• Cost and Benefits of DC Lobbying: On June 10th, the US House of Representatives passed an amendment to the Defense Department Appropriations Bill to ban Ukraine from receiving MANPADS anti-aircraft missiles and prevent any US assistance to the Azov Battalion. The amendment (H. Amdt. 492) passed by a voice vote and the overall bill received 278 votes (out of 435). Representative John Conyers (Dem-Michigan 13) and Representative Ted Yoho (Republican – Florida 18) were the bill sponsors. The amendment’s passage came as a shock for Ukraine and a public relations bonanza for Russia. Rep. Conyers went on record to say, “I am grateful that the House of Representatives unanimously passed my amendments last night to ensure that our military does not train members of the repulsive neo-Nazi Azov Battalion, along with my measures to keep the dangerous and easily trafficked MANPADs out of these unstable regions.” Rep. Conyers went on to note that Malaysian Airlines flight 17 (MH 17) was shot down by an anti-aircraft missile in Donetsk, without noting that all evidence clearly points to the missile being fired by the Russian backed forces. Thus, in one statement, the longest currently serving Member of the US House of Representatives (26th term) accused Ukrainian forces of being “neo-Nazi” as well gave the Russians a free pass on the downing of MH 17. No doubt there were celebratory toasts for “Comrade Conyers” in the Kremlin that night. However, what was most surprising was not that the amendment was introduced, but the rapid and unexpected nature of it’s’ passage.
Nothing in Washington happens by accident. In fact, those who want to get things done in Washington, hire professional lobbyists to do so. Thus, it was no surprise when Radical Party MP Ihor Mosiychuk stated that “The links to the US Congress adopting a ban to provide instructors for the Azov servicemen and supply mobile AA Stinger missiles lead to Kyiv”. Citing his own investigation, MP Mosiychuk said that the actual lobbying for this amendment was done by former Yanukovych political strategist Paul Manafort, under contract with former Yanukovych Chief of Staff and Opposition Bloc MP Serhiy Livochkin. While a check of the Foreign Agents Registration Act (FARA) does not list Mr. Manafort as a lobbyist, there is an interesting listing for Lanny Davis being hired by Dmitro Firtash’s DF Group for $412,000 in April 2014 (around the time of his arrest in Vienna). While Firtash and Livochkin have shared business interests, it is not likely that Lanny Davis was behind the passage of Rep. Conyers amendment since the registration description relates to Firtash’s US indictment, and not arms sales to Ukraine. Nonetheless, Livochkin has hired at least one of Manafort’s former consultants from the Yanukovych team (Konstantin Klimnik) to advise Opposition Bloc. Eventually, the DC lobbyist behind the legislation will be clearly revealed as FARA filings are posted regularly as public information.
Give credit where credit is due though, unlike the Ukrainian government, Mr. Livochkin appears willing to invest in professional DC lobbyists to achieve his ends. While the Ukrainian government certainly has a good relationship with the US government, they still have not hired professional lobbying help. Had Ukraine had a professional lobbying firm working in Washington, they would have been alerted to the Conyers-Yoho Amendment ahead of time and possibly scuttled it. If Ukraine had a professional lobbying firm working in Washington, they would have had a public rebuttal to Rep. Conyers remarks. If Ukraine had a professional lobbying firm working in Washington, they might already have defensive military weaponry. If Ukraine had a professional lobbying firm working in Washington, they could increase the US assistance budget for the country…and the list goes on. Having good diplomatic relations is one thing, but legally hiring American lobbyists to push Ukraine’s agenda (rather than accepting what the Obama administration offers) is more useful and effective for Ukraine. That is why Russian has invested in hiring powerhouse former Senators like Trent Lott and John Breaux. The Russians understand the usefulness of effective lobbying. Of course, Ukraine doesn’t help itself in the US by delaying the appointment of a new Ambassador. Oleksandr Motsyk, the former Ambassador departed in April and no replacement has been named publicly. While an Ambassador cannot do what a hired lobbyist can do, they are still helpful diplomatic tools and sources of objective information for their home countries. Deputy Chief of Staff Valeriy Chaliy has apparently been offered the post, but is delaying his departure out of fear that the lack of physical proximity to Poroshenko will cause him to lose influence.
Who’s Strategic Vision for Ukraine? Chaliy’s fears of losing influence might not be unfounded. Last month a working document began circulating in the Presidential Secretariat entitled, “The Strategic Vision of Partnership between the USA and Ukraine”. The draft also includes an impressive list of Western supporters who have apparently endorsed the “strategic vision”. These include the Director of Kissinger Associates Thomas Graham, the Director of the Kennan Institute Woodrow Wilson Center for International Studies Matt Rojansky, and Chevron’s Manager of International Governmental Relations for Eurasian and European Markets Jay Thompson, among others. It should be noted that Matt Rojansky was quoted in the New York Times on June 11 opposing defensive arms sales to Ukraine. Rojansky said, “There are valid arguments on both sides but you don’t get to walk this one back. Once we have done this we become a belligerent party in a proxy war with Russia, the only country on earth that can destroy the United States.” A Ukrainian member of this working group, Julia Osmolovskaya added in the same article, that “Ukrainians were divided over the potential benefits of receiving weapons from the United State”. This quote contrasts with a March 2015 Kyiv International Institute of Sociology survey in a majority (52%) support receiving US military aid. A full list of members is included above.
The “strategic vision” document, which is written in Russian language (not Ukrainian even though it contains a “strategic vision” for Ukraine), contains some interesting statements such as:
1. “…The instability in Ukraine is both a threat to Russia and the temptation for it to have to intervene in its internal affairs.”
2. “America should also uphold the fundamental right of Ukraine to choose its own way in the matter of association, taking into account Russia’s foreign policy, aimed at an open denial of any choice of Ukraine.”
3. “Development of Ukraine should remain outside the scope of agreements on security between the United States and Russia.”
4. “While nothing prevents Ukraine to join the regional institutions or security alliance, such as NATO, encouraging Ukraine on this path is not the original intent of the US.”
5. “Cooperation between the United States and Ukraine should be on a clear and time-synchronized letter from the leaders of both countries, as representatives of vested interests against their public and private companies. Potential promoters of cooperation should feel unconditional support at the government level, if they really want to convert the nascent partnership into practical results on the ground. You should follow the contracts, investments and other tangible forms of cooperation in order to demonstrate the success of the chosen strategy and convince those who are focused on specific issues of bilateral assistance, for example, obtaining weapons for Ukraine.”
While the document talks in pragmatic terms about partnership with the US, it is more striking what the document does not say. For example, the document never once mentions joining the European Union as a goal of Ukraine (and quote #2 above opposes it). The document skirts the edges of cooperation with NATO (which Ukraine has been doing for 20 years already), but never once mentions joining NATO as a goal (in fact, quotes #3, #4 and #5 above – argue against it). The document also doesn’t list obtaining defensive military assistance as a goal either. Essentially, the document returns Ukraine to a “multi-vector” foreign policy of flirting with the West and doing business with the Russians. In other words, if this vision becomes a reality, then those who died in the war and Euromaidan – will have died in vain.
Documents in and of themselves are useless. However what is worrisome is that this document is being circulated within the Presidential Secretariat and to government decision makers in an effort to get ‘buy-in’. Poroshenko’s Chief of Staff Borys Lozkhin is believed to be the coordinator for getting support for this document. The plan is to first get the President to endorse the document as the strategic vision plan with the US, and then wave it at the American side to for a fait accompli. If Ukraine endorses a strategic vision that doesn’t include the EU and NATO, how can Americans tell them they need something different? As they say, America can’t want something more for a country, than they want it themselves.
However, there is hope. Deputy Chief of Staff continues to delay his move to the US to take up the ambassadorial post and this document is one of the reasons. Chaliy, a reformer committed to Western integration, is said to be leading the effort within the Secretariat against this “strategic vision”, and for a strategic vision that includes EU and NATO membership for Ukraine. If successful, then Chaliy’s case to delay his move to Washington will prove wise. In fact, Poroshenko might want to promote him to his new Chief of Staff instead. If unsuccessful then Chaliy can take the Washington appointment to escape what would be a visionless administration, and live quietly in a comfortable diplomatic posting. The stakes remain high…
• The Oligarch Wars: Firtash on the Front Lines: Dmitro Firtash remains on the front lines of Ukraine’s “Oligarch Wars”. Prime Minister Arseniy Yatsenyuk attacked the oligarch on June 5 and threatened to nationalize Firtash’s Rivneazot and Cherkasy Azot fertilizer factories for non-payment of a six billion hryvnas debt (about $350 million US dollars) gas bill owed to the state gas company Naftogaz Ukraine. In an attempt to trump Yatsenyuk, Firtash announced a halt to the operations of both companies due to “pressure” by People’s Front (Yatsenyuk’s party) representatives. In other words, if the pressure doesn’t stop, Firtash plans to shut the business and blame Yatsenyuk for putting the employees out of work. Firtash’s DF Group added that two other enterprises in the ATO zone were also stopped from operating (Stirol Concern and Severdonetsk Azot). Firtash’s DF Group added, “The deliberate fabrication of some criminal cases against officials of Ostchem’s enterprises and the enterprises and the absolutely illegal arrest of the key raw material of the enterprises – gas – deprived these enterprises of a chance to operate”. Rivneazot and Cherkasy Azot have approximately 3900 and 6000 employees respectively. However the courts ruled against Firtash on June 15 when his DF Group lost an appeal against a Cherkasy court ruling and is now required to pay 103 million hryvnas (about $4.9 million US dollars) for failure to pay Naftogaz on time, which includes a three percent penalty to adjust for inflation.
The war of threats continued when Yatsenyuk called upon the Federation of Employers of Ukraine to reshuffle its top managers and end the Firtash’s control of the union. Yatsenyuk said, “I’d like to address the Federation of Employers of Ukraine which has become the federation of job-takers instead of federation of employers. This is one of the key agencies that is to protect the rights of those who work and give jobs, and today it is privatized by oligarch Firtash and the Head of the Yanukovych Presidential Administration Livochkin”. Firtash, who has led the federation since November 2011, fired back at the Premier by blaming the government for losing 600,000 jobs. He said, “At the present the government wants to write off two things – first, they wrote off this year to the war, and it was very convenient that they did it. When they saw there is no victory in the war and understood they still need to do something, they began a so-called fight against the oligarchs”.
Interior Minister Arsen Avakov piled on Firtash June 8 by opening a criminal inquiry against the former management of Naftogaz Ukraine on charges of abuse of office. Avakov said, “We suspect the national company’s former management of having colluded with the shareholders and executives of RosUkrEnergo and Group DF, and Centragas Holding AG which owns a 50% stake in RosUkrEnergo, co-owned by the Russian gas company Gazprom”. The Interior Minister alleges that a due to collusion, Naftogaz intentionally sabotaged its own case against RosUkrEnergo before the International Arbitration Court in Stockholm, which cost Ukraine billions. Not content with just a criminal inquiry, Avakov then filed 110 requests to seize real estate owned by Firtash’s Ostchem Company – half of which were granted the first day. In short, the Ukrainian government is waging an all out assault on Mr. Firtash, and it is a safe bet that his assets a year from now, will be much less than today.
• SBU Inferno & Political Guilt by Association: While the battle with Firtash was being waged by the Ukrainian government, politicians associations with the oligarch are starting to become a liability. Following the oligarch’s testimony in Vienna about how he orchestrated a deal last spring to defeat his arch enemy Tymoshenko in which Poroshenko would be the united Presidential candidate and Klitchko as Kyiv’s Mayoral candidate, President Poroshenko finally weighed in. In response to a question about the election deal Poroshenko stated, “I never denied a short meeting with Firtash during the presidential election campaign. I absolutely deny and denied any confidential agreements disclosed by Firtash. This did not happen and this does not exist”.
However, while the President seemed to overcome his past association with Mr. Firtash, it became a liability for SBU Head Valentin Nalyvychenko. The fire at the BSRM-Nafta oil depot over the weekend transformed from an act of arson which killed five persons, into a political inferno which might topple the country’s intelligence chief. On Tuesday and Wednesday of this week, Nalyvychenko was invited to testify before the US House of Representatives Foreign Affairs Committee and Senators to present proof of Russian aggression in the Donbass. Nalyvychenko has received high marks from the US and others for his efforts in fighting Russian terrorism and sabotage during the war. However, that trip was abruptly canceled though as the SBU Chief was summoned to testify to the Ukrainian Prosecutor General’s Office about the incident as the BSRM-Nafta oil depot. SBU Spokesman Markian Lubkivskiy said on June 15, “Instead of providing explanations to US Congressmen, he will provide explanations to investigators of the Prosecutor General’s Office”. This summons to talk with the Prosecutor’s Office stems from Nalyvychenko’s June 12th statements that former Deputy Prosecutor General Anatoliy Danylenko was the “roof” for BSRM-Nafta. “Roof” in Ukrainian slang means the protection racket for an illegal business. The SBU Chief presented documents to the Prosecutor General’s Office that linked Yanukovych Minister of Fuel and Energy Eduard Stavytskiy and Danylenko which resulted in the loss of one billion hryvnas (about $47 million US dollars) to the state budget over the last year. Then to reciprocate for the summons to the Prosecutor’s Office, the SBU then summoned the former Deputy Prosecutor Danylenko to their offices for questioning on June 16.
Though Mr. Danylenko served under the previous Prosecutor General Vitaliy Yarema, the charges led to prompt retaliation from the President’s Office. In addition to the summons to talk with the Prosecutor General’s Office (and the resulting cancellation of Nalyvychenko’s trip to DC), Poroshenko Bloc MP and confidante Serhiy Leshchenko released a photocopy of a document confirming old rumors that Right Sector’s Dmitro Yarosh was indeed a “Deputy’s Assistant” of Nalyvychenko when the later was a Member of Parliament from 2012-2014. While the connection between the two individuals raises some questions about the events of Euromaidan and Right Sector’s ideology, this attack alone did not prove sufficient to remove Nalyvychenko. Yarosh is now a Member of Parliament himself and an Advisor to the Chief of General Staff of the Ukrainian Army, Colonel General Viktor Muzhenko. In other words, regardless of criticisms and concerns, Yarosh has been legitimized by the Ukrainian political establishment. Thus, with the Yarosh connection failing to deliver the knockout punch, rumors resurfaced over the weekend about Nalyvychenko’s connection to oligarch Dmitro Firtash. The rumors are loosely based around Firtash being a member of organized crime, his backing of Klitchko, and Nalyvychenko being a member of Klitchko’s UDAR Party. The rumors then morph into allegations that Firtash insisted upon Nalyvychenko’s appointment as SBU Head, and Firtash even providing him financial support. What’s lacking in these allegations though is the fact that if indeed Mr. Firtash insisted upon Nalyvychenko as the SBU Head, he would have had to do so directly to Ukrainian government in place on February 23, 2014. That was the date Nalyvychenko was confirmed as SBU Chief by Parliament and the nomination was agreed by the coalition of Yatsenyuk-Klitchko-Tyahnybok and Poroshenko. It’s a classic case of ‘why are you complaining when you are the one who approved it?”. That being said, it is obvious that Nalyvychenko and other Ukrainian government officials know Firtash personally. Then again, it also makes sense that Ukraine’s top spymaster would have a relationship with oligarchs. That is because to gather information and get things done, an effective spy needs relationships with the people who are doing bad things. Ukraine lacks the signal intelligence gathering network that the US maintains and instead relies heavily on human intelligence (i.e. relationships). Given the war and Russia’s extensive intelligence network in Ukraine, the fact that Nalyvychenko knows both Yarosh and Firtash – is not a bad thing. Guilt by association is not necessarily guilt by deed. While guilt by association is not enough to remove Nalyvychenko, the President’s wishes probably are. At a meeting of the Parliamentary coalition partners on June 15, Poroshenko stunned everyone by stating that he was “unsatisfied with the work of the Security Service of Ukraine Chief Valentyn Nalyvychenko for the past year”.
It is not clear at this point if Nalyvychenko will stay on as SBU Chief. Radical Party MP Oleg Lyashko said that Poroshenko will ask Parliament to dismiss Nalyvychenko this week. Lyashko said the attempted dismissal is “revenge for Nalyvychenko’s uncompromising position in the fight against corruption”. However, given Lyashko’s own relationship with Firtash, it is difficult to know what he really believes. It is also rumored that Yatsenyuk, Avakov and Turchynov (a former SBU Chief himself) hold old grudges and are supportive of his dismissal. Poroshenko Bloc MP Mustafa Nayem said that Nalyvychenko has agreed to be the Head of External Intelligence for the SBU. That was followed by the Deputy Head of the Poroshenko faction Ihor Kononenko stating that Nalyvychenko had also been offered the post of Vice Prime Minister for European Integration. Possible replacements for Nalyvychenko appears focused on First Deputy SBU Head Vitaliy Hritsak, although Deputy Presidential Chief of Staff Andriy Taranov and former Kuchma-era SBU Chief Ihor Smeshko have been mentioned. At a time when the Minsk II “Cease Fire” is a cease fire in name only and the threat of Russian espionage, sabotage and invasion loom on a daily basis, sacking the country’s intelligence chief for political reasons is risky. Then again, this is not the first time that there has been speculation about Nalyvychenko’s dismissal. However in each case, Nalyvychenko’s professional performance in fighting Russian aggression has provided the justification for keeping him on the job. The fact that at least two posts have apparently been offered to him (rather than simply firing him) suggests that Poroshenko may have realized that Nalyvychenko’s talents are still needed by the Ukrainian government. On June 17th, seemingly undeterred by the controversy, Nalyvychenko continued his work by sending the Prosecutor’s Office evidence regarding crimes by the Chairman of the Constitutional Court Yuri Baulin. Mark Twain once said, “Reports of my death have been greatly exaggerated”. In Nalyvychenko’s case, the reports of his political death/dismissal may yet prove to be “greatly exaggerated”.
• Government Reshuffle in Autumn: In the President’s annual address to Parliament he said, “Am I satisfied with the government? Of course not. Am I satisfied with the Verkhovna Rada’s work? Certainly not. Do you know why? Because people aren’t very satisfied with us… We will sum up the interim results of the next stage of our joint work in the fall. Performance of each minister will be scrutinized under the microscope. I don’t rule out the possibility that the Cabinet of Ministers could be reformatted”. These comments follow earlier remarks from Poroshenko Bloc Faction Leader Yuri Lutsenko about a pending government shakeup before the October Local Elections. Despite public speculation of difficulties between the President and Premier, Poroshenko later added that he saw no need to replace Yatsenyuk. While that may be pure political posturing about the Premier, the names of several ministers are being floated as potential “endangered species”. Education Minister Sergiy Kvit is the most frequently mentioned name, although if the oligarchs and Opposition Bloc has its way, then Energy Minister Volodymyr Demchyshyn would also be on the list. SBU Chief Valentin Nalyvychenko is under fire from the President and it will be interesting to see if he manages to survive attempts to remove him once again – or if he will land in another top post. Prosecutor General Shokin is also on the list of likely names due to his battle with lung cancer and need for treatment in the United States. Ecology Minister Ihor Shevchenko is now in the crosshairs for his handling of the BSRM-Nafta oil depot disaster and presumably any government shakeup would also involve some regional Governors as well. Interestingly there is some talk of Foreign Minister Klimkin moving to the United Nations to take up the Ambassadorship there. Such a posting would put him head to head with Russian Ambassador Vitaly Churkov on a daily basis – although one wonders why he would want to leave the top post in the Foreign Ministry for a mere ambassadorship (even if it is based in New York). Finally, there is still talk about finally finding a position for Poroshenko friend and Parliamentary faction leader Yuri Lutsenko. The former Interior Minister is biding his time in Parliament until an interesting offer becomes available – and his referencing a government reshuffle in autumn suggests he already has his sights on a post. At this point, everything is mere speculation but see what happens when Parliament returns from the August recess and the focus shifts to the Local Elections as a referendum on the performance of the current government.
• Local Elections Legislation & Donbass Elections: With current EU sanctions against Russian presently under review and the deadline set for the current sanctions to expire on July 31, Russia is playing relatively nice in the Donbass and the DPR and LPR are “talking” about local elections. It is believed that the Kremlin’s strategy is to win the expiration of some of the sanctions before resuming large scale military moves in the Donbass. In addition, the Contact Group “working groups” are finally meeting (with DPR and LPR participation) and various democratic “sounding” (but substantively undemocratic) demands are emerging. One such ‘democratic’ sounding but substantively undemocratic demand was for a “single winner principle” in the holding of local elections. If applied as conceived by the “Head of the DPR Legislature” Andriy Purhin, it would prevent political parties and NGO’s from participating as candidates in the process. In other words, it would thwart rather than enhance the democratic process. Most recently the DPR negotiator at the Contact Group talks called for judges and prosecutors to be nominated by the DPR and LPR but appointed by Kyiv. In other words, the DPR and LPR expect Kyiv to rubber stamp their nominees regardless of the toxicity of their backgrounds and actual experience. Interestingly an April Gorshein Institute poll found that 69% of respondents said that there was no or little need for “negotiations with the self-proclaimed Donetsk and Luhansk ‘Republics”. Debate over proposals for a “single winner principle”, and for Kyiv to rubber stamp DPR picked judges – lend support to that survey finding. While it appears that the recent talk of elections is merely related to the review of sanctions, Ukraine’s government must be ever vigilant in defending truly democratic principles of elections in the Donbass. Ukraine must also be diligent in ensuring that Ukrainian election laws and the blessing of OSCE election monitors are not used to legitimize the DPR and LPR authorities.
While Ukraine is busy fighting for democratic principles in future Donbass elections during negotiations with the Contact Group (Russia, DPR, & LPR), the debate over the new local election law for Ukraine is moving forward. Key provisions of the proposed new election law include an open proportional list system for oblast councils and cities over 90,000 citizens, as well as a 50-50 proportional open list and half single mandate system for cities under 90,000 residents, towns and villages. Local council seats would be reduced by approximately 30% and greater transparency and accounting requirements would be introduced for candidates. Additionally, talk of requiring a runoff election for cities over 90,000 continues to be a part of the debate following its introduction by the Minister of Justice Petrenko this spring. While an open list proportional ballot system seems to have momentum, election experts are already acknowledging the difficulties such a system will create for the counting process. Given the multitude of candidate choices within each party listed on the ballot, the open list system will dramatically increase the time it takes to count ballots after the polling stations close. Since most election fraud in Ukraine has historically occurred during the vote count, this is a less than encouraging prospect. Another new proposal of the election law being discussed is the introduction of gender quotas which would require every third candidate on the party list to be of the opposite sex. Regardless of what transpires, a new election law will be passed a couple months before the election (why Ukraine doesn’t write a permanent election code like others countries do remains a mystery). Unlike previous years though, the new election law is likely to be an improvement. However more public debate, input and cost-benefit analysis are needed before any bill is passed to avoid making changes simply for the sake of making changes.
• Moldovan Political Upheaval: Last Friday’s resignation of Prime Minister Chiril Gaburici marks the end of the 39 year old politician’s brief career and possibly the initiation of a reformatted governing coalition. The 114 days as Premier marks the shortest, non-interim stint on the job in the country’s history. Gaburici shook the political establishment last week with his call for the dismissal by Parliament of the Prosecutor General, Head of the National Bank, and Head of the National Commission for Financial Markets over the banking scandal. While that call mostly fell upon deaf ears, Gaburici took the high road with his resignation speech in an effort to leave doors open for his own future
While the timing of the resignation was somewhat surprising, Gaburici’s departure had been rumored for weeks. A side scandal over the Premier’s apparent purchasing of his high school diploma (i.e. he never graduated) provided theatrical entertainment in the interim but it was clear from the beginning that Gaburici was a temporary figure. His election as Premier, with the votes of the Communists in coalition with the Democrats and Liberal Democrats, came after the former Premier Iure Leanca failed to form a majority in Parliament after last November’s Parliamentary Elections. Coalition negotiations with the Liberal Party (the other original member of the Alliance for European Integration – AEI) were unsuccessful which led to the Communists agreeing to provide votes for a situational majority instead. Gaburici, an in-law of Communist Chairman and former two term President Vladimir Voronin, emerged as the compromise candidate for the post and was confirmed by Parliament on February 18. It is unknown at this time about Gaburici’s future plans and whether or not he will return to the telecom sector where he has worked previously.
Liberal Democrat leader and former Premier Vlad Filat along with former Speaker and Democrat Party Chairman Marian Lupu announced that they are opening negotiations on a new governing coalition. Filat said, “I will contact Mihai Ghimpu and all those who want Moldova to continue on its path of European integration. We want a clear, stable majority in Parliament, which would provide full support to the new Government… A snap Parliamentary election would be a disaster for Moldova”. Under Moldova’s Constitution, once the Premier’s resignation is accepted by the President, the President must begin negotiations with the Parliamentary factions to nominate a new candidate to the Premier’s post. Then there is a three month window (and up to two votes) in which Parliament must approve a new Premier or face early elections.
Yesterday Moldovan voters went to the polls to elect mayors and local councils. The results brought welcome news for the Kremlin backed parties. The Socialist Party, which finished a surprise first place in the Parliamentary elections last November as well as won the Gagauzia Gubernatorial election in March, continued their momentum with Socialist candidate for Mayor of Chisinau, Zinaida Grecanii, advancing to a runoff against incumbent Mayor Dorin Chirtoaca. Grecanii finished a strong second place (with 35.69% compared to the incumbent’s 37.57%). In an unexpected development, Russian businessman Ilan Shor (who is at the center of the banking scandal), won a decisive 62% of the vote to become the new Mayor of Orhei (population 32,000). While the post offers no immunity from prosecution, it does give the embattled businessman a pulpit to air his side of the banking affair. Meanwhile as expected, Russian businessman Renato Usayti won 74% in the Mayoral election and control of the city council in Moldova’s second largest city of Baltsi.
Meanwhile the Communists and Liberal Democrats suffered losses of council seats throughout the country – including being reduced to just three and two seats respectively on the Chisinau City Council. The Democrats mostly held their own and managed to get into a runoff in Comrat, the capital of the semi-autonomous republic of Gagauzia. However it is in no one’s interest except the Socialists to hold new Parliamentary Elections. Therefore, expect serious negotiations over restoration of the AEI coalition of Democrats, Liberal Democrats and Liberals. Presumably former Premier Iure Leanca (with two seats in Parliament) could join the coalition as well. The first priority for the coalition will be to unite behind incumbent Chisinau Mayor Dorin Chirtoaca for the June 28 runoff election. Good faith negotiations on behalf of the Liberal Democrats and other parties will be a positive step to reformatting the pro-European coalition – without the Communists. It is also possible that some Communists may leave the faction to form a pro-EU, “European Socialist” party and join the new coalition as well. A loss of the Mayor’s office in the runoff election would be catastrophic as it would likely signal early elections with a larger share of the vote going for pro-Kremlin parties like the Socialists.
It is unclear at this time who will become the compromise Prime Minister Candidate from the pro-European parties. Speaker Adrian Candu, Foreign Minister Nataliya Gherman and possibly even former Premier Iure Leanca all have plusses and minuses. Candu is capable and well liked by the West but is the godson of oligarch Vlad Plahotniuc. Gherman is also capable and well liked by the West, but isn’t clear if the Liberal Democrats will have the clout to make her their fourth straight Prime Minister – especially given their poor rating and local election results. Leanca could possibly re-emerge if the Liberal party is properly placated with the government posts they are seeking and other demands (including the appointment of a foreigner as Prosecutor and punishment for those guilty of the banking scandal) – although the math is difficult for the former Premier. With just two votes in Parliament, it would take a serious Western lobbying effort to reinstate Leanca as the compromise candidate and the Obama administration is consistently passive about Moldova. This would also require an unlikely patching of the relationship between Liberal Democrat leader Vlad Filat and his former protégé Leanca. Thus, it would appear that Candu is the leading candidate for the post at this time. Candu’s pre-emptive release on May 4th of Kroll’s banking scandal report positioned himself as part of the solution rather than the problem. Meanwhile, Moldovan politicians are postponing their summer vacation plans until the political landscape becomes clearer.
• Personnel Moves: Former Zhytomyr Governor and Head of the Prosecutor General’s Anti-Corruption Department Pavlo Zhebrivskiy was appointed as the new Governor of Donetsk. Zhebrivskiy had served in the Prosecutor’s Office since January, but with the commencement of operations for the independent Anti-Corruption Bureau, Zhebrivskiy had indicated his desire to depart since the new bureau would take over most of his duties. Prior to taking the post in the Prosecutor’s Office, Zhebrivskiy had volunteered to serve in the ATO for military intelligence and achieved the rank of Sergeant. Zhebrivskiy was elected as a Member of Parliament in 2002 from a district in Berdychiv (Zhytomyr oblast) and from the “Our Ukraine” party list in 2006, but his efforts to win a district in Korosten (also Zhytomyr oblast) in 2012 and his old seat in Berdychiv in 2014 were narrowly unsuccessful. Zhebrivskiy’s older sister Filya is the President of Farmak, a Kyiv pharmaceutical, and is ranked among Ukraine’s top 200 wealthiest persons with approximately $250 million dollars.
Zhebrivskiy replaces Aleksandr Kikhtenko, a General in the Interior Ministry, who served the previous eight months. He is best remembered for moving the interim capital of Donetsk from Mariupol (where it had been under his predecessor Serhiy Taruta) to Kramatorsk. Kikhtenko, who lacked a media background, initially came under criticism for not generating enough positive press about events in Donetsk. Later in April, Interior Minister Arsen Avakov publicly called for Kikhtenko’s removal after an interview in which the General called for restoring economic relations with the occupied territories of the Donbass. Kikhtenko, for his part, stated that he only favored restoring economic relations with those companies in the Donbass which are registered in Ukraine. Then on June 5th President Poroshenko publicly criticized Kikhtenko for failing to build fortifications on time and noted that the construction company tasked with the effort is a relative of former Governor Serhiy Taruta. Poroshenko and Taruta have been at odds since last summer and the President blames the businessman for underestimating the separatist threat last spring and allowing parts of Donetsk to be occupied. Mindful however of Kikhtenko’s 36 years of law enforcement experience, Poroshenko “offered General Kikhtenko to take up another demanding job…” – which is not clear at this time.
Odesa Governor Mikhail Saakashvili plans to hire lawyer Sasha Borovik to “coordinate” for international investors in the region. Borovik is a Lviv native who held a German passport before becoming a Ukrainian citizen (again) in March. He is one of dozens of foreigners who have accepted Ukrainian citizenship. Borovik, a London based lawyer had previously worked for Microsoft Corporation. While it is not known if this work will be as an official advisor or freelancer, it was apparently made against the wishes of Prime Minister and others who counseled against it. Borovik was under consideration for the post of First Deputy Minister of Economy Development and Trade until the Minister Aivaras Abromavicious, decided against it last month. Borovik then went public criticizing the Ukrainian government system as “rotten” and “not efficient”.
Four term Byut MP Dmitro Shlemko (from Ivano Frankivsk) resigned from Parliament upon his own request. He will be replaced by Valeriy Dubil. Dubil was elected in Chernihiv city district #205 in 2012 but gave up his seat in favor of what seemed like a “safe” seat on the party list in 2014. Dubil’s seat in Chernihiv was won by Poroshenko Bloc candidate Valeriy Kulinich who was later appointed Governor of the region in March. With Dubil now back in Parliament, there is one less credible candidate who can contest the race against Kolomoyskyi ally Gennadiy Korban, to win the Special Parliamentary Election in Chernihiv #205 on July 26.
Dates to Watch (for Ukraine unless otherwise noted):
June 15: IMF Review to Receive the Second Tranche of Financing: While the second tranche of $1.7 billion US dollars is highly likely, and Ukraine continues to receive support from the US, EU and even the IMF Head Christine Lagarde, negotiations with bondholders are at a critical junction. Most recently bondholders have tried to drive a wedge between the government and the Minister of Finance, Natalie Jaresko. However Jaresko has stated that the negotiations will be completed “before the issue of the second tranche”. Priorities for the second tranche of IMF financing include solving issues relating to the Pension Fund deficit, improving the efficient use of funds in medicine and education, and reducing the debt burden.
June 16-19: Parliamentary Voting Session Scheduled
June 16 & 23: Next Meetings of the Trilateral Contact Group: The June 16 meeting has local elections as the topic of discussions. In response to a recent US proposal to participate in the Normandy Format meetings as an “observer”, the Russians upped the ante by proposing that the Normandy Format include representatives of the LPR and DPR. The Normandy Format consists of Ukraine, France, Germany and Russia. Meanwhile, the sudden resignation of OSCE Envoy Heidi Tagliavini has set in motion a search for a replacement. Tagliavini generally received positive marks despite a difficult task and it is rumored that her replacement will be a Serbian. Given the historically friendly relationship between Serbia and Russia, this may bode poorly for Ukraine.
July 1: Date Decentralization will be approved by Parliament according to Speaker Groisman: The second and final vote will take place in September in accordance with the Constitution which requires such sweeping changes to be approved at two different sessions of Parliament. The proposal includes elimination of Governors and replacing them with Governmental Commissioners approved by the government and appointed by the President.
June 30 – July 3: Parliamentary Voting Session Scheduled.
July 13: Ukrainian Investment Conference in the US: Ukraine’s government plans an investment conference to unveil its plan for privatization, fiscal reform and the energy potential of the country. About 150 executives of major US companies are expected to attend.
July 14-17: Last Parliamentary Voting Session Scheduled Until Autumn.
July 26: Special Parliamentary Election in District #205 (Chernihiv City): Currently 14 candidates have registered although Dnipropetrovsk businessman Gennadiy Korban is not yet one of them. The Radical Party, Svoboda and Community Initiative parties have all fielded candidates, and UDAR member and Commercial Director of Chernihivmiskbud construction company, Yuri Tarasovets, has entered the race as an independent. If Tarasovets has the backing of the Poroshenko Bloc then the race will be more competitive. Communist candidate Roman Davletkuzhyn who received 7% and finished fourth place against Dubil in 2012, has also filed.
July 31: European Union Sanctions Against Russia Expire: That is, unless the EU decides to keep them in place at their summit in Brussels on June 25-26. Technically nothing has changed to give the Europeans a reason to lift the sanctions: Crimea is still annexed and the war, the Minsk II “Cease Fire” has been breached more than 4000 times since February 12th, and the Donbass conflict has claimed more than 7000 Ukrainian lives. Nonetheless, while it is likely the sanctions will still in place after this date, do not be surprised if the EU gets wobbly the next time the sanctions are up for review.
September 23: Ukraine must repay $500 Million in Foreign Debt.
October 25, 2015: National Local Elections for Mayor and City Councils.
February 2016: Stockholm Arbitration Hearings on Counter Claims between Naftogaz and Gazprom. Naftogaz is seeking $16 billion dollars and a decision is expected by June 2016.