The EU and Russia: before and beyond the crisis in Ukraine - European Union Committee Contents


174.  In previous chapters we considered some of the structural causes that led to the decline of the relationship between the EU and Russia. In this chapter, we turn to the way those issues came to the fore during the crisis in Ukraine. We set out a chronology of events, assess the EU's response, and examine the EU's current support for Ukraine.

The crisis in Ukraine and Crimea

175.  In this section, we assess six key phases in the unfolding of the crisis in Ukraine, outlining at each stage the Russian and European understanding and interpretation of those events. We do not seek to relate the entire history of the crisis.


176.  The EU began negotiating an Association Agreement (AA) with Ukraine in 2007, having started discussing a Free Trade Agreement in 1994. According to the Government, the Russians raised no concerns at the time that the negotiations on the AA began. Mr Neil Crompton, Deputy Political Director, FCO, informed us that "Russia went through a long period in which it did not make a major issue of Ukraine's signature" of the AA. Mr Chris Barton, Director of International Affairs, Trade Policy and Export Control, Department for Business, Innovation and Skills, said that discussions on the Deep and Comprehensive Free Trade Area (DCFTA) were "not a surprise", and that Russia "had not raised specific concerns about what it would like to see different in any free trade agreement."[255]

177.  Mr Pedro Serrano, Adviser on External Affairs, Cabinet of the President of the European Council, said that as late as June 2013, at the summit between the President of the European Council, the President of the Commission and President Putin, everything was "totally normal. No one was talking about DCFTAs, and they were talking even less about Ukraine."[256] Mr Pierre Vimont, Executive Secretary, European External Action Service, was also adamant that the EU "never really had any clear warning, on behalf of the Russians, that this was unacceptable to them, for many years; it came only at the last moment."[257]

178.  Mr Fyodor Lukyanov, Chairman, Council on Foreign and Defense Policy, and Editor in Chief of Russia in Global Affairs, in contrast, said that the European Commission "never showed any interest in discussing" Russia's economic concerns: "sometimes it was just indifferent, sometimes it said quite bluntly, 'It is not your business. It is our bilateral business.'"[258] His Excellency Dr Alexander Yakovenko, Ambassador of the Russian Federation to the UK, asked whether there was advance discussion of the AA, told us that "there was none."[259] According to Mr Dmitry Polyanskiy, Deputy Director, First Department of CIS Countries, Russian Foreign Ministry, it was only in the summer of 2013, when the text was published, that the Russians had sight of the agreement. The detail in the annexes "clearly showed to [the Russians] that with such an agreement Ukraine would no longer be able to maintain the same level of relations" with Russia.[260]

179.  From August 2013, Russia undertook a policy of coercive economic diplomacy aimed at changing the political calculations of President Yanukovych. Dr Lilia Shevtsova, Senior Associate, Moscow Center, Carnegie Endowment for International Peace, said that Russia started the "August trade war with Ukraine, trying to force the former President Yanukovych to reject the Association Agreement with Brussels."[261] His Excellency Andrii Kuzmenko, Ukrainian Acting Ambassador to the UK, spoke of a "number of different 'wars'—a customs war, a gas war, a milk war, a meat war, cheese war, a chocolate war", which "the Russians started against Ukraine with the solemn purpose of pursuing us to postpone and then refuse European integration."[262]

180.  Mr Serrano said that the "first inklings" of trouble from the Ukrainian side came in September 2013, when the President indicated that "it would be difficult for him to sign the DCFTA." Then President Yanukovych suggested "trilateral meetings with Russia in order to clarify the consequences of the DCFTA."[263] By November 2013, Russian hostility had become explicit. Mr Vimont said that "it was only around the Vilnius summit that the Russians became very vocal."[264] "Everything was already done" by then, Mr Jean-Luc Demarty, Director-General, DG Trade, told us.[265]

181.  Mr John Lough, Associate Fellow, Russia and Eurasia Programme, Chatham House, informed us that Russia "suddenly woke up" to the challenge, having believed the AA to be "a totally under-resourced and hopeless initiative that was being conducted by an organisation with so many divisions in it."[266] Mr Lukyanov agreed that Russia was surprised that the signature was imminent, because the situation in Ukraine—"corruption, dysfunction" and the detention of former Prime Minister Yulia Tymoshenko—suggested that Ukraine was far from meeting the requisite conditions. However, when the issue of Tymoshenko's fate was "removed from the picture and the decision was made that it should be signed anyway", then "Russia woke up."[267]


182.  When Russian hostility became evident the EU did two things. First, it continued with the AA. Sir Tony Brenton KCMG, former British Ambassador to Russia and Fellow of Wolfson College, Cambridge, said that the EU pursued the negotiations on the AA "with a reasonable level of confidence that they were going to be brought to a successful conclusion."[268] Professor Elena Korosteleva, Professor of International Politics, University of Kent, said that the EU undertook a "moderate but miscalculated campaign to accelerate or arguably compel Ukraine to a decision over the AA" at the Vilnius summit in November 2013.[269]

183.  Second, the Commission engaged in a consultation process with Russia on the economic effects of the AA.[270] Mr Barton explained that when the level of opposition became clear, the EU was open to discussion with Russia about its concerns.[271] The Minister for Europe confirmed that "as soon as the Russian Government expressed serious concerns" about the compatibility of the DCFTA with their own free trade agreements, a "dialogue was begun, but Russia left it very late in the day."[272]

184.  The Russian view is that even in November 2013 the EU was still not open to dialogue. According to Ambassador Yakovenko, when Ukraine decided to suspend signature of the Association Agreement, Russia proposed to hold trilateral discussions with the EU, Ukraine and Russia "on the impact of the Association Agreement." However, "these proposals were rejected by the European Commission."[273] Mr Polyanskiy also noted that "instead of accepting this proposal and creating such a mechanism, which it was not too late to establish at this point, the EU … did everything to facilitate the power change in Kiev". This was the point where "we could have avoided everything that is happening right now."[274] Mr Lukyanov said that it was only now, "after all the tragedies", that the EU was inviting the Russian side to discussions.[275]


185.  In November 2013, President Yanukovych decided to suspend the signature of the AA. The domestic economic situation had become very pressing, partly due to Russia's restrictive trade measures. EU Member States had committed to facilitating an International Monetary Fund (IMF) loan in the region of $15 billion, but this was conditional on reforms which would have been difficult to deliver in the short term. On the other side, Russia offered Ukraine a $15 billion loan, without specific conditions, which was likely to be accompanied by the lifting of Russian trade restrictions and a large gas discount.[276]

186.  President Yanukovych's decision not to sign the AA triggered the protests now referred to as "the Maidan." These protests took both the EU and Russia by surprise. Events had begun to take on a momentum of their own which neither side could predict or control.

187.  Mr Serrano told us: "No one foresaw this. I do not think that Yanukovych foresaw it, I do not think that the European Union foresaw it, and I do not think that Russia foresaw it."[277] Mr Lough agreed that events "simply stunned the Russians."[278] The Russians, he said, had "misread" the mood in Ukrainian society and the "degree of civic organisation" on the Ukrainian streets. Within a short space of time, "Yanukovych had completely lost control of the situation and the Russians had given up on him."[279] Mr Lough said that the EU too "got way out of its depth" in pushing the Association Agreement, though there had been warning signs at least two years earlier, when "some people warned that if Yanukovych carried on looting the country in the way he was, the lid was just going to blow off in Ukraine."[280]

188.  As the protests in Maidan Square continued, they were viewed with increasing concern in Moscow. The Russian government's position, as explained by Ambassador Yakovenko, is that "neo-Nazi and other extremist groupings took the lead in the 'Euromaidan' movement."[281] Mr Crompton dismissed this as "very concerted Russian propaganda … to portray the political turbulence in Ukraine as the result of right-wing activists." In reality the protestors in Maidan wanted what most people in Europe wanted, which was "the rule of law, good governance, economic structures and association with the rest of Europe."[282]

189.  Ambassador Yakovenko also claimed that the public protests were "supported by the EU, a number of its member states, and the US."[283] Mr Polyanskiy told us that rather than de-escalate tensions the EU "did everything to facilitate the power change in Kiev".[284] The European Endowment for Democracy (EED) lists 15 Member States, along with the EU and Switzerland, as its Funding Members.[285] Alexander Graf Lambsdorff MEP, Chairman of the Executive Committee of the EED, said that the EED had supported civil society, blogs, newsletters and radio broadcasting, as well as rapid emergency relief of people who were injured in the demonstrations.[286] He was categorical that this was support for a "genuine civil movement that brought together very heterogeneous actors."[287] On the other hand, Mr Václav Klaus, former President of the Czech Republic, strongly recommended that EU Member States should not "support the Maidan demonstrations in an unconditional way."[288]


190.  In late February 2014, a deal was brokered by the foreign ministers of Poland, Germany and France, President Yanukovych and some of the representatives of the protestors. The proposal was to hold early presidential elections, form a government of national unity and revert to the 1996 constitution, removing some of the president's power. However, the deal was rejected by the protestors in Maidan Square. This rejection President Putin "chose or was persuaded to interpret as instigated by western states in order to install a compliant government that would be ready to lobby for NATO membership and perhaps revoke the basing agreement Russia had in Crimea."[289] On the night of 21 February 2014, President Yanukovych lost a vote of no confidence in the Ukrainian Parliament and fled Ukraine.

191.  President Yanukovych's flight triggered the next, more acute stage of the crisis. It radically altered Russian threat perceptions. Moscow viewed the events as a deliberate plot against Russia: Ambassador Yakovenko described them as a "coup", followed by "a civil war, persecution of dissenters, and deliberate actions to accelerate the destruction of the traditional ties with Russia."[290] By February, Sir Tony Brenton explained, the "Russians had decided that there was a great western plot against them, probably more American than EU, to displace them from their oldest and closest friend, Ukraine".[291] The trope of a western-fomented plot was one that recurred in Russian political thinking: in the words of Dr Alexander Libman, Associate of Eastern Europe and Eurasia Division, Stiftung Wissenschaft und Politik, in the "eyes of the Russian leadership, Euromaidan is just one more step in the sequence of events, which were initiated by 'the West'".[292]

192.  In the following weeks, a series of events reinforced Russian perceptions of a government in Kiev hostile to Russian interests. The Verkhovna Rada (Ukrainian parliament) took various steps that demonstrated strong anti-Russian sentiment. First it alarmed many Russian-speaking Ukrainians by seeking to repeal the 2012 language law allowing Ukrainian regions to make Russian a second official language.[293] Then, on 5 March, the Verkhovna Rada secretariat registered draft legislation which would have reinstated the goal of joining NATO as Ukrainian national strategy. Acting President Turchynov also issued a statement that Ukraine was considering changing its non-bloc status.[294]

193.  In particular, Moscow feared that the 2010 Kharkiv Agreements, which had extended the Russian Navy's lease of Sevastopol as a base for 25 years from 2017 until 2042, would be renounced. Professor Roy Allison has pointed out that even in 2010 "President Yanukovych's approval of this extension was virulently opposed by Ukrainian opposition politicians, suggesting that efforts may well be made to revise it in the future."[295] On 1 March 2014, three former Ukrainian Presidents, Leonid Kravchuk, Leonid Kuchma and Viktor Yushchenko, called on the new government to renounce the Kharkiv Agreements.[296] Mr Lukyanov said that President Putin's "real motivation was national security and the risk that the new rule in Kiev would very quickly denounce" the agreements of 2010 that prolonged Russia's base in Crimea for 25 years.[297] In the event, the language law was withdrawn and the draft legislation was never formally introduced. The new government in Kiev also guaranteed to honour all its existing international agreements, including those covering Russian bases.[298]


194.  In late February, pro-Russian separatists seized key buildings in the Crimean capital, Simferopol, and unidentified gunmen in combat uniforms appeared outside Crimea's main airports. On 16 March, Crimea voted to secede in a disputed referendum, and the next day the Crimean parliament declared independence and formally applied to join the Russian Federation. On 18 March, President Putin signed a bill to absorb the peninsula into the Federation.[299]

195.  While Ukraine as a whole is significant to Russia, Crimea, in particular, is of critical strategic importance. Crimea gives Moscow access to the naval base at Sevastopol and is home to Russia's Black Sea Fleet. Sevastopol's warm water port, natural harbour and existing infrastructure make it one of Russia's most important naval bases, and its geographical configuration provides a "platform for power projection into the Black Sea and beyond."[300]

196.  In a speech to the Federation Council on 18 March President Putin said:

    "We have already heard declarations from Kiev about Ukraine soon joining NATO. What would this have meant for Crimea and Sevastopol in the future? It would have meant that NATO's navy would be right there in this city of Russia's military glory, and this would create not an illusory but a perfectly real threat to the whole of southern Russia."[301]

197.  In Mr Crompton's view, everyone understood that Crimea was "of strategic importance to Russia, but there was no proper discussion about it." He believed that this "was an issue that Moscow was very capable of pursuing diplomatically with Kiev but instead it chose to resort to, essentially, military occupation in a way that we regard as completely unacceptable."[302] Dr Libman commented that, when acting in support of its security priorities, the Russian leadership's readiness to compromise was "very low" and "massively constrained by the lack of trust."[303] Sir Tony Brenton and Mr Lough agreed that the annexation of Crimea had not been foreseen. Mr Lough said that "no one saw this coming—that the Russians would simply annex Crimea". Sir Tony Brenton said that "the assumption that 'the Russians don't like this but they will probably live with it' was reasonably consistent with the Russia that we thought we had prior to the Maidan revolution."[304]

198.  Russia claimed that at the referendum the "Crimeans en masse made an unambiguous choice in favour of independence from Ukraine", and had "voted for the subsequent re-unification with the Russian Federation."[305] Mr Polyanskiy said that "people's right to self-determination … is part of the UN charter as well, and this right should also be respected."[306] However, the legitimacy of the referendum had been criticised by the international community and by domestic critics within Russia. Mr Vladimir Kara-Murza, Co-ordinator, Open Russia, told us that the referendum "was not recognised by any international organisations".[307]

199.  Other witnesses also listed a series of Russian contraventions of international law in the course of the annexation of Crimea, including:

·  non-intervention provisions in the United Nations Charter;

·  the Helsinki Final Act of 1975;

·  the 1990 Paris Charter (the tenets of which are that borders of countries are not rewritten by force and all states enjoy equal security and equal rights to choose their own alliances);

·  the 1997 Treaty of Friendship, Cooperation and Partnership between Russia and Ukraine (which requires Russia to respect Ukraine's territorial integrity).[308]

200.  In addition, Acting Ambassador Kuzmenko cited the 1994 Budapest Memorandum on Security Assurances, signed by the US, UK, and Russia, which provided guarantees on Ukrainian territorial integrity in exchange for Ukraine relinquishing its nuclear arsenal. He considered that the Memorandum was still "valid", and that Russia had "direct obligations under it", even though it was a declaration rather than a legally binding document. The Ukrainians would be interested in "upgrading" the document, and he felt that it could provide "ground for negotiations".[309]

201.  Witnesses noted that there was significant public support in Russia for President Putin's annexation of Crimea. Mr Alexander Kliment, Director, Emerging Markets Strategy, Eurasia Group, said that the "Russians absolutely loved" the message of "Russia finally springing back against years, decades, and in some sense centuries, of western encroachment and perfidy".[310] Mr Lukyanov said that the President's policy enjoyed "very wide support", and that in fact the President had broadened his base of support to include the nationalists who "perceive Russian actions in Crimea and in eastern Ukraine as legitimate protection of our people endangered by events in Ukraine."[311] Mr Denis Volkov, Head of Development Department, Levada Center, added that at the end of the 1990s, about 80% of the Russian people "thought that Crimea should be with Russia", suggesting that President Putin had "acted on some existing expectations." At the moment about 88% of the Russian population said "that it should be part of Russia".[312]


202.  A further deterioration of relations between Russia and the EU and escalation of insecurity took place as a result of Russian intervention in eastern Ukraine and the downing of the Malaysian airliner MH17. From late February, demonstrations by pro-Russian groups took place in the Donbas region (oblasts[313] of Donetsk and Luhansk) of Ukraine. Acting Ambassador Kuzmenko told us that the separatists in the Donetsk and Luhansk oblasts were "inspired, fed, paid and equipped by the Russians."[314]

203.  On 17 July, a Malaysian airliner (MH17) was brought down near Torez, a town in eastern Ukraine 50 km from the Russian border. All 298 people on board were killed. The victims came from a number of countries and included nationals from the Netherlands, Malaysia, Australia, Indonesia, the UK, Germany, Belgium, the Philippines, Canada and New Zealand. The circumstances surrounding the downing of MH17 are still unclear and an international investigation is planned, but it has been hampered by continued fighting in the region, while Russian and separatist officials have also been accused of obstruction. Some have accused Russia of being responsible, either directly or by supplying to separatists the BUK missile system that is believed to have brought down the plane. Russia, for its part, has argued that the plane was shot down by a Ukrainian fighter.[315]

204.  At the end of August 2014, when the Ukrainian government was beginning to regain the initiative in eastern Ukraine, "the Russians sent their regular troops. It was the feet of Russian soldiers directly on Ukrainian territory."[316] Mr Crompton confirmed that after the shooting down of MH17 there was "then a sharp deterioration of the situation on the ground, which led to the incursion of regular Russian troops into eastern Ukraine".[317] Mr Polyanskiy, on the other hand, denied that there was any "real proof" that there were Russian troops in eastern Ukraine.[318]

205.  The tragedy of the downing of flight MH17 hardened the political position of EU Member States on Russia. In the words of Mr Crompton, the plane crash "very much changed the politics of Russia within European Governments."[319] Mr Lough added that it had increased the "level of impatience and frustration on the part of a number of leading European countries."[320]


206.  On 5 September 2014 the Minsk Protocol was signed between Ukraine, Russia and representatives of the 'People's Republic of Donetsk' and the 'People's Republic of Luhansk',[321] setting out the terms of a ceasefire and a political process. The Protocol set out 12 steps, including a ceasefire monitored by the Organization for Security and Co-operation in Europe (OSCE); mutual withdrawal of troops and heavy weapons; border monitoring by the OSCE; decentralisation of power in Ukraine and provisions for local governance in Donetsk and Luhansk; hostage release and prisoner exchange; inclusive national dialogue; and humanitarian and economic measures to be adopted in the Donbas region.[322]

207.  The Minsk Protocol remains the basis for any move towards peace. The Minister for Europe told us that what was needed was a de-escalation of the situation starting with the full implementation of the Minsk agreements.[323] Mr Serrano said that the European Council would want "to ensure that the aggression stops in eastern Ukraine, that Ukrainian law is respected in eastern Ukraine, and that a political process is launched in eastern Ukraine." What was needed, he added, was "not only Russian words but concrete action to ensure that its border with Ukraine is not used to transfer arms and fighters into Ukraine, and that the ceasefire is respected. Russia is a key player in ensuring that this happens."[324] From a German viewpoint, Dr Hans-Dieter Lucas, Political Director, Federal Foreign Office of the Federal Republic of Germany, agreed that the Minsk Protocol remained the basis on which a political process could be built.[325]

208.  However, all our witnesses agreed that the Minsk Protocol was not being implemented and that the situation was getting worse.[326] The onus had been on the Russian side to act by withdrawing support for the separatists and controlling the flow of arms and fighters across its border, but Acting Ambassador Kuzmenko said that the promise of a Russian withdrawal was "far from being implemented".[327] The Minister pointed to a continuing "flow of people and material crossing from Russia to reinforce the separatists in Donetsk and Luhansk."[328] Mr Vimont said that the EU would welcome the opportunity to begin the political process, but that it was "difficult to do that as long as we see that even the agreements that have been reached are not being implemented properly."[329]

209.  Dr Libman feared that finding a sustainable solution to the Ukrainian crisis in the near future was "unlikely to be feasible", and said that the immediate priority should be to "concentrate on managing the crisis, i.e., preventing it from escalation, searching for opportunities of dialogue and, above all, preventing the military conflict."[330]

Recurring themes

210.  Two significant factors emerge from the summary of key events above:

·  Lack of political oversight; and

·  The pivotal and exceptional nature of Ukraine.


211.  An element of 'sleep-walking' was evident in the lead-up to the crisis. Sir Tony Brenton said that during the negotiation on the AA, any awareness of Russian hostility was not felt "at a high enough political level in the EU for people who really understand Russia actually to be asked how tough the Russian reaction was likely to be."[331] There was, he told us, "a lack of … simple thinking about how the Russians were behaving at that stage."[332] He added that the EU knew that the Russians "did not like what was happening," but assumed "Ukraine could simply ride over that."[333] Mr Lough put it to us that the "EU did indeed underestimate the determination of the Russians to ensure that Yanukovych would not sign" the Association Agreement.[334]

212.  Assistant Professor Serena Giusti, Scuola Superiore Sant'Anna, saw the EU's post-Maidan policy as "technocratic", taken forward by EU institutions which "acted in the vacuum of politics." She believed that the "EU's governments remained either unresponsive or divided on a common strategy," that the EU response was driven by "inertia rather than from an accurate analysis of the situation", and that the EU "failed to come up with a strategy for Ukraine".[335]

213.  At the same time, Mr Demarty reminded us that the decision to take forward the trade agreement with Ukraine "was not something decided by obscure trade officials; it was an initiative that was taken with the unanimity of member states at a meta-political level." As Director-General for Trade he had "implemented the strategy that [had] been fixed" at the political level.[336]

214.  Mr Lukyanov said that a similar absence of political oversight may have been present on the Russian side, "because the Russian state apparatus never was very functional".[337] Sir Tony Brenton added that there was "no evidence that the Russians really took to a high level the extent to which the EU was pursuing this".[338] Despite this, Mr Lukyanov was clear that the deliberate exclusion of Russia by the EU was chiefly to blame: "The lack of co-ordination on the Russian side was in place, but I would not believe that the European Union was really interested in discussing things with Russia."[339]


215.  An element of 'sleep-walking' was evident in the run-up to the crisis in Ukraine, and important analytical mistakes were made by the EU. Officials in Brussels as well as Member States' embassies all participate in the EU foreign policy process, but all seem to have missed the warning signs. The EU and Member States lacked good intelligence-gathering capacity on the ground. The lack of an integrated and co-ordinated foreign policy was also evident.

216.  Collectively, the EU overestimated the intention of the Ukrainian leadership to sign an Association Agreement, appeared unaware of the public mood in Ukraine and, above all, underestimated the depth of Russian hostility towards the Association Agreement. While each of these factors was understood separately, Member States, the European External Action Service and the Commission did not connect the dots.

217.  The Russians, on their side, were taken by surprise and misjudged the determination of Member States to sign the Association Agreement. When Russian hostility became explicit, the EU had a very small window of opportunity to act. By that stage, events began to take on a momentum of their own.


218.  We heard that Ukraine, and in particular Crimea, holds particular strategic, economic and historic importance to Russia. For many Russians, losing Ukraine would be to lose not only a part of the former Russian (as opposed to Soviet) empire, but a country that has played a key role in shaping their history, religion and identity.[340]

219.  Mr Kliment told us it was "impossible to overstate the extent to which not only the Russian elite but the Russian population at large view Ukraine as part of Russia's sphere of influence—historically, economically, culturally and even religiously."[341] Mr Lukyanov pointed out that Ukraine was (before the crisis) "very important for the Russian economy", as well as being important to Russia strategically.[342]

220.  Mr Klaus said that such views were long-standing and widely held: "Russia would have behaved very similarly in the Ukrainian crisis or conflict with any Russian President." In this respect he believed that President Putin's actions were "not anti-Russian—it is very Russian in this respect. I do not think it is rational to try to make any sort of schism between Russia and Putin on Ukraine."[343]

221.  Mr Klaus also urged us to consider internal factors within Ukraine. In his view, Ukraine was an inherently unstable entity, weakened by decades of political faction.[344] He believed that Ukraine was a "heterogeneous, divided country, and that an attempt to forcefully and artificially change its geopolitical orientation would inevitably result in its break-up, if not its destruction."[345]

222.  Mr Crompton, on the other hand, argued that Ukraine was "not the only country to have emerged from the post-Soviet orbit that did not really exist as an independent state, so it is not unique in that respect."[346] Mr Mikhail Kasyanov, former Prime Minister of Russia and co-leader of the Republican Party of People's Freedom (PARNAS party), added that none of the arguments regarding religious divisions or history were pertinent to the state of Ukraine today.[347]

223.  In fact, Graf Lambsdorff and Mr Kasyanov said that what had weakened Ukraine was the failure of its leaders to undertake economic and political reforms, rather than any inherent instability—in Graf Lambsdorff's words, Ukraine had "not realised its great potential" due to "endemic corruption and a dysfunctional political system".[348] Writing in November 2013, in an article titled 'The Basket Case', Mr Anders Aslund argued that for years "the Ukrainian government has pursued a disastrous economic policy, rendering a serious financial crisis possible or even likely."[349] The ruling elite, having engaged in "predatory rule", had found IMF reforms detrimental to their personal enrichment. The International Crisis Group concluded that the "crisis in Ukraine is the logical legacy of twenty years of mismanagement and massive corruption".[350]

Russia's economic interests

224.  Ukraine, we heard, was a very important economic partner for Russia.[351] It would have been the pivotal country in the Eurasian Economic Union. One of the ostensible reasons for the Russian intervention was that Ukraine's signature of an EU Association Agreement (AA), which contained a Deep and Comprehensive Free Trade Area (DCFTA), would have had a negative impact on the Russian economy, as well as being incompatible with Ukraine's regional agreements. President Putin has stated that Russia:

    "Believed it was indeed unreasonable to sign that agreement because it would have a grave impact on the economy, including the Russian economy. We have 390 economic agreements with Ukraine and Ukraine is a member of the free trade zone within the CIS (Commonwealth of Independent States). And we wouldn't be able to continue this economic relationship with Ukraine as a member of the free trade zone."[352]

225.  In contrast, Professor Sergei Guriev, Professor of Economics, Sciences Po, Paris, advised us that "Russia's statement that a free trade area between Russia and Ukraine is not compatible with the DCFTA is false." There was "nothing wrong with being a member of free trade areas with different partners."[353] Mr Vimont agreed that there was "no incompatibility between the DCFTA that we were pushing forward with the kind of trade agreement that Ukraine could have with Russia."[354] Mr Polyanskiy qualified the Russian position, saying that what would not have been possible was for "Ukraine to sign an Association Agreement and preserve its current situation as a privileged partner."[355]

226.  Two particular Russian economic concerns were the surging or dumping of products into the Russian market, and alignment of regulatory standards.

227.  Mr Kliment told us that the Russians feared that Ukraine's signature of the DCFTA would create a conduit for competitive European goods to "flood the Russian market and to damage the interests of Russian producers," who were not able to compete with European producers.[356] Mr Polyanskiy focused on potential dumping: export quotas offered to Ukraine were "very small—even laughable", while there were "no limitations for EU products entering Ukraine." As a result, Ukrainian products which could not enter the EU market because of EU regulatory standards or because of limited quotas would be dumped onto the Russian market.[357]

228.  Mr Demarty, on the other hand, took the view that if a product was not competitive in the domestic market then it was unlikely to be competitive in the Russian market. In the case of surging of exports or dumping of products by Ukrainian companies, the terms of the CIS free-trade agreement permitted "the use of safeguarding measures and anti-dumping procedures, just as is the case today."[358]

229.  With regard to regulatory standards, Mr Polyanskiy explained that the provisions of the DCFTA which would involve Ukraine adopting EU technical and regulatory standards were particularly threatening. They meant that when Ukraine introduced EU technical regulations, it would no longer be able to "export many products of the steel industry, for example, or railroad vans to Russia, because they will not meet Russian technical regulations or customs union technical regulations."[359] Mr Kliment explained that Russians feared that the "shift in Ukraine to European standards and regulations—technical standards, phytosanitary standards, the whole run of it—would in fact make goods produced in Ukraine incompatible with supply chains for Russian firms and Russian sectors that rely on Ukraine for key economic inputs."[360]

230.  At the same time, Mr Kliment could see no reason why producers in Ukraine who depended on Russian markets or supplied Russian markets "could not continue to produce goods that meet Russian specifications separate from those that meet EU specifications."[361] Mr Demarty suggested that the DCFTA foresaw "progressive timetables" for the implementation of new requirements, which could be adjusted and extended if necessary.[362]

231.  Considering the ease with which these arguments could be addressed, Mr Demarty thought it likely that Russian concerns were "more political than really commercial". Mr Luc Pierre Devigne, Head of Unit, Directorate General for Trade, also believed it was "very unlikely" that there were genuine commercial concerns, as Russian trade with Ukraine was mostly composed of raw materials rather than manufactured goods.[363] The Minister for Europe dismissed Russian economic concerns as "more a pretext than a genuine concern".[364]

232.  According to Mr Demarty, the unstated economic rationale for Russian commercial concerns was that the DCFTA implied the gradual development of a level playing field in the Ukrainian market, on which EU and Russian products would compete on equal terms. For Russia this would be "a source of loss", because at the moment it had free access to the Ukrainian market while most EU goods were paying duties.[365] Professor Guriev agreed that for "certain interest groups in Russia, Ukraine joining the DCFTA would represent a problem". More competition from European goods in Ukraine, and Europe being a destination for exports from Ukraine, created "competition and therefore a cost."[366]


233.  It is clear that Russian concerns about the impact of EU trade agreements, while having an economic basis, were also politically driven, while in seeking to address Russian concerns, the Commission was putting forward free-market liberal economic arguments. Both sides were to some extent talking past each other. The absence of Member States' political oversight during this process is glaring.

The EU's response to the crisis


234.  As the crisis escalated in the summer of 2014, EU Member States forged a united position. Having previously only applied asset freezes and visa bans, on 31 July 2014 the European Council agreed 'stage three sanctions', comprising restrictions and bans in three key areas: finance, military and dual use products, and high-tech energy exports.[367]

235.  Mr Crompton informed us that securing agreement to these significant sectoral sanctions "was very easy."[368] Mr Kasyanov pointed out that, in contrast to the "back to business as usual" approach that followed the Russo-Georgian war in 2008, this time the West and EU had behaved differently: "There is a transatlantic unity and strong positioning, and a principled attitude to the policies that Mr Putin is pursuing now."[369] In his view President Putin "was shocked" by the united position and strong attitude. However, this united position was then undermined by disagreement on the sanctions policy among Member States, which "was viewed by Mr Putin as weakness. After the so­called Normandy meetings, which Mr Putin was pleased with, he decided to go further with the escalation."[370]

236.  Mr Vimont accepted that Member States had their reservations, but said that they had agreed that "unity had to prevail above some of their reservations."[371] Mr Serrano agreed that the EU had a "very clear position towards Russia and very clear interests", namely ensuring that Russia played a constructive role in solving the crisis in Ukraine. He believed that this policy would be "pushed forward and maintained without hesitation."[372]


237.  Associate Professor Tomila Lankina, London School of Economics and Political Science, said that the objective of EU sanctions had been "to constrain Russian support for separatist forces in Eastern Ukraine in the ongoing conflict, while also preventing the repetition of a similar scenario elsewhere in the post-Soviet space in the future."[373] Mr Crompton viewed sanctions both as a useful deterrent, designed to "change the cost-benefit equation" of actions in the neighbourhood, and also as an instrument to bring President Putin to the negotiating table.[374] Below, we assess the impact that the sanctions have had on Russia against these objectives.

Effect of sanctions in Russia

238.  Sanctions have compounded the damage done to the Russian economy by two other factors: falling oil revenues, on which the government budget is very dependent, and an unreconstructed economic structure. Russia has been haemorrhaging capital. Mr Barton, giving evidence on 9 September 2014, told us that the rouble had sunk to a "record 16 year low against the dollar" and that the ratings agency Fitch had estimated that sanctions had caused Russia's reserves to "fall from about $470 billion to $450 billion" by the end of 2014.[375] In November 2014, Russian Finance Minister Anton Siluanov said that Russian capital outflows may reach $130 billion in 2014.[376]

239.  In December, the Minister for Europe confirmed that sanctions were an "additional burden on top of the grievous structural weaknesses that Russia already faces", which had been laid bare by the collapse of global crude oil prices. The "tangible impact upon Russia" had been that the rouble had hit historic lows, headline inflation outstripped wage inflation for the first time in five years, growth forecasts had been revised downwards to near zero for the current and next quarter, and borrowing costs had spiralled as Russia was locked out of western financial markets.[377]

240.  By October 2014, witnesses had begun to estimate a two to three year crunch period for the Russian economy. Professor Guriev said that the sanctions had worsened the economic difficulties for the Russian budget caused by falling oil prices. The price of oil would hit Russian public finances and this effect would be "strongly reinforced by the sanctions." Oil prices in the range of $80 or $85 directly implied that the Russian government would face "significant problems three years down the road."[378] In November, Mr Kasyanov too thought that if oil prices stayed as they were President Putin had "two years to decide what to do."[379] We note that, by January 2015, crude oil prices had further fallen to under $50 per barrel, with implications for the timeline suggested by our witnesses.

241.  It was less clear whether the sanctions were having a political impact in Ukraine. On 24 July 2014, commenting on the asset freezes and visa bans, Sir Tony Brenton judged not. He said that sanctions were "not having any political effect at all."[380] By September, after the imposition of three-tier economic sanctions, Mr Crompton believed that sanctions had an impact on President Putin's calculations: "Every time the EU has applied sanctions over the past few months, on the day before Russia has made some diplomatic gesture in an effort to avoid further sanctions".[381] Professor Guriev agreed that sanctions had driven a change in the President's political calculations in eastern Ukraine. The ceasefire and Russia's willingness to moderate its support for separatists in eastern Ukraine were evidence of sanctions working. He put it to us that President Putin "does understand the numbers", which is why Donetsk and Luhansk "even after holding a referendum, have not become part of Russia."[382]

242.  In contrast, we heard that sanctions had not so far changed President Putin's calculations in Crimea. Professor Guriev said that Russia was not going to give back Crimea "any time soon."[383] According to Dr Tom Casier, Jean Monnet Chair, Senior Lecturer in International Relations, University of Kent, the Russian government was trapped by its own nationalist rhetoric. The Russians would be "willing to hurt themselves … for the simple reason that Putin and the elite have identified their position so much with power and Russian pride that it will be very hard to force them, by sanctions or whatever, to step back."[384]

243.  Dr Libman argued that the Russian leadership divided issues into first-order priorities, such as national security (where it pursued its policies with determination and rigour), and second-order issues, such as the economy and domestic issues (where the Russian leadership was flexible and able to compromise). Even major economic difficulties did not move the Russian leadership on first-order security issues.[385]

244.  As for whether sanctions would bring the Russian government to the negotiating table, in September 2014 Mr Crompton said that sanctions had actively targeted the group of oligarchs and senior businessmen surrounding the Kremlin, and that there was "quite a lot of evidence" that that group of people were "very concerned."[386] In December, the Minister for Europe was frank that sanctions were not yet bringing about a change in President Putin's actions regarding Ukraine, but he pointed to "dissension within the Russian elite", and "very senior people inside the Russian system" who believed that the President was taking Russia in the wrong direction.[387]

245.  In addition, some witnesses drew our attention to the unintended consequences of sanctions. Professor Guriev said that as the Russian economy stuttered, the Russian government would "have to come up with certain—probably non-economic—solutions to convince Russians … that they are suffering economically for a good cause." In his view, "we should expect more propaganda, more repression and maybe even further foreign policy adventures." He added that the Russian government was using sanctions to "call Russians to rally around the flag."[388]

246.  Sectoral sanctions were also driving the Russian economy towards more protectionism. Mr Kliment told us that in response to the threat of increased sanctions, Russia had taken a number of steps that prepared the economy to become "more autarchic rather than more open to western trade and European norms."[389] Dr Libman predicted that the Russian economy would "enter a lengthy period of stagnation and lose its chances to modernise."[390] Sir Tony Brenton viewed the ending of European Bank for Reconstruction and Development (EBRD) funding streams to Russia as one of the "more ludicrous sanctions", as it would end support for small private enterprises in Russia, which were "exactly the component in Russian society that we want to develop if we are thinking about Russia post-Putin."[391]

Impact of sanctions in the EU

247.  Sanctions on Russia have also imposed economic hardship on EU countries. The Confederation of British Industry (CBI) drew our attention to trading statements from publicly listed companies that cited geopolitical tensions in Ukraine and Russia as a contributing factor to downgrading performance forecasts for 2015.[392] Professor Guriev pointed out that in the fragile state of the EU economy, while sanctions against Russia and counter-sanctions by Russia had not had a dramatic effect, they had "had a negative effect on European growth perspectives."[393]

248.  Ms Shona Riach, Director, International Finance, Her Majesty's Treasury, acknowledged the impact of sanctions on the Eurozone, but added that the biggest risk to the European economy was "the geopolitical threat and the threat from the situation in Ukraine, rather than specifically the impact of the sanctions." It followed that "not to do anything and not to take action would have had greater costs associated with it."[394]

249.  The CBI informed us that Russian 'retaliatory' sanctions, such as banning the import of agricultural goods from the EU, had a significant direct impact on EU countries, particularly in Eastern Europe. The stockpiling of some agricultural products in EU countries as a result of the Russian import ban had put a downward pressure on commodity prices across the EU as a whole.[395] Mr Barton told us that the total value of the EU food exports that were affected was "about £4.5 billion, which will mainly affect Lithuania, Poland and Germany."[396]

250.  The economic impact of sanctions on the UK has been limited. Overall, CBI members believed that the sanctions had so far "been carefully designed to limit the impact on British companies while maximising the impact on the Russian economy." According to the CBI, the impact of Russian retaliatory sanctions on the agricultural sector had also been limited. The UK exported a relatively small amount of agricultural products to Russia—in 2013 the UK's largest agricultural exports to Russia were £5.4 million of cheese and £1.4 million of poultry meat—accounting for less than 1% of the UK's total cheese and poultry trade. However, the stockpiling of agricultural products in EU countries, and downward pressure on commodity prices across the EU, had caused a consequent impact on British companies and suppliers exposed to these commodity markets.[397]

251.  There has been a more severe impact on the German economy. Open Europe informed us that German trade with Russian had declined significantly between August 2013 and August 2014—exports had fallen 26% and imports 19%.[398] Russia currently takes 3% of Germany's exports. The decline in German-Russia trade has contributed to a broader fall in German exports. In the second quarter of the current financial year the German economy shrank by 0.2%. Economists expected it to contract again in the third quarter, meaning that the economy would technically be in recession.[399]

The future of the sanctions policy

252.  The EU's asset-freezes and travel bans on individuals are due to be reviewed by the EU in March and April 2015, while the sectoral sanctions come up for renewal in July 2015.

253.  We understood from our conversations in Berlin and in Brussels that there was growing frustration that the EU's offer of dialogue was not being reciprocated by Russia. In particular, we sensed the growing impatience and disappointment in Germany. Dr Lucas told us that, in light of the slow progress on Crimea, the Federal Foreign Office was considering whether tougher sanctions should be developed. The opinion of Dr Markus Kerber, Director General, Federation of German Industries, was that some Member States tended to be of the view that if Russia's behaviour had not worsened then the sanctions should be lifted. The German position was that if Russia's behaviour had not improved, then the sanctions should continue.[400]

254.  Ms Riach noted that at both UK and EU levels thought was being given to how sanctions could be tightened further. The financial sanctions had "a number of exemptions within them", and the first thing that could be done "would be to look at tightening that up as far as possible."[401] Other witnesses drew attention to the possibility of targeting the Russian government more closely. Mr Ian Bond CVO, Director of Foreign Policy, Centre for European Reform, suggested that the EU had been "very gentle so far", and that the majority of those sanctioned so far were "utterly unknown figures in local politics in Crimea or relatively middle-ranking military officers." The EU had not done what the US had done, which was "to target those who are closest to Putin, which is likely to be more effective as a short-term measure."[402]

255.  Mr Kara-Murza too suggested that the EU should target individuals close to President Putin. Such a step would have enormous political significance for the President and his entourage. In his view there was "nothing or very little that the Putin regime fears more than targeted personal sanctions imposed by the European Union and North America—by the West in general—on the people in Putin's inner circle."[403] Mr Kasyanov agreed that there could be space to increase sanctions to named individuals, including members of parliament nominated by President Putin.[404]

256.  Mr Kara-Murza also suggested that the generic term "sanctions against Russia" resonated badly among the Russian public: "It allows Mr Putin to portray these individual sanctions as being directed not against his oligarchs and his officials, but against the whole of Russian society." He said that it was "really crucial to choose the language carefully and to talk not about 'sanctions on Russia,' but about sanctions on the regime, on the corrupt officials, on the human rights abusers, on the aggressors and so forth." The shorthand was "easier to say", but it was "very important to say those few extra words and not play into Mr Putin's propaganda."[405]

257.  In the long term, Dr Lucas argued that sanctions needed to be part of an overall strategy, in which the EU would be closely aligned with the US.[406] Mr Barton assured us that there had deliberately been a "very close alignment" between what the EU and the US were doing, and that there was agreement that this approach should be maintained.[407] The Minister informed us that the Prime Minister had "personally worked very hard" to ensure that the EU and US sanctions regimes were as consistent as possible.[408]


258.  We welcome Member States uniting around an ambitious package of sanctions on Russia.

259.  Sanctions need to be part of an overall strategy of diplomacy and a political process, including intensive dialogue on Crimea. This strategy is not yet in place.

260.  The Russian government is under severe pressure. Internal economic problems, including the falling price of oil, have been worsened by the EU sanctions regime, and are likely to have a very serious impact on the viability of the current government. However, the EU is in danger of having offered President Putin a tool for fomenting further nationalist and anti-EU sentiment.

261.  There is no evidence that sanctions have caused President Putin to shift his stance on Crimea, where Russia has direct and vital security interests through the Sevastopol naval base.

262.  While EU and US sanctions have been broadly aligned, the US has been prepared to target individuals close to the Russian government. If there is no progress on the Minsk Protocol and the situation in eastern Ukraine continues to deteriorate, the EU should find ways of targeting individuals close to President Putin and consider broadening sectoral sanctions into the Russian financial sector.

263.  In the long-term, three-tier sanctions are detrimental to the EU's interests as well as to Russia's. While they could be renewed in the short term, the prospect of the progressive removal of sanctions should be part of the EU's negotiating position. Genuine progress by Russia in delivering the ceasefire in eastern Ukraine should be the basis for ratcheting down sanctions.

EU support for Ukraine


264.  Member States have united around strong political messages, which support the territorial integrity of Ukraine and denounce the annexation of Crimea. On 20 March 2014, the European Council concluded:

    "The European Union remains committed to uphold the sovereignty and territorial integrity of Ukraine. The European Council does not recognise the illegal referendum in Crimea, which is in clear violation of the Ukrainian Constitution. It strongly condemns the illegal annexation of Crimea and Sevastopol to the Russian Federation and will not recognise it."[409]

265.  Acting Ambassador Kuzmenko urged the EU not to "leave Ukraine to deal with Russia alone." This was because Ukraine was not fighting "just for the territorial integrity or sovereignty of Ukraine but for the European values … We are the only European country that has paid such a price just for its declared decision to become a future European state."[410] Mr Crompton told us that the UK regarded the "annexation of Crimea as illegal" and would "maintain a position of principled support for Ukraine's sovereignty and territorial integrity."[411]

266.  Nevertheless, witnesses feared that the possibility of resolving the annexation of Crimea in the short-term was remote. Mr Crompton admitted that "we do not know how this will end." There was no possibility of getting a resolution through the United Nations Security Council, because of the Russian veto.[412] Dr Casier said that losing Crimea would be "unacceptable and non-negotiable for Russia." Dr Marat Terterov, Executive Director and Co-Founder, Brussels Energy Club, also considered it impossible that Russia would accept Crimea being a state distinct from Russia.[413]

267.  It was suggested that the EU could adopt a tactical and pragmatic approach to the annexation of Crimea, in effect shelving the issue for the long-term. Dr Casier pointed out that while with the annexation of Crimea "one of the most important European taboos" had been broken, namely the annexation of part of another country, it would "be very hard to do anything about the situation." He had heard it said in diplomatic circles that it was "already very much accepted as a done deed, a fait accompli."[414] He envisaged a scenario whereby EU Member States would "continue business as usual with Russia and just keep mentioning in all sorts of documents" that they did not accept the annexation of Crimea.[415] Mr Josef Janning, Senior Policy Fellow, European Council on Foreign Relations, judged that the Ukrainians were likely to make a pragmatic and tactical calculation to "solve the problems already on the table", such as energy in the winter and restarting the economy, while leaving the status of Crimea for a later date. If that were the case, the EU "could take that position too without speaking much about it".[416]

268.  Mr Janning noted that one option could be to resolve the region's political status with the help of an internationally mediated referendum, but that this would only be possible once relations between Ukraine and Russia had reached a calmer equilibrium.[417] Mr Kasyanov cautioned that it would have to be a "referendum organised in normal circumstances in the normal way", but said that to hold such a referendum would be to accept the order created by the Russians in violation of international assurances.[418]


269.  The Minsk Protocol is not being implemented, violence is escalating and with it the risk of a de facto annexation of part of Ukraine. A ceasefire, however desirable, is not in itself a permanent solution: the dismemberment of a sovereign independent state is not acceptable.

270.  There appears to be tacit acceptance within European and Ukrainian political circles that the priority is to move towards a political process in eastern Ukraine, leaving resolution of the status of Crimea to the medium or long term. We support this ordering of priorities: a political process with Russia on eastern Ukraine is urgent.

271.  However, the territorial integrity of Ukraine should not be jeopardised by any tactical steps taken as part of the peace process. As part of the peace process, an international dialogue could be convened to discuss the final status of Crimea. Here the signatories of the Budapest Memorandum, including the UK, could play a useful role.

272.  The possibility of another referendum on Crimea, under international mediation, is one option. We recognise that there is a danger that any such referendum would be coloured by Russia's domination of the political and media landscape in Crimea. It is critical that there should be an open and honest debate, and that citizens should vote without fear of reprisal. Nevertheless, this option should remain on the table.


273.  The conflict itself, along with the loss of revenue from industrial production and resources in eastern Ukraine, have imposed a debilitating cost on the Ukrainian economy. Lord Livingston of Parkhead, Minister of State for Trade and Investment, informed us that in September, "the European Bank for Reconstruction and Development (EBRD) predicted Ukrainian GDP would contract by 9% in 2014. In October, the World Bank predicted a contraction of 8%, while the IMF predicted a contraction of 6.5%".[419] In November 2014, Mr Bond wrote that inflation was expected to rise to 11.8% this year and that the value of the Ukrainian currency had fallen by almost 50% in 2014.[420] In January 2015, The Economist estimated that, factoring debt repayments and gas import bills into the equation, Ukraine would probably need $20 billion in external support to survive 2015.[421]

274.  Professor Guriev told us that the EU had committed €11.5 billion to Ukraine, which was "something like 6% or 7% of Ukrainian GDP".[422] Mr Crompton, speaking in September 2014, also drew attention to a significant IMF programme, "a £17 billion package in all, of which I believe £4.6 billion has been disbursed." The Government "believe that is enough but that is under review."[423]

275.  On the other hand, Dr Libman doubted that any realistic external funding would be enough to "rescue Ukraine", while accepting that the EU "could provide help in designing and implementing economic reforms, improving quality of bureaucracy etc."[424] Professor Guriev urged that if the EU wanted "an independent, democratic and prosperous Ukraine … the EU should prepare to think about further programmes of support in Ukraine."[425]

276.  The Minister for Europe, in December 2014, informed us that thanks to Russian intervention Donbas industrial production was not delivering the expected figures, and that the IMF was therefore reviewing the level of financing. He would not be surprised if there was "a need to add to the financing package that was agreed earlier in the year." He did not want to speculate on what the IMF would report, but said that the Government recognised that support for Ukraine would have to be for the long term. Beyond the moral case for supporting Ukraine, the Minister noted that a wealthy Ukraine could provide "marvellous investment opportunities for the agricultural and food processing sector, for retailing and for energy investment".[426]

277.  On 21 January 2015, the IMF indicated that there would be a new bailout package for Ukraine. It will be an "extended-fund facility", which means that the IMF will be able to lend more money to Ukraine for a longer period. However, while it may be more generous, it will not necessarily lead to quick, up-front disbursements. The Economist judged that the new bail-out would not help Ukraine solve its external debt owed to Russia.[427]

278.  When the Minister wrote to us in January, significant sums of EU funding had not yet reached Ukraine. The Minister informed us that since March 2014 the EU had disbursed "€1.36bn of the €1.61bn in macro-financial assistance committed to Ukraine", and that the Commission had funded three bilateral programmes under the ENP instrument: a €355 million 'state-building' general budget support programme (of which €250 million had been disbursed), to support the process of stabilisation; a €10 million civil society programme designed to enhance civil society's ability to promote the reforms required under the 'state-building' programme; and a €55 million regional development sectoral budget support programme to support Ukraine's Decentralisation and Regional Policy reforms.[428]

279.  The AA and the DCFTA were also seen as a "key element" of the EU's support for Ukraine. Mr Barton informed us that the DCFTA was "potentially a very significant step in terms of its immediate impacts", with the tariff reductions providing an estimated boost to the economy of over $1 billion a year. In the long-term, the adoption of the acquis would "play a very important role in helping Ukraine develop in a positive direction."[429] However, the implementation of the DCFTA has been postponed until January 2016, and there are still ongoing discussions on its implementation. Acting Ambassador Kuzmenko saw the trilateral process, involving Russia, Ukraine and the EU, as "a very good instrument to explain to the Russians that the majority of their negative expectations, worries and concerns about the Association Agreement are groundless."[430]

280.  Fighting corruption was also highlighted as a priority area. Mr Crompton said that "everyone recognises that [corruption] is a huge problem in Ukraine, including the Ukrainians". The AA could be a "powerful tool and leverage" to combat it. Mr Hugo Shorter, Head of EU Directorate (External), FCO, noted that the AA contained provisions "to help Ukraine strengthen the rule of law and attack the problem of corruption."[431] Acting Ambassador Kuzmenko assured us that the Ukrainian government was committed to combating corruption, with important steps being taken such as the adoption of anti-corruption laws and a law on lustration, which helped "to clean up the Government and local authorities."[432]

281.  The Minister for Europe wrote that "combating corruption was one of the earliest demands of the Maidan protestors." He set out the steps taken by the UK to aid Ukraine to fight corruption, which included hosting the Ukraine Asset Recovery Forum in London in April 2014, in order to help recover assets stolen by the former Ukrainian regime; a £0.5 million investment in supporting ongoing asset recovery investigations; and, in August, the launching by the UK of a two-year £4.3 million programme to provide rapid technical assistance to the Ukrainian Government.[433]


282.  Ukraine's reconstruction will require significantly more resources than have already been committed. We recommend that the United Kingdom should convene urgently an international donor conference for Ukraine.

283.  The disbursement of funds should be predicated on tough economic and political conditionality. This crisis is an opportunity for Ukraine to undertake difficult and much needed reforms. The EU, by holding the Ukrainian government to its commitments, has a role to play.

284.  The Association Agreement will only be a key element of support for Ukraine if the EU upholds its political conditionality. The area which we judge to be of particular importance to the future of Ukraine is in tackling corruption, also a key demand of the Maidan protestors.

285.  Member States, again, must play a role in monitoring and evaluating the implementation of conditionality attached to the disbursement of funds. We recommend that the UK Government should review its own internal mechanisms for monitoring Commission programmes, in order to maintain this political oversight.

286.  Building a Ukraine that is economically successful and secure in its energy supply will need Russian co-operation. The trilateral process, whereby the EU, Russia and Ukraine are engaging in discussions about the impact of the EU-Ukraine Deep and Comprehensive Free Trade Area, could be a useful template to discuss the broader Ukraine-Russia economic relationship.

255    Q53 Back

256    Q166 Back

257    Q154 Back

258    Q172 Back

259   Written evidence (RUS0019) Back

260    Q243 Back

261    Q2 Back

262    Q68 Back

263    Q166 Back

264    Q154 Back

265    Q138 Back

266    Q30 Back

267    Q172 Back

268    Q37 Back

269   Written evidence (RUS0003) Back

270    Q134 (Jean-Luc Demarty) Back

271    Q53 Back

272    Q254 Back

273   Written evidence (RUS0019) Back

274    Q245 Back

275    Q172 Back

276   David Cadier, 'Eastern Partnership vs Eurasian Union? The EU-Russia Competition in the Shared Neighbourhood and the Ukraine Crisis', Global Policy (October 2014): [accessed 2 February 2015] Back

277    Q166 Back

278    Q30 Back

279    Q37 Back

280    Q30 Back

281   Written evidence (RUS0019) Back

282    Q53 Back

283   Written evidence (RUS0019) Back

284    Q245 Back

285   European Endowment for Democracy, 'About EED': [accessed 2 February 2015] Back

286    Q124 Back

287    Q128 Back

288    Q213 Back

289   Roy Allison, 'Russian 'deniable' intervention in Ukraine: how and why Russia broke the rules', International Affairs, vol. 90:6 (2014), pp 1255-1297: [accessed 2 February 2015] Back

290   Written evidence (RUS0019) Back

291     Q31 Back

292   Written evidence (RUS0015) Back

293   'Russian 'deniable' intervention in Ukraine: how and why Russia broke the rules', page 1262 Back

294   Ibid., page 1272  Back

295   Ibid., page 1278  Back

296   'Kravchuk, Kuchma and Yuschenko call to denounce Kharkiv Pact', Kyiv Post, (3 March 2014): [accessed 2 February 2015] Back

297    Q177 Back

298   'Russian 'deniable' intervention in Ukraine: how and why Russia broke the rules', page 1263 Back

299   'The Ukraine Crisis Timeline', Centre for Strategic and International Studies website: and International Crisis Group website: %7b8864A71C-2EC4-456D-A9BC-5E7190244489%7d#results [accessed 2 February 2015] Back

300   'Russian 'deniable' intervention in Ukraine: how and why Russia broke the rules', page 1280 and Paul N Schwartz, 'Crimea's Strategic Value to Russia', Centre for Strategic and International Studies (18 March 2014): [accessed 2 February 2015]. In fact, Roy Allison goes further to argue that the Russians viewed the retaking of the Sevastopol base as an opportunity to rebuild it as a platform for power projection.  Back

301   Vladimir Putin, speech to State Duma deputies and Federation Council members (18 March 2014): [accessed 2 February 2015] Back

302    Q57 Back

303   Written evidence (RUS0015) Back

304    Q37 Back

305   Written evidence from His Excellency Dr Alexander Yakovenko (RUS0019) Back

306    Q246 Back

307    Q98 Back

308    Q76 (Acting Ambassador Kuzmenko),  Q256 (Rt Hon David Lidington, Minister for Europe) and  Q38 (John Lough) Back

309    Q76 Back

310    Q27 Back

311    Q170 Back

312    Q192 Back

313   Administrative divisions Back

314    Q67 Back

315   International Crisis Group website: keywords=ukraine, 'MH17 crash: Pressure grows on Russia over crash inquiry', BBC News (20 July 2014): and 'Germany blames pro-Russian rebels for MH17 passenger plane crash-Spiegel', Reuters (19 October 2014): 10/19/ukraine-crisis-mh17-germany-idUSL6N0SE0AX20141019 [accessed 2 February 2015] Back

316    Q67 (Acting Ambassador Kuzmenko) Back

317    Q52 Back

318    Q251 Back

319    Q60 Back

320    Q29 Back

321   The self-proclaimed People's Republic of Luhansk and People's Republic of Donetsk have declared themselves independent republics. They have held referendums and elections which have been declared illegal by the EU. The leaders are listed by the EU under its Ukraine restrictive measures. Back

322   In the weeks that followed the signing of the Minsk Protocol there were frequent violations of the ceasefire. Talks continued in Minsk and a follow-up to the Minsk Protocol was agreed on 19 September. These two memorandums are collectively known as the Minsk Agreements. Back

323    Q257 Back

324    Q165 Back

325   Appendix 5: Evidence taken during visit to Berlin  Back

326   As at 21 January 2015, the United Nations estimated that more than 5,000 people had been killed and over 10,000 had been wounded in the conflict in Ukraine since mid-April 2014. The United Nations Office of the High Commissioner for Human Rights added that the real figure could be "considerably higher". 'Death toll in Ukraine conflict exceeds 5,000, may be 'considerably higher'-UN', UN News Centre (23 January 2015): [accessed 2 February 2015]  Back

327    QQ67, 76 Back

328    Q257 Back

329    Q164 Back

330   Written evidence (RUS0015) Back

331    Q37 Back

332    Q31 Back

333    Q37 Back

334   Ibid. Back

335   Written evidence (RUS0007) Back

336    Q153 Back

337    Q172 Back

338    Q31 Back

339    Q172 Back

340   Kiev was the capital of the first Slav state, Kyivan Rus (10th-11th centuries). Crimea only became part of Ukraine in 1954 when Nikita Khrushchev gifted it to Ukraine. Ukraine achieved independence in 1991 with the dissolution of the Soviet Union (Rodric Braithwaite, 'Russia, Ukraine and the West', RUSI Journal, vol. 159 no. 2 (April/May 2014), pp 62-65) Back

341    Q21 Back

342    Q174 Back

343    Q218 Back

344    QQ210, 212 Back

345    Q210 Back

346    Q53 Back

347    Q238 Back

348    Q130 (Graf Lambsdorff) and  Q238 (Mikhail Kasyanov) Back

349   Anders Aslund, 'The Basket Case', Foreign Policy (26 November 2013): 11/26/the-basket-case/ [accessed 29 January 2015] Back

350   'Ukraine: Running out of Time', International Crisis Group, Europe Report no. 231 (14 May 2014), page 26: [accessed 29 January 2015] Back

351    Q183 (Ambassador Gachechiladze) and written evidence from Ambassador Yakovenko (RUS0019) Back

352   'Vladimir Putin's interview with Radio Europe 1 and TF1 TV channel' (3 June 2014): [accessed 29 January 2015] Back

353    Q81 Back

354    Q162 Back

355    Q243 Back

356    Q21 Back

357    Q245 Back

358    Q134 Back

359    Q245 Back

360    Q21 Back

361   Ibid. Back

362    Q134 Back

363    Q141 Back

364    Q254 Back

365    Q134 Back

366    Q81 Back

367   Council Decision 2014/512/CFSP of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine (31 July 2014): [accessed 2 February 2015] Back

368    Q60 Back

369    Q220 Back

370    Q221 Back

371    Q161 Back

372    Q165 Back

373   Written evidence (RUS0001) Back

374    Q59 Back

375    Q58 Back

376   'Russia sees higher capital outflows with ruble near record level', Bloomberg (17 November 2014): [accessed 2 February 2015] Back

377    Q256 Back

378    Q77 Back

379    Q222 Back

380    Q44 Back

381    Q59 Back

382    QQ85, 77 Back

383    Q77 Back

384    Q116 Back

385   Written evidence (RUS0015) Back

386    Q59 Back

387    Q256 Back

388    Q77 Back

389    Q22 Back

390   Written evidence (RUS0015) Back

391    Q50 Back

392   Written evidence (RUS0010) Back

393    Q78 Back

394    Q90 Back

395   Written evidence (RUS0010) Back

396    Q58 Back

397   Written evidence (RUS0010) Back

398   Written evidence (RUS0013) Back

399   'Why the German economy is in a rut', The Economist (21 October 2014): blogs/economist-explains/2014/10/economist-explains-14 [accessed 2 February 2015] Back

400   Appendix 5: Evidence taken during visit to Berlin Back

401    Q96 Back

402    Q12 Back

403    Q98 Back

404    Q230 Back

405    Q102 Back

406   Appendix 5: Evidence taken during visit to Berlin Back

407    Q60 Back

408    Q256 Back

409   European Council 20/21 March 2014, Council Conclusions (21 March 2014): [accessed 2 February 2015] Back

410    Q75 Back

411    Q56 Back

412   Ibid. Back

413    Q115 Back

414    Q112 Back

415    Q115. We note that there are precedents for this: for example, the EU and Member States maintain diplomatic and economic relations with China, despite not recognising its occupation of Tibet.  Back

416    Q115 Back

417   Ibid.  Back

418    Q239 Back

419   Letter from Lord Livingston of Parkhead, Minister of State, Department for Business, Innovation and Skills to Lord Boswell of Aynho, Chairman of the European Union Select Committee, 5 January 2015 Back

420   Quoted in Ian Bond, 'Ukraine after the elections: Democracy and the barrel of a gun', Centre for European Reform (27 November 2014): [accessed 2 February 2015] Back

421   'Ukraine and the IMF, Bigger and better', The Economist (22 January 2015): news/finance-and-economics/21640374-new-bail-out-will-be-no-panacea-bigger-and-better [accessed 2 February 2015] Back

422    Q78 Back

423    Q55 Back

424   Written evidence (RUS0015)  Back

425    Q78 Back

426    Q254 Back

427   'Ukraine and the IMF, Bigger and better' Back

428   Written evidence (RUS0020). In January 2015, the Commission proposed providing a further €1.8 billion of macro-financial assistance to Ukraine in the form of long-term loans. 'Proposal for a Decision of the European Parliament and of the Council providing macro-financial assistance to Ukraine', COM (2015) 5 Final (8 January 2015): council_parliament_proposal_ukraine_en.pdf [accessed 2 February 2015] Back

429    Q55 Back

430    Q69 Back

431    Q55 Back

432    Q74 Back

433   Written evidence (RUS0002) Back

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