“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.

@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

@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.

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.

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.

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.

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.

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.

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

...

“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.

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.

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.

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

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

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!

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.”

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.

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.

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.

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.

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...

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.

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.

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.

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.

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.

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.

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.

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...

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.