Ukraine's reformist economy minister Abromavicius resigns

Ukraine's reformist economy minister Abromavicius resigns
Finance minister won't be "cover for corruption".
By bne IntelliNews February 3, 2016

Ukrainian Economy Minister Aivaras Abromavicius, a Lithuanian-born former investment banker, announced his resignation on February 3, citing corrupt schemes behind his back and inability to cooperate with the entourage of President Petro Poroshenko.

"I and my team don't want to be a cover for corruption," Abromavicius said during a press conference in Kyiv, adding that people from Poroshenko's office applied pressure on him to appoint "dubious people" to head up state-run companies. The minister appealed to parliament to accept his resignation on February 4.

The exit of Abromavicius, part of a government reform team alongside US-born finance minister Natalie Jaresko, is a painful blow for Kyiv's reform drive and for Ukraine's image among its Western backers and international donors. These have repeatedly urged the Ukrainian authorities to speed up the pace of reforms, while entrenched graft and systemic inefficiency have hampered the drive at every turn.

Abromavicius said the key reason for his resignation is the conflict with the first deputy head of the Poroshenko's Block in the parliament, Ihor Kononenko, who is regarded as a 'grey cardinal' for his leading role in unofficial negotiations with other parliamentary factions.

Kononenko was one of the first business partners of billionaire Poroshenko, and is a current close business and political associate.

"It is impossible for technocrats to work with guys that want to usurp power, and make processes un-transparent... These people have names. And one of these names is Kononenko," Abromavicius said, accusing Kononenko of obstructing his work and the work of the ministry.

Abromavicius said Kononenko was lobbying for the appointment of "his people" as head managers in state-owned companies.

His predecessor, Pavlo Sheremeta, also resigned in 2014 after less than six months as minister, citing obstructions to reforms and accusing the government as acting like "predator" towards business. His reaction to Abromavicius' resignation, posted on Twitter, was simply "Respect".

War of accusations

Meanwhile, the Poroshenko Bloc slammed Abromavicius and his team for their move. Deputy head of the Bloc's parliamentary faction Oleksiy Goncharenko said in a statement e-mailed to bne IntelliNews that he was "surprised" by the minister's action.

"The faction has questions to him, specific questions regarding the state of the economy. We called him to [a meeting with] the faction with the aim of hearing his report. However, instead of briefing us, he went to a press conference," Goncharenko said.

The lawmaker added that Abromavicius had not ensured the passage of laws to help stimulate business and the economy in Ukraine over the past year. "There are [only] discussions how to spend money, but not how to earn them," Goncharenko said.

Kononenko criticised the minister's resignation as an attempt to avoid responsibility. "Abromavicius' charges [...] may be an indication of his unwillingness to give a comprehensive report on both personal and ministry activities over [the past] 18 months," he told journalists after the minister's press conference.

Abromavicius' main fault was an inability to react appropriately to Russian economic sanctions against Ukraine, Kononenko said.

Glum outlook

The resignation comes two weeks ahead of the government's official report on the cabinet's work in its first year in office, due for release on February 16. If the government's performance is recognised as unsatisfactory, the Rada could initiate a vote of no confidence in Prime Minister Arseniy Yatsenyuk and his cabinet.

Other commentators noted the hit to Ukraine's already battered image when it most needs cohesion in government.

"Clearly, there is nothing positive about resignation of Abromavicius, a former fund manager and pro-western person who had broad international support," wrote analyst Alexander Pasraschiy of the Concorde Capital brokerage in Kyiv. "His statement on deep corruption among the pro-president elite, even without any proof, is a big image loss for the entire Ukrainian government."

"He is the second minister of economy to resign citing similar concerns," adds chief strategist Tim Ash of Nomura International. "A cabinet reshuffle has been in the offing for a while, and this will likely pre-empt that. Poroshenko and Yatseniuk will need to bring in a big, reform name/dynamo for this still important ministry."

A former asset manager, Abromavicius, 40, moved to Kyiv seven years ago after marrying a Ukrainian. Two other foreigners, Jaresko and Georgian Oleksandr Kvitashvili, took Ukrainian citizenship at the same time, to become finance and health ministers. Kvitashvili tendered his resignation in July 2015 after losing the support of the Poroshenko Bloc. By the end of the year the parliament had voted four times against accepting the resignation and he remains in office.

West "deeply disappointed"

In a statement issued through the German Embassy in Kyiv, the ambassadors of nine countries said they were "deeply disappointed" in the resignation of Abromavicius, who they said had delivered real reform results for Ukraine.

"During the past year, Abromavicius and his professional team have made important strides -- implementing tough but necessary economic reforms to help stabilize Ukraine's economy, root out endemic corruption, bring Ukraine into compliance with its IMF program obligations, and promote more openness and transparency in government," said the statement representing Canada, France, Germany, Italy, Lithuania, Sweden, Switzerland, UK and the US.

"Ukraine's stable, secure and prosperous future will require the sustained efforts of a broad and inclusive team of dedicated professionals who put the Ukrainian peoples' interests above their own. It is important that Ukraine's leaders set aside their parochial differences, put the vested interests that have hindered the country's progress for decades squarely in the past, and press forward on vital reforms."