• Carts before Horses: the Ukrainian government announced today its plans to create a “Constitution Commission” by the end of the week to focus on several key changes including decentralization of government and judiciary reforms. Last autumn President Poroshenko announced “Ukraine 2020” which is the country’s strategy of 62 reforms in the areas of taxes, healthcare, national security, and law enforcement that will ultimately lead to the country to membership in the European Union. In general, all 62 of these reforms are welcome and needed. However, Ukraine’s approach to passing these reforms seems backwards. For example, the two major items for this year, judicial reform and decentralization, cannot be passed without 301 votes in Parliament. In other words, the same 2/3 vote required to make Constitutional changes is required for decentralization and judicial reform. If Ukraine is already acknowledging that making these radical but necessary changes will take up to five years (Ukraine 2020), then why risk trying to pass 62 separate pieces of legislation – most of which will require a Constitutional majority vote? Clearly, the cart appears to be before the horse. Why not draft a new Constitution which includes all 62 (or even more) reform items and vote on it one time instead? Technically, (according to Article 158 of the Ukrainian Constitution) it would require a year of review following submission of the new Constitution, and Parliament could not make more than two amendments to the same provisions during that time. However what is one year compared to the five? What is one vote compared to 62? It is simply not efficient to conduct radical reform in a piecemeal manner when the economy is in recession and the country is at war.
Some will argue that the process should be conducted slowly with widespread input and discussion. However, the most efficient manner would be a bill originating from the Ukrainian government and introduced into Parliament – while they still have a Constitutional majority. Let’s face it, the Ukrainian Constitution influenced by Socialist Oleksandr Moroz and Communist Petro Symonenko in 1996, is hardly comparable to the US Constitution influenced by James Madison and Thomas Jefferson in 1787. America won its independence with the blood of 8000 soldiers, but it was the passage of the Constitution afterwards which provided the stable framework which has prospered the nation for 227 years. Now that Ukraine has suffered the loss of 5100 citizens of its own, perhaps it is time for a new Constitution that will ensure its stability and prosperity for the next 200 years too?
• Arms Not Sanctions: With Russian backed terrorists increasing the violence in the Donbass with assaults on the Donetsk Airport, Mariupol, Debaltseve and Vuglehirsk in the last few weeks, Ukraine’s prime foreign policy objective is now obtaining arms rather pursuing additional sanctions. Prior to the escalation of violence, Western diplomats were patting themselves on their backs over the holidays to celebrate of the “success of sanctions”. While it is true that the sanctions have contributed to Russia’s economic downturn, last week’s attacks prove that they are inadequate to contain Russian military aggression. The Minsk Agreement is dead and the Russian backed terrorists are bragging about spreading the war to all of Ukraine. Additional sanctions – or even removing Russia from the SWIFT system of bank transfers- do not seem likely to prevent Russian backed violence. Interestingly, the White House is hesitant to ban Russia from the SWIFT system because they fear a wave of retaliatory cyber attacks on the US financial industry and government. The SWIFT system is a way to transfer money between banks which eliminates the need to do it in person. Without access to this system, any payments from Russian business to the US would have to be done in cash –which is of course impractical given the large scale of imports/exports.
The Kremlin has made the calculation that Obama will not approve arms sales to Ukraine under any circumstances. While it is true that the US Congress passed legislation to authorize $350 million in lethal aid, the President has the final say on whether or not to approve it. The group-think in the White House is that if US weapons are provided to Ukraine, that they will either end up in the hands of the Russians and/or sold to American enemies on the black market. Of course, when it came to arming Syrian jihadists last year (some of whom have openly pledged “death to America”), the White House did not have such an objection. What this means for Ukraine on a practical level is that they must find the weapons from someone other than Uncle Sam. Thus, Poland, Lithuania and now even Bosnia, have indicating that such considerations are already underway. Given this past weekend’s offensive by the Russian backed terrorists near Debaltseve, the weapons cannot arrive fast enough.
• Fishy Judicial Fairness & Cui Bono? Embattled Prosecutor General Vitaly Yarema issued an arrest warrant last week for former Ukrspeksexport Head (the Ukrainian Arms Import/Export Agency) Sergiy Bondarchuk on the grounds that he embezzled $7 million dollars. The Prosecutor’s Office seized $10 million in bank deposits and two Range Rover vehicles which were listed as being worth $2 million (are they gold plated?). For a Prosecutor General who is facing a no-confidence vote for his lack of arrests and convictions of Yanukovych era officials, the news would seem to show progress. Alternatively, if the alleged embezzlement took place in the eleven months while war is raging in the Donbass and when Ukraine’s military needs every kopek it can muster – the timing would make perfect sense. Instead, the case relates to arms sales more than six years ago while Yushchenko was President. Bondarchuk was the Head of Ukrspeksexport for the entire Yushchenko presidency (February 2005- February 2010) and received the “Hero of Ukraine” Award for his success in doubling the agency’s revenues and eliminating arms sales to rogue states. Bondarchuk has also received an award from former Georgian President Mikhail Saakashvili for arms sales that helped to strengthen the country’s military despite fierce Russian opposition. Additionally, during the Yanukovych presidency, Bondarchuk openly supported the opposition – specifically Vitaly Klitchko- and led roundtable events in favor of the European Union Association Agreement.
The timing and the target of the case are odd to say the least. Given that dozens of Yanukovych era officials are openly flaunting the wealth they accumulated through corrupt schemes (hundreds of millions of dollars and even billions in some cases), chasing a $7 million case from six years ago smacks of a political diversion and hardly a top government priority at this time. Thus, the question to ask is ‘cui bono?’ (Who benefits?) There are two main scenarios:
Scenario 1: the attack on Bondarchuk is designed to weaken SBU Chief Valentin Nalyvychenko. Nalyvychenko and Bondarchuk are old friends as Bondarchuk also has an SBU intelligence background. Rumors have circulated for months that Poroshenko would prefer his own SBU Chief but lacks a reason to replace Nalyvychenko – whose performance has been impeccable. Thus, by arresting Nalyvychenko’s friend and political ally for corruption, Nalyvychenko is hit with collateral damage and given a clear warning to resign.
Scenario 2: lacking a single conviction of a Yanukovych official, Poroshenko desperately needs a sacrificial lamb to demonstrate to the West that he is fighting corruption. By selecting a target who has been awarded the “Hero of Ukraine” medal by someone other than Yanukovych, Poroshenko hopes to show that the “law is one for all” under his administration. Bondarchuk was targeted because during Euromaidan he campaigned against Poroshenko being the united candidate of the opposition. Thus, this appears to be a petty “tit for tat” payback from Poroshenko.
As always in Ukraine, one or both scenarios may be accurate simultaneously. Finally, the arrest warrant was issued at a time when the government knew Bondarchuk was outside the country. It’s no secret that Bondarchuk visits Switzerland monthly for medical treatments relating to a mysterious poisoning during his time as Head of Ukrspeksexport. In this way, it allows the government to negotiate a financial settlement (aka “shakedown”) with Bondarchuk to allow him to return to Ukraine – without actually having to win a court conviction and put him in prison.
• Moldovan Coalition Merry-Go-Round Day 64: with the proposal last week to keep Iure Leanca as Prime Minister, the Parliament now has two weeks (until February 12) to vote to approve him. The Liberal Democrats (Leanca’s party) and the Democrats have 42 of the 51 needed votes to keep Leanca as Premier. However, in a blow to the functionality of the new parliamentary majority, Communist leader Vladimir Voronin has stated that his faction will not support Leanca. That leaves Leanca’s fate in the hands of the Liberals (with 13 seats), who have refused to join the Parliamentary majority after failed talks with the Liberal Democrats and Democrats. Under Moldova’s Constitution, there can be up to two votes to approve the Premier and if both fail, then it forces new Parliamentary elections. Thus, what is likely to happen? It is highly possible that Leanca will fail to receive the 51 needed votes as the Liberals are unlikely to support his candidacy given the recent rhetoric over coalition negotiations. Speculation is already underway that Foreign Minister Nataliya Gherman would then be the compromise candidate for Premier. In this case, either the Communists or the Liberals could provide the nine needed votes to approve the new Premier. The Liberal’s motivation would be that they cannot afford to vote against a strongly pro-EU Prime Minister candidate who shares 90% of their agenda. The Communist’s motivation to vote for Gherman would be to avoid new elections since the November 30, 2014 Parliamentary election yielded the worst results for their party ever (see chart 1 below)
The party that favors new elections and could benefit the most is the Socialist Party which surged from zero to 25 seats in Parliament – now the single largest faction. Last week the entire faction flew to Moscow to strategize about the future. With new elections likely to further cannibalize the Communist votes in favor of the Socialists, the Communists may provide the situational votes to elect Gherman as Premier. In return they would be likely to receive guarantees which would allow them to avoid prosecution for any crimes committed while in office as well as time to rebuild their public image. This would also strengthen the hands of former Premier Vlad Filat and Vlad Plahotniuc – the real power centers behind their respective parties (Liberal Democrats and Democrats) – in the new government. Alternatively, if the Liberals vote to confirm Gherman, then the original election campaign coalition (Alliance for European Integration) will be restored and the party may yet salvage some Cabinet seats. The only clear expectation for now is that the Parliament is likely to wait until the last day (February 12) to resolve the matter.
Dates to Watch:
February 3: Parliamentary Session Resumes: be watching for a possible vote on removal of deputy’s immunity as well as an address to Parliament by Prosecutor General Yarema later this week (scheduled for Friday, February 6). Yarema may face a “no-confidence” vote which would remove him from office if successful. Critics have cited that lack of convictions of Yanukovych officials for crimes committed while in office. The preliminary count of “yes” votes for removal range from 160 – 230 (depending on whom you are asking) with 226 required.
February 5: US Secretary of State John Kerry visits Kyiv: Kerry visits Kyiv to show his support (again) for Ukraine without bringing anything tangible in the form of weaponry. However, that is not to say he won’t announce another $10-20 million for other assistance programs for Ukraine. Nonetheless, expect nothing of real benefit for the Ukrainian people from this visit. In addition, Russia is likely to increase tensions on the border immediately following the visit, to keep their pattern of actions designed to show that America’s “promises” are meaningless.
February 6-8: Munich Security Conference: arms sales to Ukraine will be discussed on the sidelines of the event by individual European allies, but whether or not they result in the sale of anti-tank and anti-aircraft weaponry to Ukraine remains to be seen.
February 12: Final Decision on New Russian Sanctions by the EU: Expect some additional sanctions from the Europeans against Russia for the recent attacks as Europe prefers sanctions over arms sales. The sanctions themselves are not likely to be far reaching but rather an extension of existing sanctions with the addition of a few more.
February 16: Court Hearing for 2 Berkut Officers Accused of Killing Euromaidan Activists: No conviction is likely by this date but it does give the government a chance to demonstrate their efforts to bring Yanukovych officials to justice.
February 20: the one year anniversary of the murder of 76 protestors on the Maidan by snipers: this is one of the key reasons Prosecutor General Yarema is under fire from critics. Some progress in the case before the vote of no-confidence may sway last minute undecided lawmakers.
October 2015: National Local Elections for Mayor and City Council: