Posts Tagged ‘AA’

h1

The EU Summit (15th December) & Ukraine

December 14, 2016

The 15th December is the date of the last EU Summit (of European leaders) in 2016.

The agenda is going to be full and no doubt the meeting will be prickly affair.

eu

The agenda sees Ukraine as the lunchtime topic for discussion – and perhaps that is because Ukraine is probably the agenda item least likely to cause indigestion compared to all other items up for discussion.

The day covers (in no particular order) Syria, Russia, sanctions, Brexit, Ukraine, Mr Trump and refugees/migration (and by extension Turkey).  Greek issues apparently do not appear this time – there are only so many hours in a day.

With regard to Ukraine the obvious agenda issues relate to 27 of 28 Member States and the European Parliament ratifying the Association Agreement (and DCFTA) with only The Netherlands outstanding, that and the issue to be finally put to bed sometime in February/March 2017 relating to Visa-free tourism for Ukrainians (on the assumption the European Parliament votes appropriately regarding the “Visa-free suspension mechanism” issue also on 15th December).

The issue with the Dutch Association Agreement is one of optics for the domestic Dutch constituency.  In order for the Dutch to ratify the agreement and finally close the bureaucratic process they insist upon official recognition that in ratifying the EU – Ukraine Association Agreement, it is not a pathway toward EU accession for Ukraine.  Further, they require official recognition that it in no way affords EU guarantees regarding collective security guarantees or obligations to military aid.  Lastly that it does not provide an entitlement (obligation) to financially support Ukraine.

It may appear politically ugly considering that only The Netherlands remains to ratify the agreement and now seeks such official understanding to pacify its domestic electorate, but to be quite clear the EU-Ukraine Association Agreement (and DCFTA) offers none of these entitlements/EU obligations toward Ukraine anyway.

Nowhere does the Association Agreement infer, let alone state, that the Association Agreement is a stepping stone toward EU accession.  The clauses regarding defence and security offer no expectations of collective security or obligation to military assistance.  It has always been abundantly clear that any and all financial aid to Ukraine comes with conditionality relating to reform.

There is only one way for Ukraine to formally accede to the EU, and that is to first formally apply, and then go through the Acquis Communautaire 31 (minimum) – 35 (the maximum thus far) chapters therein.

There is no denying that if Ukraine complies with the Association Agreement fully and in its entirety (at best a 10 year process, probably longer at the speed Ukraine is proceeding) that for almost all Acquis chapters it will have traveled perhaps 80% – 85% of that journey in each and every chapter.  However there will be few, if any, where it will have traveled the full distance whereby that Aquis chapter will be then closed.  Ergo there would be a few more years thereafter to complete that process if embarked upon at all.

Indeed perhaps there is a need to better conceptualise the legality and spirit of both the Association Agreement and the Acquis Communautaire in fundamental terms.

The Association Agreement exists for Ukraine (at its own speed – despite some timelines in specific spheres within) to bring European values/governance/processes/standards to Ukraine from “Europe”.  Thus the Association Agreement brings a notional/perceived “Europe” to Ukraine – it does not take Ukraine to the EU.

The Acquis Communautaire is a trial undertaken by nations seeking to accede to the EU.  It is the (only) process that would therefore take Ukraine to the EU.

Thus the AA (and DCFTA) brings “Europe” to Ukraine.  The Acquis takes Ukraine to the EU.

Therefore, as politically ugly and difficult to digest for some the Dutch requirements may be, they actually make no difference to the legalities of the Association Agreement, nor the spirit in which it was negotiated and offered.

Ergo, it can be expected, despite the ugly optics, that the Dutch will get the official recognition that they seek even though some Member States will cringe whilst agreeing.  To get the Association Agreement over the finish line by officially acknowledging what is not contained in the Association Agreement will ultimately be a price paid.

Clearly from the agenda items, the Ukrainian issue is the least likely to put a Member State leader off their luncheon.  For good measure the Brexit issues are to be discussed at evening dinner – after UK Prime Minister Ms May has left the Summit and the building.

In fact Ukraine for once (in the context of AA ratification and the possible mention of Visa-free), may prove to be one of the easiest agenda items.

Advertisements
h1

The official EU overview of Ukrainian progress 2016

December 13, 2016

A very short entry to bring a reader’s attention to the official EU overview of Ukrainian progress during 2016.

eu

Predictably the issues where Ukraine invariably fails (and highlighted by the blog) is left to the concluding paragraph.

“Reform in Ukraine is a long-term process looking to bring long-term results. As outlined in this report, many important reforms are ripe to move from the legislative and institutional phase to effective implementation, which will benefit Ukraine’s citizens and contribute further to its political association and economic integration with the EU. Ukrainian civil society and other stakeholders have suggested that the EU and Ukraine should do more to communicate publicly, both in Ukraine and abroad, and explain the rationale for, and benefits of, the reforms undertaken by the government.”

If only the blog had a Dollar for every time the phrase “effective policy” and “effective implementation” had been written during the many years it has been running!

h1

Ukraine and the US – Initial thoughts with Trump on the horizon

November 9, 2016

There will be terabytes of commentary about the relations with “nation X” and the USA in a President Trump environment between now and his taking office.

Naturally much commentary will be regarding US – Russia relations.  Clearly some of that will overlap upon Ukraine.  US-Ukraine relations however, are not the same thing as US-Russia relations.  Unless President Trump immediately surrenders the post Soviet space to The Kremlin within days of taking office – which he won’t – there will be a period of policy pondering beyond anything that took place during his campaign .

Nevertheless for Ukraine there will be no “Uncle Joe (Biden)”.  There will be a far more “pragmatic” and perhaps a far less “values” approach to geopolitical issues.  Where any Trump red lines will be drawn remains very much to be seen – as will his reactions should they be crossed.

As such, most importantly it is not what President Trump says.  What matters is what President Trump is heard to say (or understood/interpreted to have said) which is not the same thing.

In short, what he says (or thinks he has said) may not be what is heard by either The Kremlin in Moscow, or The Bankova in Kyiv – or the capital of any other nation.  It is the interpretation of what he says (and does) that will be a factor in any understanding and/or response by The Kremlin, The Bankova (or any other capital the world over).

Ergo Kyiv will need to plan contingencies for whatever he says, and also for the interpretations of those words within The Kremlin.

The worst case scenario for Ukraine in the immediate future is the removal of sanctions within 6 months of President Trump taking office and the recognition of Crimea as Russia, which if his campaign rhetoric is to be believed (and campaign rhetoric very often fails to match actions when actually in power), he stated he would “consider”.

It then matters how those actions would be interpreted by The Kremlin – as being given carte blanche to re-assume control over Ukraine by hook or by crook with no meaningful US response should it do so, or not?  Ukraine should be prepared for either or both of those eventualities – as should Europe, for there would be repercussions.

Sanctions upon Russia will not last forever, and whether it be President Trump or a crumbling position within the EU that is the catalyst, to visualise sanctions as they currently exist remaining in effect in 2018 may prove to be a little more than wishful thinking even if The Kremlin position remains unchanged, and thus the reasons for their imposition remain unchanged.

Thus far The Kremlin position has not given any ground over the past few years.  A policy of exhaustion is still one The Kremlin believes it will win, regardless of any pain it suffers meanwhile.  It is particularly difficult to believe such a policy will be dropped if President Trump turns out to be less than hoped for within The Kremlin.

drift

The best case scenario is that Ukraine will have to fight very hard to prevent a US drift from the current US policy position – and succeeds in doing so.  Yet a drift seems much more likely than not unless Ukraine has a critical mass, (or a very influential mass), within both the Senate and Congress that will prevent a US policy drift – be that drift permanent or temporary.   Ukraine surely has some supporters of influence in both US institutions, but are they enough, are they stalwart, and can they manage/manipulate the unpredictable personality of Donald Trump sufficiently?

What of the Nuland-Surkov channel – is there to be a similar channel?  If so with whom?  A Kremlin dove like General Flynn, or a more hawkish Republican?  What of the behind the scenes liaisons between the US and the nations within the Normandy Four?

Once sanctions are undone, they will not replaced even if a Trump led US drift results in The Kremlin misreading him and crossing whatever lines he may have.  The European unity that has lasted thus far would not see them lifted and then once again find the unity to reapply them if removal is realised.

Perhaps far more important is the “consideration” of recognising the Crimean annexation per the Trump campaign rhetoric – which is hopefully just that.

Ukraine therefore requires some dependable and predictable partners capable of supporting its diplomatic and political line within the White House in the event of a very probable US drift (temporary or otherwise) – for what occurs within the space left by that drift may prove exceptionally difficult to undo.

2017 will see the UK, Germany and France internally distracted.

Confrontations over historical issues with Poland would certainly not be timely, and the political and/or diplomatic weight of Poland with a Trump White House is as yet unknown anyway.

Attempting to become a part of whatever European policy solutions emerge to deal with a President Trump White House will have to be pursued with the maximum vigour possible by Ukraine.

Perhaps of all the current and actively supportive partners Ukraine has, only Canada and the IMF will see no distracting and/or significant changes in 2017.

Thus unless Ukraine very rapidly becomes a poster child for swifter, deep and implemented reform from which no nation would want to disassociate itself regardless of its internal issues, the Ukrainian position seems set to diminish unless it helps itself.

Whether President Poroshenko can rein in the appetites of those around him such as Igor Kononenko to the point where the mere mention of his name no longer makes a diplomat’s eyes roll remains to be seen – but it would seem prudent to do so quickly.  What meaningful reform can be thoroughly implemented between now and a probable US drift in relation to Ukraine and/or tempo reduction of US action within Ukraine remains to be seen.  There were only so many fires it could and would fight within Ukraine under the Obama Administration.  It is likely to be fighting fewer fires under a Trump Administration.

Despite that which has been achieved with regard to reform, there is much to do.  What will get the attention and support sufficient to insure US policy toward Ukraine both remains unchanged – making any US policy drift short and swift?  Will anything prevent that drift, or at the very least is a temporary drift inevitable?

Ukraine requires contingency plans.  It should also perhaps decide upon a carefully assembled policy regarding just how to influence a personality like President Trump – who is not lacking in narcissism nor unpredictability (and to be charitable clearly has some appetites).

Whatever the President Trump policy toward Ukraine and whatever his policy toward The Kremlin will ultimately be – good or ill from a Ukrainian perception – there is far too much rhetoric on his campaign trail that forewarns of at the very least the likelihood of a period of drift which may be exploited by The Kremlin if Ukraine does not defend that space.

The immediate challenge for Ukraine is to prevent as much damage during that period as possible, whilst preparing contingency plans for a Trump led US policy toward Ukraine that as yet remains to be seen – and in all likelihood is yet to be formulated.

h1

Kremlin offers gas at $180 – Ukraine signs a deal with Engie (France)

October 28, 2016

Following President Putin’s very predictable monologue at the Valdai gathering, that day he also made a statement regarding Russian gas prices for Ukraine, should Ukraine decide to buy Russian gas once again.

Nowadays, the price of Ukraine won’t be higher than that for the neighboring states, namely for Poland. I’m not aware of actual prices, but at the moment of our conversation with Ukrainian President Petro Poroshenko, Poland was buying gas at $184-185 per 1,000 cubic meters on contractual terms. We could sell [gas] to Ukraine at $180. I named the price – $180 per 1,000 cubic meters.

We have discussed the issue of gas shipments to Ukraine with the president of Ukraine at his initiative. He asked whether Russia could resume the shipments. Certainly, it could, at any second. Nothing additional is needed – we’ve got a contract and an addenda to it. The only thing required is prepayment.

As far as I know, the price of gas for the ultimate industrial consumer in Ukraine already exceeds $300 per 1,000 cubic meters. We offer a price of $180, but they don’t want to buy from us yet.

Let it be – let them work. The main thing is that they could ensure transit supplies to European countries.

(He also commented upon the “illegalities” of Ukraine buying from western sources “which is a violation of a contract between Gazprom and its western counteragents” and to which Russia “had turned a blind eye.” and inferred to a return of  dubious”middle men” between Ukraine and western suppliers.)

 

engie

At the same time, Prime Minister Groisman was in France.

During this visit a deal was signed with French energy company Engie regarding supply and the reservation of transport and underground storage facilities operated by UkrTransGaz in Ukraine – the deal commencing this winter.

Since mid-2015 Engie has become a major supplier of gas to Ukraine, predominantly via Naftogaz, delivering approximately 3.5 billion cubic meters of gas.  Indeed Engie intends to open a subsidiary in Ukraine.

Thus far, despite quite significant legislative changes in the Ukrainian energy sector to bring it toward EU Third Energy Package compliance and Association Agreement obligations, the Ukrainian energy market has remained impenetrable to external market players.

The proposed privatisation of Centroenergo in 2017, whilst certainly of interest to dubious Ukrainians such as Igor Kononenko (who seems to be filling key positions within the company with “his people”), presents the best and swiftest opportunity for the energy market to receive a competent foreign entrant assuming control and ownership of assets and production in Ukraine – which will cause waves in the corrupt and opaque trough of Ukrainian energy from which no self-respecting oligarch fails to drink one way or another.

Clearly the Engie subsidiary, unless it becomes more than an “on-site” import management entity requires little investment and negligible risk – unlike the purchase of Centroenergo.

Nevertheless, there is a certain degree of symbolism to the French Engie opening a subsidiary in Ukraine which a reader can expect will be embellished for the purposes of political expediency.  Much more to the point however, is a clear move in the direction of a consolidated and irreversible diversification of energy supply for Ukraine.

h1

The gathering reform storm of 2017 – Ukraine

October 6, 2016

Many Ukrainian eyes are focused on 2017 and what external events will mean for the nation.

How will US policy change when a new president sits in the Oval Office?  What of the elections in France and Germany?  How much of a distraction will BREXIT be when it is eventually triggered?

All good questions – and as stated a few days ago “….. unless the Ukrainian leadership really start making strides (rather than tip-toe) with real and effective reforms US patience will expire sometime in 2017, just as the European patience will.  Real support will ultimately be reduced to little more than that surrounding territorial integrity and sovereignty.”

That statement fails to include Ukraine meeting its obligations to international institutions.  There are agreements with the IMF, World Bank, EIB and EBRD that will either be met – or broken.  This in turn will have a major impact upon FDI if (or possibly when) these agreements go unfulfilled.

To keep a watchful eye upon the external, currently” friendly” influences that will effect Ukraine in 2017 is understandable, but there are some extremely prickly and difficult issues internally that have the ability to magnify or reduce the thus far (surprisingly robust) goodwill of the international community (minus Russia) which seem destined to once again radically and negatively effect Ukrainian standing among its “friends”.

strom

In short there is a reform (or distinct lack of) storm brewing that is going to hit Ukraine in early 2017 and which when it does, the feckless domestic politicians will be once again at its core.  The issues are vividly clear, yet as normal, preparation, professionalism and policy are entirely absent.

Before looking at 2017 however, 2016 has yet to run its reform course.  The next tranche of IMF money, about $1.3 billion, is due in November.  For this tranche to be forthcoming there are but a few obligations to meet.

Clearly insuring reform progression thus far does not reverse is necessary.  The irreversibility of what has been done thus far is highly questionable.  What reforms, if any, can be claimed as being irreversible and consolidated?  Some may be close, but which are truly over the line?  The NBU has done a very good job, but a change of leadership and/or policy could undo almost all that has been done.  NABU is under direct assault by the PGO and Attorney General.  The new national police for the most part is refusing to buckle to corruption despite the police service remaining only half reformed and far from ethical as an institution.  The military are now a capable fighting force, yet its leadership remains poor and con tinuing corruption is as corrosive as the war of exhaustion with Russia in the occupied east.

Nevertheless, aside from holding the reform line that has be advanced thus far,  to meet the requirements for the next IMF tranche NABU should be given the right to wire tapping.  The list of SOEs for privatisation in 2017 completed (notwithstanding the November 2016 second attempt to sell Odessa Port Side – and the equally robust attempts to prevent its sale by vested interests.)  The e-declarations of politicians and relevant public office holders are to be filed in their entirety.  A “fair” budget for 2017 is to have been submitted.

All this to be accomplished by the end of this month so the IMF can give a timely nod of approval for November’s $1.3 billion.

Thus far, “fair” or otherwise, the budget has been submitted for consultation within the Verkhovna Rada.  The outcome of those consultations and the guaranteed subsequent amendments remain to be assessed by the IMF.  The budget however, is possibly the least problematic of the IMF requirements.

An independent NABU logically should not require the SBU to carry out wiretaps on its behalf.  The more people that know that “Mr X” is subject to a wiretap, the more chance there is that “Mr X” will find out.  Having to use a third party brings with it an unnecessary potential for leaks and/or tip-offs.  It should therefore not require stating that a nefarious elite and feckless parliament do not want a self-sufficient NABU that is far more difficult to infiltrate, influence or preempt.

The e-declaration fiasco remains just that.  The  declaration system still fails to meet the legislative framework requirements.  The e-declaration legislation itself also requires some amendment – just not the amendments to remove criminal liability that so many politicians want to see.

The sheer scale of opposition to the e-declaration reform is naked to the observing eye when considering it took EU conditionality to get the e-declaration law passed initially, and then months later it requires IMF  conditionality to actually get e-declarations completed by those who are required to do so (by the end of October).

At the time of writing about 1600 e-declarations have been submitted.  Of those only one of that number is of a parliamentarian (Mikhail Gavriluk).  None of the other 400+ MPs have yet filed.  Not a single member of the Cabinet has either.  About a dozen of the 300 NABU detectives have filed, and only two of the four NAPC members charged with policing e-declarations have done so.  Even if all e-declarations are submitted by the end of October, as stated long ago, court challenges are inevitable when the system still fails to meet the legislative framework it operates within.

In March the blog forecast that by the autumn Ukraine would not need external financing (although it would continue to accept it gratefully), but that it should nevertheless earnestly complete its obligations for reasons of external confidence in the nation’s governance.  Naturally the usual issues of fecklessness loom large, for when it is clear to the political class that there is no impending and immediate fiscal doom, the will to complete prickly reform legislation evaporates – which is where Ukraine finds itself today.

Reform orientated legislation has more or less stopped and requires resuscitation.  In fact it requires steroids if Ukraine is to meets its reform obligations to the IMF (let alone others) for 2017.

There are issues with compiling a list of SOEs ready for privatisation, liquidisation or remaining State owned.  There are at least 20 outstanding audits from those commissioned.

If the next few weeks in meeting the November 2016 and the $1.3 billion IMF tranche requirements appears optimistic, then meeting the obligations for the scheduled February 2017 tranche of $2 billion is perhaps as remote as riding a unicorn naked through the centre of Kyiv without once being snapped by a smartphone.

Despite the reform orientated legislative work completed in the energy sphere, the Ukrainian energy market remains entirely impenetrable, thus looking to 2017 the privatisation of Centrenergo is perhaps the only realistic chance of breaking into this market if it be sold to a foreign investor.  As such, the sale of Odessa Port Side in November has to be seen as a fair and transparent process by all onlookers.

Whatever the case, there is no way the list of SOEs for privatising, liquidisation or remaining State owned will be completed (and made publicly accessible upon the Ministry of Economic Development) by the year end.  Even if the only list of those SOEs identified for liquidisation is completed by then, there is simply little interest within the Verkhovna Rada to kill off such entities.  Gathering 226 votes for an exercise where none have any interests close to the New Year break is somewhat unlikely.  Auditors will not be rushed either.

Likewise “supervisory boards” such as that Naftogaz currently has (and which seems to be working well) for another 10 major SOEs is very unlikely to be achieved prior to 2017 as planned.  There is really no political will to do it – and a good deal of vested interests that will obstruct it.

Thus this reform requirement will roll over into 2017.

Fecklessness, lobbying/nefarious acts, and legislative short-comings aside – now to ever-present populism.

There two obligatory reforms by year end 2016 that seem simply beyond reach, will thus roll over into 2017, and yet are still unlikely to get through the Verkhovna Rada to facilitate the $2 billion February IMF tranche – thus finally breaking the IMF agreement and dealing a critical blow to “friendly” transatlantic assistance beyond issues of Ukrainian sovereignty and territorial integrity.

The first is the long-standing issue of pension reform that almost every government has stated it will tackle – but hasn’t.  Pensions from the age of 50 are simply unsustainable, and to be blunt most people continue to work way past being 50 because the pensions do not sustain them.

It is a policy that has to be addressed, but one that when push comes to shove, and despite a decade of rhetoric regarding the necessity of raising the pension age, every Ukrainian leadership succumbs to populism.

Nevertheless it simply has to be raised.

It is foolish to believe that any attempt to raise it significantly in one go will ever get through the Verkhovna Rada.  A system, for example, of raising the retirement age by 1 year every 2 years over 20 years (or a variation therefore) may stand a chance – however slim.  A system of greater contributions equating to greater pensions may also find some traction – but enough?  The populists however (Ms Tymoshenko, Mr Lyashko etc) will always seize upon pension reform for short term politicking and pre-election electioneering rather than looking at long-term policy necessities.

There are also existing process issues relating to checking the authenticity of claimants – something aggravated by the large number of internally displaced people.

Most difficult of all however, is the issue of land reform.  Ukraine has obligated itself to creating legislation regarding agricultural land reform by the end of October 2016.  That simply is not going to happen.  As of the time of writing the blog cannot even find a draft law registered regarding the issue.

It may be that the IMF will allow this sensitive/populist issue to roll over into 2017 and allocate the November 2016 tranche if all other conditions are met.  It will not issue the $2 billion tranche in February 2017 without this issue being tackled however.

Ms Tymoshenko is already noisily calling for the current moratorium upon the sale of agricultural land to be extended to 2022.  The Radicals being equally as populist will enthusiastically support her.

The sly oligarchy or slightly less mega-rich will look to provide/create agri-loan businesses with formidable foreclosure clauses to assume agricultural land of those farmers they lend to should the sale of agricultural land be permitted.  Huge ranges of State land will be swiftly leased through cronyism prior to any right to buy.  The farmers must be given more time to save the capital to buy the land they current lease and farm.  All such reasons will be presented not to create an agricultural land market.  Those farmers that do own their land will be tricked out of it by the unscrupulous, or simply coerced into selling it for a pittance – by continuing to stop them being able to sell the land they currently own, we are saving them from themselves (rather than infringing upon their rights to sell their own property).

There will be some societal “buy in” for some of that rhetoric, but that rhetoric can perhaps be employed to create safeguards within any laws creating a land market – if anybody actually drafts a law to create a land market that will be fair, regulated, and if necessary contain legislative restraints.  (Perhaps Ms Tymoshenko would like to draft a law that explains how a land market will be created after her 2022 moratorium expires?)

If it proves simply impossible (as is likely) to find the political will not only to lift the current moratorium but also prevent its extension, then perhaps legislation creating a fair land leasing market  is an alternative?

If the land cannot be bought and sold in a (regulated) free market environment, then create a transparent free market where leases for the land can be.  Some imagination might be required, but there is surely some way to create a land market that brings about transparent and fair benefits to all and around which Ukraine and its “friends” can agree as constituting positive market driven reform.

Although it is possible to continue with examples that are going to lead to a reform storm in 2017, it is perhaps unnecessary insofar as highlighting how swiftly matters are going to come to a head and when a probable breach of IMF conditionality occurs – with undoubted repercussions with a newly installed US Administration and immediately prior to both French and German electioneering.

Indeed it may also become the catalyst for the long anticipated early Verhovna Rada elections in Ukraine (which are unlikely to bring about a reformist critical mass as current election laws stand).

* * * * *

A note to regular readers – For the next few days your author will be in Poland locked behind closed doors with a dozen sages and otherwise insightful boffins from across the region.  Although undoubtedly returning far wiser, the normal rambling and low-brow blog entries will continue upon return.

h1

NKREKU – Draft Law 2966-d (Energy Regulator)

September 22, 2016

As part of the ratified obligations made by the Ukrainian State, within the Association Agreement with the EU is mentioned the Third Energy Package and Ukrainian adherence to it.

Quite rightly too for there is no way Ukraine would significantly overhaul its energy sector otherwise – energy is a significant font of corruption that continually spews (no differently to Government subsidies and VAT refunds/fraud/coercion).

It is true that Ukraine has made some real progress in reforming its energy sector – as difficult as each and every step (both forward and backward) has been.  Having now corrected an entirely retarded decision relating to Ukrtransgaz, a reader can nevertheless anticipate an all out assault by vested interests upon Naftogaz Ukraine and its subsidiaries almost immediately after any final Stockholm Court ruling is delivered regarding its claims against Gazprom.

Ukraine now faces the prickly issue of reforming its energy regulator into one that serves the interests of those other than vested interests.  Needless to say a process that has not, and remains, a far from smooth, influence-free, process.

Draft law №2966-d “On the National Commission in charge of regulation in the energy sector and utilities (NKREKU)” easily passed through its first reading within the Verkhovna Rada with 285 votes in favour on 12th April – unsurprisingly as it was authored by a dozen parliamentarians from across 5 parties (including those in opposition).

Nevertheless, despite its inclusive authorship, it has yet to receive its second and final reading and vote prior to being sent to the president for signature and eventually entering into law.

Amendments are being sought.  Meddling from the Bankova (Presidential Administration) occurs.

The draft Bill mandated a staggered replacement of the existing regulatory personnel, with limited departures every 6 months until all were replaced over a period of 18 months.  The fixed tenure appointments replacing them therefore also eventually departing in a staggered fashion some years hence too – which is perhaps wise if institutional memory is to be maintained in any meaningful way.

reg

As is always the case with Ukrainian politics, who decides, and who decides who decides, is a major issue in most appointments – and one that regularly slows down any process whilst decisions about decisions are decided.

The new regulatory personnel will be decided by a competition commission comprising of two presidential appointees, two parliamentary appointees from within the Verhovna Rada Coal and Energies Committee, and one appointee from the Cabinet of Ministers – when the law is eventually passed.

From this, apparently an independent regulator will emerge over the course of 2 years – allowing for the law to be passed, decisions about decisions to be decided, open competition, interviews, more competition appointment decisions, and eventually a full, staggered, personnel change.  There may yet appear an energy regulator that is an independent authority and arbiter (with a good deal of genuine independence) for the energy market that will defend the interests of consumers, and create fair conditions for suppliers and manufacturers.

Very good – so get on with it.

Indeed, Messrs Leszek Balcerowicz and Ivan Miklos who are part of the official advisory conclave regarding reform have rather tired of such nonsense and delays, stating “Further delay of the adoption of the bill as a whole can have a negative impact both on the state of the energy market in Ukraine, and the country’s international image as a reliable partner.  The independent regulator – A prerequisite for attracting foreign direct investment in the energy sector calls upon all political forces to immediately support the bill as amended, prepared by the Parliamentary Committee for a second reading.”

The passage of this draft law which pushes Ukraine further along its 3rd Energy Package obligations also releases more EU cash.

Perhaps the draft law will receive its final Verkhovna Rada vote this week.  Perhaps the President will sign it at some point.  Perhaps by Christmas the first new personnel will have been selected.  It will be 2018 however before the regulator has been completely overhauled as foreseen by the timetable within the draft law.

A reader may suspect that the necessary butchering of Naftogaz Ukraine as required by the 3rd Energy Package is not about the wait for a completely reformatted Regulator – and the guaranteed battle by vested interests over Nafogaz Ukraine and its subsidiaries prior to, and during Natogaz dismemberment will immediately follow the Arbitration Court in Stockholm making a ruling – that attack certainly won’t wait.  Thus how much more perverted and warped the market the Regulator will be asked to regulate once it is independent and fit for purpose remains to be seen.

In the meantime, as a reader will be accustomed by now, between attempts at amendments and politicking between the Verkhovna Rada Committee, Cabinet and Presidential Administration, Draft Law 2966-d remains exactly that – a draft law.

Nevertheless, if an independent regulator does eventually emerge, that can only be a positive outcome.

h1

BoJo in Ukraine

September 15, 2016

Having been asked many times about Brexit and the repercussions for UK-Ukrainian relations, both in person and by email, it is perhaps time to share some thoughts – and they are only thoughts.

Putting to one side any free trade agreement issues that would be upon a very long list of free trade and other agreements the UK is going to have to renegotiate, there are perhaps more immediate matters to raise.

The UK has been a robust supporter, and not without influence, within the EU when it comes to Ukraine.  Therefore the reaction of the Ukrainian leadership to both Brexit and then Theresa May becoming Prime Minister with a new cabinet and a basket full of EU problems probably went along lines thus:

Innumerable calls, letters and visits both to HM Embassy Kyiv and King Charles Street, London, will have occurred – all seeking insight into any change in the UK position toward Ukraine, a hint as to who will be handed the UK baton within the EU when it comes to leading the Ukrainian cause (probably Poland), and many questions over existing funding and also on-going bilateral programmes (whether they are hosted in Ukraine or the UK).

Needless to say there will also have been a lot of lobbying regarding insuring the Prime Minister and senior Cabinet Ministers either visit or receive their Ukrainian counterparts before those from The Kremlin.

In short, probably quite blunt requests to have London visit Kyiv, or have Kyiv visit London, before London ventures to Moscow or having Moscow arrive in London.  The usual framing and diplomatic messaging about priorities and positions matters.

Undoubtedly Ukraine’s FM Klimkin (who is a very good and capable FM) has held many telephone conversations with the UK’s FM Boris Jonhson (who thus far the FCO and 6 have managed to keep under control).  On a personal level, a reader would expect both men to get on very well – and personal relationships do count.

Innumerable verbal and written reassurances will have spewed forth from the FCO to reassure the Ukrainians.

bojo

Lo it has come to pass that Boris Johnson is in Kyiv 14th -15th September (and thus manages to escape before the Yes Conference) bringing soothing and comforting words, as well as the desired diplomatic message of “visits” delivered at his level.  “I am very glad to visit Ukraine soon after his appointment as Minister of Foreign Affairs. This visit is a clear indication of the long-term strong relationship between our two countries. Britain stands side by side with the people of Ukraine for the protection of the sovereignty and territorial integrity of the country, particularly in the Crimea. The support that the United Kingdom has to reform in Ukraine, is unchanged We are pleased to work closely with those who implement the program for the development of transparent, accountable and stable government, and strengthening the economic outlook for the whole territory of Ukraine.”

(It remains to be seen whether Theresa May will visit Moscow before Kyiv, or host/be hosted by President Poroshenko before President Putin.)

It also has to be recognised that the Ukrainians will be very aware – as HM Embassy Kyiv probably is too – that UK influence has now diminished across most (but certainly not all) policy areas.

BoJo has also announced an additional £2 million for the HALO Trust mine clearing in eastern Ukraine between now and 2018.

Thus the boxes ticked for diplomatic positioning/messaging, soothing words and gifts delivered – as a reader would expect.

But this will not be enough.  Both Ukraine and the UK will be looking for other ways to reinforce a relationship that is clearly weakened due to Brexit.  There is a requirement to find bilateral agreements that will drop anchors between the nations not only either side of Brexit, but also either side of the next Presidential election in Ukraine and also either side of the next General Election in the UK.

Medium term bilateral agreements, 5 or 7 years in duration would seem wise when so many existing agreements will end with Brexit.

There are things that the UK does do particularly well and that the Ukrainians clearly appreciate (apart from money laundering) which are obvious areas to look toward when trying to find 5 – 7 year agreements that will be useful and genuinely meaningful and that will not be complicated by Brexit issues relating to the EU Association Agreement and DCFTA, and assorted other treaties, agreements, memorandums, read missions, etc.

The first is defence/military.  The second is intelligence. Both are matters that will remain priority issues for Ukraine for the next decade at least, and both are areas where the UK is no slouch.  Announcing a bilateral 5 – 7 year defence/military agreement (whatever its limitations/parameters), and/or announcing a 5 – 7 year bilateral agreement regarding increased intelligence sharing (whatever its limitations/parameters) would be a well received gesture as far as Ukraine is concerned, and for the UK it will assist in keeping HM Embassy Kyiv relevant until Brexit is over and an entire raft of new agreements with Ukraine will be required as a result.  (Relying upon a small Chevening Alumni won’t do it, and neither will knowing where the money is hidden.)

Some bilateral medium term agreements beginning and concluding either side of Brexit and significant elections would not go amiss for either nation.

%d bloggers like this: