ISSUE 18
10.01 - 23. 01. 2022
|
|
|
|
- Security Update
- Ramstein update
- Accusation against Naftogaz ex-CEO Kobolev
- A step forward to the EU: restart of the High Council of Justice
- Paris Report 1: Ukraine'sreconstruction
- Perspectives of Ukraine's future cooperation with China
- Russia's fifth column in the EU
|
|
|
|
The situation on the battlefield in Ukraine remains tense, with fierce fighting bringing no significant advances to either side. The Russian military is paying considerable attention to stabilizing the situation near Svatove. The Russian advance in Soledar and Klishchiivka areas is also creating preconditions for the development of tactical success in the operational encirclement of Bakhmut. According to German Intelligence data, Ukrainian losses near the area of Bakhmut account to three-digit numbers daily. Russians have intensified their activities in the Zaporizhzhia sector, but the information about a major offensive is exaggerated, according to the head of the joint press centre of the Tavryda Defence Forces, Yevhen Yerin. Near Zaporizhzhia the Russian military units try to conduct assaults against Ukrainian positions, identifying the configuration of the defensive lines.
In the middle of January, more speculation appeared in the media about an anticipated large-scale Russian offensive from the territory of Belarus and intensified combat operations in the Eastern and Southern regions after the appointment of General Gerasimov in charge of the Kremlin’s war in Ukraine. Russian preparations for another large-scale escalation to disrupt logistics of the Western type of weapons delivery and to force the Ukrainian government to capitulate, have allegedly been the topic of the discussions between the U.S. Director of the Central Intelligence Agency Burns and President Zelenskyy in Kyiv, as well as the focus of the conversation between Valeriy Zaluzhnyi, commander-in-chief of Ukraine’s Armed Forces, and Mark Milley, chairman of the U.S. Joint Chiefs of Staff, in Poland. Ukrainian General Staff is following the developments in Belarus, specifically the ongoing comprehensive readiness checks, which have been extended to January 30.
|
|
|
|
As of now, the Russian Armed Forces (RAF) located in Ukraine have exhausted their capacity for active combat actions, continuing tactical attacks in the Eastern regions. With the expected strengthening of the grouping, as recently mobilized and trained Russian soldiers arrive from the territories of Belarus and Russia to the battle arena, Russians are likely to intensify their efforts to operationally encircle Bakhmut, cutting off the Joint Forces’ logistics routes to Bakhmut from Siversk, Sloviansk, and Kostiantynivka. The Ukrainian defense of Bakhmut is likely a strategically sound effort. If Russian troops were to take Bakhmut easily, Ukrainians would face troubles in organizing defense lines in much more unfavorable terrain. The Russian military command will continue the defense on the Svatove-Kreminna frontier, simultaneously preparing a grouping in the north of Luhansk Oblast to conduct a counteroffensive operation in the direction of Lyman-Izyum. Regarding Russian military plans for a large offensive, Ukrainian and foreign military experts have divided their views. Some do not consider the Russian presence in Belarus significant enough for another large-scale campaign into Ukrainian territory and claim that all media reports about it are part of a disinformation campaign. Ukrainian Military Intelligence believes that Russians have several scenarios of offensive, with those discussed publicly being deliberately leaked to the media to divert Kyiv’s attention away from the main theatres of war in Ukraine’s east and south. Ukrainian political leaders stress that Russia’s main strategic goal remains unchanged: a genocidal war, the destruction of the Ukrainian people and state, with a further escalation being only a question of Russian preparedness, and that therefore, without the sufficient strengthening of Ukrainian defense, time will be on the side of the Russian aggressors.
|
|
|
|
On January 20, the Ukraine Defence Contact Group held its 8th meeting at the Ramstein base in Germany. Before the meeting, nine European countries signed the Tallin Pledge in support of Ukraine, announcing a raft of new military aid for Ukraine. According to expert assessment, the results of the Ramstein format meeting were pivotal in terms of the scale of support and confirmed the determination of all participants to respond to the "decisive decade", as well as their readiness for further actions. Deputy Commander-in-Chief of the Armed Forces of Ukraine Lieutenant General Yevhen Moysiuk emphasized that the participants of Ramstein were informed about the real state of affairs on the frontline of the war, and were presented with several scenarios of its development, supported with the lists of the capabilities Ukraine needed. Following the meeting, U.S. Secretary of Defence Lloyd J. Austin III underscored that the United States will continue to play a leading role in coordinating joint efforts to support Ukraine and allocated a $2.5 billion large-scale aid package. France, Germany, and Great Britain also allocated significant capabilities for strengthening Ukraine’s air defense, in addition to the US. The Netherlands announced the delivery of Patriot system missiles and expressed its readiness to train Ukrainian service members on these systems. Canada also contributed to strengthening Ukraine’s air defences by providing NASAMS systems and missiles. The main issue remained the donations of tanks. After the meeting, the newly appointed German defence minister Boris Pistorius said that no decision on the supply of Leopard 2 tanks either from Germany or through other states was approved during the summit.
|
|
|
|
Ukrainian leadership positively assessed the outcomes of the meeting, with the reservation that increasing the firepower and maneuverability with armored vehicles and tanks remains a top priority need for the Armed Forces of Ukraine, and it was only partly addressed. Ukrainian Defence Minister Oleksiy Reznikov said he was “very satisfied” with the 8th Ramstein meeting, claiming that not all aid packages were publicly disclosed. “The keywords that were important today are unity, timeliness, the immediacy of assistance, creating the capacity of the Armed Forces necessary to continue counteroffensive operations to liberate the occupied territories,” Reznikov said. IISS (International Institute for Strategic Studies) experts interviewed by journalists believe that the Armed Forces of Ukraine need to receive at least 100 Western tanks in the nearest future to conduct a counteroffensive and to be able to defend itself. However, the weapons are required not only for de-occupation but also to prepare for a potential large-scale attack by Russia in the spring, which makes the need for tanks even more pressing. With more countries announcing their intent to form a so-called “tanks coalition” in support of Ukraine, Germany’s cautious position will challenge the unity of the Ukrainian supporters’ group, opening the way to “multi-paced” support to Ukraine, and making coordination efforts more complicated. Another conclusion of the Ramstein meeting, according to experts, was that the timeliness of support is now even more crucial than the scale of it, with all delivery plans being rather reactive to Russian military movements, and hence often being delayed. This would play a negative role, especially given that the prospects of Russia's attempt to take revenge for military failures in its war against Ukraine, including the threat of a new full-scale offensive by the Russian forces, have again become very real.
|
|
|
|
ACCUSATION AGAINST NAFTOGAZ EX-CEO KOBOLEV |
|
|
|
On January 19, Ukrainian anti-corruption authorities (NABU and SAP) informed the ex-CEO of Naftogaz Andriy Kobolev of suspicion due to a bonus he assigned himself in 2018. The bonus (UAH 261 million or $9.5 million at the exchange rate of 2018) was paid for the victory of Naftogaz in the arbitration against Gazprom. According to the investigation, the amount of the bonus significantly exceeded the normatively defined amount at that time and could be a maximum of UAH 37.5 million ($1.3 million).
Ukraine’s Naftogaz has awarded a $46.3mn bonus to employees, equivalent to 1% of the $4.56bn gross amount it won in Stockholm transit arbitration award against Gazprom. The $46.3mn was divided between 40 people. In 2018, the first part of these bonuses of $20.7 million was paid. The victory against Gazprom became the first case when Ukraine ceased to be the subject of the Kremlin’s constant blackmail. This arbitration was the largest commercial arbitration in its history and lawyers estimated the chance of Naftogaz’s victory as extremely low.
Kobolev’s actions are currently qualified under Part 5 of Art. 191 of the Criminal Code of Ukraine (the embezzlement of property or funds in particularly large amounts by a prior conspiracy, by a group of persons - punishable by imprisonment for a term of seven to 12 years with confiscation of property). This week, a session of the High Anti-Corruption Court is expected, which should choose a preventive measure for a manager who headed the largest Ukrainian state company from 2014 to 2021 and has a reputation as one of the most successful Ukrainian reformers. Notice of suspicion against Kobolev has become one of the loudest news in recent days. Some consider the accusations to be politically motivated, while others emphasize the importance of equality of all before the law. But most are trying to understand what this case really is about and what its implications will ultimately be, not only for Kobolev, but also for Ukraine in general.
|
|
|
|
Andriy Kobolev was suspended from managing Naftogaz in April 2021. The official reason for the resignation was the company’s negative financial results for the “Covid” year of 2020. A more popular version is that Kobolev, heading the richest state-owned company, did not want to use Naftogaz’s financial resources for various projects of the President’s Office, such as road construction, because the money was primarily needed for the essential needs of Naftogaz, such as the purchase of gas for Ukraine and investments in gas production. The autonomy of the actions of the chairman of the board was guaranteed by an independent supervisory board composed of several foreigners - ex-top managers of European energy companies, who later also resigned. From September 2021 to the present, Naftogaz does not have a supervisory board. The Cabinet of Ministers is in no hurry to appoint one.
Since February 2022, Kobolev was abroad, which might suggest that he understood it was dangerous for him to be in Ukraine, where he has a lot of enemies. Kobolev worked on the development of mechanisms for imposing energy sanctions on Russia, as well as the issue of restoring the damaged Ukrainian energy industry.
Nevertheless, last week he returned to Kyiv. Some sources claim that Kobolev was “lured” to Ukraine under the pretext of negotiations regarding his appointment to a high government position to lead the Ukrainian energy industry out of the crisis. Considering his experience and reputation among foreign partners, this would be a logical step. However, Kobolev denied such an option and stated that, realizing that the accusation against him was being prepared, he himself came to Ukraine in order not to give a reason for accusations of escape or hiding.
The case, which will be considered by the Anti-Corruption Court, was investigated by NABU for five years. This case was initiated by the current People’s Deputy of Ukraine, Vasyl Nimchenko, a member of the “Opposition Bloc” faction (a pro-Russian political force that has been banned in Ukraine since the beginning of the war), involved in several scandals and connected with Viktor Medvedchuk.
Kobolev did not assign the bonus to himself. It was a decision of the supervisory board, the company’s governing body. Some analysts believe that this case will cause irreparable damage to corporate governance in Ukraine, which is supposed to protect foreign investment and international aid. If the case proves to be politically motivated and initiated by representatives of the President’s Office, it will cast a shadow on the work of Ukrainian anti-corruption bodies. Without any doubt, law enforcement officers must investigate cases regardless of the person’s reputation. But in Kobolev’s case, it means one fighter less on the Ukrainian energy diplomacy front.
|
|
|
|
A STEP FORWARD TO THE EU: RESTART OF THE HIGH COUNCIL OF JUSTICE |
|
|
|
In January, the Congress of Judges appointed eight new members of the High Council of Justice (HCJ), restarting the work of this institution. Their election was conducted by secret voting, and interviews were held in private. Now the HCJ consists of 15 members (quorum). The HCJ will now select its Head and Deputy Head. The EU welcomed the continuation of the HCJ’s work. Maati Maasikas, Head of the EU Delegation to Ukraine tweeted: “Great news from the Ukrainian Congress of Judges. Eight new members of the High Council of Justice have just been appointed. Key judicial governing bodies can thus restart work. Looking forward to the reformed HCJ showcasing rule of law and integrity in practice”. Ambassadors of G7 countries previously stated their expectation regarding the restart of the HCJ and appointment of new members by the community of judges.
|
|
|
|
The cleaning of the HCJ started in July 2021 with the adoption of Law 1635-IX, which received positive feedback from the Venice Commission. This was followed by the voluntary resignation of most HCJ members, and the appointment of new members was delayed.
Who are the new members appointed in January? According to information from the Anticorruption Action Center (AntAC), seven out of eight selected HJC members have dubious reputations. Some of them visited occupied Crimea, had connections with the Russian Federation or the pro-Russian “Opposition Platform - For Life” party, had issues with their declarations, or should have been fired already. AntAC even called the new members of HCJ “Moscow patriarchy in the mantle”. More information on each selected member from the Dejure Foundation is available here.
Why is reform of the HCJ important? The High Council of Justice is a key judicial body in Ukraine that appoints, dismisses, and holds disciplinary proceedings on judges. The HCJ is also responsible for appointing the High Qualification Commission of Judges (HQCJ). The HCJ and HQCJ should jointly appoint at least 3000 new judges in Ukraine and carry out integrity assessments of existing judges. This will determine the future of justice reform and the judicial system in Ukraine. Beyond that, the HCJ will have an impact on Ukraine’s future EU integration, because the restart of the HCJ and the HQCJ are among the seven EU requirements for Ukraine (regarding judicial reform). Western partners are positive regarding the resumption of the HCJ’s work but the future will determine if its integrity is in line with Ukraine’s European choice.
|
|
|
|
PARIS REPORT 1: UKRAINE'S RECONSTRUCTION |
|
|
|
In December, the Center for Economic Policy and Research (CEPR) presented the Paris Report 1 authored by a number of Ukrainian and foreign experts. This is an over 400-page publication comprising 14 separate articles. Those texts are united under the goal of providing recommendations for post-war reconstruction in various sectors.
|
|
|
|
Most of the authors are not “reinventing the wheel” and reiterate what has been said since 2014 – Ukraine needs to establish strong institutions, rule of law, and justice reform as well as transparency and partnership during the reconstruction process. No one will disagree, however, the real issue will be in the implementation of those reforms, especially when they clash with the desires of various interest groups. However, some parts provide recommendations that need to be reflected on and can be debated within society. One such part is the article co-authored by professor Tymofiy Mylovanov, Director of Kyiv School of Economics, and Gerard Roland, a Professor at UC Berkeley, where they provide their vision of reconstruction and governance reforms.
On the one hand, Tymofiy Mylovanov and Gerard Roland warn against the concentration of power by which the post-war Ukrainian government could be tempted. On the other hand, for the early post-war period, authors suggest turning to lessons of organization theory (Weitzman 1974, Bolton and Farrell 1990). The theory emphasizes the “advantages of using direct commands to allocate resources… and of relying a lot on centralized decision making”. Thus, the authors suggest that for successful reconstruction, it is necessary to allow the state to intervene in market processes in the early post-war stage. A similar approach to increasing the role of the state is provided in some other sections, such as on health and education reform. First of all, it is unclear how this centralized decision-making will align with the demands of western donors who require using democratic practices for the funds they provide as well as with Ukraine’s EU path. From an economic point of view, the practice of centralized decision-making could, for example, stabilize prices while at the same time causing a shortage of goods. It is likely that state regulation of market mechanisms will negatively affect businesses and their activity, which will only intensify the crisis in the country. Similar concerns regarding the centralization of power are shared by Belarusian economist Yaroslav Romanchuk in his review of the Paris Report publication. There are several other risks that centralized decision-making may bring. Among them are corruption and the lack of transparency. Last but not least, the authors make no specific recommendations on preventing centralization from becoming entrenched in the future.
Among other parts of the publication worthy of attention include “How to organize aid” co-authored by Vladyslav Rashkovan and Barry Eichengreen. The report builds on experiences of other cases of reconstruction, suggesting the establishment of a reconstruction agency and a multi-trust donor fund (MTDF). The agency should be based in Brussels and its management should be divided by the EU and non-EU G7 donors toward Ukraine’s recovery. The authors mention in several parts that the reconstruction platform must be EU-led and at the same time ensure Ukraine’s ownership of the process. These are positive statements but it is likely that their practical implementation is the reason for the delay in the launch of Ukraine Reconstruction Platform by the EU. The first time Ursula von der Leyen announced establishing the EU-led platform was in May 2022 and in December 2022 in Paris she repeated this statement announcing that the platform will be launched in January 2023. However, this will most likely again be delayed.
|
|
|
|
PERSPECTIVES OF UKRAINE'S FUTURE COOPERATION WITH CHINA |
|
|
|
Volodymyr Zelenskyy wrote a letter to the Chinese leader, Xi Jinping, with an invitation to negotiations. Ukrainian officials supported such actions and expressed hope for cooperation between the countries. Such actions look strange. After all, the People’s Republic of China (PRC) has not officially expressed its position on Russia’s full-scale invasion of Ukraine. On the contrary, the PRC’s media outlets cover the war the same way as the Russian media. In December 2022, Beijing even announced plans to deepen cooperation with Russia in 2023. And yet Ukraine continues to perceive PRC as a strategic partner at the state level.
|
|
|
|
Ukrainian officials and deputies expressed their commitment to cooperation with the PRC even before the full-scale invasion. Since 1995, exports to the PRC have steadily increased by approx. 12% every year, and imports have increased by 20.3%. However, the trade balance between the countries remained negative for Ukraine. Since 2014, the difference has reached -$5.51 billion (2018). Only in 2020, the trade volume between Ukraine and PRC was almost equal (Ukraine exported $7.26 billion to the PRC and imported $7.46 billion from the PRC). In 2021, the gap widened again, and the negative balance for Ukraine was -$2.97 billion. Ukraine spends significantly more on imports from the PRC than it earns on exports. In addition, it sells the PRC cheap raw materials and goods with a low level of processing. In exchange, the country receives high-value-added products, which are sometimes produced from Ukrainian raw materials. So, the benefit of economic relations with China is exaggerated.
Due to economic losses from the coronavirus crisis, China is trying to recover and strengthen its influence in Europe. Ukraine could become an attractive place for investment as a weak democracy that needs a lot of money to rebuild. Moreover, there is an agreement between the countries on the expansion of cooperation in the field of infrastructure and construction. The priority areas of this agreement are railway transit, airports, ports, communications, and municipal engineering construction. There is a danger of attracting the PRC’s investments and loans to reconstruct Ukraine’s critical infrastructure. Considering the PRC’s close relations with Russia, this cooperation will increase the security risks.
Getting loans from the PRC is another questionable practice. The PRC has become one of the world’s largest creditors in recent decades. These loans are often issued for the implementation of unprofitable projects. In 2012, the Ukrainian state grain trader borrowed $1.5 billion from a Chinese company under state guarantees. To repay this debt on time, this trader would have to earn a considerable amount of money per year. This turned out to be unrealistic, and now Ukrainian taxpayers are repaying the debt together with fines from the state budget until 2027.
It is highly probable that the priority for the state will be to receive funds and not to thoroughly check all the circumstances of the loan agreements. Unlike other international partners, the PRC does not require any reforms, and its agreements usually have strict confidentiality terms. Research has shown that the agreement conditions hinder affected countries’ development, and the concealment of information contributes to the spread of corruption. Ukraine is purposefully looking for ways to deepen cooperation with the PRC, but this could lead to significant financial and security problems in the future.
|
|
|
|
RUSSIA'S FIFTH COLUMN IN THE EU |
|
|
|
On January 16, during a visit to France, Austrian Foreign Minister Alexander Schallenberg called on “maintaining measure,” referring to the reaction to Russia’s aggressive war against Ukraine and not to “bend the line” in relations with Moscow. “The cruel, aggressive war unleashed by Russia is insanity. But at the same time, we must think about the day after, the week after, and the months after,” Schallenberg said, explaining that the European security architecture will somehow have to contain Russia both as a permanent member of the UN Security Council and as a nuclear power state. French President Emmanuel Macron also called for dialogue with the Kremlin. The spokesman of the Ministry of Foreign Affairs of Ukraine Oleh Nikolenko thanked Austria for cooperation and support in the UN and the EU. Also, he underlined: “calls to continue dialogue with Russia and respect its history and culture strengthen the Kremlin’s sense of impunity. They perceive it exclusively as an invitation to continue the genocide of Ukrainians.” He also invited Alexander Schallenberg to visit the Dnipro city, where Russia’s recent missile attack killed dozens of civilians. At the same time, in Russia, the messages of the Austrian minister and the French president were massively spread by the propaganda media.
|
|
|
|
The statements of Alexander Schallenberg and Emmanuel Macron are another example of an appeasement policy. Such statements endanger the unity of the EU for several reasons.
Firstly, these messages go against the official rhetoric of the European Union towards Russia. Today, the key for the West is to support Ukraine and find mechanisms to bring the aggressor to justice. Evidence of this is the statements of EU leaders and two recently adopted resolutions of the European Parliament and the NATO Parliamentary Assembly, in which the international community recognized Russia as a state sponsor of terrorism, and called for the creation of an International Tribunal for the Kremlin’s top leadership. Secondly, the retransmission of Moscow’s propaganda messages by EU politicians polarizes European society, undermining Europe’s resilience to hybrid threats. At the same time, it sends a signal to the Kremlin that “Europe is ready to compromise.” Thirdly, the narrative of “dialogue with Russia” can be used as an argument in Russian information operations against the West. Such messages strengthen the Putin regime’s position, illustrating simultaneously European politicians’ weakness. Fourthly, calls to respect Russia’s history and culture seem strange, considering the mass destruction of everything related to the Ukrainian nation, identity, and culture. Fifthly, the dialogue with the Kremlin now means giving the Russians an operational pause to restore their troops and accumulate resources for further attack. Kyiv will definitely not go for this. Also, Ukrainian society will not support this step.
Attempts to flirt with the aggressor are not new for the European politician. Viktor Orbán, Emmanuel Macron, Olaf Scholz, Mario Draghi, Andrej Babiš, etc. have all appealed for dialogue with Putin. Now it looks like part of a planned campaign of the so-called “lawyers of Russia” who are trying, in every possible way, to persuade Ukraine to negotiate and form a so-called “peace coalition” among European states. For example, Czech presidential candidate Andrej Babiš built his election campaign on so-called “peacekeeping” ideas and openly pro-Russian messages. The meeting with Macron on the eve of the first round of elections demonstrates the French leader’s commitment to such a policy and legitimizes the pro-Kremlin candidate. The results of support for such rhetoric in Czech society (35.12% for Babiš) illustrate the danger for the Czech Republic and Ukraine. A similar trend is observed in the citizen’s moods of other EU member states. The Kremlin’s plans are to intimidate Europe to influence Kyiv. Unfortunately, Russia’s fifth column in the EU is working efficiently, and the longer the war lasts, the more convincing their messages will become for tired Europeans. However, softness towards the aggressor carries a much more serious threat than price increases. The Kremlin’s policy of appeasement may lead to the fact that the tanks of the Russian occupiers will appear in Poland, the Baltic states, or the Czech Republic as in 1968. The EU must make greater efforts to counter Moscow’s anti-Ukrainian and anti-Western hybrid offensive. The leaders of the democratic bloc need to act quickly because time in the current situation is working both against Ukraine and against the collective West.
|
|
|
|
- You can support us by clicking to donate money via our website,
- transfer your money to our transparent bank account
2300405420/2010
- or simply by scanning the QR code within your
internet banking app.
|
|
|
|
|
|
SUBSCRIBE TO THIS NEWSLETTER |
|
|
|
|