Minsk Format, Budapest Plus or Anything Else?

Ways to tackle long-term effects of Russia’s aggression against Ukraine and to resolve a conflict between the two are in the focus of presidential campaign in Ukraine. But after elections are over, the issue will still remain on the top of the regional security agenda. For five years geopolitical effects of Kremlin’s aggressive decisions on Ukraine have been downgrading security architecture in Europe. This is not only a problem of Ukraine, but a common challenge. Lack of trust, application of violence, and institutional weakness are making Europe a more dangerous place.  The Minsk format, designed to contain the conflict in the East of Ukraine, has been the basic framework for managing the conflict. One thing is evident so far: it is apparently not enough. It proved helpful in containing Russian advance and freezing the conflict to a level of 100-150 battle casualties from each side annually. On the other hand, at some point it may also have become useful for making the conflict protracted, just like in a number of other post-Soviet cases. Disputed areas, separatists supported from Kremlin, Russian interference are common features of a geopolitical landscape in this part of the world. Seen as instruments for advancing Russia’s geopolitical interests, these conflicts, however, are often utilized by local elites for mobilizing internal and foreign support. But that is a risky game: benefits of that kind are covered by long-term security expenses. Frozen conflicts not only undermine security of home countries for decades, but also affect neighboring countries, which have to share the risks. So far there hasn’t been any reason to believe that Minsk format would be able to resolve the conflict in the East of Ukraine. A stalemate of Minsk raises the issue of possible alternatives. One of them has always been around: breaking away from the agreement. Supported by hardliners in Ukraine, this option could hardly improve the country’s chances in struggling against Russia and at the same time places international sanctions against Russia under threat. Ukraine remains a weaker side to an asymmetric conflict, which means that a bad agreement is usually better than no agreement at all. Another alternative has recently appeared on the agenda of Yulia Tymoshenko, one of the favorites of the presidential campaign in Ukraine. It is called “Budapest Plus”, referring to the Budapest memorandum of 1994, according to which Ukraine got security assurances in exchange for giving away its nuclear weapons. The main idea behind Budapest Plus is to engage the US, the Great Britain, France, China, Germany and the EU into an extended format, which would replace Minsk as a principal tool for conflict resolution. There are at least two advantages such a format could bring about. First, a military conflict in Donbas is a part of a broader problem, which is security deficit in Eastern Europe. For various reasons, the region is facing elevated security risks. This is a problem for many, not just for Ukraine. Expanding a circle of mediators would follow the simple fact that states do care. Moreover, Russia’s actions against Ukraine have damaged mutual trust so much, that now it seems that bilateral issues can be approached only within a broader task of rebuilding security in Europe. This is something major powers can take care about. Secondly, Budapest Plus may help not only increase pressure on Russia, but also to create a more favorable framework for Ukraine to deal with Russia in the long run, in particular over the issue of occupied Crimea. Along with providing Ukraine with more leverage, a broadened format could also be more effective in restoring elements of world order, ruined by Russia’s decision to occupy Crimea in 2014. In the end most countries would benefit from restoration of international institutions, recharging of international law, and return of justice. Reference to Budapest memorandum underlines a connection between Ukrainian security and durability of non-proliferation regime, something most major powers are especially interested in. Getting major powers on board would be hard – probably, the most challenging part of Tymoshenko’s plan. However, it doesn’t seem impossible. Europeans are already in, they just need to be persuaded to get a bit more involved – and get more security on their eastern borders in return. China is expanding its cooperation with Eastern Europe. Even though Ukraine is not taking part in the 16+1 format, the country’s instability and military standoff with Russia is negatively affecting the region in general, especially in areas which are priorities for China: infrastructure and energy. If Beijing wants more presence and more influence in Eastern Europe, it has to consider bigger responsibility for security concerns. The US strategic goal of deterring Russian revisionism would play in Ukraine’s favor. However, Kyiv must be very precise in calculating its value as an ally for the US. Americans don’t seem to be willing to engage at any terms. Ukraine will have to increase its credibility and effectiveness. That could be seen as a part of preparatory work for launching Budapest Plus. Approaches to dealing with the conflict in Donbas can surely be modified and expanded. But they have to bear two key components to be effective: mechanism for compensating Ukraine’s weakness against Russia and a way to include risks Ukraine is facing into a broader security agenda in Europe. Author: Mykola Kapitonenko...

27.03.2019

Assessment of security challenges: consequences for Ukraine's foreign policy after the elections

International Centre for Policy Studies presented the analytical paper “Assessment of security challenges: consequences for Ukraine's foreign policy after the elections”. Former foreign ministers of Ukraine, diplomats, international experts participated in the expert discussion. While presenting the research, ICPS Associate Expert Mykola Kapitonenko identified the trends, challenges and threats to Ukraine's foreign policy and national security. In turn, ICPS Chief Adviser Vasyl Filipchuk outlined the tasks and priorities for Ukraine's foreign policy after the elections. “The world is changing rapidly, destroying the traditional notions of international security and the form of interaction between states, - reads the introductory part of the study. - Institutes of multilateral cooperation are in deep crisis. International law and other non-forcible means of regulating international relations are losing efficiency, while the demand for hard power is growing. States have less trust to each other and increasingly accept international politics as zero-sum games. Non-traditional threats are increasing and those that were on the agenda for a long time - for example, the proliferation of nuclear weapons - is becoming more acute. In such conditions, Ukraine is increasingly turning into an object of international relations, as well as losing its influence on regional processes, while non-mention of global ones. The space for maneuver in foreign policy is narrowing; the tools and resources to achieve their own goals are becoming less. The implementation of current foreign policy, characterized by mixing priorities and lack of realistic assessment of the international situation, further weaken Ukraine's position on all key issues: in conflict with Russia, in dialogue with Western partners and in relations with the majority of its neighbors,” the authors believe. According to them, the continuation of this state of affairs will lead to Ukraine's consolidation in the “gray zone” of Europe's security for decades. The authors consider that the only chance to avoid this scenario is the presidential and parliamentary elections in Ukraine in 2019. Although the results of these elections are difficult to predict, without doubt, one can predict for several years that the urgency of Ukraine's challenges in the field of foreign policy and security will not diminish, and their solution will occupy a priority place among the new leadership of the country. “It is probable that the reset of executive and legislative power will open a window of opportunity to solve existing foreign and security problems, but the external environment will remain as complex or even less favorable for Ukraine, - the research reads. - The domestic institutional or economic weakness of the country, even under conditions of rapid and successful post-election reforms, will continue to aggravate its foreign policy for a long time, and the absence of such reforms will further limit its foreign policy capabilities.” One of the conditions for a successful new foreign policy is an adequate reassessment of the foreign policy and security environment of the country, challenges, threats, its own resources and opportunities to achieve its goals. “No matter what developments have taken place, Ukraine will need much more professional, decisive and flexible diplomacy in the coming years. This diplomacy, in turn, will require a lot of attention and great resources. We will be forced to learn to think about safety issues not as they used to do in the past. And this can prove to be a serious test”, - the authors of the study conclude. During the discussion participants also critically expressed their views on the current work of the Ministry of Foreign Affairs and foreign policy of the state as a whole. Both Kostyantyn Gryshchenko and Borys Tarasyuk, other heavyweights of Ukrainian diplomacy and expert environment emphasized, in particular, the problem of weak management in the Ministry of Foreign Affairs. Research via the link (Ukrainian version): LINK...

ICPS Press
15.03.2019

Populism or systemic reforms: what candidates for the President of Ukraine promise?

The experts of the International Centre for Policy Studies presented research on candidates' election programs, their views on the development of economic and domestic policies and principles on which they are planning to build their own national development strategies. The candidates for the President of Ukraine in the next elections on March 31, 2019 in their programs manipulate the low level of education of Ukrainians. This was stated by the expert on internal policy of the International Center for Policy Studies Maxym Stepanenko during expert discussion in “Ukrinform”. “One can also say that presidential candidates are manipulating the low political education of Ukrainians, and therefore they are trying to sell as much air as possible,” Stepanenko said during presentation of the program analysis of candidates for the President of Ukraine. He stressed that candidates' programs are the same; it is difficult to distinguish them, not from one another, but from past programs. According to the expert, this suggests that the problems that candidates are proposing to resolve are still relevant, respectively, - “their old programs and promises were not effective”. In this regard, the expert Igor Petrenko noted that real competition for electoral sympathies is still due to pressure on the irrational. “We see that this is first and foremost an image, something with which the presidential candidate is associated, and with regard to programs, they also can write about free bread,” he said. Among the most widespread promises of presidential candidates that the expert has singled out is the promise of a tax reform that occurs in 33 candidate programs, 27 candidates promise to implement medical reform, and 24 - judicial. The same number of them promises to raise social standards. At the same time, Stepanenko said, there is a promise to carry out anti-corruption reform in the programs of 19 candidates, and constitutional - in 17. 17 candidates for the presidency mention the support of the Euro-Atlantic course of Ukraine and the promise to introduce a norm on the election of judges. “More relevant issues for today's Ukraine are plans for building a professional army that could protect us from Russian aggression in Donbas and establish territorial integrity and sovereignty. Also, the process of decentralization was actualized - 23 presidential candidates promise to stimulate it, expand the rights of communities, and contribute in every way to this process,” Stepanenko said. At the same time, according to him, only in the programs of 12 presidential candidates the attention to the issue of labor migrants returning to Ukraine was paid. Research via the link (Ukrainian version): LINK...

ICPS Press
13.03.2019

Rating of financial health of Ukrainian banks

International Centre for Policy Studies (ICPS) and online media “Apostrophe” presented the rating of financial health of Ukrainian banks, which is planned to be updated on a quarterly basis. The presentation took place on March, 12 in Kyiv. The uniqueness of the rating is that banks were evaluated in terms of attractiveness for both their own shareholders and their clients. It characterizes the bank's business model as a whole and is calculated as the sum of sub-indices of reliability and efficiency. “The first sub-index summarizes a group of criteria that assess the degree to which the bank complies with key economic standards, thus reflecting its ability to withstand internal and external risks for its operations. The second sub-index reflects the criteria for assessing the bank's ability to generate profits and the efficiency of its assets,” senior ICPS expert Yehor Kyian said. The rating was elaborated separately among large banks (with assets over 50 billion USD) and all banks with assets of over 2 billion USD. “At the moment, the most financially healthy among large banks is PrivatBank, Alfa-Bank and Raiffeisen Bank Aval. These banks are trying to adhere to all standards and fulfill all their obligations,” Yehor Kyian said. Under the sub-index of reliability among large banks, the first three banks included such as PrivatBank, Ukreximbank and Raiffeisen Bank Aval. In turn, Alfa-Bank, Raiffeisen Bank Aval and PrivatBank are the leaders in the sub-index of efficiency. Top 10 banks with assets in excess of 2 billion UAH include Idea Bank, Universal Bank, A-Bank, Citibank, PrivatBank, Alfa-Bank, Raiffeisen Bank Aval, MIB, Credit Agricole Bank, OTP Bank. The results of the rating showed that small banks compete successfully in compliance with the standards, and large banks often show significant efficiency in using their assets. There is also a significant gap between the most and the least financially healthy banks (almost in six times), indicating a significant margin for improvement. Executive Director of the Independent Association of Ukrainian Banks Olena Korobkova is convinced that the situation in the banking sector after the “banks fall” in 2014-2015 years is gradually being adjusted. “As of January 2019, we have 67 profitable banks. Over the past year, we have only one bank left, it's “VTB Bank”. The redistribution of customers has already taken place, so the banking system has already been updated and I hope that it will gain momentum in the growth of the Ukrainian economy,” she said.  At the same time, Olena Korobkova noted: “Any rating is an additional sign for making a decision in which bank to serve. According to world experience, many factors are needed to be considered and ranking is one such”.  The chairman of the International Centre for Policy Studies Supervisory Board Viktor Mashtabey advised researchers who promise to update the rating quarterly, to try to expand it comparing to the situation in other countries. The rating of financial health of Ukrainian banks and more detailed information on research and methodology can be found via the link (Ukrainian version): LINK...

ICPS Press
12.03.2019

ICPS conducted diplomatic briefing “Inside Ukraine”

ICPS presented analytical newsletter “Inside Ukraine” for representatives of the diplomatic corps. Igor Petrenko, having analyzed the domestic political programs of the main candidates for the post of the President of Ukraine, noted the prevalence of populist promises with appeals more to the voter's emotions than to the rational perception of reality. At the same time, there are a number of systemic positive steps and proposals that are different from the general populist vision of the country's development. In general, some proposals of the above-mentioned candidates are general and require considerable efforts not only from the side of the president, but also from other authorities on whom the president may not have influence. That is, almost all candidates in their proposals went far beyond the constitutional powers of the President of Ukraine. And this means that after gaining power after the elections, the candidates without any support for the parliamentary majority can hardly realize anything. Also, most of the program proposals require profound constitutional changes, which further complicate the possibility of their implementation and actualize the issue of the need to ensure the legitimacy and inclusiveness of the constitutional process in Ukraine. A common denominator in all programs is the issue of deepening the country's decentralization and increasing the capacity of communities. Anticorruption, judicial and law enforcement reforms are recognized as priorities by the majority of candidates by default. The link that unites candidates, to a greater extent, is the transformation of Ukraine into a parliamentary republic (Poroshenko and Grytsenko do not want to change the form of government). Oleg Lyashko is the only one who proposes the presidential republic. All candidates, without exception, seek to see the Ukrainian army modernized and well-armed. “Often candidates appeal to the institute of referendum and other forms of direct democracy, which in our opinion, is not fully justified and carries the danger of manipulation,” the expert said. Regarding the economic aspect, in general, the analysis of programs showed that the topic of foreign economic relations is not sufficiently disclosed in the documents of candidates. None of them refer to the country's debt obligations, the need to deepen co-operative ties and partnerships with its neighbors, technology attraction, and so on. The same internal “focus” prevails with ignoring external factors and the world situation. At the same time, there is an equation on European standards of living and wages. After five years of implementation, decentralization demonstrates results in its financial aspect mainly. The reluctance of the central government to provide real independence to the regions leads to contradictions between local and central authorities in matters of public administration in areas of critical importance to society, such as education, health care, development of local infrastructure and economic development of the regions. In addition, the duration of the decentralization process indicates that there are also weaknesses in decentralization that are directly related to the implementation of this reform. The imperfection of the legislative framework, the need to accelerate the pace of UTCs, the inability of the institutions to fulfill their new functions and the interest of local elites to “reverse” decentralization for their own benefit are all challenges that need to be addressed to transform decentralization into a success story. Please contact us for more details, ordering, reviewing issues and familiarization with subscription terms: e-mail: office@icps.com.ua...

ICPS Press
28.02.2019