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What future for the 'New Ukraine'?

04/02/2015 10:03 GMT | Updated 05/04/2015 10:59 BST

2015-02-03-ukraine.jpg

From Mykhailo Liapin, via Flickr

The fearlessness of Ukraine's civil society during the Maidan protests led many observers, including global financier Georges Soros, to see the movement as a turning point for the country, away from the oligarchy that had reigned for so many years. A 'New Ukraine' was born. Sadly, the enthusiasm of building a different future for Ukraine after the impeachment of Yanukovych now seems very distant. As the conflict continues to escalate in the East, the Ukrainian economy is on the brink of collapsing, leaving President Petro Poroshenko with little room to start working towards the changes envisioned by the Maidan.

Last September, the Ukraine crisis seemed to be cooling down following a cease-fire in Minsk between government forces and the separatists. Low oil prices, painful economic sanctions and the depreciation of the ruble built up expectations of a possible shift in Moscow's foreign policy. Less than a month into 2015, however, the separatists' breakneck advancements in Mariupol show that the crisis is far from over. So far, the EU and the US have failed to provide a quick response to address the new wave of attacks and the pro-Russian rebels seem as determined as ever to stay the course in spite of the sanctions.

Europe's hesitations over the effectiveness of the sanctions became clear earlier this month when the European Union foreign policy chief Federica Mogherini suggested that better ties with Russia could solve the Ukraine stalemate. However, the increasing violence has left the EU with few options to discuss a possible rapprochement with Russia. European Union foreign ministers agreed to extend the existing sanctions for six months, prolonging them at least through September. However, there is no reason to believe that extending the sanctions will influence Moscow's policy or that a cease-fire will be re-established.

While the EU, the US and Russia engage in Cold War nostalgia, Ukraine faces a possible default. Ukraine's economy retracted by 7.5% in 2014 and a poorly managed economy coupled with rising gas payments, spiraling defense expenses and a rapidly depleting currency reserve have left Kiev with savings equivalent to some 5 weeks of gas imports. The conflict in the East has halted industrial production and many economic sectors have been severely hit. Ukraine will need at least $20 billion to survive through 2015. If the EU is indeed interested in saving the 'New Ukraine', sanctions will not be enough.

Changing Ukraine from within

Ukraine ranks 144 out of 177 in the Transparency International's Corruption Perception Index. Corruption is part of daily life in Ukraine; bribes are paid both to be able to complete even the most mundane errand as getting a favorable judgment in court. Cleaning up those deeply entrenched practices required a stable government that is trusted. The changes that the average Ukrainian expects will not come from the EU piling up more sanctions but from Kiev's domestic policies.

Answering the demands of the Maidan will require a full transformation of politics and business alike. Poroshenko wants to achieve an ambitious reform for Ukraine. The problem is that, to ensure stability, the Ukrainian government needs the necessary resources and legitimacy to be able to carry these reforms. The main challenge is to establish a transparent system in which all citizens are equally treated under the law, a task that previous governments have failed to do as they usually favored specific interests groups.

In an interview on CNN, former Minister of Revenues and Duties, Oleksandr Klymenko, points out that the reason many people support the separatists in the East is the result of many years of poor governance and poor economic performance. Klymenko, though controversial among some commentators, was one of the few technocrats in the Yanukovych administration to put together a tax reform aimed at making Ukraine's fiscal system more transparent. His strategies included hiring a foreign audit company and finding a solution to Ukraine's largely black-market economy into the light. However, due to his association with the previous administration he is in self-imposed exile and has been placed on the European sanctions list.

Bringing the oligarchs into the fold

Klymenko is not the only one who knows that rubbing shoulders with the wrong people in Ukraine has political consequences. The country's oligarchs, who have steadily influenced Ukrainian politics since the privatization spree of the 90s, worked overtime during and after the Maidan revolt to make sure that they found themselves on the winning side.

Thanks to his ownership of the confectionary firm Roshen, Petro Poroshenko was worth an estimated $1.3 billion on the eve of the Maidan, making him the 7th richest person in Ukraine. Like many Ukrainian businessmen, he has combined entrepreneurship with politics and had held high-level government jobs even before the Maidan. But Poroshenko quit his ministerial post under Yanukovych in 2012 and joined the protesters in December 2013.

Other oligarchs were not as visionary as Poroshenko. Ukraine's richest men and former Yanukovych supporter, Rinat Akhmetov remained neutral throughout the Maidan. What's more, Akhmetov stayed on the sidelines during the early stages of the Donetsk conflict, creating a lot of suspicion in Kiev. Only when his economic and political interests in the Donbass were threatened did Akhmetov throw his weight behind the new Kiev administration, in a move that smacked more of political opportunism than sincere conviction. Another front-page oligarch, Ihor Kolomoyskyi joined the post-Yanukovych administration and was rewarded for his support with the governorship of the Dnipropetrovsk Oblast

Ukrainian oligarchs will have to be included in the New Ukraine, but the rules of the game are the ones that should be changed: none of them can be above the law, no matter their economic clout. Poroshenko must answer to the demands of the Maidan, which also means ending the corrupt practices of his fellow oligarchs. To do so it will be necessary to build a New Ukraine, one based on transparent processes and institutions and less one based on the rotation of political clans.