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Communication Fail

January 5, 2015

There can be little doubt that over the past 2 years the communication, liaison and interaction between the EU and Ukraine has been at an unprecedented high – reaching a crescendo during 2014 that is continuing to this day.  How long that will continue remains to be seen.

However, that the communication exists through as many channels as exist, at a level previously not seen, is clearly not as effective as perhaps it could and/or should be.

The Ukrainian government submitted a proposal to raise import duties on 100 commodity groups in order to raise UAH 17.6 billion to help fill the 2015 budget.  A 5% – 10% raise on these identified categories of imports.  This governmental proposal was passed by the RADA and signed into existence by the President for the limited period of the 2015 budget only, in accordance with Article XII of the General Agreement on Tariffs and Trade 1994.

It would therefore, considering the high levels of communication and interaction between the EU and Ukraine, have been a good idea to mention it to the EU, prior to including such a revenue generator within the Ukrainian 2015 budget and passing short term laws perhaps?

Apparently not.

This evening, according to the Ukrainian representative to the EU, Konstantine Eliseev, there is to be urgent consultations between Ukraine and the EU over the issue by way of a video conference.  The Ukrainian side will have representatives of the MFA, Finance and Economics Departments present, whilst the EU side, Peter Balas and the European Commission trade block.

Like so much of the 2015 budget, and the verbally agreed amendments prior to its passing, Prime Minister Yatseniuk stated that import charges would be introduced only after appropriate consultations with the EU.

Why were the appropriate consultations with the EU not carried out prior to the passing of the budget?  The revenues could have then safely been included or excluded accordingly.

What happens if the EU balk at this recent Ukrainian legislative (albeit temporary) act?  It has already, perhaps foolishly, agreed to suspend the full implementation of the DCFTA until 1st January 2016.  Every concession to the Ukrainian political and business elite (if they can be separated) allows for the continuance of business as usual – and does not instigate reform.

With so many verbal assurances and amendments (but nothing on paper at the time) relating to budgetary changes, multiplied by “hopefully our partners will agree” statements, and notwithstanding the IMF arriving in a few days with undoubted budgetary changes required,  it is little wonder that the 2015 Ukrainian budget only managed to hobble through the RADA – on the proviso it is to be revisited on 15th February with changes required.  At what price to the coalition cohesiveness remains to be seen.

Sooner or later the EU is going to have to play hard-ball with the Ukrainian political class if it wants to see reform reach the statute books and be subsequently implemented effectively.  Appeasing and accommodating the political class of Ukraine will deliver the same change in policy and attitude as appeasing The Kremlin – no change.

The EU is going to have to drive the Ukrainian political class – there is no other way to insure they conduct the reforms that are necessary.  That in turn requires preemptive and proactive communication – not reactionary urgent video conferences, post legislation, on a Monday evening.

It is time for the EU to take the Ukrainian pupil to task if it is to become the exemplary European nation its current political leadership claims Ukraine will become.

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