January 15, 2016

2015: As war in east continues, Ukraine moves Westward

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Aleksandr Sinitsa/UNIAN

Aidar Battalion members carry the coffin of a fellow fighter on February 2 on Independence Square in Kyiv.

Local elections held nationwide

Our Kyiv correspondent wrote of the October 25 nationwide local elections that, “Exhausted by war, economic depression and ongoing government corruption, Ukrainians turned out less-than-expected to elect their local councils and council heads.” As expected, the Solidarity Petro Poroshenko Bloc performed well, finishing in the top two parties on most councils in western and central Ukraine. The youth-oriented Samopomich performed surprisingly well, earning seats in the nation’s six largest city councils. On the other hand, Euro-Maidan persecutors were re-elected mayors of numerous cities in southeastern Ukraine, including Kharkiv and Odesa.

Voter turnout was 46.6 percent, far lower than the 60 to 74 percent projected by various experts. “The low turnout at the elections means Ukrainians believe in neither the government nor the opposition. No one without exception,” Serhiy Rudenko, a veteran political observer at the Espreso television network, wrote on his Facebook page. “The absence of tangible reforms, the further decline in quality of life, the prolonged war in Donbas – all this has already fed up Ukrainians.”

Restructuring Ukraine’s debt

Kyiv reached a debt-restructuring deal with a group of international creditors under which part of its debt will be written off. RFE/RL reported that Prime Minister Yatsenyuk said on August 27 that investors who own Ukraine’s bonds will write off 20 percent of their holdings, shrinking $18 billion in sovereign debt to $15.5 billion. The deal will also extend the payment period on the government bonds by four years through 2027. Finance Minister Jaresko, who was widely lauded for the deal, said Kyiv will use the saved 20 percent to spend on social welfare and national defense. International Monetary Fund Managing Director Christine Lagarde said the agreement will “help restore debt sustainability and – together with the authorities’ policy reform efforts – will substantively meet the objectives” set by an IMF bailout program. She also appealed to other bondholders to endorse the deal.

Our correspondent Mr. Zawada explained that the main success of the debt restructuring was that it postponed the first debt payments to 2019. This enabled the government to avoid a possible default, as well as continue building its international reserves, which are critical for supporting the hryvnia, Ukraine’s currency. “The International Monetary Fund (IMF) is elated with this agreement because it means its Ukraine program will be fully financed, while Ukraine is elated because it won’t have to pay anything for the next four years. By then, the Ukrainian economy will be in an entirely different condition, I hope,” said Dr. Anders Aslund, a resident senior fellow at the Atlantic Council in Washington.

However, the threat remained that Russia, which declined to participate in the debt-restructuring agreement, would insist Ukraine pay its debt by the end of the year. It was then-President Yanukovych who in 2013 took on a loan of $3 billion from Russia, which was offered as an incentive for Ukraine not to move toward the European Union. Now that loan was a danger, since Russia threatened to bloc future IMF funds to Ukraine if its loan was not fully paid back by the end of December 2015. Russia said on December 9 that it would take Ukraine to court if it defaulted on the payment. Kyiv responded by saying it was ready to fight Moscow in court.

And, at the end of the year…

As 2015 came to a close, Russia issued a new banknote dedicated to Crimea, the Ukrainian peninsula annexed illegally by the Kremlin in 2014. RFE/RL reported that the new banknote, worth 100 rubles ($1.41 U.S.), depicts a memorial to sunken ships in the port of Sevastopol, where Russia keeps its Black Sea Fleet, and the Swallow’s Nest, a clifftop castle near Yalta. The yellow-colored note also features a watermark of Empress Catherine the Great, who extended the borders of the Russian Empire in the 18th century to absorb Crimea. Russia’s central bank said in a statement it would issue 20 million of the new notes.

There was news that highly destructive computer malware infected power authorities in Ukraine and caused a power failure that affected hundreds of thousands of homes on December 23, leaving about half of the homes in the Ivano-Frankivsk region without electricity. Researchers from the security firm iSIGHT Partners, who studied samples of the malicious code that infected at least three regional operators, confirmed the malware led to “destructive events” that in turn caused the blackout. “It’s a milestone,” John Hultquist of iSIGHT told Arstechnica.com. “It’s the major scenario we’ve all been concerned about for so long.” Trend Micro researcher Kyle Wilhoit told Reuters: “This is the first time we have proof and can tie malware to a particular outage. It is pretty scary.” Antivirus provider ESET said multiple Ukrainian power authorities were infected by “BlackEnergy,” a package discovered in 2007 that has been repeatedly updated to include new destructive functions. A Moscow-backed group, Sandworm, is suspected of using it for targeted attacks.

The leaders of Germany, France, Russia and Ukraine renewed their support for a ceasefire in eastern Ukraine. The office of the French presidency said in a statement on December 30 that the four leaders also reaffirmed their commitment to the “concerted withdrawal without delay of heavy weapons.” German Chancellor Merkel, French President Hollande, Russian President Putin and Ukrainian President Poroshenko reportedly spoke by phone for two hours. The four leaders emphasized the need to follow through on the Minsk peace accords over the coming year, including preparations for local elections at the start of 2016 in areas of eastern Ukraine held by pro-Russian rebels.

Finally, as January 1, 2016, approached – the date that the free trade agreement between Ukraine and the European Union was to go into effect – last-ditch negotiations aimed at addressing Russia’s concerns and its demands that its trade interests be taken into account, ended without result. The trade deal went ahead after the parliaments of all 28 member states of the European Union had ratified the EU Association Agreement with Ukraine, a milestone that had been attained on November 20.

 

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