July and August traditionally form a period for vacations and a kind of a “political recess” in Ukraine. These months used to be rather calm when it came to politics. However, this summer was quite eventful in terms of the important issues both inside the country, as well as on the international arena
Domestic Policy. Stress before vacations
The hostilities in Donbas remain an essential factor for the domestic policy development. In July the military tensions escalated to the highest degree this year (however, August saw the tensions somewhat relaxed). Overall the number of the Ukrainian military casualties reached 24 in July. The absence of the will to stop the war on the Russian side allows for a rather large political segment (first and foremost the opposition) to be parasitic on “the peaceful settlement of the conflict”.
The key domestic policy development in July was the Prosecutor General’s Office and the Specialized Anti-Corruption Prosecutor’s Office of Ukraine appealing to allow six MPs of the Verkhovna Rada of Ukraine to be brought to prosecution. Despite the fact that only the representative of the Opposition bloc Mikhail Dobkin was allowed to be fully prosecuted (the appeal was partially granted concerning three other MPs while there was no permission to bring to prosecution two MPs), the fact remains unprecedented. According to the Prosecutor General of Ukraine, the new appeals regarding the Ukrainian MPs are to be expected in the fall.
The “cherry on top“ of this period was the former Georgian president and the former governor of Ukraine’s Odessa region Mikhail Saakashvili being stripped of his Ukrainian citizenship. The President issued this decree on 26 July the decision was based on Saakashvili submitting the false information when granted the Ukrainian citizenship. Mikhail Saakashvili is a quite popular political figure in Ukraine and the decision made by the President Petro Poroshenko sparked heated discussions inside “the national democratic camp“ evoking versions that this decision was dictated, first and foremost, by the political party activity of Saakashvili and his team.
Economy. Careful growth and moderate optimism
The most high profile development of July in the economy sector was the failure of the negotiations between the management of the state enterprise Boryspil International Airport and the Irish airline Ryanair regarding the latter starting flights to Ukraine. The failed negotiations demonstrated that the reforms in Ukraine are extremely slow while the state economy sector proved difficult to reform at all.
Another interesting development took place when Ukraine stopped supplying electricity to the occupied territories of the Donetsk region starting from midnight of 26 July basing its decision on the Donetsk electricity debts. The power supply to the territories of the Luhansk region and the Crimea had been suspended earlier. This fact speaks about the final economic separation of Ukraine and the occupied territories.
The key domestic policy development in July was the Prosecutor General’s Office and the Specialized Anti-Corruption Prosecutor’s Office of Ukraine appealing to allow six MPs of the Verkhovna Rada of Ukraine to be brought to prosecution
Despite the fact that the economy of Ukraine is the economy of a country at war (as of July, 2016 the total damage due to the ruined infrastructure in the Donbas region because of the Russian aggression made up approximately $50 billion), overall the Ukrainian tendency of the economic growth and its macroeconomic indicators demonstrated some moderate optimism in the first six months of this year. For example, according to the State Statistics Service of Ukraine, the average nominal annual wages in Ukraine (from June, 2016 to June, 2016) increased by 37,9% and as of July, 1 made up 7,360 UAH (around $285). Moreover, the first six months of 2017 saw the sales of 36,375 new passenger cars, which is 35% more against the same period last year. Ukraine ranked 64th among 128 countries in terms of its social performance, according to the Social Progress Index 2017.
The national currency, hryvna, went up by 4% from the beginning of the year as of 1 July. According to the July results, the NBU reserves remained almost the same as last month and made up $17,8 billion, and on August, 4 Ukraine paid back $450 million to the IMF under the stand-by program of 2014.
The state budget of the first half of 2017 closed with a budget surplus of UAH 29 billion (about $1,1 billion) (according to the results of the first six months last year the budget deficit made up UAH 35,1 billion – about $1,35 billion). The Ukraine’s investment attractiveness index increased according to the results of the first six months: 3,15 points on a 5-point scale (in 2016 the index made up 2,85 points). The gross domestic product of Ukraine grew by 2,5% in January-June, 2017 (given its much more moderate forecast — 1,8%). The volume of natural gas in the Ukrainian underground gas storage facilities made up 14 billion cubic meters as of 17 August which is 21% more volume against the same date last year. In January-July, 2017 the Russian gas transit via the territory of Ukraine made up 52,3 billion cubic meters, which set a 6-year record.
The export of the Ukrainian goods in the first six months of 2017 made up $20,65 billion, while import — $22,53 billion. Therefore, the trading goods deficit made up $1,88 billion. In the first half of 2017 the export of the Ukrainian services increased by 9,6% against the same period last year and made up $5 billion. The import of services grew by 7,1% and made up $2,52 billion. The surplus of the export-import in services made up $2,47 billion.
However, despite reaching a certain macroeconomic stability, the government still lacks strategic understanding of the economic reforms. For instance, on July, 25 the government announced its decision to liquidate the state aircraft manufacturing and service concern “Antonov“ in the frames of the decisions to restructure the aircraft engineering sector taken earlier, and pass its production capabilities to another state concern “Ukroboronprom“. In fact, this is not an optimal strategy to provide for a smooth crisis exit for the nation’s aircraft engineering sector, since it is a yet another step to “nationalize” the Ukrainian aircraft manufacturing.
Furthermore, in spite of its reformational rhetorics, the Ukrainian economy remains weak and primary industry oriented. For example, in the first half of 2017 Ukrainian metal workers reduced steel making by 17,2% against the same period last year (instead the export of ironstone increased). Yet, the agriculture goods export made up $8,77 billion or 42,5% from the total Ukrainian export in the first half of 2017 (the Ukrainian agricultural export increased by 28% or by $1,91 billion against the same period last year).
Foreign Policy. Many signals – few results
There was quite a lot of the Ukrainian foreign policy developments in July. On July, 9 the State Secretary of US Rex Tillerson visited Ukraine (just after the G20 summit in Hamburg, 7-8 July). On the same day the Secretary General of the United Nations Antonio Guterres visited Kyiv. The Secretary General of NATO Jens Stoltenberg visited Kyiv on 10 July– on the day when the meeting of the Ukraine-NATO Commission took place (marking the 20th anniversary of the Charter). And on 12-13 July the Head of the European Commission Jean-Claude Juncker and the President of the European Council Donald Tusk came to Kyiv, also in the frames of the 19th Ukraine-EU Summit.
These visits mostly had a symbolic function acting as a moral support without providing any strategic obligations. Having agreed to the existing Ukrainian priorities within the Euroatlantic integration, nevertheless, according to the results of the meeting, the Ukraine-NATO Commission only agreed about starting “a discussion about getting an action plan regarding the alliance membership“, and as for the results of the Ukraine-EU summit, the final statement was ruined because of the phrase regarding the “European aspirations” of Ukraine. Even this reminder about the future European prospects for Ukraine annoys the Western European partners.
The President of Belarus Alexander Lukashenko paid an official visit to Kyiv on 20-21 July. Among the other things the key goal of the visit appeared to be the sector of security. To be more precise, his aspiration to persuade the Ukrainian President that the joint war games of Russia and Belarus “West-2017“ (just as well as the military and technical cooperation between the two countries) are not aimed against Ukraine.
The President of Ukraine Petro Poroshenko’s important visits included:
- On 16 July he went to Moldova to meet the Prime Minister of Moldova Pavel Filip within the frames of launching a joint Ukraine-Moldova border checkpoint “Kuchurgan“ at the Transnistrian part of Ukraine-Moldova border.
- On 17 July he was in Georgia within the frames of the “thawing“ relations with the current Georgian elite and among other things, his participation in a business forum. These visits can provide a new incentive for GUAM reanimation and increase the role of Ukraine as a regional leader.
On 7 July the US Secretary of State Rex Tillerson tapped former U.S. ambassador to NATO Kurt Volker to be special representative to Ukraine. The later immediately took off to the antiterrorist zone and announced the results of his visit in a statement: “The situation in the East of Ukraine is not a frozen conflict, but a hot war“ and “Russia is already in Ukraine with all its heavy weapons. Right now there are more Russian tanks there than in all Western European countries combined. It is a very, very large military contingent”, “…there can be no recognition, no legitimacy for the Russian steps in the Eastern Ukraine and in the Crimea».
Special attention should be paid to an unexpected twist in the evaluation of the foreign interference in the 2016 American presidential elections. In fact, on 25 July the US President Donald Trump tweeted that the Ukrainian efforts sabotaged his presidential campaign quietly working to boost his opponent Hillary Clinton. The Trump’s position singled an unpleasant message for the Ukrainian ruling class having openly supported Hillary Clinton at the time. With the sanctions bill against Russia, Iran and North Korea passed in the US Congress in the background, this incident took a backseat, however, in the longer term such evaluation of the Ukraine’s role in the presidential elections may create significant difficulties for the communication of the authorities on both sides.
A notorious New York Times publication published on 14 August created quite a stir in the foreign policy, with the publication stating the North Korea’s missile success may have been linked to an alleged purchase of the engines from “a Ukrainian factory with the historical ties to the Russia’s missile program“. The Ukrainian side officially rejected the allegations regarding Ukraine participating in the transfer of the rocket engines (rocket technologies) to North Korea.