ANALYTICAL REVIEW OF THE MOST IMPORTANT DOMESTIC, FOREIGN POLITICAL AND ECONOMIC EVENTS OF THE WEEK
05.17. - 05.23.2021
CONTENT:
SUMMARY AND KEY TRENDS.
INTERNAL POLICY.
1. Press conference of V. Zelensky, the main messages to society.
2. Replacement of ministers of economy, infrastructure and health.
3. Searches continue in the structures of the Kyiv City State Administration.
4. The Office of the Prosecutor General appealed against the house arrest of V. Medvedchuk.
5. Sociology. Presidential and party ratings.
FOREIGN POLICY.
1. Meeting of US Secretary of State Anthony Blinken and Russian Foreign Minister Sergei Lavrov.
2. Establishing a truce between Israel and Palestine.
3. The United States lifted sanctions against the Nord Stream 2 management company.
4. Nancy Pelosi called for a boycott of the Beijing Olympics due to "China's violation of human rights."
ECONOMY.>.
1. Privatization of Ukrspirt assets. The state of corporate governance in Ukraine. Losses of Ukrzaliznytsia and Centrenergo.
2. Cancellation of the PSO on gas for public utilities.
3. Inefficient use of resources by Ukravtodor.
SUMMARY AND KEY TRENDS.
Summing up the results of the outgoing week, we note the following:
First, the press conference, timed to coincide with the second anniversary of Vladimir Zelensky's rule, was permeated with the president's pessimistic sentiments regarding support from the EU countries and the United States. For the most part, this pessimism is justified. In addition, it is obvious that the President, being unable to fulfill the key election promises (and, as a consequence, retain high popularity), took a course towards administrative, economic and informational strengthening of power, which leads to an aggravation and transformation of competition into conflict with all key political and economic groups in Ukraine.
Secondly, the key conflict of the week was the continuation of pressure from the central government on the capital's mayor Vitali Klitschko and his entourage. It is carried out with the help of searches in the structures of the Kyiv city administration and at the mayor's associates, and its reason is the desire of the President's Office to eliminate Klitschko as a potential competitor of V. Zelensky in the presidential elections, as well as the desire to redistribute control over the capital's financial flows.
Thirdly, one of the key trends in international politics in the outgoing week was the preparation for the meeting and talks between the American and Russian presidents Joe Biden and Vladimir Putin. As part of this trend, the foreign ministers of the two countries Anthony Blinken and Sergei Lavrov met this week in Iceland. Despite the rather benevolent statements of the parties, one should not make hasty conclusions about the possibility of an early "detente", since the geopolitical contradictions between the parties are of a fundamental and irreparable nature. In this regard, any agreements between the United States and Russia following the upcoming meeting between Biden and Putin are possible only on non-strategic issues.
Fourth, this week a ceasefire was established in the Middle East, marking the end of yet another exacerbation of the Palestinian-Israeli conflict. It is not yet clear whether Benjamin Netanyahu succeeded in achieving his political goal and, by rallying the Israelis in the face of a military threat, to retain the prime minister's post. The political benefits for the Hamas movement are more obvious, since against the background of their more moderate political opponents from Fatah, for the Palestinians they look like "decisive fighters for national and religious interests."
Fifth, in the Ukrainian economy, the trend continues to subordinate corporate governance from the political and economic circles of the United States and the EU to the Office of the President simultaneously with the privatization of state-owned enterprises as a way of filling the budget. The West, represented by the Organization for Economic Cooperation and Development (OECD), is actually warning the Ukrainian authorities about the negative consequences of such steps. The West seeks to centralize the management of the top 15 state-owned companies in the country through the OECD recommendation to Ukraine to create a body that will be responsible for the ownership of all state-owned companies in Ukraine (not the Cabinet of Ministers of Ukraine). The OECD also covertly recommends continuing and deepening the practice of inviting foreign professionals to manage state-owned enterprises in Ukraine, speaking of “professionalizing the functions of managing state property.” The West insists on the erosion of the rights of the Ukrainian state as the owner of state property.
INTERNAL POLICY.
Briefly:
Press conference, timed to the second anniversary of the reign of Vladimir Zelensky, was permeated with the president's pessimistic sentiments regarding support from the EU countries and the United States. For the most part, this pessimism is justified. In addition, it is obvious that the President, being unable to fulfill the key election promises (and, as a consequence, retain high popularity), took a course towards administrative, economic and informational strengthening of power, which leads to an aggravation and transformation of competition into conflict with all key political and economic groups in Ukraine. The systematic course of “tightening the screws” and cleaning up competitors is continuing. The government continues to establish control over all key and strategically important areas in the country, in particular, over local government in Kyiv. As part of this trend, searches are taking place in the structures of the Kyiv City State Administration and pressure on the mayor of Kyiv V. Klitschko, and in parliament they vote for the appointment of three new ministers: energy, infrastructure and health. The new ministers will strengthen the position of the president in the government, as well as help concentrate control over the main financial flows in the hands of Bankova.
1. Press conference of V. Zelensky, the main messages to society.
On May 20, on the occasion of the second anniversary of the inauguration of the president, a large press conference by Vladimir Zelensky took place [https://www.pravda.com.ua/rus/news/2021/05/20/7294287/].
The main messages that the President sent to the society were as follows:
Regarding the war and peace in Donbass, the President noted that this is a difficult path, not too fast. V. Zelensky is going to hold the first national referendum on the Donbass issue, if the reintegration of territories within the existing negotiation formats does not work. In this regard, the formulation of questions and the preparation of public opinion will be of great importance. As for the freezing of the conflict, this issue, according to the president, mainly depends on the Russian side, while Zelensky hopes to meet with V. Putin.
At a press conference, Volodymyr Zelenskyy spoke about the "Normandy format" and almost never mentioned the "Minsk format". Concerns were raised about insufficient support from the international community, in particular Germany and France. Risks from the planned meeting of the US and Russian presidents were noted - the lifting of sanctions on Nord Stream. Against the background of the lack of loans and the demand to transfer control over the courts and state-owned companies, the president's mood is rather pessimistic. In his opinion, one cannot count on the necessary military support from Western partners in the event of a confrontation with Russia.
The president also announced the publication of a bill on oligarchs next week. In his opinion, in this way the influence on politics will be taken away from big business. It is worth mentioning here the significant risks that a selective approach will take place in this matter. And accordingly, the law can be used as a tool to eliminate political and economic competitors.
Also, according to V. Zelensky, the era of Viktor Medvedchuk is coming to an end, which the law enforcement agencies have taken over [https://www.pravda.com.ua/rus/news/2021/05/20/7294203/]. In this regard, the society is shown the "image of a strong hand" of the president and the promotion of the process of "de-oligarchization", but at the same time maintaining a pro-Western political course. The figure of V. Medvedchuk is the most suitable for this.
The President has promised to end the era of corruption. Taking into account the practice of using such an instrument as the NSDC, which has developed this year, there are fears that under the guise of fighting corruption, a banal redistribution of assets and spheres of influence may occur.
As for the era of poverty, it turned out to be much more difficult to end. This means that in the near future, citizens do not have to rely on an increase in the level of their well-being, tariffs for all types of utilities will continue to grow, no matter what concerns the NSDC expresses in this regard.
V. Zelensky also sounded signals about the possible dismissal of A. Avakov from the post of Minister of Internal Affairs of Ukraine. The reason may be a failure in the investigation of the murder of journalist Pavel Sheremet. A. Avakov has long been dissatisfied with the office of the President and, against the background of the strengthening of the presidential vertical, is perceived as a barrier to the concentration of power. In addition, the new administration in the United States may insist on this.
The president also admitted that the counterintelligence of the SBU during the times of P. Poroshenko could have been involved in the murder of P. Sheremet. And here it is already possible to move on to the signals regarding the fifth president. Probably, in the near future, troubles with law enforcement agencies may already begin for P. Poroshenko or his entourage.
Regarding the searches in the Kyiv City State Administration, the president made it clear that he was not satisfied with the work of V. Klitschko and actually accused the measure of corruption. He also added that "there is no need to steal money from the Ukrainian budget." In this matter, V. Klitschko's presidential ambitions can play a significant role. Despite that the president has not yet given the public a clear answer whether he is going to fight for a second presidential term.
The results of the press conference make it clear that the positions of the head of the OP, Andrei Yermak, remain very strong. The president twice mentioned him in a positive context: he does everything for the negotiation process on Donbass and, unlike Klitschko's entourage, does not take bribes.
In general, we can say that the president was trying to demonstrate to the audience a willingness to communicate and explain his actions. But the target audience of V. Zelensky was his personal electorate, and he did not try to win over his opponents to his side. In this regard, the president did not work for a breakthrough, but to maintain his rating, which has recently been stabilized. V. Zelensky, although he is the leading politician in our country, can no longer count on the support of almost 3/4 of society as before, but only on the support of his constituents.
2. Replacement of ministers of economy, infrastructure and health.
On May 18, the Verkhovna Rada dismissed three ministers at once: Minister of Infrastructure Vladislav Krikliya, Minister of Economic Development, Trade and Agriculture Igor Petrashko and Minister of Health Maxim Stepanov [https://focus.ua/politics/482943-poslednij-boj-stepanova-kak- rada-uvolila-treh-ministrov-i-kto-mozhet-prijti-na-ih-mesta]. The ministers were supposed to make room for people from other groups of influence and more controlled by Bankova.
Applicants for these posts were announced earlier. Already on May 20, the parliament supported the appointment of the chairman of Ukravtodor Oleksandr Kubrakov to the post of Minister of Infrastructure [https://www.epravda.com.ua/rus/news/2021/05/20/674066/] Prime Minister - Minister of Economy [https://www.epravda.com.ua/rus/news/2021/05/20/674069/], and for the post of Minister of Health, Chief Sanitary Doctor Viktor Lyashko.
These personnel reshuffles in ministries are the strengthening of the positions of some political groups of influence and the weakening of others. As we wrote earlier, the president is trying to strengthen his own positions within the government with people loyal to himself. Additionally, it is the control of financial flows. Let us remind you that the Ministry of Economy is operating at UAH 9.46 billion. budgetary funds [https://zakon.rada.gov.ua/laws/show/1082-20#Text]; Ministry of Infrastructure - operates UAH 7.12 billion. budget funds; and the Ministry of Health - taking into account the budgets related to vaccinations and the covid fund - UAH 159.18 billion.
The appointment of the Minister of Health Viktor Lyashko to a strategically important position is an attempt by the authorities to satisfy Western partners and balance the appointment of their people to economically attractive directions. At the same time, if the ministers of infrastructure and economics themselves wrote letters of resignation, which in fact means an indirect admission of his guilt, then M. Stepanov does not want to play such a role, and is trying to preserve his reputation and authority, transforming the resignation into a political process and problems for power. It is possible that he has political ambitions and will return to politics.
3. Searches continue in the structures of the Kyiv City State Administration.
This week, a series of searches continued in the structures of the Kyiv city administration. Investigators of the State Bureau of Investigation conducted searches in one of the departments of the Kyiv City State Administration in the case of illegal construction near the Kyiv Pechersk Lavra [https://www.pravda.com.ua/news/2021/05/19/7294067/]. On the territory of the city of Kyiv, more than 60 searches were carried out in the offices of utilities, departments of the Kyiv City State Administration, in the offices of contracting structures, as well as at the place of residence of persons involved in criminal proceedings, 11 persons were given a notice of suspicion.
On May 18, the SBU officers arrived at the house where V. Klitschko lives, but did not get into the apartment. They later announced that they were looking for smugglers as part of an investigation [https://focus.ua/politics/482946-obyski-klichko-sbu]. In turn, V. Klitschko said that the version of some large-scale operation against smugglers who allegedly live two floors below looks unconvincing. Vitali Klitschko considers the mass searches at the municipal enterprises of the capital, taking place in recent days, a special operation against him personally. The president’s accusations, like “no need to steal from the budget,” confirm this. The mayor considers what is happening as manipulation and discrediting of the city authorities, when "they are looking for documents that we ourselves handed over to law enforcement officers - about financial violations that we ourselves discovered" [https://www.pravda.com.ua/news/2021/05/20 / 7294266 /].
The change in the attitude of the central government towards the mayor of Kyiv may be caused by the destruction of the previously existing alliance of Klitschko and Bankova to manage flows in the city. An equally important reason is the presidential ambitions of V. Klitschko himself. And if he continues to defend his line, as expected, the OP can initiate the dismissal of V. Klitschko from the post of head of the Kyiv City State Administration, as well as launch a campaign to discredit V. Klitschko, predominantly but with the help of the topic of corruption.
4. The Office of the Prosecutor General appealed against the house arrest of V. Medvedchuk.
This week, the Office of the Prosecutor General filed an appeal against the decision of the Pechersk District Court on the application of a preventive measure against the suspected MP V. Medvedchuk in the form of round-the-clock house arrest. Prosecutors insist on the use of a preventive measure in the form of detention with the alternative of paying bail in the amount of UAH 300 million 930 thousand [https://www.pravda.com.ua/news/2021/05/18/7293937/]. V. Medvedchuk's lawyers also appealed against his house arrest.
Earlier, on May 11, V. Medvedchuk and T. Kozak were charged with treason and conspiracy with the Russian side to extract oil and gas in the Black Sea. On May 13, the court left V. Medvedchuk under house arrest.
According to V. Medvedchuk himself, he was officially authorized by A. Turchinov and P. Poroshenko to negotiate with representatives of ORDLO [https://www.pravda.com.ua/news/2021/05/21/7294344/]. At the same time, he denies that he could have transferred to Russia secret information about the units of the Armed Forces of Ukraine.
On May 21, it became known that the Kyiv Court of Appeal did not satisfy the appeals of both lawyers and prosecutors.
Also, the Security Service of Ukraine received permission to detain People's Deputy Taras Kozak, who is being held in this case. According to Viktor Medvedchuk, T. Kozak is being treated in Belarus [https://www.pravda.com.ua/news/2021/05/20/7294233/].
As part of the internal trend to "tighten the screws", the authorities continue to unfold the case of V. Medvedchuk, as an example for the fight against oligarchy and demonstration of adherence to the pro-Western political vector. Nevertheless, it is possible that before the meeting between D. Biden and V. Putin, which according to US Secretary of State Anthony Blinken [https://www.interfax.ru/world/767854] may take place in the coming weeks, Western partners asked the authorities Ukraine will not escalate the situation. And V. Medvedchuk will be under house arrest at least until July 10, 2021 [https://www.pravda.com.ua/news/2021/05/21/7294399/].
5. Sociology. Presidential and party ratings.
This week, the sociological group "Rating" [http://ratinggroup.ua/ru/research/ukraine/dva_goda_prezidenta_zelenskogo... published a study (dated May 16-18, 2021), according to which V. Zelensky is in the presidential rating - 30.2% of respondents. In comparison with the poll published in April (24.9% according to "Rating" [http://ratinggroup.ua/ru/research/ukraine/obschestvenno-politicheskie_na...), the president's rating has grown by almost 6%. This is followed by:
•P. Poroshenko - 11.9% (-2%, downward dynamics).
•YU. Boyko - 11.1% (changes within the margin of error. The rating is relatively stable for the second month).
•YU. Tymoshenko - 7.6% - (since April (-4.5%)).
In the second round, in the pair Zelensky vs. Poroshenko, Zelensky wins with a score of 68% to 32%. In the pair "Zelensky against Tymoshenko" - 62% by 38% (Zelensky wins). In the pair "Zelensky vs. Boyko" - 69% to 31% (Zelensky wins).
The Servant of the People party is in the lead in the parliamentary rating - 24.8%. In comparison with the survey conducted by the "Rating" group at the beginning of May 2021. (22.9%), the party's rating changed within the margin of error (+ 2%), the party's rating has not changed since April. This is followed by:
• "European Solidarity" - 13.5%, since the beginning of May the changes are within the margin of error.
• “Opposition Platform - For Life” - 13.2%, practically has not changed since the beginning of April.
• "Fatherland" - 11.8%. - has not changed significantly.
The second year of V. Zelensky's rule is considered by the majority of Ukrainian citizens to be unsatisfactory or terrible - 42%; 34% are of the opposite opinion.
Among all the presidents of independent Ukraine, like last year, L. Kuchma is considered the best (23%).
V. Zelensky is considered the best - 18%
P. Poroshenko - 14%,
V. Yanukovych - 13%,
L. Kravchuk - 12%,
V. Yushchenko - 7%.
None were considered the best - 9%.
5% found it difficult to answer.
Among the presidents of Ukraine, the trust rating is headed by V. Zelensky (trust - 46%, do not trust - 51%; balance - 5%)
L. Kuchma is trusted by 36%, not trusted by 58%.
36% trust L. Kravchuk, 53% do not.
V. Yushchenko is trusted by 29%, and not trusted by 66%.
P. Poroshenko is trusted - 24%, do not trust - 75%.
V. Yanukovych is trusted by 15%, not trust - 82%.
The results of the poll show that there are no significant changes in the Servant of the People's party rating. At the same time, since April 2021, V. Zelensky's rating has grown by almost 6%, while his trust rating remains negative, and has not changed since March 2021.
It is also worth noting that the president's trust rating over the two years of his rule has shown a tremendous decline. Anti-ratings have almost quadrupled. In July 2019 (trust - 76%; distrust - 14%; balance + 62%), respectively, the balance of trust went into negative territory and lost 67%, and the level of trust lost 30% over this period. Presidential rating for two years, according to the group "Rating ”, lost more than 30%. In August 2019, 67% of respondents were ready to support V. Zelensky.
FOREIGN POLICY.
Briefly:
One of the key trends in international politics in the outgoing week was the preparation for the meeting and negotiations between the American and Russian presidents Joe Biden and Vladimir Putin. As part of this trend, the foreign ministers of the two countries Anthony Blinken and Sergei Lavrov met this week in Iceland. Despite the rather benevolent statements of the parties, one should not make hasty conclusions about the possibility of an early "detente", since the geopolitical contradictions between the parties are of a fundamental and irreparable nature. In this regard, any agreements between the United States and Russia following the upcoming meeting of Biden with Putin are possible only on economic or non-strategic political and security issues.
Also this week, a truce was established in the Middle East, marking the end of another exacerbation of the Palestinian-Israeli conflict. It is not yet clear whether Benjamin Netanyahu succeeded in achieving his political goal and, by rallying the Israelis in the face of a military threat, to retain the prime minister's post. The political benefits for the Hamas movement are more obvious, since against the background of their more moderate political opponents from Fatah, for the Palestinians they look like "decisive fighters for national and religious interests."
1. Meeting of US Secretary of State Anthony Blinken and Russian Foreign Minister Sergei Lavrov.
May 19 The first meeting between Sergei Lavrov and Secretary of State Anthony Blinken took place in Reykjavik after the administration of Joseph Biden came to power. These were the first negotiations at a similar level since the beginning of the last tensions in relations between the two countries [https://www.rbc.ru/ins/society/20/05/2021/60a5e40b9a7947750d32a12e].
Lavrov and Blinken met in the Icelandic capital after a meeting of the Arctic Council. This year, the post of chairperson of this international structure is being transferred to Russia, on a rotation basis. According to Blinken, the meeting was held "to test a proposal for a more stable and predictable relationship with Moscow." The secretary of state spoke with Lavrov about Washington's commitment to potential cooperation with Moscow in various fields, including the Arctic. But the United States did not forget about the disagreements: both Blinken and Ned Price, speaking of the meeting, did not forget to mention that the United States confirmed its readiness to respond to Russia's actions towards Ukraine, opposition leader Alexei Navalny, and on the issue of pressure on the media.
The head of the Russian Foreign Ministry, in turn, said:
"We confirmed our proposal to start a dialogue, considering all the factors affecting strategic stability: nuclear, non-nuclear, offensive, defensive."
According to Lavrov, Moscow's position is very simple: the Russian side is ready to discuss all issues with the United States without exception, but the discussion should be honest, "with facts on the table and, of course, on a mutually respectful basis."
Noting the rather respectful tone in which this meeting was held, many media outlets began to make hasty predictions about a possible "detente" between Moscow and Washington. However, in fact, within the framework of long-term trends, there are no prerequisites for this.
From our point of view, the relatively benevolent tone of the meeting was due to the fact that its main task was to prepare Joe Biden's talks with Vladimir Putin. With more confrontational rhetoric of the parties, these negotiations could simply not have taken place. But since now both the Russian and American sides are showing interest in them, a policy was observed at the meeting at the level of the foreign ministries.
At the same time, it should be noted that any lasting agreements between the United States and the Russian Federation are possible, perhaps, in the sphere of strategic arms control. Both sides perceive this issue as setting certain boundaries that cannot be crossed in the US-Russian confrontation, so that it does not slide into direct military confrontation.
As for this confrontation itself, it will continue in the foreseeable future. Joe Biden's administration is committed to trying to return the US global hegemony, while over the past 15 years Russia has managed to become one of the poles of global politics and create its own zone of exclusive political influence. From the American point of view, such actions by Moscow are completely unacceptable. However, the current foreign policy and military potential of the United States no longer allows it to be a world hegemon.
In this regard, any agreements between the United States and Russia following the upcoming meeting between Biden and Putin are possible only on non-strategic issues.
2. Establishing a truce between Israel and Palestine.
The ceasefire between Israel and the Palestinian group Hamas, mediated by Egypt, entered into force at 2 am on Friday 21 May. During 11 days of the conflict, 244 people died and almost 2 thousand were injured, most of them in the Gaza Strip [https://www.bbc.com/russian/news-57198727].
Both sides stated that they are ready to respond in case of violation of the terms of the armistice by the enemy. Egypt announced that it will send two delegations to Israel to monitor the observance of the ceasefire.
International airlines have begun to resume flights to Israel. American Delta Airlines returned its flight on Friday, and several major European carriers will do so on Sunday.
On Friday night, Palestinians, who had been hiding all these days in various shelters, in schools operating under the auspices of the UN, and other relatively safe places, took to the streets of Jerusalem, Hebron, Ramallah and other cities, celebrating the truce.
Many of them perceived the ceasefire as a victory for the Palestinian resistance. From some mosques one can hear amplified loudspeakers greetings "to the victory of resistance over the occupiers." On the Temple Mount in Jerusalem, Muslims clashed with the police again.
As we wrote earlier, an important factor that provoked the outbreak of the conflict was the desire of Israeli Prime Minister Benjamin Netanyahu to keep his post, against the background of an unfavorable situation for him with the formation of a coalition. To date, it is not yet clear whether he will be able to achieve this goal. However, the general patriotic-nationalist upsurge in Israel, against the background of the conflict with Hamas, was very significant, which gives Netanyahu a good chance.
As for the winners and losers in the next aggravation of the Middle East conflict, strategically, both sides remained "with their own people." However, it is worth noting that the decisive military actions of Hamas against Israel have significantly increased the trust rating of this organization among the Palestinians. Against the background of Hamas, the moderate Palestinian leadership led by Mahmoud Abbas, in the current situation, showed its weakness. This means that in the coming years, the Palestinian society, both in the autonomous territories and within Israel itself, will be systematically radicalized. Consequently, a new exacerbation or a large-scale wave of terrorist attacks can occur at any time.
3. The United States lifted sanctions against the Nord Stream 2 management company.
On May 18, the authoritative American publication Axios announced that the Joe Biden administration intends to lift sanctions against the companies operating the Nord Stream 2 gas pipeline, which is currently more than 95% built.
According to an article published in this media by journalist Jonathan Swan, quote:
“The State Department will soon send a report on its work within 90 days to Congress, which will list the organizations worthy of sanctions involved in the construction of Nord Stream 2. Sources familiar with the preparation of the report told Axios that the State Department plans to impose sanctions on several Russian ships.
The State Department also acknowledges that the legal entity in charge of the project - Nord Stream 2 AG and its CEO (Putin's friend and former East German intelligence officer Matthias Warnig) - are involved in sanctioned activities. However, the State Department will refuse to apply these sanctions, citing the national interests of the United States [https://www.axios.com/nord-stream-sanction-biden-russia-f6db2ae3-2c89-43... ”.
The next day, when the said report was sent to Congress, this information was fully confirmed.
The wording “referring to national interests” sounds especially curious in this situation. After all, we all remember that the Biden administration has embarked on a "new Cold War" with Russia, and is methodically going further down this path. The lifting of sanctions from the managing subjects of Nord Stream 2, at least, does not fit into this trend, or even contradicts it at all.
Unless, of course, we assume that concessions on the "Nord Stream-2" can be intentionally undertaken by the American authorities as a demonstration to the Russian leadership of their readiness to make some compromises, on the eve of Biden's negotiations with Putin.
According to the same publication Axios, sources close to the White House say that senior US officials believe that the only way to potentially stop the project, which is 95% completed, is to impose sanctions on German end-users of gas. However, the Biden administration is unwilling to sever relations with Germany over Nord Stream 2.
In our opinion, the lifting of sanctions on the Nord Stream 2 management companies speaks, first of all, of the serious problems the United States has in keeping Europe under its political control.
A new Cold War, a messianic destiny, and plans to regain world domination are, of course, attractive goals for American politicians, but reality stubbornly dictates its terms. This is not the year 2000, and Washington is far from always able to tell its European allies what to do.
In these conditions, in order not to damage their own reputation and show a complete inability to lead Germany, on whose territory the American troops are stationed, the White House probably decided not to "aggravate" the contradictions with Berlin and to confine itself to symbolic measures of influence on Nord Stream 2.
The issue of relations with Moscow and possible concessions to it in exchange for corresponding concessions from the Russian side, here, as we see it, is secondary. First, Moscow has recently made it clear that it does not intend to compromise its national interests. Well, and secondly, in any, even a "cold" war, order in the rear is much more important than tactical successes at the front.
4. Nancy Pelosi called for a boycott of the Beijing Olympics due to "China's violation of human rights."
On May 19, US House Speaker Nancy Pelosi called for a diplomatic boycott of the Beijing Winter Olympics next year over human rights concerns [https://www.bbc.com/news/world-us-canada-57166964] ...
While the athletes will be participating in the games, Pelosi said heads of state should not be present.
She also stated that the United States cannot continue preparing for the Olympic Games in China, as if nothing had happened.
In the context of international relations, what actually happens to the Uyghurs in China and what are the conditions for their stay in re-education centers is of no interest. Much more important is how the Americans use this topic to incite anti-Chinese sentiments in the world (primarily Western) community.
Since the middle of last year, when Donald Trump was President of the United States, we have noticed in the American liberal press, which strongly supported the then presidential candidate Joe Biden, articles accusing China of violating human rights in Xinjiang. Moreover, these materials starkly contrasted with the then American mainstream, which, despite its anti-Chinese orientation, criticized the Celestial Empire, mainly for economic expansion, and not human rights.
Even then, it was clear that attempts to threaten China with sanctions and trade barriers for alleged human rights violations would become the basis of the Biden administration's policy towards Beijing. At the recent meeting of the American and Chinese delegations in Anchorage, Alaska, this fact was further confirmed.
Given the above, the calls of the Speaker of the House of Representatives of the Congress Nancy Pelosi to boycott the Olympics in Beijing are absolutely not surprising. Moreover, we are rather surprised that while it leaves the athletes the right to participate in prestigious competitions, limiting itself to appeals only to nullify the attendance of the Olympiad by political delegations.
We believe that China will react rather harshly to such statements. Even during the meeting in Anchorage, the Chinese delegation allowed itself to deviate from the tactfulness traditional for Chinese diplomacy and directly advised the Americans to pay attention to racial oppression in their country, instead of caring about the rights of the Uyghurs.
ECONOMY.
Briefly:
In the Ukrainian economy, the trend continues to re-subordinate corporate governance from the political and economic circles of the United States and the EU to the Office of the President simultaneously with the privatization of state-owned enterprises as a way of filling the budget. The West, represented by the Organization for Economic Cooperation and Development (OECD), is actually warning the Ukrainian authorities about the negative consequences of such steps. The West seeks to centralize the management of the country's Top 15 state-owned companies through the OECD's recommendation to Ukraine to create a body that will be responsible for the ownership of all state-owned companies in Ukraine. The OECD also covertly recommends continuing and deepening the practice of inviting foreign professionals to manage state-owned enterprises in Ukraine, speaking of “professionalizing the functions of managing state property.” The West insists on the erosion of the rights of the Ukrainian state as the owner of state property.
In the banking sector, there has been a tendency for Ukrainian officials to withdraw funds from their accounts into cash. Another popular scheme for withdrawing funds from banks' control is their transfer to cryptocurrencies. Such actions were the reaction of the bureaucracy and politicians to the mechanism for introducing NSDC sanctions against unwanted persons. Although, in general, the volume of deposits in the Ukrainian banking system since the beginning of the year increased by UAH 21 billion. - up to UAH 851.5 billion.
1. Privatization of Ukrspirt assets. The state of corporate governance in Ukraine. Losses of Ukrzaliznytsia and Centrenergo.
This week, one of the objects of "Ukrspirt" was put up for auction [https://www.epravda.com.ua/publications/2021/05/15/673908/]. The State Property Fund of Ukraine put up for auction a separate property of the Karavan place of production and storage of alcohol in the SEZ "Ukrspirt". The starting price of the lot is UAH 23.1 million. The online auction is scheduled for June 7, 2021. The privatization object includes buildings and structures with a total area of 11,980.5 m2, including: an administrative building, industrial buildings, warehouses, workshops, production workshops, carbon dioxide, distilleries and granaries, etc.
The Organization for Economic Cooperation and Development (OECD) has published an overview of corporate governance in state-owned enterprises in Ukraine [https://www.epravda.com.ua/publications/2021/05/15/673908/] [https://www.oecd.org /corporate/soe-review-ukraine.htm]. In her review, she stated that corporate governance reforms in Ukraine are "at an early stage" and in a "fragile" form. In addition, the OECD noted that, despite the progress made, there has been a shift in priorities, resulting in “reform stagnation and failure”. The OECD Survey also provides guidance on immediate and long-term priorities for implementing corporate governance reform.
Short term priorities:
● Elimination of inconsistencies and contradictions in the legislative and regulatory framework.
● Continuation of the corporate governance reform in the top 15 state-owned companies.
● Applying best practices in transparency and disclosure to economically important public companies, including improving financial and non-financial reporting.
● Development of a comprehensive property policy with clear justifications for state ownership.
● Ensuring transparency and accountability in the implementation of corporate governance of state-owned companies.
● Return of the practice of drawing up annual aggregate reports of state-owned companies, as well as continuing to fill in information on the Prozvit platform.
● Professionalization of the functions of state property management as a means of combating corruption, as well as preventing excessive political interference and interference in the operating activities of state-owned companies in order to increase their efficiency and profitability.
Long-term priorities:
● Creation of a centralized body for the implementation or coordination of the ownership function (a body that will be responsible for the ownership of all state-owned companies or part of state-owned companies).
● Ensuring a level playing field for public and private companies.
● Further strengthening of anti-corruption regulation extends to state-owned companies.
● Reform for the rest of the state-owned companies.
Thus, the OECD, in fact, expresses dissatisfaction with the attempts of the Ukrainian authorities to regain control over strategic enterprises by clearing their management of lobbyists of Western interests.
The Ministry of Strategic Industries of Ukraine, created on July 22, 2020, should propose candidates for the supervisory boards of holdings that will be formed as a result of the corporatization of Ukroboronprom [https://www.epravda.com.ua/publications/2021/05/ 15/673908 /]. The head of the enterprise confirmed that foreigners can be members of the supervisory board of future holdings of defense enterprises. According to the OECD corporate governance guidelines, the state should separate its ownership function from that of the policymaker, and the supervisory board of a state-owned company should ensure the independence of this body's decision.
The government recognized the work of the Supervisory Board and the General Director of Ukrhydroenergo in 2020 as unsatisfactory, the Supervisory Board does not agree. He stressed that in 2020 the company received a net profit, which was 4.7 times higher than planned, fully implemented the investment program and allocated 52% more funds to the state budget than expected, a total of UAH 3.5 billion. The board of directors also said that the company's assets grew by 18.2% in 2020, while they were expected to grow by only 3%.
In the first quarter of 2021, Centrenergo received 800 million losses [https://www.epravda.com.ua/publications/2021/05/15/673908/]. According to media reports, in the first quarter of 2021, Centrenergo lost UAH 794.7 million [http://finbalance.com.ua/news/tsentrenerho-zafiksuvalo-zbitok-795-mln-hr.... According to media reports, in the first quarter of 2021, Centrenergo's net profit from the sale of products amounted to UAH 2.98 billion, and for the same period last year - UAH 4.27 billion. The value of the products sold amounted to UAH 3.64 billion (against UAH 4.32 billion in the same period last year). 78.3% of Centrenergo shares are owned by the State Property Fund of Ukraine (SSMU). In the first quarter of 2021, the State Property Fund reported income from small-scale privatization (mainly from the sale of assets such as distilleries and real estate) in the amount of almost UAH 1 billion.
Roads of Ukraine received 130 million losses [https://www.epravda.com.ua/publications/2021/05/15/673908/]. At the end of 2019, Automobile Roads reported losses in the amount of UAH 443.2 million. In 2018, the financial report revealed a loss in the amount of UAH 314.7 million. The loss for 2017 amounted to UAH 82 million. "The founder and owner of 100% of the shares of" Automobile Roads of Ukraine "is the state represented by "Ukravtodor" (State Road Service of Ukraine).
2. Cancellation of the PSO on gas for public utilities.
On May 19, 2021, the Cabinet of Ministers canceled fixed prices (PSO) for gas for public utilities [https://strana.ua/finance/334155-kabmin-otmenil-fiksirovannuju-tsenu-na-.... Responsibility for tariffs for heat and hot water now lies solely with the local authorities. Heat producers owe more than 50 billion for gas. State debts to compensate for the difference in tariffs since 2016 are 27 billion. The difference between market price tags for gas and those included in tariffs for heat and hot water is about 30%.
Now all Teplokommunenergo (TKE) receive gas without prepayment, albeit at inflated prices. Naftogaz has already sent out to TKE the conditions for the purchase of gas - this is an advance payment or guarantees of local authorities. This is an impossible condition for small and medium-sized settlements with deficit budgets - they simply do not have the money to buy gas.
Most TKEs approved their tariffs at lower gas prices. Naftogaz is now offering them 8,200 per thousand cubic meters, and after the cancellation of the PSO, the price will be about 9,500 hryvnia. This will automatically lead to the fact that all heat and power plants will agree on new tariffs for heat and hot water, higher than the existing ones by 30 to 60%. This means that the payment for heat in an apartment of 50 square meters will increase by 1-2 thousand hryvnias by the new heating season.
In many cities, the heating season may not start at all [https://strana.ua/articles/analysis/334190-chto-znachit-otmena-pso-po-ha.... Utilities are now completely in the market, so no one will be able to lend them gas - only on prepayment or on guarantees of local budgets. But not everyone has the money to buy gas. “Small towns may not start the heating season at all. That is, there will be no heating and hot water for any money,” says Oleg Popenko. In "Poltavateploenergo" we were told that they had already taken out a bank loan for the purchase of gas, as the local authorities were unable to allocate funds. In July 2021, gas workers will simply stop supplying gas to many enterprises for debts.
There are about 300 teplokommunenergo operating in Ukraine. Of these, almost 290 enter the gas market without contracts with suppliers, but almost all of them have significant gas debts. True, the Cabinet of Ministers has simplified the transition to new suppliers, allowing it to leave Naftogaz even if there are debts (although it will still have to be paid back).
At the local level, this reform can lead to a sharp reallocation of funds in favor of paying for energy and to the detriment of infrastructure (education, health care). Consumers pay for energy consumed in the last month before the 20th of that month, although they now have to pay in advance. Thus, TKE must have money in advance, before consumers pay for the consumed volume.
Utility companies say that they are already preparing new tariff proposals for NERC and expect that the regulator will approve the so-called floating tariff, when the gas component can be changed monthly depending on the gas price - already without coordination with the National Commission. If such tariffs are really adopted, the price tags for heat and hot water for Ukrainians will constantly "jump", and in the winter months, at the peak of cold weather, they will simply become record highs.
3. Inefficient use of resources by Ukravtodor.
On May 20, 2021, the parliament supported the candidacy of the head of Ukravtodor Alexander Kubrakov for the post of Minister of Infrastructure [https://www.epravda.com.ua/rus/news/2021/05/20/674066/]. Despite the report on his achievements as chairman of Ukravtodor, the results of the state audit testify to numerous abuses in the subsidiaries of Ukravtodor [https://www.epravda.com.ua/columns/2021/05/18/673982/].
The State Audit Service provided information on the completion of the audit of the financial and economic activities of the United Joint Stock Company State Joint Stock Company Automobile Roads of Ukraine for the period from September 1, 2016 to June 30, 2020, including 28 subsidiaries controlled by it. The audit revealed a number of violations in the amount of more than 368 million hryvnia, among which were recorded losses and short losses in the amount of 173 million hryvnia.In the course of the inventory of the Nikolaev regional road agency, a deficit of 25 units of machinery, mechanisms and equipment was established for a total of more than 1.5 million hryvnia. a deficit of 4 units of equipment, as well as "fuel" coupons for 60 tons of diesel fuel and 34 tons of gasoline in the amount of 1.5 million hryvnia was recorded. The deficit in the Kyiv Regional Road Administration, which has been in bankruptcy (sanitation) procedure since 2013, is 3 , 49 million hryvnia. Equipment, gasoline, fuel, etc. "disappeared". The Zaporizhzhya region refused 213 fixed assets in the amount of 6 million hryvnia (residual value - 2.4 million hryvnia).
Ternopil regional airport has 128 units of vehicles, cars and mechanisms on its balance sheet with a residual value of 3.3 million hryvnia, which are unsuitable for production activities. The Volyn regional airport, taking into account the purchase of scrap metal and spare parts from their disassembly, collected 57 pieces of equipment worth 1.9 million hryvnia. Ternopil Oblavtodor under the pretext of leasing a separate property of MBUD LLC of a production base for the production of asphalt concrete mixtures with a full technological cycle. Because of this, she received 1.7 million hryvnia in income. The negative consequences are simply enormous, because it was the only working asphalt concrete plant. The Zaporizhzhya Oblavtodor has the Andreevsky granite quarry on its balance sheet, but the production activity is carried out by a private structure - LLC "Andreevsky Granite Quarry". Since its inception in 2002, an expert assessment of the value of land use rights has not yet been carried out. The corresponding rights in the accounting of subsidiaries are reflected in the statutory estimate, which as of January 1, 2019 amounted to UAH 3.2 billion. At the same time, the market value differs significantly from the standard value. I will also note that some "subsidiaries" do not have legal documents for land plots.
At the same time, documents were issued only on 34 plots with an area of 58.6 hectares. Since the court did not provide sufficient evidence of the right to use this site. Based on permits granted in March 2018, the state-owned enterprise Zakhiddorvybukhprom rented its own production facilities as part of the Central Committee for 49 years. During 2018-2019, in the presence of equipment and skilled workers, up to 88% of orders received from the road service in the Zhytomyr region and the Zhytomyr regional state administration to contractors were sent to the Zhytomyr regional state administration.
Thus, over 2 years, UAH 336.4 million was transferred in favor of individuals, and the financial situation deteriorated significantly, which in March 2020 led to the opening of bankruptcy proceedings. The state enterprise "SRBU No. 100" sabotaged contractual obligations in previous years at the request of law enforcement agencies by court decisions, therefore, in November 2019, the property of this "subsidiary" was seized in the amount of UAH 113.7 million. In August-December 2019, the Kyiv airport, without an expert assessment and without a tender, implemented a railway siding with a length of almost 1 km in the interests of Zaliznichnoye-Dorozhnoe Construction LLC, which caused damage in the amount of UAH 1.97 million. The Dnipropetrovsk Regional State Administration was unable to document the use of fuels and lubricants in the amount of UAH 12.5 million. For example, due to non-observance by the Kirovograd Oblavtodor of the technology of arranging the upper layer of the road surface from a fine-grained asphalt concrete mixture worth UAH 10.1 million, the asphalt concrete turned out to be of inadequate quality. During 2019, the Ternopil Regional State Administration, commissioned by Techno-Bud-Center LLC, provides road maintenance services in the region for UAH 9.8 million. However, the company did not complete the work performed, since there were no monthly task plans for the necessary work, as provided for by contractual obligations. Therefore, having provided services to a commercial structure for almost 10 million hryvnia, the company incurred losses due to non-compliance with the terms of the contract.
Among such tendencies is the late acceptance by regional road services of road services carried out by the "subsidiaries" of road works. This leads to the washing out of the working capital to the "subsidiaries". As of June 30, 2020, the volume of such unacceptable work is 117.4 million hryvnia. It is also worth noting that the amount of tax debts of subsidiaries is increasing from UAH 217.6 million at the beginning of 2017 to UAH 769.1 million at the end of June 2020. In addition, salary arrears and an outflow of qualified personnel can be noted. From 2017 to June 2020, the amount of debt increased by 3.5 times, to 159 million hryvnia. It is also interesting that the withdrawal of the two "subsidiaries" from the crisis state through reorganization and bankruptcy did not give positive results, since none of them improved their position. At the same time, during the audit period, 4 more “subsidiaries” began bankruptcy (rehabilitation) procedures. And as a result of obstruction to the management of the Ivano-Frankivsk regional road operator V. Shah, the audit of the subsidiary was never carried out, but one thing is clear - the financial condition of this company has significantly deteriorated. These are the most egregious violations on regional highways.
The fact that the Minister of Infrastructure became the person who headed the structure, which demonstrated colossal losses and fraud, testifies to his loyalty to the Office of the President.
Edited by:
Ruslan Bortnik,
Daniil Bogatyrev.
Authors:
Daniil Bogatyrev,
Oksana Krasovskaya,
Andrey Timchenko.
