How Canada played a key role in neoliberalizing Ukraine
Canadian foreign minister Melanie Joly on the left, Ukrainian Defence Minister Oleksii Reznikov on the top right and Canadian Prime Minister Justin Trudeau on the bottom right.
Image credit: CGTN, FC Dynamo Kyiv and Fox News.
Editor’s note: This is part three of a three-part series into how Canada and the broader West used a compliant post-Maidan coup government to privatize agriculture to the severe detriment of ordinary Ukrainians. This part focuses on Canada’s role in pushing through Ukraine’s destructive economic liberalization, as described in parts one and two of this series.
Written by: Peter Korotaev
The 2019 ‘Ukraine Reform Conference’ in Toronto
The ‘Ukraine Reform Conference’ is as an annual event that engages political leaders from NATO countries, the G7, the European Union and private think tanks in key reforms aimed at reforming Ukraine’s economy.
‘Reform’ is a favorite buzzword among liberals in post-2014 Ukraine, following the western sponsored Maidan coup. It implies a set of initiatives advocated by loyal foreign allies designed to lift Ukraine out of its poverty. In reality, it’s a politically neutered way to describe neo-colonial economic liberalization, the topic of the previous two articles.
One detrimental reform seen in post-maidan Ukraine was the elimination of food price regulation in 2017. Along with the destruction of Ukraine’s domestic food production as a result of trade liberalization, this lead to food scarcity and hunger even exceeding levels of many Latin American countries.
All the usual suspects were present at the 2019 Ukraine Reform Conference – Chrystia Freeland, Justin Trudeau, and delegates from other NATO countries and Ukraine. The key issue on the agenda was “the irreversibility of reforms in Ukraine”. Apart from the undesirability of said reforms, ‘irreversibility’ hardly seems like a democratic way for a group of foreign countries to advocate for implementing economic reforms in a given country. For the Ukraine Reform Conference however, it’s a go!
In fact, the ‘irreversibility’ of these reforms directly rules out the pursuit of democracy. 2021 saw the legally dubious sanctioning of leaders of political parties such as the Opposition Platform for Life (OPFL), by presidential decree. This party, which primarily represented the industrial workers of Ukraine’s south-east, advocating a pro-peace and anti-IMF platform, consistently ranked high among voters. At the start of 2021, it often came a close second in polls after Zelensky’s “Servant of the People”. Following Zelensky’s 2021 unilateral bans and sanctions against the OPFL’s media voice and leading politicians, the party lost a third of its voters. Bypassing due process within the court system, associated media groups which described the negative effects of IMF-sponsored economic liberalization were also closed in 2021 by order of Zelensky’s National Security and Defense Council. This included ZiK, Strana, 112, NewsOne and Ukrlive among others, with Zelensky even sanctioning the Editor in-Chief of the social democratic opposition media source Strana. The reasoning for such crude censorship was vague and criticized by the European Federation of Journalists.
The west was also complicit in suppressing opposition parties, with US officials following in lockstep with Zelensky in sanctioning these Ukrainian political figures critical of western integration. At a high level, imposing sanctions is juridicially (administration of the law) absurd since opposition figures in foreign countries don’t pose any direct threat to the USA. OPFL-affiliated independent parliamentarian Andriy Derkach was one of those sanctioned; largely known in the west for bringing to light Hunter Biden’s corrupt affairs in Ukraine.
Further, in a long article marking one year since Russia’s large-scale military operation against Ukraine, the media portal ‘Strana’ (sanctioned by the Zelensky government) published an article arguing that the banning of ‘pro-Russian’ parties and media was the tipping point that pushed Russia to war in 2022. A more recent Russian opposition longread has also repeated this argument. Given that all pro-peace and geopolitical neutrality political forces had been banned, there was no longer any reasonable hope for Ukraine to remain a neutral, non-NATO country through democratic means.
What sort of ‘reforms’ were celebrated in the 2019 Toronto conference? The Ukraine Reform Conference declared one of the biggest ‘achievements’ of Ukraine’s “reforms” to be the liberalization of medicine—a reform regularly lambasted by the sanctioned left-leaning Ukrainian media groups. Before these reforms, Ukraine had a broadly Soviet model with a variety of specialized doctors. After the reform, many medical personnel lost their jobs and affordable specialty doctors were replaced with westernized general practitioners and private clinics. The mastermind of this reform, Ulyana Suprun—herself born in the USA and receiving her post directly after the Maidan coup-- is widely hated in Ukraine for this reform; she is often called “Doctor Death”.
She is also a close patron of neo-Nazi military veterans such as Serhii Sternenko. On trial for torture and extortion in 2020 (he also murdered an unarmed man on camera with a knife, but was never brought to court for it), Sternenko was of course released due to his ‘patriotism’ (he was an early participant in the 2014 Maidan coup and a leader of the neo-Nazi organization ‘Right Sector’). Suprun came to his trial in 2020 and offered to pay for his bail.
The liberalization of medicine facilitated another “crowning achievement” in Ukrainian health and prosperity—some of the highest COVID death rates in the world. Ukraine’s hospitals regularly lacked stocks of oxygen due to Suprun’s system of small privatized clinics and underfunded public hospital. Meanwhile, neighbouring Belarus’ Soviet-style healthcare system allowed it to have one of the lowest COVID death-rates in the world. In Belarus, only 7,118 people or 0.07 per cent of the population died of COVID (without any lockdowns) while 111,000 people died of COVID in Ukraine. This is a remarkable statistic given that Ukraine’s population is about 3.5 times bigger than Belarus.
In 2020, Ukraine’s health minister stated that continuing Suprun’s reforms would require firing 50 000 healthcare workers and closing 300 hospitals. While Zelensky’s government complained about how underfunded Suprun had made the health system, it still officially stated its loyalty to pursuing her neoliberal reforms. Healthcare workers at Ukrainian psychiatric care facilities often engaged in protests, stating that Suprun’s reforms meant:
laying off 30 per cent of employees in the sector;
cutting funding for pyschiatric care facilities by half the amount available until Suprun’s reforms began;
reducing the pay of doctors to USD $140 a month while simultaneously increasing their workload and;
removing rehabilitation centres, resulting in psychiatric patients being forced onto the street.
In Ukraine, liberal reforms are ‘irreversible’. Media outlets and politicians which critique these destructive reforms are undemocratically censored. Not only does this west-facing liberalization negatively impact the health of Ukrainians, but it has deindustrialized the economy.
Canada-Ukraine trade
In 2016, Canada and Ukraine signed a trade agreement (CUFTA) which came into force in 2017. While on the surface this appears to be a positive development in bilateral trade, a 2021 statistic showed that Ukraine imported $261 million USD of Canadian goods, but only exported $160 million USD of its own goods.
The structure of the trade is also deeply imbalanced. In 2021, Ukraine’s top three exports were ferrous metals, copper/copper products, and processed vegetable products (sunflower oil). Canada’s top exports were transport goods, seafood, nuclear reactors, boilers, machines, and aircraft. Canada’s exports of high-tech goods increased by 147 per cent compared to 2020.
Where Ukraine exports cheap raw materials which only require low-paid unskilled workers, Canada exports more expensive manufactured goods which require high-paid, skilled workers. This encourages Ukraine’s further ‘specialization’ as a country of low-paid manual laborers. As we saw in part one of this series, Ukraine’s specialization as an agricultural raw materials exporter has made millions of workers redundant, forcing them to work as super-exploited migrant laborers in EU nations such as Poland, thereby subsidizing their economic growth.
Canada’s free trade agreement with Ukraine, like Ukraine’s other FTA’s with western partners, is in fact deeply unequal against Ukraine. Supporters claim that the FTA benefits Ukraine more than Canada, since it cancels tariffs on 98 per cent of Ukrainian exports to Canada, but only 72 per cent of Canadian exports to Ukraine. The first thing to note is that the FTA also stipulates that all tariffs will be removed after 7 years time. In the meantime, among the 72% of Canada’s tariff-free goods include beef and processed food.
This will further impact Ukraine’s livestock and food processing industries, which, as our last articles showed, sharply declined after 2014 under pressure from foreign competition in conditions of near-total trade liberalization. Even in its early, ‘softer’ stage, the FTA with Canada also contributes to this tendency. It is hence no surprise that, as we saw in part two of this series, Canada is among Ukraine’s top sources for pork. This one of many food products Ukraine imports far more than it exports, and whose domestic production has declined for decades.
Another reason why CUFTA doesn’t favor Ukraine is that it keeps many of Canada’s huge agricultural tariffs on imported goods in place. Ukraine’s liberalized agriculture, on the other hand, does not boast any such similarly protective tariffs. This is a revealing example of the west’s hypocrisy when it comes to ‘free trade’ with the developing world. CUFTA exempts 108 agricultural product groups from tariff-free imports to Canada, including poultry and dairy products, eggs, and sugar. This is especially troublesome for Ukraine, as explored parts one and two of this series, since these sectors have been steadily declining due to unfettered competition from other western producers.
These exempted goods are still subject to huge Canadian tariffs (many of which are over 100% the price of the imported product, for instance an extraordinary 238 per cent tariff for bird meat) beyond small import quotas. So much for ‘free trade’. Even if Ukrainian exporters eventually get equal access to the Canadian market for these goods, by that time Ukraine’s agriculture will be so devastated by economic liberalization that it won’t be able to make use of it.
Meanwhile, the Canada-Ukraine Chamber of Commerce predicted that the only tangible Ukrainian sectors which would benefit from this FTA would be that of IT services, clothing, shoes, furniture, chocolate, and other confectionaries. In this context, it is worth recalling that Petro Poroshenko, Ukraine’s president at the time, made his billions in large part in the confectionary industry, through his company ‘Roshen’. The other sectors named represent Ukraine’s trend towards deindustrialization and specialization in low-tech, labor-intensive goods produced in low-wage sweatshops.
IT is often upheld as the leading sector of the economy in Ukraine. However, only a small minority of Ukrainians can actually become successful computer programmers, and many will emigrate permanently when given the opportunity. A pro-FTA Ukrainian publication cites increases in Ukrainian IT service exports to Canada as proof of the FTA being beneficial for Ukraine.
The inequality of Ukraine’s trade relations with Canada are also evident in terms of services, where 62 per cent of Ukraine’s service exports to Canada in 2017 were IT services, while 61 per cent of Canada’s service exports to Ukraine were state and government services. In essence, CUFTA enables Canada to manage the Ukrainian government, while Canadian IT-companies can outsource jobs to low-paid Ukrainian IT workers.
The trend towards deindustrialization is evident in Canadian-Ukrainian trade with respect to high-tech gas turbine and automobile production. In 2011, Ukraine exported $20.6 million USD worth of gas turbines to Canada, but in 2021 it only exported $4.6 million USD worth. The fact that cars are among Ukraine’s exports to Canada can be easily misunderstood. Rather, this refers to automobile cables, typically created in agricultural west Ukrainian sweatshops which are later used in car assembly by west European automobile firms.
The FTA with Canada also affords equal access for producers in either country to state purchases. In the words of Emma Touros, head of the Canada-Ukraine Chamber of Commerce: “Foreign companies now have equal access to public procurement projects. CUFTA is a modern agreement that gives Canadian companies many advantages to explore.” Because Canada’s industrial development is far more advanced than Ukraine’s, the advantage of foreign public procurement lies with Canada, while opportunities for state support to Ukrainian industry remain neglected.
Post-Maidan coup Ukraine has also entered in other agreements, such as the 2016 Ukraine-EU free trade Association Agreement, and the 2016 Agreement on Government Procurement under WTO, both of which give rich western nations free access to Ukrainian state purchases. These agreements were cited by the EU and USA when it told the Ukrainian government in 2020-21 that its attempt at industrial protectionism via Bill 3739 was unacceptable. This bill would have given Ukrainian producers preferences in state purchases, as is the norm in most countries, including the USA and EU. Ukraine changed the bill to allow EU and North American access to Ukrainian state purchases as a result of this pressure. The ministry of economic development and parliamentary committee on economic development, representatives of which proposed and defended the law, pointed to the fact that 40 per cent of Ukraine’s state purchases were from foreign producers, while the EU and USA only sourced eight per cent and five per cent respectively of its state purchases from foreigners.
The CUFTA’s bias against Ukraine could already be seen by the end of 2017 where Ukrainian imports from Canada rose by 93 per cent, while exports to Canada only rose by 76 per cent, widening the already huge trade deficit.
In examining longer term trade statistics, it becomes clear that the FTA with Canada has done little to improve trade relations. Canadian statistics claim that Ukraine last enjoyed a trade surplus (+$15.7 million USD) with Canada in 2012. The largest pre-2014 deficit (-$63 million USD) was in 2010, the first year of Yanukovych’s government after Yuschenko -the neoliberal, pro-western Ukrainian leader- left office. While 2013 saw a trade deficit of $97 million USD for Ukraine, it vastly expanded after the 2014 coup. By 2016, Ukraine experienced an trade deficit with Canada of $158 million USD.
While the trade deficit with Canada decreased by 2021, an even bigger problem remained– the low volume of Ukrainian-Canadian trade. Ukraine’s exports to Canada in 2021 were only $3 million USD higher than what they were in 2011, with a total trade turnover of under $400 million USD.
Agricultural ‘aid’ and loans
A look at the kind of agriculture Canada wants to see in Ukraine can be seen in their choice of aid projects. In 2015, the Canadian minister of foreign trade Ed Fast announced $52 million USD in aid for Ukrainian economic liberalization reforms following the 2014 coup.
One of these projects was $13.5 million to aid Ukrainian grain farmers. Rather than supporting the diversification of Ukraine’s agriculture Canada opted instead to promote the further development of big monoculture farming of Ukraine as a corn, wheat, and sunflower oil republic. As we saw in the second article of this series, this form of intensive monoculture farming worsens food insecurity and the long-term degradation of agricultural soil.
In part one of this series, we discussed a study by the ‘Ukraine Land Transparency Project’ which claimed that land privatization led to a higher GDP growth rate, and more restrictions placed on the land market (including restricting the access by foreigners), lower the growth rate. Interestingly, this NGO is funded by the European Union (EU) and World Bank (WB), and led by Klaus Deininger, an economist who works in the WB. Canada, a founding member of the World Bank Group, is the 11th largest shareholder and holds a permanent seat on the 25-member Board of Executive Directors, along with other mainly western countries. Canada holds great power and influence in determining the direction of WB funds; in fact, it is the sixth highest donor to the WB concessional fund for loans and grants to poor nations.
A recent study by the Oakland Institute think tank has illuminated the role of these financial institutions (as well as those of the European Union) in accelerating Ukrainian agricultural privatization. Even before Euromaidan, the WB provided an $89 million loan in 2013 to privatize state land and move towards the privatization of individually owned land in Ukraine, which makes up the majority of agricultural land. The IMF gave a $17.5 billion USD loan in 2015 and a $3.9 billion USD loan in 2018, both tied to land privatization. After calling for land reform again in 2017, the IMF set up a working group with Ukrainian state ministries and the WB to organize land privatization.
The World Bank has also been crucial in pushing for land privatization in Ukraine. In 2019, the WB’s announced a $200 million USD loan for the liberalization of the agricultural market. In 2020 and 2021, the WB approved two loans for Ukraine totaling $700 million USD with the aim of “establishing a transparent market for agricultural land”, as well as other neoliberal privatizing reforms. Zelensky’s 2020 removal of the moratorium on buying and selling land was motivated by the IMF making this as the condition for a $5 billion USD loan.
In the second article of this series, we examined how big agrobusiness has been given huge subsidies by the Ukrainian government. Not only have these Canadian-sponsored financial institutions aggressively pushed through agricultural privatization in Ukraine, but they have also systematically directed agricultural aid towards big agroholdings instead of the small and medium farmers that produce over 50% of Ukraine’s declining food supply, despite only cultivating 12% of Ukraine’s total farmland.
According to findings by the Oakland Institute, since 2004 the WB provided Ukraine’s biggest agrobusinesses with $1 billion USD in loans. The WB’s loan policy stipulated that smaller farmers (so far only 2,000 of them) can only gain access to these funds if they use their future harvests as collateral. The WB has created a special fund to credit smaller farmers, but it only contains $5 million USD.
The Oakland investigation also reports extensively on how the west exercises control over Ukrainian agrobusiness through its debt leverage. For instance, UkrLandFarming, one of Ukraine’s largest agrobusiness and the eighth largest in the world by acreage of controlled land, accrued $1.25 billion USD in debt owed to western creditors including to Canada’s Import-Export agency, by 2020. A 2016-17 restructuring of $500 million USD in Eurobonds arranged by these creditors involved layoffs of 6,000 employees.
In short, the agricultural aid loaned by the west to Ukraine always has the explicit – and constantly successful – aim of liberalizing Ukraine’s agricultural market. This ‘aid’ constantly intensifies the extent to which Ukraine’s agriculture is dominated by the big agroholdings whose interests, as we saw in part 2 of this series, sharply contradict those of most Ukrainians.
Sponsorship of pro-liberalization ‘Ukrainian voices’
Victoria Nuland, Under Secretary of State for Political Affairs of the United States and a key player in Ukraine’s 2014 regime change, boasted in 2014 that the USA had spent $5 billion USD in Ukraine over the past 30 years ‘promoting democracy’. In 2021, Ukraine was the number one country in Europe in terms of USAID fund destinations ($300 million USD in just that year). Canada spent $890 million CAD on aid to Ukraine from 2014-2021. More than $250 million CAD was for development aid, over $100 million CAD was directed to Ukrainian military and police, and the rest of the $890 million CAD was humanitarian aid.
‘Humanitarian’ aid has been a key vector of western influence over Ukraine. The west has spent a colossal amount of money supposedly ‘building civil society’ in Ukraine. A more accurate description of this would be that the west has bought off or even created a sizeable section of the Ukrainian urban intellectual class.
For instance, Canada spent $2.2 million CAD ‘strengthening investigative reporting in Ukraine’ from 2014-2017, and $2.9 million CAD ‘Strengthening Democratic Parties and Civil Society Organisations in Ukraine’ from 2015-2017. Canada also spent $500,000 CAD on ‘dialogue for reform and social cohesion in Ukraine’ from 2016-2018. The program was focused on Eastern Ukraine and aimed to “reduce social tensions” and “increase social cohesion” through “dialogue efforts between Ukraine's central government and regional stakeholders”. It is no wonder that such ‘aid’ is considered necessary, given that the predominantly industrial Eastern Ukraine has always been mostly against the destructive economic liberalization represented by the EU association agreement.
Having been given coveted upwards mobility by the west, the ‘civil society’, a relatively privileged minority Ukrainian society, defends the aims of its sponsors. This voice of supposedly politically conscious Ukrainians’ is the only one seen in the west because it is created by the west. Their investigative journalism focuses on individual corruption scandals, rather than the social issues created by privatization and economic liberalization.
The ‘Ukrainian voices’ spotlighted by the west never miss the chance to stress how “Ukraine needs land reform”, meaning land privatization. While acknowledging that the majority of Ukrainians are opposed to this reform, these western-funded ‘Ukrainian voices’ argue that this is the result of ‘poorly justified but emotionally loaded arguments’ made by opportunistic politicians. Ukraine’s most influential newspaper, ‘Ukrainian Truth’, is funded by USAID and other western liberal structures such as the Open Society Foundation – it never misses the chance to urge acceleration of land privatization.
Ukrainian politicians critical of these neoliberal reforms have described this as the voice of “a foreign army of journalists trained on western money that work against our own state”. This army of western agents bent on economic liberalization and NATO militarization exposed their true intentions with the 2013-14 Maidan coup, where western-funded journalists such as Mustafa Nayyem began this ‘revolution’ in favor of a free trade agreement with the EU.
Asides from creating a loyal political class, the west has also found it important to “invest” in Ukraine’s electoral infrastructure. Canada spent $24 million CAD in 2018-19 on ‘election transparency support’. Canada spent another $5.4 million CAD ‘building capacity of electoral actors in Ukraine from 2014-18, which involved sponsoring training 60 000 Ukrainian elections commissioners.
It was USAID and Open Society Foundation-funded ‘election monitor’ pollsters and NGOs that called foul on the 2004 elections which saw Viktor Yanukovych claim victory over Viktor Yushchenko. As a result of this western-backed ‘election transparency support’ and heavy western government pressure, the so-called ‘orange revolution’ took place - unconstitutional re-elections were implemented, resulting in the victory of the pro-Western Viktor Yuschenko who implemented wide ranging neoliberal economic reforms. The claims of election manipulation by Yanukovych were never corroborated by evidence, with none of the previously accused organizers of ‘election fraud’ actually charged despite Yuschenko’s many years in power and attempts to do so. Journalists have highlighted the key role of Canada in engineering this 2004 regime change.
As for economic aid, the official position by the Canadian government on support for Ukraine is quite clear: “Canada fosters inclusive growth, led by the private sector; promotes investment and job creation, particularly in agriculture”. It also has an interest in highlighting a $25 million CAD aid program aimed at assisting rural women, internally displaced persons, persons with disabilities and other vulnerable groups in Ukraine.
This is precisely what Roman Waschuk —former ambassador of Canada to Ukraine— meant when in 2020 he famously talked of ‘what the west got wrong in Ukraine’. He argued that forced economic liberalization, such as the privatization of land, which harms the majority of the population, is patched over by the west with aid programs for minority groups, resulting in the unpopularity of western reforms among most Ukrainians. While Waschuk thought that this was a ‘mistaken’ strategy, this would imply that western interests are harmed by this approach.
We can, thus, speak of two functions of Canadian ‘aid’ to Ukraine. The first is various charitable aid schemes, such as those helping minorities; the primary function though, is to distract from the destructive economic reforms in Ukraine pushed by the west. The second is through funding projects which directly protect Canadian economic interests. Examples of the latter are the ProZorro program and court reform.
ProZorro
ProZorro is a program for state purchases created by George Soros’s Transparency International created after 2014. While Transparency International’s mandate is supposedly to fight against corruption, 60 per cent of their funding comes from government agencies, including Canada’s Department for Foreign Affairs, Trade and Development. Given what we have learned thus far regarding Canada’s nefarious role in instituting reforms in Ukraine to suit Canada’s economic interests, ProZorro and its aims should already raise eyebrows.
ProZorro is commonly hailed as one of the west’s great reform ’successes’ in Ukraine. EU delegate to Ukraine Matti Maasikas called it one of Ukraine’s most powerful reforms which should inspire countries all over the world. Former Canadian ambassador in Ukraine Roman Waschuk has granted similar praise: “ProZorro stands out as a world-beating change, internationally recognized for the transparency this platform brings to public procurement in Ukraine.” The 2019 Toronto Ukraine Reforms conference emphasized “partnering with civil society and the private sector to promote accountability and transparency” as one of the top priorities of “Canada and the international community in working with Ukraine”.
So why such praise for ProZorro? First of all because, as the website explains, the purpose of the program is to privatize state assets. It “ensures that any business can have a clear process of pricing and transfer of state, municipal and big corporates’ ownership.” ProZorro is also kind to foreigners. Maksym Nefyodov, deputy minister of economic development and trade, boasted that ProZorro is one of “many services already present in Ukraine to help Canadian сompanies do business here and thrive”.
The EU’s praise for ProZorro’s privatization goals is unsurprising given their past (successful) struggle against Ukraine’s Bill 3739, which was meant to implement preferences in state purchases for domestic production. This bill clashed with ProZorro, which did not allow domestic localization of state purchases. Ihor Petrashko, the Ukrainian minister of economic development at the time, criticized ProZorro on this account. In the end though and in lockstep with the interests of the EU, the US and NGOs including Transparency International, Ukraine’s Bill 3739 was watered down to only apply to non-western producers. The WB has also made ProZorro a showcase program for ‘non-corrupt’ state purchase systems, which aligns perfectly well with the neoliberal agenda of the WB in global South countries.
Finally, ProZorro is also used to auction off agricultural land. Since this land is the collateral of bankrupt banks, it can be sold in large quantities without being impacted by Ukrainian restrictions on buying and selling land. ProZorro uses a peculiar mechanism in auctioning off this land. The Ukrainian journalist Roman Gubrienko dedicated several detailed articles to analyzing it.
Gubrienko found that through ProZorro, prime plots of land are sold for far lower than the normal price. A piece of land estimated to be worth 3.9 million Ukrainian hryvnias by an independent auditor was sold for only 602,000 hryvnias in 2021. After analyzing thousands of land sales done through ProZorro, Hubriienko discovered many such cases of extreme discounts. For instance, after looking at 21 land sales by ProZorro selling the land collateral of the bankrupt BTB bank in 2021, he found that while the estimated total price of all land sold was 17.5 million hryvnias, ProZorro slashed the selling price to a total of only 1.9 million hryvnias. The average estimated price of each plot of land was valued at over 1 million hryvnias, while the actual selling price was only 80 000 to 100 000 hryvnias (around $3,000 to 4,000 USD).
One of the reasons for these incredible discounts is because ProZorro utilizes an unusual type of auctioning system. For the sale of land, it often operates by ‘Dutch auction’. As its website explains, this means that “The starting price of the lot during the entire auction is gradually reduced from 100 per cent to 20 per cent at certain intervals in automatic mode. The reduction will continue until one of the players ‘gets nervous’ and presses the ‘buy’ button. ‘This type of bidding is used in the ProZorro sale system instead of the standard ‘English’ auction system when it is difficult to determine the minimum market price of the lot. The decision to pursue a Dutch auction is made if the organizer has twice announced an English auction but no participant has submitted to it. In this case, a Dutch auction is announced, and the minimum starting price is determined by the participants themselves.’
Gubrienko denounces the use of this reasoning to justify Dutch auctions for land sales. In his research, the immense land discounts he discovered were for prime agricultural land close to the capital of Kyiv. These are in no way ‘difficult assets’ whose market value is difficult to determine, meaning that there is no reason to use Dutch auctions in selling them.
Perhaps even more scandalously, Gubrienko’s research reveals that many of these dramatically discounted land deals went to affiliates of Soros’ business network, as well as to other western capitalists. This is not surprising, considering the extent to which ProZorro itself is not controlled by the Ukrainian government itself.
Apart from land, ProZorro was also used for highly important sales of bankrupt bank land collateral. But despite the importance to any state of maintaining direct control over such assets, the ProZorro program remained officially controlled under Transparency International Ukraine from 2017 to mid-2019. It took one and a half years for the Ukrainian government to formally take control of this process by making Prodazhy’, a state company, the administrator of ‘ProZorro’. On the ProZorro website, Transparency International is still visible as a main partner of the company alongside the Ukrainian government.
Prozorro is a showcase of ‘success’, if that is qualified as success in heavily discounted Ukrainian assets to favored western business groups.
Western sponsored court reform
In 2021, Larisa Galadza, the Canadian ambassador to Ukraine named three top reform priorities for Ukraine, in conjunction with the goals by the G7 and NATO. The first was court reform, or ‘anti-corruption and court reform’ as EU foreign policy representative Josep Borrell characterized it. Court reform was considered even more important than macroeconomic stability and military reform. The west has been investing in this ‘march through the institutions’ for a long time. In 2011, for instance, Canada spent $12.5 million CAD training Ukrainian judges. It spent $7 million CAD from 2012-2017 training Ukrainian judges and another $12.4 million CAD from 2016-21 to ‘support judicial reform in Ukraine’ by training judges.
In his 2020 lecture ‘What the west got wrong in Ukraine’, former Canadian ambassador Roman Waschuk discusses the significance of the west’s court reforms as follows:
“The four-level court system designed and staffed by Yanukovych-era legal affairs chief Andriy Portnov was reduced to three levels; the old Supreme Court was dissolved (and immediately appealed its dissolution as unconstitutional); the Council of Europe insisted that judges themselves and the legal community play a preponderant role in renewal, in accordance with the principle of an independent judiciary; a US/EU/Canada-subsidized hyper-transparent selection and training process was run; in a world-first, civil society was given an advisory role in assessing every candidate on integrity issues. The outcomes: a court with about 80% straight arrow judges, headed by a female Chief Justice, Valentyna Danishevska, with a long track record in Western-supported judicial reform, and a respectable record of court rulings in its first two years of operation, including controversial cases such as the nationalization of Privatbank, owned by oligarch Ihor Kolomoisky.”
Why has this judicial reform been so important to the west? As a result of these reforms, the supreme court was dissolved and the domestic legal system was stripped of its autonomy and placed under the direct control of the west and western sponsored ‘civil society’. With the court system under control of so-called ‘independent experts’ subsidized by the west, the judicial system has put up no fight against the government’s hyper-liberal wartime labour liberalization.
Like workers in Mexico, Canada and the USA following the North American Free Trade Agreement (NAFTA), workers in Ukraine suffer as a result of low wages, unemployment and lack of enforced labor protection, so much so that they often go to work in the EU as low wage migrant workers. As we saw in our previous two articles, the supposed ‘progress’ enacted by agricultural liberalization in Ukraine is questionable as domestic employment has been in perpetual decline. In 2021, 660 000 people left Ukraine permanently, a historical record for the country. According to the Polish ambassador to Ukraine, in June 2021 there were 1.5 million Ukrainians working in Poland. He said this was two to three times more than in 2014, and this only counts legal migrants. Poland’s central bank estimated that 11 per cent of Poland’s GDP growth from 2014-19 was due to Ukrainian migrant workers. Wages are significantly lower for Ukrainians than Poles, and Ukrainians working in Europe are sometimes even subjected to slavery working conditions, where employers steal their passports and abuse them.
Whose interests matter more, Ukraine’s or the West’s?
The west’s desire to assert control over Ukraine’s court system is such a priority because plenty of Ukrainian judges have their own conception of Ukraine’s interests, which diverge sharply from that of the west.
This battle in the court system has been particularly stark the fight to privatize Ukrainian agriculture. In late 2020, the constitutional court accepted an appeal by 48 Ukrainian parliamentarians to investigate whether the privatization of agricultural land pushed through by Zelensky was unconstitutional. They cited Ukraine’s constitution, which states that ‘Land is the main national wealth, which is under special concern of the State’. A representative of the constitutional court stated in an interview that the court could take the decision to recognize Zelensky’s privatization of land as unconstitutional. Regarding the constitutional court and the privatization of agricultural land, Zelensky’s minister of agricultural policy, Roman Leshchenko stated:
“The Constitutional Court is not a problem. If the Constitutional Court cancels the law, I give you my word that the Verkhovna Rada will vote for it again. The reason is that the process is irreversible. The right to own land will come to be. ….we have the requirements of the European Court of Human Rights - the decision in the case of Zelenchuk and Tsyutsyura v. Ukraine, where the European organization requires Ukraine to ensure the implementation of the European Convention on Human Rights regarding the right to own land by 7 million of our fellow citizens”’
An impressive crystallization of the logic whereby capitalist reforms in Ukraine are ‘irreversible’. No matter what Ukraine’s constitutional court says, what Europe says about the right to own property is more important.
In another late 2020 juridicial crisis, whereby the constitutional court began investigating whether the west’s ‘anti-corruption reforms’ (which are generally used to prevent Ukrainian state economic intervention and maintain neoliberalism) contradict Ukraine’s constitution, Zelensky officially asked parliament to give him the right to fire all of the constitutional judges. Unsurprisingly, the constitutional court described this as an attempt to stage an anti-constitutional coup. While his plan did not work at the time, throughout 2022 under cover of wartime most of the ‘problematic’ constitutional judges have since left – or fled – their posts, with Zelensky old enemy Aleksandr Tupitsky (the head of the constitutional court) declared under arrest in May 2022.
In late 2022, Zelensky signed into action the so-called ‘eurointegration law’—a reform long demanded by the west. This law changes the means of selection for constitutional judges. Since its enactment, selection is determined by a committee of six juridicial experts: three of which are ‘independent experts’ (ie. domestic western lackeys), and the remaining are selected by the government, parliament, and other judges. While the Ukrainian constitutional court is no longer a roadblock for western interests, pro-western publications are nevertheless dissatisfied with the law since it still gives too much power to Zelensky. Undoubtedly, they would prefer for the court system to be totally under the control of ‘independent experts’.
During the 2020 constitutional crisis, Transparency International bemoaned how the constitutional court was ‘destroying reforms and Ukraine’s process of European integration’. In an extraordinary, but all too common move for a foreign NGO, it called for the constitutional judges that were blocking western reforms to resign. The article continues by asking a remarkable question: “How to protect the country from the actions of the Constitutional Court itself? The court is protected by the Constitution, so there is no easy way to change how it works.”
Just as the 2019 Ukraine Reform Conference in Toronto called neoliberal reforms ‘irreversible’, so too did this article end by claiming that, “The result of a pro-Russian, or even neutral, path for Ukraine would be chaos for Ukrainians. The reforms of the past six years are too hard-won for that.”
Clearly, the irreversibility of neoliberal reforms excludes any possibility of a more social-democratic government that would pursue military détente with Russia and focus on domestic economic development.
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Peter Korotaev writes on political movements, class relations, and economic policy in Ukraine. You can follow his work on his substack, "Events in Ukraine".
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