Editor’s Note: This news article is based on the Chatham House report “Struggle for Ukraine,” which is available here. The report’s 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. The report is co-authored by Timothy Ash, Janet Gunn, John Lough, Orysia Lutsevych, James Nixey, James Sherr and Kataryna Wolczuk.
While Ukraine has reformed more in the past four years than in two decades as an independent state, progress could be reversed if the country doesn’t make tough decisions to overcome its problems.
Ukraine is still “fighting for survival as an independent and viable state,” according to a Chatham House report on Ukraine, released on Oct. 18 and coming nearly four years after the 100-day EuroMaidan Revolution that drove President Viktor Yanukovych from power on Feb. 22, 2014.
The report, entitled “Struggle for Ukraine,” details the country’s “dual existential threat”: its fight against Russia and internal resistance to reform.
The report notes Ukraine’s accomplishments, particularly in the financial and banking sector, and successful resistance to Russia’s war, launched after the fall of Yanukovych with the military invasion and illegal seizure of the Crimean peninsula and the ongoing occupation of parts of the eastern Donbas.
Furthermore, the country’s financial situation has stabilized, foreign currency reserves are up and the economy is slowly growing.
However, the report’s authors warn that Ukraine could prove to be its own worst enemy if “entrenched conservatives forces” prevail over those striving to implement essential reform. The report identifies as priorities: the creation rule of law through an independent and trustworthy judicial system; better governance or sale of state-owned companies; and creating of an agricultural land market to stimulate investment and production in the vital sector.
Meanwhile, the report’s authors urge the European Union to use the “political mandate” provided by its political and trade association agreement with Ukraine to ensure that the former Soviet republic meets its obligations.
Further, the West needs to be firm on Russia and realize that diplomacy alone will not repel its military aggression. Unless the military and economic costs rise against the Kremlin, Russia will not change course in the Donbas or withdraw from Crimea, the authors argue. Therefore, the West must prepare to support Ukraine’s military over the long run.
Experts from Chatham House told the Kyiv Post that Russia’s 2018 presidential election is unlikely to have much bearing on the war.
Orysia Lutsevych, co-author, and manager of the Ukraine Forum at Chatham House, said that the Kremlin “is looking for ways to diminish the cost of Donbass as it does not deliver so far its main goal: federalization of Ukraine. The United Nations peacekeeping mission could be some off-ramp for Russia but elections are hardly a major event that impacts Putin’s decisions on Donbas.”
James Nixey, co-author, and head of the Russia and Eurasia program at Chatham House, said that Putin will take his re-election “as additional license to continue his preferred course. A strategic retreat by Russia would put Ukraine in an awkward position. And Putin is smart. But he’s not that smart. The Russian mindset still defaults to destabilization and the weakening of your opponent.”
In a press release, Lutsevych underlined that Ukraine can’t be abandoned but ultimately needs to change itself.
“Increased political and financial support from the West to fend off Russian aggression and modernize governance is crucial – but Ukraine bears primary responsibility for its future, and must shoulder the principal burden of ensuring its sovereignty and prosperity. This requires strong political will and tangible progress in, first and foremost, building effective and resilient public institutions,” she said.
According to the report, “many members of the Ukrainian political elites still regard reforms as optional” and, consequently, put the brakes on European integration. The EU is not firm enough, however, perhaps because it fears a repeat of the political upheaval that could see populists take power.
President Petro Poroshenko comes in for criticism.
“He appoints subordinates on the basis of loyalty rather than excellence. His commitment to reform is less than his commitment to power,” the report reads. Instead, the impetus for change comes from “mainly countervailing forces – the civil society, the International Monetary Fund and the war.”
The authors call an independent judiciary as “the ultimate test of Ukraine’s reforms” and emphasize the importance of an anti-corruption court paired with a similarly independent appeals court.
The lack of a robust and credible judicial system has hamstrung efforts of independent anti-corruption institutions — the National Anti-Corruption Bureau of Ukraine and the Special Anti-Corruption Prosecutor’s Office — to successfully try high-level officials for major corruption. Resistance to reform in these areas comes right from the top: “Ukraine’s current leaders may fear an independent judiciary and the effective enforcement of laws.”
Some progress fighting corruption has, nonetheless, been made, such as by stopping the purchase of natural gas from Russia. The purchases were “previously the largest source of corruption in the economy.”
The failure to end the long-standing moratorium on agricultural land sales is also holding back Ukraine. Liberalizing the market for land would “ensure that Ukraine’s large but low-productivity agricultural sector is a powerhouse for longer-term economic growth.”
Ukraine has some of the best agricultural land in Europe and grain yields could easily reach parity with Western Europe. But, the report suggests, “vested interests behind large leasehold farming systems are preventing much-needed change.”
Ukraine’s 3,000 state-owned enterprises are in urgent of restructuring or sale.
They “represent a source of inefficiency in the economy, a continued drain on the public finances through their need for subsidies, and source of corruption,” the authors write. They advise better corporate governance for those kept under state control and privatization or liquidation for the rest of them.
Public trust can be created only if “Ukrainian politicians, judges and civil servants accept the need for their system to change fundamentally.” This must include “the creation of robust institutions, genuine safeguards against corruption, and true political and legal accountability.” At the moment, reformers contend with “a fatalistic acceptance by much of society of endemic corruption.”
The EU and IMF must tailor their funding to Ukraine’s needs because the current approach of “classic technical assistance” has not worked; all funds must have conditions attached.
The report provides pragmatic and ideological reasons for the West’s continued support, although not necessarily lethal military assistance or Western troops. Rather, Ukraine’s allies must boost the country’s ability to defend itself, because the post-Cold War world order is at stake.
A larger country cannot be allowed to use military force to bend a smaller one to its will, therefore, the report argues that a strong, reformed, Western-looking Ukraine is in Europe’s economic and security interests.
Nixey told the Kyiv Post that “convincing a skeptical and all-too-easily-diverted Europe that helping Ukraine is a vital interest is hard because it is counter-intuitive. But deeper analysis shows what can be done by making helping make Ukraine a success – more secure borders, a strengthened Western alliance and a model for others – showing that there is an alternative to typical post-Soviet decrepitude. It does require political will and backbone though.”
Lutsevych agreed that there is a risk Western politicians fail to convince their voters of the necessity of sticking with Ukraine.
“That is why it is advised that the Ukrainian government and civil society demonstrate how Western assistance is strengthening security and democracy. Ukraine is not very good at getting its message across how the country is actually changing,” she said. “Investment into Ukraine now will be smaller than investment in case the country collapses with no Western support. In the end, it is political capital that Western policymakers are spending on Ukraine. The financial burden is not so heavy for the West.”
As for diplomacy, the West should regularly review sanctions on Russia and keep them in place until Ukraine’s national borders are restored.
Despite stagnation of the Minsk peace process, the agreement’s conditions – such as “a comprehensive cease-fire, the withdrawal of foreign forces and heavy weapons from the occupied territories in Donbas,” as well as full access for international monitors, must be met. No signs of “Ukraine fatigue” should appear in Western policy.
Asked why the idea that Ukraine and the EU provoked Russia in 2013 had taken hold in the West, Lutsevych replied that “it was supported by the Russian disinformation, it played well into the old narrative that NATO’s expansion is a threat to Russia, and there are still some circles in the West that believe Russia” should have an upper hand in the post-Soviet space.
Nixey called it the “the easy, lazy explanation” that “is easily lapped up by the far left, the far right, the anti-globalization movement and a whole host of anti-systemic groups. But for those interested in the truth, the historical record clearly shows otherwise,” he told the Kyiv Post.
Ukraine’s choices now are whether to cement the transformation the EuroMaidan Revolution promised or settle for half-baked reforms that will be rejected by the Ukrainian people and will not help the country stand up to Russia’s war.
As for the West, the choice is clear: Hold firm as Ukraine’s ally or waiver.
Selected quotes from the report’s authors:
Orysia Lutsevych, co-author and manager of the Ukraine Forum at Chatham House: “Progress in Ukraine in the four years since the EuroMaidan is indisputable; but a secure and democratic future depends upon a transformation of the relationship between citizens, the economy and the state. Recent reforms have increased transparency in public affairs but the primary grievance of Ukrainians is lack of justice. If the Ukrainian leadership does not increase accountability and the rule of law, Ukrainian statehood is at risk. Increased political and financial support from the West to fend off Russian aggression and modernize governance is crucial – but Ukraine bears primary responsibility for its future, and must shoulder the principal burden of ensuring its sovereignty and prosperity. This requires strong political will and tangible progress in, first and foremost, building effective and resilient public institutions. Civil society is a vital resource of ideas and human capital in this quest.”
James Nixey, co-author and head of the Russia and Eurasia program at Chatham House: “Ukraine’s territorial integrity is crucial to European security and stability. Ukraine is a European state and to think of it otherwise is to surrender to the grip of the past – and indeed would constitute being a so-called Cold War warrior. Ukraine has undertaken deeper and more extensive reform in the past four years than in the previous 22 of its post-Soviet life. But much of what it has achieved can be reversed. Without further Western support, Ukrainian reforms will stall and public discontent would destabilize the country.”
A brief summary of the findings and policy recommendations is outlined below:
On security:
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 pose the greatest threat to stability and success.
It is an illusion to believe diplomatic formulas alone will diminish Russia’s determination to dominate Ukraine and rid it of meaningful Western influence. Russia’s calculations will change only when its most influential figures perceive that a continuation of the present course is no longer feasible.
There is no contradiction between dialogue and defense. The West must work inside and outside the Normandy Format and Minsk process to resolve the war between Ukraine and Russia and strengthen European security.
The West’s sanctions against Russia should be periodically reviewed, strengthened where necessary, and kept in place however long the illegal annexation of the Crimean peninsula lasts and destabilization of the east of the country continues.
NATO and the EU should, respectively, launch security sector and law enforcement advisory programmes in Ukraine commensurate with NATO’s existing efforts in the defense sphere.
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. A Western policy of benign neglect or, worse, accommodation with Moscow at Ukraine’s expense would seriously destabilize the country.
Western policy of benign neglect or, worse, accommodation with Moscow at Ukraine’s expense would seriously destabilize the country.
The establishment of an effective, trusted and accountable state is a primary national interest.
Unless law enforcement, security, and defense institutions are fit for purpose, Ukraine will remain dangerously vulnerable to infowar, penetration, sabotage, and destabilization.
On EU integration:
The EU has an unprecedented political mandate for driving reforms forward. However, it has been too timid to use this mandate and risks losing the trust of reformers. The EuroMaidan Revolution and the conclusion of the EU’s landmark association agreement, signed in 2014, and ratified in 2017, offer the promise of a sea change in Ukraine’s relations with Europe.
The EU must maintain strong conditionality in the long term to stimulate real, rather than partial or cosmetic, reforms. Its support should move away from the classic, pre-scripted technical assistance projects – the effectiveness of which are very low – to tailored, more flexible and longer-term programmes of at least four to five years in duration.
On economic and political reform:
Judicial reform remains the Achilles heel of the anti-corruption effort as a whole. Progress on the rule of law and an independent judiciary are the ultimate test of Ukraine’s reforms.
There must be continued pressure for progress towards zero tolerance of corruption at all levels. The establishment of a special trial court or chamber free from political interference is essential for further progress in the battle against corruption and the development of a new legal culture. The appeal system must be similarly independent.
Civil society and the international community should place as much stress on electoral and institutional reform as on anti-corruption measures, to encourage a break with the old system and allow a new generation of genuine reformers to shape laws and policies.
Land reform is badly needed to ensure that Ukraine’s large but low-productivity agricultural sector is a powerhouse for longer-term economic growth. There are indications that the Ukrainian government will partially lift a moratorium on land sales by the end of 2017. Reform should also include the sale of over 10 million state-owned hectares of agricultural land, which could potentially raise big sums for the state budget.
Further reform of Ukraine’s more than 3,000 state-owned enterprises is essential.
Of all the areas in which Ukraine needs reform, economic policy is one of the most critical. With the country’s macroeconomic and financial resilience apparently improved, the next challenge is to improve the business environment, unlock the potential of the land market and support investment to deliver much-needed economic growth.
Summary of some findings in the Chatham House report:
Democratization, governance and mass media
Decentralization has devolved authority and tax-raising power to local governments
Reform in other areas – such as the constitutional division of powers and civil service, media – lags
Judicial reform would introduce protections, enforce laws and improve governance. Those with “privileged access to power” are stymying it
The president depends on the government, which partly depends on populist parties with vested interests
Elections have been broadly free and fair since 2014; legislative elections in 2014 freshened up parliament; necessary electoral reform has stalled
Calls to hold early presidential elections must be resisted
Ukraine’s media environment is varied, though Freedom House judges it only “partly free”
Seven out of eight national television stations are oligarch-owned; there is no independent press and media regulator
Public trust in media is falling after peaking in 2014; the decline is attributed to Russian propaganda
Human capital and civil society
Society has maintained impetus for reform, unlike post-2004
62% of people identify first as Ukrainian citizens, up from 52% in 2012
In 2009, 56% of people thought fighting corruption was useless; in 2015, a third thought this
International conditional support, reformers in parliament and non-state trust networks are some of the forces for change
A new digital public procurement service, ProZorro, is an unqualified success; the old system was replaced in two years and public spending has been cut by $1.1bn
Grassroots are disconnected from professional civil society organisations ; these poorly represent normal people
Frustration fuels extreme and populist groups (the likes of which have marched and protested in Kyiv recently)
Their rise led Freedom House’s Nations in Transit to downgrade Ukraine’s civil society score
Populist parties are outpolling some members of the ruling coalition
Groups like Ukrainian Choice, sponsored by Kremlin allies, are disrupting local politics
Anti-corruption reforms
There are two aspects to the corruption issue: public acceptance of it; ownership and influence is still concentrated
The situation in Ukraine is the result of 25 years of “state capture”, a problem hardly unique to Ukraine
Some improvements have been: the elimination of gas sales to Russia; introduction of a more transparent state procurement process and mandatory asset declaration for senior officials
New anti-corruption agencies are toothless without a new judicial system
Recommendations
To strengthen security
Ukraine has to become adept at defending itself
Internal reform, for example of security services, can make Ukraine externally safer
The West must simultaneously pursue diplomacy with Russia and offer defence assistance to Ukraine
Western sanctions must not be lifted until conditions are met; they may need to be strengthened
To advance EU integration
Ukraine and its partners should admit that European integration will not be quick or easy
The EU’s assistance mechanisms must suit Ukraine’s needs
It should aim to replicate methods used in Romania to introduce law and judicial reforms
Ukrainian small and medium businesses will need help adjusting to EU integration
To boost economic and political reform
Donors should fund organisations that promote moderate grassroots civil activism; proliferation of associations like farmers’ unions can hold local governments to account, enhancing the decentralization process
They should also support Ukrainian NGOs, small political parties and universities
More deregulation will protect businesses from extortion
