Ten (Un)Easy Steps to Save Ukraine

Towards a Paradigm Shift in Western Approaches to Kyiv’s Europeanization Efforts

By Andreas Umland and Kostyantyn Fedorenko

The interaction between the West and Ukraine over the last twenty five years has been shaped by the conditionality paradigm. Kyiv’s rapprochement with the West, as a whole, and Brussels, in particular, was made dependent on the progress of Ukraine’s democratization, liberalization, and reformation. The ultimate rewards that the West offered for such achievements did exist, but were small, or blurred, or both. It was a “conditionality lite” or “soft conditions” approach that, even in case of Ukrainian successes, postponed larger repercussions for either Brussels or Kyiv. In particular, the West’s officially announced potential prizes for sustainable Ukrainian reforms included an only undetermined future membership promise from NATO made at the Bukarest summit of 2008, and demonstrative ambivalence about an EU accession, repeated in many statements by the EU Council and Commission over the last years. Arguably, prolonged Western coy- and vagueness, which continued even after the successful 2004 Orange Revolution, played their role in the eruption of deep political conflict at Kyiv in autumn 2013.

Why Ukraine Today Should Be Seen in a Different Perspective

The steep rise of insecurity, tension, and confrontation that this political escalation has now produced in Eastern Europe illustrates not only that the “soft conditionality” paradigm was misguided. It has also demonstrated that the West’s timid approach has become untenable with regard to the novel domestic and international conditions in which Ukraine found itself in 2014. The victorious Euromaidan Revolution, Kyiv’s conflict with Moscow, and the signing of the EU-Ukraine Association Agreement have changed the country’s situation to its core. Not only the ongoing war with Russia, but also the fundamentally new state of domestic affairs in the territorially largest entirely European country should lead to a critical reassessment of the West’s interests and strategies regarding Kyiv.

The earlier approach by the West emphasized Ukrainian deficiencies and promised vague integration steps once her numerous political, economic, and social imperfections are overcome. Given the different circumstances in which Kyiv finds itself today, the direction of this method should be reversed. Not only should the West take a clearer stance towards Russia. Instead of rewarding Ukrainian reforms post hoc with unspecified rapprochement, the West should offer ad hoc integrative measures that will effectively help, stabilize, and transform Ukraine. Why is such a radical change of course towards Ukraine now possible and preferable, if not gravely necessary?

First, the stakes of Ukraine’s future have grown during the last months. What is at risk is not only democracy and freedom in Europe’s largest country and the reputation of the EU’s Eastern Partnership policies. The dangers of a Ukrainian failure are now also threating political stability in the post-Soviet area, the post-war European security architecture, and cooperative transcontinental relations in the Earth’s northern hemisphere. Being a geopolitical pivot country, the fate of Ukraine will influence the future of other states, international arrangement, and numerous projects that are in one way or another tied to Kyiv. The demonstration effects of a successful Ukrainian Europeanization on Russian and other post-Soviet countries’ domestic affairs could change world politics in fundamental ways.

Second, the preconditions for a successful Ukrainian reformation have recently changed – and, in some regards, for the better. As a result of the ongoing socio-political revolution in Kyiv and beyond, Ukrainian civil society remains highly mobilized. The European Union has, with the signing of the Association Agreement in July 2014, become part and parcel of the Ukrainian reform process. Whether its political class, journalistic community, intellectual circles, or ordinary citizens – Ukraine’s population has, over the last year, experienced a thrust towards responsible patriotism and civic engagement. In earlier years, the Ukrainian government and bureaucracy often needed to be motivated from abroad to undertake necessary reforms. During the last months, increasingly deep change in such fields as higher education, procurement policies, or public relations has been initiated from civil society or from inside the new government that includes reputed Europeanizers.

Saving and Reforming Post-Euromaidan Ukraine

Given the new stakes and circumstances of Ukraine’s Europeanization, a radical redefinition of the West’s relationship to this country is due – in parallel and addition to a reformulation of Western approaches towards Russia. We propose here 10 practical steps that touch only en passant the issue of new sanctions against Russia. Instead, these measures are designed to aid Ukraine in successfully ending the military conflict on its territory, Europeanizing its socio-political system, and fostering energy security. A number of these proposals have been made before – some of them, many times so. We propose them here to be reconsidered anew, within the above-mentioned novel perspective under which Ukraine should be viewed, in 2014.

The below focus is on improving the foreign investment and business climate in Ukraine, and less on generic policies of developmental aid and cultural exchange that would be beneficial to most countries in the world. With its recent policies, the Kremlin is trying to spoil international trust into Ukraine’s economic potential, undermine entrepreneurial confidence in her political order, as well as lower general sureness about the governmental capacity of the Ukrainian state. Western counter-measures should be designed to compensate for the recent negative business climate change in Ukraine. Some of these measures would have only low financial and political costs for the EU, US as well as other organizations and states willing to support Ukraine, in this crucial moment.

1. EU Membership Perspective as Foreign Direct Investment (FDI) Encouragement: Over the last 15 years, the role of the EU’s membership perspective in East-Central Europe and the potential impact of a future entry offer for such countries as Moldova, Georgia or Ukraine has been discussed, in dozens of op-eds, book chapters and scholarly papers. How Brussels’s accession promise helped reformers in post-authoritarian Southern and post-communist Eastern Europe is by now well-known and does not need to be repeated here. So far, the academic discussion of this issue, however, had only few repercussions on high-level political and diplomatic decision-making. As the Ukrainian case was, by many European politicians, until recently seen as a minor and undetermined one, the provision of a full official membership perspective to Kyiv remained taboo.

Eminent Yale historian Timothy Snyder has recently added an argument why the European Council should, after all, officially recognize a future membership option for Ukraine. A formally announced EU entry option would not only strengthen and energize today’s reformers in Ukraine, an argument made before. It would also motivate potential foreign investors to come to Ukraine in order to gain a foot in this future EU member country. By encouraging foreign direct investment (FDI) via an EU membership possibility as well as some other measures proposed below, the West could effectively intervene into Ukraine’s economic affairs, with little costs – at least during the next years. Without much effort, the EU could help to balance the current discouragement of investment activities by Russia-promoted military and political instability. Brussels’s official membership perspective would especially encourage multi-national conglomerates to start building up already today a presence in this large East European market scheduled to become one day an integral part of the EU economy.

The official provision of a future EU entry offer should be easier than is sometimes assumed. Opinion polls indicate considerable public sympathy for Ukraine and increasing frustration about Moscow’s policies towards Kyiv, in many European states. This circumstance should make it easy for EU politicians to justify such a move. Under the Treaty of the European Union, all states situated in Europe can apply to become EU members, in any way. Finally, the example of Turkey indicates that, even once official EU entry negotiations are opened, a soon accession is not a foregone conclusion.

2. Swift VLAP Implementation and AA Ratification for FDI Facilitation: For similar reasons, the EU should push for the completion of its Visa Liberalization Action Plan (VLAP) and full ratification of its Association Agreement (AA), with Ukraine. Visa-free short term travelling for both EU citizens to Ukraine, as already possible now, also of Ukrainian citizens to the EU, under the VLAP, would facilitate economic, educational, governmental, and other interaction. Before the visa-free regime is put into action, EU consulates should issue as many long-term multiple visas as possible. (The widespread fear of an additional inflow of illegal Ukrainian labor migrants is overblown. Their numbers in the EU are already high. The possibilities for illegal migration to the Schengen area are currently wide too.)

Full ratification of the AA, by all EU member states and the European Parliament, would send signals to foreign investors similar to those of an official EU membership perspective. Its implementation would, in a number of ways, encourage, ease and simplify the planning and implementation of foreign investment projects. The fully ratified AA, moreover, presumes the creation of common institutions that would include representatives of both the EU and Ukraine. These institutions will be setting Ukraine’s reform agenda for the years to come and influencing Kyiv’s domestic decision-making. The Association Council to be created once the AA is fully ratified could be vocal on problematic issues in legislation, policy-making, and jurisdiction. It would put pressure on the Ukrainian parliament, courts, and government, both in meetings and via mass media, to deeply incorporate and fully apply EU regulations in practice.

3. Political Insurance Provision for International FDI: In an article in The Guardian, prominent financial magnate and philanthropist George Soros suggested that Western governments could provide political risk guarantees to those “willing to invest in or do business with Ukraine.” Obviously, potential investors will be more interested, if they feel their investments are safer, while their funds might be crucial to kick start Ukraine’s receding economy. To install such insurance schemes or guarantee funds, European governments and interested private donors should pool callable capital that can be used to cover losses if needed.

They could do so on both the national and international level. In the first case, they could follow, for instance, the example of the German so-called “Hermes cover,” an export credit guarantee scheme that insured, among others, German business relations with partners in the fragile post-Soviet area over the last two decades. In the second case, the  Multilateral Investment Guarantee Agency (MIGA) of the World Bank – primarily designed to insure investment risks in developing economies– could be specifically tasked (and, if necessary, additionally funded) to extend credible assurances of FDIs into the Ukrainian economy.

4. A Crimea Occupation Tax: The European Union could introduce special import duties for certain Russian deliveries through a Crimea Occupation Tax (COT). As long as Crimea remains annexed, all energy imports from Russia – which, in 2013, made up 78% of all EU imports from Russia – would be taxed, with an annually increasing customs rate. One draft project proposes a 5% tax, to be levied already in 2014, which would grow to 25% by 2018. A gradual rise would allow EU states to find alternative gas, coal, and oil suppliers, and incrementally develop non-fossil energy sources. Parts of the COT-generated revenue would be directed to Ukraine; parts could be used by the EU to become more energy-efficient and Gazprom-independent. An EU-wide unified COT would be also a step towards strengthening common EU energy policies. Finally, the economy and budget of Russia would be weakened diminishing funds that the Kremlin can direct towards the military sector.
   
5. Non-Lethal Weapons Deliveries, Medical Assistance, Counter-Insurgency Advice: The Ukrainian army is in dire need of medical assistance as well as specialized training, advice and material for suppressing the Russia-supported separatist insurgency in the Donets Basin. Non-lethal equipment and material provided by the West to Ukraine could include body armor, transport helicopters, mobile border surveillance watch towers,as well as first aid kits, medical equipment, and pharmaceutical supplies. Providing medicine and other non-weaponry support would lower Ukrainian casualties and suffering. Such equipment and aid cannot be misused in politically sensitive ways, or cause direct harm to civilians. It has low escalatory potential, and should be soon delivered. Non-lethal weapons and professional counter-insurgency counselling would also support peace-keeping in territories already liberated by the Ukrainian army, as activity of partisan separatist groups has been reported to continue in these regions.
   
6. Selected Lethal Weapons Deliveries and Military Intelligence Information: In a further step, NATO and the EU could officially recognize that Ukraine conducts an anti-terrorist operation on its territory, or formally define Russia’s activities in Eastern Ukraine as a military invasion. In either case, supplying crucial lethal weapons systems as well as relevant military intelligence, like satellite data, to the Ukrainian army could be considered. In both symbolic and practical terms, this would be a more risky endeavor than non-lethal equipment provision and non-military assistance. Thus, a positive decision to provide Ukraine with direct military help, even if excluding deployment of NATO troops, would require significant expenditure of political capital, and public discussion. Columbia University’s Kimberly Marten, for instance, pointed recently out the risk of Western weaponry falling into the hands of pro-Russian separatists and Russia.
   
7. Anti-Extremist Measures as Conditions for Weapons Deliveries: An additional risk could be that Western guns end up in the hands of Ukrainian radical rightists. There are some minor units of this kind currently serving in Eastern Ukraine under the guidance of Ukraine’s Ministry of Interior. They, for instance, include the numerically small, but well-publicized Azov Battalion, the leadership of which contains professed racists, as documented in research by, for instance, Anton Shekhovtsov. Arming this battalion and similar groups with Western lethal weapons would not only be symbolically disastrous — it could have negative repercussions for Ukraine’s post-war development, a major challenge of which will be the demobilization and deweaponization of currently active para-military units.

Therefore, lethal weapons deliveries should be made dependent upon full dissolution of all ultra-nationalist-dominated military or para-military units. The staff of such battalions should be either dismissed, or purposefully reassigned to, and dispersed in, ideologically neutral platoons. Moreover, parliamentary ultra-nationalist parties as well as individual racists should be excluded from government and other high executive positions. Such a conditionality mechanism will have positive repercussions on Ukrainian state-building that go beyond narrowly military aspects of Western help to Kyiv’s fight against the Russia-directed rebellion.

8. Continued Exploration of Solutions for Ukraine’s Energy Problem: Over the last five years, the EU and some of its member states, like Germany, have engaged in discussion and projects to lower Ukraine’s energy dependency on Russia. The topics tackled include improving energy efficiency, developing non-fossil energy sources, initiating pilot projects, as well as searching for new energy providers, carriers and routes, which would involve exploring the use of technologies such as shale and liquefied natural gas. More should be done in that regard, by Western organizations and states – in their own interest.

Despite the EU Commission’s decision to freeze the South Stream project, an energy partnership with Gazprom, Austria and Hungary are seemingly eager to continue to cooperate with the Kremlin, on this issue. Such attempts should not be tolerated considering not only the current Ukrainian situation, but also in view of general energy diversification policies of the EU. Instead, closer cooperation with other potential fossil energy suppliers, such as Azerbaijan, Algeria, Norway, the US, or Iran should be considered in order to lower the EU’s current dependency on Russian gas. Implementing South Stream would both increase the latter problem and undermine Ukraine’s effort to retain bargaining power against Russia by remaining an important player in regional energy matters.

9. Using OLAF to Fight Corruption in Ukraine: An extension of the operation of the European Anti-Fraud Office (known as OLAF) to Ukraine should be offered to Kyiv, as part of the EU’s Eastern Partnership and association policies. Corruption, budget misuse, and the prevalence of untaxed economic transactions are major problems of Ukraine. Utilizing the rich experience and high reputation of OLAF to push through effective anti-corruption measures could be an important, yet low-cost contribution to reforming the Ukrainian state. The EU itself, including  European investors and the trading partners of Ukraine, would benefit from such a change, as well as from the broader economic repercussions of lower corruption in one the Union’s major partner countries.
   
10. Dispatching Long-Term Experts to Ukrainian Institutions: Apart from ad hoc consultation, counselling and training, the West should consider financing the sustainable transfer of security, technical, legal, academic, governmental, managerial, and other relevant expertise to various branches of the Ukrainian state. Placement of experts should focus on organizations outside Kyiv, not the least, the Donets Basin. Privately and publicly supported multi-month to multi-year specialist appointments in Ukraine should include a sizeable contingent of foreign reform experts, police women and men, and MBAs. They should be made to attract, first and foremost, Ukrainians or Ukrainian émigrés who have obtained specialized training and work experience in reputed educational, governmental, non-governmental, and other institutions. There were and are such schemes in operation, in the post-Soviet area, including the Academic Fellowship Program of Soros’s Open Society Foundations, or the Returning Experts Program of Germany’s Center for International Migration and Development.

Such Western-supported appointments, fellowships and contracts should be increased. Well-educated specialists on good governance, international trade, educational reform, city policing, and border guarding  should be offered for placement in various Ukrainian governmental organs and supported financially. For instance, legal expertise could be provided to support Kyiv’s arbitration proceedings against Gazprom at the Stockholm Arbitration Court. If this Court rules that the gas price currently set by Russia for Ukraine is to be lowered, this would increase energy security in the region. Ukraine will be able to pay its debts and the gas conflict with Russia can be gradually soothed – something of vital interest to the EU too.

No list can be exhaustive when it comes to supporting a transition country like Ukraine. However, the measures proposed here are among fundamental steps necessary to transform one of the poorest states in Europe with an ongoing armed conflict into a peaceful, secure and prosperous country. To be sure, Western countries, in general, and the European Union, in particular, have currently their plate full with numerous further daring challenges in- and outside their borders. The salience, gravity and riskiness of the Ukrainian case, however, are of such magnitude that resolute Western engagement is overdue.

Kostyantyn Fedorenko is a recent alumnus of the Kyiv-Mohyla Academy’s Political Science and University of Hamburg’s European Studies and European Legal Studies M.A. programs. Andreas Umland is a Senior Research Fellow at the Institute for Euro-Atlantic Cooperation, Kyiv, and General Editor of the book series“Soviet and Post-Soviet Politics and Society” published by ibidem-Verlag, Stuttgart. 

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