UKRAINE WATCH BRIEFING #5 |
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2 6 . 0 6 . - 0 8 . 0 7 . 2 0 2 2
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- Security situation update
- Situation on the eastern front
- The environment in war times
- Ukraine’s Recovery Plan Presented in Lugano
- How Ukraine can fight corruption
- Ukraine is preparing for a cold winter
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In the previous issue of the Ukraine Watch Briefing, our authors mistakenly referred to Taiwan as an "island." We at EVC respect sovereignty of Taiwan, recognize that the jurisdiction of its government extends beyond the island of Taiwan, and apologize for the improper wording.
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SECURITY SITUATION UPDATE |
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The security situation in Ukraine remains tense, with the Ukrainian Armed Forces defending positions in the Donbas area under the massive artillery attacks of the Russian army. Russian military command already reported having established control over the full territory of the Luhansk region, though Ukrainian Armed Forces claim the Russians have had few operational successes. Observers note that Russia took an operational pause and reduced its tempo of attacks in Donetsk to regroup forces. Missile strikes on the territory of Ukraine continue daily, mostly on Southern and Central parts of the country. It was noted that Russia started using S-300 Air Defence systems against land targets, shown by the recent example of its shelling of Mykolaiv on 9 July. Russia is also slowly advancing southwards to strengthen defensive constructions in the seized parts of Mykolaiv, Kherson and Zaporizhzhia regions. At the same time, Belarus is maintaining combat forces ready on the border with Ukraine.Several sabotage and reconnaissance groups seeping through the border with Belarus have been recorded in the Kyiv region. Reportedly they are professionally trained fighters, and include both citizens of Belarus and the Russian Federation.
Under these operational circumstances, Ukrainian Armed Forces reportedly started using efficiently the newly acquired systems: the first videos of HIMARS multiple rocket launchers on the battle front appeared online on 4 July. Experts conclude that despite the limited numbers of HIMARS currently available to Ukraine, the impact on the field can already be felt. With the prospect of new deliveries, Ukraine has started to plan an operation aimed at liberation of the occupied territories in the Kherson, Mykolaiv and Zaporizhzhia regions. Ukrainian Deputy Prime Minister Iryna Vereshchuk on 8 July asked the residents of these areas to evacuate to safe places, as the Ukrainian units are approaching Kherson, the biggest city occupied by the Russian invasion forces so far. Evacuation is necessary to unbind the hands of the Ukrainian military who are slowly but steadily liberating small villages while approaching the city, and to minimize potential casualties among the civilian population.
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Ukrainian defence Minister Reznikov claimed that Ukraine is planning liberation of the occupied territories in Southern Ukraine in accordance with President Zelensky’s order. The Black Sea coastal areas are vital to the country’s economy, and their de-occupation will largely depend on Ukraine’s ability to promptly amass a million-strong fighting force equipped with western weapons. At the moment, Ukraine operates nine HIMARS. Upon receiving the systems, the Ukrainian military began systematically targeting Russian ammunition storage facilities and military infrastructure behind the frontlines. Observers note the successful performance of the Ukrainian military intelligence as well, in targeting the Russian Army’s critical infrastructure. However, to make a significant impact in the battlefield, and ensure a successful counteroffensive in Southern Ukraine, the number of such systems needs to be significantly increased. With the possibility of Ukraine’s advancement in the southern region, experts do not exclude that Russian Armed Forces would attempt to distract the Ukrainian military with an attack from the territory of Belarus, though as of now its probability is assessed as low.
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SITUATION ON THE EASTERN FRONT |
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After long battles, the Ukrainian army left the cities of Severodonetsk and Lysychansk in the Luhansk region. Such a decision was made by the higher military command in order to save the lives of the soldiers. Thus, 90% of the territory of Luhansk region is currently under the temporary occupation of Russia.
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Earlier, on 11 September 2022 (the date may change), the Russians announced a "referendum" in the newly occupied territories (including the Kherson region). According to the information of the Russian mass media (it is impossible to verify it reliably), the training of the future members of the election commissions has already begun in Donetsk and Luhansk. It is planned that according to the "results of the referendum" the newly occupied territories will be able to be included in the composition of the Russian Federation, as it happened with Crimea in 2014.
This is planned, among other things, so that when the Armed Forces of Ukraine start a counteroffensive - recapturing previously lost Ukrainian territories, Moscow would declare that these territories are structural units of the Russian Federation, therefore Ukraine is "attacking" Russia. Therefore, this is - in the understanding of Moscow - a legitimate reason for declaring a full-fledged war against Kyiv (instead of the current "special operation").
According to British intelligence, in the near future the epicenter of hostilities will move to Donetsk region. Donetsk region is the next target, after Luhansk, which Moscow plans to capture completely as part of its "special operation". In particular, it is about the strategic route E-40. This road connects Donetsk and Kharkiv, and right in the middle are Izyum and Slovyansk, where fierce battles are already taking place.
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THE ENVIRONMENT IN WAR TIMES |
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Russian aggression mercilessly destroys Ukrainian nature. According to the Ministry of Ecology and Natural Recourses of Ukraine, more than 257 cases of ecocide have been recorded in Ukraine. First of all, there are explosions of oil depots, airstrikes with phosphorus bombs, nitrogen acid leakage, mining of territories, fires in nature reserves, etc. The estimated amount of damage caused to the environment is 4,7 billion EUR. Due to Russian military operations, 2.5 million hectares of Europe's environmental network are under threat of destructiontoday. These are 160 objects of the unique Emerald Network. Simultaneously with the Ukrainian side, ecological crimes are also recorded by experts of the UN Environment Programme. According to them, as a result of hostilities, the vast majority of regions of the country have suffered, and thousands of cases of air pollution, water, land, and degradation of ecosystems have been detected, which is a threat not only for Ukraine but also for neighbouring countries.
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Map of environmental consequences and risks of the fighting in Ukraine
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The war contaminates Ukrainian territory and poses a severe threat to the ecosystem of the European continent. When it comes to the environment, the consequences of destruction go far beyond the borders of local hostilities. The seizure and shelling of nuclear power plants and explosions of ammunition threaten a man-made disaster that can make the surrounding areas uninhabitable for human life. The recent critically low flight of a Russian missile over the South Ukraine Nuclear Power Plant illustrates that such a threat is real. To prevent a possible catastrophe, the international community must respond more actively to Russian attempts at nuclear terrorism. First of all, more pressure on the Kremlin is needed by strengthening sanctions and the global isolation of the aggressor.
Environmental restoration will take decades, ecologists say. However, it is necessary to plan the future today. To cope with the consequences of destruction and preserve the affected ecosystem, a "clean environment" should become a priority in Ukraine's post-war recovery. The climate modernization of Ukraine must be implemented according to the principles of the European Green Deal. And future industrial facilities must be built according to the standards of the "green economy" – with minimization of carbon footprint and dependence on fossil fuels. Such technologies work in developed countries. Ukraine should adopt this experience. The recently presented Ukraine Recovery Plan contains 9 reforms related to environmental restoration. For their successful implementation, Kyiv must enlist the support of international partners and civil society. After all, the implementation of such large-scale projects will require significant resources.
The end of hostilities is critically important now. This will be the starting point for the revival of the Ukrainian state and the unique ecosystem of the European continent.
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UKRAINE’S RECOVERY PLAN PRESENTED IN LUGANO |
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On 4-5 July 2022, Switzerland, jointly with Ukraine, hosted the international Ukraine Recovery Conference (URC 2022) in Lugano. The Ukrainian delegation presented at the conference the Ukrainian analogue of the "Marshall Plan" – the Ukraine Recovery Plan. It is designed for the next ten years, during which the Ukrainian leadership expects to implement 850 projects. To restore the country, Ukraine wants to attract about $750 billion, and its implementation will have three key stages, according to Prime Minister Shmyhal. “The first is to restore here and now what is possible and what is critical for people's lives. The second part is a quick recovery, since the number of destroyed objects, even basic infrastructure, is huge. The third stage of this plan is long-term transformation, concerning all areas, starting from education, medicine and ending with the "green transition" and the new military-industrial complex," he said.
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Ukraine’s Recovery Plan is an ambitious project, the implementation of which will largely depend on security developments. It will require an accumulation of resources from Ukraine’s international partners and allies. It is expected that more than half of the funds for the restoration of Ukraine (about 60%) should be confiscated assets of the Russian Federation, whereas the remaining 40% is expected to be covered by the private sector. However, there is no clarity of the legal procedures and practical mechanisms to ensure the transfer of the Russian confiscated assets to Ukraine. At the conference it was also highlighted that allocation of funding for Ukraine will require conditionality regarding reforms in critical areas such as rule of law, public administration, market transparency and modernization of the security and defence sector. Draft of the Recovery and Development Plan serves as an overarching framework guiding the recovery process, allowing for coordinated multi-stakeholder participation and partnerships. It presented an ambitious vision of ‘what’ to do, but didn’t completely answer the question of ‘how to do it’.
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HOW UKRAINE CAN FIGHT CORRUPTION |
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Since the beginning of Russia's full-scale invasion, documented damage to the infrastructure of Ukraine amounts to more than $95.2 billion. This information was presented at the conference on the restoration of Ukraine in Lugano. As a result of this conference, the country once again received confirmation of support from the international community. This also applies to financial assistance for reconstruction of cities and infrastructure facilities destroyed by Russia. International partners emphasized that the success of cooperation in restoring the country will depend on factors such as honesty, transparency and accountability in using financial aid. However, in 2021, Ukraine was placed at 122 out of 180 in the corruption perception rating of the international organization Transparency International.
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A country in a state of great war will be unable to restore all the losses Russia inflicts on it without external help. The level of support of Ukraine's partners in rebuilding the country will directly depend on the strengthening of the anti-corruption policy and the minimization of corruption risks when using financial aid.
According to research by the think tank Institute of Legislative Ideas, the main task for the country is to create a single, transparent mechanism for the use of funds to reconstruct Ukraine. Eight funds in Ukraine have already been created to support various fields. However, such a number of organizations will lead to non-transparent cost disposal, which may lead to the commission of corruption or corruption-related offenses.
Therefore, it is necessary to create one National Recovery Fund of Ukraine (NRFU), which would allocate of funds for reconstruction, communicate with other subjects of the recovery process, carry out purchases and form detailed reports on funding provision. This independent structure should be headed by a manager who would be elected through transparent competition. Also, the fund must have an independent supervisory board with access to any fund information. Each competitive selection must occur with the participation of state authorities, international organizations and civil society representatives.
Establishing a unified, transparent approach to using funds at the central and regional levels is important even before creating a single fund. Currently, all fundraising initiatives, such as the United24 platform and various public funds, lack transparency and accountability. These initiatives also use different procedures and approaches to work. The current Ukrainian legislation, based on which recovery processes are built, should be revised, cleaned of corruption risks and unjustified bureaucracy, and harmonized with EU legislation.
Since 2014, a powerful anti-corruption civic movement has developed in Ukraine. Representatives of this community should be involved in all processes of Ukraine's recovery on a competitive basis, together with representatives of state authorities and international organizations. This is only part of the steps that can improve the position of Ukraine in the field of anti-corruption policy and increase partners' trust in using financial assistance from other countries and international organizations. Currently, the government of Ukraine is more focused on attracting funds for reconstruction but does not pay enough attention to measures aimed at reducing corruption risks. Such actions are affected by the active phase of the war and the significant losses of critical infrastructure that require immediate restoration. However, when hostilities reduce, the issue of combating corruption may become very acute. Therefore, if Ukraine begins implementing measures to prevent corruption immediately, this will positively affect the level of cooperation with international partners during the war and in the post-war period.
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UKRAINE IS PREPARING FOR A COLD WINTER |
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The whole of Europe is currently suffering from Russia's energy blackmail. Germany, Switzerland, and others are introducing unprecedented measures to decrease the consumption of gas and prepare for the upcoming winter season. But economies of these countries are relatively robust in comparison with Ukraine, and moreover do not suffer directly from the war (their critical infrastructure is not a target of Russian missiles and artillery strikes). For Ukraine, this winter will be critical due to its partial dependence on import of gas and Russian attacks on the critical infrastructure of the country. The Ukrainian government is intensively preparing for the winter, warning citizens that this winter will be the hardest since independence and calling for all possible measures to be taken to reduce the consumption of energy resources and use alternative and autonomous types of heating.
Natural gas consumption in Ukraine in 2021 amounted to 26.8 billion cubic meters (bcm). At the same time, 8.6 bcm were used for the needs of the population (32% of total consumption), heat production 6.3 bcm (23.5%), industry 11.9 bcm (44.6%). At the same time, according to the results of 2021, Ukraine produced 19.79 bcm of its own gas. Taking into account the drop in consumption due to the shutdown of industry, the destruction of entire cities (such as Mariupol), and the departure of a large part of the population abroad, Ukraine will lack less than a quarter of the required volume of gas this year. There is no time, money, or opportunity to replace it with alternative sourcesand energy efficiency measures. So, one solution remains - import.
The Cabinet of Ministers of Ukraine set a requirement to fill underground gas storages to 19 bcm before the beginning of the heating season. The state energy monopolist "Naftohaz of Ukraine" believes that 15 bcm could be sufficient. However, the government is obviously hedging. Currently, reserves exceed 11 bcm. In parallel with the injection of domestically produced gas, Ukraine needs an extra 6 bcm from other sources. The key questions are where to buy this gas and at what costs.
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Currently, gas is imported into Ukraine in small volumes from Poland, Slovakia and Hungary. Naftohaz is currently negotiating supplies of liquefied natural gas (LNG) in the fourth quarter of this year. There are certain technological limitations - Ukraine has never physically imported LNG and does not have LNG terminals. Therefore, it is necessary to bring LNG to terminals in Europe and then secure transit through existing pipelines to Ukraine. It is difficult, but possible. Ukraine is working on expanding the possibilities of gas import along the trans-Balkan route – to have an access to LNG terminals in Turkey and Greece.
As for funds, the situation is more complicated. The government allowed Naftohaz to reduce its dividend payment from 95% to 30% for 2021, allocating UAH 8.5 billion (about $250 million) for imports. But taking into account the record prices of gas on spot markets, this sum is not sufficient. Therefore, Naftohaz requires extra financial assistance or support from the state budget or external sources. The EBRD was the first to offer assistance. In June, the EBRD announced a decision to allocate 300 million EUR. On 6 July, the Cabinet of Ministers provided a state guarantee for the loan. Negotiations are also ongoing with the USA regarding gas supplies within the framework of lend-lease (gas now, payment after the war).
The main part of the funds for imports (about UAH 200 billion - $5.7 billion) is planned to be blocked through the mechanism of legislative changes. It is about compensating for the difference in gas tariffs without raising gas tariffs for Ukrainians (they currently pay the equivalent of less than $0.25 per m3) for gas. Heat producers and gas supply companies would receive this difference. An alternative solution is to provide targeted subsidies to those consumers who cannot pay their bills. But the Government believes that during the war, when millions of people lost their homes or the opportunity to pay for utility services, a more appropriate option would be to directly compensate heat producers and suppliers who buy gas from Naftohaz. Some members of parliament and experts oppose this approach without proposing any alternative solution.
One more risk that Ukraine faces on the eve of winter is the destruction of the gas supply infrastructure. The Russian military has already destroyed many gas pipelines and several thermal power plants (e.g. Okhtyrska thermal power plant) which produce not only electricity but also heat for the population. With the help of international donorssuch as USAID, a variety of mechanisms of state and local financing is involved. During the recovery process the possibility of using other sources are tested - for example, some boilers will use biomass. Ukraine calls on foreign companies to implement projects for the reconstruction of war-torn Ukrainian cities using modern energy-efficient means thus minimizing the use of gas.
Even if these efforts are partially successful, unfortunately there are no guarantees that a Russian missile will not hit newly repaired powerplants again, leaving tens or hundreds of thousands of people without electricity and heat in the winter time. This danger especially applies to regions located less than 100 km from the border with Russia and Belarus.
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CZK: Transparent account
AN: 2300405420/2010
VS: 2022
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