Friday, February 12, 2016

Dear Friends: Ukraine’s Grace Period For Tackling Cronyism May Have Run Out

KIEV, Ukraine -- In Tsarskoe Selo (“Tsar’s Village”), a smart district in Kiev, Ukraine’s president, Petro Poroshenko, owns a swathe of desirable land.

Arseniy Yatsenyuk, being uncomfortably hoisted during a brawl in parliament.

Across the street sits a sprawling compound belonging to Ihor Kononenko, the president’s friend and deputy head of his parliamentary faction.

The two men met during their Soviet army service.

After Ukraine gained independence they rose together in business and politics.

Last week Ukraine’s economy minister, Aivaras Abromavicius, resigned, accusing Kononenko of obstructing reform.

Abromavicius said he refused to cover for officials who, “very much like the old government, are trying to exercise control over the flow of public funds”.

Ukraine’s Maidan revolution was supposed to roll back corruption and cronyism.

Abromavicius, a Lithuanian-born investment banker, was one of several foreigners invited into government to change the old ways.

He ran up against vested interests in the circles of both the president and the prime minister, Arseniy Yatsenyuk.

Abromavicius is the second economy minister since the revolution to quit for similar reasons, and the fifth minister to resign from the current government.

Western ambassadors lamented his departure.

In unusually blunt language, Christine Lagarde, the head of the International Monetary Fund (IMF), threatened an end to Ukraine’s $18 billion bail-out programme “without a substantial new effort to invigorate governance reforms and fight corruption”.

Following Ms Lagarde’s comments, Poroshenko pledged to do more.

Yuri Lutsenko, the head of Poroshenko’s parliamentary bloc, says the country now faces a “full-blown political crisis”.

A cabinet shake-up is inevitable.

A collapse of the ruling coalition and early parliamentary elections look increasingly likely.

Ukraine’s Western allies argue that elections would be destabilising and open the door to radicals and populists.

Yet an exasperated public may demand them.

At stake is Ukraine’s chance of moving past its history of post-Soviet misrule.

Abromavicius’s problems mounted last year after his ministry was given control over Naftogaz, the state gas firm, and the power to appoint chief executives at the 60 top state-owned enterprises (SOEs).

Ukraine’s SOEs exemplify the crooked relationship between business and government: interest groups in parliament install “loyal” managers who funnel cash to oligarchs and political parties.

Abromavicius says he was pressured to let these appointments go through.

His security detail was abruptly cut off for several weeks.

The “tipping point” came when Kononenko demanded that he appoint a crony as his deputy minister. (Kononenko declined to comment.)

Figures like Kononenko abound in Ukraine’s parliament; locals call them “grey cardinals” or lyubi druzi (“dear friends”).

The lines between friends, business partners, relatives and political allies are blurred, says  Abromavicius, and reforms have stalled.

“It’s not a technical problem, it’s a political problem,” says one foreign adviser to the government. 

Dissatisfaction with the country’s direction is rising and trust in the authorities is falling.

Not a single government institution has a positive trust rating, according to the Kiev International Institute of Sociology.

Investors are worried, says Tomas Fiala, the head of Dragon Capital, Ukraine’s largest investment bank.

Bond yields have spiked in the past week.

On February 16th Yatsenyuk is set to present his yearly progress report to parliament.

A vote of no confidence may follow.

Political stakeholders have been scrambling to prepare.

Poroshenko summoned the ambassadors of the G7 nations for a meeting, hoping to regain their trust.

Yatsenyuk gathered his cabinet to push for a last-ditch attempt at unity.

Young reform-minded deputies are holding cross-party strategy sessions.

The central bank chief summoned the heads of the top 40 banks for a dour meeting earlier this week.

Western diplomats have been urging calm, concerned that instability could derail both Ukraine’s reforms and the Minsk peace process.

Sensing weakness in Kiev, the Kremlin may be rocking the boat: last week saw an uptick in ceasefire violations and snap drills by the Russian army along the border with Ukraine.

The crucial question is the fate of Yatsenyuk, who is reviled but controls a large faction in parliament.

Although he and Poroshenko are partners in public, insiders say the president wants the prime minister out.

About 70% of Ukrainians also want Yatsenyuk gone, but there is no consensus on who should take his place.

The American-born finance minister, Natalie Yaresko, is favoured by some reformers, including  Abromavicius, yet she has expressed no interest.

Two old hands, Yulia Tymoshenko, a former prime minister, and Mikheil Saakashvili, the ex-president of Georgia who is now governor of the Odessa region, do have designs on Yatsenyuk’s seat.

There is a circular quality to Ukraine’s reforms.

Poroshenko was among the lyubi druzi of a previous president, Viktor Yushschenko, after the 2004 Orange Revolution.

This time, many had hoped that real work on reforms would begin after local elections last autumn.

The opposite has proved true.

Yatsenyuk has focused on saving his job, despite approval ratings in single digits.

Poroshenko, facing a backlash over his support for an incompetent prosecutor general, has seen his credibility steadily eroded.

For some activists his failure to demand Kononenko’s resignation is the last straw.

“R.I.P. Poroshenko,” says Daria Kaleniuk, the head of Ukraine’s Anti-Corruption Action Centre.

“He’s digging a political grave for himself and for the country.”

Source: The Economist Europe

OSCE Official Warns Of Worsening Rights Situation In Eastern Ukraine

WASHINGTON, DC -- A top OSCE official has warned that the human rights situation in eastern Ukraine is worsening and the transatlantic security organization is still barred from entering the Russian-annexed Crimean Peninsula to investigate alleged abuses there.

Michael Georg Link

Michael Georg Link, of the Organization for Security and Cooperation in Europe, also warned on February 11 that a lack of regional cooperation was hampering Europe’s response to the refugees flooding the continent from the conflicts in the Middle East.

In eastern Ukraine, “the human rights situation in these certain areas.... They are increasingly affected.

The longer the war goes, the longer the conflict goes, the more affected they are certainly,” Link told the U.S. Helsinki Commission, a government agency that monitors international adherence to the 1975 Helsinki Accords.

Those accords were a landmark human rights compact signed by 35 countries at the height of the Cold War.

They also gave birth to the Vienna-based Organization for Security and Cooperation in Europe, which comprises 57 European, North American, and Central Asian countries.

Link, who heads the OSCE’s Office for Democratic Institutions and Human Rights, said the group was “very, very concerned” about the plight of the Crimean Tatar population on Crimea, which was annexed by Russia in 2014.

With signs that an anti-immigrant backlash is building in Europe amid the flood of refugees arriving from Syria, Iraq, and elsewhere, Link echoed earlier calls from European leaders for a coordinated approach to the problems.

“The lack of regional cooperation among a problem. This refugee crisis cannot be solved by one side alone, there must be a joint action,” he said.

He also warned the commission about increasing dangers to journalists among its member states, and he focused specifically on Azerbaijan, where Khadija Ismayilova, an investigative reporter and RFE/RL contributor, has been jailed.

“Journalists are key to early warning, by the way. A free media landscape, a free media press, is part of the normal early warning process that should happen in a civil society,” Link said.

“So if you shut down...independent media, if you don’t have a pluralistic approach in media, as diverse a approach as possible, then a society can go very, very wrong.”

Source: Radio Free Europe

U.S. Official Blames Russia For Power Grid Attack In Ukraine

WASHINGTON, DC -- Russia was behind a December cyber attack on Ukraine's power grid that caused widespread power outages, a senior Obama administration official said Thursday.

Elizabeth Sherwood-Randall, deputy Energy Secretary, made the comments to a gathering of electric power grid industry executives, according to an U.S. official familiar with her presentation.

Her comments contrast with the view of other top U.S. intelligence and security officials who say the evidence isn't conclusive enough and that the U.S. government isn't ready to attribute the cyber attack to the Russian government.

Other officials who spoke at the Thursday briefing stopped short of Sherwood-Randall's definitive assessment.

A spokeswoman for Sherwood-Randall said she couldn't provide details of the presentation or discuss the highly sensitive information provided.

The spokeswoman declined further comment.

U.S. intelligence and national security officials have closely followed the investigation of the Ukrainian grid attack, because they say it represents a first-of-its-kind confirmed cyber-warfare attack affecting civilians.

The attack also raised major concerns because the U.S. power grid and other major industrial facilities have many of the same vulnerabilities that were exploited in the Ukraine attack, U.S. officials say.

The briefing Thursday was done to provide the power grid industry with the findings of a U.S. team that visited Ukraine to investigate the grid attack that cut power to 103 cities and towns.

Sherwood Randall's presentation included video that captured parts of the cyber attack as it happened on computer screens monitoring the Ukrainian grid, the official said.

The U.S. team that conducted the Ukraine investigation included experts from the U.S. departments of Energy, State, Homeland Security and the FBI.

They found for the first time conclusive evidence that a cyber attack caused the blackout, U.S. officials briefed on the probe said.

The attack involved a team of sophisticated hackers who attacked six different power companies at the same time, according to the U.S. officials.

Destructive malware wrecked computers and wiped out sensitive control systems for parts of the Ukraine power grid, making it more difficult for technicians to restore power.

Ukrainian officials have publicly blamed Russia for the attack on the power grid.

In the weeks after the attack, officials said suspicion centered on a version of the malware known as BlackEnergy, which has origins in Russia and has been widespread in industrial systems.

But the U.S. government and private sector investigators don't believe BlackEnergy was the malware that caused the damage.

Instead, they cite other more destructive malicious software.

Source: CNN Politics

Sunday, February 07, 2016

In Ukraine, That Flower Crown Means More Than You Think

KIEV, Ukraine -- Since the 2014 revolution, there has been a surge in national pride in Ukraine—even, or perhaps especially, when it comes to the fashion front.

The "Vinok" on a beautiful Kiev model.

This wave of supporting homegrown designers and local production has contributed to a revival of Ukrainian folk staples, most noticeably the much-blogged-about vyshyvanka and zhupan, courtesy of contemporary Kiev-based designers like Vita Kin and Yuliya Mahdych.

And a new addition to that list?

The vinok, a traditional Ukrainian flower crown.

These days, vinoks are sold almost everywhere in Kiev, even the gray, dilapidated Soviet spaceship-type bazaars on the outskirts of the city’s main center, where they sit alongside pale pigs heads, mounds of beef, fresh fish, fake Adidas tracksuits, neon puffer coats, and rows of pantyhose.

Even at the metro stations, kiosks sell vinoks made with fake daffodils, roses, and yellow and red ribbons.

Recently, I counted the number of my Ukrainian friends wearing petal-pumped vinoks in their Facebook pictures: It was more than you might think.

From afar, the flower-woven headpieces might bring to mind the bohemian flair beloved by buzzed concertgoers at Coachella; or Jean Shrimpton in a 1965 issue of Vogue; or even Lana Del Rey, who probably had both in mind when she posed with a band of flowers on the cover of her 2012 EP.

But here, in Ukraine, the vinok isn’t merely a pretty accessory:

The meaning of the wreaths traces back to Ukraine’s early history, when they were associated with virginity, marriage, and womanhood, and have continued to be, up until the early 20th century.

“In both Ukraine and Russia, both spouses-to-be would wear crowns during the wedding ceremony, apparently continuing an ancient tradition from Byzantium,” says professor Alexander Mihailovic, who teaches at Bennington College and specializes in Slavic Literature.

“Ukraine has preserved the original Greek and Byzantine tradition of wedding head wreaths.

However, in Ukraine there is yet another tradition, of young unmarried women wearing the wreaths during the spring, which, I suspect, explains why female dancers in Ukrainian folk dances wear floral crowns, whereas their Russian counterparts generally do not.

The latter practice in Ukraine of wearing the wreath is meant to signal the purity of a young woman before marriage.”

So, not just an accessory:

If an unmarried woman “lost her vinok,” it implied that she was also no longer “pure.”

Ancient history aside, the vinok is still associated with marriage, though its literal matrimonial meaning has transformed into more of a decorative piece.

This past summer, model Nadiia Shapoval wore a modern, ethereal vinok with white ribbons, dotted with orange flowers, at her wedding.

“After the revolution, more people wore them to weddings. Now even ordinary people wear vyshyvanka at weddings and vinok as well,” she says.

“As for me, wearing these things was important, and I wore it because I wanted to marry in national dress. The vinok is a part of that.”

Even for people who do not work in fashion, the vinok has become a marriage tradition.

Yulia Trukhyan, an HR manager in Kiev, grew up in a Russian family in Crimea and is now married to a Ukrainian man:

She wore a vinok at her bachelorette party.

“It makes me feel closer to my husband,” she told me, pointing to two traditional vinoks hanging by her bedside.

“I would not have worn one before the revolution—not because I didn’t feel close to Ukraine, I just had never thought of wearing one.”

And it seems that more and more people are sharing that same thought:

Spotting the vinok in everyday life has become increasingly easy.

Ulyana Yavna, who owns a store of vintage and antique traditional Ukrainian clothing in the city of Lviv, has noticed a real uptick in purchases since the political strife.

“After the Ukrainian revolution, all Ukrainian symbols have become really popular,” says Yavna.

“The vinok is really simple to wear and buy, and it’s not expensive. People here in Lviv will wear a small vinok in daily life.”

Additionally, the growing popularity of the vinok has contributed to the increase of vinok specialists, as well as the demand of local florists, like A Note on Flowers, to create the garlands for customers.

Pared-back, casual versions of the vinok have popped up as well:

It is not uncommon to see women in Kiev wearing a headband embellished with fake flowers during the summer.

The subject of the vinok and national pride is an obvious connection, but there are political connotations that come along with representing the homeland’s florid past:

The Motherland Monument—a 203-foot-tall statue that was constructed during Soviet times and remains a potent symbol of WWII—was decorated with a massive vinok made of red poppies for the May 8 holiday known as Victory Day.

Abroad, the influence of the vinok has also made waves in a sartorial sense beyond festival girls and summertime fetes, like on the Comme des Garçons Homme Plus men’s Spring 2016 runway, where models wore heaping botanical crowns in a show titled “Armour of Peace.”

In fact, peace may indeed be the most prevalent reason for wearing the flower crown in today’s world.

“I think we are coming back to floral themes because fashion is starting to react on wars that we are having around the globe,” says Shapoval.

“We need some tenderness.”

It seems like the vinok is here to stay—and hopefully even grow.

Source: Vogue

Friday, February 05, 2016

Ukraine Entering `Serious Political Crisis' After Minister Quits

KIEV, Ukraine -- Ukraine’s leaders looked to shore up the ruling coalition after the speaker of parliament warned the nation is entering a “serious political crisis” following the resignation of its reform-minded economy minister, who accused presidential party members of corruption.

Aivaras Abromavicius

Prime Minister Arseniy Yatsenyuk at an emergency government meeting on Thursday said the cabinet remains united and committed to overhauling the economy.

Four ministers who earlier submitted resignations said they were ready to return for the sake of the reform program.

Former Economy Minister Aivaras Abromavicius didn’t participate in the meeting and won’t change his mind after having quit Wednesday, his press secretary Oleg Shimansky said.

“This crisis must be resolved by political parties’ representatives along with the president,” Volodymyr Hroisman told reporters earlier Thursday in the capital, Kiev.

“We must update the coalition agreement as a clear plan to execute. We need to reshuffle the government for those tasks. We must end the squabbling and let those who want to conduct reform work and bring results for society.”

Abromavicius in his resignation speech said he wouldn’t be a “puppet” for officials he accuses of blocking overhauls of the ex-Soviet republic’s economy and institutions.

President Petro Poroshenko said last night that Abromavicius, a Lithuanian-born former fund manager, should stay on and that his allegations should be investigated.

His resignation still requires approval by lawmakers.

Ukraine’s government, which swept to power in 2014 after pro-European street protests opposing years of corruption, has seen its ratings plummet over delays in reforms.

The U.S., which has made billions of dollars in financial aid contingent on progress to overhaul the economy, expressed its disappointment on Wednesday at Abromavicius’s exit.

His resignation also widened cracks in the ruling coalition, which is still dealing with the war in Ukraine’s east. Poroshenko has promised changes in some cabinet positions.

"The government isn’t going to tolerate political pressure from partners in the coalition or from any other political force," Yatsenyuk said at the cabinet meeting.

The hryvnia which has lost 7.1 percent this year, was 0.4 percent weaker at 25.85 to the dollar at 6:50 p.m. in Kiev.

‘Urgent Reboot’ 

Poroshenko on Thursday met ambassadors from Group of Seven countries and the European Union as well as Yatsenyuk and Hroisman to discuss the pace of reforms and the situation with the cabinet.

“The government needs an urgent reboot,” Poroshenko said on his website after the meeting, urging reform-minded ministers to stay.

The ambassadors called for unity among Ukrainian authorities, according to the statement.

“Poroshenko will likely seek to use the cabinet reshuffle to calm the situation and seek candidates with a pro-reform image for some key cabinet positions,” said Otilia Dhand, a senior vice president at the Teneo Intelligence consultancy in Brussels.

“However, the permanent sidelining of background figures accused of corruption in close circles of both the president and the prime minister appears unlikely. Without a change in the way power is exercised in the existing political system, reforms will likely continue to fall short of expectations.”

Fighting Corruption 

Ukraine’s efforts to stamp out corruption brought scant progress last year, according to Transparency International, which said in January that civil society, journalists and whistle-blowers were more effective than government officials in combating graft.

The nation of 43 million people ranked 130th of 168 countries in the Berlin-based watchdog’s Corruption Perceptions Index, level with Iran and Cameroon.

The results of Ukraine’s anti-graft endeavors -- key to the continued flow of financial aid, including a $17.5 billion loan from the International Monetary Fund, will be assessed by lawmakers during the week of Feb. 15, when Yatsenyuk is scheduled to report to parliament on his cabinet’s performance.

The IMF expressed concern over Abromavicius’s resignation. Christine Lagarde, the Washington-based lender’s managing director, praised the ex-minister for his work in overhauling the economy and attracting investment.

She also urged the government to step its anti-corruption efforts.

“We’ve known all along that in relation to corruption, a lot of work needs to be done, and it has to be implemented, enforced rigorously, because the authorities are accountable not only to the Ukrainian people, but also to the international community," Lagarde said Thursday in Washington.

Source: Bloomberg

Ukraine: What Happens In The East Starts In Kiev

KIEV, Ukraine -- Ukraine will likely undergo major political changes in 2016, during which the government will potentially replace Prime Minister Arseniy Yatsenyuk.

Ukrainian Prime Minister Arseniy Yatsenyuk delivers a speech in Kiev on Dec. 29, 2015.

To avoid holding early parliamentary elections, Ukrainian President Petro Poroshenko will attempt to back Yatsenyuk, but smaller parties within the ruling coalition will seek the premier's ouster.

Regardless of the prime minister's fate, a substantial Cabinet reshuffle is all but inevitable.

These political disruptions could impede negotiations between Russia and the West over the conflict in eastern Ukraine.


The conflict in eastern Ukraine may be simmering, but political infighting in Kiev is heating up.

On Jan. 31, the Self Reliance Party of Ukraine's ruling coalition called for a no-confidence vote against Prime Minister Arseniy Yatsenyuk in the Ukrainian parliament, threatening to leave the coalition if the vote was not held.

The same day, parliament Chairman Volodymyr Groysman announced that the legislature would consider a report on the work of the Cabinet from Feb. 16 to Feb. 19, which could precede a no-confidence vote.

But whether the prime minister retains his position is a moot point.

Kiev will need to make changes in its government to retain any semblance of stability, and the upheaval will complicate the country's position in the broader competition between Russia and the West.

After the Euromaidan uprising in February 2014, Yatsenyuk and President Petro Poroshenko emerged from the chaos as Ukraine's primary political leaders with the strongest mandate to lead the country.

Their respective parties won the most seats in the October 2014 parliamentary elections, with the Petro Poroshenko Bloc winning 132 seats and Yatsenyuk's People's Front gaining 82 seats in the 450-seat parliament.

They subsequently formed a broad-based coalition of pro-West parties that included the Self Reliance, Radical and Fatherland parties to secure a solid 288-seat majority.

However, since then the war in eastern Ukraine, a major economic contraction and painful austerity measures have led many in the public and in the government to become dissatisfied with Kiev.

The slow pace and ineffectiveness of reforms have instigated periodic protests and have diminished the government's popularity.

Consequently, smaller parties in the ruling coalition have begun to distance themselves from the embattled prime minister.

In September 2015, the Radical Party quit the coalition over controversial constitutional amendments related to the decentralization of the Ukrainian state, bringing the coalition's majority down to 266 seats.

The Self Reliance and Fatherland parties recently indicated that they might follow the Radical Party in leaving the ruling coalition as well.

And in October 2015, Yatsenyuk's People's Front did not even participate in local elections because polls indicated that the party had less than 5 percent of the vote — a dramatic decline since its strong performance in parliamentary elections a year earlier.

Sensing the need for change, Yuri Lutsenko, the leader of the Petro Poroshenko Bloc in parliament, suggested on Jan. 31 that the Ukrainian Cabinet be completely overhauled.

However, Lutsenko advocated that Yatsenyuk stay on as prime minister, arguing that his resignation could trigger early elections and would require precious financial and political resources at an already sensitive and difficult time.

It is in Poroshenko's interest to keep Yatsenyuk as prime minister despite his slumping popularity, since there is no credible alternative that would preserve the coalition.

The Ukrainian government will have to make changes to survive, regardless.

The question is whether Yatsenyuk will be able to weather those changes.

Of course, one factor favoring Yatsenyuk is that the United States, a major supporter of the pro-West government, would rather the premier stay in power.

Washington views Poroshenko and Yatsenyuk as the most effective team and those with the best chance of stabilizing Ukraine under the current circumstances.

Both are bulwarks against Russian influence in the country, and both represent Ukraine's best hope for implementing reforms to secure financial assistance from institutions such as the International Monetary Fund.

In a show of good will, U.S. Vice President Joe Biden even visited Kiev in December 2015 to bolster support for the Ukrainian government, though he also warned against disunity and growing corruption.

The amount of political infighting that ultimately occurs will have domestic consequences, of course, but it will also influence Ukraine's relationship and negotiations with Russia.

Any early elections could derail the Minsk peace talks, which have recently seen some positive, albeit tenuous, progress.

Diplomatic breakdowns, in turn, could cause fighting to flare up on the front lines and could delay the security components of the Minsk protocols.

So while eastern Ukraine is a key arena in the wider standoff between Russia and the West, politics in Kiev will increasingly shape the conflict throughout 2016.

Source: Stratfor Global Intelligence

Ukraine Launches First Military UAV To Combat Insurgents

WARSAW, Poland -- The Ukrainian state-owned defense company Ukroboronprom has built the country’s first military unmanned aerial vehicle (UAV) to bolster Ukraine’s combat against Russia-backed insurgents in the country’s east.

The Ukroboronprom booth is seen at the International Defence Exhibition and Con.

The first batch of three drones was supplied to the Ukrainian Armed Forces, Ukrobonoprom said in a statement.

The BpAK-MP-1 UAV was built by the firm's subsidiary Meridian in cooperation with a research team from the Kiev Technical University.

"The path from the design phase to production was just one year," the statement said.

Yuriy Paschenko, the deputy director general of Ukroboronprom, said that the tactical version of the new drone, which will be fitted with combat capabilities, will made in late 2016 and supplied to the Ukrainian Armed Forces in the first quarter of 2017. 

The amount of the project was not disclosed.

Ukroboronprom is headquartered in Kiev, Ukraine.

The state-owned group consists of nearly 130 companies which are specialized in manufacturing and export sales of aircraft, missiles, armored vehicles, ships, munitions, radio communication and other types of arms and military equipment.

The Ukrainian group was set up in 2010 with the aim of consolidating the country’s fragmented defense industry.

Source: Defense News