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Viewing cable 09KYIV466, A View from the Window: Consular Elements of the Economic
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09KYIV466 | 2009-03-16 14:34 | 2011-08-24 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Kyiv |
VZCZCXRO3596
RR RUEHDBU RUEHIK RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHKV #0466/01 0751434
ZNR UUUUU ZZH
R 161434Z MAR 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 7463
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFISS/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
UNCLAS SECTION 01 OF 03 KYIV 000466
SENSITIVE
SIPDIS
DEPT FOR EUR/UMB, EEB/OMA, CA/FO, CA/VO
NSC FOR KKVIEN
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
DEPT PLEASE PASS TO USTR FOR CKLEIN/PBURKHEAD
DEPT PLEASE DISTRIBUTE WORLDWIDE
E.O.12958: N/A
TAGS: CVIS EFIN ECON ETRD KFRD XH PL UP
SUBJECT: A View from the Window: Consular Elements of the Economic
Crisis in Ukraine.
//////CORRECTED COPY ////ADDED CIS AND NATO EU COLLECTIVES///
Sensitive but Unclassified. Not for Internet Distribution.
¶1. (SBU) Summary: During the past several months, the Consular
Section at Embassy Kyiv has seen changes that reflect the severe
downturn in Ukraine's economy. As "economic crisis" became a
ubiquitous refrain, the volume of nonimmigrant visa applications
dropped noticeably. Fraudulent cases increased as a proportion of
total cases, and visa fixers have expanded their reach into the
industrial regions of eastern and southern Ukraine. Ukrainian
citizens at all levels are feeling the effects of the deteriorating
economy, as illustrated by the narratives of visa applicants. If the
crisis continues to deepen, increased fraud is likely to continue.
The current drop in demand, however, has yet to significantly erode
the 36 percent growth in demand that has occurred since FY 2005. End
summary.
--------------
By the Numbers
--------------
¶2. (SBU) The recent decline in nonimmigrant visa applications at
Embassy Kyiv has paralleled a sharp deterioration in Ukraine's
overall economy. The Consular Section witnessed a 36 percent drop in
total applications during January 2009 as compared to January 2008,
and a 43 percent decrease in B1/B2 applications during the same time
period, indicating that business travelers and vacationers are
curtailing their travel spending. Exchange Visitor applications have
dropped precipitously (41 percent) from FY08 YTD to FY09 YTD. In
particular, prospective Summer Work and Travel applicants seem to be
more cautious about committing to travel plans. (Comment: For the
fiscal year-to-date, however, total NIV demand is down only 11
percent from last year and remains almost 37 percent over comparable
figures from FY 2005. End Comment.) Demand for other types of visas
has remained steady. The decrease in business travel is also evident
in a sharp drop in the use of appointment slots available to
applicants referred by the American Chamber of Commerce (AmCham) in
Ukraine. In December 2008 and January 2009, these slots went
virtually unfilled, in sharp contrast to past high demand for AmCham
appointments.
¶3. (SBU) Reports from other foreign missions in Kyiv corroborate
our observations of declining visa demand as the initial effect of
the economic slump. Poland is a popular destination for Ukrainians,
both due to proximity and family ties, yet the Polish Consul General
reported that despite Poland's low 3 percent refusal rate, his visa
officers have noted a 25 percent decrease in applications from this
time last year. He chalked up the decrease to average Ukrainians
tightening their belts, stating that "tourist trips are one of the
first things to go." Our Canadian counterparts reported a 25 to 30
percent decrease in applicants over the past few months. British,
Swedish and French consuls also reported comparable drops in visa
demand.
-------------------------
Fraud Expanding its Reach
-------------------------
¶4. (SBU) Despite the dip in visa applications during January 2009,
there has been a significant increase in the percentage of cases
involving fraud. The Fraud Prevention Unit (FPU) reported a 147
percent surge in total cases forwarded for additional scrutiny, and
a 28 percent increase in cases of confirmed fraud from September
2008 to February 2009, as compared with the same period a year
earlier. Furthermore, cases where officers suspected false documents
jumped by 63 percent. The Canadian, British, Swedish and French
Consulates have also noticed an increase in fraudulent cases.
¶5. (SBU) Fraud trends in Ukraine have also shifted in a qualitative
manner. Traditionally, the economically-depressed regions in western
Ukraine have been the epicenter of consular fraud in the country.
Recent FPU investigations indicate that visa fixers have expanded
their market and territorial reach beyond western Ukraine, extending
into southern and eastern Ukraine, as well as Belarus. (Note:
Embassy Kyiv currently processes NIV cases from Belarus.) This
dynamic is consistent with the fact that these industrial regions
have born the brunt of the global financial crisis in Ukraine.
¶6. (SBU) Even the visa fixers are feeling the economic squeeze.
Prices for fixed visa packages have reportedly dropped from as high
as $12,000 in 2007-2008 to around $5,000 in 2009. At the same time,
quality and sophistication of fraudulent documents have
deteriorated. This suggests decreased ability of applicants to pay,
and may also indicate the entrance in to the "market" of less
KYIV 00000466 002 OF 003
//////////CORRECTED COPY///ADDED CIS AND NATO EU COLLECTIVES////
experienced document venders.
¶7. (SBU) The jump in fraud has contributed to a seven percentage
point increase in our B-1/B-2 refusal rate for the fiscal
year-to-date. Our Canadian colleagues have noted an even sharper
jump, with their refusal rate rising from 15 to 25 percent.
--------------------------------------------
The Human Story: The Slump in Concrete Terms
--------------------------------------------
¶8. (SBU) NIV applicants' statements during interviews offer a
mosaic of narratives that reflect the economic outlook in Ukraine.
These concrete infopoints put the crisis in human terms, among them:
-One property owner lamented that his rental revenue in Kyiv has
fallen by 50 percent.
-Meanwhile, an HR manager from 3M reported that the company is in
negotiations for better terms on their office lease, and that 15
percent of their staff has been laid off.
-The owner of a property management company boasted that despite the
crisis, his company had only had to undertake "small" layoffs of 15
percent.
-A member of parliament from Donetsk affirmed that the metallurgy
and chemical sectors are feeling the brunt of the crisis in his
district, principally due to a decrease in export markets.
-A foreign sales director from the large metals firm Donetsksteel
claimed in mid-January that the company had avoided layoffs by
reducing salaries.
-One lawyer from a prominent firm reported that 20 attorneys in his
firm have been transferred from real estate to litigation practice
(primarily bankruptcy and creditors rights).
-An applicant from an institutional investment company shared that
her company had laid off 45 percent of its staff, and that no fresh
money was coming into the country.
-One recent Summer Work and Travel exchange program applicant
actually requested a refusal, explaining that his family was no
longer able to cover the cost of his travel and the fees of the
exchange program placement agency.
¶9. (SBU) The human side of the crisis is also evident in increased
interest in Consular Section jobs. Recent staff openings have
attracted a much larger and more qualified applicant pool than in
previous months, reflecting the scarcity of white-collar jobs and
the high-demand for dollar-based salaries. A case in point: February
2009 advertisements for an entry-level NIV Clerk position received
significantly more applications than when the position was last
advertised in summer 2008. Moreover, the Consular Section, as well
as other sections within the Mission, has seen employees who
resigned to pursue private sector jobs during last year's economic
upturn actually return to seek their old Embassy jobs. (Note: The
Human Resources Section noted that during FY2008 the Embassy saw an
average of 2 resignations per week, but in the first half of FY2009
there have been only 7 local staff resignations.)
------------------------------------
COMMENT: Future Demand and Fraud Up?
------------------------------------
¶10. (SBU) The initial effect of the economic slump has been a clear
though slight decrease in visa demand, with a strong up-tick in
fraud. If the crisis continues to deepen, fraud will likely become
even more endemic; however, it seems that the drop in applications
is temporary. Already in February, visa demand has rebounded to
above the February 2007 level. A continued growth in demand could be
fueled in part by a small group of well-heeled Ukrainians hedging
bets on the country's continued currency depreciation by spending
savings on travel and leisure, thereby maintaining a Soviet-era
tradition of investing in goods or services rather than holding on
to currency as a store of wealth or value. Joining them may be an
increasing number of still well-to-do (but now idle) applicants in
former high-growth sectors such as construction and real estate who
have indicated an inclination to take vacations precisely because
the crisis has provided more time for leisure. The real motor of
increased demand, although post's refusal rate and overstay rates do
KYIV 00000466 003 OF 003
////CORRECTED COPY//ADDED COLLECTIVE INFO////////
not yet reflect this, may well prove to be more applicants wanting
to escape economic misery by seeking illegal employment in the U.S.
TAYLOR