Yatsenyuk’s achievement: number of poor people in Ukraine has grown by 11 times

The prime minister of Ukraine has what to be proud of: in just half a year, he has made extremely poor over 1/4 of the Ukrainians. And while the horrified people are waiting to see what new problems they will have this winter, Yatsenyuk’s government continues speculating on subsidies.

Electricity: networks are Soviet, tariffs are European

On Sept 1, the Ukrainian government raised the electricity tariff. It was the second of the five scheduled raises. Chairman of the National Commission of Ukraine for Energy, Housing and Utilities Services Regulation Dmytro Vovk explained that the key reason for the raise was that all of the country’s networks were worn out.

“All of our networks are worn out. In fact, we still use Soviet-time networks. So, we have decided to balance energy prices by means of a five-stage program to raise the electric power tariff,” Vovk said.

To experts this explanation sounds absurd.

“The networks are Soviet and the money they want for them is European? It is clear as day that they will not use the raise for improving the network. Their goal is to rob their people,” economist Andrey Martynyuk says.

From bad to worse. Vovk has calculated how much the Ukrainians spend on electricity and has drawn a grandiose conclusion: most of them will not even notice the raise as they consume 150KWh so they will have to pay just 17 UAH more.

The people are shocked. The reality is that an average family in Ukraine consumes no less than 200KWh on condition that it has a gas stove. And what about those using electric power? They account for more than half of the Kiev residents and they will have to pay the same tariff as the other consumers. 

Energy expert Maria Yakovleva has found out that those using electric stove for cooking will have to pay no less than 600 UAH ($27) a month. And, in total, they will have to pay five times as much as those consuming gas.

Heating: “economy” by the Energy Ministry

In the meantime, Ukraine’s Energy and Coal Industry Volodymyr Demchyshyn has informed his people that this winter Ukraine will need 30% less coal than last year. In response, the Ukrainians suggested stopping the country’s industry. “If they do it, they will save as much as 80%!” says a visitor of a financial internet forum.

“Of course, we can believe Mr. Demchyshyn especially now that he may face a criminal case for a failed heating season. 30% is too much for a cut. Do you imagine yourself cutting your costs by 30%. I have nothing to cut. This sound like not using energy at all. But we are not in the 15th century, are we?”

Subsidies: 11-time growth

In the meantime, Yatsenyuk has announced that in Jan-Aug 2015 they gave the Ukrainians a total of 625.8mn UAH in subsidies for paying bills and that this is 11.3 times as much as a year ago.

According to Ukraine’s statistics service, in Jan-Aug 2015 the subsidies were given to as many as 2,700,000 families, that is, 190.9 UAH per family (less than $9).

According to the head of the Public Audit company Maxim Goldarb, almost 3,000,000 families have already applied for subsidies for this winter. “And by the beginning of the heating season, their number may grow to 4,000,000. With the average Ukrainian family consisting of 3 people, this means that as many as 12,000,000 people or 28% of the Ukrainians need social assistance. In any other country this would mean not a success in subsidizing but an epic fail in ensuring people’s constitutional right to normal living standard and remuneration,” Goldarb says.

He says that the government has all grounds for lowering the gas tariff but is not doing this. Today, the gas tariff for the population is 7,200 UAH for 1,000 c m, while the imported and own gas prices make up just 5,800 UAH and 1,590 UAH, respectively.

The key reason why the government is not lowering the tariff is that with a high tariff, Naftogaz will get even more money for covering its deficit.

“Next year, the government will allocate 40bn UAH for subsidies, that is, twice as much as this year. And more than half of this money will be given to Naftogaz. So, Yatsenyuk lies when he says that they have stopped subsidizing Naftogaz. They have just changed the mechanism,” Goldarb says.

“Their key motive for raising the bills was not to give subsidies to Naftogaz. They planned to earn 30bn-40bn UAH a year as a result. But now they are going to spend as much on energy-related subsidies for the population. The only question here is who will control and distribute this money,” says Ukrainian analyst Oleksandr Okhrimenko.

Ruslan Vesnyanko, economic analyst of EADaily in Kiev