Heres todays analysis by Tim Ash of Standard Bank (BELOW). On a separate note, I echo Ed Skibickis thoughts: A day of thanks and reflection: Thank you to actress Milla Jovovich (born in Kyiv) for setting up a fund to collect monies for the Heroes of Ukraine. Thank you citizens of Ukraine in the east for agreeing to speak Ukrainian today and for citizens of Lviv to speak Russian to show national unity. Thank you to the 10,000 brave Crimean Tatars for showing up today and protesting in favor of the Ukrainian nation. Finally, I ask everybody to pay attention to the Crimea today. As I speak Russian tanks and troops are on the ground there and are moving to Yalta.... -------------------------------- Tim Ash, Standard Bank, February 26, 2014: A quick summary of Ukraine events today for our US friends: • The Interim Administration (IA) is slated to put together a preliminary cabinet and present it to Maidan for approval, then to parliament as early as this evening. The idea seems to be to have some reps from the public in a range of ministries, including lustration, anti-corruption, humanitarian affairs, and then reps from the public as deputy ministers, plus also public committees attached to ministries. A very novel idea aimed to appeal to the Maidan, but likely to be difficult to implement in practice, and it might complicate policy formulation/implementation. The IA is also setting a very high bar for participation in government, in terms of clean track record on corruption, professionalism, etc – it might be difficult to get many existing Rada members through this test. • In terms of the composition, it seems that Yatseniuk and Poroshenko are up for the position of PM. Yatseniuk seems to be the leading contender. Filling the other slots could well be difficult, given tensions between the various coalition partners. I am also not sure whether this cabinet will win approval from Moscow, as it’s going to be difficult to sell Regions MPs to the Maidan. This still suggests strained relations with Moscow. • Not sure now who is going to fill the key MOF portfolio – suggestions now from Kiev that former FM and reformer Pynzenyk is reluctant to assume the role if his former boss, Yulia T ends up in office in some capacity (e.g. she might still be elected president in May 2014). This just underscores the underlying tensions which exist within the reform camp. • Russia is still making very uncooperative noises, saying it is not involved in any high level initiatives such as a donor conference. The Russian MOF also indicated that it will hold by the covenants of the 2015s Eurobond which have that tricky 60% government debt/GDP trigger. Russia’s latest bugbear is passage of a bill in the Rada which removes the special status of Russian language in Ukraine – it will argue that this undermines the rights of ethnic Russians in Ukraine. • Crimea continues to simmer, with separate meetings of Crimean Tatars (for new regime in Kiev) and ethnic Russians (against new regime in Kiev). A new “peoples” mayor, Chalyi, who is close to Moscow, ousted the pro-Kiev incumbent in Sebastopol. The meeting of the Tatar Mejlis, or parliament is expected to be attended by several thousand – men only, as they warn of potential provocations. Chalyi has announced the creation of a special anti-terrorist unit to comment the local militia – a very worrying sign all around. • IA leader/acting President has assumed control over the Ukrainian army, and the dreaded Berkut units seen as responsible for the deaths of demonstrators has been disbanded. • US government officials are visiting Kiev at present, presumably to talk through financing options. IMF officials have spoken of a potential USD15bn programme – some way short of the USD35bn called for by the new administration in Kiev. • The UAH continues to hit new lows – fixing at 10.16 today, and trading nearer to 10.30. I think it goes lower still. • BIS data suggests European bank exposure to Ukraine of USD24.1bn as of Q3 2013, of which USD7.5bn Austria (Q1 2013), Italy USD5.9bn, France USD5.3bn, Greece USD1.5bn and Germany USD1bn. This has reduced really significantly over the past 4-5 years as European banks have deleveraged out of Ukraine – Austrian exposures have for example halved – just as Russian banks leveraged back up! • Ukrainian Eurobonds are down a point or so this morning (5 points from week highs), as prospects of a Western bailout are balanced by the huge risks still on the political front. For IMF programmes to work they need a) strong ownership of key reform conditionality; b) an administration with a strong mandate to push through with these. On the former, there have been hints today that some elements within the opposition are looking to backtrack on the landmark pension reform bill pushed through as part of the last IMF programme. This would be a huge setback, and could complicate talks with the IMF. • More generally, it is quite easy to imagine an IMF/Western financing programme being put in place for Ukraine, but the political mix – domestic and external (read Russia) is so acutely challenging, that successfully implementing a programme will be a very tall order.
Posted on: Wed, 26 Feb 2014 14:32:51 +0000
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