In retaliation, Moscow has threatened to increase its military presence on Crimea – as if the Black Sea Fleet was not enough – which presumably means potentially breaching troop limits as detailed in the original agreement, which were around 27,000.
Increased Black Sea Fleet deployments, plus the 40,000 or so Russian troops in western Russia and those in Moldova’s breakaway Transnistria region on Ukraine’s southwest border would still represent a very significant threat to Ukraine.
Prime Minister Arseniy Yatseniuk expressed some optimism over prospects for new Western financing for Ukraine, with the expectation of $13.5 bilion in cash disbursements this year from the International Monetary Fund, World Bank, European Invesment Bank, European Bank for Reconstruction and Development and presumably the European Union.
He indicated the first disbursements of cash could be stalled until May, as the Verkovna Rada has first to pass a new public procurement law, which appears to be an IMF priority.
The suggestion is that a first $3 billion tranche is paid soon after.
The World Bank has agreed a $1 bilion loan to support the budget, while the U.S. Congress seems to have finally agreed on a $1 billion loan guarantee.
Presumably the $13.5 billion projection is based on three $3 billion IMF disbursements, in May, September, and perhaps December, and then the rest of the World Bank, EU, et al.
At the moment, May seems a long way away, and without new external support, and with continued political/security pressure, from Russia, the hryvnia looks set to weaken still further – up to Hr 11.60/$1 today, way ahead of the Hr 10.5/$1 average in the budget/IMF plan, which always appeared way too optimistic, as did the 3 percent real gross domestic product contraction forecast and a nominal GDP forecast of over Hr 1.5 trillion.
Dispute continues between Russia and Ukraine over gas pricing and supply, and debts, – with Ukraine’s energy minister, Yuri Prodan’s trip to Moscow this week’s only real achievement being an understanding just how far the two sides are apart.
Yatseniuk warned today though that the next stage from Russia will be to reduce gas supplies through Ukraine – presumably to Europe.
Gazprom’s spokesman only noted today that supplies will only continue as long as Ukraine pays for gas supplied, without really specifying what exactly will happen if they don’t pay/clear debts.
This all seems to have forced some serious concern in Europe, that this could cut gas supplies to Europe, and hence spurred a series of emergency meetings.
I doubt actually Moscow would do this, and it appears really, really eager at the moment to reassure to its European consumers that gas is flowing as normal through Ukraine to market in Europe.
If Moscow cuts supplies through Ukraine, Europe suffers (or goes cold), and Moscow suffers, through lower short term payments, and accelerated long run diversification away from Russia. This is probably going to happen anyway as a result of this crisis, but Russia does not want to force the pace there, and certainly does not want to be overly dependent on markets in Asia, who have proven in the past to be very hard bargainers over price.
Ukraine does have leverage over gas supply/transit, and can just not pay, and see what Moscow does – well I guess it could use this as a pretext for direct intervention.
Twenty three candidates have registered with the Central Election Commissoin for presidential elections scheduled for May 25 – Russia had been objecting to them being held earlier than towards the end of the year as agreed by former President Viktor Yanukovych at his meeting with then opposition and the three EU foreign ministers on Feb. 21, but seems now to have quietly dropped its objections.
In terms of the runners n’ riders, the top three are now clearly Petro Poroshenko, Yulia Tymoshenko and Sergey Tigipko.
Poroshenko’s bid seemed to have been boosted by support given by Vitali Klitschko over the past week, after he pulled out of the contest to run for the post of mayor of Kyiv.
Together Poroshenko and Klitschko had been polling around 33-35 percent before the agreement to ally and to run as president, and mayor.
But then strangely, Poroshenko with Klitschko went to visit the energy oligarch Dmytro Firtash in Vienna – perverse in so many respects, given that Firtash is currently on bail, awaiting a deportation hearing on charges lodged by the FBI for alleged racketeering.
Firtash is viewed as close to Moscow, on account of years-long relations in the energy sector. Suffice to say that this has been “manna from heaven” for the Tymoshenko bid, as she can now campaign on the agenda as being the only candidate who can stand up to Russia, and offer a more nationalist platform.
There have long been rumours of relations between Klitschko and Firtash, strenuously denied by the former politician, who undoubtedly earned his Maidan spurs through the past months of demonstrations and eventual revolution.
Amongst the other names of runners and riders who stand out are three prominent Regions’ politicians – which underlines that the former ruling party is split. These are former deputy PM, and former minister of energy (on numerous occasions), Yuriy Boiko, who has historically had close ties to Moscow and Firtash, plus former hardcore Khakhiv governor, Mykhaylo Dobkin, and then the more moderate Serhiy Tyhipko. Boiko and Dobkin are polling in the low single digits, with Tyhipko on around 8%, albeit he secured around 14% in the 2010 first round presidential contest, before then cutting a deal with Yanukovych for a ministerial post. Tyhipko will be pushing a reform agenda, but trying to work to normalise relations with Russia.
My sense still is that Poroshenko tops the first round vote – likely with 35%, Tymoshenko (a great campaigner and political operator) comes second with 15% or so, and the rest are all in single digits.
In a then two-horse race, which is likely to be bitter, Poroshenko looks best placed to win – but the risk is that any attempt to cut a deal with Party of Regions’ politicians, could lose him Maidan votes to Tymoshenko.
Presumably, Moscow is hoping that deals will be cut between the first and second round contests to ensure Regions’ representation in any presidential administration and future government, to eventually dash Ukraine’s bid for European integration. Moscow is hence perhaps biding its time to see how the election pans out, and what opportunities present through the campaign so as to enable it to exploit divisions within the domestic political spectrum.
Russian Foreign Minister Sergei Lavrov seems to have dusted off his “old cold war warrior” manual, and is reading to script, underlying today that “I don’t think we will be able to move the crisis out of its current phase and into political process” unless all Ukrainians’ concerns over the respect for their ethnic rights are taken into account, and real constitutional reforms are undertaken. The above begs the question what Lavrov thinks the current phase is exactly, if we are not in the political process.
And, the big blow to Russia – the news that a large US fast food retailer is closing its branches in Crimea – which underlines the difficulties now for MNCs in planning business operations in the region. The temptation will surely be to reduce exposure/business, as it remains acutely difficult to see where the current crisis is heading – the market seems unduly blasé, for a crisis which has been nothing if not unpredictable and is still very much on the edge.
Timothy Ash is an analyst with the Standard Bank in London.
