KYIV – Angela Merkel’s fourth visit to Ukraine as Germany’s chancellor on November 1 coincided with bomb threats in the capital and Russia imposing more sanctions on the country.
The goal of her one-day visit was to discuss the Russia-fueled Donbas war and, in particular, discuss Ukraine’s reform policy.
“The armed conflict in the Donbas region in eastern Ukraine is still the greatest challenge to European security since the end of the Cold War,” the federal chancellor’s website noted, referring to Moscow’s invasion that has killed more than 10,400 people.
In her first bilateral visit to Ukraine since August 2014, Ms. Merkel emphasized that there currently is no alternative document to the Minsk peace agreement to resolve the Donbas war. She added that since progress “can be measured in millimeters,” the European Union’s sanctions on Russia will remain in place.
Thus, she said, in view of the lack of progress, “Germany will be advocating an extension of sanctions [on Russia] in December, as things stand at the moment.” Her comment came in a joint news conference with President Petro Poroshenko.
Regarding the institutionalization of the rule of law, as well as other improvements in governance, Germany’s first female chancellor said during a meeting with Prime Minister Volodymyr Groysman that installing reforms is “a very painful process that is demanding.”
Germany has given 490 million euros since 2014 to help Ukraine make infrastructural improvements and assist the 1.6 million people who’ve been displaced as a result of Russia’s annexation of Crimea and subsequent invasion of the Donbas.
“I am very glad that I can talk today about our readiness to allocate additional funds in the amount of almost 85 million euros,” Ms. Merkel said. The funds will be used “to improve the prospect of employment of young Ukrainians through professional education and improvement of the housing situation.”
She also stressed that Germany supports the idea of deploying a United Nations peacekeeping mission to the Donbas. Currently, the Organization for Security and Cooperation in Europe monitors the war, yet its mandate has been impaired due to limited access and freedom of movement in the war zone.
An additional 2 million euros will be provided to create “innovation clusters” throughout the country, Ms. Merkel stated.
Verkhovna Rada Chair Andriy Parubiy discussed with the German chancellor the controversial Nord Stream 2 pipeline project that will deliver more natural gas from Russia to Germany upon its completion next year. The first Nord Stream pipeline was inaugurated in November 2011.
Ukraine fears that once the pipeline is laid, Moscow will bypass Ukraine entirely as a gas transit country through which it still partially supplies energy to EU countries.
Ms. Merkel said she has been advocating for “guarantees for Ukraine” to maintain its transit role. She added: “These negotiations are conducted with Russia…We want Ukraine to remain an important transit country.”
At the end of November, the third German-Ukrainian Economic Forum will take place in Berlin.
Overall, Ukraine-European Union trade has increased since a free-trade agreement started to gradually come into force since January 2016. Ukraine’s exports to the 28-nation political and economic union jumped by 21 percent in the first five months of this year compared to the same period in 2017. Total trade amounted to $17.1 billion, with Ukraine having a negative balance of $720 million.
Ukrainians have also enjoyed visa-free travel to most EU countries as a part of the bilateral Association Agreement that started in November 2014. Nearly a quarter of Ukrainians now have biometric passports that allow them to travel to the EU for 90 days within a 180-day period. Over a half million Ukrainians visited EU countries as of June 12 since the visa-free regime went into effect a year earlier.
As a country, Russia remains Ukraine’s single largest trading partner despite war, although volumes are shrinking. Total bilateral trade was $7.4 billion in the first half of this year, with Ukraine having a negative trade balance of $600 million.
Russia imposed restrictive measures on 322 Ukrainians and 68 companies in response to Ukrainian sanctions on the day of Ms. Merkel’s visit. They include asset freezes and limits to repatriate capital.
Bomb threats also were made on November 1 at Kyiv’s main train and bus stations, with the caller demanding the equivalent of $8,900 (U.S.) to not set the explosives off. Bomb threats have become a common occurrence at large public gathering places like shopping centers and subway stations ever since Russia invaded Ukraine in late February 2014.
U.S. energy secretary in Kyiv
In a bid to convince Ukraine and other Eastern European countries to seek alternatives to buying Russian coal and gas, U.S. Energy Secretary Rick Perry is visiting Kyiv this week.
In particular, he’ll visit Trypilska, Kyiv Oblast’s largest power plant, whose operator, Centrenergo, bought 700,000 tons of U.S. coal last year. Since anthracite coal, on which many Ukrainian plants operate, is mostly mined in the occupied parts of the Donbas that the government no longer controls, Kyiv has sought alternative, albeit more expensive, sources of coal from as far away as South Africa, Australia and America.
U.S.-Ukraine trade has also increased. Bilateral trade expanded by 16 percent year-on-year in the first eight months of this year to reach $2.6 billion.
IMF visit to discuss budget
A technical mission of the International Monetary Fund was in Kyiv through November 9 to review next year’s budget before its final second reading to ensure nothing will threaten the 2.3 percent gross domestic product deficit target.
“This would pave the way for the IMF board to approve its new program for Ukraine, a 14-month $3.9 billion stand-by loan,” Kyiv-based Dragon Capital investment bank wrote in a daily note.
At stake is Mr. Poroshenko’s proposal to introduce a 15- or 20-percent tax on distributed dividends, or capital exiting a company, in lieu of the existing 18-percent corporate tax.
The IMF has opposed this move, which would lead to a budget shortfall of 1.2 percent of GDP, according to the Finance Ministry. A compromise may have been reached with the Finance Ministry reporting that the new tax would be applicable only to small companies that have a yearly turnover of $7.1 million. The Verkhovna Rada’s Tax and Customs Policy Committee has so far postponed a decision on the matter after a consensus couldn’t be reached.