The state reserve system in Ukraine: Reforms and key changes approved

On August 9, the Verkhovna Rada of Ukraine approved a new draft law on state reserves. Law No. 9079, which was discussed in the second reading, received support from 255 MPs. One MP, Volodymyr Kabachenko of the Fatherland party, voted against it, and 35 abstained (mostly representatives of Fatherland and European Solidarity).

The law will enter into force three months after its publication. According to the Ministry of Economy and Taras Melnychuk, the Cabinet of Ministers' representative in parliament, the key changes in the law include the separation of state material and state mobilization reserves and the introduction of new principles and directions for the formation of the nomenclature of material assets.

The state material reserve will include raw materials, industrial and food products, medicines, fuel and energy, material and technical resources, etc. intended for use in peacetime and in special times. The responsibility for the formation and preservation of the state material reserve will fall on the shoulders of the relevant central authority (currently the State Reserve Agency). The law also exempts this agency from paying court fees.

The state mobilization reserve, on the other hand, will consist of material assets that are intended only for use in special periods. The reserves of the state mobilization reserve will be used for the production of military equipment, industrial goods and food, as well as for the restoration of infrastructure. Authorities assigned with mobilization tasks will be responsible for the creation and storage of the state mobilization reserve.

The law also defines clear powers of the State Reserve Agency, as well as the tasks and responsibilities of other authorities. This will help to improve cooperation between them, avoid duplication of functions in the creation of material reserves, and ensure a quick response of the state in crisis situations.

The state reserves will be able to be stored at the facilities of private market operators, including abroad. This will help ensure greater security of the reserves by distributing their storage locations. The possibility of storing fuel in European countries is also envisaged.

Additionally, the Law introduces the institute of reserves, which requires producers to reserve a portion of their products as state reserves and provide them to the state upon request. The law establishes the procedure and criteria for selecting reserves. Material assets of the state material reserve will be sold through auctions in an electronic trading system.

There are plans to create a unified register of state reserves in the form of a secure automated database. This will simplify the procedures for storage, protection, accounting, search and reporting.

The law also provides for compulsory insurance of state reserve material assets that are kept in safe custody and reserve in Ukraine. Non-residents fulfilling storage or reservation obligations will be provided with an international bank guarantee.

The law also establishes control over state reserves and liability for violation of the relevant legislation, including the possibility of imposing fines. "The reform of the state reserves system is a strategically important decision for our country. We are radically changing approaches to the formation and preservation of reserves, replacing the outdated Soviet system with a modern, flexible, rational and efficient one," said Economy Minister Yulia Svyrydenko.

According to her, the new system will meet the needs of the present and surpass even the practices of Western countries, as all the negative experience and mistakes of the previous system were taken into account in its development.

"We did our best to avoid the shortcomings of the previous system. Special attention has been paid to increasing control over state material reserves, transparency of processes and speed of response in crisis situations," the First Vice Prime Minister added.

It should be noted that the Ministry of Economy has previously stated that the draft law was developed on the basis of the Strategy for Reforming the State Material Reserve System until 2025. The document provides for the termination of the State Reserve Agency. The draft law was approved by the government on February 17 and sent to the Rada on March 3, which means it took five months to approve it in two readings.