U.S. political science professor Alexander Motyl wrote an op-ed in the Atlantic Council on Jan. 16, 2019, headlined “Putin’s dream scenario for Ukraine.”
In it, Motyl is right in saying that Ukraine has achieved more in the past five years than it did in the preceding 20 years. But that’s because the bar was set pretty low.
Moreover, much of the credit for the positive changes should go to Ukraine’s civil society. The achievements, in many cases, came despite the country’s current leaders, rather than because of them. Most elected officials have failed to deliver on the promises they made in the wake of the EuroMaidan Revolution, which ousted Kremlin-backed President Viktor Yanukovych in 2014.
Here’s a breakdown of Motyl’s foggy arguments and how some of them are flawed:
- Ukraine is no longer Russia’s hinterland, especially as gas pricing has been rationalized and Ukraine’s dependence on direct imports of Russian gas have fallen dramatically.
Ukraine-Russia trade did decrease, especially right after Russia’s war against Ukraine. Just one year after Russia annexed Crimea, bilateral trade with Russia fell by almost a half, down to some $21 billion, according to Ukraine’s then-Economy Minister Aivaras Abromavicius. Russia still, however, remains Ukraine’s main trade partner. In 2017, bilateral trade actually increased by 9 percent in terms of exports, reaching $4 billion, and by 40 percent in terms of imports, reaching $7.2 billion. Moreover, a large share of Ukraine’s financial transactions continue to come from its eastern neighbor, so Ukraine is still heavily reliant on Russia.
Motyl is also correct to say that business with China and the European Union has increased. But Ukraine’s bilateral trade with the EU also was significantly hit during that time – it fell by 20 percent in the first 11 months of 2014, down to $35 billion.
- “Business people report that it’s become easier to do business in Ukraine.”
Motyl is wrong here. According to a 2018 report by the American Chamber of Commerce, almost 9 in 10 respondents — 89 percent — said that the fight against corruption should be the main priority for enhancing the country’s business climate. The majority agreed that creating an anti-corruption court is essential to uproot corruption, and in 2018 some 91 percent of all respondents said that they faced corruption while doing business in Ukraine – some 10 percent more than in 2017. Only 36 percent of business representatives said that the level of corruption in Ukraine decreased in 2017.
- Ukraine has moved decisively toward integration with the West and the world, as trade with Russia has fallen dramatically and foreign direct investment, much of which is Chinese, has grown.
Wrong again. Even though Ukrainians, in general, have shown their willingness to move to the West, the current leadership and parliament have delayed major reforms, and shown very little decisiveness. This, in turn, delayed crucial financing from the West and keeps on scaring off investors. Foreign direct investment in 2017 has been at its lowest point since 2014, between $1.8-$2.3 billion, and it is many times lower than it was before the EuroMaidan Revolution.
And Motyl is wrong about Chinese investments. China did not pour in investments into Ukraine, but instead mainly offered low-interest loan packages – seen by many experts as a way of gaining control over Ukraine.
- Ukraine’s economy has been growing at about 3.5 percent for the last few years.
Ukraine’s real gross domestic product growth rate was only 2.5 percent in 2017, according to the IMF. And even though it was at 3.5 percent in 2018, it is expected to be only at 2.7 percent in 2019. While any growth is positive, most economists will say that a developing country like Ukraine should be growing at a 5-6 percent rate (if not higher). Yet Ukraine’s overall performance is much worse than its neighbors, and its GDP remains below 2013 levels.
- Agriculture and IT are booming. Agriculture has traditionally been an asset for Ukraine – before and after the EuroMaidan Revolution. So it’s not fair to say that this is a result of Ukraine’s post-EuroMaidan Revolution leadership. In addition, Ukraine continues to export raw materials instead of finished goods, a business model known to benefit a few, who are mostly outside of the country. Motyl does not mention anything about the highly populist land moratorium, which has been in place for over 16 years. What’s stopping Ukraine’s current leadership from lifting it? President Petro Poroshenko has signed the bill authorizing the annual land moratorium extension for three years in a row now, despite his public stance of opposing it.
As for information technology, Motyl is right, and perhaps this industry is the only hope for Ukrainian entrepreneurship in the near future. However, that’s only because the government hasn’t yet figured out how to effectively regulate it. And it also serves as a ticket to leave for many Ukrainians. Unfortunately, Motyl does not mention the flight of millions of Ukrainians from the county, looking for better lives elsewhere.
- Investments in alternative energy are on the rise (renewables are projected to comprise 25 percent of Ukraine’s energy production in 2035), even as Ukraine has identified several huge gas fields that could make it an energy exporter within a decade.
Let’s talk about renewables once they actually do make up 25 percent of Ukraine’s energy production – not in 16 years, after much could have changed. Today’s reality is that renewables make up maybe 3 percent (excluding hydroelectric plants), which is marginal.
Yes, Motyl is correct that Ukraine has identified several huge gas fields. But he is wrong with the timing. Ukraine has known this for years and foreign and local investors have been asking for access to geological data that has been available only to the state or those who are close to it. The process has been stalled. In addition, Mykola Zlochevsky, Ukraine’s former ecology minister, who allegedly abused his power during Yanukovych’s presidency by signing off licenses to his Burisma Holding, remains living comfortably in Kyiv. Motyl mentions nothing about the delayed de-bundling of Naftogaz, a promise the current administration has made since 2014. And he mentions nothing about major U.S. hydrocarbon players leaving Ukraine due to the lack of reforms in the sector, or the unpredictability of the business environment.
- Billions have been dedicated to repairing and expanding infrastructure. The banking system is on the mend and macroeconomic stability has been by and large achieved.
Motyl is correct about this. Ukraine’s Infrastructure Ministry finally decided to invest $1.7 billion into the country’s roads last year, a decision long overdue. But what we don’t have is transparency in how that money is being used.
The banking cleanup has been a major achievement, but many Ukrainians still haven’t received their deposits back from banks that were closed down by the central bank, and those who took those deposits for themselves — more than $20 billion worth — remain unpunished. Meanwhile, taxpayers are left with the bill. Non-performing loans still make up a huge percentage of its banks’ loans portfolios. Macroeconomic stability has been achieved, but at a major cost: the IMF almost backed out of continuing to finance Ukraine, and Ukraine will still have to repay the billions of dollars it has already borrowed. A better approach would have been to create a business-friendly environment attractive to foreign investors, including from the diaspora, who would invest in the country and boost the economy. If the business environment is so friendly, why don’t we see more diaspora investing in Ukraine? Instead, we see longtime investors like Daniel Sweere selling off their businesses, blaming it on Ukraine’s challenging business environment.
Motyl also doesn’t mention anything about the failed and delayed privatization of Ukraine’s major state-owned assets.
Having a truly independent judicial system would help take care of this.
- Ukraine has built a highly competitive army and military industrial complex and stopped Russia’s aggression in the southeast—a remarkable achievement in light of Ukraine’s having had some 6,000 battle-ready troops in 2014.
Again, this is a half-truth. Yes, Ukraine’s military advanced since Russia annexed Crimea and started its war in eastern Donbas in 2014. But that was at a major cost of 7 percent of Ukraine’s territory to Russian occupation and at least 10,300 lives. And despite all of that, Ukraine’s UkrOboronProm is still non-transparent, and neither is the state’s military budget. The country’s southern coast is vulnerable, and its navy depleted and out of date.
I truly want to agree with Motyl that Ukraine has changed dramatically and is moving in the right direction, but that’s not what I see or hear on the ground.
It’s my obligation as an independent journalist to deliver that tough but honest message to the public.
