I’d like to start with a salute to the British Ukrainian Society, and the work that it does, the work that a lot of you here in tonight’s audience do to bring Ukrainian and British people and institutions together. I offer another salute to your readiness to take a risk on me as your speaker this evening. After all, I have only been in place as Britain’s seventh Ambassador to Ukraine for a bit over four months (and I pause to salute too Ambassador number four, who is also with us tonight). And I dare say you could therefore have chosen to hear from more experienced observers of the scene than me this evening.
So what you are going to hear from me is going to have elements of what, when I first joined the Foreign & Commonwealth Office 26 years ago we still called a “First Impressions Dispatch”. This was generally a brave and sometimes unsuccessful effort to show that a fresh view, a view not yet smoothed out by familiarity or dented by cynicism was worth hearing alongside the perspectives of the old hand. They’re not compulsory any more, and so there are fewer of them – and opinions are – let’s say various on whether this is a gain or a loss.
So … it’s early in my tenure, and it’s still early enough in the year to wish you a successful 2013 and briefly recall one of my favourite little cautionary tales of diplomatic folklore – with apologies if you’ve heard this one before … this reminds us of a British Ambassador who had responded to a request for an end of year interview, at the end of which he was relieved to be asked a simple question about what he wanted for Christmas. He gave what he was sure was a satisfactory and innocent answer, and was surprised at the beginning of the following year to read his interview alongside several similar ones conducted with two colleagues. The magazine wrote: “We asked three Ambassadors what were their wishes for Christmas and the coming year; the French Ambassador hoped he would see progress in the resolution of conflict in the world’s troubled regions; the Ambassador of the Soviet Union hoped that the coming year would see progress towards the eventual triumph of socialism worldwide; and the British Ambassador said he’d rather like a modest but tasty box of crystalised fruit.”
I shall try to avoid the pitfalls of over-personalising my remarks this evening – but for what it’s worth, to offer a few thoughts from the perspective of my first few months in Kyiv on how things look and feel in Ukraine as we begin 2013, and what we might expect from this year.
It’s been an interesting few months: a period in which the political pulse was accelerated by the elections to the Verkhovna Rada held in October, and was then perhaps somewhat slowed as political decision makers took stock of the implications of the elections, and began the process of forming new alignments in the Rada, and forming a new government.
I want to look at both these phases – first at the elections, and then at what we’ve been able to learn about the implications of their results in in the first few weeks of the resumed Rada. And then I want to look ahead at the prospects as the year goes on, with a particular focus on the prospects for steps forward in the EU-Ukraine relationship. I don’t intend to speak for long – because I also want to encourage questions and comments from you.
Let’s look first at the elections themselves. I won’t re-visit in detail the assessment of the observer missions – just briefly to recall how many observers were struck by the distinct increase in tension in the polling stations once voting had finished and the process of counting and tabulation had begun. Having myself seen in a broad range of Kyiv districts what looked like a generally peaceful and orderly process of voting, I heard from a good many people – candidates as well as observers – who felt that it was precisely at the point that polling stations closed that the integrity of the process came under most serious and immediate threat. (And indeed it was doubts about counting and tabulation that underlay the decisions to re-run elections in five constituencies). At the same time, we saw and heard in the aftermath of the election – a good deal of evidence of how hard some members of election commissions at precinct and district level had worked to protect the integrity of the counting process, and defend it successfully from being compromised.
I am glad to recall in this context that the British Government – in addition to a substantial contribution to funding both long term and short term election observers, also funded training – under a project entitled “The Professional Election Commission” – for thousands of Commission members at precinct level. And I think we can take some satisfaction from the fact that in providing this support we were contributing to these Commissions’ resilience and robustness in defending against threats to the integrity of the electoral process.
But enough on the process – what about the results it delivered – in terms of the configuration of the Verkhovna Rada in its seventh convocation? I won’t run over the relative strengths of the various parties and fractions – most of you will know all that, but I think it’s fair to say that this was not quite the result that those weary and disillusioned with the Ukrainian political scene were expecting.
There was, on the eve of the election, quite a widely held expectation that the Party of Regions would emerge in a dominant position after the election. But the result showed that no one party was offering a vision significantly compelling to persuade the electorate to assign it a dominant role in the Rada. Or, as some would argue, no one party was in the end able to steer the campaign or the voting processes sufficiently strongly to be able to emerge with a comfortably dominant role in the Rada.
So we are left with an intriguing composition of the Rada, with quite a number of questions on future voting patterns not easy to answer at this stage. It is as a result too early to tell whether this new Rada will be a basis for pragmatic, constructive decision making, or for incoherence and confrontation. You can hear a lot of opinions in Ukraine just now arguing either way.
I was talking to one close observer of the scene the other day who fears the worst. In his view – and he’s not alone in this – there are only two coherent parties left in the Rada – the Communist Party and Svoboda. Everything else is flux and unpredictability – a recipe for short-term alliances, tactic and manoeuvre at the expense of strategy and vision. I see what he means, although I am not sure I see things in the same light. I share the view of those inclined – with a large dose of determined optimism – to see this as a time of opportunity.
Yes, there is also a fair degree of cynicism around: which assumes that the new Rada will just offer more of the same. I remember reading during the run-up to the election some rather pessimistic coverage of one candidate’s campaign: he was advertising himself with the help of a slogan that more or less said “Vote for him and he’ll look after your interests”; the author of this article commented sourly that it was all too likely that this candidate would win a seat in the Rada and then spend the next several years looking after his own interests, commenting that this was a far more typical pattern in modern Ukrainian politics.
I may be looking at this with the naivety of a newcomer, but what I learn from my own initial conversations with members of the Rada is that there is a basis to be more hopeful and less cynical than that. We have already seen prominent and critical media coverage of early examples in this Rada of behaviours that were notorious in its predecessors. And no, I am not talking about the brawling, but about the phenomena of deputies who switch sides (“tushki”) and the so-called pianists, so called because they use all available fingers to cast not just their own votes but the votes of several absent colleagues. There’s quite a strong sense that public tolerance of these behaviours is lower than it’s ever been, and that this Rada will be under a critical public spotlight in perhaps new ways. I note here the obvious point that this potentially positive factor is unlikely to be sustainable without the kind of media freedom that allows the public to see and to judge for itself the extent to which the representatives they have elected are conscientiously discharging their mandates.
I want now to shift focus from the internal scene in Ukraine and look ahead to two critical engagements coming up in the next few weeks which could tell us much about how might expect the new Ukrainian government to handle issues on the international horizon. I’m referring here to important visits to Ukraine – either ongoing or imminent – by the International Monetary Fund, and by the EU’s Commissioner for Enlargement, Stefan Fule.
The IMF is already back in Kyiv, and we should hear later this week from its mission leaders whether progress has been made on agreeing the terms of a further stand-by arrangement for Ukraine.
There are of course choices open to the Government of Ukraine to address what looks like a budgetary position of considerable difficulty through other measures: there’s nothing obligatory about concluding a new agreement with the Fund. But it’s hard to believe that any of the short-term fixes involving expensive re-financing in the market, or cutting a deal with Russia to reduce the gas bill would bring anything more than correspondingly short-term relief. Worse than that, they carry serious risks of compounding budgetary weakness and vulnerability in the future.
So a key question to watch over the next few days is whether the new Ukrainian Government can commit itself to addressing the key IMF concerns on domestic gas tariffs and the exchange rate, and to putting in place the conditions which would encourage fund shareholders to be confident that their money was being successfully put to work in support of effective budgetary management strategies.
I mention in this context the problem of un-paid VAT refunds to corporate payers. It’s an issue on which a number of British investors have shared concerns with me. They paint a picture of a continuing, repetitive struggle to obtain correct levels of refund of VAT paid in advance – with the sums concerned sometimes in the 100s of millions of dollars. Again, in the short term this can be a means of making the Government budget look less burdened on paper – but in the longer term it’s another negative and discouraging signal to investors.
We’re also heading for an interesting few weeks in the EU-Ukraine relationship. The next EU-Ukraine Summit is just 3 weeks away. And we should get a clearer idea of what that summit will achieve at the end of this week, following Commissioner Fule’s meetings in Kyiv on 7 and 8 February.
The basic texts for these meetings are already clear: the Foreign Affairs Council of the EU put it simply and straightforwardly in the conclusions agreed by Ministers on 10 December. I quote two key passages:
“Ukraine’s performance will determine the pace of engagement, and will be assessed on the basis of progress in three areas: the compliance of the 2012 parliamentary elections’ with international standards and follow-up actions, as well as Ukraine’s progress in addressing the issue of selective justice and preventing its recurrence, and in implementing the reforms defined in the jointly agreed Association Agenda.“
“The Council reaffirms its commitment to the signing of the already initialled Association Agreement, including a Deep and Comprehensive Free Trade Area, as soon as the Ukrainian authorities demonstrate determined action and tangible progress in the three areas mentioned above, possibly by the time of the Eastern Partnership Summit in Vilnius in November 2013.”
Note in particular the words “determined action and tangible progress”. The conclusions themselves didn’t need to spell out in detail in what areas the Council hoped to see action and progress. Because that work has already been done in the Association Agenda. And without wanting to rehearse that agenda in its entirety, I do think it’s worth reminding ourselves often of the specific agreed areas for action outlined in that agenda.
So, with apologies to those of you who know it off by heart, let me remind you that it includes the following objectives:
- to sustain an effective fight against corruption
- to further strengthen the independence, impartiality and professionalism of the judiciary and courts
- to promote human rights awareness among judges, prosecutors and other law enforcement agencies
- to simplify the rules and procedures on registration of companies and setting up of businesses
- to promote the application of international accounting standards
- to improve and simplify tax legislation
- to develop further corporate governance policy
- to ensure the highest standards of integrity in the implementation of customs controls [….]
… and that is just a selection of what is a substantial, detailed, and, let’s be honest, highly ambitious agenda. But my purpose in quoting fro it is not so much to emphasize how demanding it is … more to underline that this agenda is in fact something best NOT understood as a list of demands. It’s a set of objectives with which successive Ukrainian Governments have confirmed full agreement – a set of objectives, the achievement of which will make it more, not less, likely that Ukraine’s future will be one of success and stability.
So much for the EU. But where’s the specifically British aspect in all this? I want to spend my last few minutes with some words about what we are doing in the British Embassy in Kyiv to encourage the achievement of some of the objectives on that action agenda.
First, it remains a significant plus for anyone doing the job of British Ambassador in Ukraine to be able to confirm that the British government remains a keen advocate of the continuing enlargement of the EU, and that our vision of an enlarged EU unequivocally embraces the prospect of accession by Ukraine. Those of you who heard David Lidington, our Minister for Europe address the Society a year or so ago will have heard him spelling out that message clearly.
It’s true, I’ve been asked a lot recently in Ukraine whether that position is actually all that useful to Ukraine. People say “isn’t Britain about to leave the EU? And doesn’t that make Britain a pretty feeble friend of Ukraine’s European orientation?” But I am glad to be able to say “Absolutely not” in reply to both questions. And I can do so quoting the Prime Minister’s words in his speech at the end of last month, when he said “that Britain’s national interest is best served in a flexible, adaptable and open EU, and that such a EU is best with Britain in it.”
That’s the big picture – and I see it as very much part of my job to convince decision makers and opinion formers in Ukraine that the British Government is keen to champion change in the EU in a way that ensures it’s a Union that Ukraine actually wants to join when the time comes.
But on a more practical, grass roots level, we in the Embassy are working with local partners in a range of efforts to promote change in areas relevant to the Association Agenda:
- I’ve mentioned our work to help strengthen electoral commissions at local level – but we have also supported active civil society organisations like the Committee of Voters of Ukraine in developing election monitoring and exit-poll methodology
- in another project we have helped strengthen the mechanisms for civil oversight and human rights compliance in policing
- we’ve provided practical and technical support to developing the office of the Ukrainian Parliamentary Commissioner for Human Rights
- And we are currently working with a local partner in a project to identify more effective ways of communicating to a wider Ukrainian public the benefits of the Association Agreement and DCFTA with the EU
We are also continuing to fund the work of a British Special Adviser in the Ukrainian Ministry of Defense, working in support of reform and modernization in the Ministry and Armed Forces in ways which help enhance Ukraine’s capacity to contribute effectively to international security. One aspect of that work is helping to enhance communication ability in the English language …and that in turn reminds to me to flag up the hugely valuable work that the British Council does in Ukraine. The Council’s Chairman, Sir Vernon Ellis visited Ukraine a couple of months ago, to mark 20 years of the Council’s work in independent Ukraine, and this was a chance to put a special spotlight on the Council’s work to support effective English language teaching in schools – including the direct supply of state of the art teaching materials to over 16,000 schools, and a dynamic programme to support excellence in the training of the next generation of English teachers in Ukraine.
All that effort of course in turn helps to mark out the whole area of education services, including corporate training services in English, as a promising sector on the agenda of British trade promotion in Ukraine.
And it’s on the outlook for British business that I would to finish my remarks tonight. I have spent a fair bit of time with representatives of British business in my first few months in the job. And the picture is clear: Ukraine remains a challenging environment. Not just in a broad global context of stuttering economies and cautious consumers and investors. But also an environment in which there remain Ukraine-specific concerns shared by many businesses about the integrity and independence of the courts, and about the selective and inconsistent application of tax and customs regulation – with all the obvious negative impact these factors can have on plans for new investment.
But in terms of the overall picture I incline to very cautious optimism. What I am hearing from my contacts with business (and what seemed to be the message of a recent open forum I attended involving the Prime Minister of Ukraine, several members of his Government and the European Business Association of Ukraine) is that there’s a sense of modest improvement in the levels of assurance and confidence with which foreign investors are operating in Ukraine.
In that sense it would be a very welcome start to 2013 to be able to point to the recent conclusion of a Production Sharing Agreement under which Shell will lead a $10 billion plus investment in the Yuzivska gas field, as a solid, confidence-inspiring platform for investment in the country’s future, and in the fulfillment of its immense potential.
So there it is – the word potential. I wondered whether I could get through my remarks this evening without over-using it. I’m afraid I probably have overused it in my first round of interviews with Ukrainian media.
But it is not hard, when you look at Ukraine’ s endowment of energy and agricultural resource; when you look at the cerebral and creative talent that’s evident in so many of Ukraine’s young professionals …it’s not hard to see how Ukraine could have serious impact and influence on how the wider European region successfully faces the resource and economic challenges in the first half of this century.
But achieving that is going to require vision, and it’s going to require hard work in the interests of the electorate, not just in the interests of the elected… and to end with those unglamorous but important words I quoted earlier, it’s going to require a lot of “tangible progress and determined action”.