Map 1: Ukraine
Ukraine’s cohesion and its unqualified independence are central to European security and stability. Its struggle for self-determination and reform since the Euromaidan revolution is the principal subject of this report, which takes stock of the tumultuous politics of the past four years and considers Ukraine’s prospects of fulfilling its citizens’ aspirations for better governance, security and a closer relationship with Europe.
The mass protests against the Viktor Yanukovych administration in late 2013 and early 2014 set in motion a succession of profound changes to Ukraine’s political, security, economic and institutional landscape. A corrupt regime with unhealthy ties to Russia was replaced by the popularly elected and EU-aligned administration of President Petro Poroshenko – even though this administration is less committed to reducing corruption than it should be. A ground-breaking Association Agreement with the EU has been sealed, offering significant economic opportunity but imposing stringent conditionality. Partly to comply, Ukraine has attempted the most ambitious policy reforms since independence in 1991, with mixed (though occasionally impressive) results. And, of course, Ukraine has been taken to war by Russia and its proxies – an assault that has involved the illegal annexation of Crimea and the ‘separatist’ occupation, supported by Russian military power, of territories in the eastern Donbas region.
The upshot of these events is that the struggle for Ukraine is existential in more senses than one. First and foremost, there is the challenge Ukraine faces to ensure its survival as a sovereign state. Moscow’s efforts to undermine its neighbour’s political functioning, to act as a spoiler in Kyiv’s relations with the West, to restrict Ukrainian trade, and to manipulate and corrupt public opinion continue – and the military threat is never far away. Russia would likely find it hard to invade and hold the whole country, but its belligerent interference, if unchecked by Ukrainian and Western resolve, risks doing enough to fragment Ukraine or, at the least, render it adiminished client state.
Popular desire for renewal gives the reformers a strong mandate. But entrenched conservative forces are resisting, with some success
Just as important is the fierce contest within the country to decide the type of society and polity that Ukraine becomes in the future: an open, modern, transparent and essentially ‘European’ state with institutions and systems to achieve sustainable economic growth and ensure the welfare of the population; or an inward-looking and sclerotic nexus of insiders, establishment figures and unscrupulous business interests. Popular desire for renewal, allied to weariness with Ukraine’s notoriously high levels of corruption, gives the reformers a strong mandate. But entrenched conservative forces are resisting, with some success.
This demanding set of conditions, and the critical juncture at which Ukraine finds itself, provides the context in which this report assesses the country’s position and prospects. The report’s central argument is that Ukraine’s declared ambitions for domestic transformation and European integration are fragile and under threat from outside and from within, and that the country is too important to be allowed to fail. The six chapters that follow explore the nature of those threats – and the prospects for overcoming them – taking into account the complications arising from Ukraine’s Soviet legacy and a Russia hostile to its intended European alignment. The authors also suggest realistic policy actions, notwithstanding the limitations imposed by foreign policy divisions in a Western community confronting serious challenges of its own and in which liberalism is either in retreat or on hiatus.
Why Ukraine matters
The rise of insular, populist politics in the West arguably makes Ukraine’s efforts to recruit international support more difficult. It may test the resolve of governments and donors to keep providing material and/or political assistance – especially if reforms continue to disappoint, as is clearly a risk. But there are important reasons for not abandoning Ukraine to corrupt elites, not giving up on its project of European integration, and not accepting as inevitable its capture within Russia’s geopolitical orbit.
The first and most obvious is Ukraine’s determination to shape its own destiny. Plans for the EU Association Agreement enjoyed significant, though by no means unanimous, public support, and it was President Yanukovych’s suspension of the agreement in late 2013 that triggered the Euromaidan protests leading to the 2014 revolution. In the most recent opinion poll, conducted in 2016, 86 per cent of respondents representing a nominal population of 43 million (a figure excluding Crimea’s 2 million residents) said that it is very important that Ukraine becomes a ‘fully functioning democracy’. To consign Ukraine to effective Russian control would therefore be a dangerous option, both in moral and practical terms. It would deprive Ukraine of the right to choose its own system of governance and international alliances. It would also open the country to untrammelled criminality and deprivation of human rights, which would likely contaminate neighbouring EU states and others further afield. The most likely outcome of forsaking Ukraine would be prolonged instability inside the country, with the danger of internal armed conflict and refugee flows that could reach beyond Ukraine’s borders.
To compromise on supporting and protecting Ukraine’s sovereignty would be a humiliating admission of impotence and constitute a surrender of Western values
The second reason for firm but constructive Western engagement is Ukraine’s importance to the rest of Europe, NATO and some other former Soviet states. As the largest country in Europe (after the European part of Russia), bordering four EU member states, and with a population far in excess of that of Scandinavia and the Baltic states combined, Ukraine is ‘too big to fail’ – the consequences of it doing so are too severe. A weak and abandoned Ukraine would present security risks to NATO and the EU, as well as to individual states that have invested stock and reputation in supporting the country and proclaiming it as deserving of the same rights as any other state in Europe.
Ukraine’s failure would also pose a threat to the wider international order. To compromise on supporting and protecting Ukraine’s sovereignty would be a humiliating admission of impotence and constitute a surrender of Western values. It would mean accepting the existence, in effect, of a two-tier world divided between a privileged set of fully sovereign states and a group with lesser rights. And it would create a situation that Russia or other states would be quick to exploit, further weakening the international system. The abandonment of Ukraine to a resurgent Russian ‘sphere of influence’ of any kind would thus surely return to haunt Europe, just as other geopolitical bargains did in the last century.
Achievements and dangers
Sustained Western support is needed both to limit Russian predations and to build Ukrainian capacity to effect the institutional, judicial and economic reforms the country needs. Notwithstanding the West’s uneven resolve to date in holding Ukraine to policy and governance commitments, that support in principle is neither unconditional nor inexhaustible – and there is a risk that it will be offered more reluctantly in the future. This makes it all the more vital that Ukraine do more to help itself.
To its credit, Ukraine has reformed more since the 2014 Euromaidan revolution than in the previous 20-plus years of its post-Soviet existence. Under severe economic, military and psychological pressure, the country has held together after the annexation of Crimea. Notable achievements include the efforts of the government and the National Bank of Ukraine, under difficult circumstances, to stabilize the economy in response to the 2014–15 recession and economic crisis; the formation of new anti-corruption agencies (albeit with mixed results so far); and the authorities’ increasing use of technology to improve public-sector transparency. Progress has been especially evident in the transformation of the energy sector. This has involved Ukraine obtaining gas from sources other than Russia, transferring subsidies to those most in need, and stopping Naftogaz, the state-owned gas supply and transit company, from being the major cause of haemorrhage in the public finances. Many of the most impressive achievements can be attributed to pressure from Ukraine’s remarkably well-developed and tenacious civil society.
To its credit, Ukraine has reformed more since the 2014 Euromaidan revolution than in the previous 20-plus years of its post-Soviet existence
But Ukraine also lives under constant threat. It remains at war with Russia, which does not even admit to being a participant in that conflict; which has a newly professionalized and re-equipped military getting live practice in Syria; which supports rebellions in the Donbas region; which has organized targeted assassinations in Kyiv and elsewhere, as well as major and disruptive cyberattacks; and which has an unwavering goal at least as strong as Ukraine’s – to prevent Ukraine from achieving a durable association with the West.
Arguably the greatest danger to Ukraine comes from within. Ukraine’s establishment, its informal networks, its Soviet legacy and, most of all, vested interests in the form of businessmen with excessive influence on the levers of power (frequently but inaccurately known as oligarchs) pose the greatest threat to stability and success. Some brave individuals have come up against enormous pressure from those who want to dilute reforms and protect the status quo. Key reforms in areas such as healthcare, public administration and the judiciary have either not yet started or are only in their infancy.
The most recent evidence shows that reform in Ukraine risks stalling, that the forces ranged against it are pushing back with determination, and that efforts to foster good governance are being sabotaged by parts of the government, including at senior levels. Vested interests in Ukraine will remain powerful, albeit to a lesser extent, even if their most prominent exemplars are deprived of influence through corruption prosecutions or as a result of declining businesses. In sum, while institutional resilience and capacity have been built up in a number of areas, the proverbial concrete has not set. In particular, the activities of civil society are now threatened by proposed new laws that would undermine it, allowing the government in Kyiv to backtrack on much-needed administrative and economic policy improvements.
Framing the problem: the need to challenge misconceptions
A precondition of any prognosis on Ukraine’s foreign policy and reform trajectory is a sound understanding of the nature of the problem at hand. This is especially critical when expecting others to heed policy recommendations – as this report does. For this reason, it is helpful as a starting point to puncture a number of misconceptions (sometimes wilful, sometimes born of ignorance) about the country, its geopolitical situation, its reform prospects, and the roles of Western interlocutors and donors.
One frequent but uninformed criticism of the West asserts that it forced Ukraine to choose between itself and Russia in 2013, and that this caused the drastic deterioration in the West’s relations with Russia. There are several problems with this argument. The first is that Ukraine has in fact been committed to a European future throughout its 26 years of independence, and the EU merely offered Ukraine preferential trade terms in exchange for institutional reform. Indeed, the EU engaged in five years of negotiations with Ukraine on the Association Agreement before even considering the deal acceptable.
The second flaw in the argument is that it was Russia, not the West, that tried to force Ukraine to choose sides. Moscow did this initially through its bribery and coercion of President Yanukovych; and then, once he had fled to Russia, and Ukraine had undergone what it called a ‘Revolution of Dignity’ (but which Russia falsely claimed was a Western-backed coup by right-wing forces), through territorial annexation, destabilization and war.
The third problem is that the downturn in the West’s relations with Russia was well under way when the Euromaidan protests started. Russia had chosen to define itself on an increasingly anti-European platform as early as 2012, upsetting the balance in its bilateral relations with the West in addition to alienating Ukrainians. In short, Western policy towards Ukraine in 2013 was not, as some have erroneously suggested, an example of reckless provocation because tensions with Moscow were already elevated.
Another mistake is the ‘basket case’ argument – that Ukraine’s corruption is so great, and the country’s prospects so hopeless, that it is not deserving of Western support. The logic is faulty here, too. Of course the West must learn from its mistake of offering financial support and trade agreements to the corrupt Yanukovych regime. Strict conditionality is essential: Western financial aid should be dependent on reforms. But it does not follow that there is a connection between fulfilment of those reforms and support for Ukraine’s territorial integrity.
To think of Ukraine as ‘not Europe’ because we once knew it as a part of the USSR is to surrender to the grip of the past
The final misconception is by those who argue that Ukraine is always going to be in a zone of Russian interest. History does not suggest an appropriate precedent. Some of the Ukrainian lands were indeed under Russian control for over 300 years, but others were not; earlier, Kyiv had flourished before Moscow was even founded. Over the last quarter of a century, however, Ukraine has finally emerged as a political nation. This changes the situation fundamentally. To think of Ukraine as ‘not Europe’ because we once knew it as a part of the USSR is to surrender to the grip of the past. Instead, this report takes it as a given that Ukraine is a fledgling European state. Whatever Vladimir Putin said to George W. Bush in 2008 about Ukraine not being a real country, and regardless of what Russia has done to Ukraine since then or may do to it in future, Ukraine has made its own choice about its political order and European orientation. In fact, considering the backlash against a European identity in parts of what might be considered ‘traditional’ Europe, the reality is that Ukraine often acts and speaks in a more pro-European fashion than do some EU member states.
Winning the struggle
Securing Ukraine’s future as an independent state, preventing further conflict and ensuring the country derives maximum benefit from a deeper relationship with the EU will require action and commitment on several fronts. Ukraine’s reasonable record of success in reform so far will count for nothing if the direction of travel goes into reverse as a result of domestic and/or exogenous factors. This report warns of that very real danger, and offers recommendations for avoiding it.
Under normal conditions – i.e. an absence of war – Ukraine could probably survive as an independent state by ‘muddling through’, as it has done for most of its short, post-Soviet life. Now, though, it will need greater political, patriotic and military resolve to stand even a chance. Such is the fundamental level of disagreement between Russia and Ukraine (and consequently between Russia and the West), such is Russia’s implacability, and so hard is the task, that Ukraine’s success as a state will entailof many kinds.
First and foremost, many more Ukrainians will have to continue to be prepared to fight, with the risk of joining the 10,200 of their countrymen who have already died in the conflict. Russia is not letting go of its territorial gains or aspirations; nor will conventional diplomacy persuade it do so. Indeed, Russian diplomacy is designed to realize the ambition of a return to the Cold War order of great powers deciding the fates of smaller states. The unpalatable truth, unspoken by Western politicians of course, is that only more Russian deaths on the Ukrainian battlefield, combined with a greater economic squeeze through increased sanctions, will pressure Russia sufficiently to change its policy and release its grip.
Russian diplomacy is designed to realize the ambition of a return to the Cold War order of great powers deciding the fates of smaller states
Second, critical domestic reforms in a host of areas will necessarily bring difficulties and entail hardship. Independent institutions and application of the rule of law provide the only ways to diminish the excessive influence of inappropriate individuals in Ukrainian public and political life. Economic modernization is also needed to ensure that Ukraine is ready for the technical and commercial demands of European integration, and to provide political legitimacy to reform through improvements to living standards. Growth of the middle class, supported by an improving economy, would help in this respect. But prospects are uncertain: the middle class in Ukraine is struggling as the economy, even though it looks set to meet its 2 per cent growth forecast for 2017, faces fundamental challenges. Prime among these is the lack of foreign investment, a lack of competitiveness and the precipitous fall in trade with Russia. Corruption and war are not incentives to invest. (Paradoxically, though, the better Ukraine does economically, the less policy leverage the West has over it.)
The prospect of further economic upheaval offers a reminder of the fundamental political dimension to reform: Ukraine is in need of such deep-rooted change that most citizens will inevitably become economically worse off before their lives get better. That is a difficult sell politically, and will not win votes in the 2019 presidential election. Economic improvement will only come slowly, and the Ukrainian population needs to resist the blandishments of populist forces. The country is paying heavily for the lack of reforms before 2014, and there are no instant solutions.
Finally – and on the same subject of politically unpopular policies – the West will need to sustain its assistance efforts over the medium to long term, and will have to accept greater sacrifice itself in order to help Ukraine. There is an economic cost associated with deterring Russian behaviour in Ukraine. As the target of sanctions, Russia is clearly bound to suffer the greater economic pain. But there needs to be recognition in the West that sanctions, if applied properly as opposed to half-heartedly, affect Western economies too.
The West will need to sustain its assistance efforts over the medium to long term, and will have to accept greater sacrifice itself in order to help Ukraine
In other words, for the West, as for Ukraine, some sacrifices, as well as increased political resolve, are required for longer-term gains in stability and security. If Western countries remain committed to supporting Ukraine, both bilaterally and multilaterally through the G7 and the EU, Russian strategy towards the country can be checked to a significant extent. The imperative is to win time and make it possible for reforms to go deeper, and for a new political generation to mature and come to power.
About this report
The challenges for Ukraine are multiple and complex, but for convenience this report breaks them down into six categories. A separate chapter is devoted to each challenge, in addition to this introductory essay. The six chapters cover: geopolitics and security in the context of the conflict with Russia; European integration and the demands of the Association Agreement; economic reform; governance, democratization and the media; the development of civil society; and efforts to combat corruption.
Each chapter has been written by a different expert on the region. While the report as a whole seeks to offer a coherent picture of the situation in Ukraine and the challenges ahead, it deliberately allows for a diversity of voices. The seven authors are individually responsible for the views in their own chapters, but have jointly agreed on the report’s recommendations.
Box 1: Timeline – Euromaidan movement and major post-Euromaidan events
Negotiations take place over the proposed Association Agreement between the EU and Ukraine.
21 November: Prime Minister Mykola Azarov announces the suspension of preparations for conclusion of the EU–Ukraine Association Agreement. In response, the first civic protests begin in ‘Independence Square’ (Maidan Nezalezhnosti) in Kyiv. The ensuing popular movement and political transition become known as the ‘Revolution of Dignity’ or ‘Euromaidan’.
18–20 February: Seventy-nine protesters are killed and more than 500 injured in confrontations with riot police in Kyiv.
21 February: President Viktor Yanukovych is removed from office and flees to Russia. Oleksandr Turchynov is appointed acting president.
7 March: Leading NGOs and experts establish the Reanimation Package of Reforms (RPR), a coalition to lobby for rapid structural reforms.
18 March: The Crimean peninsula is annexed by the Russian Federation.
April: The state-owned National TV and Radio Broadcasting Company (NTU) is transformed into an independent public broadcaster.
April: The European Commission establishes the Support Group for Ukraine (SGUA) to deliver coordinated reform assistance, and approves a package of Autonomous Trade Preferences (ATP) opening EU markets to Ukraine on a unilateral basis.
April: The IMF approves a support programme with a credit line totalling $17.5 billion.
12 April: A group of pro-Russian militants takes control of the police, security services and administrative buildings in the city of Sloviansk, signalling the start of Russian intervention in the Donbas region. The Ukrainian government loses control over large parts of the Donetsk and Luhansk oblasts.
25 May: Petro Poroshenko is elected president of Ukraine in an early election.
17 July: A passenger jet, Malaysia Airlines flight MH17, is shot down in eastern Ukraine by a Buk missile system, transported from Russia into Ukraine on the same day.
July–August: The Ukrainian army reclaims control of some parts of Donbas. However, separatist militants and Russian regular troops halt the Ukrainian offensive in a battle at Ilovaysk. The Ukrainian army death toll: 241.
5 September: The Protocol on the Results of Consultations of the Trilateral Contact Group, known as ‘Minsk I’, is signed.
September: The EU adopts Tier 3 sanctions against Russia that introduce asset freezes, travel bans, and restrictions on access to capital markets and transfer of dual-use technology.
September: The EU and Ukraine agree to postpone provisional application of the Deep and Comprehensive Free Trade Agreement (DCFTA), a part of the Association Agreement, for 15 months. Trilateral EU–Ukraine–Russia negotiations are launched to discuss Moscow’s concerns over the impact of the DCFTA on Russia–Ukraine trade relations.
16 September: The European Parliament and Verkhovna Rada (Ukraine’s parliament) simultaneously ratify the EU–Ukraine Association Agreement.
14 October: The Verkhovna Rada adopts a law creating the National Anti-Corruption Bureau of Ukraine (NABU).
26 October: A parliamentary election results in a wide-ranging realignment of political forces and the establishment of a pro-reform coalition known as ‘European Ukraine’. Arseniy Yatsenyuk is reappointed as prime minister.
12 February: A revised Package of Measures for Implementation of the Minsk Agreements, known as ‘Minsk II’, is signed.
18 February: Debaltseve, a major rail hub, is captured by pro-Russian separatist forces. The Ukrainian army death toll: 267.
February: A law ‘On Open Use of Public Funds’ is passed, requiring all government entities, including state-owned enterprises, to publish their budgets and details of their expenditure online.
31 August: The first reading of constitutional amendments is adopted in parliament. The amendments introduce deeper decentralization and incorporate provisions on the ‘special status’ of self-governance for the Luhansk and Donetsk oblasts, which are regulated by a separate law. Four police officers die and 150 are wounded as a result of violent protest against the ‘special status’ clause.
December: A new law on the civil service is adopted.
1 January: Provisional application of the DCFTA starts. In retaliation, Russia suspends the application of its free-trade agreement with Ukraine.
19 February: The ruling ‘European Ukraine’ coalition loses its parliamentary majority, sparking a new political crisis.
29 February: The State Bureau of Investigation (SBI) is established. When fully operational, the SBI will assume most of the functions of the Prosecutor General’s Office (PGO) in respect of investigating serious crimes, including corruption.
18 March: A law on e-declarations of the assets of government officials and judges is adopted in parliament.
1 April: A new digital public procurement system, ProZorro, is introduced for all state tenders.
6 April: Dutch citizens vote in a referendum on the EU–Ukraine Association Agreement. Their rejection of closer EU links with Ukraine halts the EU ratification process. Special amendments to the agreement are later introduced to ensure a positive vote in the Dutch parliament.
14 April: Prime Minister Yatsenyuk resigns as the pro-reform coalition crumbles. Volodymyr Groysman, a close ally of President Poroshenko, is appointed prime minister.
2 June: Constitutional changes are adopted by parliament to facilitate an overhaul of the judicial system. The changes cover the establishment of a new Supreme Court, a new High Anti-Corruption Court, courts of appeal and a new High Court of Intellectual Property Rights. (At the time of writing, the changes have yet to be fully implemented.)
3 June: The government’s Strategic Defence Bulletin lists meeting the criteria for NATO membership as a priority for Ukraine.
15 August: A new National Agency for Prevention of Corruption (NAPC) becomes operational.
December: PrivatBank, the country’s biggest lender, owned by the businessman Ihor Kolomoyskyi, is nationalized. This is the culmination of a major clean-up of the banking sector.
18 February: Vladimir Putin, Russia’s president, signs a decree recognizing the internal passports issued by the so-called Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR). He authorizes use of the Russian rouble as legal tender in these separatist ‘republics’.
March: Amendments to the law on e-declarations require suppliers to anti-corruption organizations as well as citizens affiliated with them to complete the same extensive e-declaration forms as government officials. This makes it harder for anti-corruption NGOs to operate freely.
May: The Dutch parliament accepts the EU Association Agreement.
11 May: The EU Council lifts visa requirements for Ukrainians travelling to the EU for short stays.
15 May: The Ukrainian government bans the use of Russian internet service providers and social media platforms, such as Vkontakte.
July: Ukraine is hit by a cyberattack disrupting public institutions. Dubbed ‘NotPetya’, it is believed to be linked to Russian hacking groups.
7 July: Kurt Volker, former ambassador to NATO, is appointed as US Special Representative for Ukraine Negotiations.
1 September: The EU–Ukraine Association Agreement and DCFTA fully enter into force, following completion of the ratification process by all EU member states.
1 Forty-two per cent of the population supported the EU Association Agreement, according to a poll conducted for the Razumkov Center in August 2012. This level of support exceeded that for any other policy.
3 The term ‘oligarch’ suggests someone with the power to rule and control. This is inaccurate when applied to Ukraine. It is fairer to say that Ukrainian tycoons have excessive sway in their country’s politics. This nuance presupposes, however, that Petro Poroshenko himself, with his business and media interests intact, is not classed as an oligarch, on account of his being the president.
4 Office of the United Nations Commissioner for Human Rights (2017), Report on the human rights situation in Ukraine: 16 May to 15 August 2017, p. 7, http://www.ohchr.org/Documents/Countries/UA/UAReport19th_EN.pdf (accessed 5 Oct. 2017). The figures cover the period from 14 April 2014 to 15 August 2017. The report also states that the conflict has resulted in more than 24,000 people wounded. Estimates vary as to the number of internally displaced persons (IDPs) created by the conflict. An Atlantic Council report gives a figure of 1.6 million registered IDPs, citing Ukrainian government data, but mentions a UNHCR estimate indicating that the real figure is much higher. Van Metre, L., Steiner, S. E. and Haring, M. (2017), Ukraine’s Internally Displaced Persons Hold a Key to Peace, Atlantic Council Issue Brief, October 2017, p. 2, http://www.atlanticcouncil.org/images/Ukraines_Internally_Displaced_Per… (accessed 5 Oct. 2017)
6 By 2016, Ukraine’s exports of goods and services to Russia were just $6.68 billion – down from $25.26 billion in 2011. Kramar, O. (2017), ‘Diversifying from Russia: Don’t stop now…’, Ukrainian Week, 9 June 2017, http://i.tyzhden.ua/content/photoalbum/2017/06_2017/12/bild/uw/%D0%9A%D0%BD%D0%B8%D0%B3%D0%B06.pdf.
7 Ukraine’s economic recovery is all the more impressive considering the denial of Ukraine’s economic productivity through its coal and steel industries in occupied Donbas, and the closing-off of the Russian export market. Ukraine’s GDP decreased by a cumulative 16 per cent in real terms in 2014 and 2015. See World Bank (2017), ‘Ukraine Economic Update – April 2017’.