Oligarchs Stall Ukraine Progress - Top EU Official

KIEV, Ukraine -- Ukraine's business oligarchs are stifling the economy by choking competition and are holding up improved trade and economic ties with the European Union, the EU Commission's top official in Kiev said on Monday.

Jose Manuel Pinto Teixeira

Jose Manuel Pinto Teixeira told a news briefing that the global economic crisis had hurt Ukraine so badly because it had barely reformed in the two decades since the collapse of the Soviet Union.

"Corruption, red tape, administrative obstacles of every kind. These are only things that serve the interests of those who today control the economy because they do not want competition, they are allergic to competition," he said.

"The vast majority of Ukrainians cannot have employment, cannot have decent salaries, do not have a decent social system, because the country today is in many aspects like 20 years ago."

Teixeira was speaking ahead of Friday's annual summit between Ukraine and the European Union and his comments underscored the EU's disappointment five years after an "Orange Revolution" brought pro-Western leaders to power.

But hopes that Ukraine -- a major transit route for Russian gas to Europe -- could move out of Moscow's shadow have been frustrated.

Bitter political rows have led to little reform, closed business circles still control the economy, bureaucracy and legal wrangling infuriates foreign investors.


The global economic crisis means Ukraine's economy is expected to shrink by up to 15 percent this year, after exports of its key products -- steel and chemicals -- plunged.

Much of the industry lies in the east of the country and under the control of a handful of business magnates.

Teixeira said things would change when those with "a major stake in the economy, and therefore influence the government and politicians accordingly...understood that the free trade agreement is an opportunity for Ukraine to transform itself and transform its economy."

Friday's summit in Kiev will assess progress on a new "Association Agreement" that would throw open the door for Ukrainian goods to the EU market through a free trade agreement.

Asked when such an agreement could finally be signed -- 18 months ago some politicians said by the end of this year -- Teixeira said it would be impossible to fix a deadline.

Despite impatience with reform, the EU in the past year has tried to help Ukraine's energy sector after Kiev's feuding over gas prices with Moscow led to supply cuts to hundreds of thousands of Europeans for two weeks in January.

The EU facilitated loans worth up to $1.7 billion to overhaul the creaky gas infrastructure and has also promised a $500 million loan for the economy -- but all of them based on conditions that Ukraine had agreed to and then not met.

Source: ForexPros