ISSUE 31

29.05 - 04.06.2023

Dear readers,

We are sad to announce that this is the last issue of our newsletter (at least for a while).
We would like to thank all of our readers for the loyalty and trust that was put into our newsletter. We hope that our Ukraine Watch Briefing was something that gave you additional value to your viewpoint about Russia, the Russian aggression and the Kremlin's influence in the Central and Eastern European region. We tried our best to provide you with valuable information that could be useful to your further practice and knowledge.

To our deep regret, we have to end our publications due to major changes in the organisation.

The European Values Center for Security Policy has presented a new strategic plan for the development of its activities. They will primarily focus on a sustainable Czech strategy towards Taiwan and China in the European context, from both the Prague and Taipei offices of the organisation. The People’s Republic of China is, next to the Russian Federation, the most important enemy of liberal democracies and there will be a strategic discussion in the European and transatlantic context in the coming years on how to deal with the upcoming conflict. Part of the leadership of European Values is establishing a new partner organisation that will focus on disinformation, Russian influence in the Czech-Slovak context and current and future geopolitical challenges facing the democratic West. You can find more information about new strategy on our website. We will introduce you our new projects soon.

Once again, thank you very much from all members of the Ukraine Watch Briefing contributors.

Slava Ukraini. Heroyam Slava!

Information Defense Hub Team

• Security situation update
• A new stage of nuclear blackmail of Russia and Belarus
• The impact of the war on Ukraine's economy
• Ukraine Recovery Conference in London: expectations and realities
• How Ukraine is restoring its energy system
• The “Institute of Registered Partnerships” draft law: a solution to end discrimination

You can find a PDF version of this issue suitable for printing at the bottom of the newsletter.

The situation on the Bakhmut front has changed. There is a significant decline in any active hostile actions with an increase in the number of attacks from heavy weapons, mainly from artillery and mortar fire. The Russian forces’ battlefield posture shifted, with the withdrawal of mercenary Wagner units and their replacement by the regular Russian army and air assault units. Moscow seeks to offensively seize the initiative to prevent Ukrainian counterattacks, according to Ukraine’s Ground Forces Commander Oleksandr Syrskyi. In addition, he said that the Armed Forces of Ukraine (AFU) suspended their advance on the flanks on the Bakhmut front over the past few days.

Russia continued intensive daily missile attacks throughout Ukraine, targeting the capital and a number of other cities. These attacks are costly for the Kremlin; Russia spent up to $17 million on its strike on Kyiv on 1 June. In addition to missiles, Russia continues to fly Iranian kamikaze drones. The launch of more than 300 Shahed drones was recorded in May, marking its most intensive to date. According to the UK Defence Intelligence, Russia uses drones in an attempt to exhaust Ukraine of its advanced air defense missiles, but Ukraine neutralized at least 90% of the incoming UAVs mostly using its older and cheaper air defense weapons, as well as through electronic jamming tactics. Despite of overall success of Ukraine’s air defense, several Russian missiles and UAVs nonetheless reach the targets, for instance, two Russian cruise missiles struck an operational airfield near Kropyvnytskyi on the night of 3-4 June. Also, in an attack on Pidhorodne (a suburb of Dnipro), two two-story residential buildings were hit, killing one two-year-old and leaving 22 people – including five children injured.  

Meanwhile, the Russian Volunteer Corps (RDC) and Freedom of Russia Legion (FRL) conducted another raid into the Belgorod Oblast of Russia. According to observers, Russia’s forces appeared this time to be better prepared and coordinated in responding to this raid. While yet undetermined, these operations may force Russian commanders to strengthen defenses in Russia’s border regions rather than reinforce their lines in occupied parts of Ukraine. The Russian Volunteer Corps and the Freedom of Russia Legion reported that they had captured Russian soldiers in Belgorod Oblast and demanded a meeting with the local governor Vyacheslav Gladkov. who declined the offer, after which the prisoners, according to RDC,r were handed over to the Ukrainian side for future POW exchange. 

ANALYSIS

In late May – beginning of June, preceding Kyiv’s long-expected counter-offensive, a number of "shaping operations" ranging from symbolic – and anonymous - UAV strikes on Moscow to strategically significant attacks at the territories occupied by the Russians (for example, Berdiansk and Melitopol). According to defense officials, the purpose of these operations is to deceive the enemy, disrupt its mindset, and otherwise "shape" the battlefield before a large offensive. Ukraine continues to signal that the counteroffensive is about to start and President Volodymyr Zelenskyy confirmed to foreign media that the Armed Forces of Ukraine are ready. Yet despite Ukrainian assessments, Russian Armed Forces continue to gradually advance in Donetsk and Luhansk, the thrust of their efforts aimed at the full occupation of the two oblasts.   

On March 25, Vladimir Putin declared s that Russia would deploy tactical nuclear weapons on Belarus, following Russia’s suspension of participation in the framework of the Strategic Arms Reduction Treaty in February. On May 25, Russia and Belarus signed agreements to deploy nuclear weapons in Belarus. The self-proclaimed President of Belarus Alexander Lukashenka said that the Russian Federation had already begun relocating nuclear weapons. He also called on other countries to join the so-called "Union State" to have common nuclear weapons. Meanwhile, the President of Kazakhstan Kassym-Jomart Tokayev responded with a refusal. "As for nuclear weapons, we do not need them as we have joined the Treaty on the Non-Proliferation of Nuclear Weapons and the Test Ban Treaty. We remain committed to our obligations under these international documents," he said. The European Union has condemned the agreements between Russia and Belarus, emphasizing that this decision contradicts Russia's obligations under the Budapest Memorandum, according to which Belarus eliminated all nuclear weapons on its territory. Washington has also condemned Russia's atomic weapons move to Belarus, but will not change its nuclear policy.

ANALYSIS

The Kremlin's nuclear weapon-rattling rhetoric is one of the tools of its hybrid pressure on Western countries. According to analysts, there is no military logic in the relocation of the missiles, as Russia can launch a nuclear strike against any target from its own territory. Therefore, the statements about deploying Russian atomic weapons to the part of Belarus are another stage of their information and psychological operations.

Moscow's efforts at nuclear blackmail are intensifying now for several reasons. First, given that the occupying forces of Russia cannot demonstrate results on the battlefield, suffer significant losses in Ukraine, and, in the face of a likely defeat after the Ukrainian counter-offensive, the Kremlin must resort to alternative means of influence. Secondly, nuclear intimidation is closely linked to another popular narrative known as, "peace on Moscow's terms," to persuade Kyiv to negotiate through Kremlin-friendly "peace mediators." Moscow is now actively promoting both the nuclear and "peace talks"  narratives, the former to intimidate and of the latter to deceive. Combined, they aim to polarize Euro-Atlantic unity and Western societies in general. Thirdly, Moscow is raising the stakes before the NATO Summit in Vilnius in July to attract attention and influence states that are presenting as neutral in the Russian-Ukrainian war.

In addition to its propagandistic purposes, Russia is further strengthening its control over the Belarusian army by deploying nuclear weapons on its territory. Analysts at the American Institute for the Study of War cite the statement of Russian Defense Minister Sergei Shoigu, who promised to send additional Russian troops to Belarus "to develop military infrastructure, expand joint combat training, and conduct intelligence activities near the borders of the 'Union State.'" 

Both goals indicate that Moscow has no intention of stopping its hybrid aggression and will continue to escalate the situation. 

Last spring, the World Bank predicted that Ukraine's GDP could fall by 75% due to the war. The government of Ukraine had more positive forecasts and believed that the drop could reach 44%. The reality turned out to be better. According to the economic results of 2022, the fall in GDP was at the level of 30.4%. Despite the enormous losses of state and private enterprises, the blockage of ports, the massive population displacement, and the conscription’s impact on labor capacity, the worst forecasts regarding the Ukrainian economy did not occur; however, as long as Russia continues to wage its war against Ukraine, the economic situation will not be able to demonstrate any significant improvement. 

ANALYSIS

Ukraine and its economy have been able to endure for two main reasons: Ukrainians’ resilience and the considerable help of partner countries. As of February 2023, international aid exceeded $38 billion. This support ensures the provision of critical, non-military expenses throughout the country. At the beginning of the war, Ukraine had the support of its partners, but the amount of financial and technical assistance exceeded the experts' expectations. Thanks to the tough fight against  Russian occupiers and proactive diplomatic engagement, the country's economy is showing better results than was predicted last year. The National Bank of Ukraine expects the real GDP to grow by 0.3% in 2023. The projected increase is slight, but noteworthy in that it occurs during a war being fought on a frontline of 1,500 km, exacerbated by a ceaseless bombing across the country.  

Ukraine's export and import logistics have undergone significant changes. The Russians destroyed, occupied, or blocked most of the seaports. These routes provided 75% of the country's trade turnover until February 24. As a consequence, Ukraine developed new routes. Now, Ukraine’s primary trade partneres are bordering EU countries. Domestic production has also radically changed. Currently, the main manufacturing hub is in the west of Ukraine. About 700 enterprises from the country’s east and south relocated there. Therefore, Ukraine's GDP is currently in flux and risks remaining so even after a cessation of hostilities. 

In order to gradually restore its economy, Ukraine must make several changes in its domestic policy. Firstly, it is necessary to continue the institutional and legal reforms necessary for European integration. The European market is now the most important for the country, and it is worth doing everything possible to incorporate it. It is further essential to rethink Ukraine’s export strategy. Ukraine has focused on selling goods with low-added value abroad for decades; however, Russia having destroyed a large part of the country's metallurgical industry and reduced agricultural areas in the east and south should encourage Ukraine to develop high-tech enterprises and create conditions to attract foreign investment. One key sector is IT, which has demonstrated noteworthy resilience over the past year. The involvement of IT tools in strategic areas such as the military industry and agro-industrial complex will help to restore the Ukrainian economy. 

Now it isn't easy to make clear plans for the future. In addition, we should not expect a quick recovery of the economy even after victory. It is crucial not to allow the country to become frustrated and to gradually implement plans to improve the situation in the economic sphere. 

The key 2023 event on Ukraine reconstruction is rapidly approaching. On June 21-22, the Ukraine Recovery Conference (URC) jointly organized by UK and Ukraine will be held in London. URC is an annual high-level event established in 2017 with the last one conducted in Lugano, Switzerland in 2022. The aim of URC in 2023 is to mobilize international support for Ukraine's economic and social stabilization and recovery from the effects of war. This year’s theme is engaging the private sector and those reforms needed to attract foreign investment. 

Information about the conference in the public domain is for now limited to generalized messages. However, media insiders claim that Ukraine’s agenda and expectations are quite ambitious. Some of them were outlined by Ukrainian Minister of Finance  Serhii Marchenko during the last meeting of Ukraine’s Multi-Agency Donor Coordination Platform in May. He mentioned that during this year’s URC, Ukraine will present those priority recovery projects that are ongoing and need funding from international partners, businesses, and financial organizations. 

Ukraine will additionally seek to forge a joint framework on public and private war risk insurance together with representatives of partner countries and international financial institutions (IFIs). Among others, the government will also officially launch a digital ecosystem known as DREAM that will monitor all stages of Ukraine’s myriad recovery projects. 

ANALYSIS

As indicated, the two primary URC 2023  themes are the mobilization of funds for Ukraine’s urgent rapid recovery and private sector support.  As to the former, Ukraine needs $14.1 billion in 2023 to implement rapid recovery projects, according to the Ukrainian government and backed by the World Bank's updated Rapid Damages and Needs Assessment (RDNA).  The World Bank and the Government of Ukraine jointly identified five critical areas for recovery in 2023: housing, energy infrastructure, critical and social infrastructure, humanitarian demining, and revival of business activity. To meet those needs, the Ukrainian government allocated $3.3 billion from the state budget, with the remaining sum of $10.8 billion to be potentially provided by Ukraine’s international partners and IFIs through various instruments. While securing partners’ commitments to fund these priority areas will be a top priority at, Ukraine’s ambitions to receive partners’ commitments covering all of $10.8 billion by summer and spend the funds by the end of the year is less realistic. Securing these funds will be challenging, especially given that Ukraine’s donors are doubting whether Ukraine is even capable of absorbing this sum by the end of 2023. Another requirement is that donors and IFIs are expecting Ukraine to present particular projects to justify the $10.8 billion request. 

Another hope is to mobilize international and domestic businesses to proactively support Ukraine’s recovery. Ukraine’s vision is that the private sector be the key driver of economic recovery and long-term reconstruction. Yet international firms are reluctant to invest in a risky environment where their facilities or investments can be readily destroyed by Russian rockets. Under such circumstances, large-scale recovery depends on property insurance availability despite significant war risk. Several short-term solutions have been proposed. Trust fund-based models have been proposed as concepts for supporting long-term reconstruction. 

Ukraine’s international partners have their own expectations. These concern Ukraine’s reforms and reconstruction processes. State donors must ensure make sure the money of their taxpayers will be used wisely and transparently. Ukraine still has a lot of internal risks for businesses, for example, some aspects of the judiciary and law enforcement bodies. Risks associated with the unenforced rule of law cannot be covered by war insurance. Accordingly, the developed rule of law would be the first step toward a favorable business climate. International partners require a solid strategy for Ukraine’s recovery, long-term transformation, and reforms to clear its path toward the EU. Ukraine has an ambitious goal to open accession talks with the EU by the end of 2023. For this to happen, the EU will need to see substantive progress in Ukraine’s EU integration-related reforms. 

The scale of damage to the Ukrainian energy system from October 2022 to March 2023 is colossal. Ukraine has experienced several blackouts, long-term power outages, and restrictions on all types of energy consumption. The targeted attacks of Russian missiles and drones on power plants and distribution networks have been nearly daily and had an impact. Spring and summer typically permit annual repairs of power units; but for now, this is a task multiplied several times. Not only it is necessary to undertake maintenance, but outright reconstruction of destroyed infrastructure. When a power unit is being repaired, it does not produce. Accordingly, the Ukrainian government is slightly limiting the electricity consumption of citizens.

Power outages during the war reached a record 27 GW. The Ukrainian energy system emerged from the 2022-23 winter decimated by 40–50%: about half of the power that the energy system had before the invasion was temporarily lost, while approximately 40% of the main high-voltage network facilities (transformer substations, etc.) were also damaged. Nonetheless, the functionality of 70% of Ukrenergo’s damaged facilities has been restored. DTEK, the country’s largest private energy holding company, announced that 27 power plant units are set for repair this year. To date four have been serviced and another nine are under repairs. Since January, DTEK has invested more than UAH 1.2 billion (approx. €30 million) to repair thermal power plants. Active repairs have begun at nuclear power plants.

Significant questions remain concerning financial resources, the degree of restoration, and readiness for winter 2023-24.

ANALYSIS

Ukrainian authorities took an extremely unpopular, but necessary step to raise the cost of electricity starting June 1, during the war, despite an earlier promise not to do so. The government explained its need for additional funds in preparation for the next heating season. Since the beginning of Russia’s full-scale invasion, the combined revenues of Ukrenergo and regional energy companies fell by approximately 30%. Power production companies are short of funds due to dysfunctional facilities, a diminished consumer market, and the fact that some power facilities are under occupation, notably the Zaporizhzhia Nuclear Power Plant, Kakhovka Hydroelectric Power Plant, and thermal power plants in the Donetsk, Zaporizhzhia, and Luhansk regions. Prior to Russia’s full-scale invasion, the energy sector was underfunded for some time, leading to a renewed prioritization of financial resources since February 2022. 

Today, electricity for the population now costs UAH 2.64/kWh  (before that it was 1.44 UAH/kWh if monthly consumption was up to 250 kWh and 1.68 UAH/kWh if it was higher). Despite the increase, electricity in Ukraine remains the lowest in Europe. However, an increase in electricity prices inevitably leads to an increase in the prices of other utilities and the prices of various goods. It is also a painful blow for the population exhausted by the tension of daily shelling and bombing, made worse by a high level of unemployment and displacement. The Minister of Energy reassured Ukrainians that after the increase in the electricity prices for household consumers, subsidies and the night tariff (it is 50% of the total tariff) will be preserved. The second stage of raising electricity tariffs for household consumers is not foreseen at least until the end of the year. At the same time, the minister considers the market price of electricity to be 5.5 UAH/kWh. 

The situation in the energy sector remains unstable. On May 30, almost 2 million consumers were left without electricity due to the desynchronization of the energy system in Ukraine. The system was balanced thanks to Ukrainian hydroelectricity. However, the constant shelling and bombing of energy facilities continue. To maintain a balance in supply, Ukraine simultaneously exports and imports electricity, in the mornings and afternoon hours, electricity is exported to Poland, and in the afternoon and evening hours imported from Slovakia and Moldova. 

The import of electricity from the European Union or Moldova is considered to be one of the options to save the situation in the next winter too. "The disconnection of consumers from electricity we saw in the winter is the last step that we, as an energy system operator, can take to balance and keep the energy system intact," said Volodymyr Kudrytskyi, chairman of the board of NEC "Ukrenergo." Another option would be to develop additional generation capacity from natural gas. 

Regarding power infrastructure restoration, experts agree that there is no need to restore everything exactly as it was before the war, instead pursuing a more decentralized electricity network. In Ukraine, it is planned to change the format of the energy system to build small-scale "green" power plants. After all, it is more difficult to disable many small power plants with missiles or drones than one large one. Decentralization of the energy system is not only a question of efficiency but also a requirement of security. Ukraine plans, to apply more modern technical solutions in the protection of its infrastructure. Discussions are underway as to how to change the new Ukrenergo substations so that they are better automated and protected from Russian attacks.

According to the report (RDNA2) of the Government of Ukraine, the World Bank Group, and the European Commission, the Ukrainian energy industry in the coming years will need $5.7 billion. In any case, billions of dollars are needed before winter - both for generation and for substations’ upkeep. It will be necessary throughout the coming months to accumulate sufficient finances to this end. In addition to raising electricity prices, Kyiv will need to rely on financial support from the European Bank for Reconstruction and Development, the World Bank, the European Investment Bank, the German State Development Bank KfW, USAID, and UNDP. Ukrenergo has to date received loans and grants amounting to nearly €600 million from international financial institutions and European governments. Ukrenergo also receives funding from the Japanese government, UN entities, and others. These organizations, under a special procedure, finance the purchase of equipment for the restoration of facilities. They allocated about €100 million for this. There is still time before the cold season, but it must be used extremely efficiently.

On 7 March, Draft law No. 9103 on the Institute of Registered Partnerships was registered in the Verkhovna Rada of Ukraine. The Law introduces a legal status of a close relative for partners in a registered partnership (of the same and opposite sex), regulating property and non-property rights, obligations, social protection, inheritance issues, etc. At the same time, the Ministry of Justice of Ukraine is working on another draft law regarding registered partnerships which will be on the matter of joint households.

ANALYSIS

According to Inna Sovsun, the MP and initiator of the bill, the main reason for this initiative is the complex situation facing LGBT+ military personnel. In the AFU,  LGBT+ servicemen have the same duties as everyone else, but fewer rights as regards their partners, who are not legally recognized as relatives. As a consequence, LGBT+ partners are not allowed into the intensive care units or morgues, nor are they notified of capture or injury. 

In July 2022, a petition to President Zelenskyy on the legalization of same-sex marriages gained more than 25,000 signatures. The President announced that no decision will be made during the war because the Constitution (which states that marriage is a union between a man and a woman) cannot be changed at this time; however, the government was deliberating the registration of civil partnerships.

Ukraine declared its intention to legislate the institution of civil partnership for heterosexual and homosexual couples back in 2015. when the Action Plan for the implementation of the National Strategy in the field of Human Rights for the period until 2020 was approved, but then this intention was never implemented. In 2018, the Ministry of Justice reported that this point of the Action Plan could not be implemented due to public resistance from representatives of conservative groups and the Ukrainian Council of Churches and Religious Organizations. In 2021, a new plan was developed that the Ministry of Justice undertook to fulfill by December 2023. “It turned out that now the society is more ready for this,”  said Deputy Minister of European Integration at the Ministry of Justice, Valeriia Kolomiets.

In 1991, Ukraine became the first of the countries of the former USSR to abolish criminal liability for consensual same-sex relations. Still, some Ukrainian politicians have been trying to fuel anti-LGBT sentiments in society. Typically, their ambiguous statements coincided with narratives emanating from the Russian Federation, suggesting that some legislative initiatives were inspired by the experience of parliamentarians of the Russian Federation “We know that they end with the narrowing of human rights, as happened in Russia," says Borys Khmilevskyi, head of the human rights division of the "Alliance Global" NGO. According to Khmilevskyi, there is not much public demand for such initiatives among Ukrainians; however individual politicians seek to impose their worldview through such draft laws under the guise of representing the society.

In Ukrainian society, over the past six years, the number of those who have a generally negative attitude towards LGBT+ people has decreased by one-and-a-half from 60.4% to 38.2%. Since 2016, the share of those who declaratively support their full equality has doubled from 33.4% to 63.7%, and the share of those who believe that the rights of LGBT people should be limited in some way has almost halved from 45.2% to 25.9%.  

On 1 June, the European Court of Human Rights (ECHR) ruled against Ukraine for discrimination based on sexual orientation. Inna Sovsun believes this will help speed up the process of adopting the draft law on registered partnerships.

Russia's current war against Ukraine demonstrated the readiness of the democratic world to unite in the fight for freedom and liberal values. However, there are democracies all over the world in need of protection against autocracies willing to challenge international order. One year from the start of full-scale invasion, we introduce you the report “War in Ukraine: Lessons identified and lessons learned“, which analyzes policies and practices that have impacted Ukraine’s resilience in key sectors. Outcomes of this research can be used as recommendations for other democracies building resilience against conventional, hybrid, or other threats (e.g., natural disasters), from Europe to the Pacific.

Thank you.

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