ANALYTICAL REVIEW OF THE MOST IMPORTANT DOMESTIC, FOREIGN POLITICAL AND ECONOMIC EVENTS OF THE WEEK
14.06. - 20.06.2021
CONTENT:
SUMMARY AND KEY TRENDS.
INTERNAL POLICY.
1. NAPK demands to cancel the appointment of the head of "Naftogaz" Yu. Vitrenko.
2. V. Zelensky vetoed the law weakening liability for false declarations.
3. Rumors about a possible change of government for the sake of the resignation of the Minister of Internal Affairs Arsen Avakov.
4. The Golos party split and declared no confidence in the leader of the faction.
5. Meeting of the NSDC and its results.
FOREIGN POLICY.
1. Meeting of Joe Biden with Vladimir Putin in Geneva.
2. Joe Biden's talks with Boris Johnson.
3. Summit of the G7 countries.
4. NATO Summit.
5. US-EU summit.
ECONOMY.
1. The bill on "tax amnesty" and the reaction of the IMF.
2. Ukraine will pursue the assets of the former owners of bankrupt banks in 2014-2017.
3. The Minister of Territorial Development urged not to be afraid of agricultural holdings that will bring investments.
4. Prospects for using the Ukrainian GTS after the launch of Nord Stream 2.
SUMMARY AND KEY TRENDS.
Summing up the results of the outgoing week, we note that:
First, the continuation of the policy of the President's Office aimed at establishing control over the main state-owned enterprises, one of which is Naftogaz, leads to a serious conflict with Western partners. As a result, NAPK demands to cancel the appointment of Yu. Vitrenko as head of Naftogaz, and the Cabinet wants to appeal this order of NAPK in court.
Secondly, against the background of the strengthening of the presidential vertical of power, rumors are spreading in the country that a change of government may take place in the fall in order to replace the Minister of Internal Affairs Arsen Avakov. In practice, it will be much more difficult to do than to say, since most of the power structures over the past 7 years have been infiltrated by A. Avakov's people, as a result of which, even in case of resignation, he will be able to influence many processes in these structures.
Thirdly, this week the conflict in the Golos faction continued, the split of which is becoming more and more obvious. The Golos party was initially unviable for two reasons. First: it is impossible to put together a stable electoral base for such a project, due to its internally contradictory ideology. Golos tried to combine Ukrainian nationalism with liberalism and upholding the interests of American democrats. But the problem is that it cannot be combined. Therefore, neither for the liberal-minded voters, nor for the nationalist-minded, this project did not become "theirs". The second reason: initially there were two conflicting groups in the party: representatives of the Kiev grantees and natives of the Ukrainian Galician Party. As soon as the electoral support of the political force completely dried up, old contradictions surfaced in it.
Fourth, in international politics, this week the United States continued its attempts to mobilize its European allies to fight China and Russia in the framework of the new Cold War. In this case, US President Joe Biden managed to achieve some success. The final documents, adopted as a result of all the events in which he participated in Europe, contain recognition by all the signatories of the Russian Federation and China as opponents.
Fifthly, another international political tendency that manifested itself in the outgoing week is the desire of the United States and the Russian Federation to establish the framework of what is permissible, beyond which both sides do not intend to go during the new Cold War. This "framework" will be the arms control agreements, the readiness to reach which the parties confirmed after the meeting in Geneva.
Sixth, the Ukrainian government continues to look for additional sources of filling the budget by adopting a tax amnesty law and pushing middle-income citizens to show their income level and pay a new tax on them. The IMF is skeptical about the tax amnesty, seeing it as another loophole for corruption and money laundering. Another potential source of budget replenishment can be the business empire of Konstantin Zhevago, who has been on the international wanted list since 2019 and at the same time is in third place on the Forbes list among the richest citizens of Ukraine. In addition to Zhevago, the Ukrainian authorities with varying degrees of success persecute the owners of banks that went bankrupt in 2014-2017.
INTERNAL POLICY.
Briefly:
The continuation of Bankova's policy aimed at establishing control over the main state-owned enterprises, one of which is Naftogaz, leads to a serious conflict with Western partners. The latter are not satisfied with personnel reshuffles in Naftogaz, as they reduce the US influence on the company. As a result, NAPK demands to cancel the appointment of Yuri Vitrenko as head of Naftogaz, and the Cabinet wants to appeal the NAPK order in court.
Against the background of the strengthening of the presidential vertical of power, rumors are spreading in the country that in the fall it may be a change of government in order to replace the Minister of Internal Affairs Arsen Avakov.
Also this week, the conflict in the "Voice" faction received a continuation, the split of which is becoming more and more obvious.
1. NAPK demands to cancel the appointment of the head of "Naftogaz" Yu. Vitrenko.
This week, on June 15, the National Agency for the Prevention of Corruption (NAPC) issued an order to the Cabinet of Ministers to eliminate violations of Art. 26 of the Law of Ukraine "On the Prevention of Corruption", according to which the order of the government on the appointment of the head of the board of "Naftogaz" Yuri Vitrenko and the contract with him should be canceled as illegal1.
Yu. Vitrenko refused to voluntarily suspend the exercise of his powers and said that the NAPK's instructions were illegal, so he would go to court.
In turn, the chairman of the supervisory board of NJSC Naftogaz of Ukraine, Claire Spottiswood, convened an extraordinary meeting of the council to discuss the removal of the chairman of the board, Yuriy Vitrenko2.
For his part, Prime Minister Denis Shmygal wants to appeal against the NAPK's order on the chairman of the board of Naftogaz Yuriy Vitrenko - a corresponding claim was filed with the District Administrative Court of the city of Kiev3.
Justice Minister Denis Malyuska said that the NAPK issues a mandatory order to the Cabinet of Ministers, the body to which it is subordinate, but the Cabinet does not use political means of influencing the subordinate body, but goes to court.
Recall that on April 28, the Cabinet of Ministers dismissed the Supervisory Board, dismissed the head of the board of Naftogaz Andrey Kobolev and appointed acting in his place. Head of the Ministry of Energy Yuri Vitrenko.
In May of this year, US Secretary of State Anthony Blinken called the personnel reshuffle at Naftogaz a bad signal and potential international damage to Ukraine's image4.
The events described above continue the tendency of confrontation between the current government and external players for control over the main state-owned enterprises of the country. The president's office aims to establish control over the main state-owned enterprises, one of which is Naftogaz. Therefore, external influences in these structures should be minimized.
The new head of Naftogaz, as it was believed in the President's Office, should not have caused a sharp protest from the West, since he has long-established contacts there. Yu. Vitrenko, being the representative of V. Zelensky and R. Akhmetov, had to simultaneously balance all the most important energy players in the country and establish relations with Western partners. But, as it turned out, the personnel reshuffles in Naftogaz carried out in April did not suit the representatives of the West, since they reduce their influence on the enterprise. Therefore, with the help of the levers of their influence - the NAPK and the supervisory board, they are trying to change the balance of power in their favor. For their part, the OP show no desire to give up their positions and are trying to defend the appointment of Yu. Vitrenko through the courts.
2. V. Zelensky vetoed the law weakening liability for false declarations.
On June 15, it became known that Volodymyr Zelenskyy returned to the Verkhovna Rada with his proposals a law on liability for inaccurate declaration (bill No. 4651), which parliament adopted on June 3, 20215. The President's Office recalled that Zelensky initiated this bill in order to restore a prison sentence for inaccurate declaration.
However, when considering the document, the deputies made changes to the procedure for declaring information about movable and immovable property that is in the possession or use of the declarant's family members. "Criminal liability for inaccurate declaration of information should be quite severe and provide for the possibility of imposing a sentence of imprisonment," the message says.
Earlier, the National Agency for the Prevention of Corruption and the National Anti-Corruption Bureau called on President V. Zelensky to veto the law on declaration, since it allows not to declare the property of family members. The Venice Commission also recommended for adoption the norm on toughening criminal liability.
Despite the fact that the parliament returned the punishment in the form of imprisonment for inaccurate declaration, which was canceled in the fall by the Constitutional Court, the bill mitigates liability for declaring the property of relatives or failure to submit a declaration. The amendment of the deputies would allow the declarant to rewrite the property to relatives, who, for example, refuses to provide him (the declarant) with information about this property, so he cannot declare it.
But it is worth noting that, despite the fact that the tightening of declarations for officials is generally a positive process, against the background of the increasing concentration of the president's power, as well as the corruption of the system as a whole, the law is unlikely to contribute to the formation of transparent processes and prevent illegal enrichment. Most likely, the tightening of declarations for officials, acting as a pretext for PR, will also serve as an instrument of control, on the one hand, the president and his team power, and on the other - Western partners.
3. Rumors about a possible change of government for the sake of the resignation of the Minister of Internal Affairs Arsen Avakov.
This week, rumors began to circulate that in the fall the current government could be dismissed in order to dismiss Interior Minister Arsen Avakov7. But as practice shows, it is not so easy to remove the head of the Ministry of Internal Affairs. A. Avakov has been in office since 2014 and has enormous political influence and incriminating evidence on most politicians. In addition, most of the power structures have been infiltrated by his people. This allowed him to "outlive" two presidents and five governments. A. Avakov also built a serious lobby in the parliament. It includes a part of the group "For the Future", and some deputies from the "Trust". The head of the Ministry of Internal Affairs also has supporters in Servant of the People, old friendly relations with Batkivshchyna remain, at times he is supported by representatives of big business. Such an extensive influence allows Arsen Avakov to criticize the next sanctions or the law on oligarchs at the NSDC meetings.
But A. Avakov's main trump card is Control over the Ministry of Internal Affairs and the “National Corpus.” Against the background of the strengthening of the presidential vertical, this is perceived as a barrier to the concentration of power in the hands of V. Zelensky. Therefore, the figure of A. Avakov has long been dissatisfied with the Office of the President. the new administration in the United States may also insist on his resignation.
It is significant that at the last press conference V. Zelensky sounded signals about the possible dismissal of A. Avakov, the reason for which may be a failure in the investigation of the murder of journalist Pavel Sheremet.
It is not yet known exactly whether the resignation of A. Avakov will take place "solo", or for this it will be necessary to sacrifice the entire composition of the government.
4. The Golos party split and declared no confidence in the leader of the faction.
This week the conflict in the "Voice" faction got its continuation. After Sergei Pritula left the ranks of the party, 10 deputies opposed to the leadership announced the creation of a separate association "Justice" in the Verkhovna Rada 8.
The association included: Solomiya Bobrovskaya, Galina Vasilchenko, Yulia Klimenko, Roman Lozinsky, Natalia Pipa, Olga Stefanishina, Alexandra Ustinova, Vladimir Tsabal, Andrey Sharaskin, Yaroslav Yurchishin.
It should be noted that this is almost half of the composition of the "Voice" faction in parliament. The deputies announced that they would initiate the expulsion of the head of the party, Kira Rudyk, from the faction, and also expressed no confidence in the leader of the faction, Yaroslav Zheleznyak.
At the same time, all the people's deputies said that they remain in the faction and do not plan to leave it while the "Justice" association has no legal status. The deputies accuse the party leadership of "usurpation of power and desecration of the principles of democracy, which led to the actual destruction of the image of the party and the faction," of supporting the vote for the "deriban" of the capital's land, the desire to destroy anti-corruption bodies and "agreements."
Thus, the split of the Golos party is becoming more and more obvious. In the process of forming the Golos party, they initially tried to combine two incompatible ideas: pro-American liberalism with Ukrainian nationalism, which is why the political project did not manage to put together a strong electoral base.
After the departure of S. Vakarchuk and S. Pritula, the project may later cease to exist both due to internal disagreements among party members, and due to the lack of a stable electoral base and, accordingly, a low rating.
5. Meeting of the NSDC and its results.
On June 18, under the chairmanship of President V. Zelensky, a regular meeting of the National Security and Defense Council (NSDC) 9 was held, at which restrictive measures were introduced against businessmen D. Firtash and P. Fuks, S. Chemezov and M. Shelkov, and the action was extended. sanctions applied to a number of individuals and legal entities, which were adopted by the NSDC decision of June 21, 2018 and enacted by presidential decree No. 176.
A decision was made to impose sanctions against 12 more persons who are in the status of a subject of increased criminal influence. In particular, the NSDC instructed the three persons to check their presence in the sanctions lists.
The issues of military-technical cooperation of Ukraine with other states were considered.
A decision was made to revoke some licenses for the extraction of titanium and other resources. The licenses, in particular for the extraction of natural gas, were returned to the state.
The Strategy for the Development of the Defense Industrial Complex of Ukraine was adopted, which defines the main directions and tasks of the state military-industrial policy. In particular, it provides for the improvement of the system of standardization, unification and product quality management in accordance with NATO standards.
As shown by the inspections of the NSDC apparatus, Pavel Fuks was involved in the illegal obtaining of licenses for the extraction of minerals in Ukraine. Earlier in March of this year, the NSDC decided to introduce sanctions in relation to 19 companies using Ukrainian subsoil, which are allegedly associated with Pavel Fuks. In turn, the Kharkiv businessman P. Fuchs denied his involvement in these companies and will file a lawsuit regarding the imposition of sanctions against him. He also noted that the sanctions are A. Danilov's personal revenge10.
With regard to D. Firtash, it is noted that sanctions were imposed for his participation in the titanium business and the supply of raw materials for military enterprises of the Russian Federation, which were allegedly tracked down.
Since 2014, D. Firtash has been in Vienna, where the courts for his extradition to the United States are underway. In Ukraine, he owns a large gas business, three plants for the production of nitrogen fertilizers and is a co-owner of the Inter TV channel.
It is worth noting that both D. Firtash and P. Fuchs are associated with political groups opposing the authorities (OLE and Klitschko, respectively), and also own significant assets in the energy sector. As we wrote earlier11, on the eve of the “tariff autumn”, the NSDC became interested in the structure of the owners of gas sales and energy companies, which is caused both by the government's desire to promote the topic of tariffs that is painful for society, and we are sounding the ground for the redistribution of assets in this area. D. Firtash and P. Fuchs own other very important assets, moreover, poorly protected.
FOREIGN POLICY.
Briefly:
The international political events of the outgoing week were characterized by the continuation of two trends.
The first is the United States' attempts to mobilize its European allies to fight China and Russia in the framework of the new Cold War. In this case, US President Joe Biden managed to achieve some success. The final documents, adopted as a result of all the events in which he participated in Europe, contain recognition by all the signatories of the Russian Federation and China as opponents.
The second trend is the desire of the United States and the Russian Federation to establish the framework of what is permissible, beyond which both sides do not intend to go in the course of the new Cold War. This "framework" will be the arms control agreements, the readiness to reach which the parties confirmed after the meeting in Geneva.
1. Meeting of Joe Biden with Vladimir Putin in Geneva.
On June 16, Joe Biden and Vladimir Putin met in Geneva.
During it, the Russian and American delegations held two rounds of negotiations: one in a "narrow" format (presidents and heads of foreign affairs agencies), and the second - in an "expanded" format (with the participation of other members of the delegations).
Following the talks, Putin and Biden adopted a joint statement, the text of which is posted on the Kremlin's website13. It is dedicated to strategic arms control: "Today we reaffirm our adherence to the principle that there can be no winners in a nuclear war and should never be unleashed," the document says. The countries intend to launch a comprehensive bilateral dialogue on this issue.
In general, the results of the talks between the leaders of the two countries justified the forecasts of experts made on the eve of the meeting and did not bring any surprises. Biden and Putin agreed on:
• Return ambassadors to Moscow and Washington.
• Continuing the dialogue on strategic stability (nuclear arms control).
In addition, the leaders of the two countries expressed their intention (that is, not the fact that this will take place):
• Establish a dialogue on cyber threats.
• Establish a dialogue on the exchange of imprisoned citizens of the Russian Federation and the United States.
In his press conference and during the talks, Biden focused on human rights and freedom of the liberal media in Russia. To a large extent, the appeal to these topics was due to the internal demand of the American society.
Putin replied that they are non-systemic liberals and their media are foreign agents, and in the United States this practice has long been accepted, and Navalny was jailed for the cause.
In addition, according to Biden, the Russian side is ready to help ensure stability in Afghanistan after the withdrawal of American troops and negotiations with Iran on a new "nuclear deal."
Interestingly, in his press conference, Biden, answering a question about human rights in Russia, called it "Major global power". Barack Obama, as president, called the Russian Federation "nothing more than a regional power." Thus, the change in the role of Russia in world processes is evident in the eyes of the American leadership.
As for Ukraine, as expected, there has been no significant progress on this topic. Both presidents verbally reaffirmed their commitment to the implementation of the Minsk Agreements. However, this does not mean that the United States will prohibit Kiev from demanding that they be rewritten and sabotaging the implementation process in other ways. Biden also reaffirmed his commitment to Ukraine's territorial integrity.
In fact, as expected, no agreements were reached on Ukraine, due to the fundamental difference in the positions of the parties.
On the whole, it can be stated that the main result of this meeting was the confirmation of the intentions of the United States and the Russian Federation to establish certain “limits of what is permissible”, beyond which both sides do not intend to go in the process of a new “Cold War”. The role of such a "framework" will obviously be played by the systems and arms control agreements.
2. Joe Biden's talks with Boris Johnson.
On June 10, negotiations between US President Joe Biden and British Prime Minister Boris Johnson took place in Cornwall.
Their result was the signing by the heads of the two states of the updated Atlantic Charter. According to media reports, the document contains a reaffirmation of shared responsibility for security, a declaration that nuclear weapons can be used to defend NATO, and a commitment to promote the principles of responsible behavior in cyberspace.
The signing of the updated Atlantic Charter reflects the main trend of modern US-British relations - the strengthening of cooperation between the two states (primarily in the political and military spheres) after Brexit.
After leaving the European Union, Britain returned to an active foreign policy. The priority regions in which she is developing a stormy political activity are the former British colonies in the Middle East and Southeast Asia, as well as the countries of Eastern Europe.
The intensification of London's foreign policy, as well as its expansionist nature, were reflected in the foreign and defense policy strategy presented by the government of Boris Johnson in March this year. The document assumes a significant increase in spending on the armed forces and building up nuclear potential. The main opponents of London in the strategy are China and Russia, and the main ally is the United States. Moreover, the document directly states the priority of the military-political (both within NATO and in a bilateral format) areas of cooperation with the Americans.
It is also interesting that in this strategy, the British government, in fact, directly prescribes a scheme in which London will provide the military alliance with Washington with "brains", while the American side in this alliance will be responsible for financial costs and brute force. This can be judged by the fact that the strategy of the British government declared about the "significant scientific potential of the United Kingdom, which, in combination with American finances and military power, can seriously enhance the military-political capabilities of the union of the two states."
In connection with the above, the signing of the updated Atlantic Charter should be taken as one of the evidence of the trend towards strengthening the military-political cooperation between London and Washington.
However, in relations between the United States and Great Britain, not everything is rosy. Their most serious disagreements are over Brexit. While Boris Johnson's Conservative government sees Britain's exit from the EU as its biggest achievement, the Joe Biden administration believes the move was wrong.
The reason for such assessments of the American side is the liberal and globalist orientation of the current US president and his entourage. The White House would prefer to see Britain within the framework of the liberal project of the European Union, while simultaneously making it its "agent" within this association and preventing London from returning to a more active independent game on the international arena.
In addition, the United States is unhappy with the lack of agreements on the movement of goods and people across the border between Northern and Southern Ireland. The Republic of Ireland remains in the EU, while Northern Ireland, which belongs to Great Britain, leaves. At the same time, there is no customs border between the two Ireland, and its establishment contradicts the so-called Good Friday Agreement, which the British government concluded with the Irish separatists in 1998, which ended the conflict in Ulster.
At the moment, customs control is carried out at sea between Great Britain and Northern Ireland, however, this cannot last long, since customs control within one state is simply absurd.
The United States insists on respecting the Good Friday Agreement and maintaining the "open" border between Northern Ireland and the Republic of Ireland. In London, in turn, they intend to establish customs control on this border sooner or later.
Following the meeting of the American President with the British Prime Minister, this contradiction was never resolved.
In addition to the aforementioned topics, the US and UK leaders discussed Afghanistan, China, Iran and Russia. In general, there are no disagreements between London and Washington on these issues. China, Russia, and Iran in both capitals are considered opponents. Despite the fact that during the presidential campaign, Biden expressed his intentions to return to the "Iranian nuclear deal", there is still no clear understanding of whether it is possible to do this and, if so, how exactly and in what time frame.
As for Afghanistan, here the main cause for concern of the world community is what will happen to the country after the withdrawal of American troops, which ends before September 11 of this year. Given the intra-Afghan balance of power, there is every reason to believe that the Taliban will take over the country shortly after the withdrawal of American troops. And if for London and Washington, such a prospect does not pose a great threat, for the countries of Central Asia it may be fraught with problems associated with the spread of terrorism and religious extremism. Of course, the past negotiations between Biden and Johnson did not provide an answer as to how these problems would be resolved.
3. Summit of the G7 countries.
The G7 summit was held in Britain from 11 to 13 June, in which the leaders of the UK, USA, Canada, Japan, France, Germany and Italy took part15.
Following the event, the G7 heads of state issued a joint communique in which:
• In fact they recognized Russia as a party to the conflict in Donbass and called on it to “stop destabilizing behavior and malicious acts” and “fulfill international obligations and obligations in the field of human rights”. The last question is clearly a reference to the Alexei Navalny case.
• Supported the "Normandy format" as an instrument of settlement in the East of Ukraine.
• Expressed their readiness to work together in the fight against disinformation and cybercrime.
• Pledged over a billion doses of vaccine to vaccinate poor countries.
• Expressed their readiness to prosecute persons violating human rights in Belarus.
• spoke out in favor of taxing tech giants.
• Expressed interest in a stable and predictable relationship with Russia.
• Called on Beijing to end human rights abuses in the Muslim region of Xinjiang and supported Hong Kong's autonomy.
• Declared their intention to limit China's influence on world trade and to challenge practices that "undermine the fair and transparent functioning of the global economy."
• Agreed that providing one-off assistance to poor and developing countries to cope with crises is an important but insufficient measure, and stated their intention to consider more orderly investments in the economies of a number of countries, in particular in the development of labor markets. First of all, we are talking here about the so-called "developing countries" or "third world countries."
By and large, all the above-described points of the final communiqué of the G7 summit can be divided into four groups, indicating important trends in modern world politics. The first of them is the confrontation of the "collective West", represented by the United States and its allies, with China and Russia, which has a geopolitical character.
Statements of "human rights violations in Xinjiang and Hong Kong", calls to stop "China's unfair trade practices", calls to fight disinformation and cybercrime, which the US has accused Russia of in recent years, as well as intentions to impose sanctions against Belarus, which is part of the Russian sphere influences are evidence of this very trend. Against the background of the above points, the expressed intention "to build stable and predictable relations with Russia" looks like a purely ritual phrase, the purpose of which is to pave the way for Biden's future meeting with Putin.
It is worth noting that China reacted rather harshly to the G7 joint communique. On Monday, June 14, the PRC issued a condemnation of the joint statement of the G7 countries.
The Chinese Embassy in London said it was vehemently and strongly opposed to references to Xinjiang, Hong Kong and Taiwan that expose "the sinister intentions of several countries such as the United States." In addition, the Chinese side said that the time of the global economic dominance of the G7 countries is over.
In this regard, it can be predicted that the geopolitical confrontation of the "collective West" with China and Russia will continue in the foreseeable future. There are no objective prerequisites for a change in this trend at the moment.
The second important trend reflected in the communique is the struggle of national political elites against transnational technological capital.
This is evidenced by the desire of the G7 leaders to tax technology corporations by forcing them to pay the countries in which they operate (that is, virtually everyone). At the moment, such companies pay paltry taxes in the so-called "tax havens", while acting all over the world.
But the interest of Western elites in taxing them is not economic, but political. The recent elections in the United States have once again shown how great the influence corporations operating with big data have on politics. After that, the book by the director of the International Economic Forum in Davos, Klaus Schwab, “The Big Reset”, which, in fact, is a manifesto of global technology corporations to transform the world for themselves and eliminate national political and economic elites, added fuel to the fire.
The intentions of the technological globalists did not go unnoticed by the political elites of the Western countries. As a result, plans began to emerge in their midst to "tie up" the tech giants through taxation. And the point here, first of all, is not in the money that can be obtained as taxes, but in the administration's direct control, the possibility of which gives rise to the extension of the jurisdiction of national governments to technology companies.
In the foreseeable future, in the West, we will observe the continuation of the struggle of the "old" (political) elites against the "new" (technological) ones. In the countries of the East, such as China and Russia, this process has already ended in a complete and unconditional victory of the political elites. Eloquent testimony to this is the recent story of the "obedience" of the largest Chinese techno tycoon Jack Ma.
The third trend, as evidenced by the G7 communiqué, is the absence of a working system for the redistribution of material wealth on a global scale between the countries of the “rich North” and the “poor South”.
The intention of the G7 states to provide one-time aid to poor countries and begin selective investments in their labor market (in order to somehow curb mass migration) is evidence that without administrative intervention, the redistribution of benefits on a global scale under the current economic model is impossible. In market conditions, resources in it move strictly in one direction - from the “poor South” to the “rich North”. And given the fact that the majority of the world's population lives in the “poor South” and the fact that many of these people are ready to go abroad in search of a “better life”, the problem of migration crises, like the one that happened in the EU in 2015-2016. , will become more and more relevant every year.
The fourth and final trend in modern international politics is the need to combat the coronavirus pandemic.
By significantly reducing business and economic activity, the pandemic has brought significant economic losses to all countries. In this regard, the intentions of the G7 states to promote vaccination on a global scale in order to restore business activity are understandable.
In addition, one cannot ignore the competition between vaccine manufacturers (most of which are Western) for sales markets. Large government contracts for the supply of vaccines to third world countries are the coveted "booty" for the pharmaceutical giants.
4. NATO Summit.
On June 14, a summit of the heads of state of the North Atlantic Alliance took place in Brussels16.
As a result, a detailed communique was adopted, the essence of which can be reduced to three points:
• Russia is considered by the countries of the alliance to be the enemy and the number one threat.
• They also recognize China as their enemy and threat.
• In view of the geopolitical confrontation with Russia and China, the countries of the alliance, in the coming years, will increase their defense spending and deploy more troops in Eastern Europe.
Expanding these points in more detail, we note that the leaders of the alliance called on the Russian authorities to exclude the Czech Republic and the United States from the list of "unfriendly countries".
In addition, they expressed concern about the buildup of Russia's military potential, the holding of large-scale exercises near the borders with NATO, violations of the airspace of the bloc members, and the military integration of the Russian Federation with Belarus.
The authors of the communiqué devoted a separate paragraph to Russia's “hybrid actions” against NATO member states (it, among other things, refers to “attempts to interfere in elections and democratic processes”, “political and economic pressure and intimidation”, “large-scale disinformation campaigns "," Malicious cyber operations "). They also condemned the Russian Federation for using "aggressive and irresponsible rhetoric" and "policy of strategic intimidation" in the nuclear sphere.
As we wrote above, the confrontation between the United States and Russia and China is objective and long-term. The above characteristics of the Russian Federation, which were given in the communique following the summit of the heads of NATO member states, only confirm this. In this regard, it is not surprising that even before the start of the summit, Alliance Secretary General Jens Stoltenberg announced that in the coming years NATO will increase its military potential (primarily the number of troops) in Eastern Europe.
However, there is a limit to any capacity building, which was made clear by US President Joe Biden when answering a question about plans to admit Ukraine to the North Atlantic Alliance. According to him, it is too early to talk about it now. First, you need to "get rid of corruption, meet other requirements, implement the action plan" (Ukraine also does not plan to provide MAP yet). As Biden said: “The situation is incomprehensible, we have to understand it in the future, but for now we will do everything possible so that Ukraine is able to resist the physical aggression of Russia.”
By making such a statement before his meeting with Vladimir Putin, the American president made it clear that he did not intend to cross the “red line” outlined by the Russian leader in his recent interview about Ukraine. This indicates that at the moment the United States does not strive to bring the degree of confrontation with the Russian Federation in Eastern Europe to the likelihood of a "hot" conflict. However, along with this, the American president said that "the conflict in Donbass is not an obstacle to the potential admission of Ukraine to NATO." This statement looks like a desire to leave a path for bargaining and maneuver during the upcoming meeting with Vladimir Putin.
In the summit communiqué, "China's declared ambitions and assertive behavior" are for the first time called a "systemic challenge" for the security of NATO countries and a "rules-based international order."
The document contains a list of claims against Beijing, previously repeatedly announced by Washington, but for the first time officially supported by its European allies.
Among other things, China has been accused of pursuing policies that run counter to the "basic principles" of the Washington Treaty on the creation of NATO, the rapid and non-transparent build-up of its nuclear arsenal, the merger of the military and civilian sectors, and the conduct of joint exercises with Russia.
Actually, the situation here is similar to that in the case of Russia. For the United States, and therefore for its European allies and satellites, China is a geopolitical adversary. The document pays less attention to it than to Russia, only because of its geographical distance from Europe. However, in the last year, American politicians have repeatedly sounded calls to create a "Pacific NATO", uniting the US allies in the region into a military-political bloc and directing their efforts to "contain China." Similar proposals were made by the Taiwanese leadership. And the Indian government, in turn, although it does not make loud statements on this matter, has achieved some success in forming a kind of "anti-Chinese bloc" in the region.
In view of the above-described confrontation with Russia and China, NATO countries plan to increase defense spending and build up military contingents in Eastern Europe. This is the main idea of the strategy for the development of the military-political bloc called "NATO - 2030", which was discussed at the summit.
The adopted communiqué assumes that the total defense budget of all 30 NATO countries will grow by 4.1% in 2021 and will amount to $ 1.049 trillion. (of which $ 726 billion will come from the United States, and $ 323 billion from its allies).
It should be noted that not all countries of the association are satisfied with the increase in defense spending in the long term. For example, at a preparatory videoconference of NATO ministers of defense and foreign affairs, held 2 weeks before the summit, French representatives expressed dissatisfaction with the demands of the leadership of the alliance to spend more on defense. This position reflects France's desire to partially isolate itself from political control by Washington and to pursue a more independent foreign policy. In recent years, President Emmanuel Macron has even publicly announced several times his support for the concept of “Europe from Lisbon to Vladivostok,” once proposed by Charles de Gaulle. However, the matter has not gone beyond words in this regard.
Summing up the results of the NATO summit, we note that, as after the G7 summit, it was once again confirmed that the "new Cold War" between the United States and its allies on the one hand, and Russia and China on the other, is the main long-term trend of modern international relations.
5. US-EU summit.
On June 15, the US-EU summit was held in Brussels, which was attended by the President of the United States Joe Biden, the President of the European Council Charles Michel and the President of the European Commission Ursula von der Leyen.
The main topics for discussion were joint opposition to China and Russia, as well as controversial issues of economic cooperation.
In the final declaration of the June 15 summit, China is mentioned as the first among the opponents. The parties agreed to cooperate more closely and coordinate their policies within the framework of their "similar" approaches to the PRC, containing "elements of cooperation, competition and systemic rivalry." Von der Leyen explained that the European Union wants to cooperate with Beijing, in particular, to combat climate change. At the same time, in the economy, China is perceived as a competitor, and in matters of the political system, "human rights and human dignity," the EU and the PRC are systemic rivals. At least, this is what follows from the statements made at the end of the summit.
With regard to Russia, the US-European Declaration states that the parties "are prepared to respond decisively to a recurring pattern of negative behavior and harmful actions that Russia must correct in order to prevent further deterioration in relations." The EU and the US have called on Moscow to end its crackdown on civil society, opposition and independent media, and to allow foreign diplomats to work in Russia in safety. At the same time, the EU and the US expressed their desire to maintain open channels of communication with Russia. The last phrase, apparently, was included in the declaration as "ritual" on the eve of Biden's meeting with Putin.
It follows from the above that the Biden administration managed to find approaches to the European allies and satellites of the United States, persuading them to act as a "united front" in China and Russia. Considering that further engagement in geopolitical confrontation carries serious economic risks and costs for European states, it was not easy for the American side to achieve this.
Against this background, an economic concession of the Americans looks like the primary settlement of the dispute about "large transport planes", which has been going on between the United States and the European Union in the framework of the World Trade Organization since 2004.
The Airbus-Boeing conflict was the longest-running dispute in WTO history. It began in 2004, when the United States filed a complaint against the EU Airbus subsidies, which were considered inappropriate in Washington. The following year, Brussels filed a similar complaint about Boeing's support from the US budget. In 2019 and 2020, the WTO allowed parties to impose export penalties totaling $ 11.5 billion.
As a result of the last summit, the parties reached agreement in this trade dispute over subsidies. The agreement is not the final resolution of the dispute. Rather, it is a "truce" in him. So far, Washington and Brussels have only postponed the mutual application of penalties by five years. They are using this time to completely settle the dispute over the issue of "large civil aircraft." For this, a special working group will be created. In addition, the US and the EU have agreed to provide funding to aircraft manufacturers only on market terms, allocate money for research and development through a transparent process, and make available developments designed with government money.
In addition to the above issues, the parties discussed joint sanctions and pressure on Belarus (it should be considered in the general context of the confrontation with Russia and China), as well as climate issues.
In general, it should be noted that the topic of climate was declared as one of the main ones during all the meetings and summits that we analyzed in this material. However, it is noteworthy that as a result of all of them, not a single formal agreement was reached on this topic. This circumstance demonstrates how strong the differences between different countries on the "climate" issue are, and how even the closest allies of the United States oppose their idea of controlling the industrial development of the whole world by introducing a "carbon tax".
ECONOMY.
Briefly:
The Ukrainian government continues to look for additional sources of budget replenishment, having adopted a tax amnesty law and encouraging middle-income citizens to show their income level and pay a new tax on them. The IMF is skeptical about the tax amnesty, seeing it as another loophole for corruption and money laundering.
Another potential source of budget replenishment can be the business empire of Konstantin Zhevago, who has been on the international wanted list since 2019 and at the same time is in third place on the Forbes list among the richest citizens of Ukraine. In addition to Zhevago, the Ukrainian authorities with varying degrees of success persecute the owners of banks that went bankrupt in 2014-2017.
1. The bill on "tax amnesty" and the reaction of the IMF.
On June 15, 2021, the Verkhovna Rada adopted the law “On Amendments to the Tax Code regarding the stimulation of income shadowing and improving the tax culture of citizens by introducing a voluntary declaration by individuals of their assets and paying a lump sum to the budget” (No. 5153) 18. The document proposed to supplement the Tax Code with a new subsection, which will regulate the features of the use of one-time (special) voluntary declaration of assets of individuals acquired without paying the established taxes and fees until 2021. However, declarants cannot be persons who have performed or have performed public functions in Ukraine since January 1, 2010. In addition, the deputies by 257 votes adopted in the second reading the related bill No. 5156 on amendments to the Code of Ukraine on Administrative Offenses, the Criminal and Criminal Procedure Codes. The law clarifies the norms of Art. 164-1 KUoAP "Violation of the procedure for filing a declaration of income and keeping records of income and expenses", as well as supplemented Articles 212 and 212-1 of the Criminal Code with clauses that will regulate exemption from liability for tax evasion. In addition, the Criminal Code has been supplemented with a new Art. 232-3 "Unlawful disclosure, transfer or provision of access to information contained in a one-time (special) voluntary declaration." The final provisions of the law also stipulate that persons who agree to the terms of the tax amnesty and have paid the corresponding amounts to the state budget are exempted from administrative liability for violations committed before January 1, 2021. The deputies also adopted in the first reading another bill related to the tax amnesty - No. 5154, it was supported by 252 people's deputies. This document proposed to direct the proceeds from the collection from a one-time (special) voluntary declaration to the general fund of the state budget.
The law is not aimed at the public politicians of the current convocation of the Verkhovna Rada and other authorities, but primarily at non-public citizens of Ukraine engaged in business and representing the so-called “middle class”. These people are encouraged to provide non-public (confidential) declarations, thus leaving room for maneuver for both sides, and hence the possibility of behind-the-scenes agreements. In the future, the policy of forcing citizens to pay taxes will be extended further to other segments of the population with lower incomes.
On the day the law was passed, June 15, 2021, IMF Resident Representative in Ukraine Josta Lyngman had already announced that the IMF had begun analyzing the bill19. The fund does not trust Ukraine in terms of the effectiveness of the mechanisms prescribed in the law, suspecting the authorities of maintaining loopholes in the legislation that will help to selectively force citizens to submit declarations. Three months before the adoption of the tax amnesty law, Jost Lyngman was skeptical about this reform in Ukraine, because in his opinion, tax amnesties as such demotivate citizens to pay taxes, as they will hope for another tax amnesty in the future20. On March 30, 2021, the head of the tax service, Oleksiy Lyubchenko, said that Ukraine's losses from tax evasion schemes amounted to $ 7.7 billion per year.
2. Ukraine will pursue the assets of the former owners of bankrupt banks in 2014-2017.
With the beginning of the "bankruptcy" in 2014, the Deposit Guarantee Fund for Individuals (FGVFO) ceased to cope with its obligations to compensate for the damage caused to depositors as a result of bank bankruptcies. He started borrowing money from the NBU by June 2014.
The FGVFO borrowed funds from the NBU and the Cabinet of Ministers for compensation payments at market interest rates - up to 14% and 12.5% per annum, respectively. In 2019, the Fund's debt to the NBU was repaid. Over the next 10 years, the Fund is obliged to pay UAH 111 billion, half of this amount is interest on loans received from the Cabinet of Ministers. The IMF demanded a debt restructuring of the FGVFO.
One of the sources of repayment of the Fund's debt is considered to be the “culprits” of the 2014-2017 “bankruptcy”. The main goal of fundraising is the former People's Deputy and the third richest citizen of Ukraine according to Forbes, Konstantin Zhevago, who was put on the international wanted list on December 3, 2019 for financial fraud at the Finance and Credit Bank.
Another target is the former owner of the Delta Bank, Nikolai Lagun, who, presumably, managed to withdraw the illegally obtained money abroad. According to the investigation, National Credit Bank was withdrawing funds from Ukraine to Liechtenstein.
It is planned to collect UAH 309 million from the owner of Imeksbank Klimov, including at the expense of funds abroad.
The FGVFO has already begun preparing for international courts with the former owners of eight insolvent banks. To this end, the Fund held tenders for the procurement of relevant services of law firms.
Progress on the lawsuit is at different stages: somewhere recently agreements were signed with lawyers, and somewhere else, information is being searched for information about the assets of former bankers in foreign jurisdictions. The National Bank itself is suing the businessman, trying to return the loans provided for refinancing.
As the third richest citizen of Ukraine in 2021 according to Forbes, Zhevago runs the risk of losing his business empire due to targeted government actions, while he himself has been on the international wanted list since 2019. His total fortune is estimated at $ 2.4 billion as of 2021. Thus, the authorities will try to redistribute his resources, taking into account the machinations in the Finance and Credit bank owned by him.
3. The Minister of Territorial Development urged not to be afraid of agricultural holdings that will bring investments.
Territorial Development Minister Alexei Chernyshev has a normal attitude to the situation when players of different levels find themselves in unequal conditions at the moment of the opening of the land market22. He believes that large agricultural holdings will create new jobs and upgrade Ukrainian agriculture technologically. According to the minister, the transition to a qualitatively new level of Ukrainian agriculture requires up to $ 50 billion in investments, which Ukraine does not have.
Prior to assuming the post of minister, Chernyshev was the governor of the Kiev region and a major businessman. He is a close associate of Timur Mindich23, a man of Kolomoisky's team, and is also considering the possibility of competing for the post of chairman of the Kyiv City State Administration in the future.
The president will try to increase his influence on the entire vertical of power in the country by creating prefectures and appointing prefects. The Association of Ukrainian Cities, headed by Klitschko, is a potential "competing organization" in this matter, but the creation of prefectures will return the president's influence to the vertical of power in the country.
4. Prospects for using the Ukrainian GTS (nationwide natural gas pipeline system) after the launch of Nord Stream 2.
The volume of natural gas consumption by the population of Ukraine for the last decades has decreased by several times. At the same time, the costs of maintaining networks are constantly growing. That is why the current government is thinking that it is necessary not only to modernize the gas infrastructure, but to optimize it for real volumes of gas consumption and adapt it to the transportation of new energy carriers in the future.
If earlier the volume of gas consumption was almost 120 billion cubic meters a year, now the real needs are 28-30 billion cubic meters. In the last ten years alone, the volume of gas transported has almost halved - from 60 billion cubic meters to 30.
The system needs a certain constant pressure in the pipes, regardless of the volume of gas transported. To maintain the GTS in working order, 3.8 billion hryvnias are needed per year, while now only 700 million are allocated.
Since 2015, the number of emergency gas pipelines has increased 10 times and reached 15 thousand kilometers. 2014 to 2019 gas transportation has almost halved - from 49 to 27 billion cubic meters, while the level of the required volume of gas for the normal operation of the system increased from 1.2 to 1.4 billion cubic meters.
In the next 5 years, Ukraine will need 50 billion hryvnia (at the moment, 700 million hryvnia is allocated) for the maintenance of the GTS.
The hydrogen supposedly has to be transported through pipes even at low pressure, which in the long term is beneficial for Ukraine due to the drop in pressure in the pipes due to the general drop in the volume of natural gas.
Ukraine has no money to modify the gas transportation system, and it is looking for ways to optimize costs with falling profits.
At the moment, the European Union is indeed showing interest in hydrogen as an alternative to gas and coal, but the Ukrainian GTS needs funding in the next 5 years, while the transition to hydrogen in the EU remains at the level of talks and political declarations.
Edited by:
Ruslan Bortnik,
Daniil Bogatyrev.
Authors:
Daniil Bogatyrev,
Oksana Krasovskaya,
Andrey Timchenko.
