06/10-12/10/2014 Ukraine: Weekly Highlights - Ceasefire in Donbass - Lustration - Deterioration of the economic situation

06/10-12/10/2014 Weekly Highlights from “Digests & Analytics Ukraine” News Agency

Combat actions in Donbass have cooled down during the cease-fire but militant attacks on Ukrainian army positions and shelling of residential areas are ongoing. The forecast for Ukrainian economy is unfavorable. Two weeks are left until the early parliamentary elections.

War in Ukraine

Combat actions within the cease-fire regimen in Donbass

• Terrorists breach the truce for tens of times during the day, shelling and attacking Ukrainian army positions. Donetsk International Airport assault is ongoing not-stop.
• Numerous firefights between various militant groups have been evidenced, including use of artillery.
• Donetsk Governor Kihtenko declared that cease-fire and territories exchange agreement has been signed with terrorists, with participation of OSCE and Russian military. As a result, Ukrainian army could withdraw from Donetsk International Airport.
• In his appeal to Ukrainians regarding the implementation of his peace plan, President Poroshemko said that direct Russian aggression has been stopped during the truce, confrontation has cooled down and combat zone has been enclosed with fortifications, partial rotation of Ukrainian troops has been performed, and production of the armored vehicles has been tuned. He plans to create a de-militarized zone on the combat frontline and prepare the army for the winter.

Presence of Russian troops in Ukraine

• Russian President Putin ordered Ministry of Defense to withdraw the troops from the military exercises on Ukrainian border in Rostov region. Observers have evidenced a rotation of the regular units of Russian army and a partial substitution by the terrorist groups, which were previously trained in camps in Rostov region, for replenishment of severe casualties from attacks on Donetsk International Airport. Russia have concentrated a strike group on the administrative border with Crimea and conducts active intelligence actions in Donbass. SSU captures terrorists on a daily basis, both within the combat operations zone and in the rest of Ukrainian territory.

• As mentioned by the Deputy Secretary General of NATO, situation in Donbass is unstable and could strongly deteriorate during coming days.

OSCE activities in the conflict zone

• OSCE monitoring mission in Ukraine will be reinforced with another 100 employees and its mandate will be extended for another six months.  OSCE observers «haven’t evidenced» militant attacks and shelling, as reported in the official statement of the organization, simultaneously responsibility for shelling have been put on Ukrainian army, and NSDC information has been refuted. President Poroshenko would like to use the mission personnel and drones in order to control the state border. According to the USA opinion, Ukrainian-Russian border monitoring activities of OSCE are ineffective, as mission has access to only one kilometer of the border, while three hundred kilometers are being controlled by militants and Russian troops.

Shelling of cities, civilian casualties

• Intensive combat actions are ongoing in different districts of Donets’k and civilians are constantly being killed and wounded. According to UN data, total of 55 people have been killed, and the number of refugees and forced re-settlers is constantly growing.  Based on the Donetsk Coroner information, OSCE states that almost 1,500 people have been killed in Donetsk since 14 of March, including 21 children. Terrorists used tanks to shell the Luhansk Thermal Power Station in Schastye city. Two workers have been injured. Station’s operation has been partially disrupted, leading to temporary power cutoffs.

Investigation of the defeat in Ilovaysk

• President Poroshenko dismissed the Head of the Border Control Services Litvyn and his first deputy, as well as the Defense Minister Heletey.
• Temporary Investigative Commission of the Parliament works behind closed doors due to the ongoing combat operations, and focuses on the causes of the defeat and mass casualties of Ukrainian Armed Forces near Ilovaysk.

• Prosecutor Matios, who is investigating the issue, blamed fighters of one of the volunteer battalions, accused in leaving their positions.

Rearmament of Ukrainian Armed Forces

• Swedish military experts have been invited to Kyiv in order to help with acquisition of new technologies, organize co-production and modernization of arms according to the NATO standards. Foreign Affairs Minister Klimkin said that Ukraine and the Alliance are developing a program of mutual compatibility of the armed forces.
• Enterprises of “Ukroboronprom” are working three shifts and have strongly increased production, as well as are getting ready to produce new types of weapons.

Problems of refugees, re-settled persons and inhabitants of the occupied territories

• Donetsk Governor Kihtenko advocates for Ukraine to pay pensions in the occupied territories.
• As assessed by the UN Human Rights Mission, number of forced re-settlers and refugees from the combat operation area exceeds 800 thousands people. Russia have recently simplified refugee documents processing within the compatriot re-settlement program.

“Eletcions” in the territories, seized by LPR and DPR terrorists

• Leadership of so-called Donetsk and Luhans’k republics is aiming to hold “elections” on November 2, where Russian mercenaries “could vote”. Foreign Minister Klimkin said this will bring the peace process to a dead end. Official Moscow claimed support for this “declaration of people’s will”. As a result of contradictions between conflicting militant groups, part of them are not admitted to the “elections” by “authorities”.

Politics

Ukraine and NATO

• The Head of the National Security and Defense Committee of the Parliament Litvyn said that committee members have voted against the Government’s initiative on including non-aligned status of Ukraine to the agenda of the current Parliament session.
• New NATO Secretary General named reinforcement of the Alliance members’ security and support for democratic, oriented to the West Ukraine, as key priorities for the Alliance. Romania permitted the US to place an anti-missile defense base on its territory. NATO battleships are present in the Black Sea on a constant basis.

Human resources policy of Pososhenko

• President Poroshenko appointed ex-SSU chief Smeshko to the position of newly created Intelligence Committee.
• During his trip to Donbass, President Poroshenko introduced new governors of Donetsk and Luhans’k regions – former police generals Kihtenko and Moskal.

Early parliamentary elections

• Bribery of voters became a major issue for the early elections campaign. Police have already launched 50 criminal cases and is asking citizens to report any facts of such crimes. The President and other officials are openly campaigning without taking vacations, which constitues a corrupt abuse of the administrative resources.
• Political party “Narodny Front”, led by Prime Minister Yatsenyuk, urged democratic parties to promote common candidates in order to prevent odious politicians to be reelected. Party “Batkivshyna” has supported this initiative and dismissed their candidates in 7 majoritarian districts.
• Mayor Klitchko isn’t considering leaving mayor’s position in case he is elected to the Parliament.

Ebola epidemic

• Deaths from the Ebola fever are mounting all around the World. No cases have been reported so far in Ukraine.

Lustration and reforms

• President Poroshenko approved the Law on the Authorities Purification, approved by the Parliament from the third attempr with more than 400 amendments.
• The Parliament has approved amendments to the current legislation, allowing to open and proceed with criminal investigations of persons, who escaped from the justice and security authorities. That will allow to execute justice in absentia for the cases of former president Yanukovych and his fellows. The Law on Anti-Corruption Bureau has been adopted in the first reading according to the strategy developed by the Government, as well as the Law on Corruption Prevention, defining a mechanism of income declaration by governmental officials. Willingness of Prime Minister Yatsenyuk to streamline the lustration process could mean that his political force is seriously considering to pick up a fight against the fellows and party members of President Poroshenko –  corrupt officials and deputies.

Economy

“The third gas war” and problems in the energy sector

• Oil prices on world markets continue to decline rapidly amid rising inventories in the United States and lower forecasted growth of the world economy.
• President Poroshenko said that Ukraine is getting closer to resolving the natural gas conflict with Russia. Tri-lateral talks of EU – Russia – Ukraine aimed to resolve the natural gas problem are planned for 21 of October. Key topic of the meting between the Prime Minster Yatsenyuk and the Assistant Secretary of State for European and Eurasian Affairs at the United States Department of State Nuland were natural gas talks with Russia and participation of the European Commission in them. US, Canada and the EU sent their experts to advise Ukrainian authorities during preparations to the coming winter with possible gas supply disruptions and power cuts.
• Russian Prime Minister Medvedyev believes that compromise with Ukraine is necessary in the natural gas supply questions.
• The heating season for the majority of Ukrainian cities will start in the beginning of November in order to achieve some natural gas savings.

Hryvnya exchange rate and the NBU policy

• Official exchange rate of hryvnya has changed insignificantly. It’s impossible to buy foreign currency in cash due to the regulatory restrictions of the National Bank. NBU spent 725 mln. USD in order to support Ukrainian currency in September.

Deterioration of the economic situation

• State Statistics Agency  reported acceleration of inflation in September to 2.9% monthly. Consumer price index soared to 16.2% during the current year. National Bank has worsened its forecast for economic slow down to 9% by the year end. IMF followed the National Bank and worsened the inflation forecast for Ukraine to 19%, and the state debt – to 102% of the GDP. Managing  Director of the IMF Lagarde urged to increase financial aid to Ukraine not only though the IMF sources but from the others as well.

Sanctions against Russia

• Norway followed the EU and strenthened sanctions against Russia.
• The EU and the US consider the following conditions for easing the sanctions against Russia: withdrawal of Russian troops from Ukrainian territory and full adherence to the Minsk memorandum both by Russia and Russian-backed DPR and LPR militants.