When it comes to containing Vladimir Putin’s aggressive posture in Eastern Europe, the conventional wisdom advises strengthening NATO, diversifying Europe’s energy sources, and combating the Kremlin’s propaganda.
There is nothing wrong with any of these recommendations. Yet few things would be as effective in weakening Mr Putin as positive examples of countries in Russia’s immediate neighborhood that have liberated themselves from the shackles of domestic oligarchy and the Kremlin’s influence, and become a success story.
At the moment, only one country has the potential to do that: Ukraine. That is why its economic and political success is not just a matter of a “far-away country” and “people of whom we know nothing,” as Neville Chamberlain used to say about Czechoslovakia. Instead, Ukraine’s success is in the West’s immediate interest. Read more
Last month’s release of Ukrainian air force pilot Nadia Savchenko after 709 days in illegal Russian captivity came on the same day a group of us were returning from the front line of Ukraine’s Anti-Terrorist Operation (ATO) to Kiev. During the longer than usual train journey we compared notes about why Russian President Vladimir Putin had taken this step, what he hoped to achieve and how Savchenko would impact upon Ukrainian domestic politics.
Putin was not showing mercy. The day after Savchenko was released, a Russian court sentenced Ukrainians Mykola Karpyuk and Stanislav Klykhto to 22 and a half and 20 years respectively on bogus charges of fighting alongside Chechen separatists. And this by a country that has been arming separatists in eastern Ukraine for three years. Another 28 Ukrainian and Crimean Tatar political prisoners are incarcerated in Russian jails.
Instead, Putin had two goals in releasing Savchenko. Read more
The debate on the future of Europe and Britain within it is heating up. This week, Boris Johnson highlighted the problems with “EU foreign policy-making on the hoof”, suggesting that it had contributed to the protracted conflict in Ukraine. He was quickly branded a “Putin apologist” by adversaries.
None of Boris’s critics seem to have noticed that this is a clear case of shooting the messenger. What Boris has done is raise a legitimate concern. He is giving Europe a long-overdue reminder that in order to survive, it needs to get stronger. Read more
A glimmer of hope that the deadlocked Minsk II peace agreement could yet prevent a frozen conflict in the Donbas is emerging in Kiev.
Ukraine previously blocked a proposal to hold municipal elections under Ukrainian law in separatist-held territory before the end of June at a summit of the ‘Normandy Four’ signatories to the Minsk Agreement in Paris on March 3. This meant that, should the separatist authorities proceed with planned elections under their own laws in late April, the conflict would effectively be frozen. Equally, Kiev threatened to hold a referendum on the question of granting the Donbas autonomy which, if opinion polls are correct, would likely be lost, also freezing the conflict. Read more
The collapse of Ukraine’s governing coalition could not have been better timed, in what was a week of theatre led by President Petro Poroshenko.
Samopomych (Self Reliance), the ruling coalition’s most pro-reform faction, with Andriy Sadovyy, mayor of Lviv, at its centre, withdrew from the government on February 18, exactly two years after the massacre of the Euromaidan’s unarmed protesters. Read more
This year, Ukrainians can look forward to progress in their favour in relations with Russia and with the European Union. At home, however, there will be growing political instability.
First, foreign policy. Progress on two fronts is closely interlinked. Ukraine gained its independence in 1991 when Russia had been weakened by an imploding USSR and a failed hard-line coup d’état. Vladimir Putin’s Russia of 2016 will increasingly come to resemble Leonid Brezhnev’s USSR of the late 1980s. Read more
Since Ukraine gained independence it has failed to enact reform of its energy market, resulting in monopolisation and inefficient use of scarce energy resources.
Energy reform is critical for the Ukrainian economy, as energy constitutes 30 per cent of GDP with turnover of 400bn hryvnia ($17.5bn) a year. Ukraine’s biggest monopolies are concentrated in the energy sector, so wise state regulation, demonopolisation and competitive rules are essential to make the market efficient and to eliminate corruption. Read more
There is hardly any more pressing need in trying to jump start the stagnant Ukrainian economy than that of revamping its tax laws. The country ranks at number 163 in the world in respect to its tax burden and at 170 as to the share of public spending in GDP.
Despite its desperate need for new capital and new investments, Ukraine has some of the most draconian tax laws and dysfunctional tax policies in the world. It is precisely these laws that keep more than half of the country’s economy in the shadows — a breeding ground for corruption and an empty treasury in the end. Read more
Ukraine faces a moment of truth, as the first domestic energy bills to include the large increase in tariffs announced earlier this year reached hard-pressed consumers this month. We are entering the period in which the will of the country to carry out badly needed reforms will be tested against its ability to absorb the inevitable shocks and pain involved.
Raising energy tariffs to market rates is the single most important reform Ukraine has carried out so far, enabling it to root out corruption, cut waste and strengthen public finances. But the measure is deeply unpopular and unscrupulous politicians have been more than ready to exploit that fact. Read more
The European Union finds itself in the midst of multiple crises. It might be torn apart by the refugee crisis, the rise of nationalistic populism in Central Europe, the repercussions of a possible Brexit, or by the return, in some form, of the debt crisis that has been ravaging Greece for over five years now. However, the risk that these crises pose to the EU is eclipsed by their cumulative effect on the EU’s neighbours, especially Ukraine.
In all likelihood, the EU will eventually muddle its way out of its current troubles. In the process, however, it is bound to become more inward-looking and wary of engaging its eastern partners. The united front that the EU has shown in the aftermath of Russia’s invasion of Ukraine is fragile. Sooner or later, it will be replaced by a cruder form of realism that will put the immediate German or French ‘national interest’ first, effectively rewarding Vladimir Putin for his aggression. Read more
The mass movement of millions of refugees from Syria and Iraq has been perplexing politicians and exasperating economists for months. Who will take them and how many are questions that now make the Greek debt crisis look like dry rot in a house on fire – and as winter approaches, the situation is getting more serious by the day.
While western leaders quarrel over a solution, they are overlooking a country that earlier this year was the centre of yet another argument: Ukraine. Read more
Last Sunday Ukraine held elections to local councils and city mayors that the Organisation for Security and Cooperation in Europe described as “competitive and well organized overall” adding that “the campaign generally showed respect for the democratic process”.
The holding of a third democratic election in Ukraine since last year’s Euromaidan revolution in a region where free elections are uncommon is one of many signs of how far Ukraine is moving away from Russia and to what extent the actions of Vladimir Putin, Russia’s president, have accelerated this process. Read more
A $300m loan to help Ukraine fill its gas storage facilities before winter has today been approved by the EBRD’s board of directors.
The loan will enable Naftogaz, the state-owned oil and gas company, to purchase over 1bn cubic metres of gas (bcm) and so support Ukraine in reaching its target of having 19 bcm of gas in storage. It will also help the country diversify its sources of gas supply by financing purchases from its interconnections with Europe through the so-called reverse flow.
What is more, it is crucial for the wider Europe: a stronger energy security situation in Ukraine, which is still a key transit country, especially for south-eastern Europe, helps to ease a number of European energy security concerns. Read more
Ukraine’s debt restructuring plan, announced last month, is both revolutionary and evolutionary. The agreement to restructure $18bn of privately held government debt stands in stark contrast to Greece’s nearly apocalyptic showdown with the European Union this year and Argentina’s simmering standoff with holdout creditors. Ukraine’s deal showcases two important evolutionary steps: a rare case of successful investor-state coordination and the latest application of equity principles in sovereign finance.
Today, Ukraine’s parliament votes on this milestone deal. Facing an internal armed conflict and a deep economic recession, Ukraine is in dire need of debt relief. The restructuring terms include a 20 per cent haircut and a four-year maturity extension, providing Ukraine with much-needed breathing room. Yet the agreement’s favourable terms for creditors saw Ukraine’s sovereign bonds rally immediately following its announcement. Major turning points—east or west, deal or default—hang in the balance with today’s vote. But the fate of Ukraine’s debt deal also has serious implications for the broader world of sovereign finance. Read more
The annual Yalta European Strategy conference, now relocated to Kiev until further notice, is a good place to take the political temperature of Ukraine. Last weekend’s gathering saw the country’s ruling elite, from President Petro Poroshenko down, out in force and keen to talk. What regular attendees noted most was the change of mood since last year: less appetite for apportioning blame and more focus on what Ukraine can do to rebuild itself. There was even room for guarded optimism. A snap poll showed that most participants expect to see Ukraine to be stable, growing and with its conflict in the East frozen, if not solved, within three years.
There are certainly reasons to argue that Ukraine is beginning to turn the corner. Its currency has stabilised, the renegotiation of its sovereign debt has strengthened its fiscal outlook and a return to growth is widely anticipated. The government’s economic programme recently earned praise from Christine Lagarde, the IMF’s managing director. The problem is that while it is possible to detect an improvement in Ukraine’s macroeconomic position, it will take longer for this to feed through into anything resembling a feel good factor in the country as a whole. Read more
Ukraine’s economy may be battered but its agriculture is enjoying a period of record exports, defying geopolitical challenges and the conflict in the east of the country.
Despite losing control over some of its territory, Ukraine has retained its place as the world’s largest exporter of sunflower oil and was the third largest exporter of grains in 2014-15. Today, Ukrainian agriculture, which has shown overall growth during the past 15 years, is an industry worth $13.5bn. Read more
More than 20 years after the Ukraine Independence Act that created the country I love, its future hangs in the balance once again.
Hostilities have resumed in Eastern Ukraine and the number of casualties is multiplying. Following three-way talks in Berlin on Monday, the leaders of Germany, France and Ukraine all reiterated the need to implement the Minsk cease-fire agreement hammered out this year in tense late-night talks involving Russia.
“We have only one single rule today and this is the full respect and implementation of the Minsk agreement,” said French President Francois Hollande. He is not alone in this view. Many in the west still cling to the hope of a political and diplomatic solution to the conflict in Ukraine.
Yet to imagine at this stage that Russia suddenly intends to abide by the Minsk II agreement is naïve, wishful thinking. Read more
The west is in danger of losing Ukraine unless there is a significant change in the scale and nature of its engagement with the country over the coming weeks and months. That is the somber reality European and US policy makers need to grasp as Ukraine is hit by a wave of protests, terrorist attacks and continued violations of the ceasefire by separatists in the east. Against a background of deepening hardship and rising political frustration, there is a very real risk that the reformist drive of the last few months will give way to a new populism that takes Ukraine backwards and opens the door to renewed Russian influence. Complacent western leaders must act before it’s too late. Read more
The good news is that Russian and Donbas separatist leaders have called an end to the “New Russia” project, which had targeted eight Russian-speaking regions of eastern and southern Ukraine for separatist agitation and union with Russia. The bad news is that while it always was a mistake to assume Ukraine’s Russian-speakers were fans of president Vladimir Putin, Ukraine’s political vacuum and its selective “de-oligarchisation” are allowing diehards from the former ruling Party of Regions grouped in the Opposition Bloc and funded by Ukraine’s powerful gas lobby to retain influence in eastern and southern Ukraine. Read more
Germany – and its chancellor Angela Merkel – deserve credit for the continuation of the EU’s sanctions regime against Russia. But Germany happens also to be home to the energy giant E.ON, which recently signed a (non-binding) memorandum, together with Russia’s Gazprom, Austria’s OMV, and Shell from the UK and the Netherlands, agreeing to the extension of the Nord Stream pipeline, which brings Russian gas into the European Union (EU).
The extension, to be completed by 2020, would double the transit capacity of the pipeline, currently at 55bn cubic meters per year. Together with Turkish Stream, another project Gazprom is toying with, it would make gas transit through Ukraine redundant by the time the country’s current contract with Gazprom expires in 2019. Read more