Analytical review of the week No. 110 of 04/04/2021.
ANALYTICAL REVIEW OF THE MOST IMPORTANT DOMESTIC, FOREIGN POLITICAL AND ECONOMIC EVENTS OF THE WEEK
The outgoing week was characterized by the continuation of three important trends for the domestic policy of Ukraine.
The first of them is the confrontation between the Office of the President and the leadership of the Constitutional Court, caused by the desire of the OP to put the KSU under its control. As part of this process, the head of the KSU A. Tupitsky decided to appeal against the decree on his dismissal in the Supreme Court. His chances of success are very slim.
The second tendency is the authorities' attempts to "prolong the life" of the consolidation of the administrative vertical with the help of a "strong hand" demonstration. As the NSDC “crushed” with sanctions all more or less significant “anti-Western” opposition, the authorities were faced with the question of who to use to demonstrate their strength further. Citizens with a reputation as smugglers in society were chosen as the object for such a demonstration. How effective such a tactic will be will be seen in the near future.
The third trend of the outgoing week is the attempts of the Russian and Ukrainian sides to reinforce their positions in the deadlocked negotiations on a peaceful settlement by demonstrating their readiness to use military force. So far, such military-diplomatic games of the parties only lead to an escalation of trench warfare in Donbass.
1. A. Tupitsky is going to appeal against the decree of V. Zelensky in the Supreme Court.
This week, the head of the Constitutional Court, Alexander Tupitsky, said that he considers the decision of President V. Zelensky to cancel the decree of ex-President V. Yanukovych on the appointment of A. Tupitsky and A. Kasminin as judges of the Constitutional Court as unlawful and illegal, and will challenge it in the Supreme Court. Referring to the fact that the Constitution and the law on the KSU expressly stipulate that the decision to dismiss a judge of the KSU is made only by the Constitutional Court at a special plenary session, A. Tupitskiy also said that he had issued an order to convene a special plenary session to consider the issue of dismissing judges who appear in a presidential decree.
At the same time, the Supreme Court received two claims, in which the plaintiffs will appeal against the decree of President V. Zelensky.
In addition, on April 2, A. Tupitsky signed an order addressed to the Deputy Head of the Constitutional Court of Ukraine Serhiy Holovaty, in which he declared the illegality of the decree of President Volodymyr Zelensky. The document says that during remote work, the powers of A. Tupitsky are not transferred to the deputy head of the KSU, and responsibility is provided for the assignment of powers in accordance with the Criminal Code of Ukraine. Tupitskiy called on judges of the Constitutional Court to act exclusively in accordance with the current legislation and to report attempts of intimidation.
The above is nothing more than a continuation of the confrontation between the KSU and Bankova, which began in the fall. It is based on the desire of the Office of the President to obtain a controlled Constitutional Court, which was possessed by all the previous guarantors of the Constitution, or at least to withdraw the KSU from the influence of opponents (primarily P. Poroshenko, I. Kolomoisky and V. Medvedchuk).
Now, how this confrontation will be resolved will be determined by the Supreme Court. Most likely, in its decision, this court is in solidarity with the position of the president, despite the fact that from a legal point of view, it is untenable. The reason for this is the intention of the OP to strengthen the role of the Supreme Court, spelled out in the judicial reform project lobbied by the presidential team.
On Bankova, the Supreme Court is viewed as loyal to itself. And, most likely, this conviction of the president's comrades-in-arms is not unfounded. According to the decree of the head of the Constitutional Court of Ukraine A. Tupitsky, his chances of defending his own office and the independence of the Constitutional Court seem so far (until the end of the presidency of V. Zelensky) doubtful. Of course, the law is formally on his side. However, lacking levers of influence on decision-making by other courts and, most importantly, their execution, Tupitsky in his struggle is almost certainly doomed to defeat.
2. The situation around the peaceful settlement in the Donbass.
There has been no progress on the issue of a peaceful settlement in Donbass.
Speaking this week in the Verkhovna Rada, Commander-in-Chief of the Armed Forces of Ukraine Ruslan Khomchak said that Russia, under the guise of preparing for exercises, is pulling additional military forces to the borders of Ukraine in the north, east and south. The United States expressed concern in this regard.
On April 1, Ukrainian President Volodymyr Zelenskyy accused Russia of concentrating troops on the border and warned of the danger of provocations. In addition, Russia did not support the proposal of the head of the Ukrainian delegation to the TCG Leonid Kravchuk to restore the ceasefire in Donbass from April 1.
Also, this week the Verkhovna Rada adopted a law that allows you to call up reservists without mobilizing in the event of a "special period". Now, in case of aggravation on the line of contact or violation of the Ukrainian borders, reservists of the first order will be called up without announcing mobilization. In addition, the parliament supported the resolution condemning the escalation of the conflict in Donbass, and the Russian Federation was named an aggressor country.
French President Emmanuel Macron and German Chancellor Angela Merkel held a video conference this week with Russian President Vladimir Putin. Among other issues, the conflict in Donbass was also discussed during it. The President of Ukraine was not invited to take part in this dialogue. Moreover, Germany and France publicly even clarified about the negotiations to the Ukrainian leadership (only through diplomatic channels), which put them in an uncomfortable position. In response to this, the President's Office said that Ukraine continues negotiations with all the countries of the Normandy format at different levels, but no decisions regarding Ukraine can and will not be made without Ukraine's participation. In turn, the press secretary of the President of the Russian Federation Dmitry Peskov said that V. Putin is not yet planning telephone negotiations with V. Zelesky.
The talks between Putin, Macron and Merkel without the participation of Ukraine are symbolic signals that are now being received by V. Zelensky that official Kiev is behaving incorrectly, and his position on Donbass, which consists in the desire to revise the Minsk agreements, does not find support from European partners. …
According to the Russian side, Ukraine's policy is aimed at dragging out the conflict. Nothing is being done to restore peace, and any negotiations have been reduced to political rhetoric. Therefore, the Russian Federation does not see any point in negotiations without the readiness to fulfill the previously reached agreements. Russia is also persuading the Ukrainian side to negotiate with representatives of the uncontrolled territories, which Kiev categorically refuses.
The situation that has developed at the moment around the peace process in Donbass reflects the attempts of both sides to break the negotiation deadlock by means of a demonstration (namely, a demonstration, not the use) of force. The publication in the media of a video with columns of armored vehicles being pulled to the contact line and the state border by both opposing sides is a demonstration of their readiness to solve the problem by military means. The Ukrainian side hints at its readiness to go on the offensive and return the uncontrolled territories by force. The Russian side, in turn, makes it clear that in the event of such a development of events, it is ready to use its troops to repel the attack on Donbass.
The purpose of such actions is to obtain concessions from the opponent in the negotiation process, thus ensuring a way out of the negotiation deadlock. However, so far there is no need to talk about the success of such tactics.
3. Results of the meeting of the NSDC.
On April 2, following a regular meeting of the NSDC, President Volodymyr Zelenskyy announced the imposition of sanctions against the top 10 smugglers. The sanctions list includes: Vadim Alperin, Alexander Chudakov, Viktor Sherman, Alexander Kravchenko, Vladimir Didukh, Ivan Bokalo, Valery Peresolyak, Yuri Kushnir, Orest Firmanyuk, Alexander Ereminchuk, as well as 68 related companies. Separately 11 Russian companies and organizations, including Rossotrudnichestvo, were sanctioned.
In addition to personal sanctions against persons whose activities are associated with smuggling, measures are also taken against customs officials who may be involved in corrupt practices. On the basis of a letter from the Internal Security Department of the State Customs Service of Ukraine, the NSDC suspended more than 100 employees of the State Customs Service from performing their duties, including 17 heads of customs and customs posts. In the territorial bodies were removed: in the Odessa customs - 22 employees; in the Transcarpathian region - 23 workers; in Kievskaya - 8 employees; in Volynskaya - 23 employees; in Galitskaya - 46 employees; in Bukovinskaya - 3 workers.
The President also announced the preparation of legislative changes that would criminalize the inaccuracy of customs declaration.
Annual losses from smuggling in Ukraine by the NSDC are estimated at UAH 300 billion. (about US $ 11 billion).
The introduction of sanctions against citizens, according to the media (this is how, since there are no court verdicts), are featured in smuggling, evidences the authorities' search for new reasons to demonstrate a "strong hand" in the framework of the policy to maintain control over the vertical of power, as well as the redistribution of smuggled streams. After two months of regular NSDC meetings, it became obvious that there was no strong anti-Western opposition in the country that could be suppressed relatively painlessly. Nevertheless, the need for a demonstration of strength for the authorities has not gone away. In these conditions, the OP decided to show the society and the administrative apparatus "readiness to resolutely fight against smuggling."
It is noteworthy that a whole list of famous people in Ukraine who are accused of organizing smuggling flows did not fall under the sanctions of the NSDC.
4. Telephone conversation between Vladimir Zelensky and Joseph Biden.
On April 2, the first telephone conversation between Vladimir Zelensky and US President Joseph Biden took place.
In his address to the citizens of the country, V. Zelensky noted that now Ukraine has the full and constant support of international partners, in particular Europe and the United States. According to him, Joe Biden assured that Ukraine will never be left alone with Russia's aggression.
Volodymyr Zelenskyy also stressed the particular importance of the telephone conversation with US President Joe Biden, who expressed support for the sovereignty and territorial integrity of Ukraine.
Since his election to the presidency, Joe Biden has refrained from telephone calls with his Ukrainian counterpart. Earlier, the US State Department noted that the call must be supported by actions. Now, the American edition "Politico" writes that the main reason for the call was the White House's concern about the escalation of the armed confrontation in the Donbass.
Based on the results of the conversation, it can be assumed that, as a result of this introductory conversation, V. Zelensky received symbolic situational support from D. Biden and his administration, and also assumed certain obligations regarding the fight against corruption, reforms and de-oligarchization. Therefore, this conversation politically strengthens V. Zelensky, but it can aggravate the crisis of his relations with key Ukrainian financial and political groups, depriving him of some of his influence on the anti-corruption, judicial and banking systems. Of course, under these conditions, the President's Office is trying to squeeze the maximum PR effect out of the telephone conversation.
As for the American side, for it this conversation was also a "reconciliation of positions" on Donbass, which in the United States is perceived as one of the priority regions in the issue of geopolitical containment of Russia.
5. Sociology. Authority trust rating. Self-assessment by the population of the level of security against threats in various areas.
On April 1, the Sociological Group "Rating" published a study according to which V. Zelensky is in the lead in the trust rating.
46% of respondents trust him, 51% do not trust him. Over the month, trust has increased by 3%, and distrust has decreased by 3%. (based on the results from 05.03.2021. The president was trusted by 43%; did not trust - 55%). The overall balance of trust has improved by 7% and is (-5%); against (-12%) in March.
Vitali Klitschko has a relatively stable rating of trust, which ranks second. 33% trust him, 54% do not trust him, trust balance - (-21%)
Dmitry Razumkov is trusted by -31%, not trusted by 36%, balance (-5%). Don't know him - 29%. Ranking from the beginning of March has not changed significantly.
The trust ratings of Yulia Tymoshenko and Petro Poroshenko show a slight downward trend (2-3%).
Yuriy Boyko's rating has stabilized. Trust him - 23%, do not trust - 58%. The rating did not change in March, compared to a 3% drop in February after the closure of opposition TV channels.
According to the survey, 84% of citizens believe that Ukraine, first of all, lacks order, even if it restricts certain freedoms. It is worth noting that the demand of society for order in Ukraine is increasing; in dynamics, the number of respondents who focus primarily on order has increased by 19% since 2017 (63%).
Regarding the assessment of the security areas:
Citizens of Ukraine consider themselves the least protected in the field of justice (good - 6%; satisfactory - 20%; poor - 69%). Protection against corruption was also rated low (good - 3%; satisfactory - 9%; bad - 87%).
Citizens assess the protection against emergencies relatively positively (good-21%; satisfactory - 38%; bad -37%), and illegal migration (good-13%; satisfactory - 27%; bad -37%).
On a 5-point scale, the level of protection on average ranges from 2.7 to 1.6 points, that is, in no area of security, citizens do not consider protection to be satisfactory.
The results of sociological research by the "Rating" company indicate that at the moment the authorities have managed to ensure the stabilization and even growth of not only the presidential and party ratings, but also the trust rating. It is expected that the implementation of society's request for a "strong hand" will continue. It is important to note that at the same time, there is also a stabilization of the trust rating of the representative of the OPLZ party - Y. Boyko. His trust rating has stopped declining, which was observed in February immediately after the closure of TV channels. This may indicate that the effect of the closure of opposition TV channels and the introduction of a number of sanctions is exhausting itself.
The most important foreign policy event of the outgoing week is the strategic agreement concluded between the PRC and Iran, according to which over the next 25 years the Islamic Republic will receive 400 billion dollars of Chinese investments, not counting the profits from the sale of oil. The signing of this document significantly strengthened Iran's position in potential negotiations with the United States on a return to the "nuclear deal", making it impossible to revive the JCPOA without significant concessions from Washington.
Meanwhile, in Myanmar, civil confrontation is growing, fueled by external players. The country has become another field of collision of interests of the United States and China in Southeast Asia.
1. Videoconference of V. Putin, E. Macron and A. Merkel.
On March 30, the leaders of Russia, France and Germany held a videoconference, during which they discussed a number of issues from the field of international relations. And although in some areas, in particular, the fight against the pandemic, the situation in Libya and Syria, the parties have an understanding, the issues of Donbass and Alexei Navalny still remain controversial in relations between Russia and European countries.
One of the central topics of the talks was the situation in Donbass, where there is an escalation of hostilities, and the parties to the conflict are making extremely bellicose statements.
Russia has traditionally expressed concern about the "escalation provoked by Ukraine" and accused Kiev of effectively disrupting the peace talks. The position of France and Germany also did not differ from those voiced over the past six years. Paris and Berlin did not say anything about the actions of Ukraine, but called on Russia to participate in stabilizing the ceasefire regime, and also expressed their commitment to the observance of the Minsk agreements.
In this case, it was more about an exchange of views and fixing the status quo of the negotiating positions of the three countries. "Decisions on the fate of Ukraine behind its back", as initially stated by some experts, actually did not happen [https://www.kommersant.ru/doc/4752183].
The question of Russian opposition leader Alexei Navalny, who is serving a prison sentence and is on hunger strike this week, also remained painful for the three countries. Macron and Merkel ritually expressed concern about the state of health of the oppositionist, and Putin, no less ritually, "gave his interlocutors appropriate explanations of the objective circumstances of the case." In general, the scandal, which was notorious a few months ago, caused by Navalny's imprisonment, has now subsided and has not led to any significant cooling in relations between Russia and France with Germany.
It is also curious that in the German version of the message following the videoconference there was completely no mention of the discussion of relations between Russia and the EU (after Sergei Lavrov's recent statements that relations with the European Union as an institution were completely destroyed, this issue became extremely relevant). Apparently, this topic in Berlin is preferred to publicly call the competence of Brussels.
At the same time, it cannot be said that the parties did not at all find common themes in the negotiations. So, Moscow, Paris and Berlin announced the likely cooperation in the field of vaccines. This should be preceded by the completion of certification of the Russian Sputnik V vaccine in the European Union. Also, Russia, France and Germany have similar approaches to assessing the situation in Syria and Libya, where there is a gradual stabilization of the situation.
On the whole, Europe is currently obviously not ready to develop fundamentally new approaches to the existing problems of the world and regional agenda. Angela Merkel has less than six months left to rule, and the CDU / CSU bloc is at risk of losing the upcoming September elections. France, which claims to be moral leadership in Europe, does not seem to have the full resources to put this aspiration into practice.
2. Myanmar is on the brink of a civil war.
The protests in Myanmar, which have been ongoing for several months, have recently become sharply radicalized. Hundreds of people fell victim to the confrontation between the security forces and the opposition, and the country found itself on the brink of a civil war. Initially, the internal nature of the conflict is fueled by external forces interested in strengthening their own geopolitical influence not so much in the country as in the region as a whole.
Two months ago, in February 2021, a coup d'état took place in Myanmar. The military did not recognize the results of the fall elections, in which the ruling National League for Democracy (NLD) party won a decisive victory. The military dismissed the government and detained the country's president, Vin Myin, and the leader of the party, Aung San Suu Kyi, who served as a state adviser and foreign minister. The latter were oriented towards the West, while the military advocates preserving the country's independence while deepening relations with China as a key player in the region.
The military coup, as expected, provoked a wave of protests in Myanmar, which initially developed in a relatively peaceful direction. The opposition used classical methods of protest, such as actions of civil disobedience, a march of empty pans, etc. However, when the wave of discontent began to subside, the confrontation suddenly escalated, which was timed to coincide with the Day of the country's Armed Forces.
Over the past week and a half, violent clashes have killed more than 550 protesters, more than 2,500 were detained and several hundred disappeared. In addition, ethnic conflicts have escalated in the country. Representatives of the Karen people seized a military base located on their territory and killed the soldiers who were there. Involvement of other ethnic groups in the confrontation is not excluded.
Against the background of aggravated civil confrontation, external forces are increasingly drawn into the conflict. The United States has evacuated its diplomats from the country and imposed sanctions on the defense and interior ministries and two state-owned companies. Also, the United States suspended all trade and investment transactions with Myanmar. In turn, China and Russia occupy exactly opposite positions.
Russian Deputy Defense Minister Alexander Fomin attended the parade dedicated to the Day of the Armed Forces of Myanmar. And although the Kremlin said that this does not mean approval of the tragic events, the symbolic meaning of this visit is obvious. China and Russia also refrained from criticizing the actions of the Myanmar military in the UN Security Council.
In addition, the PRC called for de-escalation and protection of the interests and property of foreign citizens in the country.
Beijing is a key player in the region and evidently perceives the active actions of the pro-Western opposition as an attempt to aggravate the situation on its borders. Given that the administration of US President Joseph Biden has designated China as its main challenge, Washington will clearly strive to create a zone of instability around the PRC. Under these conditions, Myanmar's slide into open civil war seems very likely.
3. China signed a 25-year strategic cooperation agreement with Iran.
On March 27, China and Iran signed a strategic cooperation agreement. According to the Iranian side, the document is designed for 25 years and consists of political, strategic and economic components.
Of the scant information on the content of the document that can be found on the Internet, the most impressive is the amount of Chinese investments in the Iranian economy written in it. Over the next 25 years, it will amount to $ 400 billion. This is not counting the income from the sale of Iranian oil, which China is ready to buy in ever larger volumes.
In March this year, China bought 856,000 barrels of Iranian oil a day. This is the highest purchase rate in almost 2 years, and 129% more than in February. Such data are provided by Kevin Wright, an analyst at Kpler... It takes into account ship-to-ship transshipment in the Middle East and in the waters of Singapore, Malaysia and Indonesia, which hide the origin of oil.
China buys almost 12 million barrels of oil per day from various suppliers, and its oil needs exceed 30 million barrels of oil per day, which leaves significant potential for growth in purchases, including from Iran.
Iranian oil is especially attractive for China due to the discount caused by the Western sanctions imposed on the Islamic Republic. At a time when other states are afraid to buy Iranian oil in large volumes because of the so-called "secondary sanctions" from the United States, Iran is forced to dump in order to sell as much crude as possible to China. On average, Iranian oil costs $ 3-5 less than Brent. Given the amount China purchases, this discount provides substantial savings.
According to The New York Times, the agreement signed between Beijing and Tehran most likely coincides with its draft received by the newspaper last year, which provides for investments in dozens of areas, including banking, telecommunications, ports, railways, healthcare and information technology.
Speaking about the international political significance of the concluded agreement, it should be noted that it significantly strengthened Iran's negotiating positions on the issue of returning to the terms of the "nuclear deal" with the United States. Recall that the resuscitation of this document is one of the most important points of the foreign policy program of American President Joe Biden.
The Americans insist that Iran unilaterally return to compliance with the terms of the deal, after which they will be ready to begin negotiations on easing sanctions. Tehran, in turn, is setting diametrically opposite conditions, demanding from the American side to ease sanctions, after which it will be possible to start negotiations.
The guarantees of large investments and stable oil purchases provided by China allow the Iranians not to make concessions to the United States and continue to bend their line in absentee diplomatic polemics with the White House.
4. China reformed the Hong Kong legislative assembly, leveling the influence of the local community disloyal to the center on it.
Last week, the Chinese government approved a new law that will drastically restrict Hong Kongers' right to run in elections and change the structure of the city's legislature, further strengthening Beijing's hold on the semi-autonomous territory.
In a unanimous decision, on Tuesday, the Standing Committee of the National People's Congress approved proposed changes to the mechanism for electing Hong Kong lawmakers and mayor.
So far, the seats in Hong Kong's 70-seat legislature have been divided roughly evenly between directly elected MPs and so-called functional constituencies, elected by employees of large enterprises that are usually favored by Beijing's allies. In theory, opposition parties could gain a majority in the body, occupying almost all of the elective seats and several functional districts, which allowed them to have a decisive voice in the management of the city.
However, the system has changed since last Tuesday. The legislature has been expanded to 90 seats, 40 of which will be elected by a newly empowered electoral commission made up of officials loyal to the central government.
The functional constituencies will control 30 seats, while only 20 deputies will be directly elected by the townspeople. This is the smallest number of elected representatives in the local legislature since Hong Kong was taken over by China in 1997.
The reason for the reform of local self-government, initiated from Beijing, was probably the realization that the United States and its allies in their confrontation with China will use the Hong Kong factor along with the factor of information and political promotion of the topic of oppression of the Uighurs in Xinjiang. To thwart all attempts to destabilize the region, the Chinese government has decided to strengthen its control over the region by curtailing the ability of potentially disloyal local MPs to influence the city’s governance.
In the world economy, the trend for unequal exchange between the countries of the “core” and “periphery” continues, where Ukraine falls into the second category, selling state property in order to pay off the IMF, cutting compensation for doctors and entrepreneurs during the lockdown, and acting as a donor of cheap labor for Poland …
Even the military industry in our country is viewed from the point of view of profitability, not defense capability.
1. The epic with the container ship EverGiven stuck in the Suez Canal for several days caused world trade a daily loss of 9.6 billion dollars.
The situation around the stuck ship Ever Given in the Suez Canal, which caused losses for the world economy ($ 9.6 billion per day), demonstrates unequal exchange in modern world trade, where the so-called “developing economies” are assigned the role of “cash cows” supplying rich countries (in this case, the European Union) a wide range of goods. “Developed economies” have completely thrown off the “ballast” of the production of goods with low added value, which also require the use of natural resources (deforestation). While the stuck container ship was blocking the Suez Canal, a shortage of coffee, furniture and even toilet paper was predicted in the European market. Thus, the situation around Ever Given demonstrates the careful attitude of the EU countries to their forests, since they prefer to buy wood products (toilet paper, furniture) from Asia, bringing their dependence on supplies to a critical level.
The traditional sea route from Europe to Asia until the opening of the Suez Canal in the 19th century remained a route around Africa, but with modern trade volumes, this route is completely unprofitable, and is used only in extreme cases, as in the case of the blocking of the Suez Canal on March 23rd. Bypassing Africa takes up to 26 days, while the Suez Canal takes 16 hours. Thus, the northern sea route across the Arctic Ocean can become a new maritime alternative to the Suez Canal for connecting Europe and Asia.
Figure 1. Comparison of the sea route from South Korea to the UK through the Suez Canal (23 thousand kilometers) and the northern sea route (14 thousand kilometers) [https://ru.wikipedia.org/wiki/%D0%A1%D0%B5% D0% B2% D0% B5% D1% 80% D0% BD% D1% 8B% D0% B9_% D0% BC% D0% BE% D1% 80% D1% 81% D0% BA% D0% BE% D0% B9_% D0% BF% D1% 83% D1% 82% D1% 8C # / media /% D0% A4% D0% B0% D0% B9% D0% BB: Northern_Sea_Route_vs_South_Sea_Route.svg].
If such situations recur in the future, the risks will only grow, since the volume of trade (quantity of goods) through the Suez Canal grows by an average of 8.2 percent per year, and the number of ships passing through the canal grows by 3.6 percent per year. In other words, merchant ships are getting bigger and more capacious, and their number is also growing. It is important to note that even before the channel is blocked, ships approaching it cannot immediately enter it, but are forced to wait for the dispatcher's permission. So, in 2020, on average, every day 82 vessels (from the north and south of the channel) are waiting for the dispatcher's permission, and the blocking on March 23, 2021 only increased the queue from 82 to 133 vessels.
Thus, the Suez Canal can no longer cope with the volume of trade, and the parties concerned must begin to take actions to prevent similar situations in the future (either the expansion of the Suez Canal, or the acceleration of the construction of the parallel "Israeli Canal", or the reorientation of some cargo from the southern to the northern sea route ). In 2014-2015, the Egyptian government expanded part of the Suez Canal. The project cost $ 9 billion.
2. The Rada adopted in the first reading the bill # 4020, opening the way for the partial privatization of Naftogaz and Ukrzaliznytsia.
On March 30, the Verkhovna Rada of Ukraine adopted in the first reading the bill No. 4020 on state property objects that are not subject to privatization. The document was supported by 289 deputies.
The bill proposes to approve a list of 74 state-owned enterprises, in which the state's share should be 100%. Also indicated are nine joint-stock companies in which the share of Ukraine should be 50% +1 share. The document proposes to ban the privatization of strategic companies: NNEGC "Energoatom", NEC "Ukrenergo", SE "Vostochny GOK", SE "Garpok", SSE "Chernobyl NPP" and "Design Bureau" Yuzhnoye ".
At the same time, it allows partial (up to half) privatization for: JSC "Ukrzaliznytsia", JSC "Ukrposhta", NJSC "Naftogaz of Ukraine". The share of the state in them cannot be less than 50% + 1 share.
According to the bill, 102 more state-owned enterprises can be reformatted into economic companies. The state's share in them should also be 50% + 1 share. Among them - State Enterprise "Antonov", KB "Luch", State Enterprise "Lviv Armored Plant", State Enterprise "Zhitomir Armored Plant" and State Enterprise "Odessa Aviation Plant". The list also includes a number of enterprises for the production and repair of equipment. It is proposed to prohibit the privatization of forestry enterprises and cultural and sports facilities.
The bill is proposed in the current three years to prohibit the collection of real estate and production. The exception is collection for the payment of wage arrears.
The key point of this bill, for the sake of which its adoption was started, is opening the way for the partial privatization of the two largest state monopolists - Naftogaz and Ukrzaliznytsia, which are the most attractive assets in the country.
The history of preparations for the privatization of Naftogaz looked like this:
● In February 2020, Andrei Kobolev said that Naftogaz had held consultations with investors on an IPO. In June, he announced that Naftogaz could go public by 2023.
● On August 12, the Cabinet of Ministers considered a draft law on the partial privatization of Naftogaz, Ukrzaliznytsia and Ukrposhta.
● In October, the Cabinet of Ministers approved the ownership policy for Naftogaz. It provides for the privatization of a minority stake in the company.
As of 2018, Naftogaz estimated its assets with a total value of UAH 603.7 billion (in 2017 assets were estimated at UAH 723.1 billion) [https://www.naftogaz.com/files/Zvity/Annual-Report -2018-engl.pdf]. The company's share capital was estimated at UAH 194.3 billion as of December 31, 2018 [https://www.naftogaz.com/files/Zvity/Annual-Report-2018-engl.pdf].
Thus, if 49.99% of Naftogaz shares are sold, the budget of Ukraine could be replenished by approximately UAH 97 billion, or $ 3.6 billion. Net profit of Naftogaz for 2018 stood at UAH 256 billion [https://www.naftogaz.com/files/Zvity/Annual-Report-2018-engl.pdf]. Thus, the new shareholders will receive 128 billion hryvnia ($ 5 billion) of Naftogaz's net profit. From the sale of 49.99% of Naftogaz shares, Ukraine can instantly gain $ 3.6 billion, but as a result, it will lose up to $ 5 billion annually in the future.
3. The G7 ambassadors discussed the reform of the concern with the leadership of Ukroboronprom.
On April 1, 2021, the ambassadors of the G7 countries at a meeting with Ukroboronprom CEO Yury Gusev discussed the reform of the concern and the defense-industrial complex as a whole. The reform of Ukroboronprom actually started on December 21, 2020 by signing an order on corporatization of the concern. As a result of the transformation, 65 enterprises are planned to be included in the "Defense Systems of Ukraine" holding. The enterprises of "Ukroboronprom", which were included in the list and are being transferred, did not carry out financial and economic activities, or were unprofitable and had unsatisfactory economic indicators.
Military production is a priori not designed to make a profit, since its main goal is to ensure the country's defense capability, and profit is only a “side effect” after the main goal has been achieved.
Thus, when discussing the “profitability” of military enterprises, especially with foreigners, there is no talk of any kind of ensuring the country's defense capability. On January 11, 2021, Yuri Gusev published an article in the Economic Pravda publication, in which he divides enterprises within the Ukroboronprom into “poor” and “rich”, that is, the general director of Ukroboronprom considers the state concern as a commercial enterprise that exists to maximize profits. If the approach to the reform of the concern were more constructive, it should have been about optimizing exclusively outdated production, and not “unprofitable”.
With the current approach, one should expect a quick privatization of the former enterprises of the concern, recognized as "unprofitable", after which, in the hands of private traders, they will quickly begin to make a profit.
4. The situation around payments to entrepreneurs and salaries of doctors during the lockdown.
On March 30, 2021, Verkhovna Rada adopted Bill No. 5300, introduced by President Vladimir Zelensky, regarding payments to entrepreneurs and employees affected by the lockdown.
According to the document, the affected business, firstly, should be included in the corresponding list of the Cabinet of Ministers. Secondly, the business must be over 3 months old. Thirdly, the debt on ERUs will not allow receiving compensation.
The central government planned to transfer part of the burden of payments to local authorities, or rather, everything above 8 thousand hryvnia. As a result, this idea had to be abandoned.
The Diya mobile application, with the help of which compensations are calculated, sometimes fails.
If a business operates with restrictions during a lockdown, which means it loses profit, then there will be no compensation.
Payments of 8 thousand will only help employees, and not business owners, who must pay ERUs and utilities, regardless of whether the business is running or not, and it works at full capacity or with restrictions.
According to the estimates of the Razumkov Center, since the beginning of 2020, about 60 thousand doctors have gone abroad, and this process continues. From January 1, 2021, additional payments to doctors stopped, many of whom in fact receive only the basic rate of 5 thousand hryvnia.
As a result, the authorities write laws in such a way as to minimize payments to doctors and entrepreneurs. If we take the statistics on the number of doctors in Ukraine for 2018, which is over 186 thousand people [https://news.liga.net/health/news/skolko-vrachey-rabotaet-v-ukraine-info..., then, according to a study by the Razumkov Center, over the past year the country has lost one third of all doctors.
Today, the cost of studying at a university in a medical specialty costs the state an average of 30 thousand hryvnia per year [https://alexcredit.ua/blog/tsiny-na-navchannya-v-medychnykh-vuzakh-ukray.... If a future physician has been studying at a university for 6 years on average, this means that the state spends 180 thousand hryvnia on training one doctor. If 60 thousand doctors left the country, this means that Ukraine has “presented” Poland and other priority countries for emigration to 10.8 billion hryvnias, or about 400 million dollars.
Summing up the results of the outgoing week in world politics and economics, we note the following:
First, in the internal politics of Ukraine, the confrontation between the Office of the President and the leadership of the Constitutional Court continues, caused by the desire of the OP to put the KSU under its control. As part of this process, the head of the KSU A. Tupitsky decided to appeal against the decree on his dismissal in the Supreme Court. Considering the general trends in the development of the political situation in the country, as well as the fact that the Supreme Court is loyal to the Office of the President, its chances of success are minimal.
Secondly, the attempts of the Ukrainian authorities to “prolong the life” of the consolidation of the administrative vertical with the help of demonstrating a “strong hand” and to intercept financial flows are continuing. As the NSDC “crushed” with sanctions all more or less significant “anti-Western” opposition, the authorities faced the question of who to use to demonstrate their strength further. Citizens with a reputation as smugglers in society were chosen as the object for such a demonstration. How effective such a tactic will be will be seen in the near future.
Third, there have been recent attempts by the Russian and Ukrainian sides to reinforce their positions in the deadlocked negotiations on a peaceful settlement in Donbas by demonstrating their readiness to use military force. So far, such military-diplomatic games of the parties only lead to an escalation of trench warfare.
Fourth, the most important foreign policy event of the outgoing week is the strategic agreement concluded between China and Iran, according to which over the next 25 years the Islamic Republic will receive 400 billion dollars of Chinese investments, not counting the profit from the sale of oil. The signing of this document significantly strengthened Iran's positions in potential negotiations with the United States on a return to the "nuclear deal", making it impossible to revive the JCPOA without significant concessions from Washington.
Fifth, within the framework of the same trend of geopolitical confrontation between the United States and China, instability is growing in Myanmar, fueled by external players. The country has become another field of collision of interests of the United States and China in Southeast Asia, which in the near future risks turning into a civil war. Nevertheless, today, the positions of the military regime governing the country look quite strong.
Sixth, the trend in the Ukrainian economy continues to seek funds to compensate for the budget deficit and cover external borrowings by any means. Within the framework of it, two largest state monopolies, Naftogaz and Ukrzaliznytsya, are preparing for partial privatization. Similar processes, only on a smaller scale, are taking place with the reform of Ukroboronprom. The non-profit enterprises of the concern are also preparing for privatization.