Reforming Ukraine through Gas Loans

Interesting piece here from Transitions Online about the ERBD loan to Ukraine to help them pay their bill to Gazprom … however this money will only come at the price of Kiev incorporating urgent economic and political reforms.

Backed by the EU, the European Bank for Reconstruction and Development (EBRD) and other international banks have laid out an approximately $1.7 billion aid package to help Ukraine pay for gas supplies during a recession that saw its GDP fall 18 percent last quarter year-on-year, and reform its domestic natural gas market to prevent future crises.

Despite media reports to the contrary, this is not a done deal. Kyiv must implement preliminary reforms before receiving any money. Because many of these will be politically unpopular and Ukraine will hold presidential elections in January, the lenders are reticent. But if the country’s famously incompetent leadership can shape up long enough to start drawing the money, the package could prove a politically shrewd maneuver by Brussels.

“The EU is trying to seize on the silver lining in the clouds,” said Tomas Valasek of the Center for European Reform. “It’s an attempt to turn a crisis into an opportunity” to realize reforms by leveraging Ukraine’s desperation during the global financial crisis.