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    January 10, 2016

    Ukraine's Nightmare Will Continue in 2016

    Translated by Ollie Richardson for Fort Russ
    10th January, 2016

    A difficult year for relations between Russia and Ukraine has ended, whilst the next phase of the economic war begins:  litigation with respect to Eurobonds, another attempt to block electricity to Crimea and the prolongation of the Minsk agreements.

    The free trade area with Ukraine, in force since 2011, no longer exists as of January 1, 2016. On 30th December, Russian president Vladimir Putin signed the corresponding decree. In place of the free trade zone, which favoured Ukrainian products, these will now be subject to the applicable fees according to the tariffs of the Eurasian Union.

    The official reason for the termination of the free trade agreement with Ukraine is the implementation of a similar agreement with the European Union. As a result, the Russian market will experience an influx of european goods through the Ukrainian territory. But, according to some experts, the discrepancies are not limited to the economic aspects, but are also related to the confrontation between Kiev and Moscow over the fate of Donbass.

    The harsh reaction of Moscow is also a response to the refusal of Ukraine to pay the debt of $3 billion in Eurobonds, for which the Ukrainian government recently passed a moratorium of the payment of those obligations. Commenting on this decision, the Prime Minister Arseny Yatsenyuk claimed that it was a consequence of the refusal of Russia to restructure the debt obligations along with other creditors. “Therefore, the Ukrainian government approved a moratorium to stop the payment of any debt to Russia as of this moment, while Russia does not accept the position of Ukrainian debt restructuring,” said Yatsenyuk.

    The Minister of Finance Anton Siluanov has already announced his intention to go to court. But the Minister also stated his readiness to continue negotiations with the Ukrainian side: “If in this period [of courtesy], our Ukrainian colleagues change their minds and want to come back to discuss the payment of the debt, we are willing to consider the proposals or to take legal action,” said Siluanov.

    The reaction of Kiev was not long in coming. On the penultimate day of 2015, adventurers in Kiev launched literally a bundle of responses. It may be that the measure least damaging is the embargo on the import of products from Russia. According to the plans of the government, the proposal prohibits the import of meat, fish, dairy products, processed cheese, coffee, tea and other food products. Among the industrial products, it is prohibited to import equipment for railways, trams and locomotives.

    Obviously, the embargo will not affected the supply of gas or coal, required to balance the country's energy supply and to operate a large part of the metallurgical companies. Recently published information says that Naftogaz Ukraine intends to significantly increase the rate of transit of Russian gas.

    Another surprise of the New Year in Kiev was another attempt to cut the electricity to Crimea. According to the Minister of Fuel and Energy [of Crimea], Svetlana Borodulina, on the 30th of December, Ukraine completely  stopped the supply of electricity to the peninsula. Despite the messages from the authorities of Crimea to ensure that this will not affect the supply, Crimea continues to suffer from shortages and continues to rely on a part of the supply of electricity from Ukraine. Currently, a schedule has been established to limi consumption, which may cause power outages.

    As is evidenced by the information, the position of Kiev remains belligerent. All attempts to defuse the confrontation have failed. The discounts of the gas, the supply of coal to the industrial sector, the proposed restructuring of the debt or the recognition of Donbass as part of Ukraine have clashed with new provocations from Kiev.

    The main result of the disagreements between Russia and Ukraine is the continuation of the conflict in Donbass. The two objectives that need to be solved are the peace and the restoration of the socio-economic life in the region.

    The decision taken on New Year's Eve by the Normandy Four, to extend for a further year the period in force of the Minsk agreements, confirmed the fact that the situation is far from finished. In fact, the war continues regardless of any arrangements or formats of a ceasefire. The possibility of a resumption of hostilities this year remains high.

    All of this suggests that the West has no intention of altering its strategy and will continue to use Ukraine as a base to destabilize Russia. The strategy of Moscow should make certain adjustments, as certain issues may not be resolved this year or in 2017. For Ukraine, the tragic events of the past few years, they will, in the next few years, become the norm.
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