"Tariff Maidan": how will protests end and is Vitrenko becoming a new prime minister?
"The peak is still ahead," the main protest may take place on January 30 in Kyiv. We explain what will happen next regarding the tariffs, why the gas market doesn't work as initially planned, and what the IMF has to do with it.
Increasing utility payments from January 1 provoked a real avalanche of events in Ukraine: riots that broke out in the regions forced the government to take urgent measures and return state regulation of gas prices. However, now the fate of $3 billion, which Ukraine still has to receive from the IMF under the stand-by program, is in question; the demands to introduce an open gas market and raise prices for utility services are among the key ones for Western partners.
The fate of Prime Minister Denys Shmyhal is also not clear: according to rumors, the Office of the President is thinking about candidates to replace the head of government. Among them is acting Energy Minister Yurii Vitrenko, who's in favor of the oligarch Ihor Kolomoyskyi. However, to rid himself of the temporary worker's status, the former top manager of Naftogaz still needs to get the support of the Verkhovna Rada, which had already refused his candidacy during a vote in December.
How the authorities ended up in a "tariff" deadlock, what the Verkhovna Rada thinks about Vitrenko's candidacy and who might try to stir up large-scale protests throughout the country, read further in a new Rubryka article.
Tariff increasing was predicted
In Ukraine, the matter of tariffs has always been primarily political, and only then, social. Therefore, any government preferred to delay increasing prices of utility services till the last. Meanwhile, gas and electricity prices for enterprises have always been significantly higher, which created an imbalance in the market and provoked business. Besides, the state selling electricity to the population at a loss required annual budget subsidies, calculated at 65-70 billion hryvnias. It's apparent that such a situation couldn't last forever, as the West had been reminding the Ukrainian authorities many times.
However, according to opinion polls, 70% of Ukrainians consider the increase in tariffs unjustified. Therefore, increasing prices for utilities by almost a third from January 1 primarily wreaked havoc on Zelenskyi, who promised to reduce heat tariffs twofold for some reason one year ago. Thus, the Ministry of Energy didn't hide that growth would take place. The then-acting Minister of Energy Yurii Boiko warned about it at the end of November.
However, Yurii Vitrenko, whose appointment as acting minister caused a great deal of dissatisfaction after the failed vote in the Verkhovna Rada, had to withdraw the "marked card." At the end of December, he announced the elimination of the reduced tariff for consuming the first 100 kilowatt-hours per month, which amounted to 90 kopiykas/kilowatt-hour. From now on, all citizens must pay for electricity, regardless of consumption, at a rate of 1.68 hryvnias/kilowatt-hour. Formally, we can't call it a price rise, but in fact, it is.
Gas prices have also upped significantly, but the situation is more complicated. From August 1, 2020, the single gas price for the population has ceased to operate in Ukraine. Now the number of figures in this bill's column depends on the offer price of the gas supplier the consumer signed a supply contract with. Since the New Year, Naftogaz has raised the price of gas from UAH 6.33 in December to UAH 7.22 per cubic meter, without considering the cost of distribution, which has also increased. Consequently, the average price of most suppliers exceeded UAH 9 per cubic meter. Naturally, it's led to rising prices not only for heating but also for water.
Such a New Year "gift" became an occasion for protests, already dubbed "tariff maidans" by the media.
They found a way out. Or not?
Increasing utility tariffs could hurt the rating of Zelenskyi and the Servant of the People party, now steadily losing ground. Therefore, on January 11, the President instructed the government to resolve the gas tariff issue for the population urgently.
"Gas tariffs for the population must be fair. The price of gas is rising in the market due to weather and other reasons that have developed in Europe, and we can't allow a price increase for our citizens," Zelenskyi said.
As early as January 13, Prime Minister Shmyhal announced that state regulation of gas prices for quarantine was returning to Ukraine. For household consumers, they'll sell it for UAH 6.99 per cubic meter. Thus, the government hopes to "sit the difficult winter period out" to free prices in the spring and summer, when the heating season is over and the figures in bills will no longer look so scary.
However, we can't say the solution removes the problem. First, the gas price still won't fall to December levels. Second, returning state regulation directly violates the Law "On the natural gas market." Third, the reduced electricity tariff wasn't returned. Now the government wants to compensate by monetizing subsidies. The question stands for what amount and how fast.
"These tariffs are so unnaturally broken that they can reduce them with little trouble. So it looks like a certain operation: first, increase and then slightly decrease. So much for luck. Let's call it the "tight shoes" effect," commented Oleksandr Kochetkov, political analyst, former deputy head of the press service of the President of Ukraine.
There is another serious pitfall in the government's decision. The free gas market is one of the most important IMF requirements, whose mission was to start working in Ukraine in the New Year. Returning state regulation is a serious spit toward the main Ukrainian creditor, which may affect further negotiations on the next tranche. The government hopes to "persuade" creditors by explaining to them the complexity of the situation. This task was assigned to Vitrenko. His actions' success will likely determine whether the Verkhovna Rada will vote during the re-vote on his appointment, which may take place on January 26.
Peak of protests intended for January 30
Raising the utility prices is a fertile topic for manipulation and political PR. It was clearly evident during the protests against an increase in tariffs, which more or less visible opposition forces tried to join. For example, in Lubny, where protests were particularly active, a representative of the Opposition Platform — For Life party, Illia Kiva, came there to "open an office to coordinate the protests." However, the locals didn't accept him gladly, saying that they didn't want to engage in politics but only demanded a reduction in tariffs.
"Who invited you here? Why did you come to publicize? Before coming, you had to talk to us! We didn't care about politics from the very beginning, we solve economic issues," one man representing the initiative group of citizens in Lubny said.
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It was also hot in the Kharkiv region, where deputies from the Opposition Platform — For Life party and the Svitlychna Bloc party tried their best to shine to score points. Meanwhile, the organizers were outsiders, but politicians were active both at rallies and at meetings of city councils.
Serhii Dorotych, the leader of the #saveFOP movement, who has recently worked in the interests of Petro Poroshenko and his "European Solidarity" party, also tried to get involved in the topic. Not far behind colleagues, we see the "Batkivshchyna" party: the next day after authorities decided to return state regulation, one of the people's deputies of this political force, the former candidate for Kyiv mayor, Oleksii Kucherenko, convened a press conference where confidently declared that gas for the population should cost only UAH 4 per cubic meter.
In the meantime, as Rubryka learned from one of the protests' organizers, the peak of demonstrations might fall at the end of January when the lockdown ceases to operate in Ukraine. This information was confirmed to us in a comment by the head of Social Movement, Vitalii Dudin.
"Demonstrations in different regions are also planned for next week. I can say that a large-scale protest is also being discussed in Kyiv on January 30. It's clear that when the quarantine ends, people will have more opportunities to protest without being exposed to the danger of criminal proceedings, which we've already encountered. By the way, they also discussed this issue at a meeting of the Federation of Trade Unions of Ukraine. If this largest public organization in the country joins the protests, there'll be thousands, maybe tens of thousands of participants," he told the publication.
"Vitrenko wants to be prime minister"
The "Servant of the People" party is also worried: they perfectly understand that increasing prices of utility services wreaks havoc on them. Therefore, they actively express their dissatisfaction with the government in party chats and wait for a faction meeting, which should take place on January 25; probably then, they should decide on Vitrenko's candidacy. However, we must not forget about the interests of oligarchs, having a formal mono-majority with their groups of influence. For example, during the first vote, the so-called group of Illia Pavliuk, suspected of working for oligarch Rinat Akhmetov, amicably ignored the vote; it's at least 25-30 votes.
Kolomoiskyi's group "For the Future" and some deputies under his control in the "Servant of the People" party voted in favor, but it's not enough. Vitrenko's candidacy requires either the majority's full support or votes of opposition parties, which, of course, are in no hurry to help; acting as opponents is much more beneficial.
Vitrenko tries very hard to show himself as an effective manager who knows how to think strategically, but it turns out nothing to shout about. For example, his statement about him wanting to buy gas again from "independent companies from Russia" provoked a very violent reaction among national patriots and supporters of the European course of development. That's why Vitrenko had to make a new statement.
"It's beneficial for Ukraine because it creates an additional demand for the capacity of the Ukrainian gas transmission system for gas transit to Europe, reduces the gas price on the Ukrainian wholesale market to the level of export parity price. The issue is tens of billions of dollars for Ukraine," Vitrenko explained his position.
However, there's an opinion that the current situation may be in the interests of the acting minister who got a chance to show himself as a savior.
"At this moment, Vitrenko's candidacy may pass in parliament, because he acts as a savior. But he wants to be not just a deputy prime minister; his goal is to be prime minister. Now he can take the first step and show nice things to society. He'll be appointed instead of Shmyhal, who completely failed in his work. This is the plan. But it's Ukraine, and no such government's prank comes to reality in full," expert Kochetkov said.
However, in "not-on-record" conversations, three "Servant of the People" deputies admitted at once that they didn't feel admiration for Vitrenko's candidacy and government's work. The faction was already dissatisfied with his appointment as a minister through the parliament's speaker, and they consider the decision to return the state regulation half-hearted, which entails an entire chain of unpleasant consequences.
"Now everyone's waiting for the end of the lockdown. If everything goes according to plan, then on January 25, there'll be a faction meeting, where the chief topic will be Vitrenko. Judging by the mood of many of my colleagues, the conversation will be "fun." If they manage to agree on him, they may put the issues to a vote on the first plenary day," one of the "servants" said.
So far, it looks like Vitrenko's candidacy isn't getting the right number of votes. But the acting minister still has time. However, we can say the same about his opponents; the end of January promises to be "hot," and the opposition will try hard to bite off more of the ratings of Zelenskyi and the "Servant of the People" party.