Ukraine’s Maidan movement, the choice of President Petro Poroshenko last spring, and this past Sunday’s election of the most pro-European parliament in its history offers the West an historic opportunity. With Sunday’s decisive outcome, the U.S. and Europe need to offer Ukraine assistance through the IMF and other aid channels, a medium term fix for Ukrainian and European dependence on Russian energy imports, increased trade relations, support for deep reforms, and more closely coordinated security assistance. The EU bridge loan announced this week is a good start.
I had the honor of serving as part of an International Republican Institute election observation delegation in North/Central Ukraine this past Sunday, and had the opportunity to interact with a broad spectrum of ordinary citizens as well as representatives of the major parties. To a person, they wanted to be a part of the European Union, learn English, and diversify their trading and energy relations away from Russia. See this pre-election poll from IRI on views towards Russian aggression, political progress, and EU membership.
Ukraine’s turn away from Russia is a dramatic one. Ukraine has been under the rule of the Russian and Soviet Empires for most of the last 300 years. Russian is the lingua franca in much of the country, and to this day Russia remains Ukraine’s largest business partner. A great deal of infrastructure, energy, culture and mindset in Ukraine comes from Russia.
After nearly 4,000 dead soldiers and civilians, Ukraine’s rupture with Russia will not heal anytime soon. There is a profound turn away from Russia and all things Russian. I saw drivers with Russian license plates flying the Ukrainian flag so as not to have their car vandalized. I learned of Russian Orthodox groups in Ukraine quietly retreating on long standing religious conflicts because they were viewed as holding pro-Moscow positions.
Unfortunately, Ukraine is getting its act together in the context of a U.S. distracted by other global crises, and a European Union still exhausted by the financial crisis and European expansion. Following the botched Orange Revolution of 2004, there may also be a lingering “Ukraine fatigue.”
How Can We Help?
Even with such a clear political mandate, the practical difficulties of shifting away from Russia and towards the EU will make the next few years enormously challenging for Ukraine. The big questions are: Will the Ukrainian government move on the hard reforms needed to address corruption, fix social safety nets , and confront energy issues all while fighting a near frozen conflict with Russia? Secondarily, will the U.S. and EU offer the right kind of assistance to help them succeed?
1. Economic Support and Energy Reform
Ukraine’s economy shrank 6 percent in 2014, and a weak Ukraine in economic straits is what Russia wants. The IMF approved a $17.01 billion loan to support Ukraine’s economic reform program back in April, but it is clear that this is not enough. Ukraine had been expecting the second tranche of that loan, worth $2.7 billion, to be delivered this year, but the IMF now says the payment will not be disbursed until 2015. So far Ukraine has only received $3.2 billion from the loan package, as the IMF looks to delay payment until Ukraine sets itself a realistic budget.
Ukraine needs new trading partners, both for critical export goods like iron but also for necessary imports. The most important commodity imported by Ukraine is, of course, Russian gas which accounts for 25 percent of Ukraine’s energy supply. Russia is demanding Ukraine pay debts in excess of $3.1 billion and prepay for any new gas. It now appears that the EU will provide Ukraine two loans worth a combined $965 million to cover these payments until IMF funds become available in early 2015.
While Ukraine needs to find a way to keep the heat on through winter, it also clearly requires a long term alternative to importing Russian gas. This will certainly include infrastructure investments that promote greater energy efficiency, Ukraine ranked 10th worst on energy intensity globally, but Ukraine must also identify new sources of energy. Ukraine has the third largest shale gas reserves in Europe, and should develop this industry.
2. Governance Challenges
Ukraine faces a significant governance challenge. The new government needs to fight corruption, modernize social safety nets, and carefully manage government spending all while pursuing steps to harmonize Ukraine’s rules and standards to prepare for EU membership.
Ukraine passed expansive anti-corruption reform in the wake of the revolution, including an aggressive “lustration” law– meaning a law to remove holdover cronies from the previous regime. The U.S. and others should help to see that the new law is carried out fairly, consistently, and transparently.
Social reform and tax reform will also be priorities for a government which is still reliant on regulations and structures inherited from a Soviet past. While the World Bank approved a $300 million loan for the Social Safety Net Modernization Project in July, Ukraine could likely use assistance in implementing the program. Ukraine must also overhaul its tax code, which is complex and burdensome.
3. Security Support
Ukraine is in a hot war with Russia and Russian backed separatists. While no one is advocating an active military presence in Ukraine, there are intermediate steps which can be taken to support Ukraine in the face of Russian aggression. The U.S. and EU should stand ready to deepen Russia’s economic isolation, but also be prepared to pursue closer intelligence cooperation, as well as provide training for Ukrainian military forces. While the U.S. needs to determine what the goal of military support in Ukraine would be, there is clearly room for increased support and coordination far beyond the provision of blankets, night visions goggles, and MREs.
Ukraine’s People Have Spoken
The Ukrainian people need support from the friends of freedom and democracy around the world– especially the U.S. and Europe.
President Poroshenko has stated that he hopes to join the EU within 6 years. Many in Europe will say this is not possible, and a 10 year timeline is likely more realistic. Given that only three countries have joined the EU since 2005, it is hard for Europe to argue that they “still need time to digest”. By the time Ukraine is ready to join, the EU will have had two decades to absorb Romania, Bulgaria and super performers like Poland and the Baltic states. Enlargement fatigue is real, but 15 to 20 years is enough time. While the EU-Ukraine Association Agreement is a start, EU leaders (read “Angela Merkel” here) need to state clearly that they will accept Ukraine if it meets the necessary commitments.
Ukraine shares a great deal with Russia, and if we are to build a similarly strong bond, the connection needs to happen on a person to person level. It means more Peace Corps volunteers to Ukraine, more student exchanges, and more English and other Western Language teachers being sent. I’ll close with this anecdote:
I was with a Ukrainian who told me his 14 year old daughter and her classmates had led a student revolt against learning Russian at their school in Kiev. The principal convened the parents, and the parents backed the students. After much back and forth, the school is now offering Spanish instead of Russian. Ukraine is ready for a new start.
Article Published in Forbes.com on October 30, 2014.