October 13, 2017

Kyiv moves to label Russia as aggressor in Donbas war

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KYIV – Ukraine last week took a legislative step closer to reflect the fact that Russia is waging war against this nation of 42.5 million people – an unprovoked invasion that saw Crimea annexed and 3 percent of the easternmost Donbas region occupied by Kremlin-led forces nearly four years ago.

On October 6, the Verkhovna Rada passed a law in the first of two readings that names Russia as an aggressor state pursuant to international conventions and enables the armed forces to better defend the nation’s sovereign territory.

More than 10,000 people have been killed and nearly 1.7 million internally displaced persons have been uprooted from their homes, according to estimates by the United Nations and Ukraine’s Ministry of Social Policy.

Previously, the war was nominally deemed by law as an “anti-terrorist operation” that was de jure supposed to be led by the Security Service of Ukraine (SBU) – as actually was the case in the early stages of Moscow’s covert invasion starting in April 2014, when Kyiv lost control of numerous cities and towns in the Luhansk and Donetsk oblasts.

Now, the law “catches up with reality on the ground,” according to a note to investors by Kyiv-based Dragon Capital.

The bill also deems areas not controlled by Kyiv in the Donbas as “temporarily occupied,” like a similar law currently in force regarding the Ukrainian territory of Crimea that Moscow forcibly took over in March 2014, following a sham referendum held on the peninsula in the presence of its disguised armed forces.

“The law also gives more leeway for the president to enact martial law in the non-government-controlled areas of the Donbas,” Mariya Zolkina, political analyst for the Ilko Kucheriv Democratic Initiatives Foundation, told The Ukrainian Weekly. “It changes the principles of the institutional [and] structural leadership on this territory.”

It also, according to experts, including Ms. Zolkina, legally solidifies Ukraine’s position to absolve itself of “what happens to its citizens in the occupied Donbas, whether financially, on a human or civil rights level… it places the onus” on the occupiers.

“This further strengthens the use of the armed forces and expands their reach in the [war] region,” President Petro Poroshenko said. “This reinforces arguments for giving Ukraine defensive weapons… [but it also] emphasizes a peaceful, political and diplomatic path” to reaching peace.

In turn, Russian presidential spokesperson Dmitry Peskov, according to Kremlin-controlled media outlet RIA Novosti, responded by saying that the “law is quite declarative in nature… There is an article where the Russian Federation is called the ‘aggressor’ ” and added that such terminology is “unacceptable for Russia.”

The other Donbas-related bill – passed in its final reading – extends for an additional year an existing law that allows the two eastern oblasts that border Russia more self-rule upon holding local elections. A similar clause exists in the so-called Minsk peace agreement that was brokered by Germany and France together with Ukraine and Russia to resolve the ongoing war – already in its fourth year.

The measures stipulate that the Donbas could have more autonomy than other regions, more than after the so-called “decentralization” reforms, like having local councils appoint or elect judges and prosecutors to local courts and other law enforcement agencies.

“This law is more for the international audience,” said Ms. Zolkina of the Democratic Initiatives think tank. “It’s provides an additional argument for extending sanctions towards Russia [by the West].”

However, the law stipulates that local elections would take place only once the Donbas war zone is “demilitarized.” It also says that all political parties must be allowed to run for local elections, media access must be free and that international monitors must observe the voting process.

Guaranteed financing from the central state budget is also part of the measures passed for the Luhansk and Donetsk oblasts.

“‘Special status’ extension shows Ukraine [is] taking tough steps for peace,” U.S. President Donald Trump’s envoy for the Donbas war peace process, Kurt Volker, tweeted on October 6. “[I] hope Russia now acts to make peace – time to end conflict.”

The governments of France and Germany, both countries that brokered the initial Minsk peace framework, also welcomed the law’s yearlong prolongation, in separate announcements.

Pension system changed for next IMF installment

Changes to Ukraine’s pension system designed to reduce the burden on the country’s government-run retirement fund also were adopted.

On October 3, the Verkhovna Rada moved to cut costs in how it provides pensions for the 9.7 million people who are retired, and those who will stop working in the future. That is a key requirement of the International Monetary Fund, the Washington-based lender that has propped up Kyiv’s beleaguered economy since 2014, when pro-Russian ex-President Viktor Yanukovych fled office and when Russia invaded Ukraine.

Only about 50 percent of the state Pension Fund’s revenue covers expenses for retirees. The changes enacted extend the years of service required to qualify for a pension, and not the retirement age, in order to mitigate the number of people who enter the system and increase the number of those who contribute. It also makes tighter links between what people contribute to the system and their ultimate retirement allowance, and eliminates almost all early retirement options for such professions as teachers and a dozen other occupations.

But since last-minute changes were made in Parliament during the voting, it’s not clear whether Ukraine will get the next IMF installment of $1.9 billion as part of an overall $17.5 billion bailout plan. Kyiv has so far received $8.9 billion.

“Now the next tranche looks more likely, but negative surprises should not be completely ruled out,” Alexander Paraschiy of Kyiv-based Concorde Capital said in a note to investors. “In particular, it is hard to say whether all the core conditions of the pension reform will satisfy the IMF.”

Ukraine’s Finance Minister Oleksandr Danylyuk, the successor of Chicago-born Natalie Jaresko who re-financed the country’s external debt, is scheduled to meet with IMF officials this week in Washington.

Judicial reforms still at bottleneck

Other IMF benchmarks for Ukraine are keeping household natural gas tariffs at parity with import prices and forming an independent anti-corruption court – both of which Kyiv has been slow to do.

This month, as the winter season approaches, Kyiv was supposed to raise heating prices by about 19 percent in accordance with the existing formula, but it has stalled and proposed a new formula to make it less than 10 percent.

Mr. Poroshenko reversed earlier statements made this year by voicing the need for a separate anti-corruption court.

The Venice Commission, the European Union’s advisory body on constitutional matters, stated on October 10 that, since Ukraine has failed to make any high-profile convictions since the Euro-Maidan Revolution that ended in February 2014, it should create a separate anti-graft judiciary.

On October 9 the commission, also known as the European Commission for Democracy through Law, said that “corruption is one of Ukraine’s major problems, and parts of the judiciary itself have for many years been considered as weak, politicized and corrupt.”

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