Week's balance: Kobolyev retains post, Ukraine launches new sanctions against Russia, and starts search for heads of tax and customs agencies
After a short delay, the Cabinet of Ministers extended for another year the contract with Naftogaz CEO Andriy Kobolyev and launched the search for the heads of the tax and customs agencies, the president issued a decree expanding the sanctions package against the aggressor state, Russia, while the State Statistics Service pleased Ukrainians with the data on economic growth in 2018 – these are the main economic news of the outgoing week.
In the outgoing week, there was an unexpected turn in a protracted conflict between the government and the management of the National Joint-Stock Company Naftogaz of Ukraine. After an earlier vow to reject Andriy Kobolyev's bid for reappointment, Prime Minister Volodymyr Groysman announced his intention to extend his contract for another year. At a Cabinet meeting on Wednesday, the head of government said that the new contract would lay out no “exorbitant bonuses and rewards" for top managers of Naftogaz, while wages would be cut at least in half.
The very next day after the meeting, the corresponding decree was made public on the government portal. In addition to cuts in salaries and bonuses, the Cabinet of Ministers set three basic conditions for the future head of Naftogaz. Management should separate the company from the one set to manage the gas transmission system by January 1, 2020, ensure production of at least 18.2 billion cubic meters of natural gas per year, and also guarantee the transit of natural gas via the Ukrainian GTS after January 1, 2020. At the same time, the prime minister warned that the non-fulfillment of the conditions set could be the basis for the early termination of the powers of the head of the state company.
A number of experts believe that the conditions set forth by the management of Naftogaz are clearly unfeasible. In particular, in order to fulfill the requirement to produce at least 18.2 billion cubic meters of gas, this figure must be increased by 20% over the year. However, in 2018, a subsidiary of Naftogaz, Ukrgazvydobuvannya, was able to increase production by only 1.6%, to 15.5 billion cubic meters.
The cherry on the cake was a resolution of the Cabinet of Ministers promulgated on Wednesday, which gave the government the authority to elect and dismiss the head and board members of Naftogaz without a submission of the supervisory board. Thus, Groysman strengthened control over the state-owned company.
It is worth noting that the United States of America has already expressed concern about the possible consequences of the amendments to the Naftogaz Charter.
In the outgoing week, Ukraine updated the package of sanctions against the Russian Federation. The new black list included 294 legal entities and 848 individuals who were involved in the act of aggression against Ukraine in the Kerch Strait and the Azov-Black Sea basin. The restrictive measures became a logical continuation of the EU and U.S. sanctions imposed earlier, as evidence that Ukraine harmonizes its policies with the international community.
The updated sanctions list includes individuals and legal entities that were involved in the construction of the Kerch Strait Bridge or involved in the attack on Ukrainian warships and the holding of Ukrainian POW sailors in captivity.
Organizers of pseudo-elections in the occupied territories, as well as persons who illegally visited Crimea and distributed anti-Ukrainian print were also sanctioned.
In particular, the list includes 11 Russian publishing houses and online bookstores, among which are “Knizhniy Mir”, “Exmo”, “Veche”, “Tsentrpoligraf”, “Yauza”, “AST”, “Piter”, “LitRes”, and others. The restrictions included the All-Russian State Television and Radio Broadcasting Company (VGTRK) and its representative office in Kyiv.
Ukraine also extended sanctions against four Ukrainian subsidiaries of Russian state-owned banks - Sberbank, Prominvestbank, VTB Bank and BM 2018 (the legal successor of BM Bank which turned down its banking license). The measures taken prohibit banks from withdrawing capital from Ukraine in favor of affiliated persons and entities.
Heads of customs and tax agencies to be appointed
At its meeting on Wednesday, the government announced contests for the positions of tax and customs chiefs. The heads of the newly created agencies will be elected for five years with the right to reappointment for another term.
According to the conditions promulgated on the government’s website, candidates for these positions must have a master’s degree and a total experience in the civil service of at least seven years. Their monthly salary will amount to UAH 24,000 without taking into account their allowances and bonuses.
Applications for participation will be accepted until April 5, and the competition will be held by the Commission of the Senior Civil Service Corps on April 16. If everything goes according to plan, Ukraine will complete the process of reorganizing the SFS before the end of this year, thereby fulfilling its commitment to the country's main creditor, the International Monetary Fund.
By the way, according to Finance Minister Oksana Markarova, in May-June, the IMF assessment mission will visit Ukraine for another review of the stand-by program worth $3.9 billion. Only after this visit will it be decided on granting our country the next loan tranche.
In the outgoing week, the State Statistics Service pleased Ukrainians with some good news. Thus, the statistics agency reported that in 2018, the Ukrainian economy grew by 3.3%, which is the maximum figure for the last seven years. This indicates that since 2016, the growth of Ukrainian GDP has been gaining momentum.
In general, last year the nominal GDP of Ukraine amounted to UAH 3.599 trillion, which was UAH 84,190 per capita.
Also, the State Statistics Service on Friday announced the results of the industrial output in the second month of 2018. Thus, the decline in industrial production last month in annual terms slowed to 1.8%. Compared with January 2019, the industrial output in February, taking into account the adjustment to the calendar day effect, decreased by 0.6%. The largest decline was recorded in the chemical industry (19.5%), textile production (14.6%), and production of electrical equipment (9.9%).
Pharmaceuticals showed the largest growth (23.1%), computer, electronic and optical products showed a 19.1% rise, while coal and brown coal grew 9%.
But the positive news from the statistics agency did not end there. The State Statistics Service reported an increase in retail trade turnover in Ukraine over the two months of this year by 6.8%.
Next week, the agency will publish employment and unemployment rates, as well as report on the average salary of Ukrainians in February. However, in general, the last week of March promises to be not too full of economic news since all focus will be on the upcoming presidential elections, the first round of which will be held on March 31.