Archive for November 17th, 2014


Staying the course

November 17, 2014

Following on from yesterday’s entry about a lack of “Russia Strategy”, and indeed “Ukraine Strategy” – at least as far as clear and/or orated strategies go from the outside world – it is perhaps timely to think about an internal Ukrainian strategy.

One could be forgiven for thinking that such a strategy already exists insomuch as following the Association Agreement/Deep and Comprehensive Trade Agreement frameworks provides such a strategy – and it does to some extent, now that it is signed and ratified and thus legally binding on the parties.

There is also the recently published coalition agreement, currently undergoing public consultation.  An agreement by all parties in the majority coalition of the agreed priorities it will tackle.  Of note, despite all previous promises by all coalition parties, the issue of MPs immunity and non-liability verses inviolability is missing.  That is not to say it won’t be dealt with as promised, but that it is missing from the agreement is erroneous when the public expects to see it there.  Perhaps after public consultation, it will magically appear in the final agreement.

Consideration should also be given to the issue of the postponed donors conference to consider.  Kyiv has yet to submit anything that would enlighten any sovereign state as to where any donation would be directed – and why.  With government adding state owned assets to the “for sale/privatisation” list on a fairly consistent basis – most recently added, Centrenergo, Odessa and Kherson combined power plants (CHPs) – no donor will want to be duped into part financing a privatisation deal without knowing about it.

Whilst Ukraine is entirely responsible for its own internal reform, that reform is going to be heavily financed externally.

There is surely some doubt over the 2015 budget for Ukraine if it is going to be based on a UAH 12.95/$1 foundation.  The exchange rate on the street at the time of writing is currently UAH 15.40/$1.  So, whilst the Ukrainian budget may very well start from a platform that will see it struggle to deal with the internal issues that it sets out to deal with, if the monetary winds do not change soon, it is difficult to see how the budget will be fit for purpose.  There will certainly be not additional cash to finance other than budgeted reform.  A dependence on external financing of reforms is guaranteed -the only question is to what extent?  What amongst the above strategic statements – or perhaps “strategy soup” is a better description – will be considered as appropriate for external financial support?

It is necessary to be entirely blunt.

Whether any reader agrees with the use of the word “crisis” in conjunction with Ukraine or not, when it comes to a period of dramatic challenges, flux and change, “never waste a good crisis” is the maxim – particularly when there is an acceptance (currently) by the majority of the Ukrainian constituency that a period of hard times is necessary if the nation is to emerge at the other end a far closer to the desired outcome.  However that requires a clear and orated strategy.  Meandering from the path need be kept to a minimum – delays in progression along the identified path also.

Ukraine is (hopefully) entering a prolonged period of nation building (despite the on-going war in eastern Ukraine).  Whilst there is unfortunately no “Marshall Plan”, there is a good deal of external political will and finance nonetheless.  If the war in the east can be contained, then the chances of politically driven change across the rest of the nation obviously improve, as does the chances for reformation of the State itself, the dynamics of the current economic model, public finances, privatisation of State assets, and the dismemberment of the behemoth Naftogaz, together with the reorganising of the odious and highly corrupted Ukrainian energy arena etc.

International development however, requires transparency, inclusiveness, accountability and participation – from top to bottom, bottom to top, and horizontally – internally and externally of Ukraine.  This is not only a huge ask of the Ukrainian government, but also of the international community that comes to the aid of Ukraine.  It will require an unshakable unity if desired outcomes are to be realised.  A unity that will need longevity – a longevity that will surpass the time in office of all currently serving Heads of State and regional/international institutions alike.

As has been consistently written here, Ukraine is now a front line State, and will for at least a decade, in the face Kremlin shenanigans in all shapes and forms.  Successful reform is therefore only half the battle.  The battle to consolidate it thereafter will be just as important – and twice as long.

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