By PATRICK STEPHENSON
BRUSSELS – What are the prospects for developing relations between the war-torn state of Ukraine and the European Union? A mixed bag, to hear experts describe it. While most acknowledge that the country has adopted an impressive range of reforms, dark clouds remain on the horizon, with one EU politician arguing that the most difficult institutional changes in Ukraine have only just begun.
Experts and policymakers gathered on 27 April under the auspices of the European Policy Centre (EPC) to review the situation and the reforms that Kiev has adopted since its outbreak of war with Russia in early 2014.
EPC Senior Policy Analyst Amanda Paul opened the discussion, declaring that “Ukraine has turned a corner over the last few years. “[Ukrainians] are getting rid of the corrupt and criminal politics of the past.”
She noted that in early April the European Parliament reached informal agreement with the Council to exempt Ukrainians from short-stay visa requirements. This would allow them to remain in most of the EU for 90 days out of any 180-day period, although not to work. The plan is expected to enter into force in June.
Paul handed over to the featured guest speaker, Lithuanian Foreign Affairs Minister Linas Linkevičius, who labelled the visa deal a success, but reminded his audience that the military situation in Ukraine remains grim. “The situation is deteriorating as we speak,” he said, noting that in previous days, some 60 shelling attacks had killed numerous Ukrainian soldiers.
Despite such military setbacks, Linkevičius described progress in anti-corruption efforts, particularly the March arrest of Roman Nasirov, former head of Ukraine’s tax and customs service. Nasirov is suspected of defrauding the Ukrainian state of EUR 70 million in tax payments. Ten days after being charged, he was released on EUR 3.43 million bail posted by his wife, on condition that he hand over his passport and wear an electronic tag to track his location.
Linkevičius also lauded recent progress on political and economic reforms, particularly given the pressures of warfare. “In three years, more has been done [on reform] than in the past 20 years,” he said. But while more foreign aid is needed, the Lithuanian official said he did not entirely trust Ukrainians to use it. “We cannot maybe rely upon the efficiency of local institutions in using the assistance, so we have to send our own experts to deal with that.”
Dmytro Shumkiv, deputy head of the presidential administration of Ukraine and former CEO of Microsoft Ukraine, offered an update on where the reforms now stand. Reforming the Ukraine state for EU visa liberalisation, he said, was a far more intensive process than most people understood. “We had 144 items to be completed, many of them related to corruption,” he said.
The broader [EU-Ukraine] association agreement agenda is even more rigorous, requiring institutional changes within the Ukrainian government. “Some of the [reforms] are very fundamental, and very unpopular… in 2017, we need to bring the results to the citizens,” he added.
Shumkiv described how, in 2014, Ukraine started the reform process at the political and economic bottom. “There were 10,000 euros left in the state’s bank accounts,” he said. “Reserves, very little. Skyrocketing corruption. The country and state were inefficient and unprofessional. People didn’t trust state officials or policy officers. It was a perfect storm.”
Three years later, things are very different. According to Shumkiv, in 2014 only 6 percent of Ukrainians trusted the police. Now 80 percent say they do. But much more remains to be done, particularly in gas industry.
“Gas has always been a source of political corruption in Ukraine,” he said. “We increased the price of gas eight times. It was very unpopular, but we had to do it. Three years ago 90 percent of our gas was Russian gas. Now, it’s zero percent. People said it would be impossible to diversity. We did it.”
Shumkiv went on to recite a list of other macroeconomic improvements. While in 2014, for example, the budget deficit was 10 percent, it is now 3.9 percent, and still shrinking. Three years ago the inflation rate was 45 percent; now it is 12 percent, and expected to fall to nine percent in 2017.
Katarina Mathernova, deputy director general for European Neighbourhood Policy at the Commission, also provided an impressive statistic. “We’ve seen a 10 percent drop in the public sector proportion of GDP over the last three years,” she said. “It used to be around 50 percent. Not it’s 10.5% lower. That’s the 10 percent of GDP that went to the oligarchs in energy security, the banking sectors, and public procurement.”
A key remaining area of reform is judicial reform. “That’s the game changer,” she said. Immediately after the end of the Soviet Union, Mathernova explained, a new judiciary was installed that quickly ossified. The judges were not all competent, and many were corrupt. But in June 2016, a new constitutional amendment passed that allowed the Ukrainian government to require all sitting judges to pass legal exams. Before the exams were even administered, 2000 out of 8000 judges quit. “Twenty-five percent out of a system changes the system,” she said.
Not all speakers were so rosy about the country’s progress, however.
Dariusz Rosati, Polish MEP and head of the EU’s delegation to the EU-Ukraine Parliamentary Committee, sought to temper the debate. “Macroeconomic stabilisation has been impressive,” he said. “But that’s the easiest part.”
More difficult, in his view, is “microeconomic reforms, judiciary and structural reforms, and other institutional changes that take time and have an impact on vested interests that provokes resistance.”
Rosati said the single most difficult remaining task is land market reform for the sake of Ukrainian and foreign direct investors. “I come from Poland,” he said. “We had similar doubts [about land reform] 25 years ago, but we overcame these fears. Now we see it was an important driver of growth, when we opened up the land for commercial purposes.” He stressed the importance of pushing forward. “We have not reached the point of no return when it comes to these reforms,” he said.
It’s all the more of a pity that EU assistance to that country hasn’t been greater than the hundred-million or so euros it gets each year.
Nearly two decades ago, countries from the Baltic States to Romania used the lure of union with Europe as the justification for painful reforms. In late May, the Dutch Senate will have a chance to ratify the EU-Ukraine Association Agreement that was defeated, in a burst of anti-EU sentiment, by a Dutch referendum earlier this spring. Here’s hoping that the Ukraine’s pains and tears are finally rewarded.