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The General Situation in Ukraine

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   1. On Nov 10 the news broke out about a state of “catastrophic lack of funds” for the health care system. Most of the interviewed people refused to give details in fear that they would be subject to “punishment”, like interruption of the free of cost oncological therapy for their children. Reportedly patients are now “unofficially” asked to pay for their food. The emergency seems to be extending to most of the country’s clinical structure. For personal experience it is really impossible to have just any “official” declaration on such issues and most of what we know comes in the form of “rumour has it”. (see http://stolitsa.glavred.info/archive/2008/11/10/104853-6.html)
   2. On Nov. 18 in Uzhgorod (close to the Hungarian border) all schools (from children gardens to the University) were left without heating and the teaching cycle was suspended. Also without heating is the local children hospital. No changes in the situation are reported so far. (see http://podrobnosti.ua/society/2008/11/18/566984.html )
   3. On Dec. 1 a demonstration of pharmacists was held in Kiev to require the abolition of state price controls on medical drugs, in order to save profit and jobs for their sector. A few days later the President deleted the government policy on price controls and prices are now reportedly growing in the range of 10-15% for national production and up to 50% for imported drugs (see http://podrobnosti.ua/accidents/2008/12/03/569899.html and http://podrobnosti.ua/health/2008/12/10/571071.html).
   4. On Dec 11, half a million people remained without heating and hot water in L’vov. This includes 42 high schools, 26 children gardens, 6 clinics and 5 hospitals. The decision was taken by the local energy monopolist. The local administration has appealed to the government, as of Dec 15 there are no news of any decision having been made (for some basic reports see: http://www.podrobnosti.ua/economy/2008/12/11/571372.html and related pages).
      On Dec 11 two major heating complexes in Kiev were shut down. This left the like of 1 million people without hot water and heating. Among those who remained without heating and hot water there are 184 sanitary structures (including hospitals and birth-centers), 276 children gardens, 233 schools. The service interruption was motivated by a conflict between the city administration and the monopolist gas seller “Kievenergo”. The monopolist announced that they were going to interrupt service for all the town in the coming days, and that they were likely to extend the interruption to the electrical energy. On Dec. 12 the administrative judge of the Kiev region ordered to restore the service, which was restored in the morning of Dec. 15. There has been a number of conflicting versions concerning these events, in the news. Some channels reported that even the richer areas had remained without heat before the judge was requested to take a stance. Some versions accuse the Prime Minister to stand behind the event in order to damage her political enemy (Kiev’s Mayor), other claim Mrs. Timoshenko herself had her heating system off. On Dec, 15 the mayor had launched an emergency plan to deliver hot food to elderly people who also had their gas completely cut off and could not even cook. It is extremely difficult to build a map of the areas that remained without gas for cooking, though. On the evening of Dec. 15 no such event is reported, possibly it was limited to Dec, 14. (for some basic reports see: http://www.podrobnosti.ua/economy/2008/12/11/571386.html and related pages)
   5. On Dec 13 an epidemic of hepatitis “A” was reported from the Odessa region (for some basic reports see: http://podrobnosti.ua/podrobnosti/2008/12/13/571788.html and related pages).
   6. The news service of the TV channel 1+1 (http://www.1plus1.ua) just reported that in Uman’ (Cherkassy region, some 100 km south of Kiev) the local monopolist interrupted heating, water (all kind), gas and sewer services. People so far can still buy drinking water in shops as stocks are not exhausted, but it is impossible to use toilets. The news alerted about the risk of epidemics.

In the country there may be many other small or medium emergencies related to “interruption of public services”, many of which have already long become “stable situations”, rather than emergencies. This can be especially expected in the far east, close to the Russian border, where the crisis of the mining industry has generated endemic social disasters. Many of the more recent “interruptions” are connected with the desperate fight for liquidity that is expanding from a sinking banking system to all kinds of economical operators. The value of most investments is falling very quickly, the national currency is currently loosing an average of 3-4% a day. In the last days the volume of cash foreign currency sold (mainly US$) has been higher that the amount bought, which might imply that a growing number of people are starting to live off their home-kept savings (see http://podrobnosti.ua/economy/2008/12/12/571440.html). These may be at least partly related to a need for liquidity in the coming holidays, though.

For many ordinary people it is impossible to get cash from their accounts, the euro has basically disappeared from the market (it must be ordered in banks many days in advance and it is available in several hundreds at the very best) and even in national currency the “hugest” amount one can cash without “booking a large sum” is a value around 200eu. In the meantime the banks unilaterally upgraded the interest rate for standing mortgages, sometimes up to twice as much. Bankers surely aren’t the most popular fellows in the country, especially after the head of UkrSozBank, Mr. Boris Timon’kin declared at a public forum that “those who do not pay back their debts cannot be considered as human beings” (see http://www.podrobnosti.ua/analytics/2008/12/12/571405.html).

The news generally attribute little relevance to events concerning the healthcare and heating systems, they are mostly devoted to the endless political crisis that makes it hard to guess whether the country is governed at all (and by who) and to the endless free fall of the economy. There has been very little public information (if any) concerning each of the heating emergencies, we all were basically left to guess what would happen next.

To a western observer the situation of the country looks serious but not chaotic, there is no sign of open social or political violence, although the micro-criminal activity is mounting at a very alarming speed and lots of people have lost their jobs. It is more like the state was slowly disintegrating into micro-conflicts of local relevance and everybody was left to “survive by themselves”. On next Dec 17 massive strikes of transport workers are announced and the current relatively passive quiet may evolve into something else, though.

As per children related materials, I can personally report that in Kiev the situation is worsening by the day. Products are getting increasingly difficult to find, entire commercial brands seem to disappear from the Ukrainian market. Whether this is due to financial or logistical problems of the distributors or rather to speculations I cannot obviously tell.

Several days ago the opposition leader, Mr. Janukovich, has announced that the opposition will call for a general uprising if the government cannot obtain substantial results within 100 days. This has been received quite ironically by the orange leaders. As a matter of fact the financial groups that stand behind both the governmental and opposition fronts seem to be equally far from the real country and quickly loosing grip on the real situation. Protest sites are being born on the internet and none of them seem to have any relation whatsoever to existing political organizations. Moreover, the attempt to takeover the almost defaulted PromInvestBank from financial circles close to the opposition failed for lack of financial means.

But if the opposition doesn’t seem capable to lead the protest it must also be noted that payment of pensions and basic wages is currently expected to stop in Mart 2009 for lack of financial resources. In the same year the number of jobless is expected to include a massive wave of 5 million people (10% of the population), yet the provisional count is short of the mounting tide of immigrants that return from western Europe. Given such figures the 100 days limit may even be realistic, although one can hardly expect any of the current political figures to survive such an uprising.

On Dec 16, the National Bank of the Ukraine has communicated to the press that most of the current movement on the financial market is due to speculative manoeuvres of the banks. On the streets the euro is exchanged at 12,50 hriven, with a sheer 10% fall for the national currency in just 24 hours. The US$ reached 8,70 and remains the most intensively traded currency due the reluctance to sell euros that everybody still shows.

During the first 12 days of December the population has sold 609 million US$ and bought back only 600. In the same period the whole national commercial import bought only 300 million US$ to pay foreign sellers, but the leading source of financial movements were the banks themselves, who are massively converting to foreign currency all the financial help they received from the government. A massive amount of 1,5 billion US$ has been acquired by banks alone, for “internal needs”. Savers and companies are also moving away from the hrivna, but this is less relevant, as in all in December only 3 billion hriven were converted from bank deposits in hriven to bank deposits in foreign currencies. The number looks big, but it’s no more than 300 million euro in worth, half of the value of the street economy in the same period. (see http://podrobnosti.ua/economy/2008/12/16/572208.html)

On Dec 17 it appears that the government has lost interest in the hrivna: the Ministry of Transport communicates that train tickets are now quoted in euros when they go to west, towards the UE, in Swiss francs when they go East. (see http://podrobnosti.ua/economy/2008/12/17/572387.html). By now this is limited to international travel and implies an immediate 15% rise in prices. But it’s not just about trains. While most people are paid in hriven, most consumption goods are long quoted in euro.

Let alone inflation, those who have not been fired have very often been subjected to a unilateral wage reduction of around 35% (companies can legally do that here). Statistics convoy quite a poor picture of the situation. In real life at the beginning of the year I used to go to the supermarket with a 50 hriven note in my pocket, now it takes me 250 to buy basically the same things. At the beginning of the year people in supermarkets used trolleys, now most people have one or two low cost items in their hands and it is becoming quite embarrassing to stand in line with the financial equivalent of 6 months of somebody’s pension in your trolley.

On Dec 18 the euro is exchanged by banks at ~14,5 hriven, the US$ is ~10 hriven (See http://podrobnosti.com.ua/economy/2008/12/18/572662.html and http://podrobnosti.com.ua/economy/2008/12/18/572582.html).
The same day Russian Gazprom announces that the flow of gas to the
Ukraine will be fully stopped on Jan, 1, 2009, following the Ukrainian
refusal to pay the standing debts (see http://podrobnosti.com.ua/economy/2008/12/18/572641.html).
The Ukrainian side comments the announce in a skeptical mood and indeed
there already have been such announcements in the past, but they never
got to be put to practice. 

Also on Dec. 18 the National Bank of the Ukraine announces
investigation on possible speculations on currencies by commercial
banks. The announcement says that banks proven guilty of such activity
in recent days may loose their licenses (see http://podrobnosti.com.ua/economy/2008/12/18/572626.html).
Banks now need to justify all their activity in foreign currencies,
which will surely lead to a great growth in bureacracy for low-level
users and to a dramatic decrease of availability of foreign currencies
at public exchange points. Any move against huge financial corporative
powers would be unprecedented in the country’s history, yet the
political climate is worsening by the minute and it looks possible that
single banks may be involved in the conflict.

As an immediate answer the Prime Minister (Mrs. Timoshenko)
announced that the Parliament will not vote any more decisions until
the President of the National Bank is fired. The President of the
National Bank is nominated by the President of the Ukraine, Mr.
Jushenko (see http://podrobnosti.com.ua/power/2008/12/18/572683.html)
and the paralisys will not be easily solved. Mrs Timoshenko has
declared that Mr. Jushenko is “fully responsible for the current
situation with the national currency” in a growing exchange of
accusations among the government and the President. Mrs. Timoshenko
announced she will expose to the Parliament proofs that the President
in personally involved in the financial misbehaving and named a number
of private banks whose activity must be controlled. It is hard to
imagine how such a conflict can be quickly solved.

A first estimate of the number of Ukrainian migrants who will
shortly return home sets their immediate number in 200.000. According
to the announcement they will not be able to find any job and will have
to live off their savings (see http://podrobnosti.com.ua/society/2008/12/18/572629.html).

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