HomeAnalyticsWeekly Highlights: 10-16 November 2014

Weekly Highlights: 10-16 November 2014

The Ukrainian Parliament, in its new composition, should get together in a week. The problems of the occupied territories in Donbass are escalating. Russia is at any moment ready to continue an attack in Donbass. The Ukrainian economy is in a weakened state due to the war and the lack of reforms. Putin fled from the G20 summit in Australia.

Early elections into the Ukrainian Parliament and coalition negotiations

The election campaign is completed; the election results were published in the official edition of the Ukrainian Parliament “Golos Ukrainy”. 421 deputies out of 423 have been elected; vote recount is conducted in two districts and the scandal unfolding due to interference with the election process. The police opened more than 400 criminal cases for the breach of electoral laws.
The democratic parties, represented by the former speaker of Parliament, the prime minister, the president and the mayor of Lviv, received the largest number of seats in Parliament.
Leaders of the Petro Poroshenko’s Bloc are hoping for the creation of a constitutional majority in the Ukrainian Parliament. The main principles of the coalition agreement have been agreed; development of the draft will be completed by the end of the week. The first parliamentary sitting is planned in a week.

Strengthening the defence capability of the country

The NSDC stated that there are currently no plans for the fourth wave of mobilization.
Defence Minister Poltorak voiced the decision to include volunteer territorial battalions to the Armed Forces, which will allow arming them with heavy equipment and improving the coordination of the troops.
Extra 1 billion hryvnias planned to be spent on procurement of weapons for the Ukrainian army.
The Interior Minister Avakov announced that the subunits of the National Guard would be equipped with the new types of weapons.
According to the published report of the Kharkov Regional State Administration, the work on the creation of the project Stina (the Wall) on the border with Russia had been wrecked.
Measures to strengthen territorial defence and repair armoured vehicles were financed but not implemented.
President Poroshenko published a decree on strengthening of the State security and reinforcement of defence capabilities. According to this decree, separate Airmobile Forces are created; goods and food supply standards for the army are reassessed; accounting for captured weapons is introduced; and the management and coordination centre within the Ministry of Defence is created.
The operational procedures of the law enforcement agencies and prosecutors office for investigation of war crimes should be revised, and liabilities for those should be strengthened. Development of a medical military doctrine is being planned. Serious attention is dedicated to the development of military-patriotic movement and organizations. Modernization of government communications and development of ground radio broadcasting network in Donbass are being planned. Volunteer organisations created an association, the purpose of which is to improve the supply and support of the Armed Forces and the National Guard.

The third ‘gas war’ and coal scandal

The decree of the president Poroshenko on the energy security of Ukraine includes the following measures: using of natural gas produced in Ukraine solely for the need of population; strengthening financial discipline and ensuring timely payments for the consumed energy, including introduction of energy pre-payment from 1 December 2014; ubiquitous introduction of energy consumption meters.
Naftogaz received a transit payment from Gazprom; however, officials have not made the amount and period of payment public. Ukraine is ready to make an advance payment for the Russian gas only in case of sharp deterioration in the weather conditions. Ukraine managed to halve the gas extraction from underground storages due to warm weather.
According to the Polish company PGNIG, the gas supplies from Russia have been cut, what led to the termination of the reverse supply to Ukraine. Slovakia has not stopped the reverse gas supplies to Ukraine despite the reduction of gas supplies from Russia.
Gazprom revenue from gas exports dropped by more than 8%, despite the increase in the supply by 4.5%. For the first nine months of the current year, net profit of Gazprom in rubbles has fallen by almost 13 times, and prime cost has increased by 3%.
According to the opinion of the American financier Soros, Naftogaz is the main source of corruption in Ukraine.
The supplier company refused to further cooperate with Ukraine due to the scandal linked with the inspection of the Ministry of Fuel and Energy conducted by the Prosecutor’s Office. After the termination of the contract for the coal supply from the Republic of South Africa, Ukraine plans to buy more than 500 million tons of coal from Russia. Prime Minister Yatsenyuk said that the coal supplies from the territories controlled by terrorists are not planned.
Oil prices continue to fall in the world markets. The Russian authorities admit that in the new fiscal year it is possible for the cost of Urals oil to drop to $60 per barrel. The Russian Statistics Committee states the fall down of the Russian economy due to the Western sanctions and the collapse of oil prices.

G20 summit in Australia

G20 summit, which was dedicated to economics, global warming, fight with Ebola outbreak and situation in Ukraine, finished without president Putin, who left the meeting earlier. In a joint statement, leaders of the USA, Japan and Australia voiced protest against the Russian violation of the Ukrainian sovereignty and declared their determination to prosecute terrorists responsible for downing flight MH17. Issue of the coordinated response to the Russian politics towards Ukraine has been discussed during the meeting of President Obama with the EU leaders.
World leaders are putting pressure on Russia, accusing it of the support of terrorists, who brought down the Malaysian airliner, requiring de-escalation of aggression in Ukraine, as well as threatening to introduce new sanctions.
Australians welcomed the Russian president Putin with the posters and chanting “Putin – h@ylo.” The western media noted that Putin was in a bad mood, and demonstrated disregard to him from the other participants of the summit.

The collapse of the hryvnia and condition of the economy

This week started with the rapid devaluation of hryvnia, which lost more than 10% and reached the historic minimum of 16 UAH for 1 USD, against record low traded value and new currency auctions rules imposed by the National Bank of Ukraine (the NBU). At the meeting of the NBU with the leaders of 40 largest banks, the agreement of marginal exchange rate has not been reached, thus the regulator can use administrative measures as well as apply new currency auctions rules. The NBU has asked media not to specify the rate band limits in the foreign exchange market but focus on the actual figures of transactions. Ukrainians are buying foreign currency in the exchange offices on a massive scale. More than $7 billion have been withdrawn from the foreign currency deposit accounts since the beginning of the year. With the exchange rate of 16UAH / 1USD, the cost of petrol could rise to 20 UAH per litre, which would cause a powerful blow to the economy.
The NBU approved a regulation on emission of electronic money on the territory of Ukraine.
The NBU agreed to establish correspondent relations with banks in Crimea for repayment of obligations under the credit agreements by the entities of Crimea. The UX Index dropped below the psychological minimum of 1000 points, dropping just in one day for more than 7%.
According to the estimates by the European Business Association, the investment attractiveness index of Ukraine has declined due to the lack of reforms and the actual fight against corruption.
The EBRD and the Cabinet of Ministers of Ukraine agreed on the introduction of the position of business ombudsman in Ukraine, which will not be a citizen of Ukraine.

The escalation of Russia’s aggression in Ukraine and in the world

Observers record the dramatic increase in the volume of the Russian military equipment, air defence systems, radio-electronic combat and missile systems brought to the territory of Ukraine. According to the National Security and Defence Council of Ukraine, terrorists of LNR and DNR appeared to possess newest small arms, artillery systems and armoured vehicles. The OSCE mission representatives believe that the danger of the conflict escalation in Donbass has dramatically increased.
NATO announced the introduction of the Russian nuclear weapon delivery vehicles in Crimea, the increase in concentration of the Russian troops on the territory of Donbass and its border areas.
Observers report the concentration of the Russian forces and the forced mobilization of the local population in the occupied territories.
The Minister of Defence of the RF Shoigu announced that Russia is creating complete self-contained group of troops in the Crimea.


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