[Ohio UZO News] Ukraine: FT; AP; EDM

[Deychak, Orest]

Financial Times (website)

www.ft.com

Ukraine pulls IMF into bitter domestic rivalry

By Roman Olearchyk in Kiev 

Published: September 17 2009 

Ukraine’s president has accused the International Monetary Fund of being too lenient on the government led by Yulia Tymoshenko, his prime minister and bitter rival in next year’s presidential elections.

In comments that threaten to pull the IMF and Kiev’s other western lenders into the country’s messy politics, Viktor Yushchenko on Thursday questioned why the IMF had continued to provide Ms Tymoshenko’s government with financial assistance in spite of its failure to adopt key reforms.

The president has repeatedly accused Ms Tymoshenko’s government of pushing populist policies, citing its failure to raise natural gas prices for households to market levels and an unrealistic budget this and next year. “Neither the World Bank nor the IMF did the work that had been foreseen ... to shift the government towards reforms,” Mr Yushchenko said.

Ms Tymoshenko has accused Mr Yushchenko of trying to sabotage her presidential bid and her efforts to pull the country out of recession. The president’s comments were made as the IMF mulls ranting Ukraine a fourth tranche this autumn from a $16.4bn (€11bn, £10bn) standby loan approved last autumn. Nearly $11bn from this aid package already received kept Kiev’s shaky bank sector and currency relatively stable. The Ukrainian hryvnia plunged 40 per cent last autumn when the global financial crisis broke, and remains under pressure.

The IMF is keen on staying out of Kiev’s poisonous politics, but a fourth tranche is seen as vital to keeping Ukraine afloat in the near term. Gross domestic product plunged 18 per cent in the first half of 2009. 

The IMF has remained tight-lipped on Kiev’s political mayhem and has refused to confirm or deny widespread accusations by politicians and investigative news reports that suggest some of its aid to Ukraine has been misappropriated.

“In view of the upcoming elections, it is clear that on all major issues the ‘noise’ from politicians will increase,” said Peter Vanhecke, head of Renaissance Capital in Ukraine. “However, I expect the IMF position will remain consistent and that it will stick to its conditions while showing a rational dose of flexibility, especially now that the Ukrainian economy is showing signs of recovery.”

AP

World Bank approves $400 million loan to boost Ukraine's banking sector amid crisis 

18 September 2009

KIEV, Ukraine (AP) - The World Bank on Friday announced it approved a $400 million loan to boost Ukraine's banking sector, which has been shaken by a confidence crisis and a run on banks amid a severe recession.

Deposits in Ukraine's banks plunged by 30 percent from September 2008 through May this year, according to the World Bank, as worried customers rushed to withdraw their savings and convert them into foreign currency. A senior Ukrainian central bank official said in an interview published Friday that panicked Ukrainians have withdrawn a total of 50 billion hryvna ($5.8 billion or euro3.9 billion) from their accounts during the crisis.

The run on banks prompted a painful government ban on early deposit withdrawals and contributed to a collapse of the national currency, the hryvna, which lost nearly 45 percent of its value to the dollar since September.

"We hope that our loan will help to bolster confidence in the banking system in Ukraine, and thus lay the foundation for recovery and economic restructuring post-crisis," Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova said in a statement.

The loan was part of a $750 million credit package meant to stabilize Ukraine's financial sector. The second installment, of $350 million, is due to be allocated next year, according to the bank.

Ukraine's financial crisis has been one of the worst in Europe. The economy is expected to shrink by 15 percent this year after nearly a decade of robust growth due to a fall in global demand for steel and chemicals, the country's top exports, according to the World Bank. Inflation is forecast to reach 13 percent.

The country is relying on a separate $16.4 billion loan from the International Monetary Fund to avoid a complete meltdown, but has struggled to fulfill the fund's strict stabilization criteria.

Raiser and Ukraine's Economy Minister Bohdan Danylyshyn signed an agreement on receiving the loan Friday and the money was to be disbursed soon, the World Bank said.

Eurasia Daily Monitor 

http://www.jamestown.org/programs/edm/ <http://www.jamestown.org/programs/edm/> 

September 18, 2009

Ukraine Debates the Russian Threat

The poor state of Ukrainian-Russian relations, as vividly noted in Russian President Dmitry Medvedev's August letter to President Viktor Yushchenko, the expulsion of two Russian spies from Ukraine and Russia's newly adopted law giving its military the right to intervene abroad is intensifying the debate in Ukraine over the Russian threat. On September 18 three journalists from the Rossiya channel were banned for five years from entering Ukraine for conducting "falsified information propaganda against Ukraine" (www.pravda.com.ua, September 18). Earlier, Medvedev told the Valdai Club that his letter had fulfilled its purpose (Ukrayinska Pravda, September 15).

Acting Foreign Minister Yuriy Kostenko explained that the expulsion of the two spies was seen by Moscow as an "aggressive attack against Russia, and a provocation" (Ukrayinsky Tyzhden, August 28-September 3). Russia did not attempt to understand Ukraine's argument that the spies were acting in a manner "contrary to their diplomatic status."

Medvedev's staunch and unprecedented criticism of Ukrainian domestic and foreign policies was worsened by the fact that two of the three leading presidential candidates -Party of Regions leader Viktor Yanukovych and Front for Change leader Arseniy Yatseniuk- supported the Russian side. On August 26 Yanukovych told a phone-in to Segodnya: "Never before have we had such unpleasant relations with Russia as at present."

Yanukovych promised that relations would improve if he is elected. Such promises echo the 1994 presidential elections when Leonid Kuchma claimed that he -rather than the incumbent Leonid Kravchuk- would be in a position to improve such relations. Both Kuchma and Yanukovych failed to see the deeper issue involved; namely, Moscow's "refusal to recognize the existence of the Ukrainian nation," explained Volodymyr Horbulin, the former National Security and Defense Council (NRBO) Secretary and the security expert Valentyn Badrak (Zerkalo Nedeli, September 12-18). "In the last 18 years since the disintegration of the USSR the Kremlin elite has not come to terms with the existence of an independent Ukraine,' as another Ukrainian newspaper noted (Ukrayinsky Tyzhden, August 28-September 3).

These experts suggested that the situation in Ukraine resembled Austria in the 1930's before its anschluss with Germany (Ukrayinsky Tyzhden, August 28-September 3). Various political experts provided pessimistic answers as to why they did not believe that the quarreling Ukrainian elites could mobilize Ukrainians against a foreign aggressor.

Russia is held back from direct military intervention in Ukraine, Ukrainian experts believe, due to two factors. Firstly, it would destroy any hope of CIS integration. Secondly, "a war with Ukraine could destroy Russia as a state" (Ukrayinsky Tyzhden, August 28-September 3). If Russia successfully took the Crimea, "Moscow would forever lose Ukraine," Horbulin and Badrak asserted (Zerkalo Nedeli, September 12).

Although any Russian invasion into Eastern Ukraine or the Crimea might at first be successful, it would eventually be met by fierce resistance from guerrilla and loyal Ukrainian units. Interestingly, no Ukrainian experts believe that Russian aggression would be prevented by Moscow taking Western responses into consideration; this itself reflects the E.U. and NATO's ineffectual response to the Russian invasion of Georgia.

Anatoliy Grytsenko, the former Ukrainian Defense Minister and the head of the parliamentary committee on defense and national security has advised the military to develop additional spetsnaz units capable of taking conflict deep into enemy territory (Profil, August 20). Horbulin, the director of the National Institute on the Problems of International Security, affiliated to the NRBO, and Badrak, a senior expert at the Kyiv think tank the Center for Research into the Army, Conversion and Disarmament, advised the NRBO to relocate spetsnaz units Special Forces, Security Service (SBU) and interior ministry units to southern and eastern Ukraine. Grytsenko also warned the E.U. and NATO to not continue to ignore the Russian threat, as any conflict in Ukraine might risk damaging the gas pipelines crossing Ukraine. Europe could not stand aside from such a conflict, as it could severely undermine European energy security.

Critical, but diplomatic, responses to Medvedev were given by Yushchenko and Prime Minister Yulia Tymoshenko. Tymoshenko, who is running second in the polls and is likely to face Yanukovych in the second round of the presidential election, has adopted a pragmatic nationalist position that has permitted her to court western and central Ukrainian voters while continuing a dialogue on energy and economic issues with Russia. Yushchenko, in contrast, has moved towards a more nationalistic position that has narrowed his support to only Galicia, giving him just 3 percent in opinion polls -making him the sixth most "popular" candidate.

Horbulin and Badrak concluded that following the 2008 Georgian-Russian war "international law" no longer works in dealing with Russia. Moscow wants to alter "the Ukrainian foreign policy trajectory, split the country and annex portions of its territory and indefinitely extend the basing of the Black Sea Fleet in Sevastopol. Russia seeks a ‘politically loyal, pro-Russian Ukraine'" (Ukrayinsky Tyzhden, August 28-September 3). In the January 2010 elections, Moscow also wants to see the election of a "Kremlin vassal who would lead the country as a Little Russia" (Zerkalo Nedeli, September 12).

Two conclusions can be drawn from this discussion. Firstly, Ukraine is being given an impossible task by western E.U. and NATO members: to pursue good relations with Russia at a time when it seeks to undermine Ukraine's sovereignty and assassinate its pro-Western leaders (Ukrainian investigators reached the conclusion earlier this month that the Russian authorities were behind Yushchenko's 2004 poisoning). Moreover, Ukrainian-Russian relations might deteriorate further in the next eight years as the deadline approaches for Russia to withdraw the Black Sea Fleet from Sevastopol.

The recent adoption of the Russian law on military intervention abroad provides for "the ability for a direct military threat from the Black Sea Fleet" (Zerkalo Nedeli, September 12). Horbulin and Badrak advised the SBU to ensure "control over extremist and radically oriented Ukrainian groups in the south and southeast of the country" (Zerkalo Nedeli, September 12).

Secondly, the West's reputation is at stake in dealing with countries such as Iran and North Korea. Ukraine gave up the third largest nuclear weapons stockpile in 1994-1996 in return for "security assurances" from the five nuclear powers, one of whom -Russia- constitutes its main threat. In 2003, less than a decade after the "Budapest Memorandum," Russia sought to annex the Tuzla Island off the Crimean coast.

As Horbulin and Badrak argued, the nuclear powers are "de facto demonstrating a rejection of their responsibilities" and "those who are not speaking of a repetition of Munich in 1938 today in Europe and Ukraine are only ignoring the facts' (Zerkalo Nedeli, September 12-18). If Tehran interprets Western policy towards Kyiv as weak, then it is less likely to halt its nuclear weapon ambitions.

--Taras Kuzio

Eurasia Daily Monitor

September 18, 2009

Maritime Security Weaknesses in the Black Sea

Russian naval operations in August 2008 highlighted the security deficit in the Black Sea. As a littoral country, Russia misused the territory of another littoral country, Ukraine, as a staging ground for attacking a third littoral country, Georgia, using its Black Sea Fleet based in Ukrainian territory in Sevastopol (warships from Novorossiysk also participated in the operation). The Russian fleet landed thousands of troops on the Abkhaz coast, attacked Georgian coastal guard vessels, as well as shore targets further south in Georgia, and blockaded Poti. In that port, Russian troops blew up Georgian coastal guard cutters at the pier.

The Russian fleet's actions violated Ukraine's neutrality, which Russia otherwise professes to uphold vis-á-vis NATO. The naval operation also breached the 1997 basing agreements, which rule out any involvement in hostilities by the Russian fleet based in Ukraine.

According to Russian media accounts from naval sources in the war's aftermath, the Russian naval group moved slowly from Sevastopol in the direction of Georgia, four or five days before the August 8 assault. Yet, no littoral or non-littoral country or organization reacted at the political level, before or afterward, to Russia's naval operation.

In the war's aftermath, Ukrainian President Viktor Yushchenko issued a decree requiring the Russian Black Sea Fleet command to provide advanced notification to Ukrainian authorities in each case when its ships and personnel exit and re-enter Ukrainian territory. The decree cites international law and the 1997 basing agreements as the basis for this requirement. Ukraine's foreign ministry has repeatedly taken up the issue with its Russian government counterparts. Yet the Russian government and naval command have largely ignored it.

As part of its naval modernization program, Moscow hopes to buy a Mistral-class helicopter carrier from France. Announcing that intention, the Russian Navy's Commander-in-Chief, Admiral Vladimir Vysotskiy, said: "In the conflict in August last year [against Georgia], a ship like that would have allowed the Black Sea Fleet to accomplish its mission in 40 minutes, not 26 hours which is how long it took us [to land the troops ashore]." The navy also hopes to acquire the license to build three or four Mistral-class ships in Russia. Moscow is preparing an international tender for France, the Netherlands, and Spain - states which also build helicopter carriers of this class- to compete for selling the ship and the technology to Russia (Interfax, September 11, 15).

According to Vysotskiy, the negotiations are in progress. Moscow apparently expects these NATO countries to enhance Russia's military capabilities in order to intimidate its neighbors, after the same countries helped block Ukraine's and Georgia's membership action plans with the Alliance.

Moscow has recently introduced adjustments to the command arrangements for its Black Sea Fleet in Ukraine. The fleet shall be subordinated to the Russian North Caucasus Military District (ground forces), headquartered in Rostov-on-the-Don, in the event of "operational missions in the southern and southwestern directions." Prior to this change, the Russian Fleet in Ukraine was subordinated to the naval command at all times. The change is designed to integrate these naval forces with Russia's ground forces for operations in the Black Sea region. By the same token this change erodes the provisions of the 1997 Russia-Ukraine agreements that ensure this fleet's separation from the Russian ground forces and precludes the fleet's involvement in hostilities (Nezavisimaya Gazeta, September 3; Interfax, September 11).

Russia openly questions Ukraine's sovereignty in the Crimea while signaling that it will try to prolong the stationing of its fleet beyond the 2017 deadline. For that deadline to be observed, the fleet would have to begin the process of withdrawal by 2011-2012. However, Moscow is unwilling and international attention is also lacking. Even some leading Ukrainian proponents of the orientation toward NATO believe that the Alliance and the United States lack a strategy for securing Ukraine's independence and territorial integrity, particularly in the case of escalating Russian pressures in the Crimea (Volodymyr Horbulin and Valentyn Badrak, Defense Express [Kyiv], September 11).

The existing arrangements for confidence-building and security in the Black Sea are proving inadequate to these challenges. The naval confidence-building undertaking BlackSeaFor and the Black Sea Economic Cooperation Organization (BSEC) are consensus-based groups, unable even to discuss officially, let alone deal with, hard-security challenges such as those relating to the territorial integrity of littoral countries.

Those groupings and arrangements were not designed to cope with those hard-security challenges; indeed such challenges were not initially anticipated, and went unaddressed after becoming manifest. In terms of naval security, the current situation in the Black Sea amounts to a Russian-Turkish naval condominium, with Turkey probably being the stronger side. The Turkish-led exercise Black Sea Harmony, held periodically with Russia in the southern Black Sea, also has no restraining impact on Russian behavior in the eastern and northern Black Sea.

 

--Vladimir Socor






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