In Feature Articles, Ukraine

News compilation by New Cold, Feb 5, 2016

Lithuanian investment banker and Minister of Economy of Ukraine, Aivaras Abromavičius, pictured in Dec 2014 (Reuters)

Lithuanian investment banker and Minister of Economy of Ukraine, Aivaras Abromavičius, pictured in Dec 2014 (Reuters)

‘Neither I nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for those who, very much like the ‘old’ government, are trying to exercise control over the flow of public funds.’

Abromavicius’ exit could derail plans to privatize around 100 state-owned companies, which were a plank of a reform program to turn around an economy which shrank by more than a tenth last year. – Reuters

Three news reports and related reading are enclosed.

Economic minister’s resignation plunges Ukraine into new crisis

By Alec Luhn, The Guardian, Thursday, Feb 4, 2016

Ukraine has been thrust into a new political crisis after the economic minister and his team tendered their resignations complaining of ingrained corruption, which has replaced the simmering separatist conflict as the country’s main obstacle to reform. The economic minister, Aivaras Abromavicius, resigned on Wednesday, and was followed on Thursday by his first deputy, Yulia Kovaliv, and the rest of his team. Two deputy ministers and Ukraine’s trade representative have also resigned.

The parliament has reportedly begun debating whether to accept the resignations. Parliamentary speaker Volodymyr Groysman on Thursday warned that Ukraine was “entering a serious political crisis”, calling for the government’s coalition agreement to be rewritten with a new plan for economic growth and the reform of the judicial and electoral systems.

A former fund manager born in Lithuania, Abromavicius was one of a group of reform-minded foreign officials hired for their international experience and lack of local corruption networks after a pro-western government took power in 2014.

His resignation letter on Wednesday marked a major blow to the president, Petro Poroshenko, and the coalition government, who have come under increasing fire for the slow pace of reforms [sic]. The International Monetary Fund has been holding up a $1.7bn bailout to demand harsh cuts to the pension system and a stronger fight against corruption.

Abromavicius said in the letter that corrupt officials had blocked systematic reform and were attempting to gain influence over state enterprises such as natural gas company NAK Naftogaz, which Abromavicius’s ministry began to manage in December. “Neither I nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for those who, very much like the ‘old’ government, are trying to exercise control over the flow of public funds,” he said.

In particular, Abromavicius accused MP Ihor Kononenko, who is deputy head of Poroshenko’s faction and has often been described as the president’s “grey cardinal”, of attempting to install cronies in the management of several state companies and a deputy economic minister in charge of Naftogaz.

Kononenko called Abromavicius’s allegations “an attempt to blame lawmakers from our party for a failure to solve issues”, news agency Interfax-Ukraine reported.

Poroshenko looked to be in full damage-control mode on Wednesday and Thursday, meeting with Abromavicius and then ambassadors from the G7 to discuss the government’s plans. Promising an investigation, the president said on Facebook he had asked Abromavicius to stay and that the minister “went to think”. Ukraine’s anti-corruption bureau later said it had opened a criminal investigation into Abromavicius’s complaints.

A sign of increased infighting in Kiev, the resignation letter will likely alarm foreign investors as well as the EU and US. On Wednesday, Ukraine’s Eurobonds slumped on the back of the news. Ten western ambassadors including those of France, Germany, the UK and the US have spoken out in support of Abromavicius in a statement.

Kiev-based analyst Volodymyr Fesenko said although the scandal would harm Ukraine’s image and was unlikely to result in the dismissal of implicated officials, it had forced the president to support his minister against business interests. He said the new government that many expected to be formed in the coming months would need to include more reformers like Abromavicius.

“This scandal showed that Ukraine still has a big problem with the influence of big business on the economy and government,” Fesenko said. “Unlike many countries in Europe, we have a very close connection between big business and government, they’re like Siamese twins.”
REad also:

An estimated 2.7 million people have fled their homes to escape conflict with pro-Russian separatists [sic]. Traffickers prey on them, with police intercepting dozens of displaced people in the hands of traffickers en route to Germany, Russia, Belarus, Poland and Israel.

The inflated currency is pushing millions of people into destitution. Thousands are trying to find work abroad – by whatever means possible. According to a 2015 survey commissioned by the IOM, 41% of Ukrainians working abroad are doing so illegally – compared with 28% in 2011. That puts them at the mercy of criminals.

Ukraine economy minister quits in blow to reform hopes

By Natalia Zinets, Reuters, Wednesday, Feb 3, 2016

KYIV – Ukrainian Economy Minister Aivaras Abromavicius quit on Wednesday saying his ministry was being hijacked by corrupt vested interests, dealing another blow to Western hopes that the country can reform itself.

In his statement, Abromavicius singled out a close ally of President Petro Poroshenko, accusing him of blocking the ministry’s work and pressing for powerful jobs for placement, with the support of the president’s office. Poroshenko later responded by urging Abromavicius to stay, adding that the anti-corruption bureau would investigate the allegations.

Abromavicius’ exit could derail plans to privatize around 100 state-owned companies, which were a plank of a reform program to turn around an economy which shrank by more than a tenth last year.

There has been mounting public anger that the new, pro-Western government that came to power after a pro-Russian president was toppled by protests in 2014 has not delivered on promises to stamp out corruption. The government’s approval ratings have fallen sharply.

Ukraine’s international backers, including the United States and the European Union, have also become increasingly impatient with the slow pace of change in a country into which they have pumped billions of dollars in aid.

A group of envoys, including the U.S., German and British representatives in Kiev, said they were “deeply disappointed” by the resignation, which also sent Ukrainian sovereign bonds tumbling.

U.S. State Department spokesman John Kirby said Abromavicius implemented tough economic policies that delivered “real reform results for Ukraine.” He urged Ukraine’s leaders to press ahead with those reforms but declined to speculate on the impact the resignation would have on U.S. assistance to Kiev.

Any threat of Prime Minister Arseny Yatseniuk’s government collapsing would deeply worry Ukraine’s Western partners, who have backed the coalition to keep the country from falling back into Moscow’s orbit.

“Neither me, nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for those who, very much like the ‘old’ government, are trying to exercise control over the flow of public funds,” Abromavicius said in an English-language statement.

Ukraine has struggled economically since the 2014 revolt, which was followed by Russia’s annexation of its Crimea peninsula and by war in the east of the country against pro-Russian separatists Kiev says are supported by Moscow.

Abromavicius is a Lithuanian-born former asset manager who was brought in as one of several foreign experts to help run Ukraine’s new government.

He said Ihor Kononenko, a senior lawmaker close to Poroshenko, had lobbied to get his people appointed as heads of state companies, culminating in an attempt to appoint one of his people as Abromavicius’s deputy. A candidate showed up, demanding to be appointed, he said.

After that, “I received a call from the President’s Administration, whereby I was emphatically suggested to hire this individual, as well as another one, who would take the position of my deputy in charge of defense industry. I responded by declining to take part in this corrupt arrangement and by offering to resign my post.”

Kononenko denied the accusations as “completely absurd”, and said Abromavicius was trying to shift blame for his own failures in running the ministry. Yatseniuk said there was a campaign to discredit his government, and accused Abromavicius of “running from the field of battle.”

Worse not better

Since coming to power in 2014, the government has pledged to stamp out the systemic graft that flourished under former president Viktor Yanukovich and kept Ukraine hooked on Russian money and cheap gas.

But many Ukrainians believe corruption has not improved, eroding support for the authorities, deterring foreign investment and causing Western backers to question Kiev’s ability to deliver real change. The latter have warned Ukraine not to repeat the mistakes of more than a decade ago, when the euphoria of the “Orange Revolution” of 2004, an earlier popular protest movement that brought pro-Western leaders to power, eroded amid government infighting and a failure to stamp out graft.

The slow pace of change now threatens to derail a $40 billion aid-for-reforms deal championed by the International Monetary Fund, European Union and United States.

“The initial appointment of Abromavicius was made precisely because, as a Lithuanian with no experience in Ukrainian politics, he came from outside a corrupt system and could credibly work to reform it,” said Daragh McDowell of the risk analytics firm Verisk Maplecroft. His exit “will fatally undermine what little confidence investors still had in the Poroshenko administration and Ukraine’s economic prospects in general.”

Low approval ratings for Yatseniuk’s government have raised expectations of a major ministerial reshuffle, and the government also could face a no-confidence vote in parliament around the middle of February.

“It is important that Ukraine’s leaders set aside their parochial differences, put the vested interests that have hindered the country’s progress for decades squarely in the past, and press forward on vital reforms,” the foreign envoys in Kiev said in a joint statement.

Some other cabinet members have also expressed frustration at the pace of progress in their ministries. Infrastructure Minister Andriy Pyvovarsky has threatened to resign, while Health Minister Alexander Kvitashvili tendered his resignation last summer, only to have it rejected by parliament. Abromavicius’s resignation must also be approved by lawmakers, and he urged them to meet on Thursday to green-light his departure.

Poroshenko said in a statement that Abromavicius had recognised the support the president had given him. “As far as I’m concerned this support is guaranteed, in the future also. I believe that Aivaras should stay as minister and continue reforms. He went away to think,” he said.

The statement did not address the allegation of his office meddling in appointments in the ministry.

Ukraine’s economy minister dramatically resigns, citing covert corruption, Feb 3, 2016

Ukraine’s minister for economic development and trade, Aivaras Abromavicius, one of several foreign appointees in the government brought in to help Kiev with reforms [sic], has announced his resignation, citing corruption levels in the state.

“Neither me, nor my team have any desire to serve as a cover-up for the covert corruption, or become puppets for those who, very much like the ‘old’ government, are trying to exercise control over the flow of public funds,” Abromavicius said in his official statement on Wednesday.

His ministry’s reform efforts have been “paralyzed” by the “concrete actions” of certain officials and groups, Abromavicius said, adding that he has been pressured by the president’s administration to appoint “questionable individuals” to his team or to key positions in state-owned enterprises.

The minister namely mentioned Igor Kononenko as the one interfering with his work. Kononenko is a close ally of Ukraine’s President Petro Poroshenko, his deputy in the bloc in the Verkhovna Rada, as well as Poroshenko’s old business partner.

“I can only interpret these actions as a persistent attempt to exert control over the flow of money generated by the state-owned enterprises,” the minister said, mentioning the defense industry and Ukraine’s national oil and gas company Naftogaz in particular. “I refuse to be part of this system,” he added.

While the U.S. and EU, which have provided billions of dollars to Kiev in aid, are expecting to see changes, according to the country’s economy minister, it “has become clear that any kind of systemic reform is decisively blocked.”

“I am not willing to travel to Davos and talk about our successes to international investors and partners all the while knowing that certain individuals are scheming to pursue their own interests behind my back,” Abromavicius said.

The minister’s resignation is now subject to approval by parliament, but Abromavicius said that he would like to vacate his office “as soon as possible” and urged Verkhovna Rada to “avoid months of delay, as seems to be the usual practice.”

Abromavicius’s resignation has worried a number of Ukraine’s international partners. A joint statement from ambassadors from the US, UK, EU and other countries said that diplomats were “deeply disappointed,” as the minister and his team “have made important strides, implementing tough but necessary economic reforms to help stabilize Ukraine’s economy, root out endemic corruption, bring Ukraine into compliance with its IMF [International Monetary Fund] program obligations.”

Slowing down the reforms process may cost Kiev a derailment of the $40 billion deal with the IMF, EU and the US, which championed the aid expecting changes in the country, Reuters reported [report below].

Commenting on the economy minister’s Wednesday resignation, Ukraine’s Prime Minister Arseny Yatsenyuk called it a “fuss” aimed at the “discrediting of the government and individual members of the cabinet, whom I and our faction support” in order to control state revenue and “seize power.”

Speaking at a government meeting, the PM, as quoted by Reuters, said Abromavicius was “running from the field of battle, whereas we need to fight.”

The Lithuania-born politician and investment banker took Ukrainian citizenship in 2014, to occupy a ministerial post in the country where a law was introduced in December 2014 which allowed foreign experts to be invited into Ukraine’s government.

With Abromavicius quitting, there will be two foreign-born ministers left: US-born Natalie Yaresko in charge of the finance department, and Health Minister Aleksandr Kvitashvili from Georgia. A number of foreign specialists, who initially arrived in Ukraine to take its citizenship following the 2014 law no longer have their jobs.

In May last year Harvard graduate Aleksandr Borovik, who gave up his German citizenship in order to work in the Ukrainian government, lost his high post in the economy ministry. A scandal unfolded, with Borovik claiming it was caused by his disagreements with Yatsenyuk.

Also on
Pig’s funeral: Coffin brought to Ukraine parliament as hundreds protest new budget (VIDEO), Dec 24, 2015

‘Street-style brawl’: Ukrainian minister throws glass of water at ex-Georgian president (FULL VIDEO), Dec 16, 2015

Biden urges Ukraine to fight ‘cancer-like’ corruption or lose international financial aid, Dec 8, 2015

American, Georgian & Lithuanian get key jobs in Ukraine’s new govt, Dec 2, 2014

GDP per capita in constant $US (source, World Bank):
Ukraine: 2011: 3,569    2012: 3,855    2013: 4,029    2014: 3,082
Russian Federation: 2011: 13,323   2012: 14,078   2013: 14,487   2014: 12,736
Germany: 2014: 47,822

Read also:
Sex, lies and psychological scars: inside Ukraine’s human trafficking crisis, The Guardian, Feb 4, 2016


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