Peculiarities of IMF Memorandum Implementation in 2019

Ukraine received the first part of the IMF tranche in the amount of 1.4 bln. dollars on December 25, 2018. Accordingly, there will be a need to struggle for additional 2.5 bln. dollars. Of course, the Stand by requirements of co-operation are softer than under EFF, and the risks of non-obtaining the next part are lower, however the necessity of receiving the money "pressures" the government so that the interested stakeholders can take advantage of it and push their whims, especially before the elections, under cover of the necessity to meet the requirements of the memorandum. Therefore, it is necessary to analyze the possible areas for manipulation. The International Monetary Fund approved a program of assistance for Ukraine in the amount of 3.9 bln. dollars under the Stand by program on December 18, 2018. There are less requirements under this program. However, the interesting fact is that the review of the program and, accordingly, the progress of the implementation of the memorandum will only be in June-July, just after the presidential elections. On this basis, two risks can be noticed at once - attempts to reach the elections at any price and the uncertainty about the policy of the future president. With regard to monetary policy, taking into account the effectiveness of the NBU, no one should worry about it. According to forecasts, inflation in 2019 should be at the level of 7% - in case, of course, the coordination between the authorities will not fail. In turn, the introduction of medium-term budget planning will be introduced at least declaratively and will enable the effective implementation of budget projects for more than 1 year. In turn, political bargaining can lead to the situation when the requirements, that have a significant impact on the Ukrainian economy, will appear the most difficult to implement, in particular, the adoption of laws on SPLIT, privatization, energetics, administration of revenues and monetization of subsidies. What does the IMF require? · Administration of revenues The memorandum requires the reorganization of the State Fiscal Service (SFS) into two legal entities: the State Tax Service (which will include the department of the tax police) and the State Customs Service. They will be under accountability of the Ministry of Finance. This structural benchmarks must be completed by the end of April 2019. It is also planned to replace the Tax Police with a new institutional body. The first problem is that the unification of central and regional SFS offices takes place during the budget decentralization process. The latter gives local authorities the opportunity to set the rates and to administrate the taxes. At the same time, the reorganization of the SFS does not provide for the possibility of administrating the local taxes and fees directly to local authorities. Another problem is that the reorganization of the SFS does not solve the systemic problems. In particular, Ukrainian customs is currently under the jurisdiction of the SFS. The losses from smuggling and from the "inefficiency" of its functioning are over 4-5 billion dollars annually. The same figures were mentioned by the Minister of Internal Affairs of Ukraine Arsen Avakov, during the meeting with the representatives of business regarding the fight of law enforcement agencies against smuggling at the customs. Such sums are impressive due to these funds could be used to address the key economic and social issues of the Ukrainian economy. · Energetics Despite the positive developments and understanding of the need to preserve the Ukrainian gas transportation system, which resulted in a twofold decrease of gas transit tariffs, the government, while preserving the monopoly in the energy market, pushed the requirement for further tariff increase for gas and heating. In addition, an increase in gas extraction is required. The situation will be more complicated with regard to carrying out the unbundling of NJSC "Naftogaz of Ukraine". According to the agreements, it should transfer non-core transit activities to PJSC "Main Gas Pipelines of Ukraine" in 2019. In addition, the certification of the operator of the gas transportation system should take place. Firstly, the government and the management of "Naftogaz" have different views on the unbundling process (Full Ownership Unbundling or Independent System Operator), which may delay its practical implementation. Secondly, after tripartite consultations with the EU and "Gazprom", NJSC "Naftogaz of Ukraine" declared the impossibility of carrying out the unbundling due to gas contract with the Russian Federation. Under current contract, the functions can be divided only after the consent of the RF. There is also resistance from the side of "Naftogaz" - after the distribution of functions, it will only have the role of a trader. Thus, unbundling is unlikely to happen until the end of 2019. · Monetization of subsidies The pilot project should start in March 2019. Currently, there are 4 million recipients of subsidies in Ukraine and its average size is 1500 UAH. Thus, the government will give nearly 6 billion UAH per month in cash. At the same time, although the monetization of subsidies is to some extent a promising solution, however under the monopolization of the utility market, the recipient of subsidies will still not be able to select to whom, how and how much to pay - the money will be received by the same companies. In addition, it should be taken into consideration that presidential elections will take place in April and the monetization of subsidies during this period can easily "bribe" the voter. · Financial policy The memorandum includes the requirement of further increase in the stability of the banking system, the growth of the capitalization of banks (by the end of March 2019), a decrease in the amount of non-working loans, the entry of EBRD and IFC into the capital Oschadbank and Ukrgasbank. An important requirement is the adoption of the Law on amendments to certain legislative acts of Ukraine regarding the consolidation of the functions of state regulation of financial services markets or, in other words, the Law on "Split" (by the end of March 2019, a structural benchmark). As a result, all functions of the National Financial Services Commission are transferred to the NBU, except that are not related to pension funds, construction financing funds and real estate financing funds - the latter will be transferred to the National Securities and Stock Market Commission. In turn, the National Financial Services Commission will be liquidated. While analyzing the market of non-bank financial institutions, statistics show that there were 2021 of them as of December 2018. Such a number of institutions indicates the demand and importance of non-bank financial institutions for the functioning of the market.   Non-bank financial institutions in Ukraine Type of institution Amount, as of December 2018 Assets, thousand UAH Administrator of non-state pension funds 22 With NBU – 1 027 260 286 Without NBU – 259 286 Trust company 2 - Credit union 358 2 169 796 Pawnshop 366 3 763 667 Non-state pension fund 62 2 465 560 Insurance company 281 53 679 752 Financial company 930 66 780 189   Source: according to the National Financial Services Commission   The relevant existing parameters and norms for their functioning will be later changed by the regulator, probably after the adoption of the Law on SPLIT. Thus, there may be a conflict of interests due to higher requirements and "own" standards. Such implementation of the new standards may suspend the development of non-bank financial institutions and may cause the companies exit from the market. On the other hand, this situation can stimulate the development of banking institutions, while opening the new niches for them. · Privatization According to the agreements, nearly 500 objects of small-scale privatization should be sold through the system of electronic auctions ProZorro by the end of April 2019. Regarding large privatization, 16 objects will be offered for sale: - Energy industry: PJSC "Tsentrenergo" (should be sold in the first half of 2019); OJSC "Ternopiloblenergo"; PJSC "Zaporizhiaoblenergo"; JSC "Kharkivoblenergo"; JSC "Mykolaivoblenergo"; JSC "Khmelnytskoblenergo". - Mining industry: JSC "United Mining and Chemical Company"; State Enterprise "Coal Company "Krasnolymanska" (should be sold in the first half of 2019). - Machine and instrument making: PJSC "Azovmash"; SE "Plant "Electrotyazhmash". - Chemical industry: PJSC "Sumykhimprom"; PJSC "Odessa Port Plant". - Processing industry: JSC "Oriana". - Health, culture and sports: PJSC "President-Hotel" (should be sold in the first half of 2019); PJSC "Indar" (should be sold in the first half of 2019). - Agriculture: PJSC "National Joint-Stock Company "Ukragroleasing". It is important to mention that Ukraine pledged to submit a draft law on reducing the list of companies prohibited for privatization (by the end of April 2019). Taking into account the statements of the Head of the State Property Fund regarding the IMF support in privatization (however, it cannot be said that the IMF itself will be involved in the re-activation of large privatization), there is a risk that this process may turn into a "strategic flea market" for stakeholders, seemingly under the cover of direct IMF requirements. There may also be some issues with regard to state property leasing laws and concessions that are to be adopted in the first half of 2019. In particular, behind the good intentions of finding additional funding, there may hide the "monopolization" of key state property in order to enrich people close to local authorities. There may be a situation when the property, that is built on budget funds and cheaply placed for concession, will be exploited just before the next need for restoration or repair. In this period, it may simply be returned to the state. In addition, the state's interest in maintaining its own facilities in good condition under the "concessionary agiotage" is lower, taking into account the lack of funds for regional programs and needs. What will not happen? The IMF memorandum mentions reforms that will not be carried out in 2019. In particular, there will not be tax amnesty, tax benefits or privileges will not be introduced. There is also no provision for the introduction of a tax on withdrawn capital and a second level of the pension system. However, there also will not be a significant economic development of Ukraine in 2019. In particular, the World Bank has worsened the forecast of GDP growth for Ukraine to 2.9% in 2019. The forecast was also revised downwards by the Ministry of Finance - according to it, growth will be only 3%. For the effective cooperation, the Ukrainian economy should grow at least 5% of GDP per year. And for this purpose it is necessary to solve a number of systemic problems: - Growth indicators. The peak of GDP growth in Ukraine is already passing. The effect of the zero base played in favor of the government before, however currently achieving growth is becoming impossible without real changes and reforms. Forced tightening of screws, strict monetary policy with corresponding interest rates restrain the country's economic development, resulting not in an inflow, but in an outflow of capital. - Trade indicators. Trade imbalances, the prevalence of raw materials in Ukrainian exports, import and energy dependence only worsen the trade balance indicators with each year and reduce the foreign currency earnings. - Indicators of transparency and corruption. Launching the work of the Anti-corruption court, increasing the efficiency and transparency of the authorities will promote the fair distribution of funds and improve the investment climate. - Indicators of reforms (market). The reforms in the country should be carried out independently, without the need for external supervision and control. Unfortunately, the IMF is the only lever of influence on reforms in the country. At the same time, the IMF acts as a kind of "reanimation brigade". The problem is that reanimation of the country for 25 years (the Ukraine-IMF relationships continue for such a period) already seems to be wrong. Currently Ukraine has almost reached the amount of 30 billion dollars of loans from the IMF throughout the history of relations and for another 15 years Ukraine will have to pay all its debts. As long as there is a propagation of the ideas of interested stakeholders, without taking into account the national ones, under the cover of the IMF requirements with its corresponding "demonization", instead of real and full reforms, economic development should not be expected; and it is unlikely that Ukraine can become a success-case in IMF portfolio....

ICPS Press

Expert discussion on Ukraine-Poland relations. Webinar 3

International Centre for Policy Studies in cooperation with the Geremek Foundation (Poland) initiated the conduction of the expert webinar devoted to the analysis of relations between Ukraine and Poland. Bilateral Polish-Ukrainian relations fully reflect geopolitical complexities, social interconnection, and cultural context of the recent century in the history of Eastern Europe. Driven by security considerations and mutual desire for closer partnership – or even alliance – these relations haven’t escaped series of conflicts and misunderstandings. A neighborhood with a tremendous potential remains vulnerable, this time not so much due to big powers’ games, but because of modified regional context and internal political developments. Both states perceive each other as strategic partners, and such a perception survived almost thirty years of ups-and-downs in international environment and internal political transformations in both countries. The stance of bilateral relations between them continues to be one of the key factors to overall regional stability. Poland and Ukraine have enough potential combined to impact regional political developments and put forward a new security agenda. This agenda should be realistic and take into account current political and geopolitical realities. At the same time, issues connected to national identities, including conflicts over history, are not likely to disappear. Rising nationalism will be a political trend in Eastern Europe for several years to come, and Poland and Ukraine should learn to live with it. Counterweighing identity issues with mutually beneficial cooperation in various spheres, introducing regional projects which would enhance joint efforts, concentrating on multilateral regional formats would help minimize risks of another wave of nationalism in the Eastern Europe. Attention should also be paid to improving democratic institutions. The task is crucial for Ukraine, which continuously falls into the “hybrid regime” group in EIU Democracy Index, but also important for other countries in the region, including Poland. More democracy would mean less internal conflicts, more power-sharing, and better protection for minorities – benefits, which any state of the region would welcome. The detailed analysis on the current state of play in Ukraine-Poland relations can be found in the webinar’s materials:   ICPS presentation What is happening in relations between Ukraine and Poland?   ICPS conducts a series of expert webinars devoted to the analysis of Ukraine’s relations with its Western neigbors as part of the project “Ukraine and V4 countries: promoting better understanding”. Considering potential negative consequences from the current tendencies, the main purpose of the ICPS expert discussions is to elaborate common, effective mechanisms for the normalization of relations and good-neighborliness between Ukraine and the member countries of the Visegrad Group. The project is implemented with the support of the International Visegrad Fund.  ...

ICPS Press

Economic Outcomes and Prospects of Ukraine: Progress, Regress or Status Quo?

On the one hand, the year 2018 is characterized by relative stability of the economic situation in the country, and, on another hand, is showing the lack of achievements. At the same time, foreign economic situation in 2019 may worsen, while leading to greater stagnation or even economic crisis. In turn, Ukraine is still completely unprepared for the year 2019 because of the government's failure or reluctance to show political will to implement the reforms. Accordingly, Ukraine should learn how to minimize the economic risks of probable occurrences, not just their consequences post factum. What was remarkable in 2018? Compared to previous years, the economy of Ukraine developed in the absence of significant shocks in 2018. The main changes that have had a greater or lesser impact on economic development were the following: • Macroeconomics and finance. The fact that for the first time since the crisis the banking sector has become and remains profitable can be stated among the achievements in this area. Also, tax revenues have raised. On the other hand, this growth was more due to inflationary processes in the country and due to the increase of wages. This has affected the expansion of the tax base and, accordingly, the tax revenues. At the end of 2018, a balanced budget was adopted. On the other hand, the slow pace of economic growth and insufficient growth of domestic production were felt, inflationary pressures increased remarkably. Accordingly, the discount rate was raised, which currently amounts up to 18% per annum, thus restraining the economic development. Further stability of the economy is unlikely to be able to "be guided" only by the discount rate and currency intervention. A three-year budget planning for minimizing the shocks has not been launched. In addition, the following was observed in the economy: - insufficient amount of investments, problems with timely allocation of money of financial organizations and other funds for infrastructure projects; - the share of non-performing loans in the Ukrainian economy reached 54.31% (as of October 2018); - there were problems with reimbursement of benefits and subsidies for the enterprises of housing and communal services, etc. • International economic relations. It looked like that only the NBU fought with the results of non-market price increases, turbulence in foreign markets and the decrease of investors' interests in Ukraine in 2018. Meanwhile, there was a relative stability of hryvnia, the dynamics of replenishment of gold and foreign exchange reserves was positive during the year. At the same time, asymmetries in foreign trade and insufficient lobbying of national interests was present. In particular, this led to the fact that Ukraine used quotas for the main commodity groups in trade with the EU during the first months of 2018. According to the latest State Statistics Service data, the negative foreign trade balance of Ukraine is $ 3.45 billion after 3 quarters of 2018 passed. For comparison, during the same period of 2017, the negative foreign trade balance was equal to $ 1.11 billion. In addition, the following facts should also be noted: - emigration remains one of the main problems of Ukraine in recent times; - the entering to the foreign borrowing market in 2018 was not urgent; the strategy on external and internal debt remains declarative; - Ukraine could not agree with the IMF on the tranche during the year. There is still a small chance to get a tranche for the New Year's holidays. • "Non-market Shocks". Among the "non-market shocks" in 2018, the following is particularly highlighted: - Situation in the waters of the Azov Sea and the problems with the passage of ships to Ukrainian ports. Despite the fact that the total turnover of Azov ports is barely up to 4 million tons, the delays in the delivery of cargoes in this region have created threats to the functioning of local infrastructure and worsened the transit status of Ukraine. - The introduction of the martial law has become a precedent for Ukraine and economy. Although it will not significantly affect the state of the economy in 2018, however, it has given negative signals to investors regarding the development of the situation in the country. • Energetics. Form the positive side, it is worth mentioning the encouragement of the increase of the green energy share. On the other hand, currently, the share of renewable energy in Ukraine is only 1.8% (in price - 8.3%). In addition, the Stockholm Arbitration Court ordered Gazprom to pay the Ukrainian company $ 4.63 billion for short supply of gas under transit contract (or $ 2.56 billion, taking into account the Ukrainian side's debt for the supplied gas). There were no other achievements in the energy sector. All the same problems remain with the "creation" of formula tariffs, subsidies and payments between the major suppliers in Ukraine (due to which problems in receiving hot water and heating occurred in a number of cities), the general constant increase of tariffs for households and industrial producers, overloading of power stations, etc. In addition, the unreasonable government policy, insufficient gas volumes in the storage facilities during early March led to its deficit in the country (which was the reason for the declaration of an emergency situation), and which was solved by additional, more expensive imported gas. • Privatization. There was a failure of privatization again because of poor management of state property and the inability to trade: the sale of state property brought less revenues to the state budget than was planned. The reason was the disruptions / failures of large privatization objects sale due to their unsatisfactory conditions, including finance, and peculiarities of participation in tenders, the politicization of some decisions. The inability to sell the companies resulted in the decrease of their attractiveness, while reducing their estimated value and possible revenues to the budget. As a result, large privatization has been postponed for 2019. • Improved transparency. Under this aspect, in particular, the transparency of the banking system has partially increased due to the new requirements for the organization of risk management system, due to the disclosure of data on components and capital adequacy of banks, and due to the creation of a credit register. As for other spheres of economy, an online resource for price tracking was launched, new sections were introduced on e-data regarding the openness of local budgets data, there was some degree of de-shadowing and improvement of tax servicing, small privatization on ProZorro.Sales and pilot projects on the introduction of electronic receipt (e-Receipt) were launched. Nevertheless, the openness of data is unlikely to effectively impact the minimization of corruption in the country at this stage. What does await Ukraine in 2019? The following year, Ukraine will need to concentrate on the following areas: • Macroeconomic indicators. Among the main ones it is necessary to highlight: - Growth of GDP in 2019 will slow down to 2.3% due to lower growth rates of the global economy and due to allocation of significant amount of money on debt financing. - In the beginning of the year, the inflation will significantly accelerate due to rising gas prices for the population and corresponding revision of tariffs for heating and hot water. In general, inflation will decrease to 6.8%, primarily as a result of tight monetary policy in 2019. - The election campaign can lead to an increase in social standards while lacking the sufficient economic growth.   KEY INDICATORS Final data Estimate Forecast Year 2014 2015 2016 2017 2018 2019 2020 NATIONAL ACCOUNTS               GDP, billions UAH 1 567 1 979 2 385 2 983 3 483 3 918 4 348 Real GDP, apc** -6,6 -9,8 2,4 2,5 3,0 2,3 2,6 Real total consumption, apc -6,2 -15,2 2,0 7,1 3,5 2,1 2,1 Real gross fixed investment, apc -24,0 -9,2 20,4 18,2  14,0 8,0 8,0 MANUFACTURING AND AGRICULTURE               Real industrial output, apc -10,1 -13,0 2,8 0,4 1,7 2,2 2,4 Real agricultural output, apc 2,2 -4,8 6,3 -2,7 8,0 0,0 3,0 HOUSEHOLDS               Population at the start of the year, millions 45,5 45,3 45,2 45,1 44,9 44,8 44,7 Real disposable household income, apc -11,5 -20,4 2,0 7,4 8,0 2,0 2,0 Average monthly real wages, apc -6,5 -20,2 9,0 19,1 13,0 5,0 5,0 Average monthly nominal wages, UAH 3 480 4 195 5 183 7 104 8 912 10 371 11 898 Unemployment rate, ILO methodology, % 9,3 9,1 9,3 9,5 9,0 8,5 8,0 Real retail trade, apc -9,6 -19,8 4,5 6,0 4,0 3,5 3,0 PRICES               Consumer price index, apc  24,9 43,3 12,4 13,7 10,0  6,8 6,0 Producer price index, apc 31,7 25,5 35,7 16,5 16,0 10,0 9,0 Construction price index, apc 15,7 22,7 9,9 15,5 22,0 8,0 8,0 FOREIGN ECONOMIC ACTIVITY               Exports of goods and services, apc -19,9 -26,9 -3,9 17,1 10,0 4,5 4,3 Imports of goods and services, apc -28,1 -29,3 4,5 19,2 14,5 2,8 3,4 Current account balance, % GDP -3,5 1,8 -1,4 -2,2 -4,3 -3,8 -3,5 Net FDI, millions USD 299 3 012 3 268 2 593 2 300 2 500 2 500 FINANCIAL INDICATORS               Monetary base, apc 8,5 0,8 13,6  4,6 6,0 5,0 4,0 М3, apc 4,9 3,9 10,8 9,5 8,0 7,0 6,0 NBU gold/forex reserves, millions USD 7 533 13 300 15 539 18 808 19 000 18 000 17 000 Official exchange rate, average annual, UAH/USD 11,89 21,84 25,55 26,60 27,30 29,50 31,00 UAH loan interest, last month of the year, % 16,6 20,4 15,2 17,5 22,0 20,0 18,0   Source: "Economic Analysis and Current Trends: Forecast for 2018-2020", ICPS, 2018 • Energy aspect. In general, the issue of the strategy for achieving the energy security remains one of the most important challenges for Ukraine's national interests. The Ukrainian government has announced the plans to achieve the country's energy independence and sustainable development, however the path remains blurred. Realization of Russian projects of alternative gas pipelines may leave Ukraine on the sideways of such an important element of economic activity as transit of gas, while leading to significant financial losses. In particular, a contract between Gazprom and Naftogaz for the transit of gas ends on December 31, 2019. At the same time, Gazprom filed a lawsuit regarding the termination of the transit contract through Ukraine. The arbitration institute of the Chamber of Commerce of Stockholm united the above-mentioned lawsuit with the Naftogaz's claim to revise the tariff by $ 12 billion in one case. • International finance. Due to trade wars and capital outflows from developing countries, Ukraine may have lower foreign currency earnings. In addition, the loan market will become more expensive. Partially, the new tranche of the IMF may help Ukraine, however, given that the next year Ukraine needs to pay $ 5.88 billion of external debt and $ 14.8 billion of internal debt, while the gold and foreign exchange reserves are projected to be at the same level, its volumes will be not enough to solve all the problems of Ukrainian economy. The government will need to search for the ways to get out of the situation. In the absence of the state's strategy of managing the external and internal debt, the country will face additional challenges for development.  In addition, there was no final decision of the London High Court on "Yanukovych's debt", amounting up to $ 3 billion. Theoretically it can be adopted in 2019.   Main scenarios and recommendations Thus, the Ukrainian economy did not achieve significant results in 2018 and remains vulnerable to external shocks of the following years. There is an urgent need to minimize the listed risks to economic development of the country. On the background of less optimistic governmental predictions regarding the year 2019, the problem of a vicious circle "maintaining stability - the lack of economic prospects" becomes apparent, and the issues how to escape out of it and what to do next rise. In this regard, the introduction of effective medium-term planning could theoretically add "predictability" to the development of the Ukrainian economy. On the other hand, applying of such an approach practically in the realities of Ukraine is quite complicated while its vulnerability to internal and external shocks. Accordingly, any plans can be easily "spoiled" under turbulence conditions. In addition, the biggest part of the indicators of Ukrainian plans are set manually, while depending on the "mood" of the government, and are usually static rather than dynamic. They do not change automatically, while based on the formula calculations depending on the situation, and they do not guarantee the promptness of updating the plans or their relevance and independence from the government decisions. The final result is blurred. Thus, it is important how the "reboot" of the government after the elections in the next year will take place. Taking into account the above stated, it is necessary to maintain stability in the mid-election period. In general, the positive scenario of the Ukrainian economy's development in 2019 is unlikely to happen and is not feasible for consideration. Therefore, there is a need to distinguish the following scenarios: • The basic scenario seems to be more credible. According to it, the transitional government will not risk making significant changes and implementing reforms. The Ukrainian economy will continue its stagnant development trend. On the other hand, this will not cause any resistance from the interested stakeholders and the government will be able to fulfill its functions.  • In the case of a negative scenario, the post-election period will be characterized by blocked decisions of the transitional government, uncertainty and lack of time for maneuver. Ukraine risks not getting a tranche of the IMF and will not be able to pay off its debts. This will result in the country's technical default. Accordingly, while "rebooting" period, making changes will be inappropriate and difficult. However, after the formation of the government, it will be important to rethink economic development, because otherwise Ukraine will change the stagnant trend. Nevertheless, Ukraine gains experience with every year and 2019 may be extremely fruitful.  ...

ICPS Press

Ukrainian Foreign Policy: Results of 2018 and Prospects for 2019

2018 has been another difficult year for Ukraine and in particular for its foreign policy. Lack of progress in reforming the country puts strict limitations on what can be achieved internationally. As a result, most significant problems on the agenda – a protracted conflict in Donbas, tense relations with neighbors, insufficient international support – remained unresolved or got worse. As in previous years, Ukraine remains in a grey zone of European security and finds its low levels of efficiency and democracy in a sharp contrast with rhetoric about EU/NATO membership. Things seem to get worse recently also due to changes in strategic environment. The world becomes more prone to hard power and less democratic, while international politics is much closer to zero-sum game than it used to be five years ago. These trends are not favorable for countries like Ukraine – middle powers with weak economies in a dangerous environment. Ukraine, on its part, is responsible for a number of important decisions is has taken. The country’s current international stance is far from the best. Key Outcomes of 2018 Along the main lines of Ukraine’s foreign and security policy there have been several important developments in 2018. Among them are: changes in military operation from ATO to operation of united forces to  in the East of the country in accordance with an adopted Law on the Peculiarities of State Policy on Ensuring Ukraine’s State Sovereignty over Temporarily Occupied Territories in Donetsk and Luhansk Regions (hereinafter referred as Law on Donbas), accompanied by the talks on possible peacekeeping mission; high tensions with Western neighbors;  further deterioration of relations with Russia, resulted in non-prolongation of the Ukrainian-Russian Treaty on Friendship, Cooperation, and Partnership (hereinafter referred to as Big Treaty) by Ukraine; Azov Crisis; and subsequent introduction of the martial law in Ukraine; beginning of lethal arms supplies from the USA; intensive rhetoric over cooperation with NATO and EU, resulted in Parliament’s voting for constitutional amendments stipulating Ukraine’s intentions to join both organizations. The Law on Donbas, which entered into force on February, 24th, was supposed to consolidate Ukraine’s efforts in areas of the-then anti-terrorist operation. The latter has been changed into United Forces Operation on April, 30th. The Law has been introduced to resolve legal issues related to the ongoing military operation and, as it soon became apparent, is unable to resolve the conflict. As times goes by, chances for quick and effective conflict resolution are diminishing. By the end of 2018 is has become clear that the idea of UN peacekeeping mission so much disputed a year ago, is more difficult to carry out than it initially seemed. Most likely, the conflict will follow the path of other post-Soviet frozen conflicts, allowing Russia tools for destabilization and partial control and undermining state efficiency in target countries. International environment of the conflict seems to remain quite stable, with Europeans and Americans aiming at minimizing risks of escalation and keeping the conflict at low intensity levels. Ongoing militarized conflict generates demand for a more “rally-around-the-flag” ideology, which has been more actively implemented in Ukraine in recent months. It has already impacted relations with Western neighbors, most evidently Hungary and Poland; and is likely to impact them further. The Law on Education, adopted by the Parliament in September, 5th, 2017, provoked negative reaction from Hungary, which has ever since effectively blocked Ukraine’s rapprochement with NATO. Further escalation of tensions has been triggered by issues of citizenship: Hungarian consulate in Berehove has been recorded issuing Hungarian passports for Ukrainian citizens. A diplomatic scandal followed, as well as it became evident that Ukraine needs a more coherent approach to issues of dual citizenship. Moreover, on February, 6th, the Ukrainian Parliament adopted an acclamation in reaction to adoption of amendments to a Law on the Institute of National Memory in Poland. It signaled another round of Polish-Ukrainian clashes over historical issues, which are currently promoted by a rising influence of right ideologies in both countries. The bottom line of these developments is deterioration in Ukraine’s bilateral relations with its Western neighbors. This trend seems to be long-term and damaging Ukraine’s European and Euro-Atlantic aspirations. In what concerns Ukraine’s relations with its Eastern neighbor, Russia, things are hardly getting better. The year has been marked by continued discussions over the fate of the Big Treaty. In April president Poroshenko was offering denunciation of specific articles of the Treaty, but already in September a decision was taken not to extend the Treaty for the next ten-year period (as envisaged in the Article 40). Additionally, the corresponding Law has been approved by the Parliament later in December. The Treaty was a part of a huge normative basis of bilateral relations, totaling more than 450 agreements. About 40 of them have been terminated since 2014. Together with sanctions, introduced by Ukraine against Russia, weakening of the normative basis remains one of the very few instruments Ukraine implies in attempts to make Russia change its policies. In 2018, just like in previous years, a lack of long-term strategy of dealing with Russia has made most of the steps Ukraine was taking ineffective, costly and risky. Risks have become especially evident in December, when the crisis around the Sea of Azov and the Kerch Strait broke out. Three Ukrainian ships with 24 sailors has been shot and captured by the Russian naval forces when attempting to get to the Sea of Azov through the Kerch Strait. Russian actions violated norms of international law, in particular the UN Charter and the Convention on the Law of the Sea, as well as the Treaty for Cooperation in Utilizing the Azov Sea and the Kerch Strait between Ukraine and Russia, singed in 2003. Ukraine’s reaction was more resolute than even in 2014 and involved introducing of a martial law, which however was accompanied by fierce political discussions at the Parliament. With the impact of the Martial Law unclear, it is evident, that the end of the year brought about another peak of escalation, capable to influence upcoming presidential elections. Relations with the United States have remained another priority of Ukraine’s foreign policy. The Crimea Declaration, issued by the State Department on July, 25th, was enthusiastically welcome in Ukraine. The document contains a notion that United States reaffirms as policy its refusal to recognize the Kremlin’s claims of sovereignty over territory of Crimea. It also refers to the Welles Declaration of 1940, framing similar position towards occupation of the Baltic States by the USSR. Administration of President Trump doesn’t seem to take a stance, which would be very different from the one of the Obama’s, but one difference has become apparent. On March, 1st, supplies of FGM-148 Javelin anti-tank missiles to Ukraine have been approved by the State Department. The long awaited move was taken in Kyiv as a sign of American support in Ukraine’s war against Russian-backed separatists in the East of the country. President Obama was reluctant to approve weapons supplies to Ukraine for various reasons, most notably out of fear of conflict’s escalation. Russia’s actions were contained rather by sanctions than by arming Ukraine. President Trump took a more resolute stance. $350 million for military assistance to Ukraine was allocated in the budget for 2018. A subsequent decision to approve a $47 million supply of FGM-148 Javelin missiles and a $41.5 million supply of Barret M107A1 sniper rifles in 2018 must have been uneasy. The numbers are not very high: the total value of exported American weapons worldwide was about $42 billion in 2017, while supplies to Israel, a top-receiver of American arms, surpassed $3 billion in total. But nevertheless that may be an important step forward. Providing Ukraine with Javelins would certainly signal some level of support from the US, but a much more effective strategy would rest on series of arms transfers, within a properly designed time framework or even without an expiry date. Unlike a single delivery of even a rather sophisticated and/or expensive weapon, systematic supplies are capable of becoming a powerful deterring instrument. If Ukraine is to receive American weapons continuously, the strength of deterring signal to Moscow would be maximized. Deterrence of Russia inevitably involves rhetoric about NATO and EU membership on the part of Ukrainian officials. As the rhetoric becomes more persistent, Ukraine is hardly getting closer to what has been declared its top foreign policy priority. Lack of reforms which would introduce sustainable democracy, rule of law, and economic efficiency puts limits on how close Ukraine can get to become a member of either EU or NATO. At the same time, the European and Euro-Atlantic discourse of Ukraine’s foreign policy has already become dominant and in 2018 got additional impetus through the process of making constitutional amendments, launched by the President. They are supposed to turn Ukraine’s aspiration for EU and NATO membership into a constitutional norm in an attempt to make this strategic course irreversible. To a certain extent, this step can be seen as a symbol of Ukrainian foreign policy in the recent years. Declarations of the country’s pro-European choice have been accompanied by deterioration in relations with neighbors to the West, deadlock in managing conflict in Donbas, and a growing apathy on the part of major powers. Will anything change in the year to come? Setting for 2019 Years of presidential elections are usually turbulent in Ukraine. Next year’s two election campaigns may make foreign and security policy a hostage to internal political struggle. Features, which surely will persist, no matter who wins the elections, are structural to Ukrainian foreign policy. They include the following. First, Ukraine will remain in a grey zone of regional security. Lack of allies and security guarantees has been a key feature of Ukraine’s strategic environment, and will most likely remain. About two dozens of states, claimed by Ukrainian presidents as the country’s “strategic partners” do not have any security guarantees extended to Ukraine. Second, Ukraine will face asymmetry in almost any bilateral relations. Long-term weakening, lasting periods of destabilization, incoherence of foreign policy made Ukraine vulnerable not only to superior powers, like Russia, but also to smaller neighbors, which are members to NATO and EU. Managing asymmetry requires special skills, including multilateral formats, and thus may require new approaches from Ukrainian diplomacy. Third, improving foreign policy decision making remains important. The Law on Diplomatic Service, adopted June, 07 and entering into force December, 12 is only one step in that direction. Ukraine’s foreign policy bureaucracy remains largely inefficient, subordinated to issues of internal political struggle. These problems are also to be addressed. More specifically, the foreign policy agenda will most likely be dominated by the attempts to resolve the conflict in Donbas. Much will depend on whether a new president will be able to change Russia’s position and strengthen international support for Ukraine, be it in Normandy, Budapest+ or any other format. Religious issues will most likely be affecting election campaigns as Ukrainian Orthodox Church will be moving towards autocephaly. But their influence on foreign policy in the upcoming year will remain limited. Exploitation of religious, language, and national issues may become a part of longer term strategy of dealing with Russia, but a question remains whether it will be a good strategy. Ukraine should do its best to get relations with Hungary and Poland back to normal. Prolongation of conflicts on historical and linguistic grounds plays against interests of all, but most of all against Ukrainian interests. Intentions to join EU and NATO will continue to be main foreign policy slogans under any president in Ukraine. The question is how fast Ukraine will get closer to real cooperation with both. This question seems to be fundamental for the country’s foreign policy. Possible Scenarios Elections in the upcoming year open up some space for guesses and predictions. Although it is still hard to say who would be the winner of presidential and parliamentary campaigns, a variety of results can be boiled down to three basic scenarios. Scenario with incumbent leadership. Under this scenario current president in office would win elections and retain power in Ukraine. His control over Parliament would most likely diminish, but generally he will be able to carry out foreign and security policy of his choice. This choice will resemble current strategy. The conflict in the East will be frozen, and the conflict with Russia further instutitionalized, also as a part of Ukraine’s internal political agenda. Further construction of national identity would keep conflicts with Western neighbors open. Ukraine’s intention to join EU and NATO will dominate foreign policy discourse; however remain unfulfilled in five years. Scenario with a president ready to negotiate with Russia. Such a president will find it very challenging to carry out a strategy, aimed at reaching consensus with the Kremlin, since a large part of Ukrainian society takes any negotiations as a sign of capitulation. But if such a strategy would be put into practice, peace in the East will be the most valuable outcome. Whether it will lead to a comprehensive conflict resolution is doubtful, since this conflict is a part of a broader clash of interests. However, regaining control over Ukrainian territory and the border would be possible. Finding modus operandi with Russia would be the central part of the foreign and security policy. Scenario with a victory of right-wing/radical forces. Although not a likely scenario, it is still possible. It is also possible that any elected president would tend to take a more radical and a more right-wing stance, as it often happens in countries which experience wars or protracted military conflicts. If that is the case, the most likely foreign policy outcome would be deterioration of relations with the West, series of crises in relations with Ukraine’s Western neighbors, and escalation in relations with Russia. Foreign policy of such a president would be more risk-prone and, most likely, more isolated. Much will depend on observing democratic standards and the day of elections. Possible frauds, non-recognition of results by competing parties, or violence would significantly undermine legitimacy of the future president, decrease support from the West, and thus make external challenges even harder for him. Conclusion Ukraine finds itself in a quite complicated international environment, which will remain so for at least several years. Vulnerable to numerous challenges, having no allies and long-term strategy on most pressing security issues, the country is de facto implementing and most likely will proceed with ad hoc foreign policy. Fighting for its statehood and independence Ukraine will need a much more creative, flexible, and strategic foreign policy. A protracted conflict with Russia, vague perspectives to further deepen relations with Western institutions, and deteriorating regional neighborhood will set the scene for the next president of Ukraine in 2019.      ...

ICPS Press

Internal policy of Ukraine: results of 2018 and forecast for 2019

2018 was accompanied by constant political turbulence, which in fact became a systemic phenomenon in Ukrainian politics. There was no serious breakthrough in structural reforms, but some point changes were managed to realize. 2019 will be marked by the elections. The parade of candidates will increase political uncertainty in the first half of the year. Structural reforms will go to the background, at least until the end of the entire election period. Any qualitative changes in all the hot issues of internal politics will be possible only after the parliamentary elections, but the vector of these changes is difficult to predict, as Ukraine once again finds itself at a crossroads. Achievements and failures of 2018 The achievements of the Ukrainian authorities in 2018 include: 1. Preservation of authorities` efficiency. Presidential Administration, BPP and NF managed to preserve the existing political structure and provide the opportunity to make decisions. However, the crisis in the relations between BPP and NF is deepened, and, besides finding allies for important voting, these parties spend a lot of time to coordinate positions between them. It is increasingly difficult for the president to keep his own agenda in parliament. Parliament, though with difficulty, but continues to adopt government laws, the government works without much shocks and stupor. The duality of the executive branch though intensifies the relationship between the president and the prime minister, but does not lead to catastrophic conflicts between them. 2. Continued implementation of reforms. In 2018, the implementation of decentralization, health-care and education reforms continued. The decentralization reform is the most successful, as evidenced by the dynamics of the creation of new UTCs and the increase of local budgets. As for the implementation of the health-care reform, the transition to a family doctor system has started and it has results in the form of millions of signed declarations of citizens with doctors, but real changes are still poorly felt. Some family doctors began to receive new wages. The reform of education system has more problems, in particular through realization at local level, but its implementation continues. In addition, Ukrainian politicians finally managed to adopt the law on the anti-corruption court, the formation of which will allow continuation of the implementation of anti-corruption reform. However, one should understand that its adoption is largely the merit of international partners of Ukraine and the public sector, rather than the representatives of the authorities themselves. It is also possible to note the adoption of the law on privatization, which, according to the people's deputies' plan, should create transparent and understandable conditions for privatization in Ukraine. However, the law has been adopted, but the privatization itself has not actually been carried out. Finally, the launch of the SBI, however, was accompanied by numerous scandals. 3. Preservation of cooperation between Ukraine and IMF. Given the high debt burden on the budget of Ukraine, as well as the fragile financial stability of Ukraine, it is important to conclude a new program of cooperation between Ukraine and IMF. Ukraine is planning to receive the first tranche in 2018, subject to a positive decision by the IMF Board of Directors on December 18 this year. It should also be emphasized that the conditions of cooperation between Ukraine and IMF act as a basis (main driver) for carrying out structural reforms. In addition, continued cooperation between Ukraine and IMF automatically expands the list of potential sources for attraction of funds on foreign markets by Ukraine. The failures of the Ukrainian authorities in 2018 include: 1. The low quality of democracy, the strengthening of anti-liberal tendencies. Despite a certain weakening of the president's position, he continues to monopolize the power in his hands. Formally, while not belonging to any of the branches of government, due to the exclusive influence on the GPU and the SSU, the informal mechanisms of personal commitments, as well as the largest faction in the parliament, president Poroshenko has an exclusive influence both on the government and parliament, and on the judicial branch, which, after judicial reform, actually came out under the influence of the Verkhovna Rada. Currently, there is practically no criticism of the president among the Ukrainian media, and the authorities' attacks on media have increased, which allow criticism of the current president. Pressure on journalists and representatives of civil society organizations (the use of physical violence against them) by law enforcement agencies and various “titushki”, as well as representatives of nationalist movements, became a common phenomenon. Against the background of increasing the role of representatives of the public sector in state-building processes, the opposition of the authorities to this trend increases proportionally. Representatives of the authorities continue to use fake or manual NGOs, which are members of the supervisory boards of state bodies. There were frequent cases of open hostility between government officials and civil organizations and activists. An apogee in 2018 was the murder of activist Kateryna Gandzyuk and the apparent sabotage of the crime investigation process by law enforcement agencies. There are numerous attacks on activists in the regions. 2. Critical politicization of the work of state authorities. In terms of the pre-election year, voting in the parliament was more like election campaigning than real legislative work. The pressure on political forces by opening criminal cases on separate deputies, holding dirty PR campaigns to discredit political opponents, etc., became merely common. All this has a very negative effect on the institutional capacity of the entire state machinery. The distrust of citizens towards state authorities is critical. The GPU, the SSU, the Ministry of Internal Affairs, and recently SAP and NABU are used in Ukraine as institutes of political competition; in most cases the law enforcement function is secondary to them. 3. Security situation. Today, the level of insecurity among Ukrainian citizens is the largest in the history of Ukraine's independence. The streets of the Ukrainian capital and other cities are no longer safe for politicians, businessmen, journalists, ordinary citizens. The security issue is being actualized not so much in the context of the war in the East, but in increasing the number of publicly commissioned murders, gang raids, terrorist attacks, and explosions of military warehouses in the deep rear. The level of security in Ukraine is approaching a threatening level, when the state actually becomes unable to meet the basic needs of society, which in the end can lead to the destruction of statehood. 4. The war in Donbas and Crimea. In 2018, the issue of de-occupation of non-controlled territories did not have any positive dynamics. This concerns not only the actual issue of the return of the temporarily occupied territories, but also the question of establishing a strategy for the gradual reintegration of these areas, ensuring the rights (in particular electoral) of IDPs and implementing their social guarantees. The authorities are actively using Russian aggression for internal political use in order to receive electoral dividends during future elections. 5. Lack of results in the fight against corruption. Despite the fact that almost all the necessary anti-corruption infrastructure was established before 2018, these authorities continue to demonstrate the lack of real results in the fight against corruption. The reason for this is, first of all, the political engagement of anti-corruption bodies, which increasingly play along with the authorities, in particular Presidential Administration and less engaged in a real fight against corruption. Also, the conflict between NABU and SAP, GPU, Security Service of Ukraine and Ministry of Internal Affairs, also has a negative impact on the actual result of the anti-corruption policy and law-enforcement system as a whole.In addition, the SSU has not lost its non-specific functions of combating corruption, which requires business,  public sector and international partners of Ukraine. Also at the stage of creation of the High Anti-Corruption Court there was a series of attempts on the part of the authorities to gain control over this anti-corruption institution.    Positions of the main political players The president has lost some of his influence, but continues to be a figure №1. Yulia Tymoshenko is gaining strength, who, with her political strength, is firmly entrenched in the first place in political ratings. Narodnyi Front is increasingly moving away from Poroshenko, trying to build his own game, looking for new allies and new playback formats in power.The white and blue camp ends the year with a split day of "Opposition bloc", where "gasovyky" and "akhmetivtsi" can not agree on the candidature of a single candidate for president. The liberal-democratic opposition was not able to unite and goes to elections in different columns, headed by Sadovy and Grytsenko.There was also no complete consolidation in the nationalist camp, from which Ruslan Koshulynsky and “Svoboda” and Andriy Biletsky “National Corps” run for the presidency. Yulia Tymoshenko and “Batkivshchyna”. Yulia Tymoshenko started her unofficial presidential campaign in the beginning of summer. She was the first who announced her intention to run for the presidency and introduced her program "New course". She and her political force are now the leaders of all sociological ratings According to the latest sociological research conducted by the Kyiv International Institute of Sociology among Ukrainians, who decided to vote,  21.2% are ready to vote for Yulia Tymoshenko, 23.4% - for the All-Ukrainian Association “Batkivshchyna”. Tymoshenko is always open to the search for new allies. Today, her allies include Valentyn Nalyvaichenko and his party “Spravedlyvist”, as well as Sergiy Taruta and his “Osnova” party. She establishes a dialogue with the leaders of the “Narodnyi Front”. And given not very attractive prospects for this party (its rating according to the latest results of social surveys is 0.2%), parliamentary deputies are often seen next to Tymoshenko's office. It's no secret that there is a good communication between Lady Yu and Arsen Avakov. His control of the security forces in the country can be useful while protecting election results. Friendship with the NF can be observed in her proposals for limiting the president's powers and turning Ukraine into a parliamentary republic, as previously stated by the "veterans". Also, recently, Yulia Tymoshenko stated that she is ready to cooperate with “Samopomich” party, Svyatoslav Vakarchuk, if he goes to politics and Anatoly Grytsenko. Petro Poroshenko and BPP. The current president, Petro Poroshenko, has not officially announced his intentions to run for presidency, and promised to do it after the start of the election campaign. And he has something to think about. Low electoral support and humiliating ratings still open up to him insignificant prospects and uncomfortable electoral position. Of course, now he can not state that he is not going to the next elections, because he will immediately lose all his influence on decision-making in the country. Therefore, he is now actively demonstrating full readiness and positioning himself the only possible candidate from the authorities. Also, Petro Poroshenko is attempting to postpone the presidential elections or even unite their holding with parliamentary elections, which could give him the opportunity to preserve immunity, if not presidential, then at least get a deputy one. The president builds his pre-election rhetoric with the slogans: “Army. Language. Faith.”, “We Go Our Way,” “Get Away From Moscow.” However, such a rhetoric does not receive a special response from the public, as evidenced by the latest sociological data that records the support of the current president at 11.6% (among those who have been decided to vote), and 11.2% of the country's population support his party. Despite the third place in the rating, Poroshenko has a chance to go to the second round, but it will be very difficult to win because according to sociological research, he will lose to all his possible opponents. Although not everything is so simple. Once the closest companion, “one`s” prime minister, Volodymyr Groysman, shows more independence. First, he has his own political ambitions, and secondly, after a long conversation and bidding, he didn't want to lead the presidential political force and sit in the same boat with the president's team, and thirdly, he establishes close ties and looks for partners with other political forces, including Arseniy Yatsenyuk and Narodnyi Front. All this leads to the thought that there may be a serious split within the authorities. “Narodnyy front”. The recent appearance of Arseniy Yatsenyuk on billboards showed that the former prime minister apparently had forgotten about his complete fiasco in the government and also dreams of returning to the political Olympus. The tensions in his relationship with the president became especially noticeable. After all, the BPP and the NF don’t have a particular ideological difference, so Yatsenyuk, albeit with a poor rating, will still take away the president's electorate. The NF leader is clearly going to take over the pre-election campaign agenda of Poroshenko because Yatsenyuk's new advertisement sarcastically interprets the main pre-election slogans of the president. At present, the disparity of the faction is intensifying, various groups of influence in the party are actively looking for ways to play in power, picking up allies. It is likely that the NF will participate in the elections as different columns within political organizations. As of today, the NF has a part of the administrative resources, which the main applicants for power in the country want to get. Liberal-Democratic Powers. The union of liberal-democratic forces, which their leaders have been talking for so long, didn’t happen. A few months ago, the most recognizable of them - the head of "Hromadyanska pozytsiya" Anatoliy Hrytsenko, mayor of Lviv and leader of the "Samopomich" Andriy Sadovy, as well as people's deputy and the head of “Narodnyy kontrol” party Dmytro Dobrodomov publicly called on to leave personal political ambitions and unite. The first one to leave “the ship” was Sadovyy. He announced that he would run for the presidency and united with the “Democratic Alliance” political party of Vasyl Gatsko. Dmytro Dobrodomov also announced the intention to strive for the presidential post. Grytsenko, after unsuccessful attempt to create a joint platform with Dobrodomov, united efforts on presidential and parliamentary elections with the leader of the "Hromadskyy rukh "Khvylya" Viktor Chumak, who headed his election headquarters. Mykola Tomenko, leader of the "Ridna krayina" party and leader of the "European Party" Mykola Katerenchuk also expressed support for Anatoliy Hrytsenko as a candidate for president of Ukraine. Anatoliy Hrytsenko has the highest rating in this camp, who are ready to support 8.2% (among those who already determined their choice) of voters, and 9.1% of Ukrainian citizens are ready to vote for his "Hromadyanska pozytsiya". 2.2% of voters are ready to vote for Andriy Sadovy, 3.6% for the "Samopomich" Association". 0.5% are ready to support Dmytro Dobrodomov, and 0.4% - his party “Narodnyy kontrol”. There will be no special differences in their programs, although they position themselves differently. According to Sadovy, key elements of his campaign will be "mobilization of young people, breaking the corruptive  esprit de corps in politics and technological modernization of the country". Grytsenko’s campaign will be based on several key statements: legality, order, responsibility, honesty. Dobrodomov positions himself as an outspoken fighter against corruption. “Opposition block”. In the white-and-blue camp, a very difficult situation arose - the split between the two main groups of the party's influence, which had previously been conflicting, but never brought the opposition into the public plane. As a result, Yuriy Boyko and Serhiy Lyovochkin were expelled from the OB faction in the Verkhovna Rada, while Vadym Novinsky became the head of the faction. After that, Boyko and Lyovochkin created a separate parliamentary group in the parliament - "Opposition platform - For life". That is, in this field, we have two main centres of influence: the first one is represented by the so-called "Akhmetovs" (Akhmetov, Novinsky, Kolesnikov), and the second by the so-called "gasmen" and "pro-Russian politicians" - Boyko, Levochkin, Firtash, Medvedchuk and Rabinovich. At the moment, these two groups are leading a struggle for control over the "Opposition block". This confrontation doesn’t give political dividends, but only leads to the dispersal of the electorate and obviously complicates the chances of passing their candidates to the second round of the presidential election. It is likely that, both in the presidential and parliamentary elections, these politicians will move as two, separate and quarrelling with each other, columns. Nationalist powers. Ukrainian nationalists failed to unite. "Natsionalnyy korpus" decided not to support a compromise figure from the rest of nationalist organizations Ruslan Koshulinsky, a representative of the "The All-Ukrainian Union "Svoboda". Thus, Andriy Biletsky announced his independent campaign for the presidential election. According to the latest sociological research, Ukrainian nationalists don't have much support among Ukrainians. As follows, currently, Koshulinsky can count on the support of 0.9% of Ukrainian voters, and Biletsky - of 0.4%. The political party "VO "Svoboda" today has support in 2.2% of voters, and "Natsionalnyy korpus" - 0.6%. Most likely, Ukrainian nationalists will play the role of "violence traffickers", which will be used to pressure certain candidates or even to break the election in a particular district. The Jokers of Ukrainian politics. Ukrainian showman Vladimir Zelensky continues to increase his rating. According to the latest sociological research, he ranked second, 14.6% of voters (among those who already determined their choice) are ready to vote for him, and 13% for his political party "Servant of the people". And this despite the fact that Zelensky didn’t confirm his intention to participate. Interest in Zelensky as a presidential candidate was well-heated in the run-up to the election of a new part of the popular TV series "Servant of the people", where, according to the scenario, a simple teacher Vasyl Goloborodko, performed by Volodymyr Zelensky, receives the power in Ukraine. The series very successfully shows the real state of affairs in Ukrainian politics and prompts Ukrainians to vote for a non-systemic candidate - a simple guy from the people who is fed up with corruption, injustice, poverty, and who seeks to change everything by joining the struggle with the Ukrainian oligarchs. In fact, Ukrainians want to vote not so much for Zelensky, but for the image created by him in the series. His electorate is people, deeply disappointed with the classic politicians, who seek for the way to break the vicious circle of esprit de corps in Ukraine. However, when Zelensky will begin to speak political language, making the relevant statements and offering his options for solving the problems of our state, it's unlikely that his rating, will remain the same or will keep growing. Given the proximity of Zelensky to the oligarch Igor Kolomoisky, who in return supports Yulia Tymoshenko, there is a likelihood of Zelensky's refusal to take part in the presidential race. Nevertheless, we will most likely see his party in the election ballot at parliamentary elections. The rating of the musician Svyatoslav Vakarchuk "subsided" essentially: from the top three he moved to the 9th position with the assets of 3.8% of voters (among those who already determined their choice), essentially "subsided". Obviously, his electorate was tired of waiting for him to confirm his participation in the presidential election and began to consider alternative options. It is believed that Vakarchuk could become a reserve option for Poroshenko by “giving the way”, but at the same time he will solely run  for parliamentary elections within “Vakarchuk block”. But such a variant may be beneficial for the current president only in the case of simultaneous holding of presidential and parliamentary elections. Perhaps a military state will be able to help Poroshenko in this "special operation". It is also worth noting that so-called “Vakarchuk block” can count on only 4.1% of the support of Ukrainian voters. There is a high probability that the 2019 elections will be a battle of jokers. Under these conditions, we will have Vakarchuk and Zelensky in the second round, however, behind their backs one can see quite familiar oligarchic silhouettes. General forecast of the situation The defining trend for 2019 will be presidential elections and the further domestic development of Ukraine's political will depend on how they will be held. Accordingly, we distinguish three baseline scenarios. The first scenario (pessimistic). Failure of the election process, destabilization, Maidan 3.0. In this scenario, Ukraine faces great political instability, massive mass protests and a high probability of street violence. In such a situation, our country will be on the verge of entering the category of "failed state". There is a high probability that Russia will want to use such a state of affairs, and will be able to  at least expand its zone of effective control or even occupate; as a maximum, it will carry out a military sweep of the country and ultimately return Ukraine to its womb. The other side of this scenario could become an adoption of authoritarian power in Ukraine by the current authorities. Second scenario (basic). Presidential elections will take place, but they will be accompanied by an active use of violence and a debate on the recognition or non-recognition of their results both inside the country and abroad (other states). A similar situation will be repeated in parliamentary elections. The confidence in the state bodies thus formed will be low, the decision-making process is complicated, but in general, the institutional capacity of the state will be at a more or less acceptable level, although the implementation of structural reforms will be complicated by a high level of political conflict. The third scenario (optimistic). Presidential elections will take place in a civilized way. The transfer of power (or its preservation under the current president) will take place under all democratic procedures. Parliamentary elections will be held democratically and without systemic violations. And by the end of the year, Ukraine will have a legitimate president, a parliament and a government that can effectively carry out structural reforms and develop the country. Of course, political conflict will remain, but in such a scenario, it will be at a minimal level and will not constitute a serious threat. In any case, the results of the presidential election will have a decisive influence on parliamentary races. The latter will determine the political life in the second half of 2019. The situation is complicated by the fact that it is almost impossible to foresee parliamentary elections. First, because of the uncertainty of the election results of the head of state, and secondly, due to the large number of political forces and the small electoral gap between them. The results of the presidential elections structure the political field, promote the formation of new political alliances and the crystallization of political forces through the power opposition. Given the victory of Yulia Tymoshenko, there is an option to hold a constitutional assembly, which will turn Ukraine into a parliamentary republic of the chancellor type. For this, Tymoshenko will have to initiate an all-Ukrainian referendum, which legitimizes her plan and will launch a radical change in the system of public administration in the country. Under such a scenario, it is possible to postpone parliamentary elections at a later time after the referendum, and then the price of such elections will be very high, since the whole power of power in the country will stand on the horse. It should be noted that constitutional changes to simplify the president's position and the introduction of a parliamentary republic are supported by most of the NF. In addition, the transformation of Ukraine into a parliamentary republic may also be beneficial to the political forces of the white-and-blue camp. To prevent such a course of events may be a significant political turbulence, the economic crisis, as well as the peak period of payments for external borrowing. A separate issue that deserves attention is the relationship between the president (old / new) and the government in the period after the presidential and parliamentary elections. The fact is that, in accordance with the Constitution, the Cabinet of Ministers terminates its work in the following cases: the conferral of powers to the newly elected VRU; voluntary resignation of the prime minister; the Verkhovna Rada of Ukraine adopted a resolution of no confidence in the Cabinet of Ministers of Ukraine. That is, the election of a new president does not directly affect the resignation of the government, without the influence on which head of state is very difficult to promote their will. With the abandonment of the post of Petro Poroshenko, these special changes are unlikely to happen. However, in case the president will pick up a new person, there are still several options for his interaction with the government (see below). Option 1 - the new president will be able to reform the government and appoint a nominal prime minister to parliamentary elections. Option 2 - the current composition of the government and the newly elected president will find a common language, will consolidate areas of interest and in more or less consensus will reach the parliamentary elections. Option 3 - the president and the government will enter the clinch and will resist each other. In fact, Ukraine will burgeal in the times of the presidency of Viktor Yushchenko and Prime Minister Viktor Yanukovych and Yulia Tymoshenko. By the end of November, the process of formation of state-political institutes in Ukraine will be completed. It is also worth bearing in mind that in addition to the threats posed by the elections in Ukraine, there are other dangers that will in one or another way determine the agenda for domestic political discourse, namely aggression of the Russian Federation, the war in the Donbass, the occupation of the Crimea, the Azov crisis, the need for payments for external borrowing. Decisive influence on the outlined situation may be the introduction of martial law throughout the country.    ...

ICPS Press

Expert discussion on Ukraine-Slovakia relations. Webinar 2

The International centre for Policy Studies (ICPS) in partnership with the Institute for Economic and Social Reforms, INEKO (Slovakia) initiated the conduction of the expert webinar devoted to the analysis of key trends and future prospects of the relations between Ukraine and Slovakia. “Pragmatism” and “balance” – that is how the relations between Ukraine and Slovakia can be characterized. Unlike the situation with other western neighbors of Ukraine, relations with Slovakia are not burdened with historical and ideological speculations. At the same time, the partnership between the two countries is driven with complementary interests, first and foremost, in the security and energy spheres. However, prospects for the development of strategic partnership between Ukraine and Slovakia are often underestimated, as there is enormous potential for increasing and deepening bilateral trade, cooperation in the areas of energy, regional security and cross-border cooperation. Moreover, a bilateral mechanism for the protection of minority rights can serve as a model for solving this problem with other countries. The experts emphasized the importance for both countries to use rationally the existing potential for cooperation in order to strengthen the strategic partnership between Ukraine and Slovakia. The detailed analysis on the current state of play in Ukraine-Slovakia relations can be found in the webinar’s materials: ICPS presentation  UKRAINE-SLOVAKIA RELATIONS: DEVELOPING A TRUE STRATEGIC PARTNERSHIP? ICPS conducts a series of expert webinars devoted to the analysis of Ukraine’s relations with its Western neigbors as part of the project “Ukraine and V4 countries: promoting better understanding”. Considering potential negative consequences from the current tendencies, the main purpose of the ICPS expert discussions is to elaborate common, effective mechanisms for the normalization of relations and good-neighborliness between Ukraine and the member countries of the Visegrad Group. The project is implemented with the support of the International Visegrad Fund....

ICPS Press