Ukraine govt halts social payments to separatist-controlled territory

The Ukrainian government is halting social payments to the territories of Donbas controlled by separatists, Prime Minister Arseniy Yatsenyuk announced on Nov. 7. These territories receive UAH 34.2 bln (USD 2.6 bln) annually, he estimated. Such costs won’t reach residents but will be stolen by the separatist leaders, he said. “Once the Russian terrorists leave these territories in Donetsk and Luhansk, we will restore control of the territories without delay and will pay each person that social benefit, to which they have a right to,” he said.

At the same time, the Ukrainian government will continue to supply electricity and natural gas to those territories controlled by the separatists, Yatsenyuk said. “But once we renew control of these territories, the sum accumulated in the government for social payments and subsidies will be reduced based on the value of electricity and gas that we are currently supplying to the territories in the Donetsk and Luhansk regions,” he said. Yatsenyuk called upon the Russian government to remove its terrorists from these territories.

Ukrainian Energy Minister Yuriy Prodan told journalists on Nov. 7 that the Cabinet will prepare legislation to compensate Naftogaz’s losses from gas supplies to occupied Donbas. He said that he assumes the compensation will come from the funds reserved for social payments on the occupied territories.

Zenon Zawada: The government is looking for ways to cut costs so the step of cutting social payments to the terrorist-controlled territories is quite logical. The risk of this approach is that Donbas residents will grow even more antagonistic to Kyiv. But in our view, the Ukrainian government can’t be making decisions based on the political attitudes of certain groups of citizens, which change ever so often. The government’s priority needs to be fiscal discipline.

Yet what’s discouraging in this Cabinet initiative is the latest “compensation” measure to emerge, creating yet another avenue for corruption. The initiative clearly goes against the government’s earlier declarations of intending to improve transparency in Ukraine’s gas sector and remove all its cross-subsidization and compensation practices that generate corruption. In our view, in these harsh times for Ukraine, either Donbas residents and enterprises should pay for gas for Kyiv in a timely fashion or they should be cut off.