Week's balance: gas transit arrangements with Russia, "crusade" on gambling business, and strengthening hryvnia
Ukraine and Russia have reached an agreement on key issues of a new contract for the transit of Russian gas, the government has declared a "war" on the gambling business, while the Ukrainian hryvnia continues to beef up – these are the main economic developments of this week.
The outgoing week brought disturbing news for those who like to test their luck at gambling, as well as for businessmen who make fortunes on this.
On Friday, December 20, Minister of Internal Affairs Arsen Avakov unexpectedly for many fellow citizens demanded that the National Police stop the activities of gambling establishments operating under the guise of state lotteries throughout the country by 16:00 that day.
"The decision of the Cabinet of Ministers dictates that all gambling clubs, lotteries and gambling establishments should be closed. I demand from the National Police to halt operations at gambling establishments by December 20, in accordance with the Cabinet decree," the minister said.
The "crusade" on the gambling business was preceded by a failed attempt by the Rada to pass a bill on the legalization of gambling. Only 213 deputies voted for the bill at first reading with the required minimum of 226 votes.
"We know who stands behind this [disastrous vote]. If you don't want to play by transparent rules and work in a civilized manner and pay to the budget, we'll do it the other way. Starting today, we immediately close all gambling halls. Think," President Zelensky said Friday.
In turn, Prime Minister Oleksiy Honcharuk noted that the government did not intentionally remain inactive pending the adoption of the relevant law by parliament. "We hoped that the parliament would quickly pass a law that would create a normal gambling ecosystem. Comrades who pretend to be lottery players are hiding behind a bunch of pieces of paper and judges' decisions. We were counting on new civilized rules. When we realized that this story was dragging on, we took a closer look at the legal position and decided to break this legal construction," Honcharuk said.
It is hoped that such actions by the authorities will soon help pass a high-quality law that will create in Ukraine civilized rules of the game in the market, 80% of which is now illegal.
Gas transit arrangements
This week, December 20, representatives of the European Commission, Ukraine, and the Russian Federation reached a final agreement in principle regarding the transit of Russian gas via the territory of Ukraine after the existing contract expires on December 31, 2019.
"Representatives of the European Commission, Ukraine and the Russian Federation today reached a final agreement on principled positions on the transit of Russian gas via Ukraine to European consumers and the settlement of mutual claims," reported the Office of the President of Ukraine. No details have been provided though.
It is noted that all the nuances will be voiced on Saturday, December 21, at a briefing by Minister of Energy and Environmental Protection Oleksiy Orzhel and Executive Director of Naftogaz Yuriy Vitrenko, which will be held at the Presidential Office.
The latest round of talks was held in Minsk. It was preceded by trilateral negotiations between Ukraine, Russia, and the European Commission on December 19 in Berlin. Then EC Vice President Maros Sefcovic said that the parties had reached an "agreement in principle" on all key issues. Earlier, a series of bilateral negotiations between Ukraine and Russia was held in Vienna, as well as the summit of the Normandy Four in Paris, which played an important role in the parties' ability to come to a compromise version of the new deal.
On the other hand, U.S. sanctions, record-high gas reserves in Ukraine and Europe, Naftogaz’s multi-billion-dollar lawsuits vs Gazprom, and lagging in the introduction of bypass routes put Russia in a weaker position, which made the aggressive northern neighbor more willing to cooperate.
The new deal is "very good news for Ukraine, Europe, Russia, for the gas market," said Deputy President of the European Commission Maros Sefcovic, who spoke at a briefing in Berlin following hours of negotiations.
Initially, the Ukrainian side insisted on signing a contract for ten years with an annual transit volume of at least 60 billion cubic meters. The Russian side proposed to conclude a contract for one year and put forward a demand that Ukraine renounce its win in the Stockholm arbitration and conclude a contract for direct gas supplies.
What the parties finally agreed on will be reported in the near future.
Another landmark international event was the final win of Ukrnafta, the largest oil producing company in Ukraine, at the Swiss Supreme Court, which upheld the arbitration decision to recover from Russia in favor of the Ukrainian company $44.4 million in compensation for the expropriation of assets in the annexed Crimea. The decision of the Swiss Supreme Court is final and not subject to appeal.
Hryvnia's strengthening spree
In the past week, the Ukrainian national currency broke another record. On Friday, December 20, the National Bank of Ukraine set the official rate at UAH23.37 per dollar, which is the strongest indicator since January 2016. It is noteworthy that the national currency updated its four-year high daily throughout a week, starting on Monday, when the official rate was UAH 23.5 per dollar.
NBU on Saturday, December 21, set the official rate at UAH 23.33, once again updating the record.
Such a rapid increase in the hryvnia has become a convenient occasion for criticism of the leadership of the National Bank by some experts and politicians, who claimed that the regulator has every opportunity to contain the national currency in the established parameters, however, it does not use them to the full, which affects Ukrainian exporters and hinders the efforts to meet budget revenue targets.
The NBU made it clear that their policies are not being changed, saying that a strong exchange rate at the same time saves state treasury expenses for foreign currency borrowing and servicing foreign currency debt, as well as on government purchases of imported goods. Besides, a strong hryvnia helps reduce energy costs and cut labor migration rates.
The last week of the outgoing year will be devoted to the celebration of Catholic and Protestant Christmas, as well as intensifying preparations for the New Year. Parliamentarians will go on vacation until mid-January, while the State Statistics Service will publish data on industrial output for eleven months.