Ukraine

Viscount Waverley Excerpts

Monday 17th December 2018 Grand Committee

Asked by

[Viscount Waverley]

To ask Her Majesty’s Government what assessment they have made of the current situation in Ukraine.

[Viscount Waverley (CB)]

My Lords, my objective in introducing this short debate is to bring general awareness before the Committee of some of the many complexities that surround Ukraine and to offer the Government an opportunity to outline their thoughts and strategy.

Amid the conflict, it is simple to forget the many domestic challenges, political and economic, that underpin Ukraine’s present situation and its future. On the macro level, growth is forecast to accelerate in 2018 to 4% and the IMF has announced a new tranche in response to its Government’s decision to step up the implementation of some long-delayed energy sector reforms and accelerate tough austerity measures. As the country grapples with its past, with conflicting visions for its future, endemic corruption in Ukraine is felt throughout domestic institutions at both local and state level. The National Anti-Corruption Bureau of Ukraine has been set up, which could improve the rule of law, but its independence is cited as being far from guaranteed due to its inability to secure prosecutions because of the unreliability and bias of the courts. A key ingredient lies in the programme of root-and-branch judicial reform.

Moves within the banking sector, including tighter and wider fiscal reforms and governance, have closed more than 80 underperforming banks in the past three years. A Washington-based organisation, the International Tax and Investment Center, with which I am associated, has held discussions with the tax and customs policy committee about reforming the tax system and working to define a road map to improve and ameliorate, if not reverse, Ukraine’s precarious economic state.

On the economic front, the ongoing trade embargo with the eastern regions has cut off access to all anthracite coal deposits. Ukraine is forced to purchase its needs from South Africa and the USA at a much more expensive rate, with inevitable grave economic effects. Ukraine is highly dependent on grain, iron and steel exports, making the Kerch Strait, the shallow Azov Sea and the bridge critical, while Russia is delaying shipping from entering and exiting fully laden. It is suggested that Ukraine might wish to consider developing alternative export infrastructure as part of a long-term strategy. Ports generally suffer from gross inefficiencies, with accusations of rampant corruption and poor infrastructure capacity. A suggestion doing the rounds is that an effective option might be to assist Ukraine in upgrading railway links and expanding other port facilities that bypass the Azov Sea.

Gas transit fees are a major source of revenue. However, the contested 1,200-kilometre Nord Stream gas pipeline, which will double the amount of natural gas flowing directly to Germany from Russia, is one of several Russian projects that circumvent Ukraine in order to give it access to its biggest markets. This bypass infrastructure is part of Russia’s strategy to weaken Ukraine economically and reduce its strategic importance for the EU. Germany is effectively supporting this strategy. Do the Government express opinions to Germany about this or does the Minister have a view he might wish to share with us? As an aside, I add that commercial opportunities exist for UK interests. For example, the Royal Mint called on me on Friday on unrelated matters, but I was interested to learn that Ukraine is considered to have great potential for that organisation.

On the political front, the reassurances given that martial law in 10 regions will not be used as a lever to postpone presidential elections on 31 March should be welcome. The elections in March will present a choice between the status quo and a move towards a change in direction. However, the expulsion of an Opposition Bloc presidential candidate from the party is likely to fragment the pro-Russian vote at the elections. It should be recorded that a far-right extremist group is gaining traction, though it is currently not well-represented in Parliament. A consequence of martial law is the fear that freedom of speech and assembly will be curtailed in those regions. It should be recorded for the purposes of this debate that opinion polls in Kiev this morning position two-thirds of Ukrainians as favouring a western orientation. Before i turn to matters relating directly to the conflict, will the Minister in his response say what steps the Government are taking to support economic and political development in Ukraine, including tackling the bane of corruption, which is essential if long-term investment in Ukraine is to be considered?

With that overview, I move on. Russia’s annexation of Crimea, the recent Azov Sea incident and the humanitarian and social consequences of the war in eastern Ukraine, with 10,000 people killed there, require urgent resolution. The downing of a Malaysia Airlines flight changed the dynamic into an international crisis and, as we have seen recently, there is potential for unstoppable escalation. On Saturday, for example, there were reports of major Russian troop build-up along Ukraine’s eastern border.

France, Germany, Russia and Ukraine have attempted to broker a cessation in violence through the Minsk accords. Efforts to reach a resolution have been unsuccessful thus far and show ominous signs of failure. This is to be regretted as good material is contained in the 13-article draft, including a large degree of regional autonomy. However, if Minsk is indeed foundering, where do we go to from here? Ukraine will not become a frozen conflict and should be viewed as a potential regional threat to peace that could envelop the West. No peace operation will succeed without a supportive Ukraine and Russian acquiescence. Two options are worth pursuing, as the US and NATO are unlikely to become directly involved. The first is a clear road map for de-escalation in eastern Ukraine, coupled with recognition that Russia accepts extrication linked to some sanction alleviation.

Peacekeepers monitoring the Ukraine-Russia border, together with a strong police presence and governance reform, would be a major test of Moscow’s good faith. It should be noted that representatives of the Donetsk and Luhansk regions re-affirmed in March a full commitment to a comprehensive, sustainable and unlimited ceasefire. The Government’s decentralisation programme might also be built upon to provide a positive environment, although a further complicating factor has arisen in the split of the Orthodox Churches, with the potential to further inflame nationalism on both sides.

That leaves us with the extraordinarily difficult situation of Crimea. I take it that President Putin was well aware that what occurred was illegal and what the international reaction would be. Why did he do it? Let there be no doubt: this theatre of overt operations is a cauldron. The positioning of aggressive front-line artillery firepower, along with the naval arrests and pending prosecutions, makes for potential unavoidable action. I reference and pay respects to the families of those on flight MH17, and those whose lives have been lost in this conflict to date. The UK, EU, US and others are adamant that Russia must leave Crimea. That appears unlikely thus far and, given that Ukraine will never become a frozen conflict, what do the Government believe should be the course of action if there is a dilution of attitude by key European partners or an impasse? How long will the Government give Minsk to resolve this before looking at alternatives? Should there be more effort to encourage Ukraine and Russia to resolve all matters bilaterally through an accommodation based on shared interests?

Given that a rapprochement between the UK and Russia currently appears remote, is the UK, as a joint custodian of world security at the United Nations, exploring avenues of reconciliation? Is it ever considered by the Government that President Putin would prefer to connect with the West but has no idea how to do it and is then pulled in a different direction by the old guard? Would understanding the origins help with a solution? Did the crisis begin with the decision of Ukraine to reject a deal for greater economic integration following the understanding with Yanukovych and did the EU push too hard, or were sensitivities a factor over the fear of losing the Crimean naval base? Then there is the NATO question: was there a miscalculation in understanding the importance of the Russia-Ukraine relationship, with the West not sending messaging and actions of inclusiveness following the break-up of the Soviet Union?

Russian political experts have over the weekend suggested that the UK is on the ground in Ukraine, managing and—as they view it—aggravating the situation. That question is also of interest to those attempting directly to broker a peace settlement. Will the Minister comment on what assets the UK has on the ground and with what objective, particularly in relation to article 10 in the Minsk draft calling for the withdrawal of all foreign armed groups, weapons and mercenaries from Ukrainian territory?

I issue a general word of caution. The international alliance should counsel Ukraine against any actions for political expediency that would draw the West directly into the conflict, but balance that with General Powell’s practical messaging when he said that you cannot control developments from the outside. Ukraine’s development is not just for Ukraine but for Russia. Russia needs a good example of how things can be done and so, ideally, would in some way be involved. It should be noted what Russia has achieved when implementing the rules; the World Bank’s Doing Business ratings for 2018 have it placed 31st, up from 170th in 2012. That is why it is important.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

My Lords, at the start of my contribution I mentioned the Statement that the Prime Minister made that the sanctions would be rolled over and strengthened, particularly with the continued collaboration of our European partners.

Several questions were asked about UK assistance and I will seek to cover some of them in the time that remains. I assure noble Lords that more progress has been made in the past four years than in the previous 23 years combined, notably in reforming the energy and banking sectors. Crucially, progress has been achieved in tackling corruption through the procurement of electronic systems, building anti-corruption institutions and launching an electronic income declaration system for officials. The UK Government hosted the Ukraine reform conference in July 2017. Indeed, it was one of my first acts when I joined the Foreign Office. I recall visiting Ukraine in 2014 as a Communities and Local Government Minister to help it on local governance methods.

The noble Lord, Lord Collins, raised the impact on the economy of east Ukraine. The consequences of recent Russian actions have been quite severe, particularly on trade through the Kerch Strait. Cities situated on the Sea of Azov have seen the economic throughput in their ports reduced in the past nine months, Mariupol by 43% and Berdyansk by 30%.

My noble friend Lord Bowness, among others, raised the £35 million of UK assistance to Ukraine. This continues, including £8.7 million in DfID humanitarian funding and £40 million through the Conflict, Stability and Security Fund, as the noble Lord, Lord Collins, acknowledged. I assure the noble Baroness, Lady Smith, that our wide-ranging programmes include technical assistance and have had a positive impact on the business climate. Headline achievements include the establishment of an intellectual property rights court, more professional management of public finances and support for small and medium-sized enterprises, a point I know will resonate with all noble Lords. I will highlight two projects that have made a real difference to people in the conflict-affected communities: a mine clearance project, and our support for valuable work to raise awareness and improve the response to sexual and gender-based violence in Ukraine.

My noble friend Lord Bowness also asked about the role of the OSCE special monitoring mission. The UK makes one of the largest personnel contributions to the mission, and I assure him that we will continue to support the continuation of its vital mission in discussions at the OSCE. My noble friend Lord Risby asked about sending NATO troops to Romania and Bulgaria. In the interests of time, I will write to him on that.

The noble Lord, Lord Wallace, raised the issue of stepping back from the Normandy process. France and Germany are of course leading this process, as he knows, but I assure him that we continue to support their efforts to make progress on the Minsk agreements.

In conclusion, in terms of souls lost and lives fractured, potential thwarted and hope dimmed, Ukraine continues to pay a heavy price for daring to exercise its sovereign rights to look to the West. The Ukrainian people are suffering an illegal, immoral and unjust punishment meted out by a neighbour that uses external force to mask geopolitical and economic insecurities, and to unite its own population. Russia’s illegal and aggressive strategy not only threatens Ukraine but is a clear challenge to the rules-based international system and to the will of the international community. In thanking the noble Viscount, Lord Waverley, for initiating this debate, I assure all noble Lords that the UK Government remain committed and will continue to work collaboratively and collectively to ensure that the resolve of the international community remains undiminished, and that we will continue to work bilaterally with the Ukrainian Government for a better future for all Ukrainians.

[Viscount Waverley]

My Lords, before the Minister sits down, does he think it worthy of note to agree that it could take up to 10 years to clear the mines in eastern Ukraine—which should give some indication of the true gravity of the situation?

[Lord Ahmad of Wimbledon]

I have noted the noble Viscount’s comment, but the mine clearance project is one of the successes that we have seen through the investments made.