Working Paper on the strategies of the international financial institutions towards EaP countries

EU-STRAT Working Paper No. 14 looks at the approach of the International Monetary Fund and World Bank to Belarus, Moldova, and Ukraine.

Click on the title or the picture below to download the PDF.


Title: Strategies and Approaches of International Financial Institutions towards Eastern Partnership Countries

Author: Ramūnas Vilpišauskas


Abstract:

The paper focuses on the strategies and approaches of the main international financial institutions (IFIs) – the International Monetary Fund and the World Bank – towards reforms in the Eastern Partnership (EaP) countries, namely, Belarus, Moldova and Ukraine. It assesses the main principles, goals, policy instruments, conditionalities and the target groups of these IFIs in their interaction with the authorities of the three countries and the implementation of country support programs.

The two core questions that guide the analysis are, first, the role of IFIs in supporting economic and institutional reforms, which aim at transforming limited access orders into open access orders, and, second, these IFIs’ interaction with other external actors, such as the European Union, that are present in the EaP countries. In addition to the traditional advice on fiscal consolidation and structural reforms, the IFIs have been focused on banking and energy reforms, as rent-seeking and corruption were especially wide-spread in these sectors. Increasing focus on policies aimed at reducing corruption, in particular in the case of Ukraine, is among the most notable features of the IFIs’ operation in those countries. However, such measures often risked being implemented only ‘on paper’, especially after the financial pressure on the ruling elite in recipient countries decreased. The attempts to broaden the political and societal support for agreed policy reforms have become another exceptional element of the support strategy practiced by the IFIs in the EaP countries, in particular in Ukraine. In the latter case, the negotiated arrangements were discussed not only with key figures from the ruling elite and responsible institutions but also with the opposition, societal activists and other important stakeholders. Despite attempts at broadening reform ownership and coordination with other external donors, the actual effects of the IFIs’ strategies on transition reforms have been limited, as evidenced by a history of half-implemented and sometimes reversed policy measures.

Catch up on EU-STRAT in our January 2019 newsletter!

Our first EU-STRAT newsletter in 2019 is ready!

 

Click here to download it now. 

 

Curious about what will you find inside?

Let’s see what project coordinators – Tanja A. Börzel and Antoaneta Dimitrova – wrote about this issue in the editorial:



“Dear friends and colleagues,

We hope you’ve had a great start to 2019. The past months have brought plenty of publications and events to fill you in on. And while the new year has just begun, we are looking at the final stage of EU-STRAT.

Back in November, our partner institute in Kyiv, the Ukrainian Institute for Public Policy, hosted a policy briefing on the political economy of EU legislation harmonization. We’ll take a look at the EU-STRAT findings that were presented as well as the discussions that took place between our consortium members and participants largely from Kyiv’s research and business community. The impact of the EU Association Agreements and Deep and Comprehensive Free Trade Area (DCFTAs) on Ukraine, Georgia, and Moldova has left plenty to discuss.

Our latest policy comment, featured in this issue, sheds light on recent developments in Armenia stemming from the Velvet Revolution. The parliamentary elections held in December 2018 have confirmed overwhelming public support for the revolution movement, but what is the actual scope and depth of these changes? Our authors examine the reforms that are already underway, what’s still needed, and how this impacts relations in the neighbourhood.

Our research on the strategies of external actors in the Eastern neighbourhood has featured in several working papers released in the last months. While the EU and Russia are known players in the Eastern Partnership countries, EU-STRAT set out to examine the role of other actors in this region as well. Accordingly, we present in this edition a glimpse into the papers examining the approach of China, Turkey, and the international financial institutions, such as the International Monetary Fund and the World Bank. This  research has important implications for how the EU could potentially work with other external actors that might not always share the goal of keeping EaP countries on the path of transformation towards greater political and economic access. As the final piece in this edition’s ‘EU-STRAT at Work’, we also share a report from our St. Gallen team’s workshop in Bucharest on the interdependencies of different secessionist conflicts. (…)”



PS. Dont forget to mark your calendars! Our final conference is scheduled to take place in the Wijnhaven Building of Leiden University (Turfmarkt 99 2511 DP, The Hague, NL) on 11-12 April 2019. The conference will take a look at our most recent research on, to name just a few of the topics, the link between domestic regimes and interdependencies, the susceptibility of domestic actors to external actors’ strategies, and scenarios of potential opening or closure in Moldova, Belarus, and Ukraine. We’ll keep you in the loop as more details are finalized – don’t forget to check our Facebook page (EU-STRAT) and Twitter (@eu_strat)!


 

The political economy of EU legislation harmonization: a policy briefing in Kyiv

A second policy briefing was organized in Kyiv by EU-STRAT’s local partner, the Ukrainian Institute for Public Policy (UIPP). The briefing, entitled “Political economy of EU legislation harmonization with Ukraine and other Eastern Partnership (EaP) countries” took place on 12 November 2018 on the premises of and in partnership with the National Academy for Public Administration of Ukraine. Panelists and keynote speakers were drawn from the Ukrainian research and business community: Natalia Palamarchuk, professor of the Ukrainian Academy of Public Administration, Svitlana Mykhailovska, Deputy Director of European Business Association, Dmytro Naumenko, analyst at Ukrainian Centre for European Policy, Taras Kachka, strategic advisor at International Renaissance Foundation, Klaudijus Maniokas, chairman of the ESTEP board and EU-STRAT partner, and Ildar Gazizullin from UIPP. Maxim Boroda, Director of UIPP, opened the briefing with a short presentation on EU-STRAT’s objectives and the briefing’s topic.

Here are some of the discussions that took place, with a full report to follow later this month in EU-STRAT’s newsletter…


How EaP countries balance costs and benefits of legal approximation

Klaudijus Maniokas presented some of the findings from EU-STRAT’s case studies on the legislation harmonization of the Association Agreement (AA) with the EU and selected EaP countries in the area of transport, energy, environment (TEE). While legal approximation in TEE contributues to increased connectivity (both in terms of trade and mobility), it is also associated with high costs, for example, related to safety standards. Therefore, countries often seek to reach a compromise to balance perceived costs and benefits of legal approximation, ensuring that the EU acquis are conducive to addressing their development needs as well. This is done by prioritization of the harmonization process, which involves limiting or even stopping process in areas with high approximation costs.

The progress with transposition and implementation in TEE in the EaP countries is uneven, but is arguably better than could be expected. An ongoing informal adjustment of the AA reduces the scope of the commitments taken, as in the case of road worthiness in Georgia, electricity unbundling in Ukraine and Moldova, as well as transport and environment in Ukraine. The EU conditionality, however, seems to be effective in Ukraine on a number of reforms that directly relate to Kyiv’s interests, such as reform of the gas sector, which reduces dependence on Russia.


The effects of interdependencies in Ukraine’s energy sector on domestic reforms

Ildar Gazizullin presented developments of Ukraine’s interdependence in the gas and electricity markets and how this has contributed to applying EU legislative norms in sectoral reforms. Complex interdependence between Russia and Ukraine in terms of transit and supply of gas has had a strong impact on security and economic relations between the countries. Ukraine implemented a number of polices to reduce its energy dependence, including steps to increase imports of gas from the EU and energy market reforms in line with the EU aquis. The role of the EU has increased, both as a blueprint for reforms, but also as a mediator in gas disputes with Moscow.

EU demands for greater transparency in the energy sector also target rent-seeking behaviour by business and political elites. Hence, increasing energy prices implies additional costs (or foregone benefits) for both citizens and elites in countries with a long tradition of heavily-subsidized prices. EU-induced energy reforms thus have important social implications and affect other public policies. The risk of alienating a large share of the population as energy poverty risks looms, on the one hand, and pressure from incumbent businesses to constrain competition in the sector, on the other hand, seems to be slowing down otherwise successful sectoral developments.

 


For more, stay posted for our January newsletter! You can also find information about the event (in Ukrainian) on the National Academy for Public Administration of Ukraine’s website:


 

New working paper on Turkey’s foreign policy

EU-STRAT has released Working Paper No. 13, which examines Turkey’s foreign policy towards its post-Soviet Black Sea neighbourhood. Click on the title or the picture below to download the PDF.


Title: Turkey and the Eastern Partnership: Turkey’s Foreign Policy Towards its Post-Soviet Black Sea Neighbourhood

Authors: Ole Frahm, Katharina Hoffmann, Dirk Lehmkuhl


Abstract:

This paper discusses the main strands of Turkey’s post-Cold War foreign policy in its post-Soviet Black Sea neighbourhood of Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine with a focus on the period of Justice and Development Party rule (2002-2018). Based on the analysis of Turkey’s rhetorical stance towards the region’s countries and its actual interaction across five sectors – trade, energy, security, education/culture and migration – our findings demonstrate that the foreign policy rhetoric with its strong emphasis on historical ties, economic and energy cooperation and support for regional countries’ territorial integrity is not matched by Turkey’s observable engagement. An important factor for the mismatch between rhetoric and engagement is that relations with the region are seen at least partly through the prism of Turkey’s more salient relations with Russia.

EU-STRAT Final Conference (11-12 April 2019). Save the date!

Dear EU-STRAT supporters,

we would like to announce that our Final Conference will be taking place on 11-12 April 2019.

It will be held on the premises of Leiden University in the Wijnhaven Building, Turfmarkt 99 2511 DP, in The Hague.

More details about the panels and discussions planned are soon to follow!

 

New policy comment on recent developments in Armenia!

Policy comment / October 2018

Armenia’s ‘Velvet Revolution’: Whither Change?


by Laure Delcour & Katharina Hoffmann


“In spring 2018, the installation of former President Serzh Sargsyan as prime minister – a scenario which would have enabled the incumbent elite to maintain their grip over Armenia – unexpectedly failed to materialise. The 2015 constitutional referendum that transferred key powers to the prime minister as of spring 2018 paved the way for this swap scenario. Instead, on April 23rd, the newly appointed Prime Minister (and former President) Serzh Sargsyan resigned amidst a wave of protests that swept the country. This outcome to the demonstrations took many observers by surprise.

Admittedly, over the past decade, Armenia has been home to frequent protests against the ruling elite. In 2008, the flawed presidential elections that brought Serzh Sargsyan to power were followed by a brutal crackdown on protesters, killing at least ten people. None of the prior protests led to changes as substantial as the ones Armenia has experienced since spring 2018, though. In light of the authorities’ record of excessive use of force, there was little reason to believe that the 2018 protests would not end up with a brutal crackdown, thereby perpetuating the rule of the incumbent elite through a constitutional change. The scenario made possible by the constitutional amendments was also likely to materialise given its success in other post-Soviet countries, primarily Russia (Armenia’s strategic partner). Yet contrary to all expectations, the founder of the Civil Contract party and leader of the demonstrations, Nikol Pashinyan, was elected prime minister in early May 2018, raising considerable expectations among the Armenian population. ”


Policy brief on EU’s soft power in the Eastern Neighbourhood is out!

EU-STRAT Policy Brief No. 3 analyses how the EU communicates via official channels, what messages and news about the EU are disseminated by media in the Eastern neighbourhood countries (Belarus, Moldova and Ukraine) and finally how these messages are received by citizens. In addition, authors compares the EU’s communication strategy to that of other actors present in the region, especially Russia, and its tools and communicative strategies.


Policy Brief No.3 (2018): Getting the message across: How can the EU bolster its soft power in the Eastern Neighbourhood?


Authors: 
Honorata Mazepus, Antoaneta Dimitrova, Dimiter Toshkov, Tatsiana Chulitskaya and Matthew Frear


Click on the Policy Brief title above or on the image to download EU-STRAT Policy Brief No.3

New policy brief on external actors in the Eastern neighbourhood

EU-STRAT Policy Brief No. 2 shares the results of analysis on the strategies of the EU and other external actors towards the EaP region, which can be either competing or complementary. Recommendations are made for how the EU can engage with these actors (Russia, China, NATO, the U.S., international finance institutions, EU member states) across the fields of trade, energy, security and migration, to ensure greater coherence and positive impact.


Policy Brief No.2 (2018): The EU and other external actors in the Eastern neighbourhood: Maximizing the transformative impact


Authors: 
Marta Jaroszewicz, Tadeusz Iwański, Kamil Całus, Dovilė Jakniūnaitė, Laurynas Jonavičius, Margarita Šešelgytė, Ramūnas Vilpišauskas, and Elyssa Shea


Click on the Policy Brief title above or on the image to download EU-STRAT Policy Brief No.2

 

Looking back at EU-STRAT’s Midterm Conference in Vilnius

A year on, we look back at our Midterm Conference, which took place from 5-6 October 2017 at Vilnius University’s Institute of International Relations and Political Science. Enjoy conference snippets and highlights in this short video!



If you would like to know more about the conference and read about the keypoints of all the discussions which took place during the event please take a look at the report summarizing the EU-STRAT’s midterm conference and its findings.

Workshop in Bucharest: The Present and Future of Secessionists Conflicts

On 7 July, the Center for Governance and Culture in Europe at the University of St Gallen together with the Leibniz Institute for East and South East European Studies Regensburg organized a one-day workshop on the future of secessionist conflicts in the wider Black Sea region. The event was held in Bucharest at the New Europe College and brought together mostly young researchers from Germany, Switzerland, Georgia, Romania, Bosnia-Herzegovina, Czechia, Russia, Azerbaijan and Moldova. In three sessions, participants sought to establish the state of the art in the field of research on secessionist conflicts and – inspired by the University of St Gallen’s research as part of EU-STRAT’s work package 3 – to deliberate on the interdependencies of different secessionist conflicts.

Panel I explored the issue of commonalities and differences between protracted conflicts by focusing on the cases of Abkhazia, South Ossetia, Crimea and Republika Srpska. For one, it touched upon the philosophical question of under which circumstances secession can be justified and whether in the wake of Putin’s justification for annexing Crimea secession may become regularized rather than remain reserved only to extremely oppressed peoples. The argument was made that the Russian foreign policy elite’s approaches to separatist statelets changed not in 2014 but in 2008 following the war in Georgia and Kosovo’s declaration of independence. Moreover, it was emphasized how important not only the ethnic imaginary but also an idealized memory of the Socialist social order was for secessionism and how detrimental intrusive policies by the EU could be – for instance in Bosnia-Herzegovina – for the growth of a culture of democratic accountability.

The second panel concentrated on interdependencies between protracted conflicts in the post-Soviet space and delved into the particularities of relations between Russia and Transnistria as well as the economic cost of conflict in Nagorno-Karabakh. There are some forms of institutionalized exchange between the ‘post-Soviet four’ but the lack of further cooperation is not only due to the preference for other relations (e.g. to Russia) but to different ambitions among local elites and some level of competition over international recognition. Whereas in general the level of the client states’ leeway towards the patron is proportional to the severity of the security threat, for the post-Soviet space the global financial crisis marked a turning point as fiscal dependence on Russian aid reduced agency substantially. The militarization and brinkmanship of the Nagorno-Karabakh conflict meanwhile not only imposes high economic costs on states and communities but also negatively effects education, services, corruption and democracy.

In the third panel on the role of international actors, presentations dealt with the international community’s stabilization dilemma and with the contentious part played by international organizations in shaping dialogue and confidence-building measures in Ukraine and Moldova. As unilaterally seceding entities can subsist even without international recognition, the international community faces the insoluble dilemma that efforts to stabilize the situation on the ground, for example through development work, run counter to efforts to stabilize the international state system. In the case of Ukraine, efforts by the EU and OSCE to foster track 2 and track 3 forms of dialogue in a process of orchestration were hampered by very different understandings among Ukrainian stakeholders of what actually constituted dialogue. Similarly, different agendas among donors and the Moldovan government have created downsides for civilian confidence-building measures regarding relations between Transnistria and the right-bank.

The panels were followed by a collective brainstorming session to develop new avenues for the future of this research field and to sow the seeds for collaborative research projects. One strand of argument arose over the need to provincialize the post-Soviet space and to engage more directly with research on secessionist conflicts in other world regions such as Africa as well as with more theoretical approaches from the field of conflict studies and international relations theory. Overall, the workshop benefitted from a very open and collegial atmosphere and there was a general sense that it would lead to further get-togethers in the near future.


You can find the full workshop programme here:

http://www.nec.ro/data/pdfs/public-events/2018/july/2018-07-07_Workshop.pdf