{"id":81730,"date":"2017-11-02T17:33:07","date_gmt":"2017-11-02T17:33:07","guid":{"rendered":"http:\/\/uacrisis.org\/?p=61929"},"modified":"2017-11-14T11:42:37","modified_gmt":"2017-11-14T09:42:37","slug":"61929-the-struggle-for-ukraine","status":"publish","type":"post","link":"https:\/\/uacrisis.org\/en\/61929-the-struggle-for-ukraine","title":{"rendered":"The Struggle for Ukraine"},"content":{"rendered":"

UCMC\u00a0presents a part<\/a> of the comprehensive\u00a0report\u00a0by Chatham House devoted to the progress Ukraine has made in the past four years and the challenges it still has to survive. The text was originally published here<\/a>. Full text of the report is available here<\/a>.<\/em><\/p>\n

Executive Summary<\/h2>\n

Four years since the start of its \u2018Euromaidan\u2019 revolution, Ukraine is fighting for its survival as an independent and viable state. Ukrainians took to the streets in late 2013 in protest at their government\u2019s suspension, under pressure from Russia, of plans for a closer relationship with the European Union. While their activism forced President Viktor Yanukovych from power and heralded a more EU-aligned foreign policy under a new government, it also prompted a hostile response from Russia, which annexed Crimea in early 2014, started a territorial conflict in eastern Ukraine, and continues to\u00a0try to fragment and enfeeble\u00a0its neighbour.<\/span><\/p>\n

This report is partly about Ukraine\u2019s struggle to hold together and resist Russia\u2019s interference and pressure\u00a0\u2013 in the military, diplomatic, economic and media spheres. But it is also about a related internal contest to determine the political, institutional and civic future of Ukraine. In broader terms the Euromaidan was a response as much to poor domestic governance and corruption as to thwarted ambitions for European integration\u00a0per se<\/em>. In this context, the \u2018struggle\u2019 in the title of this report refers to the challenges of internal reform\u00a0\u2013 challenges which pit, broadly speaking, modernizing forces sympathetic to European norms against the entrenched conservatism of vested interests in political and business elites. Fending off Russia and delivering on policy reforms in a wide range of areas (including those related to European integration) are\u00a0the two defining challenges that Ukraine\u00a0faces today.<\/span><\/p>\n

Ukraine\u2019s future and fate hinge upon a transformation of the relationship between citizens, the economy and\u00a0the\u00a0state<\/p>\n

This report recognizes Ukraine\u2019s considerable achievements since the Euromaidan. The\u00a0country has not succumbed, despite grievous loss of life and territory, to Russian military aggression. It has sealed a landmark Association Agreement with the EU, opening up economic opportunity and making it clear that it sees itself as a\u00a0fundamentally<\/span>\u00a0\u2018European\u2019 country rather than a Russian satellite or tributary. And it has undertaken deeper and more extensive reform in the past four years than in the previous 22\u00a0of its post-Soviet life. This has included efforts to challenge a deep-seated culture of\u00a0corruption and rent-seeking, improve public-sector transparency, and reduce risks to financial stability and economic distortions in the energy sector. Civil society\u2019s contribution to many of these endeavours has been crucial. Ukraine\u2019s future and fate hinge upon a transformation of the relationship between citizens, the economy and\u00a0the\u00a0state. Both national security and political legitimacy are\u00a0at stake.<\/span><\/p>\n

While acknowledging Ukraine\u2019s accomplishments, this report forensically scrutinizes\u00a0those areas in which the leadership is failing to live up to the expectations of\u00a0its own\u00a0people, or to meet its new commitments under the EU Association Agreement. Resistance to reform remains widespread even among those in high office, and\u00a0there are recent signs that anti-progressive forces are becoming emboldened in their\u00a0attempts to block or dilute the policies Ukraine needs to develop its economy, establish a truly independent judiciary and provide meaningful deterrents\u00a0to corruption.<\/span><\/p>\n

The West\u2019s credibility and cohesion are also at stake. The international community has invested heavily in Ukraine\u2019s future and spent billions of dollars on supporting the country, while rejecting the Russian claim to primacy in deciding Ukraine\u2019s geopolitical alignment and domestic political arrangement. This report puts forward recommendations to ensure credibility is retained (or strengthened) through adherence to the principles of the post-Cold War order, and through strictly conditional\u00a0financ<\/span>ial assistance.<\/span><\/p>\n

<\/a>Ukraine\u2019s principal challenges<\/h2>\n

1. Security and defence<\/h3>\n

Despite three-and-a-half years of multi-variant war against Russia and its separatist allies, Ukraine has demonstrated an internal robustness that few predicted in 2014. Thus far, its sense of national purpose has been humbled neither by Russian arms nor by Ukraine\u2019s unscrupulous system of power, which continues to arouse widespread dissatisfaction among Western allies and its own population. The West has provided critical support in four areas: diplomacy, anti-Russian sanctions, economic and reform assistance, and defence cooperation. Although these efforts have produced some dividends, more can be done in the political and defence spheres without inordinate expense or political risk. Worries that the West will succumb to \u2018Ukraine fatigue\u2019 or the lure of \u2018grand bargains\u2019 with Russia have not been borne out. Thus far, the policies of the US administration under President Donald Trump have been\u00a0impressively staunch.<\/span><\/p>\n

Nevertheless, much of what Ukraine has achieved is susceptible to reversal, and\u00a0underlying political conditions are far from healthy. Ukraine\u2019s core security objectives depend on national cohesion, wise allocation of resources and a long-term commitment by state and society alike. Neither Ukraine\u2019s own resistance nor Western steadfastness has dislodged Moscow\u2019s perceptions that Ukraine is an extension of the homeland and a tool of Western efforts to enfeeble Russia and overthrow its regime. Russia\u2019s tenacity and adaptability should not be underestimated. The appearance of stalemate in the parts of Ukraine\u2019s eastern region of Donbas occupied by pro-Russian separatists\u00a0\u2013 who have established autonomous quasi-republics of dubious legitimacy\u00a0\u2013 should not divert attention from other means that Russia is employing to sabotage and \u2018reset\u2019 the Ukrainian state. It is an illusion to believe that diplomatic formulas alone will diminish Russia\u2019s determination to dominate Ukraine and rid it of meaningful Western influence. Russia\u2019s calculations will change only when core elites perceive that a continuation of the present course is no\u00a0longer feasible.<\/span><\/p>\n

2. Reforms<\/h3>\n

EU integration<\/em><\/h4>\n

The Euromaidan revolution and the conclusion of the EU\u2019s Association Agreement offer the promise of a sea-change in Ukraine\u2019s relations with Europe. Signed in 2014, and ratified in 2017, the Association Agreement has both political and economic components, the latter formalized in a Deep and Comprehensive Free Trade Agreement (DCFTA) that boosts Ukrainian access to the EU single market but requires substantial policy reforms\u00a0in return.<\/span><\/p>\n

The conclusion of the EU\u2019s Association Agreement offers the promise of a sea-change in Ukraine\u2019s relations with Europe<\/p>\n

The EU has significantly stepped up its assistance to Ukraine. Brussels is involved in\u00a0almost every aspect of reforms. The EU\u2019s Support Group for Ukraine (SGU) plays a\u00a0strategic coordination role, matching domestic demand for expertise and assistance with their supply. However, at the operational level, EU assistance is still delivered via a\u00a0large number of classic technical assistance projects, which are known for their ineffectiveness both in Ukraine and in other developing countries. The EU has an unprecedented political mandate for driving reforms forward in Ukraine. However, it has been\u00a0too timid to use this mandate, and thus risks losing the trust\u00a0of reformers.<\/span><\/p>\n

A further problem is that many members of Ukrainian political elites still regard reforms as optional, often merely paying lip service to fundamental reforms of the state and implementation of the Association Agreement. There is no single decision-making centre in Ukraine on matters related to European integration, nor is there effective coordination. The EU has been too lenient with the Ukrainian authorities, continuously giving them the \u2018benefit of the doubt\u2019. The EU is unwilling to risk triggering a change of government which could lead to more populist and\/or pro-Russian forces gaining more power. Where meaningful reforms have occurred, they have been championed by numerous ad hoc \u2018reform coalitions\u2019 consisting of politicians, state officials, civil society groups, and EU officials and experts\u00a0\u2013 albeit in the face of strong resistance from reform spoilers. The activism of progressive coalitions is welcome, but on\u00a0its own\u00a0it does not provide a sound basis for\u00a0institutional transformation.<\/span><\/p>\n

Economic reforms<\/em><\/h4>\n

Of all the areas in which Ukraine needs reform, economic policy is one of the most critical. It is commonly argued by investors and observers that Ukraine is un-reformable, and that it should be left in the \u2018twilight zone\u2019 between East and West, as was the case for much of the first 20-odd years of its independence. This view ignores the reality that the status quo was failing the bulk of Ukraine\u2019s population, with the exception of a few hundred business tycoons with privileged access to the political system and members of political elites who used the system to personal advantage. The Euromaidan revolution was, at its heart, a rejection of this corrupt system and a demand for the creation of an economy and society based on Western and\u00a0European norms.<\/span><\/p>\n

The Euromaidan revolution was, at its heart, a rejection of Ukraine\u2019s corrupt system and a demand for the creation of an economy and society based on Western and European norms<\/p>\n

Policy developments since 2014, while sometimes failing to meet expectations for\u00a0revolutionary change, have nonetheless been encouraging. Ukraine has proven that change is possible. Basic macroeconomic stability has been achieved, with the economy returning to growth in real terms in 2016, inflation easing, the hryvnia strengthening and foreign exchange reserves more than tripling from the lows of 2015. The current-account and fiscal deficits have been cut to manageable proportions. Budget spending has been reduced and rationalized, tax reform and debt restructuring\u00a0rolled out.<\/span><\/p>\n

The energy sector has been a priority for reform. Energy prices have been hiked to cut\u00a0demand and fuel subsidies are now more targeted; this has cut the public-sector deficit in respect of Naftogaz, Ukraine\u2019s state-owned oil and gas company, to zero in 2017. The banking sector has also undergone far-reaching change, with almost half the banks closed and others cleaned up sufficiently to ensure that the sector no longer imposes a\u00a0large contingent liability on the public finances. The National Bank of Ukraine has also undergone remarkable internal reform, with the result that the central bank is now fit for purpose in terms of managing monetary and exchange rate policy and regulating and supervising the banking sector. With the country\u2019s macroeconomic and\u00a0financial resilience apparently improved, the next challenge is to enhance the business environment, unlock the potential of the land market and support investment to deliver much-needed\u00a0economic growth.<\/span><\/p>\n

Democratization and governance<\/em><\/h4>\n

Reform of Ukraine\u2019s over-centralized, excessively regulated and dysfunctional system of governance\u00a0has started. Large amounts of legislation have been enacted, though in many cases not yet fully implemented.\u00a0Decentralization has devolved significant authority and tax-raising powers to local governments, but reform of\u00a0the constitutional division of powers, institutional (especially civil service)\u00a0capacity and the media has barely begun. Establishment of robust protections and enforcement of the rule of law through\u00a0judicial reform,\u00a0the\u00a0essential underpinning of\u00a0good governance, is meeting stiff resistance from political and economic groups that\u00a0currently benefit from privileged access\u00a0to power.<\/span><\/p>\n

The president shares power with the government, and both rely on shifting support from other political parties. The agenda is often set by populist parties, and vested interests are still entrenched. This results in damaging institutional rivalry and corruption of the democratic process. Ukraine has a relatively good record of mostly free and fair elections since 2004. The October 2014 legislative election greatly reduced the influence of the Donbas elite, bringing in many new members of parliament who are pressing for reform. The resistance they encounter testifies to the degree of change that has already occurred\u00a0\u2013 though also to the gravity of the challenges that persist. Electoral reform, crucial to the establishment of a more level playing field, is\u00a0ser<\/span>iously delayed.<\/span><\/p>\n

Human capital and civil society<\/em><\/h4>\n

The Euromaidan movement empowered citizens and started a consolidation of civic identity in Ukraine around justice, accountability and an anti-corruption agenda. Subsequent Russian aggression provided a powerful bond for Ukrainians to unite around the idea of\u00a0Ukrainian nationhood.<\/span><\/p>\n

Ukrainian civil society has reason to be proud of what it has accomplished to date. Unlike in the aftermath of the 2004\u201305 Orange Revolution, society is no longer immobilized in a post-protest phase. Concerted effort at the national level, the presence of reformers in the government, an inflow of substantial Western assistance with strong conditionality, and an episodic power vacuum after the Euromaidan have enabled active citizens to contribute to Ukraine\u2019s transformation. An important democratizing effect of civil society has been the integration of non-state trust networks into public politics. Most prominent has been the launch and institutionalization of ProZorro, a\u00a0new digital public procurement mechanism. Its success has established a new norm\u00a0of transparency in terms of citizens being able to hold the state\u00a0to account.<\/span><\/p>\n

Inadequate channels exist for civil society organizations to listen to citizens\u2019 concerns and transmit these to the authorities<\/p>\n

However, the dynamism of civil society continues to depend on a small cohort of\u00a0activists and professional civil society organizations (CSOs). As the \u2018old\u2019 system of entrenched interests mounts its defences, the persistence of a gap between organized advocacy and concerned citizens reduces the scope for reform pressure from grassroots level. Indeed, the increasing mobilization of populist and radical groups testifies to the continuing weaknesses of civil society, and to the popular frustrations this generates. Inadequate channels exist for CSOs to listen to citizens\u2019 concerns and transmit these to the authorities. As a result, there is a sense that CSOs are disconnected from local communities, and that activity on\u00a0behalf of<\/em>\u00a0citizens rather than\u00a0with<\/em>\u00a0cit<\/span>izens prevails.<\/span><\/p>\n

Anti-corruption reforms<\/em><\/h4>\n

Over the past four years, Ukraine has made significant progress in laying the foundations for reducing very high levels of public corruption. However, this is only\u00a0the start of a long-term process that needs to address two principal problems: first, a\u00a0fatalistic acceptance by much of society of endemic corruption; and second, a\u00a0concentration of ownership and influence that has prevented the development of the rule of law. These problems are far from unique to Ukraine, but their accumulation over more than 25\u00a0years of \u2018state capture\u2019 presents an extraordinary challenge for\u00a0the\u00a0country\u2019s<\/span>\u00a0reformers.<\/span><\/p>\n

The most notable reform achievements since 2014 have been the elimination of gas\u00a0sales from Russia (previously the largest source of corruption in the economy), which has shrunk the space in which corrupt practices can occur; and improved public-sector transparency as a result of the above-mentioned introduction of an electronic system for state procurement tenders. An intrusive new e-declaration system through which senior officials must declare their assets marks another victory\u00a0for anti-corruption<\/span>\u00a0reformers.<\/span><\/p>\n

However, the new agencies established to investigate and prosecute high-level official corruption\u00a0\u2013 the National Anti-Corruption Bureau of Ukraine (NABU) and the Specialized Anti-Corruption Prosecutor\u2019s Office (SAPO)\u00a0\u2013 have yet to deliver results. This largely reflects the lack of a robust judicial system. Judicial reform remains the Achilles heel of the anti-corruption effort as a whole. It is clear that Ukraine\u2019s current leaders may fear an independent judiciary and the effective enforcement of laws. Not surprisingly, a fierce battle is under way between genuinely reformist forces and\u00a0those\u00a0who would like to preserve as much as possible of the \u2018old\u2019 system.<\/span><\/p>\n

<\/a>Recommendations<\/h2>\n

To strengthen security<\/h3>\n