Friday 9 December 2016

Time to act, because Ukraine's fate is key to future of Europe

If Europe wants to avoid the risk of more mass migration, it will have to do more to help Ukraine, writes Dan O'Brien from Kiev

Published 13/09/2015 | 02:30

Suffer little children: A young boy looks through the fence of the migrant holding camp at the Hungarian border with Serbia where 6,000 refugees have arrived in the week alone
Suffer little children: A young boy looks through the fence of the migrant holding camp at the Hungarian border with Serbia where 6,000 refugees have arrived in the week alone

Syria had a population of 20 million when war broke out five years ago. It is in Asia Minor and is separated from Europe by a sea and the vastness of Turkey. Despite its geography, the humanitarian effects of that country's war have spilled over into Europe, with waves of refugees fleeing to a continent which has been utterly unprepared for the numbers involved.

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Now consider Ukraine. Its population is more than twice that of pre-war Syria and it borders four EU countries. Since conflict erupted in early 2014, the UN estimates 8,000 have died. Almost 1.5 million people have been forced to flee their homes to escape the fighting. Among the differences with Syria is that these displaced people have become refugees within their own country, rather than seeking refuge elsewhere.

The point of this comparison is to highlight one of the many consequences for those of us in more stable parts of the continent if the conflict in Ukraine were to descend into Syria-type conflagration: an influx of refugees that could dwarf either the current influx from Syria or the large-scale movements out of the Balkans in the 1990s. It is for this reason, along with many others, that there is not just a strong humanitarian case for Europe to do more to support Ukraine, but an obvious self-interest, too.

As with all conflicts, many factors are at play in determining whether they escalate, reach a stalemate or fizzle out. In Ukraine's case, the Putin factor is front and centre.

Since Russia intervened in Ukraine, annexing Crimea and providing men and materiel for separatists to wage war in the east, Vladimir Putin's intentions have become the focus of feverish speculation from eastern Europe to Washington DC.

Was his decision to intervene so aggressively opportunistic, and will he continue in that vein; or is it part of a strategic initiative to regain the "sphere of influence" that Russia had in Soviet times, and one which he has been waiting to implement?

While nobody knows what is going on in Putin's mind, for many - particularly in neighbouring countries - his actions have brought power politics back with a vengeance to the continent. Travelling in Poland and Ukraine in recent days, the sense of fear and insecurity that now exists towards Russia across the region is palpable.

A sharp exchange of views at the Yalta European Strategy conference, held over the past few days in Kiev and ending last night, illustrated not just this sense of insecurity, but also the underlying divisions in how Europe should adapt to a Russia that has ended the post-Cold War order by its actions in and towards Ukraine.

A French parliamentarian, Pierre Lellouche, made the realpolitik case for accepting the new realities and attempting to come to terms with a more aggressive Russia on the basis that some modus vivendi will - sooner or later - have to be found. The former Latvian president, Vaira Vike- Freiberga, witheringly responded that French notions of "grandeur" applied only to big countries and that small countries, or the "peasants" as she described them with undisguised sarcasm, ended up getting crushed when the great powers decided matters.

She reminded her interlocutor that when her country had tried to accommodate Russian interests, by taking a position of neutrality in the Second World War, it ended up under Soviet occupation for half a century. Mr Lellouche did not take the matter further.

If Poles and Balts are deeply fearful of a Russia that has taken to "hybrid warfare" and annexation, Ukrainians are living with the consequences. The outcome of the conflict will be the central factor in determining the country's fate. But even if the war is contained and merely becomes a "frozen conflict" (nobody here expects a better outcome), the challenges Ukraine faces are enormous.

Politically, economically and administratively, the country is in a parlous state. In the quarter century since the end of Communism, average incomes have hardly grown, while they have multiplied in most of the country's neighbours. Gains from periods of growth and stability have been repeatedly reversed by bouts of economic collapse.

The latest crash resulted from the outbreak of conflict at the beginning of 2014 after the then president, Viktor Yanukovych, ended talks with the EU on a comprehensive "association agreement" and moved to return Ukraine to being a satellite of Russia.

Pro-EU forces rebelled against the move, driving him from office. Russia and the pro-Russian minority in Ukraine claim - not entirely without justification - that the ousting amounted to coup.

The upheavals of 18 months ago, followed by Russian military intervention in Crimea and the east of the country, pushed an already desperately weak economy over the edge. Activity went into freefall and the situation was made much worse by the currency going the same way. A huge devaluation meant that everything the country imported soared in price. Inflation for this year alone will hit almost 50pc. The impact on household's spending power in a country which was among the poorest in Europe before the conflict has been disastrous.

Over a coffee yesterday, I spoke to Ukraine's finance minister Natalie Jaresko, a member of the country's diaspora who was born and raised in Chicago of immigrant parents, but who last year took on the daunting task of turning the economy around.

As all finance ministers do, Jaresko puts the best possible gloss on things, citing indicators which suggest that the economy could be close to the bottom of its slump, even if she readily concedes that extreme fragility still characterises the situation.

She also lists off the wide range of reforms that the administration of which she plays a central role has implemented or is in the process of implementing.

Among the most important are the changes in the massively bloated and corruption riddled energy sector. These have included popular measures, such as reducing the role of unneeded middlemen who cream off revenues, and unpopular ones, including big reductions in subsidies which are pushing up fuel bills.

But if Jaresko is like all politicians in emphasising her achievements, she differs from any finance minister I have ever met in that her country is at war.

Her demeanour is characterised by grim determination with regards the economic war with Russia, and the likelihood that it will escalate - the Kremlin is threatening further economic sanctions if the trade deal Ukraine is trying to close with the EU is eventually sealed.

Speaking publicly on Friday, she said again and again "we will cope" if the noose is tightened further. Yesterday, she was just as adamant. Given all that the Ukrainian people have already suffered, she believes that they will manage their way through any new measures Russia imposes.

It is always hard to assess how meaningful reforms are in their early stages, but the IMF, which is deeply involved in bailing the country out and not known for sugar-coating analyses, appears convinced real progress is being made.

Last month, it published its latest assessment and having read more of these assessments than I'd care to over the past five years - on Ireland, Greece, Portugal, Spain and Cyprus - it is clear that the technocrats in Washington believe that the administration is serious about putting in place the sort of reforms that other central and eastern European countries implemented in the early 1990s after the end of Communism.

That the economy and trade minister, Aivaras Abromavicius, comes from one of those countries (Lithuania) is also a good sign - it is always a reasonable indicator of willingness to change when a government gives jobs to outsiders.

Whether Abromavicius can make real changes stick is moot, but he certainly knows what needs to change.

On Friday, when I mentioned (in his giant Soviet-era ministry) how badly his adopted country does in international rankings on how easy or difficult it is to do business in countries across the world, the 39-year-old reeled off new and proposed laws targeted at improving those very rankings (compiled by the World Bank) and by how much and when each change would impact the rankings.

And that is crucial because by any available measure Ukraine is among the most corrupt and most difficult countries in Europe in which to do business, the later having much to do with the power of a handful of super-rich oligarchs who have for too long prevented the emergence of a genuine market economy.

The 'Orange' revolution of 2004 promised the same kind of modernisation that the current administration is committed to. That experiment failed.

There is certainly a different context now - a failure to make a success of the economy would leave the country without the capacity to resist a return to subservience under Russia. But reforming a country from top to bottom is a massive enterprise - just think of Greece - and one which can all too easily fail, no matter how serious the consequences.

If it does fail, the implications will be felt far beyond the country's borders. The case for offering more financial help to the country is overwhelming.

Sunday Independent

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