Food-for-thought paper: Ukraine
1. Attitudes towards European integration
The overwhelming Ukrainian perception is that the level of attention and engagement from the EU is inadequate and does not meet our ambitions. The Ukrainian parliament defined the ultimate foreign policy goal of seeking EU membership back in 1993; since then, it was confirmed repeatedly, but never met a welcoming response from the EU. The European Neighbourhood Policy (ENP), launched in 2004, did not offer the prospect of membership for Ukraine – even after the Orange Revolution the same year which clearly manifested the democratic and European choice made by the majority of the Ukrainian people.
For bilateral Ukraine-EU relations, the Eastern Partnership has provided no real added value – unlike with the other countries in the region to which the EU extended offers already tested with Ukraine.
All successive Ukrainian governments sought good relations with both natural poles of gravity – Europe and Russia. The business interests of the home-grown oligarchs required access to the both markets anyway. Thus, since the 1990s Ukraine has persistently refused Russian invitations to join post-Soviet supranational integration frameworks (due to a fear of losing sovereignty) and has at the same time promoted free trade in the post-Soviet area (with Russia, until 2011, refusing due to protectionism). Ukrainian official documents defined European integration as the priority foreign policy goal, but with the reservation that at the same time good relations with Russia should be maintained. The short-term priority was (and still is) to have both free trade areas at the same time – with the EU and with Russia.
For society, Europe has not been a factor in domestic policies until very recently. The Russian factor was much more evident in political debates, touching the complex question of Ukrainian post-Soviet identity. Until 2014, Ukrainian population overall had a very positive attitude towards Russia and this is why there was a distinct lack of domestic support for NATO membership (in 2002-2010).
This positive attitude towards Russia survived bilateral quarrels over the Black Sea Fleet in the 1990s, the gas wars of 2006 and 2009, and began to suffer only after the Georgian war of 2008. With a lot of family ties as a Soviet heritage, with the Russian language widely spoken, Russian media easily accessed and Russian border open, Ukrainians have been pretty exposed to Russian soft power. They have tended to perceive Russia as a closer and more understandable option when compared to Europe which was associated first of all with higher living standards. The image of the latter, however, suffered a lot as a result of the financial and economic crisis. The same crisis in Ukraine made the ‘Orange’ government fail and got President Yanukovych elected in 2010.
Europe became a domestic political factor in 2013 because of the saga of the Association Agreement (AA). With his popularity declining, President Yanukovych was in desperate need of financial and political support to secure his position in power. President Putin forced him to make a zero-sum ‘either/or’ choice and Moscow’s sticks and carrots proved to be more powerful than those of the EU.
Most people who stood on the Euromaidan in the winter of 2013-14 knew little about the EU or the AA. The progressive part of society came to protest against the abandonment of the last hope for a democratic, accountable and responsible government – Europe. In essence, this was a protest against a corrupt regime which was only tolerated for as long as there was any hope of a long-term prospect of a European model of development.
This unexpected and unusual protest with people suffering, struggling and dying under the European flag also saw the first signs of disillusionment with the EU as it expressed its ‘deep concern’ and hesitated to apply personal sanctions against key figures of the regime.
The subsequent Russian aggression in Crimea and the Donbas clearly made the biggest impact on current Ukrainian attitudes towards the EU. As a result, the current figure of support for the EU (52%) is the highest ever measured (with the alternative Russian-led Eurasian Union having only 12%). Now the political class is clearly united around European integration too. At the same time, this is because they have no other option. In fact, the EU is being widely criticized for its perceived insufficient level of practical support for Ukraine in this time of war.
- EaP successes and failures
Relationship status. TheAA saga beganback in 2005 when after the Orange Revolution the EU proposed negotiations on a ‘new enhanced agreement’ with Ukraine. These negotiations started only in 2007 and until September 2008, many EU member states were opposed to the very notion of ‘association’ as an implication of potential membership.
Now that the AA has been signed, the question arises of what happens next. It is difficult to explain, especially to those who stood for the European dream on the EuroMaidan and now defend a European future from Russian aggression, that the EU is simply tired and not ready to offer the prospect of membership to Ukraine.
Economic integration.The EU was a hard negotiator during DCFTA talks, trying to limit Ukraine’s access to the EU market. It was not a development support mode, but rather a standard ‘take it or leave it’ trade bargain. In 2004-2013, there was no preferential expansion of EU trade with Ukraine: it did increase twice (from €19bn to €38bn), but at the same time EU trade with Russia increased more than twice (from €131bn to €326bn). Still, Ukraine has become an important market for the EU:. in 2013, German trade volume with Ukraine (€6.9bn) was larger than that with Greece (€6.5bn).
In 2014, Russian aggression caused great economic instability in Ukraine. Direct damage from the war was significant (estimated at 20% of industrial potential destroyed or not under Kyiv’s control), but much greater was the impact of the broader feeling of insecurity – as it caused significant panic, devaluation (three times over one year), price rises, unemployment, impoverishment, and lower production.
In response, in 2014 the EU launched autonomous preferences for all imports from Ukraine, applying its DCFTA obligations unilaterally. But at the same time, the implementation of DCFTA chapter of the AA (i.e. Ukraine’s obligations under the DCFTA) was postponed until 2016, which leaves doubts as to what will actually happen and when. Its implementation is of paramount importance to send a reassuring message to potential investors who so far have been reluctant to come to Ukraine. Otherwise, the country will be left dependent on financial aid. So far, even with preferential treatment, Ukraine’s exports to the EU fell in 2014 by 0.9 percent.
Energy.The security of gas transit is the EU’s clear interest in Ukraine. In 2009, when Russia interrupted the gas supply to Ukraine and to Europe through Ukrainian territory, it was actually pressure from the EU and its member states that made the then Ukrainian Prime Minister Yulia Tymoshenko go to Moscow to sign a highly disadvantageous 10-year gas contract with harsh conditions dictated by Putin. This contract gave him huge political leverage over Ukraine. In spring 2014, Russia stopped delivering gas to Ukraine but continued gas transit through Ukrainian territory to the EU. Still, the European Commission stepped in to save European gas transit from potential disruption, and facilitated the EU-Ukraine-Russia trilateral interim deal for the winter 2014-15 and spring-summer 2015. It is remarkable that, 24 years after the dissolution of the USSR, the former Soviet gas border still exists as under the long-term contracts of European companies with Gazprom the point of gas delivery continues to be Ukraine’s western border. Thus, European transit through Ukraine continues to be a Ukraine-Russia issue.
At the same time, Ukraine became a member of the Energy Community in 2010 and started to approximate its regulations on gas and electricity markets to those of the EU. When joining the EC, Kyiv’s major expectation was not greater transparency of the most opaque, corrupt and ineffective sector, but rather that the EU’s abandon Russian offers of alternative gas transit routes. However, things started to move under the new government when the corrupt Rosukrenergo intermediary company was removed in early 2014 and the basic law on the gas market was adopted in spring 2015 in conformity with the Third Energy Package.
Mobility. On the eve of the EU’s Eastern enlargement 2004, the respective candidate countries were obliged to introduce visa requirements for Ukrainian citizens. Before that, Ukrainians were able to travel visa-free across the whole post-communist area from the Adriatic and the Baltic to the Pacific. Since then, the visa regime and the Schengen ‘paper wall’ has become quite a sensitive issue affecting the EU’s image in the eyes of ordinary Ukrainians. The ‘visa facilitation agreement’ has not produced any tangible simplification; there are particular problems not in the refusal rate which has been quite low for Ukraine (2 – 3%), but in the low number of long-term multiple-entry visas.
Only after some hesitation did the EU finally offer a set of criteria for a visa-free regime for short-term travel (‘Visa Liberalisation Action Plan’, VLAP) in late 2010. The implementation of VLAP criteria met resistance from political and economic vested interests, so Ukraine was only able to officially end the first phase of VLAP implementation and start the second phase in 2014. For the time being, the biggest challenge is the low capacity of various governmental bodies responsible for VLAP implementation. Thus, according to the latest assessment of the European Commission published on 8 May 2015, Ukraine has yet to demonstrate further progress to gain the visa-free regime.
The Common Aviation Area (Open Sky) agreement between Ukraine and the EU was initialled at EaP Vilnius summit in November 2013, but still has not been signed because of disagreement between the UK and Spain over the mention of Gibraltar in the text.
Reforms. The ENP and EaP have not produced much success in stimulating domestic reform in Ukraine. Though no-one disputes that Ukraine is also responsible for this, one should at the same time acknowledge the EU’s flaws. The bilateral practical instrument – the Action Plan – contained a list of almost 300 vague priorities for Ukraine’s homework, but, unlike the political guiding documents with candidate countries, it lacked benchmarks, timeframes, and linkages to EU aid, and was not supported by serious monitoring. Moreover, the EU could hardly expect serious financial leverage with the total amount of aid of less than 1% of Ukraine’s state budget.
The situation started to change recently, with the new Association Agenda agreed in early 2015 being a more concrete document and for the first time containing short-term reform priorities with benchmarks. The EU Support Group for Ukraine, the EU Assistance Mission to Civilian Security Sector Reform and other expert advisory missions have been launched. The major question is at the receiving end – with Ukraine’s unreformed civil service, the level of governmental absorption capacity remains very low.
Overall, at present, the most effective leverage on reforms in Ukraine seems to be the Western macro-financial assistance. IMF programmes (17 and 15 Bio USD for short- and medium-term) are among the most important policy guiding documents for the government for the time being.
Dmytro Shulga is European programme director at International Renaissance Foundation.
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