Ukraine Quarterly Digest: January-March 2019

BY ANDRIAN PROKIP

During the first quarter of 2019, Ukrainian voters’ attention was absorbed by the heated run-up to the presidential election, which took place on March 31. International and local observers found that, despite some drawbacks, the electoral process was transparent and competitive. This was welcome news: the election was widely seen as a test of the robustness of Ukraine’s reform efforts. As expected from pre-election polls, the winners were a beginner in politics, the actor-comedian Volodymyr Zelenskiy, and Ukraine’s current president, Petro Poroshenko. As neither achieved an outright majority, they will meet in a second round on April 21.

At the same time, society was rocked by fresh corruption scandals and a thinly disguised, politically motivated attempt to dismiss Dr. Ulana Suprun, acting minister of health. Separately, a court ordered the jailing of former president Viktor Yanukovych, who, however, fled to Russia in 2014 and has not returned.

1. FOREIGN AFFAIRS

Crimea Developments

On March 18, five years after Russia annexed Crimea, NATO issued a statement demanding that Russia return control of the peninsula to Ukraine. NATO expressed concern over human rights violations, including extrajudicial killings, forced population movements, and the imposition of Russian citizenship, and the deeper militarization of the peninsula. The EU reiterated that it did not accept Russia’s illegal annexation of Crimea. The EU expressed the hope that Russia would allow free passage of vessels through the Kerch Strait and condemned Russia’s building of the Kerch Strait bridge. (Though historically, a bridge had been proposed for that location at least since the early 1900s, Ukraine fears the new road-and-rail bridge will be used to disrupt shipping to and from its ports on the Sea of Azov.) The EU also called on Russia to release Ukrainian seamen captured and detained in Russia in November 2018 and to grant international and regional human rights monitoring bodies unrestricted access to the autonomous republic of Crimea and the city of Sevastopol to evaluate the situation on the ground.

New Sanctions

On March 20 the Ukrainian government imposed new sanctions on 848 Russian individuals and 294 enterprises. The reasons for the sanctions included participation in building the Kerch Strait bridge, the publishing and distribution of works with anti-Ukrainian content, armed attacks on and the seizure of Ukrainian naval vessels, the expatriation of Ukrainian museum collections, and other matters directly challenging Ukraine’s sovereignty and territorial integrity.

On March 14 Canada imposed sanctions on another 114 individuals and 15 entities in Russia. Earlier in March the United States had extended for another year its sanctions against Russia over the annexation of Crimea.

The Issue between Ukraine’s General Prosecutor and the U.S. Ambassador

An unexpected conflict has cast a shadow over U.S.-Ukraine relations. In an interview with The Hill, General Prosecutor Yurii Lutsenko stated that U.S. ambassador to Ukraine Marie Yovanovitch at their first meeting had presented him with a list of persons who should have not been prosecuted by his office. The ambassador and the U.S. State Department have denied the general prosecutor’s account of events. To smooth over matters and maintain a framework for good U.S.-Ukraine relations, President Poroshenko issued an urgent statement in which he expressed “full support” for the U.S. ambassador.

Political Prisoners

On March 22, a court in Russia sentenced Ukrainian citizen Pavlo Hryb to six years in prison. Hryb was kidnapped at age nineteen by the FSB, Russia’s Federal Security Service, in Belarus, where he was meeting a friend he had become acquainted with through the internet. Later the FSB transported him to Russia and accused him of facilitating terrorism. Hryb is suffering from serious medical conditions and may not survive six years in prison.

Western governments, including the UK and the United States, expressed their concern over the unjust detention and sentence and called on Russian authorities to rescind the decision and free Hryb. The EU also issued a statement demanding that Russia free all Ukrainian political prisoners, including Oleg Sentsov, Volodymyr Balukh, Hryb, and the navy servicemen captured in the Kerch Strait incident. However, these appeals are unlikely to be effective. Over the past three years Russia has not released any Ukrainian political prisoners, with the exception of the politician and former Ukrainian Army pilot Nadiya Savchenko.

Illegal Trade in Donbas-Origin Coal

On January 7, a freighter with a Ukrainian crew and sailing under the Panamanian flag sank near Turkey’s coast, resulting in the death of several sailors. The ship was transporting coal from Russia to Turkey. Ukrainian officials stated that the coal had probably been extracted from mines in the occupied Donbas territories; its transport would therefore be in contravention of a law making trade in Donbas coal with certain neighboring countries illegal, because coal mines are a property of Ukrainian companies and the coal belongs to Ukraine. Russia-backed armed separatists from Donetsk and Luhansk are not permitted to trade directly with other countries.

Ukrainian companies and authorities regularly detect illegal coal trading and try to stop it by negotiating with the importing companies. Earlier, attempts to export Donbas-origin coal to Poland and Turkey became publicly known. After the freighter sinking brought to light perhaps more of such illegal trade than was previously understood, Ukrainian Minister of Foreign Affairs Pavlo Klimkin said that Ukraine will call for an international investigation of the Donbas-origin coal trade.

In February 2019, based on official Belarusian statistics, it also became known that Belarus, though not a coal producer, nonetheless had provided substantial anthracite coal exports to Ukraine in 2018. At the same time, the Ukrainian Statistics office did not show any anthracite imports from Belarus. Experts and representatives of the energy sector believe the coal was of Donbas origin.

2. INTERNAL AFFAIRS

The 2019 Presidential Election Campaign

December 31, 2018, marked the official launch of campaigning for the presidential election, though informal activities had been under way for months as candidates strived to position themselves on matters of importance to the Ukrainian public and tease out likely voters’ sentiments. Forty-four candidates were registered—a record number. However, before the elections this number was reduced to thirty-nine as some candidates took themselves out of the race and threw their support to others. Andrii Sadovyi, for example, mayor of Lviv and head of the Samopomich party, took himself off the list and lent his support to Anatolii Hrytsenko, who had been minister of defense during Viktor Yushchenko’s presidency. Two years ago, Sadovii seemed to have a good chance at being among the top contenders, but his popularity collapsed after tensions with Poroshenko emerged, and especially after the garbage blockade of Lviv (more about this case is available in Kennan Cable 27).

Only a few of the thirty-nine hopefuls had any perceptible popularity and support. Among the leaders ginning up election fever were the actor-comedian Volodymyr Zelenskiy, a novice in Ukrainian politics; Ukraine’s current president, Petro Poroshenko; and Yulia Tymoshenko, a veteran politician and well-known name. Zelenskiy become popular for his comedy TV show and especially for his starring role in the political sitcom, Servant of the People. The plot of the TV series revolves around a schoolteacher who is elected president and demonstrates a strong moral compass while running the country. These three candidates were the main competitors in the campaign and, as expected, took the top three places in the March 31 election. According to the Central Electoral Commission, Zelenskiy received more than 30 percent of votes and Poroshenko almost 16 percent, while Tymoshenko’s support fell to 13.4 percent. This means that Zelenskiy and Poroshenko will compete for the presidential office on the second ballot, on April 21, 2019.

The U.S. intelligence service had warned in advance of possible Russian interference in Ukraine’s elections. It is in the Kremlin’s interest to introduce and support presidential and parliamentary candidates who might be more amenable to Russia’s interests. U.S. National Intelligence director Daniel Coats told the U.S. Senate Intelligence Committee on January29 that the Kremlin could be expected to apply multiple tools to “achieve results.” Despite some worrisome expectations and a few violent incidents, however, the campaign was relatively quiet.

Canceling Liability for Illegal Enrichment

Ukraine’s anti-corruption system has been hit hard in recent months. In late February the Constitutional Court of Ukraine (CCU) issued a decision that the paragraph on illegal enrichment (as determined by the possession of unexplainable assets) in Ukraine’s Criminal Code violated the constitution because it contradicted the principle of the presumption of innocence. The decision was issued in response to the petition of fifty-nine MPs, lodged in 2017, though twenty-nine MP signatories to the petition had actually voted in parliament for this paragraph.

As a result of the CCU decision, the National Anti-Corruption Bureau of Ukraine had to close its investigations against sixty-five individuals (mostly former officials) suspected of corruption under this paragraph. The Ukrainian anti-corruption system took a considerable hit.

Adopting legislation against illegal enrichment was among the requirements for establishing a vise-free regime with the EU and the granting of macrofinancial assistance and loans to Ukraine, especially by the IMF. Now parliament must approve a new formulation that will allow the Ukrainian anti-corruption system to resume its work.

Autocephaly of the Ukrainian Orthodox Church

January 5, 2019, the day before the Orthodox Christmas Eve, Ecumenical Patriarch Bartholomew signed a document confirming autocephaly of the newly established Orthodox Church of Ukraine (OCU), thus dissolving Russia’s religious control over Ukraine. On February 9, all other members of the Ecumenical Patriarchate of Constantinople signed the tomos, or decree, establishing the OCU.

President Petro Poroshenko, who has actively promoted the creation of the OCU, toured most of the Ukrainian regions to present the tomos to communities. Though his efforts may have been intended to forestall any potential split among individual parishes over preferences for remaining with the Russian church—the Moscow Patriarchate—versus accepting the OCU, Poroshenko’s critics understood it to be part of his reelection campaign.

In conjunction with autocephaly, all the Orthodox churches in Ukraine, to include the existing Ukrainian Orthodox Church of the Kyiv Patriarchate and the Ukrainian Autocephalic Orthodox Church, were unified under the umbrella of the OCU in January and February. Some parishes of the Ukrainian Orthodox Church of the Moscow Patriarchate also joined the OCU. For the most part this process went on peacefully, except for some instances of parishioners being unable to reach consensus on which church they wanted to affiliate with.

In the wake of autocephaly, on January 17, 2019, the Verkhovna Rada amended a number of laws relating to the regulation of religious organizations. Parishes may now make their own decisions about which church they affiliate with, and parishes located in the same area but affiliated with different churches may share the same church building. These changes are expected to make it easier for different parishes to accept the newly established OCU.

Om January 27 another amendment (approved on December 20) on religion entered into force. According to the new law, the Ukrainian Orthodox Church of the Moscow Patriarchate is required to rename itself the Russian Orthodox Church. Those who affiliate with this church reject this change, calling it discriminatory.

Corruption Scandal at State-Owned Military Enterprises

In late February 2019 a group of Ukrainian investigative journalists published the results of an investigation into corruption in state-owned military enterprises. According to reports, the son of Oleh Gladkovsky, the first deputy secretary of the National Security and Defense Council, was involved in embezzlement. Gladkovsky Sr. stepped down from his post soon after the scandal broke.

The journalists also discovered that some private Ukrainian companies were buying parts for military equipment in Russia, then selling them in Ukraine to military plants at a much higher price. The investigations found that participants in the scheme bribed officials from different law enforcement agencies, including the new anti-corruption agencies. These revelations sent shock waves through Ukrainian society, which trusts and highly values its armed services.

To date, the investigation has not uncovered any evidence that President Poroshenko was personally involved in the embezzlement scheme or knew about Gladkovsky’s activity. Nonetheless, Yulia Tymoshenko, a presidential contender at the time, called for Poroshenko’s impeachment because of the scandal. Poroshenko responded by confirming the removal of Gladkovsky Sr. and called for an audit of military enterprises.

Court Ruling on Viktor Yanukovych

On February 24, a district court in Kyiv announced its verdict in the case of ex-president Viktor Yanukovych. The court found him guilty of high treason and of contributing to Russia’s war of aggression against Ukraine, and sentenced him in absentia to thirteen years of imprisonment. After fleeing Ukraine in February 2014 in the wake of the Euromaidan, Yanukovych has never returned to the country he once led.

Acting Health Minister Ulana Suprun: Still in Office

On February 5 the Kyiv Regional Administrative Court ordered Dr. Ulana Suprun, acting minister of health, to temporarily stop fulfilling her duties. The restriction was to last for the length of a lawsuit initiated on the basis of an appeal from an MP representing Oleh Liashko’s Radical Party. The MP demanded a clear statement from Dr. Suprun as to whether she held dual U.S. and Ukrainian citizenship; the Ukrainian constitution forbids such dual citizenship.

The action appears to have been politically motivated, for the Radical Party opposes the public health care system reforms that are endorsed by Dr. Suprun. Along with other reformers in the Ukrainian government, she has managed to increase transparency and decrease corruption in the provision of public health care.

Supporters of the reforms, including President Poroshenko and Prime Minister Volodymyr Groysman, organized a public campaign in support of Dr. Suprun. On February 14 the same court canceled its previous decision and allowed Dr. Suprun to continue carrying out her duties, but the legal proceedings against her go on.

3. PROGRESS IN REFORMS AND SUCCESS STORIES

Progress in Battling the Shadow Economy

According to the Economic Development and Trade Ministry, in 2018 Ukraine’s shadow economy fell to its lowest level of the past ten years. However, it is still too high, accounting for 32 percent of official GDP in January–September 2018 (for the same period in 2014, by contrast, it amounted to 43 percent of GDP). Factors contributing to a reduction in the shadow economy included a good business environment and the demonopolization of markets. The pace of improvement is likely to slow, however, with ongoing shadow economic transactions in the noncontrolled territories.

Developing Tourism

The number of foreigners visiting Ukraine, as well as the number of Ukrainians traveling inside the country, is rapidly increasing. In 2018 revenues from tourism taxes increased by 20.7 percent over the previous year. According to official data, visitation from Spain increased by 68 percent, from India by 57.4 percent, from Great Britain by 47.3 percent, from China by 38.8 percent, and from Lithuania by 23.4 percent. It appears that the relatively low costs of sojourning in Ukraine and the country’s numerous cultural attractions are boosting tourism.

Exports and Imports

Ukraine is now among the top five exporters of agricultural products to the EU. Last year Ukraine’s export to the EU grew for 8.7 %. In this way diversifying its economic ties with Europe. However, Ukraine is still dependent on imports.

Currency Liberalization

On February a new Currency Law and an accompanying regulatory framework entered into force. The law simplifies foreign currency operations for individuals and enterprises, lifting a number of restrictions. It also creates more favorable conditions for capital and currency to enter the country and eases operations for foreign investors.

4. THE SITUATION IN THE DONBAS

The situation in the Donbas did not change particularly in the first quarter of 2019. Intermittent exchanges of gunfire are daily occurrences and have caused injuries to and the deaths of Ukrainian soldiers and noncombatant civilians alike.

An attempt to launch a “spring cease-fire” on March 8 came to naught. The very next day Russia-backed separatists opened fire again.

On January 28, Ambassador Martin Sajdik, Special Representative of the OSCE, Chairperson-in-Office in Ukraine, and a member of the Trilateral Contact Group on Ukraine, offered a plan for pursuing peace in the Donbas. The plan, which would replace the Minsk agreements, stipulates establishment of a joint UN/OSCE mission in the Donbas (to include an international administration of the occupied territories) and the organization of an EU-led reconstruction agency for the Donbas. The plan would have to be approved by the parliaments of the Normandy Four countries—Ukraine, Russia, France, and Germany—and by representatives of the self-proclaimed Republic of Donetsk and Republic of Luhansk.

The plan was harshly criticized by some Ukrainian experts, who pointed out that it could legitimize the illegal separatist militias in the noncontrolled areas. President Poroshenko’s comment was that Ukraine was already implementing the Minsk agreements, which provide a framework for peacekeeping in the region. So far the plan has not received much support from the involved parties.

In sum, while the attention of many Ukrainians in the first quarter of the year was riveted on the end-of-quarter presidential elections, other events were unfolding across the political landscape, including new allegations of corruption in the military procurements process and an attempt to disenfranchise the acting minister of health. The Minsk process seems to have stalled, with yet another cease-fire in the war zone treated cynically by at least one side. In the plus column, the reform process has helped stabilize Ukraine’s business environment and made the country more attractive to foreign investors and lenders. The April 21 runoff elections will either return to the presidency a tested veteran of that position or install a newcomer to politics. Though their goals are similar—chiefly, resolving the crisis in the East, continuing engagement with Ukraine’s Western partners, and improving Ukraine’s socioeconomic climate—the means and timeline each has proposed do differ. How the winner of the presidential contest enacts his agenda, and how the Ukrainian populace responds, is expected to color events in Ukraine for the coming year.