Fifth National Expert Forum "Ukraine. Stress Test". Report

Transcription

1 The ifth National Expert Forum held by Gorshenin Institute in Kiev on 31 March 2015 provided experts, of icials, businessmen and managers with a platform to discuss Ukraine's efforts in tackling new challenges, including the armed con lict in the east, economic reforms in terms of war and energy security issues. Local and foreign experts offered their views on how Ukraine can ind a way out of the existing situation along three main directions: the end of hostilities, reforms, inancial and expert help for Ukraine from Europe and the world. The forum was divided in three discussion panels. Discussion panel 1 The irst panel, "The First Ukrainian War. A Year under New Conditions", sparked a lively debate among Ukrainian and foreign participants as they were weighing chances of a peaceful settlement in Donbass and prospects for political or diplomatic solutions to the con lict. Representatives of the Ukrainian authorities, including Security Service of Ukraine head Valentyn Nalyvaychenko, Interior Minister Arsen Avakov and Information Policy Minister Yuriy Stets, said that the European community underestimates the threat posed by the Russian Federation when it describes the events in east Ukraine as a "local con lict" or "separatist unrest" instead of calling it the aggression against Ukraine by its neighbour. MEP Petras Austrevicius agreed that the EU only partially acknowledged these risks. In his opinion, Ukraine is involved in a pan-european war rather than in an internal con lict. Christine Dugoin-Clement, an expert with the Sogdian strategic think-tank (France), brought a geopolitical re lection to the discussion by saying that the world has changed and that the current events should be analysed using new categories whereas the breakdown into West and East was a thing of the past. The participants agreed that the war in Donbass is a civilizational con lict in which Ukraine, as the last guard on the border of European values, has to resist the empire appetite of Vladimir Putin. Common human values and modern international legal mechanisms should be utilized to ind an exit from this con lict.

2 Speakers' comments: Valentyn Nalyvaychenko, head of the Security Service of Ukraine: The most dif icult task is to tackle the suffocating fumes (verbatim: carbon monoxide) of separatism. Terror acts are made in the environment of these people. We need to change the understanding of information security and work with civilians. Society must partner with law enforcers. The population should support security agencies of our country, not terrorists or saboteur groups, to overcome regular terrorism as soon as possible. Arsen Avakov, interior minister of Ukraine: We are facing the following challenges: 1. Post-Maydan expectations 2. Awful economic crisis 3. Occupation and war Thirty per cent of our GDP ended up on occupied territories. What should we do? The window of opportunities is tight. The war is not an excuse for the absence of reforms. As for the Interior Ministry's reform, we can do everything right, write ideal laws, use the most effective Western models and carbon-copy the reform. However this will not work unless citizens have trust in the Ukrainian police. In this dif icult time, society must recognize police actions as correct and justi ied and support their work. Petras Austrevicius, a member of the European Parliament, a member of the European Parliament Committee on Foreign Affairs, founder of the Friends of European Ukraine group: Ukraine returned to the political map of Europe. For a long time it had remained on Russia's political maps only. Ukraine's return to the political map of Europe happened not by default, it cost money and efforts. Ukraine became an effective state, which is important if you need to understand the reality. We (EU) understood what we can expect from Russia. Eastern Partnership requires new tools. Reforms are necessary as is a strategy of common political security. There is a gap here in Eastern Partnership at the moment. Ukraine needs a strong information policy and an information campaign. Christine Dugoin-Clement, an expert with the Sogdian strategic think-tank (France): Classic tools do not work in a hybrid war. There is a threat to security of the whole region not only Ukraine. We must be on alert for the next several months, we must watch out for any anniversaries about to take place because Russia would not lose an opportunity to use them for propaganda or media ends. Arsen Avakov, interior minister of Ukraine: I demand a clear position from our European and US partners. Pressure must be put on Putin's regime until it bites the dust. You do not want to give us lethal weapons? Then help us economically. Create a shield. Our nation is not to blame for inding itself at the tip.

3 Yuriy Lutsenko, a member of the Ukrainian parliament, head of the Petro Poroshenko Bloc parliamentary faction: Putin seeks to destroy the unity of the EU. Four EU member states are already serving the interests of the Kremlin. Does Europe not understand that soon it will have to run EU issues past the Kremlin? Petras Austrevicius, a member of the European Parliament, a member of the European Parliament Committee on Foreign Affairs, founder of the Friends of European Ukraine group: The European security policy adopted 11 years ago assumed that the EU should focus on building closer ties with Russia to strengthen security in Europe. But then Russia waged a war in Ukraine. Russia provoked processes that created the Ukrainian nation. NATO, which we started to forget about as a security tool, is now active again. We must stop Russian expansion at the Russian border. Essentially, we are back to how things were in the 19th century. We must cover a long path but Europe gradually starts to understand. European policy against Putin must be more aggressive. Christine Dugoin-Clement, an expert with the Sogdian strategic think-tank (France): We must stop thinking in geopolitical terms of West and East. There is an open world, this world is in our hands and we must do something about it. Summary of conclusions and suggestions: - It is necessary to hold peace talks, to save the lives of soldiers and residents of the con lict zone at any cost. (V. Nalyvaychenko) - Control over the Russian-Ukrainian border should be restored with the help of OSCE observers to prevent restocking of separatists with arms from Russia and Russian servicemen's ingression in Ukraine. (V. Nalyvaychenko) - The world should recognize Russia's aggression against Ukraine, in particular in Donetsk and Luhansk regions, followed by all the ensuing consequences and international legal procedures. (Y. Stets) - European countries should join efforts to resist the plan to split the EU which is being increasingly actively enforced by Russian authorities and business under the leadership of Vladimir Putin. (Y. Lutsenko) - A potent pan-european information space, both in Ukraine and in EU member states, is necessary to counteract active Russian propaganda. Information security becomes one of the most important conditions of survival in terms of the hybrid war waged by the Russian Federation against Ukraine and EU member states. (Y. Stets) - Ukraine needs inancial aid and arms supplies not as much as united efforts of the international community, particularly the EU, to ind a diplomatic solution to the armed con lict and in luence the aggressive policy of the Russian Federation against its neighbour states. (P. Austrevicius).

4 Panel Discussion #2 Participants of the economic panel Wartime Economy discussed the reforms that were successfully implemented or those that failed over the past year. One expert group included government of icials, particularly Deputy Head of the Presidential Administration Dmytro Shymkiv, Minister of Energy and Coal Industry Volodymyr Demchyshyn, and First Deputy Minister of Finance Ihor Umanskyy, who argued that reforms are being implemented by the government, although at a somewhat slower pace, and irst positive results can be observed already today. The second group of experts brought together businessmen, namely Chairman of the Board of Directors of the Industrial Union of Donbass Corporation, MP Serhiy Taruta, CEO of OJSC Zaporizhstal Rostyslav Shurma, Deputy CEO of Ukrlandfarming Ihor Petrashko, who denied the positive changes, pointed at obstacles in the legislation, and voiced the opinion that Ukraine is going through not only a military con lict, but is also facing an economic war. Nevertheless, both expert groups admitted that reforms can be and must be carried out even in the wartime, despite enormous expenditures on the army and restoration of the regions affected by the armed con lict. The main reform is ight against corruption. According to Peter Balas, head of the Support Group for Ukraine at the European Commission, Ukraine has no choice but to move forward, which requires tougher anticorruption laws. The rule of law is the active element which can bring into action the country's entire economic and administrative systems. No reform is possible without it, regardless of whether it is war or peace in Ukraine. Statements/comments by the speakers: Ihor Petrashko, Deputy CEO of Ukrlandfarming (an agricultural holding company): How to bring Ukraine out of the exceptionally challenging economic crisis? The critical sectors include energy, metallurgy, and agriculture. These sectors must undergo reforms as soon as possible.

5 Serhiy Taruta, Chairman of the Board of Directors of the Industrial Union of Donbass Corporation, member of the Ukrainian parliament: What is reform? Reform is means a major change with an improvement in the end. As of yet, I can't see any single reform that has resulted in any change in our country. Today we can speak of a catastrophic employment situation. And this problem is only getting worse. Today the government's work should be assessed on very short and clear criteria, which exist everywhere in the West. First, it is the situation with jobs and the level of unemployment. The next criterion is the rate of in lation. The key reform is ight against corruption? It's nonsense. We must ight not with the consequences, but with the causes. We must begin with the constitutional reform. Then, we need to ensure decentralization and give more power to the regions. Cosmetic change is not a reform. We should talk about essential changes. We can't live on credit for a long time. Rostyslav Shurma, CEO of OJSC Zaporizhstal : There are government monopolies, with their well-known level of corruption and inef iciency. Rather than increasing ef iciency, these companies use their monopoly position and raise, for example, railway service tariffs. First, by 12 percent, then by 30 percent, and tomorrow by another 25 percent. Of course, government of icials have become more client-oriented. But we don't see any systemic change yet. And no one is ready for investment. Dmytro Shymkiv, Deputy Head for Reforms of the Presidential Administration: Should reforms be carried out during wartime? We know the examples of Israel, Great Britain, and Georgia. First, we should reduce the number of government of icials. Second, we must reduce the budget de icit. Third, we need to adopt a liberal policy towards enterprises. Ihor Umanskyy, First Deputy Minister of Finance: Is default possible this year? We have a clear position for stabilizing public inance. We will inish the irst quarter with a surplus. But there are risks that cannot be controlled. Firstly, it concerns the situation in the east. Generalized conclusions and recommendations: - Corruption is based on impunity, so the most important and high-priority reforms should be ful illed in the legislative ield, which governs liability for acts of corruption (Peter Balas). - Decentralization of power is required in order to ensure inancing of the regions according to their needs, and to toughen the responsibility of local communities for effective management (Serhiy Taruta).

6 - The IMF does not provide assistance to ensure economic growth. It only allows balancing public inances and stabilizing the economy. It is necessary to look for other sources of funding, and organizations that will help create jobs and bring investment into the country (Ihor Umanskyy). - Ukraine has become a hostage to external injections. At the end of 2014, its external debt amounted to a trillion of hryvnyas (Ihor Umanskyy). - Inef icient management of the state has led the country to political, inancial, energy dependence - it's choice without choice. We have reached the bottom, and now we need to push off and move up (Ihor Umanskyy). Panel Discussion #3 Participants of the third and inal panel Energy Security. Ukrainian Context arrived at the conclusion that today the energy security of Ukraine is also the energy security of entire Europe. Alan Riley, the law professor of the City Law School (London), pointed at the successful implementation of the project for reverse- low supply of natural gas from Europe to Ukraine. He also discussed Ukraine's positive possibilities in the development of the energy independence of Europe. In particular, Alan Riley said that if Ukraine continues to develop its energy security, then Kiev's gas price will be the main price in Europe. Ukrainian MP Mykola Martynenko, chairman of the parliamentary committee on energy sector, was not so optimistic. He noted that Ukraine is breaking its relations with Russia, but is not in a hurry to integrate with Europe. In his opinion, it is the fault of the government, whose efforts in this direction are not suf icient. The lawmaker also said that the parliament plans to adopt three laws, particularly, the bills on the gas market, the electricity market and the national regulator. According to Deputy Fuel and Energy Minister Ihor Didenko, a recognized expert in the energy sector, an equally important element of the country's energy security should be citizens' responsibility in energysaving issues. Oleksiy Tymofeyev, CEO of Smart-Holding, held a consistent expert position during the debate, discussing problems and prospects for drawing in domestic and foreign investments in natural gas production.

7 Statements/comments by the speakers: Oleksiy Tymofeyev, CEO of Smart-Holding: Investors in Ukraine are facing a pyramid of risks. In terms of further incentives, the investor does not have enough understanding of the industry speci ics or risks incentives in the business chain. Once a project comes to a successful stage and begins to generate its margins, we can talk about increased taxation. But those investors who go through the entire chain, who dare to drill deep wells, with the cost of only one well reaching million dollars... that's a risky part, where we have heavy taxation. Therefore, our great potential remains behind the iscal regime fence, which places Ukraine in the bottom of the investment attractiveness rating in this industry. Alan Riley, expert, Professor of Law at the City Law School (London), Associate Research Fellow of the Centre for European Policy Studies, Brussels: Ukraine has done everything right. Instead of being a victim, it has decided to become a player in the energy market. Ukraine has storage facilities. It has a huge transit network just about the biggest in the world. Once Ukraine liberalizes the market, launches an independent regulator, then Kiev's gas price will be the decisive price for Europe. Mykola Martynenko, Ukrainian MP, Chairman of the Parliamentary Committee on Energy Sector: When we talk about gas exports, it's not the question of our dependence on Russia anymore. We have to solve our internal problems, particularly legal and technical issues. Ivan Plachkov, Chairman of the Supervisory Board at Kyivenergo, ex-minister of Fuel and Energy: We have forgotten about the subject for whom the energy sector works. It is the consumer. We need a balance in the consumer - natural monopolies relations. Such a balance is a necessary condition, although insuf icient, for legislation and investment. Mykola Martynenko, Ukrainian MP, Chairman of the Parliamentary Committee on Energy Sector: About the independent regulator: In our situation, we can't entrust it to only one entity. We can't give it to the president, the prime minister, or to the parliament for sharing out. We're thinking about it, let's discuss it together. Generalized conclusions and recommendations: - Ukraine should pay attention to the issues of energy ef iciency and renovation of markets. It is also necessary to remember that the energy market is primarily oriented at the consumer, and it does not matter whether it is an individual or a company. There should be conditions that will suit all participants in this process (Mykola Martynenko, Ivan Plachkov). - Discipline is everything in the energy sector - timely payments of bills, taxes, debt repayments, quality services. It is necessary to tighten control over the industry through legislation, through the judicial ield, and awareness-raising methods (Ihor Didenko).

8 - Citizens of Ukraine must learn to make priorities in the ield of energy saving. They must learn how to save, to make ef icient use, and accumulate reserves for many years ahead in order to avoid dependency and excessive consumption, for which we have to pay a very high price (Ihor Didenko). - We should take the war factor into account, but this should not be the major and decisive aspect (Mykola Martynenko). - According to the Geneva Convention, resources to occupied territories must be supplied or paid for by the aggressor country. If the Russian Federation refuses to provide gas supply to the occupied territories, and instead Ukraine does this, then Ukraine should send bills for such deliveries to Gazprom on a monthly basis (Alan Riley). Our contact information: 18b Mala Zhytomyrska st., Kiev 01001, Ukraine f For more information please visit our website