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Tough love on Ukraine’s (still) new elite

Amid the US domestic turbulence centred on Ukraine and President Zelenskyy’s opening to Russia, equal attention needs to be paid to Ukraine’s domestic reform agenda. As Zelenskyy continues to give high hopes, business interests seem to be re-infiltrating the political-judicial system.

December 17, 2019 - Henrik B. L. Larsen - Articles and Commentary

Volodymyr Zelenskyy presidential inauguration‎, May 20th 2019. Photo: Mykhaylo Markiv / The Presidential Administration of Ukraine (cc) wikimedia.org

President Zelenskyy’s two landslide victories earlier in the year showed that the Ukrainian people never gave up their hopes for a state that serves the citizens and not the other way around. Zelenskyy gained his popularity from the famous TV show where he plays a schoolteacher unexpectedly elected President, who tries to fight corruption in country but who is constantly undermined by the established elites. Despite the sensitivity in negotiating with Moscow over the Donbas region, the opinion polls continue to give Zelenskyy high approval ratings.

Yet, the historical record of the past 25 years calls for scepticism about any leader’s ability to deliver their promises of reform. The Orange Revolution in 2005 similarly nourished high hopes but quickly reached political deadlock and laid the ground for the return of Russia-friendly Yanukovych in 2010. The Euromaidan Revolution in 2014 paved the way for the leadership of Petro Poroshenko, an oligarch himself and deeply intertwined with the system he was elected to change. The international society, in exchange for financial assistance and political support in 2014, required Ukraine to undertake a number of key reforms.

But the reform record is at best mixed. As a rule, Ukraine progressed in the areas where there was no strong opposing interest, such as decentralisation by bringing tax collection closer to service provision of citizens at the local level. Ukraine also progressed where the international pressure was most intense: notably, the restoration of the credibility of the National Bank and cleaning up the shaky banking sector. Yet, Ukraine failed in most other important areas: customs and tax reform, reform of the prosecutorial office and the security service, the fight against high-level corruption, privatisation and land reform, as well as certain free trade commitment under the Association Agreement with the EU. The current state of the judicial system also leaves doubts about a genuine renewal. The government consistently failed not only to raise gas prices but also to make sure that competitors would have equal access to the existing gas distribution network.

In most cases, oligarchs’ or other political groups interests in preserving the status quo stand in the way between Ukraine’s official commitments and its ability to deliver reform. No oligarch with respect for himself and with sufficient influence on the political system or media would allow de-monopolisation or an end to beneficial economic schemes. No politician whose power rested on the schemes and corruption were interested in truly independent courts and law-enforcement agencies because they might have to stand trial themselves. Under these circumstances, the Ukrainian political system became skilful in imitating reform. It used the language the Europeans and the Americans wanted to hear but implementation dragged out, while rulings of ‘independent’ courts conveniently undermined reform steps already undertaken.

It is obviously positive that Zelenskyy is a political outsider but his links to one of Ukraine’s most powerful oligarch, Igor Kolomoiskiy, is equally troubling. Zelenskyy’s first big test will be Ukraine’s ability to withstand Kolomoiskiy’s effort to overturn the 2016 privatisation of PrivatBank, a major bank belonging to the oligarch that threatened stability of the financial system due to insider loans. Ukraine never succeeded in retrieving the billions of lost assets from PrivatBank.

The Ukrainian voters and the international supporters are rightly judging the ability of Kolomoiskiy (and other oligarchs) to penetrate the political system as ground-breaking for the rest of Zelenskyy’s tenure. Zelenskyy has been criticised for appointing Kolomoiskiy’s former lawyer, Andriy Bohdan, as his chief of staff, while both the new Prime Minister and Defence Minister have been linked to the oligarch. The situation is symptomatic to Ukraine: private interests will sooner or later try to infiltrate the new politicians with monetary offers that are really hard to refuse. The doubtful renewal of Ukraine’s judiciary does not suggest that the courts will dare stand up against strong political power either.

Zelenskyy so far had luck in lifting the immunity of parliamentarians and securing the release of prisoners from Russia. However, Ukraine’s long history of business interference with politics calls for precaution. All eyes must be kept on the new political elite, who face a daunting law-making task going forward to meet domestic and international expectations. Ukraine should be judged not against processes but against when its leadership has implemented reforms that make an actual difference for its citizens. International leadership is no longer just about mobilising economic support but to show the “tough love” needed for Ukraine to strengthen its resilience against external shocks.

Dr. Henrik B. L. Larsen is a Senior Researcher at the Center for Security Studies at the ETH Zürich. He served as a political adviser with the European Union in Ukraine during 2014-19.

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