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Thursday, November 19

Government Bets on Weekend Lockdowns to Stop Rising Corona Rates...IMF Chief and Zelenskiy Talk on Phone, Online Review Mission to Start Next Month...Solid European Support for Ukraine Joining EU...Higher Education: a Growth Export for Ukraine
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Although Ukraine is recording record corona infections and deaths, the government believes weekend lockdowns will be enough to stop the nation’s rising infection rate. The nation is recording about 12,500 new infections a day. Without the Saturday-Sunday lockdown, the infection rate would jump by 50% to 20,000 new infections a day; Prime Minister Shmyhal told a government meeting yesterday.

With shopping centers closed last weekend, ‘mobility’ dropped by about 25%, said Viktor Lyashko, the deputy Health Minister. He says a well-enforced lockdown this weekend, could cut ‘mobility’ by 50% from normal levels. Even cutting mobility by 25% can cut transmission by two-thirds, Shmyhal said.

Last weekend, a string of big city mayors defied the lockdown. Whilst National Police who work for the Interior Minister,  shut down and fined 2,400 establishments, many of them in cities boycotting the lockdown call. Yesterday, a Rada bill to stop the weekend lockdown failed to get enough votes. Starting this weekend, PM Shmyhal has asked banks to close many of their branches.

Speaking to Reuters yesterday, Health Minister Maksym Stepanov said that he believes Ukraine can get to the Christmas holidays without a total lockdown. However, he warns: “The winter, in my opinion, will be very severe in terms of morbidity and the number of seriously ill.” Due to better treatment, the death rate for Coronavirus patients in Ukraine has fallen to 1.8%, down from 2.9% in the spring.

IMF Managing Director Kristalina Georgieva tweeted yesterday about Ukraine: “Constructive call with President Zelensky on IMF program implementation, Central Bank independence and anti-corruption efforts. Full agreement on actions needed prior to program review.” Ukrainian officials said the upshot of the call would be an online IMF review of Ukraine’s IMF standby agreement next month and disbursement of a second tranche in the first quarter of 2021.

President Zelenskiy said after the Tuesday night call: “To date, all the structural beacons provided for the revision of the IMF program have been fulfilled.” Zelenskiy assured the head of the IMF that his government is countering moves by the Constitutional Court to abolish anti-corruption agencies designed with Western help since 2015. Zelenskiy tweeted: “Our teams enjoy strong trust & work closely to welcome the IMF mission ASAP.”

Deputy Finance Minister Yuriy Draganchuk told Korrespondent.net that there are no “formal preconditions for not giving us a tranche or sending a mission.” However, he added: “They look at the general situation in the country, which is not entirely positive now. The [Constitutional] Court does not represent our country in the best light and, indeed, may send some negative signal to the IMF. I hope that joint efforts will resolve the constitutional crisis.

Veteran British financial observer Timothy Ash was skeptical, emailing clients: “[I] cannot see IMF disbursements until the new US administration takes office and puts new focus on Ukraine.” Predicting that Ukraine could float 10-year Eurobonds at 7% yields, he said: “I assume the Ministry of Finance will use the phone call with the IMF MD to come to market very soon with a new Eurobond deal – and likely before a new IMF mission hits the runway/zoom button.”

Dollar-denominated bonds accounted for 85% of revenue raised on Tuesday at the Finance Ministry’s weekly auction. A total of $76 million 1.2-year dollar bonds went for 3.77%, up 15 basis points from one week earlier, the Ministry posted on Facebook. Yields also rose slightly for the hryvnia bonds, which netted the equivalent of $13.3 million. The 1-year hryvnia bond was the most popular, going for an average yield of 10.5%. Despite the higher yields, the Ministry raised slightly less than one third the amount of the previous week.

The Finance Ministry is not considering issuing hryvnia government loan bonds to help pay off the $800 million debt owed to solar and wind producers of electricity, Deputy Finance Minister Yuriy Draganchuk told Korespondent.net. “There will definitely not be government bonds,” he says of support for Ukrenergo. “There will be either state banks or international donors.” The American Chamber of Commerce in Ukraine supports a bill in the Rada which would allow issuing of additional government bonds by raising the state budget deficit by $700 million. Since July, the EBRD and the European Investment Bank have discussed participating in a settlement. They have not made public any decision.

University education is a major export for Ukraine. Last year, 80,500 foreign students spent $570 million here for tuition alone, reports the Kyiv Post. Adding food, lodging, airfare, and services, this spending could total $1 billion a year. Indian nationals account for almost one quarter of the students. Other major source countries are: Azerbaijan, China, Egypt, Israel, Morocco, Nigeria, Turkey, Turkmenistan and Uzbekistan.

55% of people polled in France, Germany, Italy and Poland support Ukraine joining the European Union, according to an internet-based survey of 4,000 people polled at the end of September for the New Europe Center. The top obstacle to Ukraine joining the EU is corruption, according to 43% of respondents. This was up from 33% five years ago. The portion of respondents who associate Ukraine with war is 12%, down from 49% in 2015. About 38% of interviewees support Ukraine joining NATO.

Due to the Constitutional Court’s October 27 decision that filing fraudulent asset declarations should be punished, the Ukraine’s new High Anti-Corruption Court said Tuesday that it was forced throw out its own conviction of a judge last year. Anti-corruption activists predict that at least four other corruption rulings will be thrown own. Over the last 10 days, the Anti-Corruption Court dropped investigations against two more judges and against the mayor of Odesa, Gennadiy Trukhanov.

Concorde Capital’s Zenon Zawada writes: “This is yet another negative consequence of the scandalous October 27 ruling, which has been quite destructive, not only for Ukraine’s anti-corruption infrastructure but also its image among its Western sponsors… many critical convictions – intended a signal to deter others – will be lost forever.”

The Rada lacks the political will to approve bills that world restore the electronic declarations or deal with the Constitutional Court, a body determined to dismantle much of the Europe-oriented institutions adopted since the 2014 Revolution of Dignity, the parliament’s deputy speaker Olena Kondratiuk told ICTV ‘Freedom of Speech’ program. “Unfortunately, now there is no political will in the parliament to pass any bill concerning both the return to electronic declaration […] and the reconstruction of the Constitutional Court,” she said, predicting that any action will be deferred until Dec. 1.

“Now you’ve got to put people in jail,” Joe Biden recalls in his 2017 memoir saying to Prime Minister Arseniy Yatsenyuk. Then Vice President Biden made the exhortation in a speech to the US-Ukraine Business Forum on July 13, 2015.

Editor’s Note:  A couple of years ago, Krzysztof Siedlecki, the gregarious Polish president of the European Business Association, liked to tell Kyiv audiences that Ukraine’s war on corruption was: ‘Like watching sport fishing on TV.’Pause. ‘Catch and release… Catch and release….’ Har har. Since then, the EBA presidency has rotated. But Ukraine’s sport fishing traditions continue unchanged. With Best Regards, Jim Brooke

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Wednesday, November 18

Western Reformers Purged from Defense Agencies...Hopes Fade for Foreign JVs...Nova Poshta Hires 2,500 for Christmas and Beyond...Road Builders Hit 93% of Target...Open Skies Start Early Next Year...Western Watchers See Ukraine At a Crossroads
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

With the third departure in six weeks, the purge of pro-Western reformers from Ukraine’s defense industry continued with Monday’s abrupt firing of Volodomyr Usov, the head of Ukraine’s Space Agency. On Nov. 4, Oleksandr Los resigned as CEO of Antonov, ending four months on the job. On Oct. 6, Aivaras Abromavičius resigned as director general Ukroboronprom, the defense production conglomerate. All three men advocated ‘corporatization,’ or the creation of smaller, profitable companies to save an industry starved by lack of budget funds.

By creating transparently run companies, the directors hoped to open doors to join ventures with foreign, NATO-standard companies wary of getting tarred by corrupt practices at state defense manufacturers. Usov was fired four days after he signed the Artemis Accords, a US-led alliance of Western space programs which has the goal of landing “the first woman and the next man” on the Moon by 2024. “Congratulations to Ukraine!” the US Embassy tweeted apparently unaware the Usov was about to be fired. “On Nov 12, it became the 9th country to sign the Artemis Accords.” Russia harshly criticizes the program.

Behind the firings is Oleh Uruskiy, a Soviet-trained, three-decade veteran of Ukraine’s defense industry. Appointed First Deputy Prime Minister last summer, Uruskiy is creating a ‘mega-ministry’– the Ministry for Strategic Industries. This ministry is to include Antonov, the space industries and the two rocketry giants, Pivdenne design bureau and Pidvenmash factory.

Critics say modernization is stopping and new structures are opaque. “With the choice of this manager, Volodomyr Zelenskiy really made a mistake,” Ivan Sergienko writes in Lenta.ua. “Uruskiy is not only incapable of dealing with a rocket construction project, but also, in principle, of carrying out elementary things to launch the work of the ministry… of the declared 330 employees of the ministry, at the moment there are only seven people working – the minister, his deputies and advisers…The ministry is needed to block real reforms in the defense industry.”

The Chinese investors in Motor Sich have hired three well known international law firms to pursue their claim against Ukraine for $3.5 billion in compensation for being blocked from taking over the aircraft engine manufacture. As reported by their Ukrainian partner, DCH, the firms are: WilmerHale, DLA Piper and Bird & Bird. Arzinger will act as an advisor on Ukrainian law in international arbitration. DLA Piper was in the headlines last week when it was announced that one of their Washington partners, Doug Emhoff, will leave the firm next month to avoid conflicts of interest. He is the husband of Kamala Harris, who is to be sworn in as Vice President on Jan. 20.

With e-commerce booming, Nova Poshta is hiring 2,500 drivers, couriers and sorters. Although the hiring is for the Christmas rush, Alexander Bulba, CEO of the delivery company, says: “After the high season, new employees can stay on a permanent basis.” So far this year, Nova Poshta has opened 1,300 new offices in Ukraine, increasing its network by 22%, to 7,145.

With the first snow falling yesterday, Ukravtodor announced that it reached 93% of its target of rebuilding 4,200 km of roads during the 2020 highway construction season. Next year, the state highways agency plans to oversee the repair or rebuilding of 6,800 km of roads, almost 75% more than the amount completed this year. Ukravtodor CEO Oleksandr Kubrakov reports three main sources of money for this year’s roadbuilding: $1 billion from the Road Fund; almost $1 billion from the Stockholm arbitration with Gazprom; and $540 million from international organizations, such as the World Bank and the European Investment Bank.

Roads were paved in all 24 regions this year. Six were leaders: Kharkiv — 262 km; Zakarpattia – 248 km; Zaporizhia — 220 km; Sumy -197 km; Khmelnytskyi –194 km; Cherkasy 163 km; and Lviv 155 km. Next year, Ukravtodor plans to rebuild 150 bridges. Two big ticket projects start next year: Kyiv’s $3 billion ring road; and construction of a new $430 million bridge over the Dnipro, in Kremenchuk.

The number of foreigners entering Ukraine has plunged by 75% so far this year. Through September, 2.7 million foreigners visited Ukraine, down from 10.7 million during the first nine months of last year, according to the State Border Guard Service. Spending by foreign tourists is estimated to finish this year at 80% below last year’s level of $1.6 billion, forecasts the National Bank of Ukraine. Spending by Ukrainians for foreign travel is down by 55% yoy, to $3.3 billion through September.

The EU plans to sign an ‘open skies’ agreement with Ukraine in the first quarter of next year,  Katarína Mathernová, the European Commission’s deputy director-general for Neighborhood Policy and Enlargement Negotiations. First initialed in 2013, the deal was held up over the Britain-Spain standoff over Gibraltar airport. After Britain leaves the EU at the end of next month, the agreement can be signed.

Notable and Quotable:

“It’s not a coincidence the Constitutional Court decided to demolish anti-corruption reform right in the middle of an American election,” Daria Kaleniuk, executive director of the Anti-Corruption Action Center, tells Dan Peleschuk for a Slate article, “Don’t Forget About Ukraine.” The goal, she adds, is to “make Ukraine truly look like a failed state.”

“Oligarchs are further coopting Rada members, judges, and others to undermine the President’s agenda,” Kristina A. Kvien, US Embassy Chargé d’Affaires in Kyiv, said at the Ukraine Reform Conference, as reported by UNIAN. “Their primary goal is their own personal enrichment achieved by any means possible, including bribery, coercion, and even joining with outside forces that wish to see Ukraine’s Euro-Atlantic integration fail ultimately.”

“As US vice president, Biden was at the forefront of an anti-corruption reform agenda that aimed to facilitate Ukraine’s integration into the Euro-Atlantic community,” Peter Dickinson writes in an Atlantic Council blog, “What can Ukraine expect from a Biden presidency?.”  “Some hope Biden will now revive these efforts and help undermine an attempted counter-revolution that is currently gaining momentum in Kyiv with support from Ukraine’s pro-Russian political forces and the country’s oligarchs.”

Editor’s Note:  Half a century ago, US Attorney General John N. Mitchell told reporters: “You will be better advised to watch what we do, not what we say.” That advice backfired on Mitchell. He ended up spending 19 months in jail for Watergate crimes, partly unraveled by reporters from The Washington Post. But Mitchell’s advice stands the test of time. Here in Ukraine, President Zelenskiy resolutely faces West, while marching backwards — to the East. Starting with the March 3 Cabinet purge, the President has methodically removed most prominent pro-Western reformers. Last Thursday, the young IT entrepreneur running Ukraine’s Space Agency signed the moon shot alliance of Western space agencies, a project roundly criticized by Russia. On Monday, the space director is fired. Can anyone connect the dots? With Best Regards, Jim Brooke