Aid to Ukraine: Barrel without a bottom
The failed state of Kiev: How corruption makes Ukraine a dysfunctional entity
Published: January 1, 2019, 5:11 am
Before Christmas the International Monetary Fund (IMF) approved a new loan to Ukraine for 3,9 billion dollars. This loan was, according to repeated statements in the media by Ukrainian authorities, absolutely needed and long-awaited as the country faces huge external debts, hostilities at the Eastern front and rising levels of poverty.
Therefore, anyone trying to understand the situation in Ukraine might have had an idea that a new IMF loan would be used by the Ukrainian leadership for at least minimal efforts on stabilizing of the dire sociо-economic situation in the country.
But the Ukrainian leadership itself evidently had other plans for the IMF money.
Ukrainian media exploded with the news announced by the Ukrainian Ministry of Information Policy, when the Ministry ordered advertising videos on the US CNN channel for 15.4 million Hryvnia (around $550 000) right away. But neither the message that the video is supposed to convey, nor the target audience are very clear.
At the same time the Ukrainian government announced hikes in gas prices as well as increasing heating tariffs for the population.
These price hikes beg the question of how exactly funding by the state in Ukraine is managed, especially in the light of the following couple of brief facts: Ukraine occupies the 130th place on the Corruption Perceptions Index, research provided by Transparency International shows, and 150th place on the Index of Economic Freedom, according to The Heritage Foundation and The Wall Street Journal.
One of the biggest corruption scandals of Ukraine in recent years that has been stirring up resentment in Ukrainian society, has been the so-called “Rotterdam-plus” scheme. Rotterdam-plus is the method of pricing the fuel component – coal – in the production of electricity at plants in Ukraine.
The scheme started in May 2016, as a result of Ukraine’s loss of control over part of the Donetsk coal basin following the conflict in Donbass. Since Donbass coal was previously almost completely under control of the rebels, the Ukrainian government decided to ensure energy independence and to buy coal on the international stock exchange in Netherlands. The actual coal comes from South Africa and South America.
The cost of fuel, according to the Rotterdam-plus formula, is determined by the price of coal in the ports of either Amsterdam, Rotterdam or Antwerp, plus the cost of its delivery to Ukraine.
So, according to this formula, Ukrainian electricity plants had to conclude contracts with foreign counterparties to buy coal priced on the basis of this formula. But in reality most of electricity plants – which are mostly tate enterprises anyway – were still buying coal in the Donbass region at the price of around 700 hryvnias (around 25 dollars) per ton.
Onto the price of coal – the main component of the cost price of 1800-2000 hryvnias (around 64.5-71.7 dollars) per ton – the tariff was nevertheless added.
And the fact remains that from January to November 2016, the price of electricity in Ukraine doubled while the coal for the electricity plants was still delivered from Donbass, and not from foreign countries.
Also, the price keeps getting higher with each passing year. Clearly, “Rotterdam-plus” has become a golden goose for certain state structures while being an additional burden for the population, since it is costing about 15 billion hryvnias (around 500 million dollars) extra per year.
Other recent corruption scandals include the so-called “September stories”. On September 13 2018, three Ukrainian top officials, namely the deputy head of the Security Service of Ukraine (SSU) Pavel Demchina, the Minister of Justice Pavel Petrenko and the Minister of Infrastructure Vladimir Omelyan were linked to corruption.
Demchina and Omelyan were suspected of illegal enrichment, while Petrenko was suspected of submitting false information in a tax declaration.
Thus, in the pre-election period in Ukraine, chances are that massive corruption and fraud details will soon be leaked. That obviously does not mean that there was less corruption cases before the election campaign started.
Actually, Ukraine has been climbing on the corruption index with every passing year – at least according to Transparency International.
The pre-election period in Ukraine may prove to be a boon to those who like to share interesting facts about corrupt officials in order to gain some political capital by denouncing their electoral rivals.
Despite a growing wave of corruption-revealing information, American partners of Ukraine seem unfazed since the IMF is still providing financial help to Ukraine and not actually demanding reports on how this help is spent. The situation with European donors to Ukraine is different.
On Wednesday the European Commissioner for Migration, Internal Affairs and Citizenship Dimitris Avramopulus stated that Ukraine “should take immediate steps to overcome corruption in order to preserve the existing procedure for visa-free travel of Ukrainian citizens to EU countries”.
German MP Markus Frohnmaier is another European official who has raised the issue of the German government’s responsibility towards its taxpayers in the framework of German–Ukrainian “common projects”.
“After a request from Frohnmaier about financing projects with Ukraine against the backdrop of rampant corruption there, the response of the federal government was surprising: The German government described the development of cooperation with Ukraine as “successful”.
Considering the extremely high position of Ukraine on the index of corruption, such an answer from the Merkel-government raises lots of other issues, including reducing or even cutting financial aid to Ukraine. Halting German funds altogether is the only possible way to prevent the squandering of German taxpayers’ money by Ukrainian authorities.”
All rights reserved. You have permission to quote freely from the articles provided that the source (www.freewestmedia.com) is given. Photos may not be used without our consent.
Consider donating to support our work
Help us to produce more articles like this. FreeWestMedia is depending on donations from our readers to keep going. With your help, we expose the mainstream fake news agenda.
Keep your language polite. Readers from many different countries visit and contribute to Free West Media and we must therefore obey the rules in, for example, Germany. Illegal content will be deleted.
If you have been approved to post comments without preview from FWM, you are responsible for violations of any law. This means that FWM may be forced to cooperate with authorities in a possible crime investigation.
If your comments are subject to preview by FWM, please be patient. We continually review comments but depending on the time of day it can take up to several hours before your comment is reviewed.
We reserve the right to delete comments that are offensive, contain slander or foul language, or are irrelevant to the discussion.
The HagueFood Innovation Hubs (FUBs) are being set up all over the world for the "transformation of food systems". In November 2020, the World Economic Forum announced that the European Food Innovation Hub will be located in Wageningen, in the Netherlands.
ViennaA political earthquake is threatening Austria. The ÖVP continues to drop in the polls and is now in third place. The FPÖ can establish itself in second place under its pro-Russian chairman Herbert Kickl. Another disastrous result for the Chancellor's Party, after the governing coalition of the ÖVP and the Greens lost the majority in the polls months ago.
BerlinGermany is fast becoming a dystopia – a society in cataclysmic decline: Minister of Justice Buschmann (FDP) and Minister for Family Affairs Paus (Greens) have now presented a draft law according to which every person in Germany can determine their own gender and first name themselves and change it in a simple procedure at the registry office.
BurkelA clandestine drug laboratory has been discovered on a military base in Belgium where NATO nuclear weapons are stored. The synthetic drug Ecstasy was being mass produced on a large scale at the site.
ElmauIt is repeatedly claimed that the G7 are the “most important industrialized countries” and thus generally the most important countries in the world. However, on closer inspection this contention is wrong.
KievBefore the war, the Ukrainian police actively fought drug-related crime. Now the authorities have other priorities.
Brussels/KievThe decision to grant Ukraine accession status raises numerous questions: Ukraine (and Moldova) were officially granted this status at the EU summit in Brussels on Thursday evening. This decision had been extremely controversial and contested for weeks. But all previous critics – above all Austria, Slovenia, Croatia, the Netherlands and France – have surprisingly caved in and have cleared the way for the two countries to join the EU.
ViennaThe failure to put the financial system on a solid footing after the financial crisis in 2008, the pandemic and sanctions due to the Ukraine war, have ensured that the cards are finally being reshuffled.
RomeIn Italy, the dispute over the Draghi government's Ukraine policy has led to a political earthquake: Foreign Minister Di Maio has resigned from his party, the Five Star Movement, after considerable squabbling over Ukraine.
HelsinkiAmong all the alarming reports about an impending food crisis, a Finnish company believes that it has found a way to incorporate bones into minced chicken, which reduces the meat's production cost and environmental impact. But will anyone want to eat it?