How stable is Ukraine

By Andrian Prokip (Kennan Institute, Wilson Center, Washington, D.C./Ukrainian Institute for the Future, Kyjiw)

Summary
In the first quarter of 2021, Ukraine was an epicenter of sanctions policies. The US imposed sanctions on Ukrainian MPs accused of attempting to influence the 2020 US elections and the oligarch Ihor Kolomoysky; the Russian government extended its list of sanctioned Ukrainian companies. The Ukrainian government imposed sanctions on Ukrainian citizens, especially pro-Russian opposition politicians and their families, as well as on the Chinese investors who bought the company Motor Sich - a manufacturer of airplane and helicopter engines, which is of strategic importance for Ukraine's defense policy. The overall political picture in Ukraine was shaped by a new - the worst so far - Covid-19 wave and the slow start of a vaccination program.

1. International Relations

International »Crimean Platform« for the deoccupation of the peninsula

At the end of February, President Volodymyr Zelensky signed a decree establishing the Crimean Platform, an initiative to bring together and coordinate international efforts to de-occupy the Crimean peninsula, which have so far taken place at an ad hoc level. As expected, Russia described the initiative as an “aggressive threat” directed against “its regions”. The first international summit of the platform is scheduled to take place on August 23, 2021 - on this day Ukraine will celebrate the 30th anniversary of its independence.

On January 14, the European Court of Human Rights accepted some of Ukraine's lawsuits against legal violations in Crimea as admissible. It can take years for the court to reach a final judgment.

US sanctions against Ukrainian citizens

In early January, the US imposed sanctions on seven Ukrainian citizens and four media outlets that the US administration claims have links with Russia and Andrij Derkatsch, a member of the Ukrainian parliament who the US government accuses of being a Russian agent. Derkatsch imposed sanctions on the US in September 2020 for attempting to influence the 2020 US presidential election. Other Ukrainians who have been sanctioned include Oleksandr Dubinskyj, a member of parliament from Zelenskyi's party, and several former government officials.

In March 2021, the US imposed sanctions on the powerful Ukrainian oligarch and former owner of the private bank Ihor Kolomojskyj. According to a statement by the Foreign Ministry, he was involved in "extensive corruption" in 2014/15, during his time as governor of Dnipropetrovsk. The US government accuses Kolomoyskyj and his partner Hennadij Boholjubow of having embezzled funds from PrivatBank.

Motor Sitsch Nationalization and Relations with China

The Ukrainian company Motor Sitch is one of the largest manufacturers of aircraft and helicopter engines and gas turbines in the world. It was privatized in the mid-1990s, and in late 2019 its Ukrainian owners approved the sale of a majority stake to Chinese investors. The US government opposed the sale fearing that it would give Beijing access to key defense technology.

In mid-2020, President Zelenskyi commissioned a report on the economic and security implications of the Motor-Sitsch sale. On the basis of the intelligence analysis provided, the President then imposed sanctions on the buyer of Motor Sitsch, the Chinese company Skyrizon. A few days earlier, the US Department of Commerce had put Skyrizon on its list of military end-users because the manufacturer conglomerate has close ties to the People's Republic of China and its People's Liberation Army.

In March 2021, the National Security and Defense Council of Ukraine announced that the company would be nationalized as its privatization had been illegal. China then called on Ukraine to take the interests of corporate investors into account when deciding on nationalization. Skyrizon is currently seeking new arbitration proceedings against Ukraine to increase legal pressure on them; As early as 2020, Skyrizon initiated international arbitration proceedings against Kyiv for 3.5 billion US dollars. Despite this leverage, President Zelensky signed an ordinance on March 24, 2021 that put the nationalization into effect.

These developments are sure to have an impact on Ukrainian-Chinese bilateral relations. Part of the Chinese response to the nationalization decision was a visit by Chinese company representatives to Crimea in March 2021 to examine the peninsula's tourist potential. Following the visit, the Chinese Foreign Ministry asked Ukraine to refrain from politicizing cooperation between Chinese companies and companies in Crimea.

Sanctions ping pong between Russia and Ukraine

In February, the Russian government extended the list of goods that cannot be imported from Ukraine. Railway wheels and some other components for railway wagons were added. Russia also put nine other Ukrainian companies on its sanctions list, which now includes 84 Ukrainian people and companies.

In return, the Ukrainian government expanded its sanction lists of Russian citizens and companies - in addition, there were a number of Russian media channels and state officials. President Zelenskyi has only recently started using sanctions against Russia as an instrument to safeguard national security.

Iran report on the downing of a Ukrainian plane

On December 31, 2020, the Iranian government sent Kyiv its final report on the downing of a civilian plane on January 8, 2020. Ukrainian officials called the document a "cynical attempt" to cover up the real causes of the crash and continued to say the report denies guilt instead of guilt Investigate the circumstances of the incident. In addition, Iranian authorities violated the provisions of the international civil aviation agreement. US State Department officials said the US would advocate bringing Iran to justice for the incident.

Relations with the EU

On February 11, the EU-Ukraine Association Council held a regular meeting in Brussels. The Ukrainian Prime Minister Denys Schmyhal addressed the progress made by Ukraine in implementing the necessary reforms set out in the Association Agreement. EU Representatives Josep Borrel and Valdis Dombrovskis also urged Kyiv to do more to fight corruption and strengthen the rule of law regarding the situation in Ukraine, and the European Parliament passed a resolution on Ukraine containing the same concerns .

Relations with Hungary

Hungarian Foreign Minister Peter Szijjártó paid an official visit to Kyiv in January 2021, where he met his Ukrainian colleague. The meeting was arranged to stop the deterioration in relations between the two countries. The formation of a bilateral working group for a fair settlement of the Ukrainian-Hungarian conflict over educational and cultural policy measures on both sides was discussed. The ministers agreed that the tension between their countries is based on hurt emotions and a lack of trust and can and should be overcome.

Relations with Moldova

On January 12, Moldova's President Maia Sandu paid an official visit to Ukraine, where she met President Zelenskyi, Prime Minister Denys Schmyhal and Foreign Minister Dmytro Kuleba. Topics from the areas of bilateral trade, territorial integrity of both countries, modernization of the border infrastructure and water disputes over the Black Sea tributary Dniester were discussed. The heads of state agreed on further cooperation in the energy and infrastructure sectors.

President Zelenskyi's visit to the United Arab Emirates

On February 14th and 15th, President Zelenskyi visited the United Arab Emirates, where a number of agreements and letters of intent on investments and military cooperation were signed. In addition, a number of large Ukrainian private companies agreed on letters of intent with Mubdala, the state investment company of the Emirates.

2. Domestic Policy

Sanctions and other measures against pro-Russian politicians in Ukraine

In February 2021, President Zelenskyi and the National Security and Defense Council imposed economic sanctions on two Ukrainian politicians. MPs Viktor Medvedchuk and Taras Kozak are suspected of pro-Russian activities and terrorist financing (in the form of cooperation with the unrecognized republics in the Donbas). Medvedchuk is a leading figure in the party Opposition Platform - For Life and personally closely connected to Vladimir Putin. Since 2014 he has tried to act as a mediator between Ukraine on the one hand and Russia and the unrecognized republics on the other, although Kyiv has not recognized him in this role.

The sanctions will ban three television channels officially owned by Kozak and the sale of shares in a gasoline company allegedly owned by Medvedchuk. The companies are major players in the Ukrainian fuel market, importing gasoline from Russia.

On the grounds that this had been illegally privatized, the Security and Defense Council of Ukraine also brought into play a possible nationalization of the pipeline through which the gasoline is transported from Russia. Ukraine's intelligence service has opened an investigation into suspicions that Kozak and Medvedchuk were preparing a coup and financing terrorism.

In February and March, the Security and Defense Council also passed a series of sanctions against other companies and individuals, including Russian citizens.

Some well-known Ukrainian NGOs publicly supported the sanctions against the television channels, arguing that these were not an attack on freedom of expression - as has been claimed - but a necessary step in the fight against foreign influence.

Covid-19 in Ukraine

In the first quarter of 2021, Ukraine was hit by a third wave of the Covid-19 pandemic. The rate of new infections every day reached a new high of 18,000 in March, with over 300 deaths per day. On March 20, the cabinet again tightened the quarantine rules.

Ukraine launched a mass vaccination campaign on February 24, but it has been slow; At the end of March, only 200,000 Ukrainians had received a first dose of vaccine. The Ukrainian population, including the medical staff, does not trust the available Covishield vaccine, which is produced in India by analogy with the Oxford compound by Astrazeneca. Low confidence in vaccination stems from disinformation about Covid-19 and related issues, according to a survey by the United Nations Development Program. In addition, Ukraine lacks the necessary quantities of vaccines to organize a rapid mass vaccination program.

The Ukrainian economy has also been hard hit by the ongoing pandemic. In 2020, trade turnover fell by 6.4 percent and the country's gross domestic product fell by four percent. The level of FDI was the lowest in 20 years. Should the regulatory restrictions in the regions be relaxed, the economy could start to recover in the second quarter of 2021.

Investigation of the 2010 Kharkiv Agreement

The Security and Defense Council of Ukraine decided to investigate all the rulings of the former president Viktor Yanukovych, who had fled, to see if they could threaten national security. In this context, the Secretary of the Security and Defense Council Oleksiy Danylov announced that the reasons for signing the Kharkiv Agreement in 2010 should also be investigated - at that time, Ukraine agreed to an extension of the lease for the Russian Black Sea Fleet in Crimea until 2042 and received im In return, a discount of US $ 100 on the original price of US $ 330 per 1,000 cubic meters of Russian gas. Although Russia terminated the treaty after the annexation of the Crimean Peninsula in 2014, Ukraine's security service announced that it would ask the 2010 Verkhovna Rada members to approve the ratification of the pact in order to uncover possible high treason cases against the state.

The developments around the Constitutional Court of Ukraine

President Zelenskyi continued his fight with the Constitutional Court of Ukraine (VGU) and called for the resignation of several of its members who are suspected of corruption. The last episode took place on October 27, 2020, when the VGU announced a ruling that some legal provisions relating to procedures and institutions for combating corruption are unconstitutional and contradict the independence of the judiciary. President Zelenskyi then issued several decrees suspending presiding judges of the VGU. In order to dismiss two judges, on March 27, he annulled the decrees that had appointed them constitutional judges.

It must be mentioned here that the legal and constitutional validity of these decisions Zelenskyj is doubtful.

Protests against energy costs

At the end of 2020, the government increased the electricity price for private households, which had remained unchanged since the beginning of 2017. Due to a liberalization of the natural gas market for private households decided in 2020, prices have been linked to market fluctuations since the beginning of 2021. As a result, households received higher bills than they expected in January and February, which led to a wave of protests in Ukraine - according to Ukraine's intelligence service, they were incited by Russia.

In response to the protests, the government capped gas prices until the end of March, which many observers believe is a threat to a resilient gas market that is trying to get back on its feet. In Ukraine, there is a risk that political leaders will undermine reforms for paternalistic and populist motives; The IMF in particular has insisted on a stable gas market as a condition for releasing additional loan tranches to Ukraine.

3. Reform progress and success stories

S&P Global Ratings reaffirmed Ukraine's B rating with a stable outlook for long and short-term payment obligations in foreign or local currency. Negotiations between the Ukrainian government and the IMF in the first quarter of 2021 ended without an agreement. The IMF announced that the independence of the National Bank of Ukraine, as well as the anti-corruption agencies, was the decisive condition for further cooperation.

In January, the ambassadors of the G7 countries with embassies in Ukraine proposed a roadmap for renewing trust in the Ukrainian judicial system. The plan contains recommendations for better functioning of the VGU and a better selection of VGU judges, as well as recommendations for reforming the High Judicial Council, the future of the Supreme Court, greater responsibility for judges, establishing transparency guidelines and criteria for competition the selection of judges as well as uninterrupted and independent working methods of the Ukrainian institutions for the fight against corruption. As a result, President Zelenskyi publicly recognized that there were problems with the judicial system.

Advisors from the EU and the USA criticized the approach of restarting the work of the High Appeal Commission for Judges in 2021; the departure of judges from the current system without a stable replacement mechanism is seen as a restriction of the general availability of the legal system. One of the main concerns is the proposal to give the Commission more power. Critics were also alarmed that those seeking a revision of the Commission might oppose the recommendations of the Venice Commission on new powers for the Commission and, in particular, on adequate judicial representation in the Commission. Because conflicts between the Commission and VGU on legal issues should be avoided.

In March, President Zelensky signed the Law Establishing the Bureau of Economic Security (ESPE). This is intended to reduce the pressure on companies that arises from arbitrary taxation and criminal interference in business activities. The new agency will apply an analytical approach to protecting legitimate business activities, locating shadow economy organizations and not acting clumsily. As soon as it starts working, the tax police will be disbanded.

In March, the President approved a revision of Ukraine's Military Security Strategy.It contains a comprehensive approach to defending Ukraine in the face of ongoing military threats and a hybrid war with Russia.

At the end of March, President Zelenskyi confirmed a national human rights strategy for the next five years. It marks the occupation of Crimea and the war in the Donbas, the rule of law and the administration of justice as well as women's rights, freedom of expression and hate crimes as the most problematic human rights issues in Ukraine.

4. The situation in the Donbas

In the first quarter of 2021, the situation in Donbas worsened compared to the last six months of 2020. The number and severity of attacks and the number of victims increased significantly.

A UN General Assembly resolution on March 26, supported by 47 countries, described Russia in eastern Ukraine as a party to the conflict, not a mediator. The Russian government continues to support armed separatists in the Donbas and continues to provide military material. According to the directorate of the Ukrainian Military Intelligence Service, Russia sent anti-tank and personal mines, unmanned aerial vehicles, stations for electronic warfare and several dozen military jeeps to the Donbas for "quick reactions" including fuel in March alone.

The Russian-backed armed separatists in the Donbas denied representatives of the International Atomic Energy Agency access to nuclear material storage sites in non-government-controlled parts of the Donetsk and Luhansk Oblasts.

A government representative Zelenskyi reported on plans by the government to organize a summit in Normandy format. However, with Russia blocking this option, President Zelensky plans to speak personally to the heads of government of Germany, France and Russia individually. At the moment, the talks about the Donbas have stalled and no one sees a way out of the impasse.

Translation from English: Sophie Hellgardt


The Kennan Institute of the Wilson Center publishes four quarterly reports every year under the title "Ukraine Quarterly Digest", which briefly and concisely summarize key domestic and foreign policy developments in Ukraine over the past few months. The latest report for the first quarter of 2021 appeared on April 7, 2021 and is available at: https://www.wilsoncenter.org/blog-post/ukraine-quarterly-digest-january-march-2021.

The editors of the Ukraine-Analyzes would like to thank the Kennan Institute of the Wilson Center for the cooperation and the permission to print the quarterly report in German translation.