Ponomarenko, the pastor, and others who help the retirees fear a lot more will succumb to starvation.

    “We have only enough money to help a few pensioners who are able to walk to our church each day,” he said, adding that’s a small fraction of the retirees going hungry.

    Posted by Pterrafractyl | December 28, 2014, 5:54 pm
  8. So it sounds like Ukraine’s neo-Nazi battalions are just going ahead and seizing towns now:

    The Washington Post
    Warlords and armed groups threaten Ukraine’s rebuilding

    By Adrian Karatnycky December 30, 2014

    Adrian Karatnycky is a senior fellow at the Atlantic Council, where he co-directs the “Ukraine in Europe” initiative.

    Kiev is abuzz with creative reforms in governance, major anti-corruption initiatives and budgetary clawbacks against rent-seeking oligarchs. Civic activism is on the upsurge, and a new government team — populated with many foreign-born and Western-educated ministers — is largely free from the control of the country’s super-rich, who dictated policy in the past.

    In recent months, Ukraine’s defenses have strengthened since the Russian takeover of Crimea and the eastern industrial Donbas region. Ukraine’s security service, formerly riddled with corruption and Russian infiltration, has rebuilt its leadership. Combat readiness has improved and weapons production is on the rise, as are the refurbishment and modernization of tanks, artillery and armored personnel carriers. With winter in full swing, the danger of a major Russian offensive has faded.

    In many ways, Ukraine is intelligently addressing its key challenges: restructuring the national budget to avoid default and meeting the military threat posed by Russia. Despite such important progress, however, a new threat is emerging: independently operating warlords and armed groups.

    After the collapse of the Yanukovych regime in February and subsequent Russian aggression, Ukraine’s new government was saddled with an ill-prepared military and required the help of thousands of volunteers. These volunteer fighters were motivated by a patriotic desire to protect their homeland. Many were veterans of the Maidan civic protests. The fighters were mainly supported by grass-roots financing from civic initiatives and small and mid-size businesses.

    A minority of the fighters were ideologically motivated members of far-right movements. These included the ultra-conservative Right Sector and the notorious Azov brigade, whose members had been shunned during the Maidan protests because of their white-supremacist, anti-democratic views. Other volunteer brigades, such as the Dnepr-1, were recruited by business oligarchs, who financed them and commanded their loyalty.

    During the spring and summer, many of these volunteer forces exhibited remarkable courage and helped stem the Russian-backed offensive. In the months that followed, most were integrated into the interior or defense ministries as special-status units.

    But now several of these units, especially those linked to oligarchs or the far right, are revealing a dark side. In recent months, they have threatened and kidnapped government officials, boasted that they will take power if Ukrainian President Petro Poroshenko fails to defeat Russia, and they served as armed muscle in illegal attempts to take over businesses or seize local governments.

    In August, members of the Dnepr-1 battalion kidnapped the head of Ukraine’s state land fund to prevent him replacing an official deemed inimical to business interests. On Dec. 15, these volunteer units interdicted a humanitarian convoy destined for the Russia-controlled Donbas, where a major emergency is emerging.

    On Dec. 23, the Azov brigade announced that it was taking control of order in the eastern port city of Mariupol, without official approval from local or national officials.

    Government prosecutors have opened 38 criminal cases against members of the Aidar battalion alone.

    A pattern of blatant disregard for the chain of command, lawlessness and racketeering is posing a growing threat to Ukraine’s stability at a critical juncture. Concern about volunteer groupings is widely shared in the Poroshenko administration, which reportedly raised the question of dealing with these dangers at a meeting in November of his National Security and Defense Council.

    Most alarming, however, is the role of Ukraine’s interior minister, Arsen Avakov. Instead of reining in these fighters, conducting background checks on their records and reassigning those who pass muster, he instead has offered them new heavy weapons, including tanks and armored personnel carriers, and given them enhanced brigade status. Amazingly, in September he even named a leader of the neo-Nazi Azov brigade to head the police in the Kiev region.

    Equally worrying is the activity of Ihor Kolomoyskyy, the governor of Dnipropetrovsk oblast. Kolomoyskyy, who played a crucial and widely respected role in stabilizing his East Ukrainian region, is now flouting central authority by interdicting aid convoys headed to the Donbas and permitting brigades he finances to engage in activities that contravene the law.

    What can be done? Poroshenko clearly wants this problem resolved but has been reluctant or unable to act. For him to succeed will likely require coordination with Prime Minister Arseniy Yatsenyuk, who has also been slow to address the threat, possibly because Avakov is one of his key political allies.

    “Most alarming, however, is the role of Ukraine’s interior minister, Arsen Avakov. Instead of reining in these fighters, conducting background checks on their records and reassigning those who pass muster, he instead has offered them new heavy weapons, including tanks and armored personnel carriers, and given them enhanced brigade status. Amazingly, in September he even named a leader of the neo-Nazi Azov brigade to head the police in the Kiev region.”

    Heavy weapons and high offices. That should keep the neo-Nazis in line.

    Posted by Pterrafractyl | January 1, 2015, 3:07 pm
  9. Following the shutdown of the Zaporihzhzhya nuclear plant late last month (the second shutdown in December), there was a report in Russian media claiming to reveal document from Ukraine’s emergency ministry that showed a radiation leak 16 times above permitted norms over the prior two days. Ukraine’s government denied the report:

    Ukraine denies radioactive leak on Zaporizhzhya nuclear plant

    By Pavel Polityuk

    KIEV Tue Dec 30, 2014 2:46pm EST

    (Reuters) – Ukrainian authorities denied on Tuesday a report in pro-Kremlin media that a radioactive leak had taken place at the Zaporizhzhya nuclear plant, Europe’s largest.

    Life News newswire published documents which it said came from Ukraine’s emergencies ministry and showed that a leak at the power plant had led to a spike in radiation over the past two days exceeding permitted norms by 16 times.

    Three officials from Ukraine’s emergencies ministry, energy ministry and the plant itself told Reuters there had been no leak.

    “The plant works normally, there have been no accidents,” said an energy ministry official. The officials could not comment if documents published by Life News were authentic. Reuters was not able to verify the documents independently.

    Earlier this month, Ukrainian authorities reported an accident at the plant but said it represented no danger to health or the environment.

    An explosion and fire at Ukraine’s Chernobyl power plant in 1986, the world’s worst nuclear accident, was caused by human error and a series of blasts sent a cloud of radioactive dust billowing across northern and western Europe.

    Well, let’s hope it really was a bogus report. Keep your fingers crossed, but beware of finger cramps. That plant is going to be running for the foreseeable future:

    Los Angeles Times
    Russia says Ukraine deal to buy U.S. nuclear fuel poses safety risks
    By Carol J. Williams contact the reporter

    December 30, 2014, 6:50 PM

    Russia’s Foreign Ministry accused Ukraine of endangering public safety in Europe with its decision to buy nuclear fuel for its Soviet-built nuclear plants from a U.S. supplier, saying Ukrainian leaders had failed to learn anything from the 1986 Chernobyl disaster about safe nuclear energy usage.

    “Moscow was somehow alarmed” over the deal announced earlier in the day by Ukrainian Prime Minister Arseny Yatsenyuk for Kiev to buy fuel for its nuclear plants from U.S. company Westinghouse through the year 2020, the ministry said in a statement posted on its website.

    “Consequences of possible accidents and meltdowns will be the full responsibility of the Ukrainian authorities and U.S. suppliers of the fuel,” the statement added.

    The shift in supplier for the Ukrainian plants that produce 44% of the country’s electricity was part of an effort across Eastern Europe to diversify fuel supplies currently sourced almost exclusively from Russia’s monopoly Rosatom.

    Westinghouse, majority-owned by the Toshiba Group and the builder and operator of more than half of the nuclear plants around the world, noted it “has been working in the Ukrainian market since 2003, and brings diversification of suppliers, global best practices and technology to the Ukraine market.

    “Westinghouse fuel is currently operating safely and efficiently at the South Ukraine Nuclear Power Plant without any defects in performance,” the company noted in a statement from its global headquarters near Pittsburgh.

    Consequences of possible accidents and meltdowns will be the full responsibility of the Ukrainian authorities and U.S. suppliers of the fuel. – Russia’s Foreign Ministry in a statement issued Tuesday

    Posted by Pterrafractyl | January 7, 2015, 9:33 am
  10. “Attempting to create unbearable conditions of life is a whole new ballgame… using starvation of civilians as a method of warfare is a war crime”:

    Reuters
    More than 1 million flee, Ukraine close to “humanitarian catastrophe”

    By Kieran Guilbert

    1/8/2014

    LONDON (Thomson Reuters Foundation) – More than one million people have been driven from their homes by the conflict in Ukraine, hampering aid efforts and leaving the country on the verge of a humanitarian catastrophe, aid agencies said on Thursday.

    The number of people uprooted within Ukraine, 610,000, and of refugees who have fled to neighbouring countries, 594,000, has more than tripled since August, figures from the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) show.

    The U.N. said an estimated 5.2 million people in Ukraine were living in conflict zones, of whom 1.4 million were highly vulnerable and in need of assistance as they face financial problems, a lack of services and aid, and harsh winter conditions.

    The conflict between Ukraine and pro-Russia separatists, killed more than 4,700 people last year and provoked the worst crisis in relations between Russia and the West since the Cold War.

    Denis Krivosheev, deputy director of Europe and Central Asia at Amnesty International, said residents in separatist-controlled Luhansk and Donetsk could barely afford food and medicines, especially vulnerable people such as pensioners.

    “While it may be too early to call this a humanitarian catastrophe, it’s clearly progressing in that direction,” Krivosheev told the Thomson Reuters Foundation by email.

    The provision of humanitarian aid was being hampered by pro-Kiev volunteer battalions that were increasingly preventing food and medicine from reaching those in need in eastern Ukraine, he said.

    “Attempting to create unbearable conditions of life is a whole new ballgame… using starvation of civilians as a method of warfare is a war crime.”

    The battalions often act like “renegade gangs” and urgently need to be brought under control, Krivosheev added.

    Social benefits, including pensions, have also become a major concern for those in eastern Ukraine following Kiev’s decision to transfer the payments to government-controlled areas, the U.N. refugee agency (UNHCR) said.

    UNHCR spokesman William Spindler said those unable to leave their homes, such as the elderly and the sick, and people living in institutions were not receiving the help they needed.

    Well that was a predictably horrible story.

    Posted by Pterrafractyl | January 8, 2015, 2:42 pm
  11. And the Mighty Wurlitzer plays on:

    Consortium News
    CIA’s Hidden Hand in ‘Democracy’ Groups
    January 8, 2015

    Special Report: Documents from the Reagan presidential library reveal that two major institutions promoting “democracy” and “freedom” — Freedom House and National Endowment for Democracy — worked hand-in-glove, behind-the-scenes, with a CIA propaganda expert in the 1980s, reports Robert Parry.

    By Robert Parry

    Freedom House and the National Endowment for Democracy stress their commitment to freedom of thought and democracy, but both cooperated with a CIA-organized propaganda operation in the 1980s, according to documents released by Ronald Reagan’s presidential library.

    One document showed senior Freedom House official Leo Cherne clearing a draft manuscript on political conditions in El Salvador with CIA Director William Casey and promising that Freedom House would make requested editorial “corrections and changes” – and even send over the editor for consultation with whomever Casey assigned to review the paper.

    In a “Dear Bill” letter dated June 24, 1981, Cherne wrote: “I am enclosing a copy of the draft manuscript by Bruce McColm, Freedom House’s resident specialist on Central America and the Caribbean. This manuscript on El Salvador was the one I had urged be prepared and in the haste to do so as rapidly as possible, it is quite rough. You had mentioned that the facts could be checked for meticulous accuracy within the government and this would be very helpful. …

    “If there are any questions about the McColm manuscript, I suggest that whomever is working on it contact Richard Salzmann at the Research Institute [an organization where Cherne was executive director]. He is Editor-in-Chief at the Institute and the Chairman of the Freedom House’s Salvador Committee. He will make sure that the corrections and changes get to Rita Freedman who will also be working with him. If there is any benefit to be gained from Salzmann’s coming down at any point to talk to that person, he is available to do so.”

    Cherne, who was chairman of Freedom House’s executive committee, also joined in angling for financial support from a propaganda program that Casey initiated in 1982 under one of the CIA’s top covert action specialists, Walter Raymond Jr., who was moved to President Ronald Reagan’s National Security Council staff.

    In an Aug. 9, 1982 letter to Raymond, Freedom House executive director Leonard R. Sussman wrote that “Leo Cherne has asked me to send these copies of Freedom Appeals. He has probably told you we have had to cut back this project to meet financial realities. … We would, of course, want to expand the project once again when, as and if the funds become available. Offshoots of that project appear in newspapers, magazines, books and on broadcast services here and abroad. It’s a significant, unique channel of communication” – precisely the focus of Raymond’s work.

    According to the documents, Freedom House remained near the top of Casey’s thinking when it came to the most effective way to deliver his hardline policy message to the American people in ways they would be inclined to accept, i.e., coming from ostensibly independent sources with no apparent ties to the government.

    On Nov. 4, 1982, Raymond wrote to NSC Advisor William Clark about the “Democracy Initiative and Information Programs,” stating that “Bill Casey asked me to pass on the following thought concerning your meeting with [right-wing billionaire] Dick Scaife, Dave Abshire [then a member of the President’s Foreign Intelligence Advisory Board], and Co.

    “Casey had lunch with them today and discussed the need to get moving in the general area of supporting our friends around the world. By this definition he is including both ‘building democracy’ … and helping invigorate international media programs. The DCI [Casey] is also concerned about strengthening public information organizations in the United States such as Freedom House. …

    “A critical piece of the puzzle is a serious effort to raise private funds to generate momentum. Casey’s talk with Scaife and Co. suggests they would be very willing to cooperate. … Suggest that you note White House interest in private support for the Democracy initiative.”

    The importance of the CIA and White House secretly arranging private funds was that these supposedly independent voices would then reinforce and validate the administration’s foreign policy arguments with a public that would assume the endorsements were based on the merits of the White House positions, not influenced by money changing hands.

    In effect, like snake-oil salesmen who plant a few cohorts in the audience to whip up excitement for the cure-all elixir, Reagan administration propagandists salted some well-paid “private” individuals around Washington to echo White House propaganda “themes.”

    In a Jan. 25, 1983 memo, Raymond wrote, “We will move out immediately in our parallel effort to generate private support” for “public diplomacy” operations. Then, on May 20, 1983, Raymond recounted in another memo that $400,000 had been raised from private donors brought to the White House Situation Room by U.S. Information Agency Director Charles Wick. According to that memo, the money was divided among several organizations, including Freedom House and Accuracy in Media, a right-wing media attack organization.

    When I wrote about that memo in my 1992 book, Fooling America, Freedom House denied receiving any White House money or collaborating with any CIA/NSC propaganda campaign. In a letter, Freedom House’s Sussman called Raymond “a second-hand source” and insisted that “this organization did not need any special funding to take positions … on any foreign-policy issues.”

    But it made little sense that Raymond would have lied to a superior in an internal memo. And clearly, Freedom House remained central to the Reagan administration’s schemes for aiding groups supportive of its Central American policies, particularly the CIA-organized Contra war against the leftist Sandinista regime in Nicaragua.

    In an Aug. 9, 1983 memo, Raymond outlined plans to arrange private backing for that effort. He said USIA Director Wick “via [Australian publishing magnate Rupert] Murdock [sic], may be able to draw down added funds” to support pro-Reagan initiatives. Raymond recommended “funding via Freedom House or some other structure that has credibility in the political center.” [For more details, see Consortiumnews.com’s “Murdoch, Scaife and CIA Propaganda“]

    Financing Propaganda

    In 1983, Casey and Raymond focused on creating a funding mechanism to support Freedom House and other outside groups that would engage in propaganda and political action that the CIA had historically organized and paid for covertly. The idea emerged for a congressionally funded entity that would serve as a conduit for this money.

    But Casey recognized the need to hide the strings being pulled by the CIA. “Obviously we here [at CIA] should not get out front in the development of such an organization, nor should we appear to be a sponsor or advocate,” Casey said in one undated letter to then-White House counselor Edwin Meese III – as Casey urged creation of a “National Endowment.”

    A document in Raymond’s files offered examples of what would be funded, including “Grenada — 50 K — To the only organized opposition to the Marxist government of Maurice Bishop (The Seaman and Waterfront Workers Union). A supplemental 50 K to support free TV activity outside Grenada” and “Nicaragua — $750 K to support an array of independent trade union activity, agricultural cooperatives.”

    The National Endowment for Democracy took shape in late 1983 as Congress decided to also set aside pots of money — within NED — for the Republican and Democratic parties and for organized labor, creating enough bipartisan largesse that passage was assured.

    But some in Congress thought it was important to wall the NED off from any association with the CIA, so a provision was included to bar the participation of any current or former CIA official, according to one congressional aide who helped write the legislation.

    This aide told me that one night late in the 1983 session, as the bill was about to go to the House floor, the CIA’s congressional liaison came pounding at the door to the office of Rep. Dante Fascell, a senior Democrat on the House Foreign Affairs Committee and a chief sponsor of the bill.

    The frantic CIA official conveyed a single message from CIA Director Casey: the language barring the participation of CIA personnel must be struck from the bill, the aide recalled, noting that Fascell consented to the demand, not fully recognizing its significance.

    What the documents at the Reagan library now make clear is that lifting the ban enabled Raymond and Casey to stay active shaping the decisions of the new funding mechanism.

    The aide said Fascell also consented to the Reagan administration’s choice of Carl Gershman to head the National Endowment for Democracy, again not recognizing how this decision would affect the future of the new entity and American foreign policy.

    Gershman, who had followed the classic neoconservative path from youthful socialism to fierce anticommunism, became NED’s first (and, to this day, only) president. Though NED is technically independent of U.S. foreign policy, Gershman in the early years coordinated decisions on grants with Raymond at the NSC.

    For instance, on Jan. 2, 1985, Raymond wrote to two NSC Asian experts that “Carl Gershman has called concerning a possible grant to the Chinese Alliance for Democracy (CAD). I am concerned about the political dimension to this request. We should not find ourselves in a position where we have to respond to pressure, but this request poses a real problem to Carl.

    “Senator [Orrin] Hatch, as you know, is a member of the board. Secondly, NED has already given a major grant for a related Chinese program.”

    Besides clearing aside political obstacles for Gershman, Raymond also urged NED to give money to Freedom House in a June 21, 1985 letter obtained by Professor John Nichols of Pennsylvania State University.

    A Tag Team

    From the start, NED became a major benefactor for Freedom House, beginning with a $200,000 grant in 1984 to build “a network of democratic opinion-makers.” In NED’s first four years, from 1984 and 1988, it lavished $2.6 million on Freedom House, accounting for more than one-third of its total income, according to a study by the liberal Council on Hemispheric Affairs that was entitled “Freedom House: Portrait of a Pass-Through.”

    Over the ensuing three decades, Freedom House has become almost an NED subsidiary, often joining NED in holding policy conferences and issuing position papers, both organizations pushing primarily a neoconservative agenda, challenging countries deemed insufficiently “free,” including Syria, Ukraine (in 2014) and Russia.

    Indeed, NED and Freedom House often work as a kind of tag-team with NED financing “non-governmental organizations” inside targeted countries and Freedom House berating those governments if they crack down on U.S.-funded NGOs.

    For instance, on Nov. 16, 2012, NED and Freedom House joined together to denounce legislation passed by the Russian parliament that required recipients of foreign political money to register with the government.

    Or, as NED and Freedom House framed the issue: the Russian Duma sought to “restrict human rights and the activities of civil society organizations and their ability to receive support from abroad. … Changes to Russia’s NGO legislation will soon require civil society organizations receiving foreign funds to choose between registering as ‘foreign agents’ or facing significant financial penalties and potential criminal charges.”

    Of course, the United States has a nearly identical Foreign Agent Registration Act that likewise requires entities that receive foreign funding and seek to influence U.S. government policy to register with the Justice Department or face possible fines or imprisonment.

    But the Russian law would impede NED’s efforts to destabilize the Russian government through funding of political activists, journalists and civic organizations, so it was denounced as an infringement of human rights and helped justify Freedom House’s rating of Russia as “not free.”

    The Russian government’s concerns were not entirely paranoid. On Sept. 26, 2013, Gershman, in effect, charted the course for the crisis in Ukraine and the greater neocon goal of regime change in Russia. In a Washington Post op-ed, Gershman called Ukraine “the biggest prize” and explained how pulling it into the Western camp could contribute to the ultimate defeat of Russian President Vladimir Putin.

    “Ukraine’s choice to join Europe will accelerate the demise of the ideology of Russian imperialism that Putin represents,” Gershman wrote. “Russians, too, face a choice, and Putin may find himself on the losing end not just in the near abroad but within Russia itself.”

    With NED’s budget now exceeding $100 million a year — and with many NGOs headquartered in Washington — Gershman has attained the status of a major paymaster for the neocon movement with his words carrying extra clout because he can fund or de-fund many a project.

    Thus, three decades after CIA Director William Casey and his propaganda specialist Walter Raymond Jr. struggled to arrange funding for Freedom House and other organizations that would promote an interventionist agenda, their brainchild – the National Endowment for Democracy – was still around picking up those tabs.

    Posted by Pterrafractyl | January 8, 2015, 11:07 pm
  12. In keeping with Kiev’s new trend of hiring foreigners for high-level government positions, it looks like the head of Ukraine’s new anti-corruption bureau might not be Ukrainian:

    Zik.ua
    Foreigner may head Ukraine’s anti-corruption bureau
    Addressing a 9-member committee which is to appoint 3 candidates to head the Anti-Corruption Bureau, Pres Poroshenko said the ACB is to operate independently and openly, his Jan. 10 press service report runs.
    Sunday 11 january, 2015, 10:10

    Corruption is Ukraine’s major enemy today, the incumbent stressed.

    There are anti-corruption structures in the executive and police, he stressed, but their work is not effective since they are infested with corruption, Poroshenko said.

    The ACB is to become an effective and transparent organization. Only this will help it to gain the confidence of Ukrainians, he said.

    The fight should be started with graft, with ACB bringing to accountability high-level officials, and then proceed to low-level corruption, he stressed.

    The key figure in the ACB is its director. He did not exclude the possibility for a foreigner to occupy this position.

    This probably shouldn’t be a surprise given the other foreigners that have already been given cabinet positions. That, and the fact that the three-member panel for selecting the new head of the anti-corruption bureau includes the Italian head of the EU’s anti-corruption agency:

    Zik.au
    Coalition proposes Italian anti-corruption fighter for selection commission of ACB head
    All the coalition factions support Italian Jovanni Kesler, the director of European anti-corruption bureau, for membership of a 0-member commission that will choose 3 candidates for Ukraine’s Anti-Corruption Bureau head, Oleh Lyashko wrote in Facebook Dec. 22.
    Monday 22 december, 2014, 18:52

    Verkhovna Rada has to nominate 3 members of the commission.

    Of the three nominated candidate Pres Poroshenko will choose the ACB head.

    The cabinet and president have already nominated their 6 members.
    w
    According to the media and NGOs, the 6 are Ukrainian partiots with impeccable public record.

    Note that EU anti-corruption bureau chief Jovanni Kesler was indeed appointed to the committee. So now it’s a matter of seeing which of the three nominees are non-Ukrainian. Hint: it might be more than one:

    ITAR-TASS
    Ukraine’s anti-corruption agency could be led by US citizen — media
    World

    December 26, 8:47 UTC+3
    Another candidate for the top post is former Georgian President Mikheil Saakashvili, reports say

    KIEV, December 26. /TASS/. A former US federal prosecutor Bohdan Vitvitsky, who has Ukrainian roots, could be appointed as the director of Ukraine’s newly-created Anti-Corruption Bureau, local media reported on Friday.

    Officials from the Ukrainian presidential administration are currently in talks with Vitvitsky, who has not yet made a final decision saying that he “still has no guarantees that the position is independent.”

    Another candidate for the top post is former Georgian President Mikheil Saakashvili, the reports say. The candidacy has been proposed by a member of a tender commission, Yury Butusov.

    The ex-Georgian leader, who is now on the run and has recently failed to receive a US working visa, has not yet taken a decision, saying that he is waiting for “a more specific proposal.”

    Saakashvili will have to take Ukraine’s citizenship and in line with an anti-corruption law to settle the issues over closing criminal cases against him in his home country, including on abuse of power.

    In October, Ukrainian President Petro Poroshenko signed a package of anti-corruption laws, including on creating the National Anti-Corruption Bureau in Ukraine. The agency will be charged with exposing, preventing and investigating corruption cases in the country.

    Poroshenko also suggested that a foreigner could lead the newly-created agency.

    Foreigners have been already appointed as ministers in the Ukrainian government. President Poroshenko earlier signed a law on granting Ukrainian citizenship to US national Natalya Yaresko, Lithuanian Aivaras Abromavichus and Georgian Alexander Kvitashvili, who head the country’s finance, health and economic development ministries, respectively.

    “Saakashvili will have to take Ukraine’s citizenship and in line with an anti-corruption law to settle the issues over closing criminal cases against him in his home country, including on abuse of power.”

    Ukraine’s government seems to really really want to hire Saakashvili. It’s rather odd.

    Posted by Pterrafractyl | January 11, 2015, 7:19 pm
  13. Mr. Semenchenko is at it again, passing fake photos of a fake invasion to prompt US spending on a real war.

    It’s like Ahmed Chalabi and Adolfo Calero all over again!

    http://www.nytimes.com/2015/02/14/world/europe/sifting-ukrainian-fact-from-ukrainian-fiction.html

    Posted by Allen Saul | February 16, 2015, 1:12 pm
  14. From Sen. Inhofe:

    “These photographs were given to me by Lt Col Semen Semenchenko, the commander of Donbas Volunteer Assault Battalion and newly elected member of the parliament of Ukraine, during our meeting on 13 Nov last year.”

    http://www.inhofe.senate.gov/newsroom/press-releases/inhofe-authors-bill-to-arm-ukraine-with-lethal-military-aid

    Posted by Allen Saul | February 16, 2015, 5:54 pm
  15. Ukraine recently completed negotiations for a $40 billion international financial assistance package. The IMF’s contribution is $17.5 billion and, like almost all things IMF-related, there are strings attached. Yes, there’s the standard insane austerity strings attached, but there’s another string: Of the $17.5 billion in financial assistance for Ukraine, $14 billion of it is assumed to come from Ukraine’s private bondholders. And, at this point, it’s not actually clear that those bondholders are going to agree a full collective $14 billion haircut:

    Financial Times
    New funding deal gives Kiev added incentive to enact reforms

    Anders Åslund
    Aid programme for Ukraine looks underfunded, writes Anders Åslund
    February 15, 2015 8:20 pm

    There has been little good economic news to come out of Ukraine over the past year. The war in the east of the country brings ever greater losses, undermining the stability of the country as a whole and fuelling tensions between Russia and the west. The economic fallout has been dramatic. Last year output fell by 7-7.5 per cent, of which 5 per cent was caused by the war. The national currency, the hryvnia, has fallen by two-thirds in a year. The country was, until very recently, on the verge of financial meltdown.

    The unveiling on Thursday of a new agreement between Ukraine and the International Monetary Fund came as a relief.. Christine Lagarde, IMF managing director, announced that Ukraine would receive a four-year credit programme of $40bn, of which the fund would provide $17.5bn. The EU has committed only $2.5bn and the US $2bn. The World Bank and other international financial institutions can add a couple of billions of dollars. The rest of the funding is tenuous. The Ukrainian government hopes to get relief from its bondholders amounting to $14bn.

    Overall, the programme appears underfunded. The EU and the US will need to come up with more funding in due course. That said, we should not overlook the importance of the fact that an agreement was reached so Ukraine can receive some financial assistance. On February 1, Ukraine’s international reserves had fallen to a paltry $6.4bn, only one month of imports, causing the exchange rate to plummet further. The aim is now to raise reserves to $17bn, corresponding to three months of imports, by the end of the year.

    Ms Lagarde praised the programme agreed with the Ukrainian government as “ambitious” and “tough”. But she added that “it is not without risk”. The obvious big risk is the war. Coincidentally, just before Ms Lagarde made her announcement, the warring parties signed a new ceasefire agreement in Minsk, the Belarusian capital. Whether that will halt the conflict remains uncertain. What is known is that neither side has any immediate plan to scale back their military capabilities. The Kiev government, for example, intends to increase defence spending from 1.6 per cent of gross domestic product last year to 5.2 per cent this year.

    Arseniy Yatseniuk, Ukraine’s prime minister, insists that the reform programme is aimed at re-establishing growth. The measures outlined are many and significant. The budget deficit is supposed to decline to 4 per cent of gross domestic product — compared with 11 per cent last year — but that is presumably excluding bank recapitalisation, which could boost the real budget deficit to 8 per cent of GDP.

    The most important reform will be the gradual elimination of the subsidies for gas, electricity and heating. These have fuelled corruption, and their elimination will stimulate energy savings and promote domestic energy production. The IMF claims that most of the price adjustments from the elimination of the subsidies will take place early on, which will help in cleaning up the corrupt gas market. Even so, Ukraine and the IMF only aim to eliminate all subsidies by April 2017. Sensibly, the government and the Fund have agreed on substantial social support for the poor to mitigate the effects of increased energy prices.

    Apart from reduced energy subsidies, the biggest budget savings are supposed to come from Ukraine’s very large pension expenditure. At last, generous “special pensions” to the former elite are meant to be abolished. The overall pension bill will be reduced through a freezing of pension payouts until December — this will hit the poor hard, as annual inflation is currently 25 per cent. It would be better to raise the very low retirement age of 55 for women and 60 for men.

    The structural reforms look impressive and many are under way. On Thursday, the Ukrainian parliament adopted a law on deregulation of businesses, abolishing all kinds of cumbersome red tape. Another measure now being pursued is the improvement of corporate governance at the large state-owned companies, including the state oil and gas company Naftogaz.

    Other legislation on the agenda includes anti-corruption and judiciary reforms. Several anti-corruption laws were adopted last October, but little has been implemented as yet. State administration reform is much discussed, and many government agencies have been slimmed down, but a modern administration needs to be introduced. Reforms to render education and healthcare more efficient are also proceeding.

    To receive the IMF funding, the Ukrainian parliament will need to act on all the Fund’s preconditions to disbursement. Fortunately, the government appears to have a sufficient majority to do what is required.

    Keep in mind that the above author works at the Peterson Institute, hence the cheery attitude towards slashing deficits via mandated “structural reforms” (like freezing pensions for the poor and eliminating electric, gas, and heating subsidies).

    So now that Ukraine is turning those “structural reforms” into law, the question is raised as to whether or not Ukraine can actually get those private bondholders to fork over $14 billion as planned. Can Ukraine do it? Presumably the IMF will also be pressuring bondholders but will that be enough to get a deal reasonably soon?

    Well, according to the article below that covers on some of the most immediate looming challenges facing Ukraine’s US-born finance minister, Natalie Jaresko, and her team of foreign advisers, the most immediate challenges involving a renegotiation of that $14 billion. Jaresko claims being a former American will give Ukraine the edge in the negotiations, telling reporters, “Coming from the private sector and coming from the Western side, I can understand both the demands and the perspectives of the creditors as well as the Ukrainian side and the Ukrainian perspective…Bringing those two together is a skill set that I bring to the table.” So will hiring an American banker as Ukraine’s new finance minister actually assist Ukraine in its international debt negotiations? We’re about to find out:

    Ukraine’s new US-born finance chief enduring baptism by fire
    Associated Press
    By JAMES ELLINGWORTH 15 hours ago

    KIEV, Ukraine (AP) — War-torn Ukraine is a long way from Wood Dale, Illinois.

    But Natalie Jaresko, the country’s new finance minister who was born and raised in the Chicago suburbs, says she feels just as much at home here as she takes on a daunting task: overhauling a Soviet-era economy at a time when public finances are being drained by war.

    It’s been a baptism of fire for the 49-year-old former banker, who only got her Ukrainian citizenship the day she was appointed minister in December but has lived in the country for over two decades. She hopes the fact she is not part of the entrenched political elite will help as she attempts a root-and-branch reform of the economy.

    “I don’t see myself as a politician,” she told The Associated Press at her office in the Ukrainian capital, Kiev. “I’m a technocrat minister and I don’t have a political career ahead of me. I’m not running for office.”

    The job is as big as it is urgent.

    She estimates that the war has consumed about 20 percent of the economy, taking out a region rich in industry and commodities. Corruption is endemic throughout Ukraine. Red tape and a lack of financing are hindering business. Foreign investors are wary of the geopolitical instability. Inflation is forecast to hit a staggering 26 percent this year as the hryvnia currency has fallen 70 percent since last year, when former President Viktor Yanukovych was ousted by popular protests.

    Amid all this, the government is living a hand-to-mouth existence — it must pay Russia up front for gas supplies at a time when it is quickly running out of money. Ukraine and Russia will hold more talks on the gas issue Monday.

    Jaresko’s first success in the job came this month when she clinched a promise for a $40 billion four-year lifeline from the International Monetary Fund and Western nations.

    However, that eye-catching headline figure includes up to $15 billion of expected debt renegotiation with private investors by the government in Kiev, a sum which is by no means guaranteed. High-stakes debt renegotiations are likely to start by the second week of March and conclude by June, according to Jaresko, who says her U.S. background gives Ukraine an edge.

    “Coming from the private sector and coming from the Western side, I can understand both the demands and the perspectives of the creditors as well as . the Ukrainian side and the Ukrainian perspective,” she said. “Bringing those two together is a skill set that I bring to the table.”

    After studying at DePaul University in Chicago, during which time she lived in the Ukrainian Village neighborhood, Jaresko’s moved in the mid-1990s to Kiev as head of the economic section at the U.S. embassy. She then ran the Western NIS Enterprise Fund (WNISEF), which invests USAID funds into small and medium-sized businesses in Ukraine and Moldova.

    She and her then-husband later founded Horizon Capital, an investment firm that now manages WNISEF. Jaresko says she no longer has any ownership or control at Horizon Capital.

    Jaresko’s appointment gifted Russia’s state media a line of attack — an American banker representing Washington’s interests rather than the Ukrainian people — but Jaresko says she does not feel any need to prove her Ukrainian credentials.

    Ukrainian law obliges Jaresko to renounce her American passport within two years, although she declined to say whether she had yet done so.

    Jaresko is one of three foreign-born cabinet ministers as President Petro Poroshenko looks to bring in outside expertise. Mirroring the policy that brought her into government, Jaresko has assembled a multinational team partnering U.S.-educated Ukrainians with advisers seconded from the U.S., German and Polish governments, as well as Ivan Miklos, who reformed the tax system as Slovakia’s finance minister from 2010-12.

    “I think it’s important for us not to reinvent the wheel,” she said, adding that her foreign advisers should “help us to skip over many of the steps, or many of the mistakes, that may have been made by others in the past.”

    Jaresko is clearly confident in her negotiating skills. That’s good news for Ukraine. But there’s another big factor in these negotiations that might makes things really easy for Jaresko or really messy: A single fund owns over half of Ukraine’s privately held debt and making big bets on risk sovereign debt is one of its specialty:

    Bloomberg News
    Hasenstab Sees $3 Billion Vanish in Ukraine as Big Bet Sours

    by Boris Korby and Charles Stein

    January 28, 2015,10:47 PM CST

    Michael Hasenstab is all about the big trade.

    It’s a tack that has made him one of the world’s most successful, and famous, bond fund managers during his 17-year stint at Franklin Templeton. But if his contrarian bets on Irish and Hungarian debt highlight the rewards to such a strategy, his gamble on Ukraine underscores the risks.

    After loading up on more than $7 billion of the country’s bonds, Hasenstab has seen the value of the securities collapse as the conflict with pro-Russian rebels deepened an economic recession, depleted foreign reserves and prompted government calls for a debt restructuring. His investment, equal to almost half of all Ukraine’s foreign bonds, is now valued at just $4 billion, based on fund holdings from the end of the third and fourth quarters.

    As the losses mount, returns on Hasenstab’s two biggest funds – standouts in the industry that have outperformed 99 percent of peers over the past decade – have slipped, helping fuel client redemptions. Investors last year pulled a record $14 billion from the US and European versions of the Templeton Global Bond Fund and Templeton Global Total Return Fund, which have a combined $150 billion in assets, according to estimates compiled by Bloomberg.

    “His success speaks for itself, but he does take bets,” said Alex Petrovic, a financial planner in Kansas City, Missouri, who invests in Franklin Templeton funds for clients. “And so far this Ukraine bet hasn’t played out.”

    Creditor Talks

    Hasenstab and Stacey Coleman, a Franklin Templeton spokeswoman in San Mateo, California, declined to comment on the firm’s Ukraine strategy.

    “Franklin Templeton’s Global Bond group often takes a contrarian approach to investing,” Coleman said in an e-mailed response to questions. “It has the research capabilities, size and long-term perspective to buy and hold investments that are out of favour.”

    The Ukraine trade started to unravel in the second half of last year as the government’s finances deteriorated. The maths at this point isn’t encouraging: Ukraine has to make $14 billion of foreign bond payments over the next three years, an amount that’s almost double the $7.5 billion of international reserves it has left, according to data compiled by Bloomberg.

    And the economy is in tatters. Government officials are predicting a 4.3 per cent contraction this year following a 7.5 percent drop last year. The military conflict with separatists, which has claimed more than 5,000 lives since it began in April, has snarled business in much of the east of the country.

    Looming restructuring

    Prices on Ukraine’s benchmark bonds have fallen to 55 cents on the dollar, from as high as 105 cents last year, indicating that investors are expecting a debt restructuring that will saddle them with losses.

    Finance Minister Natalie Jaresko emerged from a meeting last week with International Monetary Fund officials in Davos, Switzerland, saying she plans to negotiate more favourable borrowing terms with bondholders. That same day, Christine Lagarde, the IMF managing director, said the lender was also willing to support an extended fund facility that would replace a $17 billion loan provided to Ukraine in the aftermath of the toppling of President Viktor Yanukovych last year.

    Shortly after Yanukovych — an ally of Russian President Vladimir Putin — left office in February following months of protests, Hasenstab traveled to Kiev to survey the scene on the ground. While there, he filmed a video for Franklin Templeton spelling out why he remained bullish on the country.

    ‘Crisis Management’

    “It’s a country that despite some of the short-term fiscal issues has very little indebtedness,” Hasenstab, 41, said in the April 5 thpiece. “So from a bondholder investor standpoint, it made a lot of sense. Then the crisis came, and what encouraged us was the response of crisis management.”

    Two months later, Hasenstab was quoted in a Morningstar interview as saying that Franklin Templeton had made “a good amount of money” as Ukrainian bonds rallied. The selloff would start a few weeks later.

    Hasenstab, who was named the top global bond fund manager in 2010 by Bloomberg Markets magazine, helped cement his reputation as a bargain-hunting investor when he snapped up Irish bonds amid the European debt crisis. The bet paid off handsomely as the bailout took hold. Irish bonds have returned 68 per cent since the end of 2011.

    Big bets

    He’s also made big investments in debt from South Korea, Hungary and Poland, Bloomberg data show.

    Hungary’s dollar bonds have returned an average 54 per cent over the past three years, helping Hasenstab’s Global Bond Fund return an average 10.1 per cent annually over the past decade. The fund’s return, though, slipped to 1.99 per cent last year, a figure that put Hasenstab behind 53 per cent of his peers. The Ukrainian bonds were responsible for more of that slump in returns than those from any other country, according to data compiled by Bloomberg.

    Piecemeal approach

    Hasenstab now finds himself in the position of having to decide how much, if anything, he’s willing to give up in restructuring negotiations. The government has hired Lazard to advise it in talks with bondholders, Reuters reported Wednesday, citing people familiar with the situation.

    Restructuring talks will likely have the support of the IMF, according to Lutz Roehmeyer, a fund manager who oversees $1.1 billion in emerging-market debt at Landesbank Berlin Investment. If IMF officials are showing a willingness to extend the terms of their financing to Ukraine, they will be looking for bondholders to make concessions too, he said. “Nobody wants to fund Ukraine alone,” Roehmeyer, whose holdings include Ukrainian debt, said.

    “Not the US, not the EU and not the IMF. It’s a piecemeal approach, and of course creditors will have to contribute. If the IMF prolongs its loans, it will demand the same from bondholders.”

    So half of Ukraine’s $14 billion in privately owned debt is held by one Franklin Templeton fund managed by a fellow, Michael Hasenstab, known for making contrarian bets (like buying Ireland’s distressed debt in 2010. At the same time, everyone is apparently expecting that Ukraine’s private bondholder are going to have to make some sort of concession, especially if the IMF agrees to a writedown of its Ukrainian debt.

    And note Hasenstab’s point about the total size of Ukraine’s debt:

    “It’s a country that despite some of the short-term fiscal issues has very little indebtedness,” Hasenstab, 41, said in the April 5th piece. “So from a bondholder investor standpoint, it made a lot of sense. Then the crisis came, and what encouraged us was the response of crisis management.”

    That’s something to keep in should Ukraine creditors decide to turn the screws on the nation even more: Ukraine didn’t actually have that much debt before the country melted down. You can’t claim it was going on a giant spending spree all these years.

    Still, when your industrial heartland rebels and the economy collapses, what was a relatively low level of debt can become untenable. So it’s looking like Ukraine’s fiscal fate, at least in the short to medium term is going to be heavily determined by how big a loss Natalie Jaresko can convince Michael Hasenstab to accept in the upcoming negotiations. So let’s hope her self-proclaimed ability to “understand both the demands and the perspectives of the creditors as well as the Ukrainian side and the Ukrainian perspective” somehow allows her to convince Hasentab to take some massive write-down since the alternative is going to inevitably be more austerity for the masses.

    Also keep in mind that Hasenstab didn’t emerge as Ukraine’s dominant private bond holder until the fall of 2013, when he bet that Ukraine would sign the EU free-trade agreement and the debt could be renegotiated under more favorable terms. Since that obviously didn’t happen and the nation succumbed to war and mass poverty, some pretty substantial haircuts are probably in order:

    Financial Times
    Franklin Templeton takes $5bn Ukraine debt gamble

    By Robin Wigglesworth in London and Roman Olearchyk in Kiev
    November 10, 2013 5:12 pm

    Franklin Templeton, a big US money manager known for astute but aggressive bets in the sovereign debt market, has emerged as the dominant bankroller of Ukraine despite the country teetering on the edge of an economic crisis.

    The investment group has snapped up Ukrainian international debt with a face value of almost $5bn at the end of August, nearly a fifth of the country’s outstanding international government bonds, according to data gleaned from Bloomberg.

    The investments have been directed by Michael Hasenstab, who was also the architect of Franklin Templeton’s massive purchase of Irish debt, which helped calm the country’s financial markets in the wake of the eurozone crisis.

    Mr Hasenstab’s Irish bet has contributed significantly to Dublin’s rehabilitation in bond markets – and has so far paid off handsomely for Franklin Templeton – but the Ukrainian move is potentially even riskier.

    The country is struggling with a weak economy, a large budget deficit and a current account deficit that is rapidly eroding the central bank’s currency reserves to mere months of import cover.

    The cost of insuring against a Ukrainian default is among the highest in the world, and most analysts and investors expect it is only a matter of time before Ukraine either succumbs to an International Monetary Fund programme, a Russian rescue package or crashes altogether.

    “They face a currency and funding crunch, it’s as simple as that,” said Paolo Batori, a senior strategist at Morgan Stanley.

    “The trigger point could come tomorrow, it could come next week, or next month. But Ukraine is simply not equipped to deal with another wave of outflows. It needs the help of a third party, whether that is Russia or the IMF,” he said.

    Kiev is facing mounting pressure from Russia as it inches towards forging closer relations with the EU. The possible signing of a free-trade agreement with the EU later this month could help pave the way for an IMF deal and in the longer run provide a fillip to the economy.

    But in the short term, Ukraine’s future looks uncertain. Underscoring the country’s rapid deterioration, Fitch Ratings, one of the major agencies that assess the creditworthiness of countries and companies, cut Ukraine’s grade to B minus on Friday, deep in “junk” territory, and warned that the outlook was still negative.

    “If Ukraine fails to sign the [EU agreement] I think they face a real risk of a full-blown economic and financial crisis,” said Timothy Ash of Standard Bank. “The economic options are narrowing fast.”

    Franklin Templeton has held most of its Ukrainian bonds for some time, but Mr Hasenstab increased its exposure even further this summer, buying $171m of a big bond due in 2023, according to filings.

    Analysts said this helped contain the rout in Ukrainian bonds this summer, after the US Federal Reserve said it planned to scale back its monetary stimulus programme, which triggered a wave of declines across emerging markets.

    Local Ukrainian press have reported that Serhiy Arbuzov, Ukraine’s first deputy prime minister, and Yuriy Kolobov, the finance minister, earlier this year made an unofficial visit to Franklin Templeton’s San Mateo headquarters to reassure the country’s biggest creditor.

    “If Ukraine fails to sign the [EU agreement] I think they face a real risk of a full-blown economic and financial crisis,” said Timothy Ash of Standard Bank. “The economic options are narrowing fast.”

    That was the sentiment in November 2013, a reminder of the stakes involved with Ukraine’s decision to join or reject the EU free trade agreement: even of the Maidan revolution hadn’t taken place and war never broke out, if Ukraine was still going to face a major crisis if it didn’t sign the free-trade agreement or work out a new arrangement with Russia. What path Ukraine would have taken had war not broke out is unclear but the status quo was pretty much settled: Ukraine was going bankrupt one way or another.

    And not only was everyone expecting a debt restructuring for Ukraine back in 2013, but as the article below points out, the US State Department and IMF appeared to actively want some sort of debt crisis (or at least didn’t appear to approve of Hasenblat extending credit to the Yanukovich government).

    So the upcoming debt renegotiations were not only pretty much inevitable but, in the minds of the IMF and Western governments, long overdue. As the article puts it, “The record flood of money since 2009 into nontraditional bond funds from investors hurt by ultralow interest rates has fueled worries among government officials and analysts that it could get harder to prod some countries toward more democratic policies and stricter financial discipline. Governments that don’t want to bother with the IMF’s loan requirements can sell bonds instead”:

    The Wall Street Journal
    Michael Hasenstab Bets Big in Controversial Places
    Mutual-Fund Manager’s Bond Purchases Sometimes Align Him With Regimes Criticized by U.S., Europe

    By Matt Wirz
    Updated Nov. 16, 2014 10:50 p.m. ET
    8 COMMENTS

    Ukraine’s deputy prime minister was in a bind when he came to the San Mateo, Calif., office of mutual-fund manager Michael Hasenstab in January 2013. The country’s cash reserves were shrinking, but the International Monetary Fund refused to unfreeze loans to Ukraine unless it abandoned currency and energy-price controls.

    A few weeks after the meeting, Mr. Hasenstab’s mutual funds bought nearly $400 million of new bonds issued by Ukraine. It wasn’t a surprise. He had snapped up $3 billion of bonds shortly after Ukraine was cut off by the IMF in 2011—and then kept on buying. By the end of 2012, he held $8 billion of the country’s government debt, or 16% of the total.

    The bond purchases miffed some officials at the State Department, who believed the mutual-fund manager was helping Ukraine’s pro-Russian government, led by President Viktor Yanukovych, according to a person familiar with the situation. Mr. Yanukovych was ousted in February.

    “Our role is not regime change,” Mr. Hasenstab responds. “It is investing in the long term.”

    He tries to pick bonds that will pay the highest returns without defaulting—and usually sticks with his investments for years. As a result, Mr. Hasenstab has emerged as a major lender to countries around the world, with easy access to government officials, who often seek his investors’ money and sometimes his opinions.

    A Franklin spokeswoman says Serhiy Arbuzov, Ukraine’s deputy prime minister at the time of the meeting, was part of a delegation of officials who visited the mutual-fund manager and his colleagues to update them on the Ukrainian economy.

    Mr. Arbuzov couldn’t be reached. His whereabouts have been unknown since March. As of Sept. 30, funds run by Mr. Hasenstab owned $8.8 billion of Ukrainian bonds, according to capital-markets data provider Ipreo.

    His funds also own roughly $14 billion of Hungary’s government-issued bonds, equivalent to 14% of the country’s overall debt, according to Standard & Poor’s Ratings Services. He bought most of those bonds after Viktor Orban took power as prime minister in 2010.

    Analysts say the bond purchases gave Mr. Orban more confidence to reassert Hungary’s sovereignty over what his government sees as interference by the IMF and European Union in policy-making.

    Mr. Orban’s government has moved to restrict judiciary powers and push through a new constitution that critics say limits basic rights. He backed down last month from a controversial plan to tax Internet traffic after protests, but Hungary forced the IMF to close its Budapest office last year.

    “They publicly kicked the fund out of the country,” says one former official at the IMF, which helped rescue Hungary during the financial crisis with a massive loan. Messrs. Hasenstab and Mr. Orban have met several times.

    An IMF spokeswoman declined to comment on Mr. Hasenstab, as did a spokeswoman for the State Department.

    Mr. Hasentab is the biggest single investor in Hungary, Ireland and Uruguay. As of Sept. 30, he also owned 10% of the outstanding government debt in Malaysia and 5.6% in South Korea.

    In Uruguay, Mr. Hasenstab owned 95% of the $277 million in peso-denominated government bonds that were due in January.

    Because Mr. Hasenstab could have driven down the peso’s value if he exchanged repayment on his stake for dollars in the open market, government officials changed the repayment terms to U.S. dollars. A spokesman for Uruguay’s Ministry of Economy and Finance declined to comment.

    From January to September, investors pulled out a net $464 million from the mutual fund, the only decline during the first nine months of any year since Mr. Hasenstab started running Templeton Global Bond Fund in 2001, according to data from Thomson Reuters.

    Mr. Hasenstab says he bought more bonds when prices fell. “We are comfortable being out of consensus and being contrarian. You have to do it carefully.”

    Because of the mutual-fund manager’s long-term performance, investors seem to have no qualms about putting some of their money in countries with controversial regimes through Mr. Hasenstab. Supporters note that mutual funds, hedge funds and even pension funds have long chased higher returns in places like apartheid-era South Africa, Iraq, Myanmar and Venezuela.

    “So far, his instincts have been right,” says Kirk Taylor, a financial adviser who manages about $215 million for individual investors in the Washington, D.C., area. Templeton Global Bond Fund is the only international bond fund that Mr. Taylor recommends to his clients.

    The record flood of money since 2009 into nontraditional bond funds from investors hurt by ultralow interest rates has fueled worries among government officials and analysts that it could get harder to prod some countries toward more democratic policies and stricter financial discipline. Governments that don’t want to bother with the IMF’s loan requirements can sell bonds instead..

    Mr. Hasenstab doesn’t invest anywhere that is legally off-limits to U.S. investors, such as Iran. Frustrated State Department officials didn’t confront him about buying Ukrainian bonds because there was nothing they could legally do about the move, according to the person familiar with the matter.

    “Whether you’re talking about China or Ukraine, these countries are not monolithic,” Mr. Hasenstab says. “Peeling back the layers to see what motivates people, that appeals to me.”

    Bond-fund managers who compete against Mr. Hasenstab are envious of his track record but say some of his investments are so big that there could be a disastrous chain reaction in emerging markets if investor redemptions force him to sell lots of bonds at once.

    “If they have to liquidate their positions, there will be blood,” says Viktor Zsiday, a hedge-fund manager in Budapest who holds Hungarian bonds. Mr. Hasenstab says he can withstand squeezes because his funds set aside as much as 15% of their assets in cash.

    Mr. Hasenstab told a Franklin analyst who followed Argentina after its debt default in 2001 to determine which European countries were most likely to default. Mr. Hasenstab stayed away from Greece but plowed about 20% of his mutual fund’s assets into Ireland and Poland, he says.

    Bond prices in both countries sank as other investors fled, but Mr. Hasenstab felt confident. “Walking the streets of Ireland, even though things were tough, at the same time Occupy Wall Street was happening in the U.S. there was a social cohesion in Ireland,” he says.

    He made a huge profit as Ireland and Poland muddled through the crisis—and gained a reputation among government leaders as a white-knight investor. Mateusz Szczurek, Poland’s finance minister, says Mr. Hasenstab “provided stability, and time has shown it was the right strategy.”

    Mr. Hasenstab has been bullish for about a decade on Hungary and saw a buying opportunity when bond prices fell after Mr. Orban was elected prime minister in 2010 when the nationalist Fidesz party took power. Government officials were desperate for new investors and lenders.

    Some critics claim that Mr. Hasenstab and other buyers of Ukrainian bonds while Mr. Yanukovych was in power helped prop up a corrupt, bankrupt government. “Bondholders acted irresponsibly by lending to the previous Yanukovych administration,” wrote Timothy Ash, head of research for emerging markets outside Africa at Standard Bank PLC, in a research report.

    Ukrainian bonds are down about 20% this year to around 83 cents on the dollar. Bond prices hit near-record lows this month on fears that bondholders will be asked to forgive some debt if Ukraine needs additional IMF loans.

    The country got a $17 billion bailout from the IMF in April. Some of the bailout was used to repay bondholders, including Mr. Hasenstab. Fighting between Ukrainian forces and pro-Russia separatists in the east of the country has crippled the economy and killed more than 4,000 people.

    Ukraine’s shaky future was underscored by Russian President Vladimir Putin ’s early departure Sunday from a meeting of the Group of 20 major economies amid fierce criticism of Moscow over the Ukraine crisis.

    Mr. Hasenstab remains optimistic. “Ukraine’s geopolitical importance to the East and West assists their ability to access global liquidity,” he says. “I think history will look back at this crisis and see some good come from it.”

    When Mr. Yanukovych fled, Mr. Hasenstab reached out to opposition leaders. “We have had conversations with them, and they are ready to support us,” says Oleksandr Shlapak, Ukraine’s finance minister.

    In a YouTube video posted by Franklin in April, Mr. Hasenstab strolls through Kiev’s central square and praises the new government. Wearing a black coat, the mutual-fund manager shakes hands with a military officer.

    “Adversity doesn’t define a country,” he says. “It’s how a people respond…and I think the crisis response, the coming together of the people here to make steps in the right direction is very encouraging, very heroic in many senses, and we’re excited to be part of this transformation.”

    Note that the following quote admonishing investors like Hasenstab for lending to the Yanukovich government…

    Some critics claim that Mr. Hasenstab and other buyers of Ukrainian bonds while Mr. Yanukovych was in power helped prop up a corrupt, bankrupt government. “Bondholders acted irresponsibly by lending to the previous Yanukovych administration,” wrote Timothy Ash, head of research for emerging markets outside Africa at Standard Bank PLC, in a research report.

    is expressed by the same Timothy Ash that was quoted above as saying “If Ukraine fails to sign the [EU agreement] I think they face a real risk of a full-blown economic and financial crisis…The economic options are narrowing fast,” back in November 2013. It’s another reminder that Ukraine’s fiscal crisis was not only expected by all parties involved but actively desired by a number of them in order to force the nation into making a fateful choice over whether to economically integrate with the EU to the West or Russia to the East. And, lo and behold, the country broke in half and now the long-awaited private debt renogotiations are about to get underway.

    It all raises a number of questions over the looming privately held debt renegotiations, but perhaps one of the biggest immediate questions is whether or not Ukraine gets to trim back its IMF-mandated austerity policies of Natalie Jaresko is unsuccessful in getting the full $14 billion in haircuts OR would it be expected to increase the austerity to cover the gap. The international community is clearly intent on imposing massive austerity on Ukraine so it’ll probably just say “stick with the austerity”, but would the international community really be that cruel? Probably, but we’ll just have to wait and see!

    Posted by Pterrafractyl | March 2, 2015, 7:25 pm
  16. USA Today recently interviewed members of the Avoz Brigade about its reputation as a Nazi-infested outfit. What did they discover? Well, one fellow, a drill sergeant, admitted he is a Nazi and estimated that no more than half his comrades are fellow Nazis (and then vowed to march on Kiev and overthrow the government there once the war is over). The brigade spokesman put the estimate at somewhere between 10 and 20%, while a trainer interviewed claimed to have not witnessed a single fascist. So in a single article we have estimates between 0-50% of the brigade members are basically Nazis. While the ‘no Nazis’ estimate is clearly way too low, it’s still kind of amazing the spokesman, who is presumably lowballing the figures, was even willing to give a 10-20% figure. It’s the kind of admission that makes the 50% estimate seem a lot more likely:

    USA Today
    Volunteer Ukrainian unit includes Nazis
    Oren Dorell
    3:32 p.m. EDT March 10, 2015

    MARIUPOL, Ukraine — A volunteer brigade with self-proclaimed Nazis fighting alongside government troops against Russian-backed separatists is proving to be a mixed blessing to its cause.

    Though the 900-member Azov Brigade adds needed manpower to repulse the rebels, members who say they are Nazis are sparking controversy, and complaints of abuses against civilians have turned some residents against them.

    A drill sergeant who would identify himself only as Alex wore a patch depicting Thor’s Hammer, an ancient Norse symbol appropriated by neo-Nazis, according to the Anti-Defamation League.

    In an interview with USA TODAY, he admitted he is a Nazi and said with a laugh that no more than half his comrades are fellow Nazis. He said he supports strong leadership for Ukraine, like Germany during World War II, but opposes the Nazis’ genocide against Jews. Minorities should be tolerated as long as they are peaceful and don’t demand special privileges, he said, and the property of wealthy oligarchs should be taken away and nationalized.

    He vowed that when the war ends, his comrades will march on the capital, Kiev, to oust a government they consider corrupt.

    Russian media exploit such statements to describe the brigade in this port city in eastern Ukraine as a bunch of thugs who menace the population yet are embraced by Ukraine’s national government.

    Andriy Diachenko, a spokesman for the Azov Brigade, said only 10% to 20% of the group’s members are Nazis. “I know Alex is a Nazi, but it’s his personal ideology. It has nothing to do with the official ideology of the Azov,” Diachenko said. “He’s a good drill sergeant and a good instructor for tactics and weapons skills.”

    The brigade’s deputy commander, Oleg Odnorozhenko, complained that Alex does not speak for the group. “If he has his own sympathies, it’s his own matter,” Odnorozhenko said in a former high school serving as a base. “But he has no right to make statements in a way they can be construed as the position of the regiment. He will be dealt with severely for his lack of discipline.”

    Col. Oleksiy Nozdrachov, a member of the Ukrainian Armed Services’ General Staff in Kiev, defended the brigade’s members as patriots. “They are volunteers who decided to sacrifice their lives to the country,” Nozdrachov said. “They are tough and fierce in battle who stand and fight and won’t give up soil.”

    Deputy commander Odnorozhenko said the brigade preaches Ukrainian patriotism and independence, strong leadership and accountability. “Ideas like going to Kiev to change the government in an illegal way should be nipped in the bud,” he said.

    Alex Borisov, 44, a trainer for Ukraine’s military, said he spent two weeks teaching shooting and tactics to a group of brigade members who speak mostly Russian.

    “I didn’t see any fascists or anti-Semites,” Borisov said. “And I tell you this as a Jewish guy.”

    “He vowed that when the war ends, his comrades will march on the capital, Kiev, to oust a government they consider corrupt.”

    Posted by Pterrafractyl | March 13, 2015, 4:58 pm
  17. If you think walking a tightrope is kind of crazy, check out this madness:

    The Wall Street Journal
    Ukraine’s High-Wire Act: One Misstep Could Plunge It Into the Abyss
    By

    Ian Talley

    11:28 am ET
    Mar 13, 2015

    Ukraine’s bailout is a high-wire balancing act: One misstep and the economy could fall into the abyss.

    Just hours after the International Monetary Fund approved an expanded, $17.5 billion emergency-financing package for the country, outside economists were once again questioning the reality of the fund’s assumptions.

    There are a myriad of what the IMF calls “exceptionally high risks” to the program.

    But three sets of assumptions stand out: about the conflict with Russian-backed separatists, economic growth and a planned debt restructuring.

    “The odds of this program surviving intact for four years, or even through the end of 2015, are not much higher than for the original 2014 program,” said Robert Kahn, a senior fellow at the Council on Foreign Relations and former IMF economist in a blog post Thursday.

    Since the start, the Ukraine bailout has drawn comparisons to the Greek program. Five years later–after countless revisions, expanded financing and the largest debt restructuring in history–Greece is still fighting with creditors and struggling to return to health.

    As in the Greek program, the IMF was at first adamant that no debt relief would be needed. Then, after repeated downward revisions of the growth outlook, the IMF acknowledged what analysts, economists and reporters had predicted all along: A debt restructuring was vital.

    In Ukraine’s case, one of the biggest risks is that the bailout is based on a fragile cease-fire holding between Kiev and the militants. A re-escalation would scupper the ability of the government to meet its obligations to the fund. Underscoring the frailty of the program, U.S. officials said just hours before the fund approved the bailout that separatists had already violated the accord.

    “The greatest risk is the Russian military aggression in eastern Ukraine,” said Anders Åslund, a senior fellow at the Peterson Institute for International Economics and former adviser to Ukraine’s government. “Nobody outside the Kremlin knows if, when, or where Russian troops will intensify their attacks again.”

    Analysts said that the fund’s approval of the program despite the “exceptional risks” shows the larger international aid deal is a political decision by the West to shore up a strategic Eastern European country against Russian aggression. The Kremlin ordered an invasion of Crimea and backed separatist fighters in the east after Moscow’s longtime ally in Kiev was ousted last year and a fledgling pro-West government committed to re-engaging with Europe on a trade pact.

    Economists also question the growth outlook, which is based on a “nonintensification” of the program. The IMF has had to revise down its growth forecast for the country again. It now assumes a 5.5% contraction this year and a rebound to growth next year at 2%.

    “Private forecasters predict a deeper recession, as much as a 10 percent decline this year and a further fall next year,” Mr. Kahn said.

    One reason why the IMF’s forecasts may be rosier than many private expectations is that the fund says there’s “spotty” data from the regions of conflict. That means most of the IMF’s growth forecasts are based largely on nonconflict areas. The fund’s program also doesn’t include the annexed region of Crimea.

    IMF staff, whose reputations are on the front lines for these bailouts, include careful acknowledgements of such risks in the 173 pages of program documentation.

    “The uncertainty around these projections remains exceptionally high,” fund officials wrote.

    The third major risk is the $15 billion in debt relief that the IMF is assuming will come from creditors—even though Kiev hasn’t yet started negotiations.

    “Creditors may balk at the terms being offered in the debt operation and holdouts may try to free ride,” the IMF said. “The negotiations may be protracted, particularly as some creditors have large positions in specific bond issues.”

    The process could turn “disorderly,” a fund euphemism for default, fund officials wrote.

    In a worst-case scenario–such as if fighting intensifies, the debt restructuring negotiations fail and the contraction is much longer than expected–the IMF said the ratio of debt to GDP could more than double by 2017. That would push the economy into the abyss.

    “Ukraine has a new chance to reform and save itself, but the situation remains precarious,” Mr. Åslund said.

    “The third major risk is the $15 billion in debt relief that the IMF is assuming will come from creditors—even though Kiev hasn’t yet started negotiations.” Yep!

    And while you can’t fault the IMF for recognizing the various “exceptionally high risks” associated with any Ukrainian “bailout” (it’s not really a bailout when you factor in the austerity and privatization demands, but whatever), notice how the possibility that the overall structure of the bailout – forcing a right-wing supply-side shock doctrine that has basically never worked in any country – might be a fatally flawed approach is never seen as even a moderate risk. It’s part of a rather disturbing contemporary theme.

    It’s also worth noting that the “worst-case scenario” described above that could double Ukraine’s debt by 2017 certainly sounds horrible, but also kind of likely:


    Economists also question the growth outlook, which is based on a “nonintensification” of the program. The IMF has had to revise down its growth forecast for the country again. It now assumes a 5.5% contraction this year and a rebound to growth next year at 2%.

    “Private forecasters predict a deeper recession, as much as a 10 percent decline this year and a further fall next year,” Mr. Kahn said.

    One reason why the IMF’s forecasts may be rosier than many private expectations is that the fund says there’s “spotty” data from the regions of conflict. That means most of the IMF’s growth forecasts are based largely on nonconflict areas. The fund’s program also doesn’t include the annexed region of Crimea.


    In a worst-case scenario–such as if fighting intensifies, the debt restructuring negotiations fail and the contraction is much longer than expected–the IMF said the ratio of debt to GDP could more than double by 2017. That would push the economy into the abyss.

    So between fighting intensifying, debt restructuring negotiations failing, or a longer economic contraction than expected, maybe the debt restructuring negotiations will take place successfully, but does anyone seriously expect the conflict to subside and the economy to meet the IMF’s rosy predictions that already vastly exceed private estimates? At least anyone not working for the IMF?

    So what’s the end game here? Oh, that’s right, endless crisis and endless austerity. And, of course, plenty more “bailouts”:

    The Wall Street Journal
    Ukraine Finance Minister Seeks More Bailout Financing
    Natalie Jaresko says security, political risks could push up debt-restructuring needs

    By Ian Talley
    March 16, 2015 11:12 p.m. ET

    WASHINGTON—Ukraine needs more bailout financing than currently promised to help jump-start the embattled nation’s economy, Finance Minister Natalie Jaresko said Monday, just days after the International Monetary Fund approved an expanded rescue package.

    “The package that we have is going to stabilize the financial banking system, but it’s not enough to seriously restart growth and promote growth,” Ms. Jaresko said in an interview after meetings with U.S. Treasury Secretary Jacob Lew. “I’m looking for more support.”

    The IMF last week approved a $17.5 billion emergency loan as part of a larger $40 billion international financial package designed to keep the country afloat as Kiev’s pro-West government overhauls its creaking economy and contends with Russian-backed separatists in the east.

    In meetings with senior U.S. Treasury, State Department and White House officials and lawmakers, Ms. Jaresko this week is making the case that backing Ukraine will pay geopolitical dividends.

    “No one is paying more to protect the world from a nuclear power that is an aggressor” than Ukraine, the finance minister said, referring to Russia. “If, for whatever reason, one of our partners is not willing to come up with, or not able to come up with defensive military support, then provide us with financial support.”

    The White House has rebuffed requests by Ukraine and some U.S. lawmakers to provide Kiev with lethal support. But Washington has been instrumental in pushing through the IMF bailout and whipping up around $7.5 billion in aid from other international lenders.

    Still, the U.S., the IMF and other lenders are wary of a number of what fund officials call “exceptional risks” to the bailout. Previous governments have twice before abandoned IMF bailouts. The violent conflict in the east has cost thousands of lives, displaced large portions of the Ukrainian population, drained government coffers, and helped push the economy into a deep, two-year contraction.

    The overhaul required under the IMF bailout requires painful and controversial budget belt-tightening, tackling deeply vested interests and a restructuring a bureaucracy known for corruption. It relies on a cease-fire with militants holding, economic forecasts that many economists say are too optimistic, and $15 billion in debt relief from creditors.

    For many analysts, the fact the IMF is moving ahead with the bailout in the face of those risks shows the international aid is a political decision by the West to shore up a strategic Eastern European country against Russian aggression.

    U.S. officials have praised the efforts of the new government while showing caution. “Secretary Lew underscored the importance of continuing to implement urgently needed reforms,” the Treasury Department said in a readout from the meeting with the finance minister.

    But aside from promising to guarantee $2 billion of new Ukraine debt and working with the World Bank, Europe and other international lenders to provide support, U.S. officials haven’t indicated they are prepared to cough up any more cash.

    This is a key point:


    For many analysts, the fact the IMF is moving ahead with the bailout in the face of those risks shows the international aid is a political decision by the West to shore up a strategic Eastern European country against Russian aggression.

    That sure seems like a good assumption that point: the bailout must be a political decision because the underlying austerity-driven economics makes no economic sense. In other words, the reason the IMF is proceeding ahead with a “bailout” that everyone expects to fail is because having Ukraine economically fail and endure years of Greece-style austerity and right-wing socioeconomic “structural reforms” is an acceptable outcome. And under this kind of plan, where the default solution to national crises is to make the rich richer and poor poorer, not only is failure acceptable, failure is success. Failed societies become feudal societies, which is great if you’re a wannabe aristocrat (or a real one). It’s something to keep in mind.

    Posted by Pterrafractyl | March 17, 2015, 2:42 pm
  18. The negotiations over Ukraine’s debt with its private bondholders hit a stumbling block: The bondholders are will to extend the bonds’ maturities, but not write off any of the the principal. And while this would save Ukraine some money (over $15 billion over four years), it won’t save it nearly enough to comply with the IMF’s target of drastically reducing Ukraine’s debt-to-GDP ratio from 94% to 71% in 2020. So Ukraine has found itself caught between the proverbial rock and a hard place shackled to the walls of the IMF’s debt inquisition dungeon:

    Bloomberg Business
    Ukraine’s $32 Billion Eurobond Pile Means Restructure or Go Bust

    by Marton Eder
    and Natasha Doff
    5:00 PM CDT
    April 19, 2015

    With less than $10 billion of reserves to repay $32 billion of foreign-currency bonds, Ukraine is running out of time to reach a deal with creditors.

    Finance Minister Natalie Jaresko last week rejected a bondholder proposal to extend the maturities of its debt because it wouldn’t ease the over all burden enough without a reduction in principal, known as a haircut. The nation must repay $7.5 billion in government and corporate Eurobonds due this year and $5.3 billion in 2016, according to data compiled by Bloomberg.

    “The creditors are trying to achieve a reprofiling without a haircut,” Michael Ganske, who helps manage $6 billion as the head of emerging markets at Rogge Global Partners Plc in London, said by phone on Friday. “Frankly speaking, I can’t see how that will work because debt-sustainability is not established with that.”

    Ukraine needs to reach a deal with bondholders by the end of May to qualify for the next part of its $40 billion bailout package, led by the International Monetary Fund. Jaresko is negotiating with a group of five creditors, including biggest bondholder Franklin Templeton, as a fragile truce holds in eastern Ukraine, where pro-Russian insurgents have battled government troops for much of the last year.

    IMF Targets

    While such a proposal would allow Ukraine to save $15.3 billion in debt payments over the next four years, it would fail to comply with IMF targets to cut public debt to 71 percent of gross domestic product by 2020 from 94 percent this year and keep debt costs in the next decade below an average of 10 percent of economic output.

    Keep in mind that the IMF’s targets for reducing Ukraine’s debt load includes an expectation that Ukraine somehow reduce $15.3 billion in public financing costs over the next four years, so the proposal by Ukraine’s creditors for extending maturities that would allow Ukraine to save $15.3 billion in debt payments over the next four years appears to be designed to meet the component of those IMF demands. But as the article points out, debt deferrals aren’t an option because Ukraine ALSO needs to cut its public debt from 94% to 71% by 2020. And that’s why this deal was scuttled.

    So now we get to see what Ukraine can offer to sweeten the deal. And, interestingly, with the IMF playing “let’s you and he fight” with Ukraine and its creditors while holding a gun to Ukraine’s head, Ukraine really does have some additional leverage with its creditors: if Ukraine can’t reach a deal with its private bondholders, the IMF will end up trashing the country to such an extent that those bondholders will have no possible option other than the write down the debt in the future.

    That’s, at least, one way to positively spin the situation.

    Posted by Pterrafractyl | April 20, 2015, 2:35 pm
  19. And she seemed so sweet in person…

    Daily Mail
    Teenage girl soldier hailed as Ukraine’s ‘Joan of Arc’ by Elle magazine is revealed as neo-Nazi and is arrested over cop killing

    Vita Zaverukha, 19, arrested after a failed attempt to rob a petrol station
    Two police officers killed and three injured after ensuing chase in Kiev
    Vita is a known to be a neo-Nazi, spreading her views through social media
    But she featured in French magazine Elle praising female Ukrainian fighters

    By Will Stewart In Moscow And Flora Drury For Mailonline

    Published: 07:35 EST, 8 May 2015 | Updated: 09:16 EST, 8 May 2015

    A neo-Nazi portrayed as Ukraine’s version of Joan of Arc by French fashion magazine Elle for her ‘brave’ fight against the Russian separatists has been arrested in connection with the deaths of two policemen.

    Vita Zaverukha was taken into custody after two officers were killed and three more injured on May 4, following a gang’s failed attempt to rob a petrol station in the capital Kiev.

    The gang, who all have links to the far-right in Ukraine, and allegedly were involved in a shoot out as they tried to flee the scene.

    At first glance, it seems shocking that this slight, blonde teenager could be involved at all.

    But Vita, 19, is charged with ‘an attempt on an officer of the law’, reported news outlets in Moscow – and a quick search reveals she is an active promoter and supporter of vile neo-Nazi ideals.

    What’s more, she is also suspected of being linked to an attack on a traffic police post in Bykovnya two days beforehand, and it is also claimed she participated in bloody attacks on the Odessa House of Trade Unions in May last year in which 46 perished and 200 were injured.

    Yet just six months ago, Elle magazine’s French edition was portraying her as Joan of Arc-type figure, bravely defending her home from Russian separatists – taken in, it seems, by her innocent appearance.

    Vita – who uses the name Sveta in the piece – poses dressed in her army fatigues, staring at the camera in a pose which is reminiscent of the hundreds of other female fighters feted as heroes for their stance against their attackers.

    The magazine shows ‘Sveta’ as a brave young woman volunteering as a fighter to save her country from being overrun by Russian-backed militants.

    In a caption alongside the photograph, she is quoted as saying: ‘If the Russians return to my town, I will shoot. If not me, then who will do it?’

    But the magazine’s mistake was quickly picked up: Vita is a well-known member of the Aidar Battalion, which last September was slammed by Amnesty International for its campaign of terror through the war-torn Luhansk region.

    Among the 400-strong volunteer unit’s alleged crimes were abductions, unlawful detention, ill-treatment, theft, extortion, and possible executions.

    The battalion is known for its links to the far-right, and members have previously been pictured with Nazi insignia.

    But it is Vita’s VK page – the Russian equivalent of Facebook – which provide unequivocal evidence of her own extreme views.

    Pictures of the blonde teenager performing the Nazi salute, posing in a t-shirt covered in the fascists’ emblem and even decorating her tent with a colourful swastika populate the page, while pictures she shares include things like ‘Ukraine with Yids’.

    What Vita – who says she is ‘Aidar from the beginning’ and will continue to be so – writes on the page makes her vile views even more startling obvious.

    ‘I promote Nazism, terror, genocide,’ she wrote in December last year. ‘For all this, I’m not a bad person. The justification is the “War for Peace”. If you go bringing the work to the end, only in this case, justify my actions would not. Winners are not judged.’

    In one of her more recent posts, she writes: ‘The victory may be only radical action – campaigning and murder.

    ‘Rallies , picketing and other dressing did not achieve. Action should always be sharp. The less time costs for the action , the longer it takes effect.’

    The revelations meant Elle France was forced to print an apology – although whether they were referring to Vita in particular was unclear.

    The statement explained they had met her in Luhansk, but there was nothing to suggest – from her clothes to her words – that she was in any way attached to a far right movement.

    ‘ELLE’s editorial board, as well as the two journalists in charge of the coverage, were shocked to learn the true ideological beliefs of this woman,’ the statement continued. ‘We vigorously condemn all and any xenophobic, anti-semitic, racist and Nazi ideologies.’

    Ekaterina Roshuk, former Managing Director at The Kyiv Times, claimed she had ‘long ‘terrorised’ the city, with no one able to do anything about her.

    ‘The police were afraid to touch a hero of the Anti-Terrorist Operation, which in turn was used as license to engage in lawlessness.’

    The state-owned Russian broadcaster Sputnik News Service also claimed: ‘She is also suspected of attempting to destroy a thermal power station in militia-controlled Luhansk, and of attempting to organize the robbery of the office of a Russian firm operating in her home city of Vinnitsa, central Ukraine.’

    It added: ‘In March, a video appeared showing Vita shooting an RPG into a village in Donbass ‘just for fun’.’

    Vesti reported that Vita’s four male accomplices were members of volunteer battalions fighting in country’s eastern conflict zone.

    They were named as Vadim Pinus, 23, a decorated Azov Battalion fighter who was killed in the shootout with police, Evgeniy Koshelyuk, 20, sniper Andrei Romanyuk, 17, and Nikolai Monishenko, 17.

    She and ‘friends’ were earlier accused of staging a row with a shop in Vinnitsa, blaming managers for links to Russia.

    It was not possible to reach Zaverukha or her lawyer.

    Of all the deeply disturbing details in that piece, this might be the most disturbing:


    Ekaterina Roshuk, former Managing Director at The Kyiv Times, claimed she had ‘long ‘terrorised’ the city, with no one able to do anything about her.

    ‘The police were afraid to touch a hero of the Anti-Terrorist Operation, which in turn was used as license to engage in lawlessness.’

    Given the widespread adulation of the ‘volunteer battalions’ as some sort of national strategy for maintaining national morale, just how many ‘too heroic to touch’ gangs are running around Ukraine right now? Apparently, as long as they don’t shoot the police, anything goes.

    It’s also worth noting that the jurisdiction of Vadim Troyan, the the deputy commander of the Azov Battalion was made the chief of police of Kiev, doesn’t actually cover the capital itself. So when the former Managing Director at The Kyiv Times claims Vita has long ‘terrorised’ the city with no one able to do anything about her, it’s a reminder that all the warnings from the far-right battalions that they’re are going to ‘march on Kiev’ if they don’t get their way are already kind of moot.

    Posted by Pterrafractyl | May 8, 2015, 10:01 am
  20. Ukraine’s government just hired John McCain. Involuntarily:

    BuzzFeed
    Ukraine Makes John McCain A Presidential Advisor — Without Telling Him First

    The Arizona senator says Ukraine announced his appointment to a semi-official government position before he cleared it under Senate rules.

    Max Seddon BuzzFeed News World Correspondent
    Kate Nocera BuzzFeed News Reporter
    posted on May. 13, 2015, at 3:08 p.m.

    Ukrainian President Petro Poroshenko announced that Sen. John McCain (R-AZ) was to take up an official part-time government post in Kiev on Wednesday — apparently without clearing it with McCain, who says he never signed off on the gig.

    A decree published on Poroshenko’s website on Wednesday lists McCain as one of eight foreign members of a presidential advisory group headed by Mikheil Saakashvili, the former Georgian leader who has found a new lease of life in Ukraine as a political gadfly and government aide.

    McCain told BuzzFeed News, however, that he never agreed to do it. “I was asked to do it both by Ukraine and Saakashvili and I said I would be inclined to do it but I said I needed to look at all the nuances of it, whether it’s legal under our ethics and all that kind of stuff,” he told BuzzFeed News. “I of course would love do anything I can to help Ukraine, but I’ve got to make sure it’s ok under Senate rules.”

    The position would entail the former presidential candidate giving advice to the leader of a foreign power and working under Ukrainian law — an unusual step for a sitting U.S. lawmaker. Its goal is to recommend specific policy steps Ukraine should take to reform and modernize its decrepit and corrupt Soviet-era bureaucracy, as well as attract expert advice and support from abroad.

    Most of the group’s supposed members are former European politicians who have been vocal supporters of Ukraine’s pro-Western course. It’s not clear what Poroshenko actually okayed with any of them before publishing the decree, since each of them is listed as a council member “by agreement” — including Saakashvili, whom Poroshenko appointed head of the council by a separate decree in February. Two of the other men listed are current members of the European Parliament.

    A spokesperson for Ukraine’s presidential administration did not immediately return a request for comment. McCain’s proposed appointment was widely reported as fact in the Russian and Ukrainian media.

    McCain has been one of the loudest supporters of Poroshenko and Ukraine on Capitol Hill. In February, McCain said on CBS that he was “ashamed” of the U.S. and President Barack Obama for not doing more to help arm Ukrainian forces fighting Russia-supported separatists in the country. McCain is also a longtime friend of Saakashvili, whom he backed during Georgia’s short, disastrous war with Russia during his losing 2008 presidential campaign.

    Poroshenko conceived of the council earlier this year as a way to involve Saakashvili, 47, who won plaudits for sweeping reforms while Georgia’s president, but fled the country after leaving office in 2013 under threat of prosecution from Georgia’s new government. Since then, he has become a visible presence in Kiev, where he went to college. His modernizing efforts in Georgia ensure he remains a more popular figure there than in Washington and Brussels, where many former allies soured on his conduct during the war with Russia.

    In an interview with BuzzFeed News in Kiev in February, Saakashvili said the council aimed to convince international donors that Ukraine’s government was serious about major reforms. Though the U.S. and European Union continue to back Ukraine as it attempts to pull its moribund economy back from the brink of default and quell a war with Russian-backed separatists in the east of the country, ties have frayed in recent months over a perceived reluctance in Kiev to make good on pro-Western reformist rhetoric.

    Given that “the U.S. and European Union continue to back Ukraine as it attempts to pull its moribund economy back from the brink of default and quell a war with Russian-backed separatists in the east of the country, ties have frayed in recent months over a perceived reluctance in Kiev to make good on pro-Western reformist rhetoric,” it’s probably for the best that John McCain isn’t actually interested in taking the job as a Ukrainian Super Friend. The country clearly doesn’t have the cash to blow on John McCain’s advice.

    Unless, of course, John McCain happens to have some awesome ideas for how the nation can convince its creditors to take a haircut on their bonds so Ukraine can avoid even more austerity than its friends in the West already have in mind. Now that would be some advice well worth the cost of hiring a hundred John McCains.

    So all this had to be a rather awkward, if somewhat pleasant, form of flattery for John McCain. “We love you so much we hired you!” He probably appreciated the timing all things considered.

    Posted by Pterrafractyl | May 13, 2015, 5:15 pm
  21. More ‘useable’ nuclear weapons. Just what the world needs:

    Think Progress
    The ‘Insane’ Plan For More Useable Nuclear Weapons

    by Justin Salhani
    Posted on June 23, 2015 at 8:44 am

    A new and controversial report arguing for the production of low-yield, tactical nuclear weapons by the U.S. released by a noted D.C. think tank has drawn heavy criticism from field experts, including one of the report’s coauthors, who labeled the report’s conclusions as “reckless” and “insane.”

    The report, released by the Center for Strategic and International Studies and entitled Project Atom: A Competitive Strategies Approach to Defining U.S. Nuclear Strategy and Posture for 2025–2050, was produced by nine coauthors from four think tanks but the conclusions drawn were solely that of the CSIS’ Clark Murdock.

    “In order to execute its Measured Response strategy, the nuclear forces for both deterrence and extended deterrence should have low-yield, accurate, special-effects options that can respond proportionately at the lower end of the nuclear continuum,” Murdock writes in the report.

    Funding for nuclear weapons comes from the Department of Defense (DOD) and the Department of Energy (DOE). In recent years, the DOD has had to spread funding over a range of issues, such as cyber security and anti-terrorism, in addition to nuclear weapons. Murdock argues that developing smaller nuclear weapons will act as a deterrent against the military power of competing nations. This is necessary, he says, because the U.S.’ conventional military power – unarguably the strongest in the world – cannot be maintained.

    Murdock’s proposed strategy would not act as a deterrent but instead renew a nuclear arms race between global powers, experts specializing in nuclear weapons and disarmament told ThinkProgress. “There’s a number of reasons why this idea doesn’t make sense,” Kingston Reif, the Director of Disarmament and Threat Reduction Policy at the Arms Control Association, said. “[I don’t think that] Russia and China would understand its use to control escalation and not part of a campaign to change regimes in those countries.”

    Such a move would be seen as provocative by the Chinese and Russians, Dr. Barry Blechman, a political scientist and cofounder of the Stimson Center who coauthored the report, told ThinkProgress.

    With the strongest conventional military in the world at the U.S.’ disposal, experts believe that the threat of retaliation by conventional means is enough to deter the prospect of a nuclear attack.

    Murdock’s idea for the U.S. to expand its arsenal of low-yield, tactical nuclear weapons and deploy them to allied countries was “terrible on so many grounds,” Blechman said, because it would upset U.S. allies uncomfortable with hosting nuclear weapons and would be “a huge waste of money.”

    An even more concerning aspect that comes from Murdock’s recommendations is the suggestion to distribute these low-yield nuclear weapons to allies around the world – primarily in Europe and southeast Asia. Experts worry about those weapons falling into the wrong hands. “Terrorists might penetrate [bases where the weapons are held] and secure the weapons,” Blechman said. He pointed to Turkey, where the jihadist movement the Islamic State holds territory across the border, as a concern.

    Murdock’s suggestions don’t seem likely to be taken up by the government anytime soon. Apart from the threat they may pose to Russia and China, the two departments who give funding to the nuclear program have budget constraints. However, a strong movement to remove American nuclear weapons hosted in Europe seems to have been derailed thanks in part to Russian President Vladimir Putin’s aggression. Blechman pointed to a “rebirth of the adversarial relationship between NATO and Russia,” as a reason why $8-10 billion will be used to modernize the current nuclear arsenal.

    “Every dollar we spend on nuclear weapons is a dollar we can’t spend on conventional weapons,” Blechman said.

    Note the fun dynamic at work: Tactical nukes are being proposed as a cheaper alternative to conventional weapons:


    Funding for nuclear weapons comes from the Department of Defense (DOD) and the Department of Energy (DOE). In recent years, the DOD has had to spread funding over a range of issues, such as cyber security and anti-terrorism, in addition to nuclear weapons. Murdock argues that developing smaller nuclear weapons will act as a deterrent against the military power of competing nations. This is necessary, he says, because the U.S.’ conventional military power – unarguably the strongest in the world – cannot be maintained.

    And that raises the question: if an arsenal of smaller tactical nukes really is a cheaper alternative to conventional forces and the kind of deterrent that isn’t so powerful that the US could feel free to use them in response to a nuclear strike, how much smaller do they have to get before we feel free to just use them as a conventional weapon of war and how soon is that technology going to be developed and deployed? Those are probably questions worth asking, although we may not like the answers…

    Posted by Pterrafractyl | June 23, 2015, 3:14 pm
  22. With all of the horrors that have taken place in Ukraine over the last year, here’s the latest reminder that the Great Ukrainian Fire Sale hasn’t really happened yet. Yes, the original 90’s fire sales that created Ukraine’s oligarchs in the first place certainly happened. But that was then, before Ukraine’s EU-ambitions became abundantly clear. And this is now:

    Forbes
    Left Wing Economic Views Are Alive And Well In Ukraine

    Aug 25, 2015 @ 9:26 AM

    Mark Adomanis

    Over the past year and a half, the International Republican Institute (IRI) has done positively invaluable work tracking public opinion in Ukraine. I’m not aware of any organization that has commissioned a wider and more in-depth series of polls, polls that have helped quantify some dramatic shifts in Ukrainian attitudes towards, Europe, Russia, NATO, and other topics. You don’t have to agree with the IRI’s institutional views to understand how incredibly important it is to get real data about Ukrainian opinion.

    From my perspective, however, the IRI’s latest poll might very well be the most interesting yet published. Why? Because it shows that, beneath the surface of growing public support for ”European integration,” there are some severe and totally unresolved tensions between the requirements of that process and what Ukrainians actually think.

    As perhaps the most glaring example, consider Ukrainian attitudes towards privatization. Among experts and regional analysts, privatization is almost universally acknowledged to be a cornerstone of the integration process and as something that Ukraine desperately needs to do. Indeed, in the West privatization genuinely isn’t an issue: you need to go out to the extreme fringes of the left (like the soon to be leader of the labor party Jeremy Corbyn) to find anyone who argues that the state should own more than a small handful of companies. Whether you’re left right or center, almost everyone in the US and Europe agrees that it’s just a really bad idea for the state to actively run companies.

    The problem is that the Ukrainian public hasn’t gotten that memo. When asked what they want to happen to Ukraine’s four thousand state-owned enterprises, here’s what Ukrainians said:

    [see graphic that shows 49% of Ukrainians polled want no privatizations and another 30% only want a few privatizations]

    Does that look to you like a country that is ready to embrace liberalizing shock-therapy? Roughly half of the population doesn’t want there to be any liberalization at all! They want the state to continue owning and running a significant chunk of the economy.

    Now perhaps privatization will get rammed through anyway. The 1990’s provide a very clear historical precedent. Back then, public opinion polls also showed that privatization was broadly unpopular. But the authorities were unmoved, said ”there is no choice,” and implemented mass privatizations anyway despite a huge public outcry. If you consider the enormous damage that an analogous process of privatizations did to public perceptions of democracy in Russia, you might be a bit wary about just where Ukraine will head if the government decides to ignore public opinion and privatize anyway.

    In some important ways Ukraine appears to be genuinely coalescing around broadly pro-Western positions. Public support for entering the Russia-led Customs Union, which as recently as September 2012 was as high as 42%, has withered down to a mere 14%. But while public support for the idea of “Europe” is clearly growing, support for the actual policies that would need to be enacted as part of an EU integration process has not.

    Perhaps that will change. Maybe a year from now another IRI poll will show that Ukrainians have turned into huge fans of privatization. But as things stand there is surprisingly little enthusiasm for many of the “inevitable” economic reforms that Ukraine needs to make.

    “But while public support for the idea of “Europe” is clearly growing, support for the actual policies that would need to be enacted as part of an EU integration process has not.”
    Yeah, Ukraine hasn’t gotten the memo yet about the cost of EU entry yet. Well, ok, the government has clearly gotten the memo. But it’s not clear that public has fully read it yet. It’s too bad. It’s a gripping read.

    Posted by Pterrafractyl | August 26, 2015, 1:50 pm
  23. OMFG…look what the cat just dragged in…:

    Newsweek

    Former Economic Adviser to Reagan and Thatcher Hired by Ukrainian Government

    By Mirren Gidda 9/16/15 at 6:18 PM

    Ukraine’s Minister of Finance, Natalie Jaresko, has hired the prominent U.S. economist, Arthur Laffer, to advise her on tax policy.

    Laffer, widely considered the father of supply-side economics, was a member of former U.S. President Ronald Reagan’s Economic Policy Advisory Board from 1981-89. He also advised former U.K. Prime Minister Margaret Thatcher on fiscal policy.

    In a statement Ukraine’s Ministry of Finance said Laffer will be working with them on tax reforms, “aimed to create a transparent and efficient tax system which should contribute to the increase of investments, economic growth and employment as well as improve the quality of public services for business and thus provide a powerful stimulus for the sustainable economic growth of our country.”

    As well as his political credentials, the economist is well-known for the creation of the Laffer curve which indicates the relationship between rates of taxation and government revenue. According to the model, at taxation rates of 0 percent and 100 percent, revenue earned is 0. Somewhere between the two points, according to Laffer, is the optimum tax rate that will bring about maximum revenue.

    Laffer joins Slovakia’s former Minister of Finance Ivan Miklos and economists Chris Wales and Robert Conrad as part of the international team advising Ukraine’s Ministry of Finance.

    On August 27, Ukraine reached an agreement with its creditors that saw the country avoid a default. Ukraine’s debt is currently held by a number of foreign investors. By far the largest is the U.S. investment manager Franklin Templeton which bought $7 billion worth of bonds between 2011 and 2014.After five months of negotiations, the creditors agreed that Ukraine’s sovereign debt, estimated at $19 billion, would be cut by 20 percent. The country’s debt repayments would also be frozen for four years.

    Noticeably, Russia did not participate in Ukraine’s restructuring deal. Kiev still owes Moscow $3 billion, due for repayment in December.

    “Laffer, widely considered the father of supply-side economics, was a member of former U.S. President Ronald Reagan’s Economic Policy Advisory Board from 1981-89. He also advised former U.K. Prime Minister Margaret Thatcher on fiscal policy.”
    Yes, Art Laffer is bringing the magic of the Laffer Curve to Ukraine. And note that while has advised Reagan and Thatcher in the past, it’s his more recent policy prescriptions that should probably be used to assess the quality of advise that Ukraine is likely to get. Let’s just say there’s a good chance Ukraine is over-paying for his services.

    Posted by Pterrafractyl | October 5, 2015, 2:15 pm
  24. Russia just restarted natural gas shipments to Ukraine under a deal worked out last month with the EU that will guarantee Ukraine has access to Russian gas through the coming winter. In addition to avoiding a potential humanitarian crisis during Ukraine’s harsh winter, the guarantee or Russian gas serves another critical objective: while brutal winters may have been the Nazis’ worst enemy in WWII, this year’s winter, and the angry sentiments that come with not being able to keep warm, just might be Ukraine’s Nazis’ best friend:

    Foreign Policy
    Winter Is Coming. And So Is Ukraine’s Far Right.

    An armed, radical threat could tear Ukraine apart before snow falls in Kiev.

    By Lev Golinkin
    October 8, 2015

    There’s a reason most revolutions in Eastern Europe begin in the winter, from Russia in 1905 to Ukraine’s Maidan in 2013. Once the cold settles in, a government’s empty promises are laid bare. Over the next several days, forecasters are predicting, the temperature in Ukraine will plunge to freezing. When President Petro Poroshenko looks at the thermometer, he should be worried.

    Ukrainians are seething with anger over the plunging quality of life and the government’s failure to purge the country of oligarchy and corruption, the very issues that ignited the 2013-2014 Maidan uprising in the first place. This is not Kremlin propaganda. A Washington Post article in August spoke of the “sense that last year’s wave of protests delivered little but fresh misery.” A recent Atlantic Council report states that “[i]f the Ukrainian government does not follow through with an ambitious reform agenda, public support for reforms will wane while dissatisfaction will increase, threatening political stability and the country’s successful future.” Even George Soros, a stalwart backer of Kiev, wrote this month that “the general population is increasingly dissatisfied both with the slow speed of reforms and the continued decline in living standards.”

    If Ukraine were a stable country, this mounting public disillusionment would manifest itself through an unseating of the ruling party in the next election or perhaps through a referendum of no confidence in the administration. But Ukraine — fresh off a revolution followed by 19 months of war — is far from stable. Its citizens have more weapons than they do trust in their government. If the average Ukrainian can’t scrape together enough money to feed and heat his family in the brutal Ukrainian winter, he will blame Kiev (and the West) and express his outrage not at the polls, but in the streets.

    Russian President Vladimir Putin is not the only one who would love to see the Poroshenko government fail. Ukraine has an active far-right movement composed of ultranationalist groups, organizations that combine radical political agendas (with racist and homophobic overtones) with sizable paramilitary formations. Some of these groups, such as Svoboda, began as far-right political parties that were on the margins of Ukraine’s politics before Maidan. Others, like Right Sector, were formed out of paramilitary groups of street fighters that merged into a movement during the uprising. As the war against Russia-backed separatists unfolded, these organizations formed volunteer battalions that proved crucial in containing the separatists.

    As with many things in Ukraine, the far right’s numbers, as well as the extent of Kiev’s control over their battalions, remains nebulous. In July, Right Sector’s Dmytro Yarosh was able to call up around 5,000 members for a march in Kiev, though how many of the participants were fighters as opposed to party supporters is unclear. Likewise, the Azov Battalion, which has been banned from receiving U.S. training and weapons by Congress, has been nominally under Kiev’s control when it comes to fighting separatists; where Azov’s loyalty lies when it comes to facing Kiev is an open question.

    What is clear is that these groups are capable of sowing immense chaos and carnage, as was proved on Aug. 31, when grenade-wielding thugs from Svoboda killed four Ukrainian National Guardsmen and wounded 138 others in front of the parliament building in Kiev. This attack was far from the first time that the far right has threatened Kiev or spilled blood: On July 11, Right Sector was involved in a deadly shootout with police in the western Ukrainian town of Mukacheve, and members of several battalions have threatened a coup after the fighting in the east is concluded.

    Up to this point, more or less, the far right and Kiev have shared a common enemy: Russian-backed separatists in eastern Ukraine. But as the violence in the eastern regions abates, the ultranationalists — including their affiliated (and heavily armed) battalions — are turning their attention inward. Over the past several months, these groups have been increasingly ratcheting up the pressure on Poroshenko, declaring his administration to be an “internal occupation” and calling, as Right Sector put it, for the “new phase” of the revolution.

    Kiev and the far right are at a stalemate. Poroshenko doesn’t have the power to disband the ultranationalists (the administration’s response to the Aug. 31 bloodshed has been restricted to a handful of arrests), but the far-right factions aren’t able to openly move on Kiev either. For that, they’ll need to have everyday people protesting in the streets. They need another Maidan.

    This is why two narratives are currently battling each other in Ukraine — across op-eds, social media, and news conferences. Poroshenko is exhorting his compatriots to stay calm and look to the future. The far right, meanwhile, is exploiting frustration and anger amid economic hardships and urging people to take to the streets.

    Each week brings winter closer, making austerity measures such as reduced social services and raised utility fees bite harder. Meanwhile, the far right’s cry will resonate more and more. Perhaps the clearest indicator of this has come from the way in which some of Ukraine’s bigger parties have taken up ultranationalist talking points while distancing themselves from Poroshenko. In early September, Oleh Lyashko, the leader of the Radical Party, which officially split from Poroshenko’s coalition, denounced the president as Ukraine’s biggest criminal. Poroshenko’s rival Yulia Tymoshenko went even further, telling the Independent that the administration’s unpopular reforms are going to trigger “an uncontrolled uprising that could sweep Ukraine away as a country.”

    This is exactly what the far right needs. Groups like Svoboda function best when they can mix in with crowds, presenting themselves as fighters against corruption and injustice; when a crowd is gathered, any imprudent move on the government’s part will be seen as a move against “the people.” Throngs of protesters are the far right’s fuel, and once they are in place, the country has no shortage of explosives.

    Under the most optimistic scenario, a far-right uprising would greatly destabilize Ukraine; Poroshenko wouldn’t be able to continue implementing IMF reforms if he were busy fending off an armed insurrection in the middle of Kiev. At worst, this would set off a chain of events that would rapidly turn the country into a fractured, failed state of 45 million people in the middle of Europe.

    To give democratic Ukraine the best chance to survive, Washington must minimize the chances of citizens rising up once winter hits. Statements of solidarity aren’t enough. What’s needed are food, clothing, medicine — tangible, visible, and immediate relief, all stamped with “Courtesy of Kiev and the United States” — to ensure that the people of Ukraine continue to believe that they have a positive future with the West..

    This isn’t a novel idea. During the Cold War, the State Department turned it into an art form. From the Berlin Airlift in 1948 to the Russian-language Voice of America broadcasts beamed into the Soviet Union through the 1980s, the United States has a long history of analyzing the situation on the ground, predicting the needs of the population, and acting to win over hearts, minds, and stomachs.

    America’s current Ukraine policy has mostly neglected this kind of aid. That’s a shame. Washington has an opportunity to mitigate what the United Nations describes as an impending humanitarian disaster while combating the destabilizing power of Ukraine’s far-right radicals. It’s an opportunity that shouldn’t be ignored, because if angry, starving people take to the streets of Kiev, the result is likely to be most unpleasant, both for Ukrainian and American interests in the region. Meanwhile, the temperature is continuing to drop.

    Ok, to summarize, if enough Ukrainians freeze in the coming months, the fires of revolution, led by Ukraine’s neo-Nazis, could be once again lit:

    …If the average Ukrainian can’t scrape together enough money to feed and heat his family in the brutal Ukrainian winter, he will blame Kiev (and the West) and express his outrage not at the polls, but in the streets.

    Kiev and the far right are at a stalemate. Poroshenko doesn’t have the power to disband the ultranationalists (the administration’s response to the Aug. 31 bloodshed has been restricted to a handful of arrests), but the far-right factions aren’t able to openly move on Kiev either. For that, they’ll need to have everyday people protesting in the streets. They need another Maidan.

    To give democratic Ukraine the best chance to survive, Washington must minimize the chances of citizens rising up once winter hits. Statements of solidarity aren’t enough. What’s needed are food, clothing, medicine — tangible, visible, and immediate relief, all stamped with “Courtesy of Kiev and the United States” — to ensure that the people of Ukraine continue to believe that they have a positive future with the West.

    So that’s one perspective on what Ukraine needs to avoid some sort of far-right Maidan II of Doom movement.

    But there are others. For instance, why not shore up the confidence of Ukraine’s people via the mass privatization of state assets, in particular the state-subsidized natural gas companies that provide cheap heating fuel to the masses:

    Foreign Policy
    Smart Privatization Can Save Ukraine

    How can Kiev save its moribund economy? By breaking the bonds between companies and the state.

    By Josh Cohen
    October 5, 2015 – 2:16 pm

    Ukraine’s 2014 Euromaidan revolution toppled a corrupt regime and promised Ukrainians radical change that would bring the country’s governance in line with European standards. But nearly two years later, reforms appear to have stalled. Ukraine’s parliament has passed only 59 out of 150 reform laws promoted by an alliance of leading civil society organizations amid allegations that the nation’s politicians are merely tinkering with a fundamentally corrupt system. The Democratic Initiatives Foundation has just released a poll indicating growing popular anger at the slow pace of change: Nearly 50 percent of Ukrainians believe nothing has been accomplished at all, while 25 percent feel only one-tenth of the needed reforms have been made. The country’s leaders, clearly feeling the heat, are starting to trade accusations about who’s most at fault. To head off populist unrest that could threaten Ukraine’s fragile democratic transition, Kiev needs to move forward with aggressive reforms — and quick.

    One step the government could immediately undertake to promote cleaner governance is to privatize the approximately 1,800 state-owned enterprises it still controls, including many of the largest firms in the country, mostly in the energy and infrastructure sectors. Many of these state companies are holdovers from the Soviet economy, which was entirely state-run (and woefully inefficient). If successfully implemented, privatization could play a critical role in jump-starting Ukraine’s war against corruption, as well as spurring on other sorely needed political and economic reforms. After initially planning to launch mass privatization in 2015, the government recently postponed the process until 2016. Ukraine should do everything in its power to meet this schedule — without further delays.

    The single greatest benefit of privatization is that it would assist Ukraine’s desperate battle to free its governing institutions from the baleful influence of corrupt oligarchs. Prime Minister Arseniy Yatsenyuk has noted that “state companies have essentially fallen into the private hands of one political group or another.” Anders Aslund of the Atlantic Council agrees, arguing that the majority of Ukraine’s state-owned enterprises “have a shadow proprietor who taps them on money through opaque procurement or transfer-pricing schemes.”

    Ukrainian oligarch Ihor Kolomoisky’s relationship with state-owned oil company Ukrnafta aptly demonstrates this phenomenon. Kolomoisky owns 43 percent of Ukrnafta and has controlled the company behind the scenes since the early 2000s. He has been accused by critics in the Ukrainian press and private sector of forcing the company to sell oil at below market prices to a bank under his control. This bank, in turn, sold the oil to Ukraine’s only refinery, which — you guessed it — is also owned by Kolomoisky. The oligarch is therefore reaping windfall profits on oil that belongs to the state.

    Natural gas subsidies — which are meant to benefit the poor — are another example of how Ukraine’s state companies have enriched oligarchs and corrupt officials. According to Aslund, until recently, Ukraine’s government-subsidized household prices for gas were only 12 percent of its actual market price. With such a huge discrepancy, shadowy intermediaries run by corrupt oligarchs could bribe the right people necessary to buy this cheap subsidized gas from Naftogaz, the state-owned natural gas company, and then sell it to industrial consumers for a big markup.

    Ukraine’s current International Monetary Fund loan commits it to phasing out natural gas subsidies, and on April 1 the government began to do so, thereby increasing the price the country’s households pay. But while global gas prices have dropped, Ukraine’s household gas prices are still only about 75 percent of the real market price. Ukraine has been through nine previous IMF agreements requiring natural gas price increases, but one oligarch or another has always found a way to induce the government to halt the price hikes. Unless this cycle ends, argues Aslund, “somebody else will pick up this business.” This is how removing valuable enterprises from state control can finally break the corrupt links between oligarchs, government officials, and state companies like Naftogaz.

    The privatization experience of Estonia, another former Soviet republic, shows how privatization could diminish graft in Ukraine. Neil A. Abrams, a political risk consultant who’s writing a book on Ukrainian corruption, argues that, in Estonia, eliminating subsidies to all firms ended the privileged position of so-called “political capitalists” and helps explain Estonia’s clean governance today. Corruption is more deeply entrenched in Ukraine than it ever was in Estonia, but that only makes aggressive action like mass privatization all the more necessary.

    Privatization would also provide a more direct boon to Ukraine’s budget by eliminating expensive subsidies, thereby promoting macro-economic reform. To survive, the country’ state-owned enterprises suck up government subsidies like a black hole to the tune of at least 10 percent of GDP in 2014 alone. State enterprises have also accumulated liabilities of over 12 percent of GDP. These liabilities represent a huge fiscal risk to Ukraine, as future budgets would be consumed by paying down these debts. With Ukraine’s public debt to GDP ratio expected hit an unsustainable 94 percent by the end of the year, the sooner Ukraine finishes privatization, the sooner it can begin reducing its debt load. Ending the explosive growth of public debt will not solve all of Ukraine’s problems, but it would buy Kiev time to make further progress on its reform agenda.

    It’s crucial to note that what Ukraine needs is successful privatization. If the process is carried out as corruptly as everything else in Ukraine, it could only make things worse. Russia’s failed attempt to sell state companies fairly in its own 1990s privatization process demonstrates how high the stakes are. After the Yeltsin government sold many of its largest state enterprises for pennies on the dollar to oligarchs such as Boris Berezovsky and Vladimir Potanin in the corrupt “loans for shares” scheme, the entire reform process was discredited. Today, Russians still associate privatization and economic liberalization with poverty and chaos, preferring Putin’s authoritarian system of state capitalism, where the largest enterprises in the country are state-owned. Given Ukraine’s volatile politics, a corrupt privatization process could not only discredit the entire reform agenda — it could topple the government.

    To ensure that privatization helps Ukraine’s reforms rather than discrediting them, the private sector and civil society must be involved from the start. For the sake of transparency, all state companies but the 100 largest should be sold at open electronic auctions, with the bidding and results publicly available for anybody to see. Transparency International Ukraine, an anti-corruption watchdog, recently helped create just such an e-auction system for public procurement called ProZorro. This system — or something similar to it — should be used to privatize the country’s smaller enterprises. Even a one-dollar winning bid should be accepted, since the ultimate objective is to get these companies off the government’s balance sheet.

    The 100 largest state enterprises — which account for 82 percent of assets and 80 percent of sales of Ukraine’s total state-owned enterprise sector — are more complex, and a simple e-auction will not be sufficient. Many are money-losing, but possess valuable assets and could be profitable in the right hands. To make the privatization corruption-free, it should consist of two distinct steps. First, the government should select international investment banks to function as lead managers for each of these large enterprises. These banks would be responsible for preparing financial statements and bidding rules for each state enterprise, marketing it both domestically and internationally, and selecting the winning bidder.

    Second, a committee of experts from one of Ukraine’s leading civil society organizations, such as Transparency International Ukraine, would be required to certify that the sales process was free of corruption. No final contract could be signed until this occurs. These steps would require the Ukrainian government to surrender some of its control over the process, and that would rankle — but it’s the whole point. The corrupt Ukrainian state has been by far the greatest impediment to the country’s success, and government officials simply cannot be trusted to run a graft-free privatization without oversight.

    Changing Ukraine will continue to be a struggle, one thing’s for sure: Done properly, privatization could be the game-changer that jumpstarts the political and economic reforms the country desperately needs.

    Yes, nothing is going to get the Ukrainian populace quite like a system where “Even a one-dollar winning bid should be accepted, since the ultimate objective is to get these companies off the government’s balance sheet.” They’ll be really pleased to know state assets are getting sold off at beyond fire sale prices.

    And they’ll be especially pleased to hear that the IMF has repeatedly demanded that Ukraine do away with its natural gas subsidies for the poor, which already happened, in part, this April. What a great way to increase confidence in future “the West” is offering Ukraine:


    Natural gas subsidies — which are meant to benefit the poor — are another example of how Ukraine’s state companies have enriched oligarchs and corrupt officials. According to Aslund, until recently, Ukraine’s government-subsidized household prices for gas were only 12 percent of its actual market price. With such a huge discrepancy, shadowy intermediaries run by corrupt oligarchs could bribe the right people necessary to buy this cheap subsidized gas from Naftogaz, the state-owned natural gas company, and then sell it to industrial consumers for a big markup.

    Ukraine’s current International Monetary Fund loan commits it to phasing out natural gas subsidies, and on April 1 the government began to do so, thereby increasing the price the country’s households pay. But while global gas prices have dropped, Ukraine’s household gas prices are still only about 75 percent of the real market price. Ukraine has been through nine previous IMF agreements requiring natural gas price increases, but one oligarch or another has always found a way to induce the government to halt the price hikes. Unless this cycle ends, argues Aslund, “somebody else will pick up this business.” This is how removing valuable enterprises from state control can finally break the corrupt links between oligarchs, government officials, and state companies like Naftogaz.

    An anti-oligarch, anti-corruption drive that’s centered around privatizing the state-owned firms that provided the cheap for the poor. That’s the plan, not just from random neoliberal policy advisers but the IMF too.

    At least the Russian gas is once again flowing and apparently guaranteed through the winter. Let’s hope Ukraine’s citizens can actually afford to purchase it.

    Posted by Pterrafractyl | October 13, 2015, 1:35 pm
  25. This could be an interesting experiment in reducing bureaucratic corruption in Ukraine: Ukraine’s Economy Minister Aivaras Abromavicius, a Lithuanian who was one of the foreigners brought into the government under the idea that they would less corruptible, described one of the plans for both reducing government expenditures while also reducing corruption. Fewer bureaucrats would be employed, but they would be paid more than they are now to reduce the incentives for corruption. And one of the ways Ukraine would pay for these higher salaries is by allowing private parties and corporations to “sponsor” the bureaucrat’s salaries. So in addition to outsourcing government positions to non-Ukrainians, the anti-corruption strategy is also going to include outsourcing who pays government employees too:

    Kyiv Post
    New economy minister stands for austerity, deregulation, privatization

    Dec. 15, 2014, 3:54 p.m. | Ukraine — by Brian Bonner, Ivan Verstyuk

    Ukraine’s newly appointed Economy Minister Aivaras Abromavicius, 38, clearly signaled his conservative direction during a Dec. 13 interview with the Kyiv Post. “The role of the state in the economy should be decreased,” Abromavicius said.

    A former citizen of Lithuania, Abromavicius quit his job at East Capital, a Swedish asset management firm that claims to have provided a 1,542 percent return on investments in 2000-2010, to take the job that Pavlo Sheremeta quit in September, citing an onerous bureaucracy and vested business interests that resisted any reforms.

    Abromavicius also expects to encounter big resistance, but hopes to stay longer than Sheremeta, who left the job after six months.

    “I expect resistance as well and I understand where the resistance is going to come from,” he says. “But I want to push. Ukraine has no way out.”

    While Abromavicius didn’t say where the resistance would come from, he didn’t have to specify. Ukraine’s state bureaucrats and oligarchs have teamed up with corrupt politicians in Ukraine throughout 23 years of independence to perpetuate a graft-ridden, Soviet-style system that has kept millions of Ukrainians impoverished and prompted millions of others to flee the nation. Those who stayed have engineered two revolutions in a decade to advance the nation’s democracy and economy.

    Abromavicius said he’s coming into public office without any compromising personal ties. “I’m very happy I don’t know any of Ukrainian oligarchs personally,” he says.

    While he is determined to succeed, he wants to do it on his terms. If he fails, “it’s not the end of the world for me personally. I will go back to what I know best, which is investment activities.”

    Ukraine spends Hr 140-150 billion of taxpayers’ money on public procurement annually. Bringing transparency and efficiency to these deals could cut the figure by some Hr 30 billion – nearly $2 billion. “That’s a lot of money,” he says, especially for an economy that may shrink to as little as $150 billion in gross domestic product this year.

    Moreover, the nation’s public expenditures are 56 percent of GDP. He says the new government wants to cut the state’s share of spending 10 percentage points.

    A good start would be the state-owned Naftogaz, which sucks up 7 to 9 percent of the nation’s GDP — much of it on non-transparent schemes that epitomize Ukraine’s corrupt ways. Every month, the nation pays up to $1 billion to plug Naftogaz’s finances.

    “We cannot feed Naftogaz at the expense of Ukraine,” he said, noting that Ukraine should start charging market prices for energy while helping the poorest consumers cope with the price increases.

    Abromavicius says that large-scale privatization is necessary, but will have to wait for better economic times.

    “The public sector is 3,300 state-owned companies, 1.1 million people employed – and billions of dollars of losses and indebtedness,” he explains. “The state is a horrible owner of the assets.”

    Meanwhile, he hopes to stimulate private pension funds, a rather novel concept for Ukrainians, to supplement the nation’s simultaneously burdensome (17 percent of GDP) and paltry state pension for retirees (average payment of only $110 monthly). The private savings will create a long-term investment base that will be contributing to the development of business.

    Deregulation will also help, especially for the small and medium businesses whose share in the country’s economy remains low by Western standards.

    An exports promotion strategy includes discussions with the European Union authorities over quotas applied to the Ukrainian goods under the free trade agreement coming into effect in 2016.

    “We need the trade representative offices,” Abromavicius explains. “China has 5,000 people in Moscow working only on trade promotion. All these big embassies of the Netherlands or Germany – all they do is trade promotion. And, certainly, you shouldn’t have a 65-year-old guy promoting IT goods.”

    The former asset manager is looking for a circle of experts to work at the Economy Ministry to make it more productive. He thinks government can get by with fewer, but better-paid employees – in the order of $2,000 monthly to reduce incentives for corruption.

    “Dmytro Shymkiv’s team at the Presidential Administration is working on that. They plan to submit some laws to allow salary sponsorship from a separate fund. The basic idea is that you get private and corporate sponsors to that fund,” he said.

    One big difference between his native Lithuania and his adopted home of Ukraine is the attitude towards public officials. In the Baltic nation of three million people where he grew up, public officials are treated as public servants. In Ukraine, by contrast, some public officials act as if the people should serve them.

    “I don’t understand how somebody working in the public administration can be a billionaire or millionaire,” Abromavicius emphasizes.

    “I don’t understand how somebody working in the public administration can be a billionaire or millionaire.”
    Well, that’s an interesting sentiment from the wealthy asset manager heading up Ukraine’s Economics Ministry. Especially since getting millionaires and billionaires to “sponsor” public salaries is apparently part of his agenda:


    The former asset manager is looking for a circle of experts to work at the Economy Ministry to make it more productive. He thinks government can get by with fewer, but better-paid employees – in the order of $2,000 monthly to reduce incentives for corruption.

    “Dmytro Shymkiv’s team at the Presidential Administration is working on that. They plan to submit some laws to allow salary sponsorship from a separate fund. The basic idea is that you get private and corporate sponsors to that fund,” he said.

    So will Abromavicius succeed in his ambitious neoliberal agenda? Well, Ukraine did pass a pro-austerity package on December 25 that got tentative IMF approval. But that didn’t stop Abromavicius from resigning over blocked reforms and corruption:

    Bloomberg Business
    Ukrainian Economy Minister Quits as Government Cracks Widen

    Kateryna Choursina and Daryna Krasnolutska
    February 3, 2016 — 2:59 AM CST
    Updated on February 3, 2016 — 7:28 AM CST

    * Outgoing minister levels graft accusations as bonds slump
    * Post-revolution administration at odds over reform plans, war

    Ukraine’s government, splintering over issues from the war in the nation’s east to faltering anti-corruption efforts, suffered a new setback as its reform-minded economy minister stepped down.

    Aivaras Abromavicius, 40, a Lithuanian-born former fund manager, said Wednesday that he wouldn’t be a “puppet” for officials he accuses of blocking overhauls of the ex-Soviet republic’s economy and institutions. He said politicians, including one from President Petro Poroshenko’s party, had pressured him to appoint “dubious people” at state-controlled companies. Government bonds slumped after his comments.

    The minister’s departure underlines growing dysfunction in Ukraine, where memories of broken reform promises from the 2004 Orange Revolution persist. The administration that took power in 2014 after a wave of pro-European protests has become bogged down by infighting and criticism over failing to rein in the vested interests that have controlled much of the economy for decades. Poroshenko, who must deliver reforms to maintain the flow of financial aid from allies such as the U.S. and the European Union, has promised personnel changes in the cabinet this month.

    “This is a point of no return for perceptions of Ukraine as a country implementing reforms,” Sergey Fursa, a bond trader at investment bank Dragon Capital in Kiev, said by phone. “Abromavicius’s resignation will lead to a decline in Western partners’ confidence that will cause trouble for the country’s access to international financing.”

    Wednesday’s news brought losses for government debt. The yield on dollar-denominated bonds due 2019 jumped 50 basis points to 10.109 percent, the biggest daily increase in more than seven weeks on a closing basis. The hryvnia gained 1.1 percent to 25.6259 against dollar, recovering from an 11-month low Tuesday.

    ‘Blatant Corruption’

    Abromavicius, whose predecessor also left citing frustration over reforms, was one of several foreign citizens drafted into Ukraine’s post-revolution government to add impetus to plans to steer the nation away from its Soviet past. Announcing his exit, he accused officials of seeking to gain control over cash flows at state energy producer NAK Naftogaz Ukraiany as well as government-run enterprises in the defense industry. Pressure tactics on him included pulling his family’s security detail, he said.

    “My team and I don’t want to be cover for blatant corruption or controlled puppets for those who want old-style government to establish control over public finances,” Abromavicius told reporters. “It’s not just a lack of support or political will. These active steps are aimed at paralyzing our reforms.”

    Svyatoslav Tsegolko, a spokesman for Poroshenko, said he couldn’t immediately comment on Abromavicius’s remarks when contacted by phone. The president’s party wants to appoint Vitaliy Kovalchuk, first deputy head of Poroshenko’s staff, as deputy prime minister for economic issues, the Unian news service reported, citing Igor Kononenko, the lawmaker singled out by Abromavicius. Kononenko called Abromavicius’s allegations lies.

    ‘Parochial Differences’

    Geoffrey Pyatt, the U.S. ambassador in Kiev, described Abromavicius as “one of the Ukrainian government’s great champions of reform.” A joint statement from Pyatt and eight other ambassadors expressed disappointment at Abromavicius’s resignation, saying he’d “delivered real reform results” and promoted “openness and transparency.”

    “It’s important that Ukraine’s leaders set aside their parochial differences, put the vested interests that have hindered the country’s progress for decades squarely in the past, and press forward on vital reforms,” the ambassadors said.

    Ukraine’s efforts to stamp out corruption brought scant progress last year, according to Transparency International, which said in January that civil society, journalists and whistle-blowers were more effective than government officials in combating graft. The nation of 43 million people ranked 130th of 168 countries in the Berlin-based watchdog’s Corruption Perceptions Index, level with Iran and Cameroon.

    Note the enthusiasm for Abromavicius from the US ambassador and others:


    Geoffrey Pyatt, the U.S. ambassador in Kiev, described Abromavicius as “one of the Ukrainian government’s great champions of reform.” A joint statement from Pyatt and eight other ambassadors expressed disappointment at Abromavicius’s resignation, saying he’d “delivered real reform results” and promoted “openness and transparency.”

    And given the fact that the IMF is making the kind of reforms Abromavicious was pushing as necessary in order for Ukraine to receive more loans, that probably means another pro-austerity neoliberal is going to have to be chosen for that position. Soon. And that means Ukraine is in for another international job search for a new Economy Minister.

    So if you’re a pro-austerity neoliberal, there’s a job opening you might want to look into. And who knows, if you can demonstrate that you already have corporate “sponsors” ready to “sponsor” part of your salary, that probably won’t hurt your hiring prospects.

    Also, Ukrainians presumably need not apply.

    Posted by Pterrafractyl | February 3, 2016, 1:45 pm
  26. Are we about to see Urkainian Prime Minister Arseniy Yatsenyuk forced to resign and a new crew of presumably foreign technocrats replace Poroshenko’s cabinet in an effort to appease Ukraine’s international creditors? As dramatic as that sounds, earlier today it was looking like that might be exactly what we should expect to see:

    Bloomberg Business
    Ukraine President Calls for Premier’s Resignation to End Crisis

    Daryna Krasnolutska, Natasha Doff, and Kateryna Choursina
    February 16, 2016 — 7:51 AM CST
    Updated on February 16, 2016 — 9:49 AM CST

    * Poroshenko seeks `complete government reboot’ to boost reforms
    * Top prosecutor also urged to leave to help anti-graft efforts

    Ukrainian President Petro Poroshenko called on the prime minister to resign and a government of technocrats to be formed in an effort to end political turmoil that’s jeopardizing the nation’s economic recovery and billions of dollars of foreign aid.

    Poroshenko said he wanted to avoid early elections, urging a “complete government reboot” instead. Lawmakers say they’ve gathered the signatures needed to trigger a confidence motion against Premier Arseniy Yatsenyuk, who’s reporting Tuesday on cabinet performance. The president told parliament to act quickly in deciding Yatsenyuk’s fate.

    “In order to renew trust, therapy isn’t enough, surgery is needed,” Poroshenko’s spokesman, Svyatoslav Tsegolko, said on Twitter. “The president has asked the Prosecutor General and the prime minister to quit.”

    Ukrainians and the nation’s foreign backers are losing patience with delays in fighting corruption and modernizing the economy. Two top reformers quit this month, alleging graft within the ruling coalition. The president and his team, swept to power after a popular uprising, arrived with a mission to bring European levels of transparency to the ex-Soviet republic after decades of misrule. They’ve also had to grapple with a recession and a pro-Russian insurgency that’s killed 9,000 people.

    Ukrainian government bonds pared losses after Poroshenko’s comments on signs new appointments will accelerate the reform agenda. The yield on notes due 2019 climbed 50 basis points to 11.38 percent after earlier jumping as high as 11.63 percent.

    Yields surged last week as International Monetary Fund Managing Director Christine Lagarde warned the nation’s bailout may be halted by political infighting. A $1.7 billion disbursement from the Washington-based lender has been delayed since last year, holding up other bilateral aid.

    “Investors are in wait-and-see mode,” said Dmitri Petrov, a London-based analyst at Nomura International Plc. “There could be a temporary pressure release if the new cabinet proves able to pass legislation. Otherwise an early election could follow and that would spook the market.”

    The escalating political crisis adds to headwinds for Ukraine. Almost two years after pro-Russian separatists seized swathes of the nation’s easternmost regions, a peace accord to resolve the conflict has yet to be implemented. Three Ukrainian soldiers were killed in the past 24 hours, the worst casualties in three months.

    The economy also remains fragile as it recovers from an 18-month recession, with the hryvnia losing 10 percent this year. Trade with Russia has been ravaged since the street protests toppled Ukraine’s pro-Kremlin leader in 2014. Russia is also threatening legal action over a $3 billion bond that Ukraine defaulted on after restructuring attempts failed.

    Poroshenko and Yatsenyuk had previously sought to convey unity after Economy Minister Aivaras Abromavicius and Deputy Prosecutor General Vitaliy Kasko quit amid accusations ruling-party officials were blocking reforms. JPMorgan Chase & Co. and Bank of America raised their recommendations on Ukrainian debt to overweight late last week, saying the market was overplaying the risk of early elections. Franklin Templeton, Ukraine’s biggest bondholder, was said to be holding onto its investment.

    A snap ballot remains a possibility. A no-confidence motion would need 226 votes in the 450-seat parliament to pass. While a motion is possible on Tuesday, coalition party Samopomich said it’s more likely in March. If lawmakers dismiss the government, parliament would have 60 days to form a new one before early elections are triggered.

    Within the four-party coalition, Samopomich and ex-Premier Yulia Tymoshenko’s Batkivschyna are also seeking Yatsenyuk’s exit. Backing for his People’s Front party, parliament’s second-biggest after Poroshenko’s, has plunged to less than 1 percent.

    Maksym Burbak, who heads the People’s Front in parliament, warned Tuesday of the dangers of pushing Ukraine into early elections, saying such a move would play in to Russia’s hands by destabilizing the country.

    “Within the four-party coalition, Samopomich and ex-Premier Yulia Tymoshenko’s Batkivschyna are also seeking Yatsenyuk’s exit. Backing for his People’s Front party, parliament’s second-biggest after Poroshenko’s, has plunged to less than 1 percent.”
    Well, that level of opposition to Yatsenuk would make it appear that his chances of surviving a no-confidence vote would be slim. But, of course, appearances can be deceiving:

    Bloomberg Buiness
    Ukraine Set for Political Standoff as Bid to Oust Premier Fails

    Daryna Krasnolutska & Kateryna Choursina

    * Confidence vote can’t be repeated in this parliament sitting
    * President Poroshenko earlier urged Yatsenyuk to step down

    Ukraine headed for a standoff between its two most powerful politicians after Prime Minister Arseniy Yatsenyuk defied President Petro Poroshenko’s call for his resignation and defeated a no-confidence motion in parliament.

    The result threatens to conserve political gridlock that’s jeopardizing the economy and billions of dollars of foreign aid. The motion to remove Yatsenyuk can’t be repeated during the current sitting of parliament, which ends in July. While Tuesday’s vote failed, it “demonstrated that this government already has no parliament support, it will not be able to carry out laws,” said Yuriy Lutsenko, the parliamentary head of Poroshenko’s party.

    Poroshenko earlier called for a “complete government reboot” to end political turmoil and urged the formation of a technocratic cabinet. That drive ended when the no-confidence motion, co-authored by Lutsenko, garnered 194 votes, short of the 226 needed to oust the 41-year-old Yatsenyuk. Parliament Speaker Volodymyr Hroisman closed the session immediately after the vote. The result means the risk of early elections was averted.

    Ukrainian government bonds had pared losses after Poroshenko’s comments, when he also sought the removal of Prosecutor-General Viktor Shokin. Shokin later in the day submitted his resignation, Mustafa Nayem, a member of the presidential party, said on Twitter. The yield on notes due 2019 climbed 25 basis points to 11.13 percent after earlier jumping as high as 11.65 percent.

    Yields surged last week as International Monetary Fund Managing Director Christine Lagarde warned the nation’s bailout may be halted by political infighting. A $1.7 billion disbursement from the Washington-based lender has been delayed since last year, holding up other bilateral aid.

    It now falls on Poroshenko and Yatsenyuk to get legislation through an increasingly acrimonious parliament. While lawmakers on Tuesday approved a bill to improve procedures for the sale of state assets, a key piece of legislation to access IMF funds, their agenda includes a constitutional amendment to grant regions more power. The latter is one of the provisions of the peace accord signed a year ago in the Belarusian capital of Minsk.

    Within the four-party coalition, the Samopomich party and ex-Premier Yulia Tymoshenko’s Batkivshchyna group also sought Yatsenyuk’s exit. Backing for the premier’s People’s Front party, parliament’s second-biggest after Poroshenko’s, has plunged to less than 1 percent.

    “It now falls on Poroshenko and Yatsenyuk to get legislation through an increasingly acrimonious parliament. While lawmakers on Tuesday approved a bill to improve procedures for the sale of state assets, a key piece of legislation to access IMF funds, their agenda includes a constitutional amendment to grant regions more power. The latter is one of the provisions of the peace accord signed a year ago in the Belarusian capital of Minsk.”
    Yikes. Well, Ukraine’s parliament has quite a challenge ahead of it. And while it’s unclear what, if any, benefits the IMF-mandated austerity to accrue for the public, the decentralization of powers is pretty much the only approach that could conceivably lead to an eventual peaceful resolution of the civil war. So let’s hope the government that almost just dissolved itself can somehow find of way to pass those decentralization bills. And, of course, that means we also have to hope that the government isn’t simultaneously facing down armed far-right anti-decentralization protests:

    Politico EU
    Ukraine’s far-right menace

    A bloody divorce between the Ukrainian government and the country’s ultranationalist groups could be in the offing.
    By

    Lev Golinkin

    9/1/15, 4:30 PM CET

    Updated 9/1/15, 5:27 PM CET

    On Monday, an eerily familiar scene in the streets of Kiev heralded a dangerous new phase in the Ukraine crisis. Once again, riot police faced angry demonstrators who claimed that the government was betraying their country; once again, blood spilled on the pavement, resulting in at least one death and over 100 injuries.

    This time, however, the players’ roles had shifted. The ones fighting the government were grenade-wielding members of Svoboda and Right Sector, radical militants who had, until that point, been allied with Kiev. Their target was the democratically elected, Western-leaning government of Petro Poroshenko which is working on decentralization legislation mandated by the Minsk II agreement.

    Monday’s bloody standoff over decentralization laws is symptomatic of a much wider problem. It is a prelude to what could soon turn into a bloody divorce between the Ukrainian government and the country’s far right groups.

    The fact that the far right has fought alongside Kiev’s moderates creates the false impression that the two are united. They are not: in truth, the only thing uniting them is a common enemy. Kiev and the ultranationalists are both fighting Russian-backed separatists, but they’re fighting for two very different visions of Ukraine’s future.

    On July 3, 3,000 ultranationalists took to the streets of Kiev, chanting “one nation, one race – that is Ukraine.” This sentiment was echoed by SNA leader Andriy Biletsky, who stated that his group’s mission is “to lead the white races of the world in a final crusade for their survival.”

    Biletsky, a deputy in Ukraine’s parliament, is also the commander of the Azov Battalion, which has been described as “openly neo-Nazi” by the New York Times and banned from receiving American military training by the U.S. Congress. Members of both the battalions and their political parties have publicly declared that their organizations have no interest in integrating with the EU (which they consider “degenerate”), or decentralization of power, or equal rights. One nation, one race — that is Ukraine.

    This white supremacist vision is fundamentally incompatible with the democratic, pro-Western agenda of the Kiev government. There is no middle ground here, no room for compromise, and as Kiev continues to implement Western reforms (such as the decentralization of power which is supported by the U.S. and Europe), these two visions are beginning to collide.

    Monday’s clashes are not the first crack in this rift. Members of several battalions had publicly warned of their intention to take the rebellion to Kiev over six months ago. The dissension isn’t limited to the rank-and-file: after February’s disastrous military defeat at Debaltseve, over a dozen battalion commanders announced the formation of their own command structure, an act which would not be tolerated by any Western government.

    Right Sector thugs viciously assaulted police and marchers in June’s gay pride parade,, an attack which was accompanied by homophobic rhetoric from the group’s leaders. And on July 11, heavily armed Right Sector members engaged in a deadly shootout with police forces in the western Ukrainian town of Mukacheve; when Poroshenko attempted to establish control in the wake of the shootings, Right Sector’s response was to converge on Kiev and declare a referendum of no confidence in the government.

    Even after the bloody events in Mukacheve, some analysts have argued that Ukraine’s neo-Nazi groups aren’t a serious threat because their political factions garnered less than 5 percent of the vote in last October’s nationwide elections.

    The problem with that reasoning is that while the ultranationalists do not have enough votes to gain a majority in the parliament, armed radicals don’t always rely on the democratic process. Ukraine’s far right doesn’t need support at the polls; it needs unrest in the streets. It needs an opportunity to do what radicals have been doing ever since the French Revolution — the chance to declare the Kiev government as traitors to the country. That opportunity may be around the corner.

    According to most indicators, the Maidan honeymoon is over. Ukraine’s economy continues to teeter on the brink of collapse,, and the crisis is beginning to be felt not just by the war-ravaged eastern regions, not just by families of soldiers, but by the rest of the country as well. IMF-mandated austerity measures such as utility price hikes are stoking resentment. Polls show that popular support for Kiev is plummeting as more and more Ukrainians are starting to view the current government as being just as corrupt and inept as its predecessor. Most disturbing are the rumbles of plans for another uprising, another Maidan, which would give the far right the perfect opportunity to tap into popular discontent and move on Kiev. Regardless of whether they succeed, the outcome would be disastrous.

    The U.S. and Europe have not shied away from publicly calling on Kiev to implement necessary yet unpopular changes such as austerity measures or the decentralization of power called for by the Minsk II agreement. And yet, when it comes to Ukraine’s far-right militias, the West has been largely quiet. One factor behind this reticence is Russia. Moscow’s propaganda machine had latched onto Ukraine’s far right from the beginning of this conflict, embellishing and distorting until it painted all of Ukraine as a nation of Nazis. These lurid exaggerations triggered a backlash in the West, wherein any legitimate mention of white supremacists is immediately dismissed as Kremlin propaganda. After all, no one wants to be suspected of drinking Putin’s Kool Aid.

    By giving in to this fear, the West is allowing Moscow to dictate the conversation in a dangerous manner. The presence of armed and organized radicals who have repeatedly flouted the rule of law is a clear threat to any nation, especially an unstable one such as Ukraine. Acknowledging that reality does not turn the Kiev government into a nest of fascists, as Kremlin propaganda has claimed, nor does it absolve Russia of its assault on Ukraine’s sovereignty and illegal seizure of Crimea. Ignoring Ukraine’s far right, on the other hand, can have dire consequences for the very dream of a free and democratic country which so many Ukrainians have fought, suffered, and died for.

    “This time, however, the players’ roles had shifted. The ones fighting the government were grenade-wielding members of Svoboda and Right Sector, radical militants who had, until that point, been allied with Kiev. Their target was the democratically elected, Western-leaning government of Petro Poroshenko which is working on decentralization legislation mandated by the Minsk II agreement.
    That was the situation back in August, following the passage of the decentralization bill by the Rada. Flash forward to today, and now we a government that has so little support that it can’t dismiss a Prime Minister with one percent backing. And not only does the current government need implement the IMF’s austerity if it want to get its loans, but it also has to pass the decentralization bill passed a second time, by larger margins, in order for it to become a constitutional amendment.

    All in all, it was latest ominously eventful day for Ukraine’s government, which is extra ominous in this case since nothing actually changed.

    Posted by Pterrafractyl | February 16, 2016, 2:08 pm
  27. Well, Ukraine government just banned criticism of itself by government officials. It’s one of those stories that’s hard to know how to respond, although Ukraine’s Ambassador-at-Large Dmytro Kulega appears to have found the appropriate response given the spirit of the times: “I’m a loyal public servant. I’m thrilled with the work of state bodies (and) their officials”:

    Reuters
    Ukraine bans officials from criticizing government

    KIEV | By Alessandra Prentice

    Tue Mar 1, 2016 11:04am EST

    Ukraine banned government officials on Tuesday from publicly criticizing the work of state institutions and their colleagues, after damaging disclosures last month that highlighted slow progress in fighting corruption.

    The move immediately drew criticism from some civil servants who saw it as a blow to freedom of speech at odds with the embattled government’s Western-backed reform drive.

    The rule on “loyalty” is one of several outlined in a new ethics code that civil servants must follow or face disciplinary action, according to a decree posted on the government website.

    “The government has decided to introduce standards of ethical conduct for civil servants to restore public faith in the work of the state bodies and officials,” the decree said.

    Government employees should “avoid any public criticisms of the work of state institutions and their officials,” the code stipulates, alongside rules on the need for transparency and integrity.

    The shock resignations in February of Economy Minister Aivaras Abromavicius and a top prosecutor shone a spotlight on the failure of the Kiev leadership to follow through on promises to eliminate the influence of vested interests on policymaking.

    In a Facebook post about the new ethics code, Olena Minitch, a department head in the economy ministry, said the new rules appeared to have been “created hastily and adopted quickly” in the wake of Abromavicius’s allegations about corrupt state practices.

    Others appeared to poke fun at the state’s call for officials to toe the party line.

    “I’m a loyal public servant. I’m thrilled with the work of state bodies (and) their officials,” Ukraine’s Ambassador-at-Large Dmytro Kuleba tweeted, linking to an article about the ban.

    The future of the government itself is in doubt unless Prime Minister Arseny Yatseniuk can shore up the coalition and avoid snap elections, having barely survived a no-confidence motion in parliament in February.

    Yatseniuk’s approval ratings have plummeted to less than 1 percent since he came to office in 2014 after protests ousted the previous pro-Russian government. The economy has tanked and a conflict with separatist rebels has no end in sight.

    The political turbulence has further delayed the disbursement of critical financial aid from the International Monetary Fund and raised doubts about Yatseniuk’s ability to win parliamentary support for promised reforms.

    “The government has decided to introduce standards of ethical conduct for civil servants to restore public faith in the work of the state bodies and officials,” the decree said.
    While it’s unclear how much public faith this move is going restore given that it appears to be in response to the high-profile resignations of former officials alledging endemic corruption and an unwillingness to privatize state-owned enterprises. Especially since, as the article below points out, one of the highest-profile critics of the current government, Mikheil Saakashvili, has already declared that he refuses to follow the law. Also, there’s still no law in Ukraine that actually stipulates punishment for ethics violations:

    Kyiv Post
    Cabinet forbids civil servants from criticizing government

    Author:
    Veronika Melkozerova

    Mar. 03, 2016 22:21

    Ukraine’s government apparently sees and hears no evil about its performance, and now it wants civil servants to speak no evil as well.

    A new Cabinet of Ministers resolution on rules of ethical behavior for civil servants, which was approved on Feb. 11, quietly came into force on March 1. It bans civil servants from criticizing the institutions they work for and requires them to “put every effort into forming a positive image of Ukraine.”

    But free thinkers and vocal critics who aren’t silenced or intimidated by the new policy say the resolution just makes Ukraine look even worse.
    Petro Poroshenko Bloc lawmaker Mustafa Nayyem told the Kyiv Post the issue is one of civil rights.

    Free speech violation

    “Yes, we have a ban on making public information that is only for internal use. That’s normal. But banning officials from making criticisms is a direct violation of freedom of speech,” Nayyem said. “Criticism is not always about disclosing insider information.”

    Nayyem compared the “no criticism rule” to military discipline under which a soldier must unconditionallyfulfill the orders of his commander.

    Odesa Oblast Governor Mikheil Saakashvili clearly doesn’t intend to be a loyal soldier for the current government. Speaking from the stage of his touring anti-corruption forum at its latest stop in Vinnytsia on March 1, he vowed to continue criticizing the government.

    “Today the Cabinet has approved a resolution designed to forbid us from launching such forums and talking to you,” Saakashvili told the audience. “The government wants officials to stop criticizing its actions. I will break the new rules! I think this resolution is stupid, and I will keep criticizing them.”

    Saakashvili factor

    Poroshenko Bloc lawmaker Serhiy Leshchenko said the government’s resolution is a direct swipe at Saakashvili.

    “The approval of this code is an attempt by (Prime Minister Arseniy) Yatsenyuk to break Saakashvili’s wave of criticism,” Leshchenko told the Kyiv Post. “Saakashvili is the only state official who constantly questions Yatsenyuk’s competence. So this resolution might as well be called ‘A Ban on Saakashvili’s Criticism.’”

    Announcing its new ethical behavior code for civil servants, the government spun the measure as part of ongoing efforts to ensure the transparency of governance in Ukraine.

    “The government has introduced new standards of ethical behavior for civil servants in order to regain the trust of its citizens,” reads a government statement on the new rules.

    Civil service reform

    Civil servants and officials will from now on have the shared rules of ethical behavior in the workplace, and will also be protected from coming under any kind of pressure from businessmen or political forces, the Cabinet statement reads.

    Yatsenyuk adviser Danylo Lubkivsky told Ukrainska Pravda that the European Union approves new measures. “Our European partners appreciate the new rules of conduct for state employees, especially the demand to withhold public criticism of authorities and other state officials,” Lubkivsky was quoted as saying.

    But the government’s definitions of transparency, dignity, loyalty and integrity, as set out in its resolution, are open to question.

    For example, the integrity of officials is defined as faithfully serving the country and forming a positive image of the nation, while loyalty implies no criticism.

    Common practice

    Nevertheless, political analyst Taras Berezovets told the Kyiv Post that an unspoken rule of not criticizing the government is common in civil services around the world.

    “For example, in Israel there is a strict ban on criticizing the state during anti-terrorist operations carried out by the government,” Berezovets said. “As we all know, Israel is constantly at war, so the ban is effectively permanent.”

    Nayyem, a vocal critic of the current government, isn’t affected by the new code because lawmakers are not state officials – unlike prosecutors, ministers or employees of state administrations.

    Nayyem said he still can’t believe the government approved such a “nonsense” resolution.

    Silencing critics

    “Today the main conflicts our government and other state institutions have to face are internal, he said, citing public criticism of government corruption by former Economy Minister Aivaras Abromavicius, former Deputy Prosecutor General Vitaliy Kasko and current Deputy Prosecutor General Davit Sakvarelidze.

    Abromavicius, who resigned on Feb. 3, was the first of Ukraine’s “reformist” ministers to lift the curtain on what he said were ongoing corruption schemes in state enterprises.

    Abromavicius accused Poroshenko’s business partner, lawmaker Ihor Kononenko, of angling to establish control over state-owned enterprises under the Economy Ministry’s jurisdiction. Abromavicius’s claims provoked an investigation and triggered a deeper political crisis.

    Kasko and Sakvarelidze have also complained about the lack action against corruption in the General Prosecutor’s Office, a widely distrusted institution whose 18,000 prosecutors are seen as protecting corruption rather than fighting it. Kasko resigned on Feb. 15, and issued a public statement claiming Prosecutor General Viktor Shokin was sabotaging efforts to stamp out corruption.

    How to punish?

    The new civil service ethical behavior code also imposes total discipline: state officials are obliged to be conscientious in fulfilling all the decisions made by the Cabinet, Verkhovna Rada, and president, as well as his or her direct superior, without question.

    In addition, the code bans state workers from letting their political views influence their work. They are barred from wearing or display political symbols, or giving “public demonstrations of their political sympathies.”

    The Cabinet resolution includes a warning that violators of the rules will be prosecuted, but Berezovets is unsure how that is going to work, given that there’s no law in Ukraine that stipulates punishment for ethics violations. Civil servants might face other forms of retribution, he said.

    “As I know, in our government they always find ways to punish critics. There are various ways: salary cuts, dismissal for underperformance. The most popular way to get rid of an unfavorable official is to make him fail the re-attestation exam that civil servants have to pass every two years,” Berezovets said.

    The Cabinet’s statement reads that its resolution is based on European ethics rules, particularly the Polish model of maximum transparency of state institutions.

    David Stulik, the press officer at the European Union Delegation to Ukraine, said that many modern public administrations ban civil servants from publicly criticizing the authorities and the government institutions for which they work.

    “Public service should be apolitical and entirely professional,” Stulik said, noting that he has signed a similar standard ethical code – as is required of all EU employees.
    The text of the civil service ethical code can be read on Cabinet of Ministers website here.

    “The Cabinet resolution includes a warning that violators of the rules will be prosecuted, but Berezovets is unsure how that is going to work, given that there’s no law in Ukraine that stipulates punishment for ethics violations. Civil servants might face other forms of retribution, he said.”
    Well, as the press officer of the EU Delegation to Ukraine notes, similar standard ethical codes is required of all EU employees, so it shouldn’t be too hard to develop rules for punishing ethics violations that at least don’t piss off the EU.

    Of course, if the intent of the law really is to silence Mikheil Saakashvili, Ukraine’s most popular politician who has branded himself as a reformer, the design of those punishments could get rather tricky. After all, this could easily backfire and turn Saakashvili into a symbol of resistance against the oligarchs. The stronger the punishment, the more Saakashvili grows in strength as he defies those orders. In other words, this new law could position Saakashvili to become a kind of Ukrainian Dondald Trump: the more he fights with “the establishment” and pledges reforms, the more public support he gets even if he’s a lunatic. At least that’s the dynamic that could get underway pretty easily in this situation. Uh oh.

    Posted by Pterrafractyl | March 3, 2016, 3:47 pm
  28. Check out the top candidate to emerge as a replacement for Arseniy Yatsenyuk as prime minister of Ukraine: Natalie Jaresko. Although there are other candidates all the short list…including Mikheil Saakashvili:

    Ukraine Weekly

    Jaresko emerges as top candidate for prime minister

    By Zenon Zawada

    March 4, 2016

    KYIV – Chicago-native Natalie Jaresko, the current finance minister of Ukraine, is among the top candidates to succeed the embattled Arseniy Yatsenyuk as prime minister, according to Kyiv insiders and recent news reports.

    She has already begun forming a Cabinet of Ministers consisting of technocrats, reported the rbc.ua news site on February 26, citing an anonymous source identified only as being “in the coalition.” President Petro Poroshenko has offered her the post already, the hromadske.tv news site reported on February 26, citing someone “familiar with the talks.”

    The latest turn of the rumor mill ended without Ms. Jaresko being nominated as prime minister, and without Mr. Yatsenyuk’s resignation, which also was rumored. Yet she’s at the top of the president’s list, said Volodymyr Fesenko, a Kyiv political pundit who has intimate ties with the Presidential Administration

    “The rumors reflect the truth, to a large extent. She is among the potential contenders,” said Mr. Fesenko, the head of the Penta Center for Applied Political Research. Speaking with The Ukrainian Weekly’s correspondent on March 1, he didn’t discount the rumor that the president had already offered her the post behind closed doors.

    Ms. Jaresko’s candidacy is being raised by Western authorities who are desperate for a technocrat committed to reforms and anti-corruption, as opposed to setting up and covering for corrupt schemes, as has been alleged of numerous current Cabinet ministers, including Mr. Yatsenyuk.

    “Jaresko stands outside the old corrupt networks in Ukraine,” said Anders Aslund, a resident senior fellow at the Atlantic Council in Washington. “She is highly considered both in Ukraine and abroad, and she has proven herself highly competent as finance minister at a very tough time.”

    Mr. Poroshenko has discussed Mr. Yatsenyuk’s successors with U.S. Vice-President Joe Biden, Mr. Fesenko said. The potential successors include Ms. Jaresko, former Georgian President and Odesa Oblast State Administration Chair Mikheil Saakashvili, and Presidential Administration Deputy Head Dmytro Shymkiv, a Lviv native and former CEO of Microsoft Ukraine.

    If any of these candidates is chosen, it would mark the first time an outsider to the Ukrainian political and business oligarchy would become Ukrainian prime minister, experts pointed out. But that’s precisely what stands in the way of Ms. Jaresko’s candidacy, they said.

    In sacrificing the prime minister’s post, Mr. Yatsenyuk’s party will require compensation in the form of lucrative government posts, said Petro Oleshchuk, an assistant professor at Taras Shevchenko National University in Kyiv.

    “Without political support, it’s very hard to strive for an independent role,” he said. “Such an appointment is theoretically possible, but all the parties involved will demand a large number of state positions in return, which would nullify the value of such an appointment. She won’t have freedom to maneuver and could become hostage to the situation.”

    Ms. Jaresko also lacks a parliamentary faction to back her on the legislative front and has already made some enemies with her tax reform efforts, rejecting alternative proposals.

    Besides that, the populist Oleh Liashko, head of the Radical Party, has already pounced on the notion that a foreign-born person should not be prime minister (though Ms. Jaresko has lived in Kyiv since 1991.)

    “About 170 national deputies (out of a 226-vote majority) were ready to vote for her in February,” Mr. Fesenko pointed out. “But she won’t gain approval without active campaigning.”

    When asked about her possible candidacy, Ms. Jaresko has avoided commenting.

    “To tell the truth, I don’t want to speak today about personnel issues. We need to focus attention not on personnel, but on principles,” she told the “Freedom of Speech” show on the ICTV television network on February 8.

    Aivaras Abromavicius, the economic development and trade minister who resigned on February 3, told the Deutsche Welle news agency in an interview published on February 15 that Ms. Jaresko is “skeptical” about becoming prime minister because “it’s the most difficult task in the most difficult conditions in the absence of support.”

    “So she needs to get the prime minister and president to guarantee that their parties will vote for all Cabinet initiatives,” he said.

    To do her job, Ms. Jaresko should have full freedom and carte blanche in appointing ministers, without any political or financial influences, Mr. Abromavicius told the BBC.

    While that demand might be unrealistic in the cynical realm of Ukrainian politics, some concessions may prove necessary as the president needs a reformer like Ms. Jaresko to work with the International Monetary Fund, which has withheld its latest loan tranche of $1.7 billion that could have arrived as early as late January.

    The postponement is due to the lack of political stability, including the failed attempt to dismiss Mr. Yatsenyuk and ongoing efforts to remove him, said Alexander Paraschiy, the head of research at Concorde Capital investment company in Kyiv.

    “In order to release the tranche, the IMF needs a report of reforms and an action plan signed by key state officials,” he said. “Those who sign take the responsibility upon themselves and the IMF must be sure they have the ability to fulfill these tasks and will be in their positions for the next two to three months.”

    Since Mr. Yatsenyuk and his Cabinet aren’t even sure they’ll be around for so long, they can’t sign anything, he said.

    Mr. Poroshenko and other top officials have been trying to convince Mr. Yatsenyuk to leave of his own will, Mr. Fesenko said. Several news agencies on February 26 reported his willingness to resign, citing high-placed anonymous sources. Yet his spokeswoman immediately dismissed those reports, which went unproven.

    That same evening, the Cabinet website reported that Mr. Yatsenyuk said in an interview with a German newspaper that he advised the president to form a new government if he no longer suits him. That will require early parliamentary elections, Mr. Yatsenyuk warned the president, in which case he won’t have anyone to fulfill the IMF loan requirements.

    But observers said that a new Cabinet can be formed by keeping the current Parliament and merely forming a new coalition government involving a new combination of its six factions.

    That combination has yet to be achieved as Mr. Liashko was reportedly in talks in late February to become chair of the Verkhovna Rada, but they didn’t materialize. His Radical Party would have been able to form a coalition with the Poroshenko Bloc and Mr. Yatsenyuk’s People’s Front.

    The Batkivshchyna and Samopomich factions abandoned the coalition on February 18 and 19, respectively, after the failed ouster of Mr. Yatsenyuk. A new configuration is required within 30 days, after which the president can dismiss the Verkhovna Rada and call early elections.

    Instead, Ms. Jaresko could lead a technocratic government during an interim period until early parliamentary elections are held, possibly in the fall, said Dr. Aslund said. That would make the arrival of the next IMF tranche possible.

    “She has proven herself highly competent as finance minister at a very tough time,” he said, referring to the finance minister’s success in negotiating the $15 billion debt restructuring with Ukraine’s creditors, preparing the 2016 budget that met IMF requirements and finding compromise on tax reform.

    “Ms. Jaresko’s candidacy is being raised by Western authorities who are desperate for a technocrat committed to reforms and anti-corruption, as opposed to setting up and covering for corrupt schemes, as has been alleged of numerous current Cabinet ministers, including Mr. Yatsenyuk.”
    That’s right, the IMF and Ukraine’s western creditors are keeping with the creeping ‘Ukrainians need not apply’ policy for high-level appointments and pushing for Natalie Jaresko to become the new Prime Minister and lead a technocratic government at impelmenting the austerity policies and privatization plans the IMF is mandating in return for new loans. It sould be nice if this was surprising.

    And if Jaresko doesn’t get the job, there’s always the former CEO of Microsoft Ukraine or, of course, the former president of Georgia:


    Mr. Poroshenko has discussed Mr. Yatsenyuk’s successors with U.S. Vice-President Joe Biden, Mr. Fesenko said. The potential successors include Ms. Jaresko, former Georgian President and Odesa Oblast State Administration Chair Mikheil Saakashvili, and Presidential Administration Deputy Head Dmytro Shymkiv, a Lviv native and former CEO of Microsoft Ukraine.”

    But note the complication in replacing Yatsenyuk. Either new parliamentary elections will have to take place, or a new coalition government can be formed instead. And which party appears to be the deciding factor in forming a new government? Oleh Liashko’s Radical Party:


    That same evening, the Cabinet website reported that Mr. Yatsenyuk said in an interview with a German newspaper that he advised the president to form a new government if he no longer suits him. That will require early parliamentary elections, Mr. Yatsenyuk warned the president, in which case he won’t have anyone to fulfill the IMF loan requirements.

    But observers said that a new Cabinet can be formed by keeping the current Parliament and merely forming a new coalition government involving a new combination of its six factions.

    That combination has yet to be achieved as Mr. Liashko was reportedly in talks in late February to become chair of the Verkhovna Rada, but they didn’t materialize. His Radical Party would have been able to form a coalition with the Poroshenko Bloc and Mr. Yatsenyuk’s People’s Front.

    “That combination has yet to be achieved as Mr. Liashko was reportedly in talks in late February to become chair of the Verkhovna Rada”
    Yes, the guy known who used kidnapping videos as a political selling point was in talks to become chair of the parliament late last month. That didn’t happen, but it looks like that might be the price of this new technocratic cabinet scheme, especially since it didn’t sound like Liashko was very keen on having a foreign born prime minister:


    Besides that, the populist Oleh Liashko, head of the Radical Party, has already pounced on the notion that a foreign-born person should not be prime minister (though Ms. Jaresko has lived in Kyiv since 1991.)

    “About 170 national deputies (out of a 226-vote majority) were ready to vote for her in February,” Mr. Fesenko pointed out. “But she won’t gain approval without active campaigning.”

    So that’s the unfolding situation in Ukraine’s latest political crisis: In order to get one of the foreign-born technocrats on the IMF’s short-list installed as prime minister so Ukraine can implement the austerity and privatizations the public will loathe but the IMF demands in exchange for loans, the violent nationalist Oleh Liashko is going to have to be bought off by making him the head of parliament.

    The short list of priorities for Ukraine doesn’t appear to include sanity.

    Posted by Pterrafractyl | March 6, 2016, 6:41 pm
  29. As Ukraine’s current crisis of self-confidence continues to simmer following the failed of a no-confidence vote to remove prime minister Arseniy Yatsenyuk, Natalie Jaresko continues to look like the probably next prime minister. But as the article below reminds us, don’t count Saakashvili out yet:

    Financial Times

    Ukraine’s pro-western reform project hangs in the balance

    Kiev could move towards greater EU integration or slide back into cronyist authoritarianism

    Neil Buckley and Roman Olearchyk in Kiev
    March 13, 2016 1:53 pm

    Two years on from the protests that ousted pro-Russian president Viktor Yanukovich, Ukraine’s revolution is confronting its central paradox: many of the leaders who emerged from it were veterans of the oligarch-dominated political system it aimed to sweep away.

    Kiev has been in political ferment since a foreign-born, technocratic economy minister, Aivaras Abromavicius, resigned five weeks ago. He alleged that cronies of President Petro Poroshenko — himself a billionaire businessman — and prime minister Arseny Yatseniuk — another of the protest leaders but a political veteran — were blocking reforms to preserve their access to lucrative cash flows.

    Mr Yatseniuk survived a subsequent no-confidence vote, but was badly weakened. Ukraine is now grappling with whether to appoint a new premier and government — potentially a wholly non-political, technocratic one — to keep it free from vested interests.

    While this still seems unlikely, a broader question is whether to call early elections to accelerate political renewal.

    At stake may be the future of Ukraine’s pro-western reform project. Decisions in coming days will be critical in determining whether the ex-Soviet republic continues towards greater integration with the EU and more transparent, democratic governance. Or whether, as after its 2004 “Orange” revolution, it slides back into the cronyist authoritarianism typical of most post-Soviet states, and back under Moscow’s influence.

    “Ukraine had a revolution, but no revolutionary change,” says Mikheil Saakashvili, the former Georgian president who led his country’s 2003 pro-democracy revolution and subsequent reforms, and has been appointed a regional governor in Ukraine by Mr Poroshenko.

    Mr Saakashvili is forming an anti-corruption movement and holding roadshows across the country, to enthusiastic receptions. Without change that ordinary Ukrainians can feel, warns Mr Saakashvili, the country could see a backlash by pro-Western activists — or “restoration” of the old, pro-Russian system.

    He advocates elections now, calling for “one more push” to get rid of the vested interest networks that have captured politics. Opponents and supporters alike suggest that is because elections could open a path for him on to Ukraine’s national political stage.

    Mr Yatseniuk, the current premier, made clear in a Financial Times interview last week that he is fighting to keep his job. He argues his government has already made Ukraine an “entirely different country” from two years ago, despite its struggles with parliament.

    One senior political power broker, however, puts the chances of a new premier being appointed at 60 per cent. A leading candidate is Natalie Jaresko, the US-born finance minister, who political insiders say has held talks over the job and drawn up a “dream team” for a technocratic government.

    Ms Jaresko is highly regarded by Ukraine’s international partners such as the IMF and the investors it urgently needs to rebuild an economy shattered by long misrule, war with Russia in the east and Russian trade restrictions.

    But many in Kiev question whether she and a non-political cabinet, however smart, could operate effectively in the shark-infested waters of Ukrainian politics.

    “A technocratic government? OK, excellent idea. But how can you make sure there will be enough support in the parliament?” asks Victoria Voytsitska, a young MP from the pro-reform Samopomich party.

    “A technocratic government? OK, excellent idea. But how can you make sure there will be enough support in the parliament?”
    That comment, coming from an MP of the Samopomich party (a self-describe Thatcherite party) is like a meta-statement on how democracy is treated in this era: neoliberal “reformers” pining for a troika to call their own. And while Natalie Jaresko is leading the pack of likely replacements for Yatsenyuk, she has competition:


    “Ukraine had a revolution, but no revolutionary change,” says Mikheil Saakashvili, the former Georgian president who led his country’s 2003 pro-democracy revolution and subsequent reforms, and has been appointed a regional governor in Ukraine by Mr Poroshenko.

    Mr Saakashvili is forming an anti-corruption movement and holding roadshows across the country, to enthusiastic receptions. Without change that ordinary Ukrainians can feel, warns Mr Saakashvili, the country could see a backlash by pro-Western activists — or “restoration” of the old, pro-Russian system.

    He advocates elections now, calling for “one more push” to get rid of the vested interest networks that have captured politics. Opponents and supporters alike suggest that is because elections could open a path for him on to Ukraine’s national political stage.

    “He advocates elections now, calling for “one more push” to get rid of the vested interest networks that have captured politics. Opponents and supporters alike suggest that is because elections could open a path for him on to Ukraine’s national political stage.”
    Yes, a growing number of people expect Saakashvili to go from merely being an appointed governor to actually running in Ukraine’s elections. And that includes Sasha Borovik, the the Deputy head of the Odessa Regional State Administration for investment and development. Although, as Borovik was forced to explain recently on his Facebook book, just because Borovik believes that Saakashvili is about to start a new national political party, doesn’t mean it’s true. Or, even if Borovik is correct, it doesn’t mean he should go around talking about such plans on Facebook:

    Interfax

    Odesa governor’s deputy denies Saakashvili team’s plans to create political party

    15:37 14.03.2016

    Deputy head of the Odesa Regional State Administration for investment and development Sasha Borovik says his remarks about rumored plans by Odesa Governor Mikheil Saakashvili’s team to create a political party are not official.

    “I’d like to refute that a new party has been or will be formed,” Borovik wrote on Facebook.

    Borovik said the “Rukh za ochyschennia” [Cleaning Up Ukraine] anti-corruption movement led by Odesa Regional Governor Mikheil Saakashvili is a broad program currently being drawn up to battle corruption. .In a Facebook post made earlier on March 14, Borovik expressed his personal view about the program and the future of anti-corruption movement. .

    “I represent my own views and my own wishes only,” he wrote on Facebook on March 14.

    He also updated his previous Facebook post about the plans. Borovik earlier wrote that Saakashvili’s close allies were discussing the idea of creating a political party.

    “We will soon have a political program that will be election-oriented. This will be a centre-right, fiscally conservative, socially liberal program. We’d like to build a democratic, European-style party organization in which leaders are elected in a democratic way,” he wrote in his original post.

    “Ukraine needs a new political elite,” Borovik added.

    “He also updated his previous Facebook post about the plans. Borovik earlier wrote that Saakashvili’s close allies were discussing the idea of creating a political party.
    Well, that’s at least one Saakashvili supporter who’s expecting Mikheil to throw his hat into the electoral ring soon. He just apparently got a little little enthusiastic with the public speculations.

    But assuming Borovik has does indeed possess insider insights into Saakashvili’s thinking, who knows, not only might we end up with Prime Minister Saakashvili soon, but the increasingly popular Saakashvili could end up running an entire new Ukrainian party too.
    And the band played on…

    Posted by Pterrafractyl | March 14, 2016, 5:30 pm
  30. Yatsenyuk just resigned as prime minister. And with approval ratings in the low single digits after barely surviving previous no-confidence votes, it’s hard to see how this is going to upset many. Although there might be some feathers ruffled amongst Ukraine’s western creditors, since Natalie Jaresko doesn’t appear to be set to replace him:

    The Washington Post

    Ukraine’s embattled prime minister resigns as patience wears out

    By Andrew Roth April 10 at 2:18 PM

    Ukrainian Prime Minister Arseniy Yatsenyuk on Sunday announced his resignation, calling for the formation of a new government as Kiev endures its worst political crisis since the “Euromaidan” revolution of 2014.

    The public’s patience has grown thin with Yatsenyuk, as well as with President Petro Poroshenko, because of a struggling economy, stalled reforms and entrenched corruption. The ruling coalition has fractured as public support hits new lows.

    As Western leaders have openly signaled their exasperation with the political logjam in Kiev, the choice of Yatsenyuk’s replacement is seen as a bellwether for the fate of Ukraine’s stalled reform program. Candidates for his successor include Vladimir Groysman, the parliamentary speaker and a close political ally of Poroshenko, and Natalie Jaresko, the technocrat finance minister born to Ukrainian immigrants in Chicago and favored by foreign investors.

    Yatsenyuk, who narrowly survived a no-confidence vote in February, said in a weekly televised address that he would tender his resignation on Tuesday to end an “artificially created” political crisis in Kiev. He said that a new government must be selected immediately to avoid the “destabilization of the executive branch during a war,” a reference to the conflict in eastern Ukraine.

    A veteran pro-European politician who charmed Western officials in fluent, idiomatic English, Yatsenyuk had long predicted his own demise. He called himself a “political kamikaze” a week after the Maidan revolution that unseated President Viktor Yanukovych in 2014, predicting widespread anger over the austerity measures needed to secure a bailout from the International Monetary Fund.

    Two years later, Yatsenyuk’s opponents in parliament were accusing him of bowing to corrupt interests, including oligarchs close to the pre-revolutionary government. Ahead of the abortive no-confidence vote, Poroshenko indicated that Yatsenyuk should resign, saying that to restore public trust, “Therapy is no longer sufficient. Surgery is needed.”

    In his speech Sunday, Yatsenyuk signaled support for Groysman, the parliamentary speaker, noting that the Bloc of Petro Poroshenko party had nominated him to lead the new government. Groysman is widely seen as the front-runner for the position. On Sunday, Poroshenko said that he expects the parliament to announce a new coalition Tuesday.

    Poroshenko had suggested that Jaresko, a former investment banker, was also a prospective candidate for the prime minister’s post. Her supporters thought she could lead a government that would sidestep the tumult of partisan politics and entrenched interests to pass a widespread reform package.

    “In my opinion, only a technocratic government can take on the tasks in this political situation — meaning a team … not subservient to any oligarchs or “friends” of politicians, which doesn’t have future political ambitions,” Jaresko wrote in a Facebook post in March, confirming her readiness to head the new government. “I am ready to put together such a team which can be able to right now work for the interests of the entire country — all of its citizens, not separate business groups.”

    The political crisis began with the resignations of a number of prominent reform officials, who claimed that entrenched interests loyal to Poroshenko and Yatsenyuk were involved in corrupt schemes.

    “In his speech Sunday, Yatsenyuk signaled support for Groysman, the parliamentary speaker, noting that the Bloc of Petro Poroshenko party had nominated him to lead the new government. Groysman is widely seen as the front-runner for the position. On Sunday, Poroshenko said that he expects the parliament to announce a new coalition Tuesday.
    Groysman over Jaresko. That’s the chatter. And if it’s accurate chatter, that’s going to leave a lot of question over Jaresko’s future, since the chatter also includes a future where Jaresko isn’t finance minister either

    Reuters

    Top finance job still unclear in new Ukraine government

    KIEV | By Natalia Zinets and Pavel Polityuk
    Mon Apr 11, 2016 9:41am EDT

    Ukraine’s likely new prime minister Volodymyr Groysman said on Monday that coalition members were assembling a reform-minded cabinet to root out corruption and cronyism, but it was not yet settled who would take the crucial post of finance minister.

    Prime Minister Arseny Yatseniuk, who has headed the government since the heady days of the 2014 pro-Europe “Maidan” uprising, tendered his resignation on Sunday culminating months of infighting.

    That has delayed disbursement of billions of dollars in aid from the International Monetary Fund and Western backers as the economy continues to be weighed down by war with Russian-backed rebels in the east.

    The two largest parties – President Petro Poroshenko’s BPP and Yatseniuk’s People’s Front – are expected to announce a new coalition agreement in the coming days with a rebooted government, headed by Groysman, a long-standing ally of Poroshenko.

    The two parties are under pressure to end the deadlock and avert snap parliamentary elections. But with only a slender majority in parliament the new alliance may struggle to pass reform laws as populist former coalition allies have vowed to vote against IMF-backed austerity measures.

    In Brussels, the head of the Council of Europe, a 47-member body which acts in an advisory role to the EU, said Ukraine had become “very volatile” since Yatseniuk resigned.

    “It is urgent that they establish a new government and even more urgent that they speed up the reform process,” Thorbjoern Jagland told reporters.

    Groysman said he would be willing to lead a government committed to rooting out corruption and sleaze that critics say undermine any reform drive in Ukraine.

    But it was not clear if Finance Minister Natalia Yaresko, a U.S.-born technocrat who is respected in Washington, would keep her job – a lynchpin position given Ukraine’s strategic dealings with the IMF and other Western backers.

    U.S. Vice President Joe Biden raised the issue of continuing economic reforms when he spoke to Yatseniuk on Sunday.

    “The leaders agreed these changes must be irreversible and that continued progress is critical to securing a prosperous future for the people Ukraine,” the White House said in a statement.

    “The leaders also agreed on the importance of assembling a new Cabinet committed to implementing needed reforms, in particular those recommended by the International Monetary Fund and European Union,” it said.

    “If the coalition suggest I head the government, I would need the new government to have a core of people who have proved in recent times they lack political bias, are clean, and able to carry out reforms,” Groysman told journalists on Monday.

    Groysman’s nomination and proposed government will have to be approved by a majority in parliament. But his appointment as prime minister would be a disappointment to some reformists, who say this would consolidate power in the hands of Poroshenko – with whom he is very close – and his inner circle.

    Former Slovak finance minister Ivan Miklos, currently an adviser to Finance Minister Yaresko, was reported to be in line to replace her – something that might have assured reformists and Ukraine’s allies that a technocrat would remain in charge of the country’s war-torn finances.

    But a source in the Ukrainian parliament said Miklos would remain only as an adviser.

    Groysman appeared to backtrack on earlier statements where he said Miklos would have a place in the cabinet. “There are a number of what I see as highly qualified candidates and I am insisting that all should be considered.”

    “Groysman appeared to backtrack on earlier statements where he said Miklos would have a place in the cabinet. “There are a number of what I see as highly qualified candidates and I am insisting that all should be considered.””
    So it appears that the likely new prime minister is considering not only dumping Jaresko as the finance minister but also passing over former Slovak finance minister Ivan Mikos. Are Ukraine’s oligarchs no longer interested in imported leadership to carry out the IMF’s austerity demands in exchange for loans? It’s too early to say, but given all the uncertainty over whether or not Ukraine can endure the kind of austerity the IMF is demanding it’s not inconceivable that the shift to the West would eventually start to be seen as too ‘expensive’ for oligarch and rabble alike.

    So we’ll see what happens, but it’s worth keeping in mind that if Ukraine does give up hope that a big shift towards trading with Europe could lead to a prosperous future, that could be because the plans of more austerity plus more trade to help cushion the blows of austerity were kind of hopeless:

    Reuters

    EU deal yet to bear fruit for Ukrainian exporters

    GORODOK, Ukraine | By Pavel Polityuk
    Fri Apr 8, 2016 2:25am EDT

    Ukraine’s Association Agreement with the European Union was meant to lure the bread basket of the former Soviet Union away from its longstanding ties with Russia by offering better access to the EU market.

    But debate about it was the spark that lit the Maidan street protests in 2013 and a pro-Russian insurgency that led to more than 9,000 deaths. The disruption sent exports to Russia into freefall and depressed sales to the European Union.

    Now many exporters are worried that the deal, in place provisionally since January, does not offer enough to compensate for the collapse in trade with Russia to just $4.83 billion last year from $15.06 billion in 2013.

    “Our company does not feel any change,” said Taras Barshchovsky, the founder of T.B. Fruit, the parent company of Galicia-Trade, which makes juices from apples, carrots, cherries and other fruits.

    Under the deal tariffs were lifted on most products traded between Ukraine and the EU. Quotas for textiles were lifted and will be phased out over 5 years for mineral products, chemicals, plastics and wood.

    In agriculture, by far the largest sector of the economy with a 12 percent contribution to gross domestic product, and also an area where Ukraine can successfully compete with European producers, many quotas were unchanged including for maize, alcohol and fruit juice.

    Barshchovsky said the low quotas were a problem for his company and showed the deal had limited benefits for Ukraine.

    “In my opinion, they’re pulling the wool over our eyes,” he said.

    The EU rejects any idea the deal is unfair and Ukraine’s exports to the EU rose 3.3 percent in January, the first month of the deal, to 1.02 billion euros compared to a year earlier, according to data from EU’s statistics agency Eurostat.

    And Ukrainian attitudes towards the EU remain broadly positive. A survey in November showed 58 percent of Ukrainians supported the EU deal, versus 15 percent who wanted a customs deal with Russia.

    There is, however, growing disillusion with how Ukraine has turned out despite promises of the Western-backed leaders who came to power after Maidan. Corruption is still endemic, the separatist war in Ukraine’s Russian-speaking east is raging, and a political crisis has delayed talks for new overseas aid.

    At the same time, Ukraine’s chief backers, the United States, the EU and the International Monetary Fund, are getting increasingly frustrated with the slow pace of change, and the IMF has threatened to end a multi-billion dollar aid package.

    The Association Agreement itself may be under threat after Dutch voters rejected it in a referendum on Wednesday, although Ukrainian President Petro Poroshenko said the result won’t push his country from an EU path.

    ROTTING POTATOES

    Under pressure from Russia, the Kremlin-backed former Ukrainian President Viktor Yanukovich pulled out of signing the Association Agreement in 2013, setting off a chain of events that culminated in his ouster in February 2014.

    Some see Wednesday’s Dutch rejection of the deal, even if the result is non-binding and was already signed by the Dutch prime minister and all other European Union nations, as playing into Russia’s hands.

    With Russia also imposing a trade embargo on Ukraine and blocking the transit of Ukrainian products to Asia, Alex Lissitsa, Chief Executive Officer of Ukraine’s agricultural lobby UAC, estimates Ukrainian farmers are losing about $1 billion a year in business from Russia.

    “At this stage Ukraine has received few benefits from the free trade zone – it is simply a political and long-term deal,” he said.

    “Markets that were open have remained open, while those that were closed, remain closed,” he added.

    Ukrainian potatoes were left to rot, he said, because the markets of Russia, Crimea and the war-torn Donbass region had gone, and sales to the EU can’t make up the shortfall.

    Sugar producers have a similar complaint. Ukraine produces 1.5-2 million tonnes of sugar a year. But its quota to sell to the EU is just 20,000 tonnes, Ukrainian sugar union Ukrtsukor said, saying the EU should raise this to at least 300,000.

    Ukraine’s main poultry union says its businesses lost $60 million a year from being shut out of the Russian market.

    Russian restrictions on the transit of Ukrainian goods meant Ukrainian businesses were forced to reroute trade through costly routes such as Georgia and Azerbaijan, the union said.

    “The main problem is that there is a very small quota for certain types of produce, including poultry products,” it wrote in an email.

    Yuriy Kosyuk, who owns Ukraine’s largest poultry company and an ally of President Poroshenko, went as far as to say publicly that Ukraine had been “duped”.

    However, the poultry union acknowledged that while the EU is a huge opportunity for poultry producers Ukrainian companies need time to bring their products up to EU standards.

    For other sectors of the economy, the deal has also made little difference.

    “For metallurgists the agreement with the EU did not lead to any changes in terms of quantity or quality of trade. We have traded openly with the EU since Ukraine joined the WTO (World Trade Organization) after tariffs were scrapped on metal product supplies,” said Roman Kurashev, marketing director for Metinvest, Ukraine’s largest steel maker and exporter.

    LONG-TERM GOAL

    Both the EU and Ukraine’s government have played down the effect of the quotas. Protesters didn’t man the barricades at Maidan “just to sell a jar of honey to Europe,” Agriculture Minister Oleksiy Pavlenko told Reuters in an interview.

    “I wanted my children to live in a European country with European values,” he said. “Any process is long-term process and you cannot get everything at once.”

    The EU’s representative office in Kiev said in a statement the deal gives Ukraine fast access to EU markets with quotas “limited to a small number of agricultural products.”

    Ukrainian exporters aren’t able to sell enough products in many cases because their products don’t meet the standards stipulated in the agreement, it said.

    “Rather than blaming the EU and asking for additional quotas, many producers should rather lobby the Ukrainian government and urge it to focus on the implementation of the sanitary and phytosanitary chapter of the (agreement),” the statement said.

    Ukraine and Brussels have a huge stake in showing they can make their relationship work and that Kiev’s pain of losing its alliance with Russia will be worth it in the long run.

    “In agriculture, by far the largest sector of the economy with a 12 percent contribution to gross domestic product, and also an area where Ukraine can successfully compete with European producers, many quotas were unchanged including for maize, alcohol and fruit juice.”
    That doesn’t sound like the kind of arrangement with the EU that’s going to incentivize Ukraine to subject itself to austerity indefinitely. It takes a lot of trade to make up for civil war and conflict with your former main trading partner and it’s very unclear that the trade deal with the EU could possibly make up for those losses in the foreseeable future. So if we do see a turn away from the IMF it’s going to raise a number of questions about Ukraine’s future path. But it’s worth keeping in mind that one of the biggest open questions regarding Ukraine’s current path forward was how on earth anyone thought it wasn’t going to eventually lead to popular calls for a different path forward.

    Posted by Pterrafractyl | April 11, 2016, 12:05 pm

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