“Promising to promise”: will “new Marshall Plan” help Ukraine?

The so-called new “Marshall Plan” for Ukraine that should include conditional financial aid to Ukraine has been swirling in media space since 2014. Many used that issue for PR-campaigns suggesting their own ideas: British historian Timothy Garton-Ash, French public intellectual, media person Bernard-Henry Levy, some Bundestag members and Dmytro Firtash, a Ukrainian oligarch who has been under home arrest in Austria since 2014. His so-called Agency for the Modernization of Ukraine promised to attract nearly $300 billion investments.

This time, Lithuanian politicians have grabbed the initiative. Along with their Estonian colleagues they are one of Ukraine’s few allies in “deterring Russian aggression.” The former prime ministers of Lithuania Andrius Kubilius and Gediminas Kirkilas have pledged to introduce the “new European plan for Ukraine” at the Eastern Partnership Summit in November. The Lithuanian Seimas and European People’s Party (union of Right Centrist and Conservative parties of Europe) have already approved the document.

Lithuania hopes EU External Investment Plan budget will become a source for financial resources for the “new Marshal Plan,” under which European Commission is expected to provide up to 88billion EUR by 2020 mostly for African states (parallels with Ukraine are not for nothing here). Besides, Kubilius suggests reserving 3% of EU’s budget for 2020-2027 for Ukraine, which is as much as 30 billion EUR.

The idea is actively promoted in Kiev too with a focus on the population. Particularly, first deputy prime minister –minister of economy of Ukraine Stepan Kubiv left a post on Facebook saying the “Marshall Plan for Ukraine implies at least 5 billion EUR of annual assistance for implementing key reforms to boost economic growth and development.” Kubiv is the former “Maidan” commandant and first post-Maidan president of Ukraine’s National Bank. Under his leadership Ukrainian national currency depreciated by half. Experts linked that devaluation with Kubiv-approved billion worth of refinancing to PrivatBank owned by tycoon Igor Kolomoisky. The money was later converted into foreign currency and transferred to offshore jurisdictions.

5 billion EUR is exactly 3% of the EU budget revenues for 2017 and 3.7% of the expenditures. In relation to the gross national income of Ukraine, 5 billion EUR is equivalent to 6% - even in Baltic States and other countries in “New Europe” the ratio of subsidies from EU to GNI does not exceed 5%.

After “Maidan” leaders came to power in Ukraine, the country has received about $20 billion from international financial institutions and foreign sovereigns in terms of loans and financial aid. Nevertheless, that huge amount of money did not help resolving any of Ukraine’s fundamental social and economic problems since most of the financial assistance was spent to redeem earlier borrowed money and was pocketed by those in power. Since 2016, every new tranche has been issued with a larger set of requirements by lenders, with the loan sizes decreasing dramatically. Ukraine’s key investment resources are still the Russian capital, money from offshore jurisdictions (earlier transferred there by Ukrainian oligarchs) and money remittances by labor migrants.

Lithuanian authors of the “Marshall Plan for Ukraine” admit that EU may approve the document in 2019 at best. Note that starting 2020, EU’s financing to the EU countries of Eastern Europe may be cut dramatically, if not halted at all, due to Brexit and idea of two-speed Europe. In 2017, under EU Cohesion Policy, certain redistribution of financing was undertaken and some financing programs were cut by 23.9%. Will they find money for the corrupt government of Ukraine? It is a rhetorical question.

Besides, after EU approved visa-free travels for Ukraine, the epoch of Ukrainian “Euroromanticism” is due to over. At least, recall the recently failed signing of the final declaration of the Ukraine-EU Summit. Kiev insisted on including a phrase “EU acknowledges European aspirations of Ukraine and welcomes its pro-European choice” into the joint declaration, but the Netherlands, Germany, and France opposed the idea. From now on, EU’s policy towards Ukraine will be more pragmatic, though during the last three years, EU has received many bonuses from Ukraine, such as lifting of customs barriers, access to mineral resources and raw materials, labor and intellectual resources, an opportunity to participate in privatization processes with the highest priority, part of the gas market etc. Ukrainian authorities, in turn, are ready to promise anything to the people, whether it is “Marshall Plan” or any other project, with the only goal to retain power amid social genocide that is gathering pace in the country. “We promise to promise!” Here is the key tactics of the Kiev government. In particular, the latest report by Economy Ministry of Ukraine for UN says the country plans a GDP growth within 15 years. Suffice it to say that yet not so long ago, in 2013, GDP was higher than it is now.

So far, the finance ministry offers cutting or postponing until 2018 the compulsory payments to International organizations the country is a member off, as well as student scholarships. This shows the financial situation of Ukraine, needless to say about the debt burden of 80% of GDP as of mid-2017 versus 40% in 2013. As usually, the only hope is foreign aid.

Igor Federovsky, Kiev