Posts Tagged ‘reforms’


No more IMF money until after 2012 elections….but it’s not urgent‏

July 20, 2011

Well now, Ukraine and the IMF are at a stand-off once again, although this time it would seem to suit Ukraine, at least politically, and possibly spell the end of IMF assistance to Ukraine.

A few months ago The Democratist and I sat in Odessa discussing Ukrainian issues and the IMF came up. He seemed somewhat surprised when I said that Ukraine no longer needed IMF money urgently but that the government was keeping to the IMF conditions as a foundation and straight-jacket to push through unpopular reforms. It is always helpful to have somebody else to blame for unpopular changes after all.

Confirmation of what I told him months ago, now appears to have become public knowledge due to the Ukrainian government failing to push through additional charges for utilities despite the IMF insistence. The most difficult political issue of pension reform having now made it through the RADA under the guise of economic necessity and IMF insistence. It is yet to get the Presidential signature and become law it must be said.

Now however, what I suspected/knew to be the case, has become public knowledge either deliberately or accidentally. Ukraine is not reliant upon IMF funding and does not expect to get any more money until the utilities pricing issues are addressed.

There is no rush as the above link shows. Ukrainian reserves are at a record high.

The real issue is whether this is the end of IMF involvement in Ukraine. As it seems the current government will not address yet another unpopular issue until after the October 2012 elections and the previous and now unseated government broke the terms of the initial IMF agreement in 2009, there may still be no political will after the elections to reengage with the IMF.

That said, should the current government retain a majority after October 2012, it may well then address the issue rather swiftly, confident of another 5 years in power and the knowledge any utility price rises pushed through at the end of 2012 will be forgotten by 2017 when the following elections come around.

Should it lose having passed the unpopular utility price rises before 2012, you can guarantee the populist left of centre politicians such as Ms Tymoshenko would reintroduce the utilities subsidies and campaign on a platform that would include exactly that (regardless of the long-term outlook). It would seem politically inept to knowingly provide such a platform with an election only 14 months away and a winter heating season looming.

Another large financial shock to the global system resulting from the EU or the undoubtedly weak US budget deal that will emerge from negotiations in October within the bowels of Capital Hill, may well force changes in the current Ukrainian position should the US$ devalue rapidly.

Anyway, baring economic shocks, it would appear further IMF funding will not come until after the 2012 elections. Thereafter, it will depend upon who wins a majority in the RADA.


Influence and leverage verses kinetic energy – Will Turkey be a precedent for Ukraine?

June 21, 2011

Most of us will remember the kinetic energy formula of half mass x velocity squared equaling kinetic energy from our days plodding through O level physics, when the cane was still a fashionable accessory to the Head or Deputy Headmaster. Always an unfortunate event if the potential energy of that wooden stick turned into kinetic energy across the hand or derriere!

What has this to do with Turkey and Ukraine? The answer is the glacial moving behemoth of the many headed hydra that is the EU. (Too many mythical creatures from mixed heritage in one sentence?)

Anyway, as all good learned readers of this blog are fully aware, Turkey has been banging on the EU door for quite sometime looking for at the very least a friendly handshake and the possibility of an invitation to come in from the outside. It has, despite being a valuable ally in NATO, having a booming economy that has bought a fair amount of EU debt and an unprecedented ability to negotiate within the Muslim world with a western tint, been consistently refused. In fact the door has not been opened but the EU has peeked through the letterbox when dealing with Turkish aspirations of integration.

There are several good reasons for the EU stalling Turkey and also many that are folly. That said, there has been effectively no movement, not even a shuffling along the door mat, to retain Turkish interest for far too long. Seemingly nobody in the EU has had the backbone to simply say “No, but we will offer you this instead, and that’s the best offer you will get”. It seems the EU plan has been to bore Turkey into a complete lack of interest negating the necessity to have to say that uncomfortable word “No”.

Returning to our O level physics lesson, what is the result of velocity squared when velocity is zero? Inertia.

It is no surprise then to read, following a healthy victory for the third time, the Turkish leadership dismissing EU involvement in the reforms it plans to carry out.

“The European Commission’s recommendations will be taken on board to the extent that they reflect universal norms. Take the death penalty [which Turkey abolished in 2004]. Whether or not you want to join the EU, it’s a good thing to abolish the death penalty. But in the absence of any clear perspective of accession, there’s no reason why Turkey should align its legislation toward narrow EU standards. To put it simply, the EU has lost its leverage on Turkey.” – Turkey’s Ambassador to the EU, Selim Kuneralp 20.06.11

Quite! Far too much pontification from within the EU, not enough direct and clear dialogue and far too many heads of the hydra disagreeing with each other over how and what to say to Turkey for far too long.

Given the close ties of Ukraine and Turkey through trade, history and geographical location, Kyiv will not be blind to the Turkish situation and the internal EU waffling with no discernible movement either towards or away from Turkey. Initially, one could have mistaken the EU to have been deep in contemplation over Turkey and thus the glacial movement. There comes a time though, when contemplation appears more like it is completely ignoring Turkey, or far worse, it is not competent enough to make a decision and articulate it.

Turkey would now appear to have reached the point that the EU no longer is an aspiration but a source of unnecessary perspiration on a diplomatic and political front. It is now a case that Turkey has taken away any leverage the EU once had over its domestic reform and European integration and may very well turn out to be like many a spurned lover, rather uncooperative when you try to remain friends. Given the current situation in North Africa and the Middle-East that may well have some difficult ramifications for the European nations.

By now, of course dear readers, you will have noted that as Ukraine happily walks along the path they think will lead to EU integration, there is a considerable chance that, after the unpopular reforms, DCFTA, and AA between the EU and Ukraine (if they are signed off as expected) generally bringing laws and trade regulations in line with those of the EU, there may be no goose willing to lay the ultimate golden egg for Ukraine.

(I know, mythological creatures from different regions at the start of this entry, and now I jump to fairy tales. I think something has been slipped into my tea.)

One suspects this is why Yanukovych has publicly called for a guarantee of eventual membership to be written into the Association Agreement. As he has said, without it all current negotiations are “empty”. He is undoubtedly not oblivious to the Turkish experience.

Nonetheless, the EU should take heed of the words from the Turkish Ambassador to the EU, Selim Kuneralp. Sooner or later, should there be a protracted lack of momentum within the EU towards Ukraine, such words will undoubtedly be uttered by a Ukrainian Ambassador to the EU. The years of work that have gone into the DCFTA can be undone in a moment and the geopolitical battle between the EU and Russia over Ukraine lost in an instant.

Before I sign off for the day, I will acknowledge that the physics metaphor employed as loose stitching throughout this entry, is borrowed from the ever-wise Charles Crawford. We have, however, come to an agreement that he will borrow a metaphor I used relating to foreign policy mountain tops, slopes and valley’s in an entry I wrote a few weeks ago.

Can’t you just feel the love in the Brit blogosphere? Far better than entering into those on-line tiffs. Quite unseemly!


Good times to bury bad news

June 2, 2011

My UK readers will remember a rather poor statement, albeit a true one, from Jo Moore, a Labour Party “spin doctor” who stated on the day of 9/11 that is was a “very good day to bury bad news” as far as the then government was concerned, thus encouraging whatever unpopular and bad results the government had, be released on that day knowing there would be hardly any mention of them in the media following the events unfolding in the USA.

She was eventually sacked, although not immediately. She was though, correct.

With the political holidays soon upon us in Ukraine, and with international pressure to speed up reforms whilst there is a reform minded government in situ, one has to suspect the same principle is about to apply.

Whilst there may not be events such as 9/11 to distract the public gaze, a month long holiday effectively closing off all political debate at government level, allows time for the mellowing and acceptance of what one has to expect is about to come.

Ukraine seems set to meet the IMF demands relating to Pension reforms, realistic gas and utility pricing and various other demands from the IMF just prior to the holidays in order to get the next tranche of IMF money.

Amendments to the law of Government Procurement will be made to appease the EU and IMF.

It may well be that the Tax Code is also amended and finalised before the holidays, allowing any protesters to protest outside an empty building, although I do expect some concessions from the government’s current stance.


In short, to follow the Jo Moore line of thought, as much bad and unpopular news will come out just prior to the month long holiday for the politicians.

To get as much as can be done, that will be unpopular but mostly necessary completed prior to the holiday, will mean there will be very little time for any new business or laws until September if not dealt with by July.

A summer of discontent? Unlikely, the sun is shining and many people soon go on their own holidays as well. Not really a time to gain maximum support to stand and chant outside an empty political building. When they return, all attention will be on the signing of the DCFTA and AA with the EU before the year end and the countdown to FIFA 2012.

As you can see, Jo Moore was right even though appearing rather callous.

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