From Stabilisation to Stagnation. Viktor Yanukovych's Reforms

32

FROM STABILISATION TO STAGNATION VIKTOR YANUKOVYCH’S REFORMS

Sławomir Matuszak, Arkadiusz Sarna NUMBER 32 WARSAW MARCH 2013

FROM STABILISATION TO STAGNATION VIKTOR YANUKOVYCH’S REFORMS

Sławomir Matuszak, Arkadiusz Sarna © Copyright by Ośrodek Studiów Wschodnich im. Marka Karpia / Centre for Eastern Studies

Content editors Adam Eberhardt, Wojciech Konończuk

Editor Anna Łabuszewska

Co-operation Katarzyna Kazimierska

Translation Maciej Kędzierski

Co-operation Tim Harrell

Graphic design PARA-BUCH

DTP: GroupMedia

Figures: Wojciech Mańkowski

Photograph on cover: Shutterstock

Publisher Ośrodek Studiów Wschodnich im. Marka Karpia Centre for Eastern Studies ul. Koszykowa 6a, Warsaw, Poland Phone + 48 /22/ 525 80 00 Fax: + 48 /22/ 525 80 40 osw.waw.pl

ISBN 978-83-62936-21-2 Contents

Key Points /5

Introduction /8

I. Political reforms /11

1. Constitutional reform /11 2. Administrative reform /14 3. Anti-corruption measures /16

II. Economic reforms /21

1. Macroeconomic stabilisation /21 2. Tax reform /24 3. Pension reform /26 4. Investment climate /28 5. Land market reform /30

III. Energy sector /33

1. Gas sector reform /33 2. Attempts to diversify Ukraine’s gas supplies /36

IV. Assessment of the current situation and prospects for the future /40

1. Assessment of the current situation /40 2. Prospects for the future /42 • • • Points Key vych prehensive social complete social Ukraine lowing Several The It achieved or assistance thanks country. the in reforms er Viktor of years, initially the partners. of coalition Regions’ Party the reform led carried goal ly the ernance tion negotiations Agreement should at on Ukrainian government to overall marginalization constitutional in of least and the reform. a created and Yanukovych to programme. many Ukraine’s line out, of gradual of seen is be government dominance was condition his initiated. the the provided political a recovery stressed, programme however, and with country between as president of government planned the state After the just a the erosion the EU most step ideal stabilisation changes, and life. The a to coming The reforms by of of creation however, of law, was in on few policy which consolidate reforms Kiev the conditions Ukraine’s the serious global as before need manner first of A of the borderline which a months developed return International political Ukrainian reforms way to and which Ukrainian was but and could of of markets that power him. economic have deep to in a of also correlated Brussels opposition the to for to more Deep implement after this ease which have the competition, This, bring indeed across illegal the most the in thanks an political, economy). (which was and 2010, public political power the and ambitious introduction Monetary presidential given crisis for these Ukrainian on important and achieved the been with improve parties election the to Comprehensive Viktor an the impact economic than finances, the changes ever the consequently key first scene, resulting carried Association The the president’s financial Fund and president and Yanuko any in areas not the allowed intense success legisla time of system official direct 2009. were were com even deep only gov oth out, and and fol in in of ------

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29 POINT OF VIEW 03/2013 30 POINT OF VIEW 03/2013 area twenty tares panies, enabled dismantled tor Ukraine 5. 36 ly and complete President development. of further its direction likely in on regard ricultural opment mate voted and tutional land. lagers based As of holdings, negative

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33 POINT OF VIEW 03/2013 34 POINT OF VIEW 03/2013 ket to 40 ship es. last of visions Later, reforms. the started into standards. the amended be ing on a that (EC) addition, gas responsible the for from traction. An bill another pipeline the gy-community waw.pl/en/publikacje/eastweek/2012-03-28/ukraine-moldova-and-ener and See: 2015). January by package) energy third so-called (the regulations kan der made In of law, to amendments, privatisation transportation, 40 year, different of brought reforming organization Naftogaz . fact, Naftogaz EU Despite the the states, Yanukovych’s outbreak Wojciech this for Kiev regulations. by And Energy law, in Parliament rest the In election transport, the organization the for as February July took Ukraine’s the finally financially first of however, well separation and Konończuk two the transit Community”, government established of Europe). of 2010, obligations its changes real as campaign, the national its Its those of and time in Ukraine adopted government removing members subsidiaries 2011, its for economic change (namely, autumn keeps gas and and Ukrgazvydobuvannya In and parts subsidiaries: of in before example, to EastWeek gas 2005 Kiev June extraction, sector and Sławomir without stemming the the the amendments legally include in did market, an of 2012, to Moldova. implementing place earlier the structure 2012, crisis joined government not the create did involved earlier ,

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35 POINT OF VIEW 03/2013 36 POINT OF VIEW 03/2013 significance which co-owners or construction “flagship” aplanned ofOne the was new policy the under projects issue. on the a U-turn failure Yanukovych of ously: Ukraine 2. eight years. past the local (including tensive state-run little quired world. than lion hovna 2010, energy ernments put and on government Spanish country’s A the the the words m ttempts to diversify U US-based progress in services under 3 need the Rada Middle , is signing to According in legal imports, which Central company has necessary produce energy programmes gas into in president’s the of for took the of tentatively frameworks one and Kiev of multi-apartment was market. Excelerate would East. negotiations the creation action. the of Europe. an so-called off mainly supply of his an one Socoin to made diversification have document, LNG the to Work the allow agreement local government 2010 unit Initially, deal Meanwhile, agenda aimed of approved been The (especially terminal most over from preventing Energy, completed National on the of Ukraine estimates, reform with with country GDP the the kraine’s supplies gas stressing energy-intensive Russia. so-called Parliament at a residential after proposal with the next project Russia, modernising of with under in on did programme Projects gas) to in Ukraine’s Ukraine a current taking change is 8 Spain’s import As two feasibility the September not August a also the but OSBBs, which was target a however, for years. has buildings). amount treat result, little initiative heavily power need in a complicated is gas launched Gas gas new failed 2012. the the 3 the made capacity or economies this In to has study from to Natural successive supplies. 2012, associations in housing Housing 5 early has country parties of dependent diversify Commenting times to been matter 2010, – no Despite Azerbaijan energy which a pass in prompted the of 2012, mention series and done August Fenosa higher Viktor would 10 in sector Kiev’s Code, Verk – it seri gov bil but the the the the the ex re for on to of of ------man’s After meeting pany’s day, in history, and and “This Prime 42 41 create Subsequently, scandal or attorney Ukraine gas In straits. its Turkey’s through tankers of gas for transit permission lem ish cost 2012. supplier raised its The On legal securing November ning higher. much be could cost real the abroad, projects lion, beginning the official meeting. liquefied signatory was rejected is quoted of the Due a is first months RWE the Spanish Minister official the a visit a stage. although obligations, (and transported a successfully Spanish number for is by consortium delegation to historic lack shipment to project currently to “technical for sign of the Ukraine’s the gas The reports the Qatar loss signatory 2015; to 2012, representative. the of of the some person project) Azarov official (Azerbaijan it, the limited adequate company negotiations, of of is in government which from moment… of supply the and Ukraine concerns. November credibility) believed commentators suggesting gas alleged through in import of to energy value difficulties” Gas documents named proudly the talks under seems no as investors capacity of Natural agreement well infrastructure “historic denied of 56.7 is “agreement” was to gas of with We’ve the rather the Poland independence”. Kiev The being by was last Kiev as be that announced notwithstanding, new project million have from Fenosa able of Ukrainian possible too RWE for year, signing as expected tried did unrealistic forced taken was it moment” this project signed considered in the suggested had optimistic the to, across not has President only November was to to m particular cause for did in been the to been 3 LNG re-route difficulties the mention play could of asked delayed on a Azerbaijan due admit timeframe officials gas the However, ever not its contract first that, 26 deal estimated of represented Yanukovych down terminal reach to 42 as to western to November first the . have delays the Another on stand happened. and really that based the this with Ukraine. transit any Ukraine the confusion as the in project time main December with powers at in the year’s at later to and financial the way securing on Ukraine big scandal €865 when project, the border. said export similar prob route, Span at in com 2012: to at total Ger LNG plan The step that The mil has that gas the the the the its of 41 ------.

37 POINT OF VIEW 03/2013 38 POINT OF VIEW 03/2013 estimates, ing actual two import government has Boyko, supplies 44 43 nies Gazprom) However, August terialise, won limited A West. the from tic a duction, technology Gazprom investors would Initially, agreement sidiary) “Ukraine: Sławomir third more western-oil-companies-will-invest-ukraine OSW, lishment-joint-ventures eastweek/2010-12-29/ukraine-naftohaz-and-gazprom-announce-estab tures”,

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39 POINT OF VIEW 03/2013 40 POINT OF VIEW 03/2013 A 1. I 48 ing cal Kuchma, tion tion nukovych’s nukovych’s appeared between by Yanukovych sition that disciplined serious coherent country. dency As slogans. placed of by populist aseries sion are initial good of ment V. It return A Ukraine’s or Belarus. Russia in circumstances the to scene, a the the

still ssessment situation of current the reform, and p and A he of result, should of decisions

managed chaos forces ssessment of the current situation current of the ssessment created main fragmentation the power had politics, in Several 2010-2011, political who Yulia to to progress. be deep after parliamentary managed position that capacity 48 the which ros lack leader gas noted unprecedented . This enjoyed an and have Tymoshenko. to presidential reforms not followed of years supplies, p an opportunity get strategy that ects for the future forects the raised was relative them of created also Among to even was for to the the of equally the of mention made completely been his implementing proposed have political the public additionally the Ukrainian situation basic although majority, for ideal stability them political In system, global state possible made political now to extensive the addition, awareness a finances conditions implement was deadlock, in complete pension country, by marginalise been regarding economic it Ukraine opposition has of base, coupled the the in could strengthened powers. the change. completed large powers given the under highly president age. could of Ukrainian is Yanukovych’s for lack which real be opposition crisis, no the with part how President In the from argued Ukraine’s control. Even unpopular The longer but of reforms not diversification 2010, had implementa by to while a a the in was by concentra viable the stable match eliminat engage President comparable 2010. economy after been govern that the parties Several stalled politi Viktor others in oppo presi pen fact and and Ya Ya the the the re in ------

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41 POINT OF VIEW 03/2013 42 POINT OF VIEW 03/2013 country’s signs The of crisis. times in than economic prosperity his the Still, success of Yanukovych’s presidency. achievement menting ity negotiations have The 2. tially presidential presidential Ukraine, cause this Comprehensive scene. remove real 2012 sociation tain courage for upset elections. recent parliamentary the after answered Prospects for future the Prospects the hands for many economic reforms stems a results suggest since now of finding seen his stable government This, the to Yanukovych’s decline complex, at GDP of Agreement accomplishments, been supporters push political outcomes from as least the election. in Party of majority that in on loyal situation of figures a turn, wasted. through the the Free president, both necessary his in the until there systemic of began power coalition country, years, parliamentary reluctance Trade of scuppered Ukrainian Regions Despite agreements in with for in 2015, in opponents The his is unpopular big the the to Ukraine in little while it Area. the condition policies. drop. consolidation change. is when Ukraine turned partners business, was Verkhovna securing second may he EU to chance Ukraine’s the negotiators subsequently Nonetheless, who This should bring remains the nonetheless from in reforms election out Viktor It half preliminary is is for 2011 must a question or country is currently of nominal to always about Rada. the difficult of be the whether substantial of be and chance very take 2012 when Yanukovych, seen held political Ukrainian and incapable implementation change the This used struggle build will easier also challenging. full showed victory, concentrated as to public on figures an completion to he is hold remains a responsibil say to sign a 28 power, significant unclaimed reforms in lacked simply that gradually Deep of to whether political support times the the October its despite for an imple main could next pro- first un and The ini As the the be of in in of of ------

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43 POINT OF VIEW 03/2013 44 POINT OF VIEW 03/2013 to ticularly paign avoid going block of sion and, a budget above actionary state ening posed tial and carry 51 50 Therefore, ning cow’s ried happen moment, presidential Meanwhile, pro-EU foreign policy.Ukraine’s current including A p. 46. Studies, OSW democracy”, “Oligarchic Matuszak, Sławomir coherent create the ukranews.com/ru/news/ukraine/2012/07/28/75656 ииоаь аооу милицию, налоговую видировать chyna campaign

the out. statement for reform over any revenues) antagonising to out help any donations the economic Ukrainian deficit in instance, focus party. opposition Although important a the major reforms 2015, level position membership the alternative plan would business small-scale 51 election the . opposition by Турчинов пообещал отменить пенсионнуюреформуи отменить лик пообещал Турчинов and on So will electorate the of reforms. would for Oleksandr crisis from victory his far, inflation. oligarchs has adversely likely higher towards focus most it local what will as would empire re-election, may Ukraine’s announced ideas big and leave despite changes of likely has come call oligarchs. on Over and of to levels Turchynov, business be the the not the This about (which do the an affecting that Yanukovych been for too trying the his Customs scenario with need give next. government’s opposition of personal opposition are will and a early would каньі Новини Українські plans how taking public next best change 50 This could much one specific for . going to It undoubtedly in Any individual to the efforts has two maintain of order to is radical Union, end last debt, a try traits the at hope be that reverse attack reforms to of fairly candidate become parties years, Russia’s his conditions element caused and leaders reform leadership, be to he which the for action of which win reliance business directed , populist has on guess social the the 28.07.2012, Yanukovych next lead change. should have quite of he the by mercy. programme, in so will recent candidates, the in to would to presiden will the what itself attached, spending far interests increase not the on Batkivsh difficult without a groups. at and be be At bigger

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45 POINT OF VIEW 03/2013 Centre for Eastern Studies Publication series

The Centre for Eastern Studies Point of View – short analytical studies (OSW) is an expert institution presenting the opinions of our experts that monitors and analyses the on current policy issues, published in political, economic and social Polish and in English. situation in Russia, the Caucasus, Central Asia, OSW Studies – large analytical studies Central and Eastern Europe, devoted to major political, social Germany and the Balkans. and economic processes taking place in OSW’s area of interest; published in OSW was founded in 1990 and Polish and in English. is fully financed from the state budget. In 2006 the Centre was OSW newsletters named in honour of its founder Marek Karp. EASTWEEK – a weekly analytical newsletter on Russia, Ukraine, Belarus, Our studies are addressed the Caucasus and Central Asia mainly to state institutions (published in Polish as Tydzień na including the Chancellery Wschodzie). of the President of the Republic of Poland, the Chancellery CEWEEKLY (Central European Weekly) – of the Prime Minister, ministries a weekly analytical newsletter on the and government agencies, Baltic States, Central Europe, Germany as well as the Sejm and Senate and the Balkans (published in Polish as of the Republic of Poland. BEST OSW).

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