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Thank you to the European Institute and Bocconi University for inviting me to mark the anniversary of this partnership aimed at encouraging the cross-border, European education of new generations post-Brexit.
I am delighted to address students and guests from the London School of Economics and Political Science, the home to philosophers of liberty such as Hayek and Popper and to many free thinkers closer to our own times.
My subject today is Ukraine and our vision for helping it achieve its European destiny.
Ukrainians have aspired to that European destiny since long before the collapse of the Soviet Union.
Whether they were living under the Polish-Lithuanian Commonwealth, the Russian empire or the USSR, their ideas of self-determination and national identity were inspired by European thinking.
And after independence in 1991 they could look towards political membership of, and economic integration into, Europe.
The view of many Ukrainians has long been that a nation state is important - but not enough in itself.
A secure nation state, they believe, needs a larger association with its neighbours to the West.
And this now means the European Union.
Such an association would allow Ukraine to fully share in the freedom, security, justice, and sustainable development which are the values of today’s EU.
That transformation Ukraine is seeking is also at the heart of our mission at the European Bank for Reconstruction and Development.
As a major institutional investor throughout all its three decades of independence, we have formed deep and close relationships there.
We are strongly committed to Ukraine’s development as a modern, democratic and prosperous nation.
At the same time, there has been a learning curve, for us, for Ukraine’s other friends and partners and, I would suggest, above all for Ukraine itself.
Over the years, we have come to see that Ukraine needs more, and different kinds of, support in reorienting itself.
But we also see a cruel paradox.
A terrible war, inflicted on it by its largest neighbour, now threatens Ukraine’s cherished independence.
We deplore the human suffering which is the war’s result.
We at the EBRD have pledged our unwavering support to the country ever since the full-scale invasion two years ago.
But Russia’s war has also focussed minds on how to help Ukraine fulfil its European destiny – and to do so even faster.
And if Ukraine and other EU candidate countries can be fully welcomed into the European family, today’s suffering will not be in vain.
2. Post-communist transition
Let me now go back in time to the era when, for Ukraine, fulfilling its European destiny suddenly began to look possible.
The EBRD was created in 1991. This was also the period when countries in what was then called Eastern Europe and the former Soviet Union started their post-communist transition.
The EBRD was set up to help them make that happen.
How did we understand the post-communist transition back then?
In general, in two ways:
Firstly, transition from state-controlled to market economies, with a sizeable private sector. The EBRD’s own purpose was defined as to “foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative.”
Secondly, transition from a centralised (often one-party) political system to pluralist democracy.
With hindsight, however, the transition journey was not a one-size-fits-all one.
The countries of Central and Eastern Europe, such as Poland, had lived for only a few decades under Communism.
Others, such as Ukraine, secured independence only after 70 years of Soviet rule.
3. The harder road to travel
Transition was not easy for any of the states that experienced it.
But post-Soviet countries like Ukraine had a much harder road to travel towards a market economy and pluralist democracy.
Ukraine – along with other post-Soviet states, like Moldova, Georgia, or Armenia - required fundamental transformation.
There were three main reasons for this:
First, the post-Soviet countries had darker historical legacies.
Second, they had little recent experience of building national identities.
And, thirdly, they suffered from geopolitical tensions with their neighbour to the east, one which tries to undermine their efforts at nation-building to this day.
The historical legacy I will leave to the historians.
I will just quote Timothy Snyder’s insight that if the Europe of the 1930s and 1940s “was a dark continent, Ukraine and Belarus were the heart of darkness.”
And no discussion of Ukraine is complete without mention of the tragedy that remains in every Ukrainian heart today: the Holodomor.
This was the man-made famine of 1932-33 that followed the collectivisation of agriculture and killed millions.
The second major challenge they faced was state-building and, in some cases, unfinished nation-building.
When the Soviet Union collapsed, these countries, Ukraine the largest among them, had no strong tradition of independent statehood.
Unlike their eastern European neighbours, their most recent experience of it was the short-lived and chaotic independence of the years after the First World War.
They had no real state institutions.
The result, for Ukraine and other post-Soviet nations, was years of transition which we might describe, to be polite, as “uneven”.
Even the potential of the Orange Revolution – when people power overturned a rigged election - failed to be realised by both Ukraine and the EU.
4. A turning point
For Ukraine, the first real turning point came only 10 years ago.
This was the Revolution of Dignity, and the spectacle of Ukrainians fighting and, in some cases, dying for their European destiny and a European future.
This, as well as Russia’s annexation of Crimea and the start of the war in the East that same year, was a pivotal moment for Ukraine - and for the international community.
Let us not forget that the Revolution of Dignity had its origins in the strong support of the Ukrainian people for an Association Agreement with the EU.
The international focus now shifted to the incentives and resources needed to:
strengthen good governance and the rule of law,
reform the judiciary and public administration,
and create an independent anti-corruption architecture.
At the EBRD, our emphasis has always been on supporting Ukraine’s agile and resourceful private sector.
But we were also quick to grasp the importance of the new realities.
Although Ukraine faced unprecedented challenges and an urgent need to reform, it still lacked the capacity to do so.
So, after 2014, we massively scaled up our policy work and became an enabler of reforms.
We supported the establishment of a Business Ombudsman, to bring greater transparency in business.
And we helped set up teams of bright young Ukrainian experts, smoothing the way for specific reforms, as well as creating the nucleus of a new generation of civil servants.
Their focus in the early days was on EU integration, alignment with EU regulation, advisory work with SMEs and improvements to public procurement.
These teams have been equally successful in wartime, supporting Ukraine’s EU membership application and quickly turning to emergency planning and preparing for reconstruction.
Ukraine had now set itself on a strategic path of wide-ranging reforms, underpinned by the aspiration to integrate with the rest of Europe.
The old oligarchic model of political economy was hard to get rid of.
But reformers in government and in parliament, as well as Ukraine’s active civil society, have continued to fight for what they believe is right.
They know how important good governance was and will continue to be for rallying support for reconstruction.
5. Geopolitics
Let me turn now to the third major obstacle to Ukraine’s transition and statehood I mentioned earlier: geopolitics.
Again, with hindsight, we should have been more alert to this risk.
Unfortunately, in the years after 2014, Ukraine remained stuck “in between” two poles.
To the east, it faced Russia, which has never accepted that Ukraine should decide on a European future for itself.
To the west, it looked towards the EU.
The EU had served as a powerful centre of gravity for most countries in the region.
But at first it had been cautious to embrace Ukraine.
This was in stark contrast to the welcome Brussels extended to central and eastern European nations at the beginning of this century.
The uncertainty of Ukraine’s geopolitical position meant that, even with the positive impetus of its post-2014 reforms, geopolitics continued to be a strong drag on its transformation.
6. A second turning point
Then came Russia’s full-scale invasion two years ago.
The shock in Europe and beyond, and the bravery and resolve of Ukrainians in defending their country and their European future, brought about another turning point in international thinking.
If there had been any doubt before, there was now broad agreement that that Ukraine belonged in Europe.
Events moved fast.
Just five days into the biggest war in Europe since 1945, Ukraine formally applied for EU membership, followed by Moldova and Georgia.
In June 2022 - in record time - the EU formally recognised their European prospects and granted them candidate status.
And last December, in a truly historic breakthrough, the EU decided to launch accession negotiations with the two countries.
The EBRD’s response to Russia’s aggression was equally swift and strong.
We were the first development bank to commit to continuing to invest and to taking the risk on our own balance sheet.
It was very unusual for a bank like ours to operate like this in wartime.
But we saw this as absolutely the right thing to do.
With support from our donors, who provided half our financing, we first committed to sharply raising the volume of finance we deployed in Ukraine.
And we then delivered significantly more than the 3 billion euros we had pledged for 2022 and 2023.
In fact, the current total is now above 4 billion.
We chose to support the real economy and critical infrastructure – keeping the lights on and the trains running – as the best way to help the private sector and the resilience of the country as a whole.
Our work on energy security, infrastructure, food security, trade and the private sector has helped major state-owned companies as well as our private sector clients and the Ukrainian people at large.
At the end of last year, our Governors also agreed to a capital increase for the Bank of four billion euros.
This will enable us to keep investing in Ukraine in wartime at the current level.
And, when the time comes, it will help provide more funds for reconstruction too.
In parallel, we have continued to support Ukraine’s reforms, because only a stronger, better-run Ukraine can both win the war and secure EU membership.
Ukraine’s leaders have focussed on reforms too.
In the early days of the war, my worry was that all their energy would be invested in the military effort, with much less attention paid to structural change and governance.
But, very impressively, we have seen an ever-increasing capacity to deliver, with growing unity and efficiency in decision-making.
In fact, Ukraine has risen courageously both to the challenge of the war and that of reform.
And in its hour of need it has developed a new sense of statehood – and nationhood, one that is strongly oriented towards Europe.
7. What Ukraine brings with it to Europe
We can see what Europe and the EU have to offer Ukraine.
I now want to say a few words about what Ukraine can contribute to the rest of Europe – and the world.
Integrating Ukraine into the EU will come with challenges.
Some of them are already apparent.
So we need to be clear about the many benefits its accession will bring with it.
Ukraine would be the largest country to join the EU since Poland did so 20 years ago.
Once reconstruction begins, its economy has the potential to grow by 5 per cent a year.
And it could also attract large volumes of foreign direct investment, spurring innovation and growing connectivity across the EU.
It is already an exporter of steel, electricity, technology, including ICT and cyber security skills, and much more.
And its human capital, with strengths in engineering, private enterprise and innovation, could help EU companies move their supply chains much closer to home.
This is especially true of the IT, defence, and climate sectors which are likely to be the EU’s focus in the years ahead.
Ukraine is also an agribusiness superpower, one blessed with very fertile ‘black earth’.
Its produce is vital to food security in Europe - and the Global South.
Indeed, its grain covers up to a quarter of import needs in countries such as Egypt, Indonesia and Bangladesh.
It has the largest gas reserves in Europe after Norway and good energy connections with the EU.
Its untapped renewables offer investment opportunities in the range of 10 billion dollars a year.
If fully exploited, its potential could contribute significantly to Europe’s energy security and its transition to a net zero world.
Ukraine has a highly educated population, one with strong ties to the rest of Europe.
And, with help from institutions like ours, Ukrainians who have grown up since independence are already mastering the skills they need to develop their country further and to achieve their goal of EU membership.
A secure, successful and well-run Ukraine will bring many benefits to the countries to its West.
Its proposed membership and the EU’s further enlargement could give the union the sort of boost Poland and other central and eastern European countries did when they joined.
That enlargement did deliver more economic growth in countries which were already EU members both before and after the expansion.
And, after 2004, it took only eight years for foreign direct investment from the rest of the world to the EU as a whole as a percentage of the latter’s GDP to double.
Backing Ukraine and its accession to the EU, now in particular, is an investment in the security and stability of us all.
And not to support it today would be to store up many more problems, costing us far more financially, for later.
One final point: the war has also highlighted Ukrainian qualities of courage, resilience, patriotism and a willingness to make sacrifices, which reflect Europe’s own values.
We owe it to Ukraine – and to ourselves – to do all we can to help Ukrainians fulfil their European destiny.
8.Conclusion
Since February 2022 I have visited the country three times.
The first trip was in October of that year, just a week after Russia’s first massive missile attack on critical energy infrastructure.
I could see with my own eyes the damage from missile strikes in Kyiv and the destruction of the town of Irpin by Russian shelling.
The war has inflicted terrible costs.
But – with international support – Ukraine’s economy is still delivering for its people.
Its institutions need strengthening.
But in many ways they are in better shape now than before the war.
Its people, traumatised and tired as they are, remain determined to defend their country.
They have not lost their belief in victory…
Or their hope for a brighter future - in Europe – as part of their destiny.
It is a faith that we share with them. |
