[Ohio UZO News] Ukraine: FT; NYT; EDM; KP

[Deychak, Orest]

Financial Times

www.ft.com

Ukraine hit by downgrading

By Roman Olearchyk in Kiev 

Published: May 13 2009 

Pressure mounted on Ukraine's shaky banking system when Moody's cut the
country's credit rating after two top banks missed payments on debt
obligations.

The ratings agency, which downgraded 19 of Ukraine's 180-plus banks on
Tuesday, said it had assigned a negative outlook, reflecting "the
continuing fragility" of Kiev's economy and its banks.

Kiev bankers called Moody's downgrade alarmist, insisting a financial
meltdown was not on the way. They said the country was in a very
difficult situation and that western lenders would help prevent a
possible spillover of Kiev's problems into Europe, whose banks control
about 40 per cent of the domestic market.

However, a top western banker said the Moody's report was a "warning",
taking note that the challenges facing Ukraine were still ahead.
"Ukraine is not in a meltdown but in a financial freeze."

Andriy Kravetz, deputy finance minister, said on Tuesday: "We were
shocked by the downgrade by Moody's after the decision by the IMF to
grant Ukraine an additional tranche."

Moody's cited capital controls for rationing foreign currency
implemented by Kiev's central bank last month as a "supplementary"
worry. "These controls have already contributed to a foreign payments
default by one of Ukraine's banks," Moody's said, referring to the
Ukrainian subsidiary of Alfa Group, controlled by Russian oligarch
Mikhail Fridman. Alfa Bank Ukraine blamed the tighter currency rules for
its late payment on its $100m Eurobonds, which were redeemed within a
given grace period. 

Ukraine's central bank on May 7 said Alfa's foreign currency holdings
exceeded the amount due.

Moody's said the capital controls "heighten the possibility of default"
by Ukrainian corporations and banks, which are struggling this year to
pay off or restructure more than $10bn in foreign currency debt. There
are fresh signs of trouble brewing at other top Ukrainian banks. Late
last month, a bank controlled by Ukraine's richest man, Rinat Akhmetov,
fell into technical default on a $10m payment. 

It is currently seeking to restructure debts. Stockholm-based Swedbank
told Bloomberg on Wednesday that it would seek to sell parts of its
Ukrainian and Baltic operations to western lenders in return for fresh
capital injections.

The International Monetary Fund on May 8 unfroze a $16.4bn standby
credit granted last year. The Fund's first $4.5bn tranche, granted late
last year, helped stabilise Kiev's banks. An additional $2.8bn will
arrive this month, delayed for months because of concerns over Kiev's
financial prudence and political stability.

However, concerns and uncertainty loom. And the majority of Kiev's
banks, many small-pocket banks owned by domestic businessman, have
nowhere to turn. Consolidation is coming but some are expected to go
bust. 

 The New York Times

WORLD BRIEFING EUROPE

Ukraine: Court Rejects Date For Presidential Election 

By REUTERS 

14 May 2009

Late Edition - Final

8

President Viktor A. Yushchenko won a tactical victory Wednesday when a
top court struck down the October date set by Parliament for the
presidential election. The popularity of Mr. Yushchenko, left, has
plummeted, and he remains locked in a political struggle with a former
ally, Prime Minister Yulia Tymoshenko. Parliament, in rare unity, voted
overwhelmingly last month to hold the election on Oct. 25. But the
president appealed to the Constitutional Court, saying the election
should not take place until early next year. The court's ruling appeared
to back his position that under the Constitution, the vote should be in
the last month of his fifth year in office; he became president in
January 2005.

Eurasia Daily Monitor

May 14, 2009

Ukraine's Interior Minister Resigns

The Ukrainian Interior Minister Yury Lutsenko has tendered his
resignation following his arrest at a German airport. Prime Minister
Yulia Tymoshenko wanted to keep him since he was a loyal minister, but
the opposition Party of Regions (PRU) instead attempted to use the
opportunity to politically weaken Tymoshenko. Lutsenko's removal from
the government, may allow the PRU to either form a new coalition or
persuade Yushchenko to disband parliament and call new elections.

The German police detained Lutsenko and his teenage son at Frankfurt
airport on May 4. Lufthansa's flight attendants suspected that both were
drunk and consequently did not allow them aboard a flight to South
Korea, where he was scheduled to attend a conference. Lutsenko
complained that his son who suffers from cancer, was treated rudely by
the police -forcing him to intervene. According to Lutsenko, he had
consumed only a small quantity of beer, while his son is teetotal due to
his illness. The German tabloid Bild alleged that Lutsenko not only
verbally abused the policemen but injured four of them, and that his son
was drunk. Lutsenko denied this and said that the police subsequently
apologized to him (Bild, May 5; Ukrainska Pravda, March 6).

Lutsenko has proven to be controversial and the opposition has attempted
to oust him several times during his two periods as interior minister
since 2005. He was allegedly involved in trying to help a company linked
to his family illegally securing a lucrative contract, distributing
small arms among his political allies, and obtaining flights for his
family at state expense. In 2008, he assaulted Kyiv Mayor Leonid
Chernovetsky. On those occasions he was saved from dismissal, first by
Yushchenko and then by Tymoshenko, whose ally he has been for several
years.

Lutsenko resigned on this occasion in response to Yushchenko's request
and in the absence of any public expression of support from Tymoshenko.
On May 12, he submitted a resignation request to parliament. He told a
press conference that he was not ashamed, though he could not continue
to serve because of "a dirty campaign against myself and my son." He
accused Yushchenko of trying to "destabilize" the interior ministry and
threatened to sue Bild (Interfax-Ukraine, May 12). Lutsenko's allies
have been trying to convince the public that the incident in Frankfurt
had been somehow masterminded by his political rivals, alleging that
several articles on the incident in Bild had been written by a Slav, and
that Yushchenko's chief aide Viktor Baloha was behind the "smear
campaign" that allegedly ensued (Ukrainska Pravda, May 8; Channel 5, May
12).

Tymoshenko's parliamentary allies made it clear that they will not vote
to approve Lutsenko's dismissal. Tymoshenko is reluctant to part with
him for two reasons: it may be difficult to replace him with someone
equally loyal, and his small Self-Defense group has been instrumental in
sustaining her coalition since June 2008 -when it ceased to control a
majority in the 450-seat parliament. The coalition and the communists
(who are not in the coalition but support Tymoshenko) argue that the
official position of the German police should first be clarified. The
Ukrainian foreign ministry asked the German authorities for an
explanation, but has received no official reply (Ukrainska Pravda, May
13).

The PRU's response to the coalition's reluctance to part with Lutsenko
has been to block the rostrum in parliament so that the speaker
Volodymyr Lytvyn, cannot open any sessions of parliament. The PRU has
been blocking parliament since the morning of May 12, demanding
Lutsenko's dismissal for shaming the country. Tymoshenko's caucus leader
Ivan Kyrylenko suggested that the PRU's real aim is to prevent
parliament from gathering until May 17, when Yushchenko can legally
disband it for failing to convene for 30 days -since the last session on
April 17 (Ukrainska Pravda, May 12). Yushchenko tried to disband the
parliament late last year, but Tymoshenko overturned his decree within
the courts.

Alternatively, the PRU might try to persuade Tymoshenko to join a new
coalition. The PRU hopes that once Lutsenko has been removed
Self-Defense may withdraw, leaving Tymoshenko's government seriously
weakened. Talks on a possible PRU-Tymoshenko coalition have been
conducted intermittently for almost one year. Yushchenko has made it
clear that he will oppose a PRU-Tymoshenko coalition. Yushchenko said in
a recent interview that such a coalition would work to "divide this
country between two people," meaning Tymoshenko and Yanukovych.
Yushchenko suspects that a PRU-Tymoshenko alliance might amend the
constitution in order to elect the president within parliament rather
than by universal suffrage. In this case, Yanukovych may become
president, while Tymoshenko continued serving as prime minister (One
Plus One TV, May 12).

Yushchenko can do little to prevent the emergence of a PRU-Tymoshenko
coalition, since he is nearing the end of his term, as well as being
weakened institutionally by the constitutional reform of 2004-2006. His
allies in parliament however, may support the PRU in any vote on
Lutsenko's dismissal, since Yushchenko shares the PRU's belief that
Lutsenko must leave the government after the scandal in Germany.

--Pavel Korduban

 

A somewhat under-reported, yet huge problem that needs to be overcome if
Ukraine is to become a state based on the rule of law: 

Kyiv Post

www.kyivpost.com

 

Despite high-profile arrests, corruption still dogs courts

May 14, 2009

Alina Pastukhova, Kyiv Post Staff Writer

 

Bribery is the only way to get a favorable ruling from a judge, lawyers
say.

 

Despite several high-profile arrests of judges suspected of taking
bribes, people working in Ukraine's judicial system say the courts are
as corrupt as ever. 

"Bribes are taken by everybody from chairman of the court to judge
assistants," said a lawyer who spoke on condition of anonymity because
he's a practicing attorney who fears retribution if he is identified.
"If one doesn't take bribes, this person doesn't work in the court
system," he said. Even when the law was on the side of his client,
bribes were required to get the necessary ruling, this lawyer said.

About half of Ukrainians believe that courts are corrupt, according to a
2008 study conducted by the National Institute for Sociological Studies.
But still they fared better in the survey than the Verkhovna Rada, the
government, road and regular police and medical institutions.

Kateryna Tarasova, head of the Courts Association of Ukraine, whose
members include judges, acknowledged the problem. Tarasova blames low
salaries of judges. "There is no sufficient financing of the judicial
processes. A starting judge makes less than Hr 3,000" monthly, she said.

Attempts to reach Vasyl Onopenko, top justice of Ukraine's Supreme
Court, for comment on this story were unsuccessful. In the past,
Onopenko has resisted legal changes to make it easier for politicians to
appoint and dismiss judges, saying such steps would undermine judicial
independence.

In the last six months, several judges in Ukraine have allegedly been
caught red-handed taking bribes, including Lviv appeals court judge Ihor
Zvarych. He is accused of accepting a $100,000 bribe. Other notable
cases: Mykola Tyshchuk of Kyiv's Obolon district court allegedly took a
$3,000 bribe while Vyacheslav Lyubashevskiy of Lviv's appeals court is
accused of taking a $20,000 payoff.

The number of criminal cases against judges grows yearly. According to
the State Security Service, there were 29 criminal cases opened in 2006,
43 cases in 2007 and 52 last year. But few of these get to court because
the procedure for lifting the judges' immunity from prosecution is
complicated and involves Verkhovna Rada approval.

Also, prosecutors complain that lawyers refuse to testify against
judges. "I never met a lawyer who gave testimony against a particular
judge," said Maksym Yakubovskiy, a prosecutor at the General
Prosecutor's Office who investigates such cases. "They want to live and
work in this country."

Lawyers who asked for anonymity because they work in the court system
described to the Kyiv Post how the bribe-taking works: A chairman of the
court is in charge of assigning cases to subordinate judges. Sometimes
while passing the papers, the chairman surreptitiously whispers the
amount he wants to receive from the interested party as payment for the
'right' decision. After the money is passed, it is divided between those
involved in the decision making process.  

Lawyers said most of the bribes are taken and given in property disputes
and while determining the term of imprisonment in criminal cases. The
sum depends on the level of court, the client's affluence, and
complexity of the case. In a property dispute, for example, bribes can
reach 10 percent of the cost of property.

 "The minimum bribe to a judge in a property dispute is equivalent to
the cost of five up-to-date laptops and appeals court decisions will
cost twice more," the lawyer said. He added, however, that in his five
or six years of practice he has only come across several honest judges
who told him "to hide the money, or I will be arrested for proposing
bribes."

Tetyana Montian, a Kyiv lawyer unafraid of voicing her criticisms
publicly, has written blogs about bribing judges. Montian said the legal
system's corruption is due to imperfections in legislation regulating
property disputes. "A court is a service designed to regulate disputes
between parties on property issues. But if positions of parties are not
legally regulated, this service won't work," she said.

Yakubovskiy said vague legislation is not the only reason. He said
bribes are accepted because they are offered: "Two-thirds of the time
it's the lawyers who promote corruption in courts." Yakubovskiy said he
knew of several cases in which judges were being pressured into
accepting bribes by lawyers who literally stuffed cash into their
pockets or briefcases. 

Yakubovskiy said this happens because for a lawyer it's easier to pay
for the right decision than make a lot of effort to win a case. But
Montian said the main problem is that politicians like the status quo
and have little interest in changing it, as "our judges are a tool in
the hands of political groupings struggling for influence and power,"
she said.

To become a judge, one has to pass a qualifying exam in front of a
committee of 13 members. Two of these are appointed by parliament, two
by president, one by the human rights ombudsman, one by the Ministry of
Justice, and the rest by an assembly of courts.

"They never allow anyone they do not control to become a judge," one
lawyer said.

After gaining approval from the committee, the judge is appointed by the
president for a term of five years, and confirmed for life in parliament
once that term runs out.

"Political groupings have divided quotas for appointment of judges; they
simply determined that a particular political force will have influence
on particular judges," Montian said.

Prosecutor Yakubovskiy said his office has made numerous proposals to
the government on how to fight corruption, to no avail.

So far, Prime Minister Yulia Tymoshenko's bloc has only proposed
introducing an automated system of assigning cases to make their
distribution more random, a step that may cut down on shopping around
for favorable judges.

Anatoliy Hrytsenko, Our Ukraine faction lawmaker, drafted a bill
implementing life imprisonment for corrupt judges. But there is little
optimism in these initiatives, even if they are approved.

 

 

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