These events sparked a finger pointing sessions pitting Yatsenyuk versus Poroshenko (via his proxy Demchyshyn) and Poroshenko versus Akhmetov. Premier Yatsenyuk said, “I assess the situation in the coal sector as critical”. He added that only 35 of 90 coalmines are under the control of the government and that the cash cost to extract coal from these mines is $73-91 per ton. However the tariff for electricity which they produce is just $47. Thus, it costs more to extract the coal than sales price of the electricity it produces (a loss of $26-44/ton). Yatsenyuk demanded that Demchyshyn present a plan to reform the industry since “without reforms it will be impossible to change the situation in the coal industry and miners will continue to strike”. Demchyshyn, a Poroshenko ally, has been a target of criticism almost from the moment he took office and prior to these protests already had 25 Members of Parliament calling for his dismissal.
Meanwhile, Poroshenko Bloc MP Mustafa Nauyem released a copy of an apparent DTEK (Akhmetov’s energy company) memo outlining the company’s strategy for fighting Poroshenko and his ministers making use of coal miner protests. The SBU launched a criminal inquiry into the funding of the coal miner protests and stated that the protests were an attempt to destabilize the country. “Given that throughout April 22-24 officials of several Ukrainian private coal mining companies, guided by their mercenary corporate interests and with the aim to pressurize state authorities, organizing financing of the protests in Kyiv, while blocking the work of the central-government agencies and administration, SBU investigators have registered a criminal inquiry”. The SBU alleges that the financing for the protests is coming partly from former Premier Mykola Azarov.
The bigger battle however, is Poroshenko’s war on the oligarchs. Having successfully clipped Kolomoyskyi’s wings, the President is now targeting Akhmetov in an attempt to break up his control of certain energy related industries. Poroshenko has been planning to go after Akhmetov since 2005 when he was the Chairman of the National Security and Defense Council. The abrupt government shakeup after just nine months in office put Poroshenko’s plan on hold for a decade. Now though, with Akhmetov weakened, Poroshenko is seizing the moment to try to break Ukraine’s richest man. Poroshenko warned Akhmetov in a televised interview, “Those oligarchs who are preparing to put pressure on the authorities through pseudo-strikes will get their knuckles rapped”. Already the Prosecutor General’s Office is reviewing privatizations deal for Dniproenergo and other businesses which Akhmetov won in questionable tenders under Yanukovych. It would appear that the protests are part of an organized strategy on Akhmetov’s behalf to counter attack Poroshenko via his vulnerable Energy Minister Demchyshyn. DTEK attacked Demchyshyn last week in a press release stating, “DTEK describes the decisions of the top executives of Ukraine’s energy sector as unprofessional and destructive” and went on to claim that the company is under pressure to sell assets which Poroshenko’s team believes were illegally acquired. However Akhmetov is hampered by allegations of his financing of terrorism (e.g. the Russian backed forces in the Donbass) causing his public relations department to work overtime. On Saturday they issued a statement calling MP Yegor Firsov’s comments on the popular Fright night political talk show “Shuster Live” as intentional disinformation…and defamation” as well as “provocative and unacceptable”. Firsov, a 26 year old native of war town of Avdiyivka in the Donbass and member of the Poroshenko faction, stated that “Akhmetov is facing a criminal case over his financing of terrorism and separatism”. People’s Front MP Andriy Teteruk aided the attack with his comments days earlier, “A more accurate explanatory work should be conducted there, as major complaints should be addressed to Mr. Akhmetov. What money does he make via employee’s labor? Money that he put in offshore accounts and other business. And why did he fail to provide necessary conditions for the people working for him”.
Meanwhile, Demchyshyn is working to get DTEK declared a monopoly since it produces most of the non-nuclear power in Ukraine and currently around 65% of the country’s coal. To accomplish that, it would take a ruling from the Anti-Monopoly Committee (AMC) which is currently run by Acting Chairman Mykola Barash. Barash took over after Parliament sacked Socialist Vasyl Tsyushko last March. Barash is considered a competent bureaucrat and was appointed State Commissioner for the Anti-Monopoly Committee in July 2004, having previously worked since 1994 for the Kyiv AMC. However, as political analyst Viktor Nebozhenko said, “The AMC needs a strong politician, not a strong accountant with which the oligarchs tomorrow will find a common language”. People’s Front (Yatsenyuk’s faction) MP Andriy Ivanchuk’s name has been floated in recent weeks as a possible new Chairman of the AMC. However, it is likely that Poroshenko will select his own person to take control of the Committee given his open battle with Akhmetov. Under the Constitution, the President appoints the Chairman but the appointment must be confirmed by Parliament.
In two final bizarre twists to the story, the CEO of Shakhtarskantratsyt Mykola Kovaliov and his wife were gunned down in their car by looting DPR gangs on Monday. Shakhtarskantratsyt is a coal mine located in the occupied part of Donetsk which is managed by the Ministry of Energy and Coal. Then on Friday, there was an apparent attack on the protesting coal miners by Right Sector members. The Head of the Independent Trade Union of Miners, Mykhailo Volynets said, “Our further steps are to mobilize ourselves once again and demand that the authorities, rather than organizing attacks, should secure payment of salaries and jobs for miners”. Volynets vowed that the miners “will come back in bigger numbers on Monday”. Clearly, this battle is far from finished….• Populism & Redistributions: The ongoing “Oligarch Wars” has gained both public support as well as encouraged politicians to return to populist slogans of redistribution of wealth. On Tuesday the Parliament’s most prolific populists introduced a bill to nationalize the ATB retail supermarket chain’s property in Ukraine. ATB is indirectly owned by Russian oligarch Konstantin Malofeyev. Malofeyev who is on the US Sanctions List, one of the original financiers of terrorism in the Donbass last spring. Once a Kremlin insider, Malofeyev had his apartment searched by Russian police two months over a legal case with VTB Bank. ATB Corporation responded by stating its’ plans to go to court to “protect its honor, dignity, and business reputation over accusations that the company finances terrorism and illegal armed groups in the country and the corporation will aim to deprive those lawmakers who drew up the draft law on the nationalization of the chain of their parliamentary immunity”. The bill was jointly introduced by Radical Party leader (a modern day Huey Long) Oleg Lyashko, People’s Front MP’s Tetiana Chornovil and Mykhailo Havryliuk, Samopomich’s Semen Semenchenko, Byut’s Ihor Lutsenko, Poroshenko Bloc’s Serhiy Trehubenko and independent Volodymyr Parasyuk. The deputies followed up the next day by introducing a bill to nationalize Rinat Akhmetov’s Brusnychka supermarket chain on the same grounds. The Parliamentarians allege that “via the logistics of these chains, the lion’s share of smuggling goes between the self-proclaimed Luhansk and Donetsk people’s republics, annexed Crimea and the rest of Ukraine”. For Akhmetov the financial impact of losing the Brusnychka supermarket chain would be minor compared to the damage of being convicted of financing terrorism. Such a conviction, if only by a vote of Parliament, would open the floodgates to nationalize other Akhmetov owned properties. Suffice to say, it’s open season on Akhmetov… • The Corruption Case against Yatsenyuk: though the case has received little media attention so far, charges that Prime Minister Arseniy Yatsenyuk and his government incurred losses of 685 hryvnas (just under $30 million dollars) are gaining steam. The charges originated from Mykola Gordienko who was fired as the Director of Ukraine’s State Financial Inspectorate. Gordienko alleged that the government had embezzled 7.5 billion hryvnas (about $323 million dollars) with 3.5 billion hryvnas being lost “when the Yatsenyuk government was in power”. Gordienko added, “After my first public report, Mr. Yatsenyuk ordered political reprisals against me and tarnished my honest name, and now they have warned me that they are opening a criminal case against me”. Following the charges, Yatsenyuk requested the Prosecutor General’s Office to probe the allegations. Currently the Prosecutor’s Office is working on 12 cases relating to the matter and has whittled down Gordienko’s estimate of $3.5 billion hryvnas ($151 million US dollars) to approximately $30 million dollars. While that generally bodes well for Yatsenyuk’s chances to beat the charges, any conviction of embezzlement no matter how small the amount, would be ruinous for his career and a major setback for Ukraine. Opposition Bloc MP Vadym Rabinovich and independent Boryslav Bereza introduced a bill to set up a special Parliamentary Investigation Commission to look into the matter. The case is not likely to be resolved anytime soon but it could come to a climax near the end of the year when the Yatsenyuk government can be dismissed. Under the Constitution the government can be dismissed after one year in office following Parliamentary elections. Even without a court conviction, the allegation of embezzlement combined with the economic recession may be enough to topple Yatsenyuk from the Premier’s post when his one year anniversary comes on November 27, 2015. This will be a case to keep an eye on…
• State Fiscal Service Chief Competition: Following the surprise resignation of Ihor Bilous last month as the Head of the State Fiscal Service, the Ministry of Finance has moved quickly to interview and screen 67 candidates for the post. Of the original applicants, 47 have been shortlisted including the Acting Head of the Service Maksym Mokliak, former Deputy Finance Minister Denys Fudashkin, Head of the Parliamentary Committee for Taxation and Customs Policy MP Roman Nasyrov (Poroshenko Bloc), MP Oksana Prodan (Poroshenko Bloc), MP Nina Yuzhanina (Poroshenko Bloc), MP Valeriy Patskan (Poroshenko Bloc), Deputy Director General of Ukrlandfarming Ihor Petrashko, former MP and Director of the State Tax Administration Mykola Katerynchuk, former Kharkiv Deputy Governor and nephew of Viktor Yushchenko – Yaroslav Yushchenko, and the Chairperson of Providna insurance company Iryna Sirenko.
The vacancy follows Yatsenyuk’s firing last month of the First Deputy Head of the Service Volodymyr Khomenko and the Deputy Chairman of the Service Anatoliy Makarenko for “violating the oath of a public servant”. Though the Cabinet investigation recommended that Bilous stay in his post, he resigned in protest over the firing of his two deputies.
Under tax changes in the new budget, the State Fiscal Service reported receiving more than 2600 applications to take advantage of a compromise offered to taxpayers that had not previously been paying taxes. This resulted in new revenues of 262 million hryvnas (more than $11 million US dollars) for the government.
• Power Personnel Permutations: Samopomich MP Andriy Miroshnyk resigned his parliamentary mandate last week. “I continue to think that a poor politician can’t build a rich Ukraine. Moreover, it won’t be built by politicians pretending to be poor. In the future I will support important public initiatives, in particular I will help our glorious soldiers.” The 35 year old Miroshnyk was the Director of the Business Finance Department for Datagroup in Kyiv at the time he was elected. He will be replaced by Andriy Nemyrovskiy from Dnipropetrovsk who is the next in line on the Samopomich party list (#33). Nemyrovskiy is an “expert in motor transport” for the Mostova company.
Meanwhile the Poroshenko Bloc lost another member when businessman Fedir Nehoy left the faction. Nehoy won election in Kherson district #186 (Kahovka) as an independent last October by defeating the Poroshenko Bloc candidate by a 28-16% margin. In 2012, Nehoy won as an independent by defeating the Party of Regions candidate by a 31-22% margin. He then joined the UDAR faction (Klitchko) in Parliament. The loss of Nehoy drops the Poroshenko to 145 members which is down five from its formation.
Finally, Radical Party leader Oleg Lyashko resigned as the Coordinator of the majority coalition in Parliament stating, “What is happening in this room is a bluff and a deception”. Lyashko went on to allege that Parliament have voted to “actually restore the Yanukovych regime”. While Lyashko resigned as the majority coalition Coordinator, his faction remains a part of the majority coalition in Parliament. Lyashko replaced People’s Front MP Andriy Teteruk less than two weeks earlier as the Coordinator of the majority coalition. It now appears that the Coordinator position will go to Tymoshenko’s faction (Byut) since the post is not elected but selected by rotation amongst the majority coalition factions.
Dates to Watch (for Ukraine unless otherwise noted):
April 28: International Conference in Support of Reforms: This conference is forerunner for an investment conference which will take place later this year. The idea is for Ukraine to highlight its’ progress in making reforms at the conference this week. This in turn will make attracting foreign investment easier when the next conference is held.
April 30: Ruling from Vienna Court on Firtash’s Extradition to the US: If the court doesn’t delay a decision, Dmitro Firtash may face extradition to the United States to face bribery charges. This would be a crushing blow to one of Ukraine’s formerly most powerful oligarchs.
May 12-15: Parliamentary Voting Session Scheduled
May 13 & 16: Constitutional Commission Meetings:
May 19-22: Parliamentary Voting Session Scheduled
May 21-22: EU Eastern Partnership Summit in Riga, Latvia
Late May: IMF Talks with Bondholders Completed: the talks are continuing but in the meantime, a Razumkov Center poll released April 24 showed the IMF being viewed favorable by 45% of Ukrainians versus 35% who viewed negatively. Given that the IMF requirements for Ukraine are part of the economic discomfort being felt by ordinary Ukrainians, these are encouraging numbers.
June 2-5: Parliamentary Voting Session Scheduled
June 14: Moldovan Local Elections
June 16-19: Parliamentary Voting Session Scheduled
July 1: Date Decentralization will be approved by Parliament according to Speaker Groisman
June 30 – July 3: Parliamentary Voting Session Scheduled
July 14-17: Parliamentary Voting Session Scheduled
October 25, 2015: National Local Elections for Mayor and City Council
February 2016: Stockholm Arbitration Hearings on Counter Claims between Naftogaz and Gazprom.