2020 trends for Ukraine (inertial variant)

The year 2020 in Ukraine will be marked by the intensification of opposition within the power team, intensification of socio-political protests, the government crisis, intensification of external and internal financial pressure on state power.

Before the President of Ukraine V. Zelensky, the mono-majority in the Parliament (“Servant of the People”) and the Government in 2020 there will be several key challenges:

1). Maintaining team unity and completing the construction of an "architecture of power" against the backdrop of the growing influence of oligarchs (especially I. Kolomoisky, Victor Pinchuk, R. Akhmetov and V. Khoroshkovsky, etc.) and lenders (IMF, EU, private lenders targeting the US and EU).

1). Maintaining team unity and completing the construction of an "architecture of power" against the backdrop of the growing influence of oligarchs (especially I. Kolomoisky, Victor Pinchuk, R. Akhmetov and V. Khoroshkovsky) and lenders (IMF, EU, private lenders targeting the US and EU) .

2). Maintaining social support (ratings) and stability (above all, street and economic) - it is necessary to demonstrate success in key social issues: the world (the Donbas war), the fight against corruption, raising the welfare of citizens (reducing tariffs, raising incomes).

3). Continuation of liberal reforms (launch of the land market, tax reform, decentralization, final privatization, deregulation, democracy, etc.).

1.

The current architecture of power in Ukraine consists of 3 large blocks: 1) Office of the President of Ukraine (under control of V. Zelensky, with influences of I. Kolomoisky and V. Pinchuk); 2) the parliamentary faction of the mono-majority “Servant of the People” (131 deputies out of 254, elected by majority constituencies - most of them have their own interests; “Presidential Group” - 80-120 deputies; the Kolomoisky group - 20-40 deputies; the Avakov group; mini-groups of V. Pinchuk, I. Pavlyuk, Russian Federation, regional centers of power); 3). A. Goncharuk's government (focuses on Western partners and creditors, formed at the expense of the Prime Minister, President and A. Avakov's staff; influences from V. Pinchuk and V. Khoroshkovsky are also traced).

The system is sufficiently fragmented. It`s exacerbated by the lack of effective control by the President (V. Zelensky does so through the head of the office of President A. Bogdan, who has his own interests), filled with internal conflicts and competition (above all for financial flows), saturated with new ones non-professional players with huge ambitions; due to the inexperience and poverty of many members of parliament and government, it is quite, easy and cheap to corrupt them.

Therefore, over the course of a year, the government's personnel policy will be dominated by two opposite trends:

1). Completion of central government (over 50 vacancies at the level of services, committees, inspections and agencies); 2). Governments of state-owned companies and enterprises (more than 600 vacancies); 3). The diplomatic corps. The review of all the nominees of the Poroshenko era will continue. However, some of them have chances to remain in their posts. In these matters there has already been serious internal competition between the Office of the President and the Government, the oligarchs, the West;

2) Departure from political system politicians and officials who have lost in the fight for influence or failed to meet their goals. For 2 months of full-fledged work of the new government and parliament have already left the Secretary of the National Security and Defense Council, Alexander Danilyuk, 4 governors (the head of the Lviv Regional State Administration Markiyan Malsky, the head of the Transcarpathian Regional State Administration Igor Bondarenko, the head of the Kiev Regional State Administration Mikhail Bno-Ayriyan and the head of the Lugansk Regional State Administration Vitaliy Komarnitsky), Deputy Ministers (Deputy Minister of Health Mikhail Zagriychuk, Deputy Minister of Health Mladen Kachurets, Deputy Minister of Infrastructure Alexander Klitin, Deputy Minister of Economic Development, Trade and Agriculture Inna Meteleva, Deputy Minister of Foreign Affairs Elena Zerkal).

This process will continue, and most likely will affect to the government. In 2020, the possible resignation of certain ministers (most likely - health, veterans, economics, justice, etc.); the departure of the Prime Minister of Ukraine and the resignation of the government as a whole are possible by the end of the year, in October-December. In the event that the resignation of the Cabinet of Ministers of Ukraine will take place at the height of a political crisis or street confrontation, the next prime minister of Ukraine may be a security official, for example, A. Avakov or a representative of the Privat group (I. Palitsa).

Resignations of the Head of the Office of the President, the Prosecutor General, the head of the SBU, the leadership of anti-corruption structures - NABU and NAZK are also likely.

Similar tendencies will occur in the parliament - individual MPs-majority members are likely to leave the “Servant of the People” faction, exclusion of directories; further crystallization and separation of influence groups within the fraction, which, without leaving it, will begin to play an increasingly prominent role and block important initiatives of the MP and the CMU (especially the Kolomoisky / Avakov groups, regional and industry elites).

Similar tendencies will occur in the parliament - elected by majoritarian districts deputies are likely to leave the “Servant of the People” faction, will be excluded of deputies elected by the lists; further crystallization and separation of influence groups within the fraction, which, without leaving it, will begin to play an increasingly prominent role and block important initiatives of the OP and the CMU (especially the Kolomoisky / Avakov groups, regional and industry elites).

Early parliamentary elections in 2020 are unlikely due to the provisions of the Constitution (parliament has 1 year of immunity from dissolution), and even in 2021, because any next parliament in composition will be worse for the President than the current one. Constitutional reforms will continue in terms of democracy, decentralization, strengthening the role of the President in the political system. It is possible to hold referendums on land issues, Minsk agreements and so on.

There is a possibility of reformatting the mono-majority of “Servants of the People” into a coalition of “Servants of the People” and “Voice” (formal or informal), especially if fragmentation processes in the Presidential faction and/or individual deputies leave it. “Batkivshchyna” may also join the process.

The key lines of the conflict in the system are privatization, the land market, personnel appointments, the budget, Avakov, Kolomoisky, Poroshenko, Medvedchuk, the influence of Western partners.

One more reform of the courts, prosecutor's office and anti-corruption structures in 2020 will not yield a result - the situation with the protection of property rights, other rights and freedoms will remain low.

The foreign policy situation will remain unstable: the level of support for Ukraine from the United States and the EU will at best be the same (at worst, it will begin to decline) due to the dominance of the domestic agenda or the shift of attention to other world regions; The EU will gradually continue to return with small steps to cooperation with the Russian Federation in the field of security and energy; Trump and the Democrats until November 2020 will continue to try to use Zelensky and Ukraine in the presidential election campaign in the United States; foreign economic conditions will deteriorate due to the export and raw materials nature of the Ukrainian economy.

2.

Preservation social support (ratings) and stability (primarily street and economic) - it is necessary to demonstrate success in key social requests: peace (war in the Donbass), the fight against corruption, improving the welfare of citizens (lower tariffs, higher incomes).

The ratings of the President and his political party are likely to decline and reach 30-45% of support by the end of the year, the topic of impeachment will arise (in the inertional scenario), opposition leaders and parties will retain or increase their support (first of all, Tymoshenko and Boyko, maybe - Vakarchuk); oligarchs will be in search of new political persons and projects in terms of possible early parliamentary elections of the year 2021 (4-7 new projects have already been launched in test mode). As a result, it will be more difficult for the authorities to make decisions, it`s level of legality will decrease, the role of public opinion and the likelihood of referenda will increase.

Within the framework of the “fight against corruption”, there is a significant likelihood of the arrest of P. Poroshenko and his inner circle (due to the struggle for the assets of the Roshen group and the opposition to street protests that P. Poroshenko’s team can stand behind); the conflict between the power team and the Mededchuk-Levochkin group will worsen; crises will occur situationally between Zelensky and Kolomoisky (primarily due to the informal influence of Kolomoisky on power and the situation around Privatbank).

No major breakthrough is expected in the implementation of the political part of the Minsk agreements and the return of Donbass to Ukraine. Most likely, the situation will go towards freezing the conflict. At the same time, a certain demilitarization will take place - the armed forces will be divorced on separate sections and the total number of shelling and casualties will decrease, exchanges of captured persons will take place, the procedure for crossing the demarcation line between citizens and freight transportation will be simplified. Perhaps even steps will be taken in terms of restoring (simplifying the receipt) of social payments and transport links. Probably, even a meeting of the Norman Four will take place, but the political part of the Minsk agreements will not be implemented, and the new Law of Ukraine "On the peculiarities of local self-government in certain regions of the Lugansk and Donetsk regions" ("on special status"), which is likely to be adopted in the first quarter of 2020, will be rejected by the Russian Federation and in "LDNR". The Russian Federation will continue the integration of the "republics" by universal passportization of the inhabitants of Donbass and further unification of social and legal life. Talks about changing the Minsk negotiation format will be intensifying.

In 2020, Ukraine will try to update the issue of Crimea as an instrument of pressure on the Russian Federation.

Although the geopolitical players of the USA, EU and Russia are gradually softening the confrontation in Ukraine, they are still only in search of a scenario for ending the “Ukrainian crisis”. They will be more expectant.

The authorities are unlikely to be able to significantly (at times) reduce tariffs for housing and communal services (although the President promised personally, tariffs may even increase) due to the huge budget deficit (about $ 4 billion; + external debt of $ 83 billion) and pressure of creditors (primarily the IMF), which will increase social discontent. Also, the income of citizens will not change significantly.

The issue of peace and war, local elections, as well as land reform, and tax changes (for example, a new system of taxation of individuals of entrepreneurs), decentralization, new labor legislation will be the areas of street instability, which are used by competitors Zelensky - Poroshenko, Medvedchuk, Tymoshenko and the right radicals to organize mass protests and pressure on power. The authorities are sensitive to such protests, which competitors will try to take advantage of.

The land reform will be launched (a law has been adopted), but its format and launch dates may still change significantly.

There are notable risks of either consolidation of power in the hands of the President (although external/foreign support and consensus will be needed), or attempts to radically destabilize the government through protests and activities of radical groups.

Also, in 2020, a population census is waiting for Ukraine (for the first time in 19 years), which may serve as the beginning (occasion) of the next stage in the formation of a new social policy - the rejection of post-Soviet social-democratic regulation.

3.

The continuation of liberal reforms (launching the land market, tax reform, final privatization, decentralization and administrative-territorial reform, deregulation, democracy, etc.) will become a zone of political confrontation and destabilization and will not give quick results.

Based on the budget of Ukraine for 2020, the economic priorities of the new government are:

- repayment of debts (438 billion UAH - 37% of the budget revenue) + war and security (246 billion UAH - 20%) = 57% of all Budget 2020 revenues;

- infrastructure and agriculture (which can be considered within one cycle: creating conditions, roads, ports, etc. for exporting agricultural products). In case of loss of the opportunity to receive financing from the IMF and other lenders, Ukraine may expect default scenarios, although this is unlikely so far.

Already in 2020, in connection with the launch of Nord Stream-2, Ukraine may lose a significant part of revenues from the transportation of Russian energy carriers to the EU.

Another significant risk for Ukraine is the situation with the devaluation of the national currency. Her revaluation in the last year is due to the active issue of government bonds. The dependence of the exchange rate on currency inflows on government bonds in 2019 is 95%. Wherein, the trade deficit is increasing (the growth rate of imports exceeds the growth rate of exports); direct foreign investments are decreasing, which are already at a meager level; receipts from Ukrainian guest workers slowed down. Further dynamics of the exchange rate depends entirely on the behavior of the NBU and, increasingly, on non-resident speculators. If for some reason they want to fix their profits (for example, a likely global financial crisis, worsening foreign economic conditions or political instability in Ukraine) and begin to withdraw currency from Ukraine, a sharp devaluation of the hryvnia may occur.

 

Ruslan Bortnik, political scientist, director of UIAMP