Ukraine Quarterly Digest: October–December 2020

BY ANDRIAN PROKIP

The final three months of 2020 in Ukraine were marked by a constitutional crisis (resulting from disputes over the place of the anticorruption agencies in Ukraine’s political system), local elections (which were, with only a few exceptions, transparent and representative), and a peak in the COVID-19 pandemic. The economy remained in a difficult situation and far from recovery, which also had a negative influence on the public mood. In matters of foreign relations, Ukraine’s foreign policies led to improved relations with some of its neighbors but worsened relations with others.

1. INTERNATIONAL AFFAIRS

UK-Ukraine Relations

President Volodymyr Zelensky, during his visit to London in early October, signed an Agreement on Political Cooperation, Free Trade and Strategic Partnership between Ukraine and Great Britain. The EU-Ukraine Association Agreement did not cover relations with a post-Brexit UK, so the two countries had to formalize relations in a new way. The new agreement stipulates a strategic partnership between them, including closer cooperation in trade liberalization and security. It is essentially a continuity agreement, preserving all provisions of the EU-Ukraine Association Agreement except those pertaining specifically and uniquely to UK-Ukraine cooperation.

The parties also signed a memorandum on the joint construction of military ships in British plants for the Ukrainian defense sector, and the UK agreed to provide a loan to finance the construction.

Relations with the EU

The 22nd EU-Ukraine Summit was held in Brussels on October 6, 2020. The post-summit joint statement released by the parties stressed the necessity of Ukraine continuing reform of the judiciary, fighting corruption, and eliminating the influence of the oligarchs, while recognizing the successful implementation of EU requirements for Ukraine to be granted access to the EU visa-free regime. The EU recognized the prospects of deeper economic integration with Ukraine. The parties also agreed to review and update the EU-Ukraine Association Agreement.

On December 11, the EU’s International Arbitration Panel issued a decision on Ukraine’s 2015 ban on exports of all unprocessed wood. The arbitration found the ban to be illegal in general; however, there are some cases in which a partial ban might be acceptable, such as for environmental protection purposes. In this way the Arbitration Panel indirectly addressed Ukraine’s earlier, 2005 ban on the exports of ten specific species. The 2015 ban did not halt the uncontrolled logging of Ukraine’s forests, as some politicians and exporters had touted, and the EU considered the ban to be in violation of the EU-Ukraine Association Agreement.

Poland

On October 11, Poland’s president Andrzey Duda visited Ukraine to meet with Ukrainian officials and commemorate the victims of the mass repressions of 1937–1941. Duda called this visit “super-important” and said that Poland stood with Ukraine in combating Russian aggression. Two days later, the Ukrainian and Polish presidents participated in an economic forum in Odessa, at which an agreement between the ports of Odessa and the Polish city of Gdansk and an agreement on promoting privatization in Ukraine were signed.

Even though the two countries have had serious disputes over historical memory issues in recent years, economic cooperation seems to help them overcome their distrust of each other.

Hungary

A new source of tension emerged between Hungary and Ukraine. On November 30, after the local elections, Ukrainian security services conducted searches of local charitable foundations in Zakarpattia oblast (Transcarpathian region) that had been founded to promote the interests of the local ethnic Hungarian minority. The oblast borders four countries—Poland, Slovakia, Hungary, and Romania—and is home to numerous ethnic populations. The searches were aimed at checking whether the charitable organizations had acted to undermine the state sovereignty of Ukraine. The operation was allegedly related to an inaugural council session in a small Transcarpathian village where council members sang the national anthems of both Ukraine and Hungary. The security services’ operation fueled tensions between government and community that had been ignited by Ukraine’s recent divisive language and education laws, disputes over issuing Hungarian citizenship to Ukrainians, and other conflicts between official Kyiv and Budapest.

After the security services’ operation, Hungarian foreign affairs minister Peter Szijjarto once again appealed to NATO headquarters to freeze NATO-Ukraine cooperation. Over the past six years official Budapest has often interfered with Ukrainian efforts to integrate with NATO; Hungary’s veto power over Ukrainian membership has now become a routine leverage point to pressure Ukraine in bilateral disputes. However, this time NATO said it would not have a response and called on the parties to resolve the conflict peacefully.

Turkey

On October 16, President Zelensky visited Istanbul to meet with his Turkish counterpart, President Recep Tayyip Erdoğan. In a joint statement issued after the meeting, the Turkish president affirmed that Turkey would support Ukraine’s efforts to join NATO and to reintegrate Crimea and the Donbas and protect human rights in the region. The statement emphasized developing cooperation in other areas, including an economic and security partnership.

Russia, Belarus, and the CIS

Ukraine-Russia relations continued to deteriorate. In September and December, Russia expanded the list of Ukrainian officials under sanctions, adding some Ukrainian MPs, including the chair of the Ukrainian parliament, and Ukraine’s former president, Petro Poroshenko.

Relations between Ukraine and Belarus (governed by Aleksandr Lukashenko, who is not recognized as the country’s lawful leader by official Kyiv) also continued deteriorating. Ukraine has joined the sanctions regime against Belarus imposed by the EU. At the end of December the Ukrainian government simplified the rules for Belarusian IT specialists and some other categories of professionals to obtain permanent residence. Among the reasons for doing so was Ukraine’s decision to focus on supporting human rights. The connectivity blackout in Belarus in response to protests against the election results stymied IT businesses, some of which were also engaged in amplifying the protests across platforms. Despite a potentially less favorable tax environment and other business hurdles, IT specialists and other professionals have begun looking to Ukraine as a destination for relocation.

At the same time, the Ukrainian government continued dissolving the country’s ties with Russia and the Commonwealth of Independent States. Recently Ukraine withdrew from the treaty on antimonopoly legislation and from a couple of agreements on cooperation in the energy sphere.

2. INTERNAL AFFAIRS

Constitutional Crises

On October 27 the Constitutional Court of Ukraine (CCU) issued a decision with respect to some legal norms on anticorruption procedures and institutions, declaring them unconstitutional and undermining the independence of the judiciary. Among the norms deemed unconstitutional was criminalizing false declarations of incomes and expenses, required of politicians and government employees at certain levels (administrative and disciplinary actions were left in force). In general, the CCU decision required the legislature to review the legal acts that created the basis for the anticorruption agencies’ activities and to harmonize those acts with Ukraine’s constitution.

This decision provoked strong reactions from certain political and civil society groups, as well as from the leadership of the anticorruption agencies. The head of the National Agency on Corruption Prevention (NACP) charged the CCU with undermining the anticorruption efforts of Ukraine but acquiesced to the decision and suspended access to the registry of declarations. The National Anti-Corruption Bureau had to close 110 criminal proceedings. Civic groups organized mass protests  in support of the anticorruption agencies and demanded the resignations of the CCU judges. The Ministry of Foreign Affairs stated that the CCU’s decision could threaten the EU-Ukraine Association Agreement and the visa-free regime with the EU. President Zelensky convened the National Security and Defense Council to look for solutions; the council recommended adopting a law that would challenge the CCU decision and change the membership of the CCU. This proposal, however, was not in line with the fundamental division of powers in Ukraine’s legal and political system and, if carried out, could only have deepened the crisis. International organizations such as the Group of States against Corruption (GRECO) and the Venice Commission reacted immediately and negatively.

One thorny issue connected to the constitutional crisis is that some CCU judges had a conflict of interest while rendering the decision on the anticorruption agencies’ overreach: they were being audited by the NACP for allegedly filing false declarations.

On December 14 the Verkhovna Rada amended existing legislation to restore the NACPS’s power. However, debates over the constitutionality of the anticorruption agencies’ founding legislation are ongoing, and there is uncertainty as to whether the December 14 legislation will be canceled by the CCU in the future.

On December 29, President Zelensky issued a decree suspending the head of the CCU from the post of CCU judge for two months, as he was suspected of engaging in bribery and fraud. However, under the constitution, the president does not have the authority to suspend a CCU judge for such actions.

The constitutional crisis was not resolved in 2020. With the strong reaction to the CCU decision, President Zelensky may have inadvertently opened a path for the opposition to launch an impeachment effort. In many ways, this crisis will define Ukraine’s political cleavages for the rest of 2021.

Local Elections

Local elections were held in Ukraine on October 25. They were conducted within the framework of the reformed electoral system. The major change was a proportional representation system with open lists in multimember constituencies for the councils in raions, oblasts, and settlements with more than 10,000 voters. The changes entered into force shortly before the elections, and both voters and electoral committees had difficulty understanding them.

Nonetheless, the Election Observation Mission of the OSCE reported that the process was generally orderly, well organized, and transparent, and that the prescribed procedures were mostly followed, despite the newness of the regulations and the voting challenges posed by the pandemic. However, the Election Observation Mission also noted that the work of the territorial electoral committees (as opposed to Ukraine’s Central Electoral Commission) was often politicized, though the reported violations did not significantly affect the results.

The election results underscored territorial differences in sympathy for politicians and political forces. They also spotlighted the increasing independence of local elites such as city mayors from the national party bosses in Kyiv, which will force the national parties to take local leaders’ interests into account more seriously.

Presidential Opinion Poll

Two weeks before the local elections, President Zelensky announced he would be conducting an opinion poll on Election Day to ask “questions that nobody ever wanted to ask” the nation. The five questions he proposed, however, raised criticism and concerns among the public: the questions were posed in such a way as to mobilize supporters of the Servant of the People party. The OSCE reported that the survey, funded by the president’s party, appeared to create an undue political advantage on Election Day and blurred the separation of state and party. However, the questionnaire did not have any legal status, being neither a referendum nor a plebiscite, and by the end of December President Zelensky still had not said what he intended to do with the results of the survey.

COVID-19 in Ukraine

In the last quarter of 2020, the COVID-19 infection continued spreading in Ukraine. The number of new cases per day, around 4,000 on October 1, grew to 16,000 in late November before decreasing to approximately 9,000 at the end of the year.

Beginning November 30, the government introduced a weekend quarantine, which required a lockdown regime on weekends. However, the mayors of many big cities, as part of their election campaigning, refused to enforce the cabinet’s decision, arguing that such a measure would cause economic losses to communities while failing to fight the spread of the infection. The government had to cancel the weekend quarantine regime on December 2.

According to polls, in late November more than half of Ukrainians supported some form of lockdown in the country. However, there were also widespread protests against the lockdowns planned for early 2021.

In December, Ukraine’s parliament voted for a financial aid mechanism for employees and small entrepreneurs who had lost incomes because of the pandemic and quarantine. The government has already started paying out the support, but many doubt how much help a one-time payment that is less than Ukraine’s average monthly average salary will be. Moreover, workers not from all industries are eligible to receive it. However, it is likely to be welcomed by the numerous small business and self-employed people who manage to create just enough income not to be dependent on the state but whose ongoing livelihood is imperiled.

Vaccination Prospects

By the end of 2020, the Ukrainian government had come up with a plan to vaccinate half the population, approximately 21 million people, by 2022. The cost is estimated to be $15 billion, but the government has allocated only 15 percent of this amount in the 2021 state budget. In December, Ukrainian officials said that COVAX (the global initiative aimed to provide access to COVID-19 diagnostics, treatments, and vaccines) had officially approved Ukraine’s request for COVID-19 vaccines in the amount of 4 million doses. The governments of France and Poland may also provide Ukraine with vaccines if they have a surplus.

As of the end of 2020, according to Bloomberg’s vaccine tracker, Ukraine had contracted for vaccine doses for 2.1 million individuals, or 5 percent of the population, and later contracted to buy 1.9 million doses of the Chinese vaccine, which has not yet been fully tested. The planned vaccination schedule is expected to start in January 2021 and continue to March 2022.

Impact on the Economy

The COVID-19 pandemic has had a negative impact on Ukraine’s economy. In the third quarter of 2020, Ukraine’s GDP fell by 3.5 percent (year-over-year comparison). According to the National Bank of Ukraine, a key reason for the GDP decrease was a fall in investments and the unresolved problem of reducing indebtedness to renewable energy producers. The volume of foreign direct investment has also fallen drastically: FDI for the first nine months of 2020 amounted to only 22 percent of FDI during the same period in 2019.

The UN Development Program’s assessments show that COVID-19 pandemic may cause the worst recession in Ukraine for decades, or even a depression: more than 8 percent of small and medium-sized enterprises may go bankrupt or close, and those living in poverty may increase from 6.3 million to 9 million people. The World Bank forecasts that, because of the COVID-19 epidemic, poverty in Ukraine could increase by 4 percent, reaching around 23 percent of the general population by the end of 2020. The World Bank approved a $300 million loan support for low-income families affected by the epidemic.

Public Mood

In the face of a growing pandemic and an economic recession, President Zelensky and his party continue to shed popularity. According to mid-December polls, only 18 percent of respondents believed that the country was moving in the right direction, while 70 percent considered that the economic situation had worsened over the past half year. Only 32 percent expressed satisfaction with President Zelensky, but only 26.4 percent of probable voters would support him.

New Round of Governmental Reshuffle

On December 17, parliament, with a minimal required number of votes, appointed Serhiy Shkarlet education minister. Shkarlet, who was functioning as acting minister, became widely known for plagiarism in his doctoral thesis and for his past  support for President Viktor Yanukovych.

Though parliament failed to appoint Yuriy Vitrenko (a former Naftogaz top official who contributed a lot to Naftogaz’s victory against Gazprom in the Stockholm arbitration) first vice prime minister and energy minister, the cabinet did appoint him acting energy minister. As he is considered to be a person without political ambitions, his selection was meant as a radical step toward solving the deep and long-standing crisis in Ukraine’s energy sphere, where debt payments are in arrears and citizens may face blackouts.

Also on December 17 parliament appointed a minister for agriculture. In 2019, after Zelensky came to power, this ministry was united with the Ministry for Economy and Trade; now they are separate ministries once more.

The uniting and splitting of state-level entities such as ministries, accompanied by a quick reshuffling of top officials, has become fairly quotidian in Ukraine. As discussed in another Kennan Focus Ukraine piece, the situation further discourages seasoned government officials from stepping forward to help President Zelensky formally, believing they would not remain in office long enough to effect positive change. Thus the president, a political novice himself, tends to rely on other political novices, persons he knows and trusts from media circles and show business.

3. PROGRESS IN REFORMS AND SUCCESS STORIES

October saw the end of the state’s formal monopoly of alcohol production, when the first alcohol production plant was privatized; a couple more were privatized by the end of the year. The privatization auction was held on the Pro-Zorro platform to guarantee transparency. Almost eighty plants in total will be privatized. Alcohol production is a key part of Ukraine’s economy; beyond spirits for consumption, alcohol is used in the production of fuels in the energy sector. Privatization is expected to streamline production and increase profits, thus bringing more into the government’s coffers.

4. THE SITUATION IN THE DONBAS

Despite an official ceasefire entering into force at the end of July 2020, the shooting went on, resulting in the deaths of four persons among peaceful populations and military staff in the past three months (more than forty persons were killed in January–July 2020, as per OSCE Special Monitoring Mission reports). Even though the number of victims in the Donbas fell drastically in the second half of 2020, in recent weeks the situation has slowly worsened. The armistice seems very fragile indeed.

In late November the Russian government sent its hundredth “humanitarian convoy” to the Donbas. As usual, it was done in violation of Ukrainian legislation and international rules; the Ukrainian border service was not allowed to check the contents of the trucks.

The Trilateral Contact Group, whose work is aimed at resolving the conflict in the Donbas, is growing less and less efficacious. The major obstacle to the work of the commission currently is Russia’s attempt to include representatives of the unrecognized, self-proclaimed Republic of Luhansk and Republic of Donetsk as part of a proposed Advisory Group to the commission. Official Kyiv does not recognize them as parties to the negotiations. Still, Ukrainian foreign affairs minister Dmytro Kuleba stated that the Minsk and Normandy formats have the potential to solve the conflict. Meanwhile, Russian president Vladimir Putin’s spokesperson Dmitry Peskov said that settlement of the conflict was becoming  more complicated with time, mainly because Ukraine’s vision of the solution, in his opinion, was “contradictory to the Minsk agreements.”

In December, the Ukrainian commissioner for human rights Lyudmila Denisova informed that Russia-backed militants in the Donbas were holding captive 251 Ukrainian citizens, and there is no opportunity to check on the conditions in which these hostages are kept. For the duration of the war in Ukraine’s East, beginning in the summer of 2014, Russian-controlled militants running illegal prisons have pursued an elaborate system of torture, prisoner rapes, routinized humiliation, forced labor, and even murder. (An earlier Kennan Focus Ukraine piece discusses a secret prison run by the Donbas militants.)

On December 15 the Verkhovna Rada once again extended the law on the special status of and specific conditions for local governance of the noncontrolled parts of Donetsk and Luhansk oblasts for 2020. This act is based on the Minsk Agreements. It has been in effect since 2014 and is extended annually by the Rada. The original 2014 act stipulated the following: (1) Ukraine guaranteed that participants in the conflict in the Donbas would not be criminally prosecuted; (2) specific procedures were established for appointing judges and prosecutors in the noncontrolled regions; and (3) the act established people’s militias to maintain control and provide law and order within the Ukrainian legal framework. However, the extension acts stipulate that full implementation of the 2014 law is to begin only after the complete exit of illegal military forces and troops from the region.

We will continue to monitor developments in these several spheres and report back at the end of the first quarter of 2021.

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.