Ukraine: Economic relations across the contact line and the role of trade unions


of the roundtable
on Tuesday, 23 May 2017, 11.00 – 12.00 a.m.

at the International Institute for Peace (IIP)


Julien Pinaudeau


            Trade and economic exchange between Western Ukraine and the non-government controlled areas have come to a halt, which resulted in a situation of economic deprivation of the people in the non-government controlled areas. At the same time, the trade unions in Donetsk and Luhansk/Lugansk separated from the Ukrainian trade unions. Former trade union colleagues do not have official contact anymore.

Which steps can be taken in order to restore economic ties between Ukraine and the non-government areas? What can be done in order to contribute to re-establishing a dialogue between the trade unions and other institutions dealing with economic issues? Which impacts do economic relations between the parties concerned have on the different aspects of societal behaviour?

Please note that the summary will respect the Chatham House rule.

            The International Institute for Peace is honoured to take part of a project in Ukraine which aims at improving interconnectivity and dialog between Ukrainian regions across the borders or between both sides of the contact line. After several visits and meetings in Ukraine, the Institute decided to organize the current roundtable about economic exchange and trade in a context of political tensions and fragmentation.

            The first speaker insists on the fact that dialog is the first step for setting peace. As representative of the Lugansk´s trade union federation, he embodies a region of workers and farmers who are looking for peace and prosperity. The federation of Lugansk unites approximatively 200 000 people and aims at observing the respect of rights and freedom for the workers. Civilians and working people are currently suffering from armed conflicts and are deprived from two fundamental rights: the right to live and the right to work. Some statistics may illustrate the consequences of hostilities in the region of Lugansk:

Number of destroyed items

1 036 schools

43 water supply facilities

65 medical institutions

37 administrative buildings

53 transport infrastructures (bridges, roads, railway and bus stations, airports)

            The trade union´s representative points out the absence of military targets among this list of damages. Furthermore, he mentions the blockade imposed by Ukrainian radical forces and the disastrous impact on the regional and national economy. Many families are separated and remained on different sides of the demarcation line without any opportunity to meet or to communicate.

            Under such circumstances, the trade union federation of Lugansk is trying to do his best to maintain employment in local enterprises and to improve cooperation with partners from the Russian Federation. Unfortunately, ties with Ukrainian partners are broken. If authorities from Lugansk are willing to start negotiations, the national political context represents a massive obstacle due to the fact that the Ukrainian government considers the Republic of Lugansk as a “terrorist territory”. In this context, the speaker thanks the participants to the Platform for Dialogue and Conflict Resolution in Ukraine for their noble initiative and their efforts.

            The second speaker analyses the recent agreement between Ukraine, Moldavia, Georgia and the European Union as a deep and comprehensive step for bringing the country closer to the EU. Such an association goes far beyond a simple liberalization of the Ukrainian market and takes into account the ensemble of acquis communautaires. The implantation of measures is a complex and long-term process by which immediate costs such as EU regulations or technical standards seem to be more significant than concrete benefits. The three signatory countries are suffering from the current conflict in the Donbass region. The implantation of the free trade agreement is prejudiced not only in the separatist territories but in the whole Ukraine as well.

                        Some policy recommendations have been provided to authorities. A first pillar is related to background conditions, especially the need for decent macro-economic and political environment. A second pillar concerns the improvement in terms of awareness and communication about the agreement with the EU. Links between business partners should be increased, included between separatist regions and the rest of Ukraine. Some positive feedback from Moldovia and especially Transnistria may represent a model in order to overcome the current conflict in Ukraine. The comprehensive agreement with the EU is a volume of regulations, rules and measures which need to be implemented and observed at once. Priority should be given to expend the export base, to improve competitiveness, market access and attractiveness for foreign indirect investments.  Nevertheless, the EU has to take its responsibility by increasing its technical and financial support to Ukraine.

            The next speaker starts his statement by underlining the fragility of the appeasement process in Ukraine, especially after the decision to impose a blockade on the separatist regions. Trade connections represent a first step for maintaining contact between people from both sides of the contact line, nevertheless such trade should be done by business partners and not by smugglers. New rules are needed in order to reunite Ukrainian territories. A large number of young entrepreneurs from Donetsk and Lugansk decided to move their business to neighbouring regions and became internal displaced citizens. This is currently no compromise about how to restore dialog between both sides of the contact line and therefore no common vision about the peace building process.

According to a survey made recently over the youth generation in different parts of Ukraine, the current conflict does not represent a priority due to a feeling of usefulness. Such a feeling is related to a relative official lack of interest for young citizens. Youth organisations has to face a very low level of funding.

            The last member of the roundtable is specialized in European policies towards Ukraine and Eastern Europe. Regarding economic relations, there is some hope in the sense that the deep and comprehensive free trade area between the European Union and Ukraine will give medium to long-term outcomes. At this stage, the implementation of the trade association will improve the economic integration of Ukraine without any participation in the political institutions. This association with the EU is challenged by the relationship with Eastern Ukraine due to many unsolved topics, especially concerning Ukrainian citizenship or business orientation. Eastern Ukraine is characterized by several dilemmas such as: no war and no peace or not part of Ukraine and not part of Russia.

            The trade blockade over Eastern Ukraine is mostly affecting citizens, small companies, humanitarian aid and commercial activities, so that there is a damageable shift from cooperation to isolation. The panellist suggests to start initiatives on a small scale in order to recreate profitable exchanges between Eastern Ukraine and Ukraine.

From one side, the current situation seems to be better for the country in terms of integration to the EU, but on the other side, Eastern Ukraine is characterized by a growing isolation.

            During the question and answer session, the participants agree on the fact that the main problem in Ukraine is a political one, even if business and trade tensions should not be underestimated. The possible perspectives after the elections in Eastern Ukraine may worsen a growing gap between Ukrainian authorities and the separatist territories. 

            The Minsk agreement represents a better starting point in order to envisage negotiations and dialogs due to the engagement of Russian, Ukrainian and European leaders.

Concerning Ukrainian history, a speaker considers that the government in Kiev wants to destroy every monument or building related to the Soviet Union era. Such a deliberate policy is not helping people to understand their history and therefore find their identity. There is obviously a need to develop a historical narrative which is able to unite rather than to oppose the people of Ukraine.

            The relationship between Ukraine and the European Union is another key aspect during the discussion. The EU is not a political actor because if several member states are engaged in the negotiations in the context of the Minsk agreement, the Union is not taking part as such. However, Brussels is using different tools such as the stabilization package; for example, the EU is the largest investor in the region and the second biggest aid provider with 11 billion euros. Furthermore, the 28 are trying to help the Ukrainian civil society within the Eastern Partnership by promoting people-to-people contact, cooperation with NGOs and civil society movements towards Ukraine.