Ukraine Economy Minister decides to resign

Minister of Economy and Trade of Ukraine Aivaras Abromavicius has decided to resign from post, stressing that the key reason for his resignation is the conflict with the deputy head of the Bloc of Petro Poroshenko, Ihor Kononenko.

“Me and my team, we are ready to go immediately. I am asking the parliament to vote for my resignation tomorrow,” said Abromavicius at a Tuesday’s briefing in Kyiv.

The Minister stressed that the key reason for his move was the conflict with the deputy head of the Bloc of Petro Poroshenko, Ihor Kononenko.

“Me and my team, we do not want to be a cover for blatant corruption or controlled puppets for those who want to establish control over public funds in style of the old government. I don’t want to come to Davos to meet with foreign investors and partners, telling them about our successes, while certain issues in the interests of certain individuals are solved behind my back,” reads the statement on the Ministry’s website.

“These individuals have names. And I do want to name one of them. This is Ihor Kononenko. As a representative of a political party that nominated me for the post of minister, he has done a lot recently in order to block my work and the work of my team. First, the BPP deputies controlled by Kononenko drafted a resolution on my resignation and submitted it to Parliament through Vidrodzhennia faction. For several months, it has gained just 18 votes,” Abromavicius said.

“During the year, Ihor Kononenko actively lobbied his people for the position of Ukrtransamiak director. Kononenko was personally interested in Ukrtransamiak where, instead of throwing out MP from the Party of Regions Bondyk from office, he got his people to manage the company together with the latter. MP from the BPP directly controlled by Kononenko pressed on appointment in Derzhzovnishinform, powder metallurgy enterprises, and the National Accreditation Agency of Ukraine,” says the statement.

The culmination of the lawlessness in personnel issues and desire to fully subdue [the money] flows was the will to have his [Kononenko’s] “own” deputy minister in the Ministry of Economy, who would be responsible for Naftogaz and other state-owned enterprises. The candidate presented a full package of documents for his appointment and said: “I want to be your deputy. I’m in Kononenko’s team, and my candidacy has been agreed above.” Then I received a call from Presidential Administration with an insistent recommendation to accept this person, and also another one – as deputy for defense issues. To which I replied: “I will not be part of this bargaining,” and asked to release from office.

“Eventually, Kononenko said he wants to hear my report at a faction meeting and consider my resignation. I decided to facilitate the task of Kononenko and his team, so I submitted a resignation letter,” said Abromavicius.

Abrmavicius thanked his team from the Ministry of Economic Development team, all the partners, international organizations, the business community and his allies in the Government and the Verkhovna Rada. “I would be happy to continue working on the reforms in the economy as a team with these people. But under these circumstances, it would be more honest to step aside and to do something that can actually bring results,” said Abromavicius. “I am a patriot of Ukraine. I live here, and so does my family. We managed to do a lot, but the point of no return has not yet been passed. The forces of evil want to rewind it back. We must get rid of ‘supervisors’ that have been milking Ukrainian economy. There should be no such people in Ukrainian politics and in the Government.”

As UNIAN reported earlier, Aivaras Abromavicius was appointed minister in December 2014. Prior to his appointment, he has earned 18 years of experience in investment companies with headquarters in Stockholm and other European capitals.

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Russia is a great power whose reach now exceeds its grasp. Although capable of bold moves, it is beset by strains.

In 2016, Moscow will face pressures to align ambitions with means, but this will require reforms, a doubtful prospect. The West has a stake in Russia’s course, but can influence it only at the margin.

Russia’s current policies put at risk three key ambitions—material well-being, political stability and the ability to exercise power and influence abroad.

In the first year after he came to power in 2000, Vladimir Putin oversaw a steady rise in Russia’s standard of living, fueled by higher prices for raw materials exports and accumulated economic reforms.

Since he returned to the Russian presidency in 2011, the economy has moved into crisis. Politics are driving too much economic policy and wasteful state enterprises squeeze the private sector. The oil-price drop and Ukraine-related sanctions weaken the commodity-driven economy, already sapped by policy rigidity, corruption and criminality. GDP in 2015 declined by four percent.

The outlook for 2016 might improve slightly, but downward risks will remain. Oil prices may stay low. Western sanctions are likely to persist. Perceiving high risk, investors on whom Russia depends to spur growth are reluctant. Proposed gas projects with China and Turkey are foundering, and the planned Nordstream 2 gas pipeline to Germany is controversial.

Except for terrorism and insurgency in parts of the North Caucasus, Russia appears outwardly stable. The anti-Putin demonstrations by tens of thousands of peaceful protesters in 2011-12 are no more.

After Russia’s intervention in Syria, an official poll claimed that Putin’s popularity had risen to almost 90 percent, though propagandistic state media can affect public attitudes and the results may have been influenced by respondents’ concerns with expressing a negative opinion.

Hints of discontent, however, are evident. A recent trucker strike over a new tax sparked the largest public protest in recent years; a poll showed a majority of respondents backing the drivers.

Though little publicized, social protests around the country have risen. The government is preparing the security forces in case of disturbances again around Duma elections, set for later this year. At an elite level, the war in Ukraine and the economic downturn have caused unease, but those dissatisfied are disorganized or intimidated.

Russia’s influence abroad is ebbing. An imperial mindset and insensitivity explain why. In 2005, Putin claimed the collapse of the Soviet empire “was the greatest geopolitical catastrophe of the century.”

In 2008 he told then-President George W. Bush, “Ukraine is not even a country.” Last year Putin said Kazakhstan had never been a state until President Nursultan Nazarbayev assumed power. Such attitudes stir resentment.

Moscow’s biggest stumble is in Ukraine. After the surprise, bloodless takeover of Crimea two years ago, the Kremlin became over-confident. It attacked eastern Ukraine with proxies and then its own forces, but Ukrainian defenders fought them to a standstill.

Russia has now lost much of its influence in Ukraine. A Pew poll last spring found that even in Ukraine’s east, 61 percent of respondents viewed Russia unfavorably.

Despite Russian occupation forces in Georgia, Moldova and Ukraine, all three have Association Agreements that bring them closer to the European Union. One reward is visa-free access. Other neighbors oppose some of Moscow’s wishes.

Belarus is resisting a Russian air base; Kazakhstan is stymying Putin’s aim to expand the Eurasian Economic Union (EEU) into a political and currency union; a new Lithuanian terminal for liquefied natural gas frees the Baltic states from Russia’s gas monopoly; and a million ethnic Russians live in the Baltics, but show no interest in joining Russia.

Moscow’s hopes have been frustrated elsewhere. In the wake of sanctions Russia “turned to the East,” but China is exploiting its isolation and offering little financing. Meanwhile, Beijing is investing billions of dollars in Central Asia, displacing Russia’s influence.

When Bashar al-Assad’s legions in Syria were reeling, Russian forces intervened. Together, however, they have not regained much lost territory. Iran may be drawing down its fighters, leaving Moscow more exposed. Russia is not powerful enough to succeed in Syria unless it works with the international community to find a political settlement that moves beyond the Assad era.

In all three contexts—domestic politics, economics and foreign policy—Russia is losing ground, but some of its leaders may not recognize this. Moscow has made some concessions to reality, such as floating the overvalued ruble, cutting the state budget and dialing down attacks in eastern Ukraine.

Russia can take other steps to strengthen its position, such as withdrawing from Ukraine, privatizing inefficient state enterprises, improving the investment climate and nurturing an EEU that lowers trade barriers and treats all members fairly.

This will not be easy for the Kremlin. It has replaced the earlier social contract, which promised people a rising standard of living in exchange for staying out of politics, with one based on rebuilding Russia as a great power. To back down could put at risk the current leadership, but policy stasis will hasten decline.

In an interview with the German magazine Bild on January 12, Putin indicated that he wanted to improve relations with the West, but that it first must acknowledge the injustice of its approach to Russia and remove sanctions.

This will not fly. The West will not sacrifice its values, but may be willing to accommodate legitimate interests. For example, the West is likely to maintain sanctions related to aggression in Ukraine, but seems ready to end them if and when Russia withdraws.

Russia will have a difficult year, but can take a number of steps to make it better.

If Moscow is willing to cooperate on Syria, the West should allow it a key role in the peace process. With effort and with bona fide, legitimate intent to solve the problem on both sides, it’s possible in these next months to find those Minsk agreements implemented.

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Russian President Vladimir Putin has said he is and has always been fond of communist “ideas”, while also comparing the Soviet code of conduct to the Bible, independent news agency Interfax reported.

Last week, Putin came under scrutiny from the Russian Communist Party for criticizing Vladimir Lenin, founder of the Soviet Union. Putin attacked his fellow Vladimir, holding Lenin responsible for the collapse of the USSR. Kremlin spokesman Dmitry Peskov then defended the president’s statement.

At a forum in Stavropol on Monday, Putin piled more criticism onto Lenin, but insisted his attitude to Communist ideas had never wavered and that to this day he keeps his party membership ticket at home.

“You know that I, like millions of Soviet citizens, over 20 million, was a member of the Communist Party of the USSR and not only was I a member of the party but I worked for almost 20 years for an organization called the Committee for State Security,” Putin said, referring to the KGB.

“I was not, as you know, a party member by necessity,” he said. “I liked Communist and socialist ideas very much and I like them still.”

In his speech, Putin insisted he was never just a “functionary” when it came to party matters and said the Moral Code of the Builder of Communism—a set of rules to be followed by all party members—“resembles the Bible a lot.”

According to the Russian president, the code revolved around key concepts such as brotherhood, equality and happiness.

However, Putin also conceded that these ideas were not implemented fully in the USSR and later admitted the Soviet Union began with repressions—something the Communists accused the tsar of.

Once again taking on Lenin, Putin said the founder of the Soviet Union was wrong in opposing his successor Joseph Stalin over the issue of how autonomous regions in the USSR should be.

Almost reiterating last week’s comments, Putin said Lenin laid “a landmine” underneath Russia when he opposed Stalin’s idea that separate republics should only have a “broad autonomy” and insisted instead that they should have the right to opt-out of the union whenever they want to.

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Visa system operates in Crimea as Russia finds ways to avoid US sanctions

The cards of the international payment system Visa are now operating in occupied Crimea. This news appeared on the site of Russia’s Genbank on 20 January 2016. It states that Visa cards will be accepted both for payment and cash withdrawal. However, the bank itself is under sanctions of U.S. Department of The Treasury and Visa together with MasterCard officially stopped working on the peninsula a year ago. How did this operation become possible?

Genbank is a Russian bank which started operating in 1993. On 1 March 2015, the bank’s assets amounted to over RUB 18 bn (USD 229.86 mn), own capital – RUB 1.95 bn (USD 24.9015 mn). At the end of 2014, Genbank‘s net profit was RUB 305 mn (USD 3.89 mn).

Now the bank describes itself out as “a base bank of the Crimean government (in August 2015, the executive authorities of the Republic of Crimea and the city of Federal significance Sevastopol became 50% of the shareholders of JSC Genbank) […] Today on the peninsula over 170 branches have been opened, the bank has more than 580 ATMs and 960 POS terminals.”

When the self-proclaimed government of Crimea received 50% of nominal capital of the bank, Sergey Aksyonov, the “prime-minister” of Crimea said that “authorities” of Crimea use equity participation in the nominal capital of Genbank for the development of new banking products, including loans for small businesses. The bank activities in occupied Crimea could not have been left unnoticed.

International payment systems Visa and MasterCard refused to operate with Russian banks in occupied Crimea already in December 2014. However, Russia found a way to work with the cards and avoid sanctions: by creating the inner National System of Payment Cards (NSPK). Banks should have transferred the traffic to NSPK by 31 March 2015.

MasterCard passed traffic in time, but Visa only on May 27. Formally, the traffic was handed over the cards of both systems, but, according to Russian media, only MasterCard worked in Crimea.

Visa was promised that problems with its operation would be resolved in the nearest feature. It’s noteworthy that MasterCard and Visa use different technologies of transmitting information, according to the Russian outlet Vedomosti referring to the words of an employee of a large bank. According to him, with MasterCard, it was easy, but to start operations through NSPK by Visa, sanctions banks had to “crack” Visa files and NSPK learned to do it only at the end of 2015. “Banks which are under sanctions are served under such scheme,” concluded the employee.

Such an approach is dangerous for banks through which an international payment system is connected. International payment systems can send a notification to a principal bank that its partner bank violates sanctions, and the former may stop or reduce cooperation.

Overall, information about the operation of MasterCard on the peninsula is contradicting. In the end of May 2015, Russian media hurried up to inform that it works, but some sources wrote about complaints of people who did not manage to receive their money using the card.

At the end of December 2015, the USA released its new list of sanctions. As Genbank was in it, international payment systems Visa and MasterCard stopped working with the bank. In fact, it does not matter anymore if the system of NSPK really works. So that the happy message of “Genbank” on it’s site appeared because of solving technical problems with VISA and NSPK which they faced before the new sanction least appeared.

Visa started to work in Crimea only now because its traffic was not fully localized before. “When Genbank‘s transaction data was transmitted from Crimea to the NSPK, it did not pass because NSPK sent a part of the information to Visa and it blocked the operation,” a banker told to Vedomosti. Also, according to Kommersant journalists, the new list of sanctions even accelerated the process of finding new ways to work with Visa, as before the operations were conducted not fully bypassing Visa and the difficulties with cards of Russian banks could appear only abroad.

Now the message of Genbank states:

“1. In all trade and service enterprises connected through JSC Genbank Visa cards of all Russian issuing banks are accepted within the National System of payment cards;

2. In all cash machines of Genbank Visa cards of all Russian issuing banks under the National System of Payment Cards are accepted.”

The question which remains is: if the system of NSPK really works, how can sanctions against Russian banks be implemented in practice?

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Russian Regrets? Crimeans disenchanted 2 years after annexation

As the second anniversary approaches of Crimea’s annexation by Russia, new reports from Crimea suggest the honeymoon may be over, and that that so-called “brightest page in history” may have seriously dimmed.

Ninety-five per cent of Crimeans voted in favour of joining Russia in a hastily-arranged 2014 referendum.Canada was among the many nations that declared that vote illegitimate, but it was clear that many Crimeans welcomed their return to Russia.

Though since that’s happened, all has not been well. Crimea is increasingly isolated internationally, and coping with heavy western sanctions. It has been in a state of emergency since last November, when important powerlines were sabotaged by suspected anti-Russian activists. Energy shortages are rampant. The economy is in shambles. There are reports of human rights abuses. And the prospects for returning to Ukraine, as some would hope, are vanishing.

Dmitry Porfirov left Crimea late last year and now lives in Lviv, Ukraine. Originally from Simferopol, he was against the annexation in 2014 and didn’t vote in the referendum. By the end of last year, he felt his life was just too unstable under Russian rule and left his homeland to provide a better life for his two daughters.

Inside Crimea, ethnic Tatars are one of the groups most fiercely opposed to Russian annexation. Tatars have a troubled history with Russia. The Soviets deported them from Crimea in the 1940s, sending them to central Asia. They only returned in the 1990s. And since Moscow has reclaimed Crimea, ethnic Tatars report being persecuted.

Ridvan Bari Urcosta, a Tatar and political scientist who left Crimea a few months after the Russia took control in 2014, shared his experience as a Tatar before and after the referendum vote.

We called the Russian embassy for a response to the issues we just heard about the Tartars in Crimea, as well as those Dmitry Porfirov talk about. The ambassador was not available, but they sent a statement.

With regards to human rights abuses against Tatars, the embassy says:

“These allegations are totally baseless and are coming from a small group of people aligning themselves with Ukrainian nationalists.They are not supported by the overwhelming majority of the Tatar community who welcome the positive changes that have happened after Crimea reunited with Russia… [These] include recognizing the Tatar language as one Crimea’s official languages.”

With regard to the recent sabotage of powerlines into Crimea, the statement says:

“This provocation failed because Russia managed to provide electricity and other energy and food supplies for the mainland.”

Prior to its annexation two years ago, tourism was one Crimea’s biggest earners. While there are signs that it could be slowly returning, the region seems destined to remain in this state for some time to come. Sanctions remain in place, even as, last week at the Davos Summit, Ukraine’s finance minister said her country would make a new diplomatic push to take back Crimea.

Journalist Dimiter Kenarov has been covering Crimea over the past two years. He says Crimea’s isolation needs to end as the situation is increasingly getting worse, and the region is becoming what he refers to as a “perfect breeding ground for large-scale corruption, profiteering and human rights violations.”

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Yatseniuk doubts that investors soon arrive to Ukraine, has stake on self-employment

Ukrainian Prime Minister Arseniy Yatseniuk has urged banks to finance the creation of new businesses, entrepreneurship and self-employment, offering new tools, as the quick arrival of foreign investors to the country is unlikely.

“Foreign investors would not come running here tomorrow, and you know better than me what it is linked to. The first and main reason is what will be in Donbas,” he said at a meeting with representatives of the banking sector held on January 16.

The prime minister said that the government sets a task of creating new jobs, including via self-employment.

“Friends, we do not credit production, we issue short-term credits, mainly consumption. [We need] credits so that people were able to create businesses and develop self-employment in Ukraine,” he said, addressing bankers.

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