Smoliy alleges NBU Council sought presidential approval for nomination

Yakiv Smoliy, the recently dismissed governor of the
National Bank of Ukraine, told the lb.ua news site on July 6 that the NBU
Council head refused to approve Oleg Churiy for the position of deputy NBU
governor, instead demanding to “agree upon this with the president.” Smoliy
recalled that by law, the candidate for deputy NBU governor is appointed by the
governor and agreed upon solely with the NBU Council.

Recall, Churiy, whose term as deputy NBU governor
expires this week, was nominated by Smoliy for a second term in late June, but
the NBU Council hasn’t approved it.

In response to Smoliy’s claims, Vitaliy Shapran, a
member of the NBU Council, defended its actions, writing on July 6 that
“Ukraine has a tradition that (nominees for) deputy NBU governors are presented
to the president.” He accused NBU top management (Smoliy) of attempting to
“avoid the traditional acquaintance with the president” as part of Churiy’s
reappointment.

Alexander Paraschiy: By stating
that the NBU Council wanted consent from the president in the reappointment of
Churiy, Smoliy wanted to emphasize that the independence of the NBU management
from the president has been undermined by the NBU Council. The law stipulates
that the deputy NBU governor, nominated by the governor, is approved by the
Council in case he/she meets a certain list of criteria. Churiy must have met
such criteria, having already served as deputy NBU governor since June 2015.
Shapran’s reference to “tradition” merely confirms what had already been
suspected, which is that the NBU governor is de facto not independent in his
ability to appoint his deputies.

Now that Churiy’s reappointment has failed and Smoliy
has been dismissed, the NBU management board has lost two out of
six members in just the last week. That means the new NBU governor (yet to be
elected by parliament) will be able to take full control over the NBU’s decision-
making process. Recall, the NBU adopts all its rulings on a collective basis,
requiring at least three (out of six) votes of its board members. The new NBU
governor will have at least two votes in his favor and will only need one vote
of the four remaining deputies, given that he acts as a tie-breaker.

Given (1) recent statements from Western
institutions concerned about the NBU’s
independence, (2)
the removal of Smoliy and Churiy to the satisfaction of Zelensky’s entourage,
(3) Smoliy’s accusations of political pressure and (4) what Shapran confirmed
about Ukraine’s de facto “traditions,” it’s apparent that the
president is about to take control of the NBU monetary policy. Western institutions
have a right to be concerned about the threat to the bank’s independence, which
had been among the top achievements of the Poroshenko administration.