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Week's balance: Anti-corruption court for IMF, finance minister sacked, and new energy regulator's stance on "Rotterdam +" formula

16:00, 09.06.2018
7 min.

Verkhovna Rada's constitutional majority adopted the Anti-Corruption Court it earlier resented, thus, fortunately, retaining cooperation with the IMF, but then immediately sacked Finance Minister Oleksandr Danyliuk, who had dared accuse of corruption the entourage of President Poroshenko. The National Energy and Utilities Regulation Commission received a new leader: its notorious ex-chief was not given even an advisor post. These are the main economic of the outgoing week.

This week, the confrontation between Prime Minister Volodymyr Groysman and Finance Minister Oleksandr Danyliuk which suddenly spilled into the open resulted in the dismissal of the latter.  

It was possible for the public squabble between two top officials to end differently. However, the head of the Ministry of Finance decided to go for an escalation when he appealed to the G7 ambassadors with the letter, claiming that President of Ukraine Petro Poroshenko attempted to impose on him a new deputy lobbied by MPs Ihor Kononenko and Nina Yuzhanina.

The prime minister decided not to start a philosophical dispute on whether it's better to keep it in the family, considering it easier to get rid of the obstinate member of government. And although it seemed to some that the Rada will not collect the required number of votes for the minister's dismissal, further developments proved otherwise. It is worth noting the speed at which Danyliuk got sacked.

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At the beginning of the outgoing week, Groysman on his Facebook page said he had signed a submission to the Verkhovna Rada on dismissal of the Minister of Finance, accusing him of disseminating distorted information among international partners on the eve of negotiations with the European Union zo important for Ukraine that "could pose a threat in terms of their outcome."

"Unfortunately, Oleksandr Danyliuk did not make adjustments to his chosen line of conduct even after discussing the situation with members of our government team. Therefore, I do not see the possibility for him to remain in it, so I ask the people's deputies to support my idea. In the face of the challenges that we face, the question of changing the head of the Ministry of Finance must be resolved without delay," the prime minister wrote.

On the same day, the parliament's budget committee supported the draft resolution on the dismissal of the disgraced minister, after which it became clear what the outcome of this story would be.

Danyliuk himself did not intend to quit quietly, saying that there had been attempts to involve him in "political corruption."

"Throughout the year, I've been under tremendous pressure. They demand that I support the program titled "Subventions for the socio-economic development of the regions." In human language, it is the distribution of money to the projects of deputies in majoritarian constituencies. This is political corruption," the minister wrote on Facebook.

Before the vote, Danyliuk chose to deliver a "farewell show" in the Verkhovna Rada, reminding MPs that he had joined the government team "to build a modern financial system, fight against corruption and squandering of public funds."

"With honor and dignity, I defended the interests of our country before our international partners," stressed Danyliuk.

As for the ill-fated letter, in his words, he simply stated in it some "well-known facts."

"We need to make state decisions rather than be guided by teenage complexes that will cost the state billions," he pricked Groysman.

Photo from UNIAN

The prime minister had the last word and called the minister's behavior inadequate.

"I invited him and told him that it was impossible to act against the state, and gave him two weeks to fix the situation and to absolutely objectively brief our international partners," Groysman said in his short speech.

It seems that the minister did not "fix" anything, which was followed by the premier's further actions. His arguments were supported by 254 people's deputies.

Of course, Ukrainians, first of all, care about how this turbulence in the Cabinet will affect them personally. The prime minister assured that the Ministry of Finance employs a strong team of professionals who will keep the situation under control after the departure of their leader.

It is possible that this is the way it will be, but UNIAN sources reported that two deputy finance ministers Yuriy Butsa and Serhiy Marchenko after the voting in the Rada also decided to resign. The former was responsible for issues of debt policy, cooperation with international organizations and European integration, and the latter - fiscal decentralization, budgetary process and tax policy.

So far, the Cabinet of Ministers has entrusted the duties of the head of the Ministry of Finance to First Deputy Minister Oksana Markarova, appointing her an acting minister.

The IMF expressed its concern about the changing of the role of the Ministry of Finance in fiscal policy after Danyliuk's resignation.

"The finance ministry should retain in our view its central and crucial role in fiscal policy. A finance minister is obviously an important counterpart for the IMF in our discussions. And Minister Danyliuk had been a strong supporter of the reforms," Gerry Rice, Deputy Spokesperson at the IMF Communications Department, told a traditional Thursday briefing in Washington DC, answering a question by UNIAN.

IMF to make next move


Another long saga of the Ukrainian politics ended this week - the Verkhovna Rada adopted the presidential law on the High Anti-Corruption Court.

On Monday, Groysman added more tensions into a protracted discussion - first about whether or not Ukraine needs the Anti-Corruption Court, and then whether it is necessary to grant the right to international experts to choose judges to the new court.

"If this fair and independent court is not created, I will forfeit the authority of the Prime Minister of Ukraine and resign," he promised.

It's difficult to say whether his words were decisive, but given the numerous amendments to the law, the parliament nevertheless supported it.

It is possible that the prime minister sent out a signal about a not very bright prospect for the national economy, which needs foreign injections as much as people need air. And the creation of the Anti-Corruption Court is one of the main conditions for the continued cooperation with the International Monetary Fund.

The IMF responded rather quickly to the adoption of the law: its spokesman Gerry Rice said that it would be assessed to determine the decisive role of the panel of international experts in the selection process for the judges of the new body.

"Regarding the parliament adopting the law on the anti-corruption court today... That happened a few hours ago. So we will now need to assess that law as it was adopted, we will take a look at that. And we will be looking to see is that it ensures the establishment of an independent and trustworthy anti-corruption court that meets the expectations of the Ukrainian people. And in this regard, the selection process for the judges who will serve on that court is critical. And it's important that the panel of independent experts to support this process has a crucial role in verifying the applicants to the position of a judge have the necessary qualifications. So those are the things we're going to be looking at as priority items as we assess the law that was passed," he said.

An excellent background explaining the vital need to receive financial assistance was the National Bank's report saying that the international reserves of Ukraine in May decreased by 1.6% - to $18.120 billion.

The reduction of reserves is due to the implementation of payments on public debt nominated in foreign currency. In particular, in May, the government and NBU paid $455.1 million in favor of the International Monetary Fund, $214.4 million was spent on government payments for servicing and repaying public debt.

Photo from UNIAN

Ukraine's leading economists, members of the Strategic Group of Advisers for Support of Reforms under the Government of Ukraine and representatives of businesses also commented on the situation. According to them, the country may find itself in a deep economic crisis in the event of a breakdown of the program of cooperation with the IMF.

"The Ukrainian state is on the verge of a deep economic crisis. In the second half of this year, the government must pay more than $3 billion to creditors. Next year - about $7 billion. The state has no such money, and sources of their receipt are not yet available. Non-payment of debt would mean a catastrophic devaluation of the hryvnia with the inevitable rapid impoverishment of the majority of Ukrainian citizens," they said in a public statement.

In their opinion, Ukraine has three options for debt repayment: continued cooperation with the IMF, loans from private investors or a drastic reduction in budget expenditures, but the signatories of the statement consider the only option is to continue cooperation with the IMF.

Now we all wait for the IMF response and hope that the creditor does not come up with other requirements for securing the treasured tranche.

NEURC reshuffle

Dmytro Vovk / Photo from UNIAN

In the outgoing week, a former employee of the regulator's office Oksana Kryvenko was elected the new chairperson of the National Energy and Utilities Regulation Commission. Speaking with journalists, she dispelled rumors that the former head of the National Commission, Dmytro Vovk, will keep working there as an adviser.

"There is no position of an adviser," Kryvenko said.

She also told that the NEURC plans to hold its first meeting in the updated composition on June 12. According to her, the priority directions in the work of the National Commission for the near future will be the unblocking of the licensing process, approval of investment programs for licensees, and work on reforming gas and electricity markets.

Such approach by the new leader inspires certain optimism, if we take into account the fact that the NEURC has not held a meeting since the end of March 2018 due to the lack of a quorum.

One cannot but note an important statement by Kryvenko that the National Commission does not plan to raise the cost of electricity for the population in the near future. She said that the Commission needed time to thoroughly study the issue.

Needless to say, almost all tariffs have a considerable component in the form of the cost of electricity, so after a significant price increase for this resource during 2015-2017, a new price increase could lead to unpleasant consequences.

Gas war continues


An important event of the outgoing week was the decision of the Dutch court granting the petitions of the National Joint-Stock Company Naftogaz of Ukraine to arrest the assets of Russian Gazprom, which did not fulfill the decision of the Stockholm Arbitration to pay the Ukrainian side $2.56 billion.

"The petitions were filed to ensure the right of Naftogaz to receive $2.6 billion from the Russian monopoly on the decision of the Stockholm Arbitration, adopted in February 2018. The Dutch court granted these motions, but six of the seven subsidiaries of Gazprom in the Netherlands refused to cooperate with judicial executors. However, all of this will not affect the arrest in any way," the press service of Naftogaz said.

Company CEO Andriy Kobolyev noted that Naftogaz would use all available legal means and tools to secure the implementation of the Swedish Arbitration award and receive from Gazprom the whole sum.

In this regard, it is worth recalling that the supervisory board of Naftogaz decided to pay bonuses to company management worth $46.3 million in connection with the victory in the Stockholm Arbitration in a dispute with Gazprom over the gas transit contract.

Speaking at a Government Hour in the Verkhovna Rada, Prime Minister Groysman told the deputies that he applied to the supervisory board of Naftogaz with a proposal to reconsider the bonuses. According to him, he, like many Ukrainians, was concerned about such a decision, which he does not support because he considers such compensation amounts untimely.

Most likely, the next week will begin with the abolition of scandalous bonuses. However, in case it doesn't happen (after all, such payments are stipulated by the contract), nothing prevents the management of Naftogaz from receiving them and then transfer them for the needs of the Ukrainian army fighting with the Russian aggressor or for the treatment sick children.

Dmytro Shvarts

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