It seems fitting after Ukrainian Cossacks Day to recall the legend of one Cossack, Hetman Pavlo Polubotok, who made waves in Ukrainian-British international relations nearly three centuries ago. Legend has it that Pavlo Polubotok, suspecting his arrest under Tsar Peter I of Russia, deposited 200,000 gold coins in the Bank of England in or around 1723 and gifted (most of) them to a future independent Ukraine. With interest, that deposit would be worth 40 billion pounds today. The recently signed UK-Ukraine Political, Free Trade, and Strategic Partnership Agreement is perhaps a first step towards recovering this lost fortune.
But in all seriousness, the agreement is truly historic and comes at an existential crossroads for both countries. Britain is revving its engines in preparation for the end of its transition period with the European Union and Ukraine is emerging as a serious candidate to fill the UK’s now vacant seat in the EU. Ukraine’s dynamic economy on the doorstep of Europe is an obvious and attractive partner for “Global Britain.” The warm reception received by President Volodymyr Zelensky at Buckingham Palace, Portsmouth and Downing Street last week shows the British Prime Minister’s statement that “the UK is Ukraine’s most fervent supporter” was more than just a platitude.
On trade, the agreement not only ensures the continuity of trade liberalization between the UK and Ukraine, but also establishes a Trade Committee to finally build a proper economic dialogue between the two countries and in fact increases certain tariff-rate quotas from 13% – 20% of existing EU levels. Furthermore, it provides a mechanism for the quotas to be revised (one hopes upwards) in two years and for certain goods even before that time. It is also comforting to see that the UK has appointed the highly respected Baroness Meyer to be the prime minister’s trade envoy to Ukraine.
On investment, Ukraine now has the opportunity to tap 2.5 billion poundsof UK export finance for the defense, agriculture, infrastructure, energy, and healthcare sectors. This support will be much needed at a time when capital flows to Ukraine are under pressure and the global economy is at its most fragile in modern history. However, there will need to be a concerted effort to communicate clearly to Ukrainian and British businesses how they can access this finance and its availability will rightly depend on the success of Ukraine’s reform agenda. British businesses and investors have told me that they are concerned that this agenda is losing steam, pointing to the ousting of a competent team in the National Bank of Ukraine that was responsible for clearing up the banking system and stabilizing the hryvnia, a failure to defend victims of fraud and an unlevel playing field for international business. The Ukrainian government must address such concerns with clear and decisive action or the UK-Ukrainian memorandum of understanding on export finance may not in fact lead to binding commitments of capital. In terms of communication, both countries must work closely to create a platform that provides information about the opportunities that exist for Ukrainian and British companies and issue guidance on how trade and investment support can be accessed. The Canada-Ukraine Trade and Investment Support Project funded by the Canadian government is a good model, but there is an opportunity for Britain and Ukraine to be more ambitious and develop an ecosystem that facilitates the flow of services, goods and, most importantly, capital.
Lastly on defense, the UK has been a staunch ally of Ukraine in recent years providing military training to 18,000 members of the Ukrainian armed forces. The signing last week of a memorandum of intent between the two countries aboard the HMS Prince of Wales and the arrival of HMS Dragon in the Black Sea in support of freedom of navigation was further evidence of the UK’s continued commitment to supporting Ukraine as it fights tooth and nail to protect its sovereignty from Russian aggression. A successful and prosperous Ukraine is by far the most powerful antidote to this aggression and that is why it is right for the UK to elevate the place of Ukraine in its foreign policy agenda. Deepening socio-cultural ties with Ukraine is also in the UK’s interest and the introduction of visa-free travel for Ukrainians would be a significant next step in that direction.
Now more than ever do countries need to forge strong political and economic relations as the global economic pie shrinks. Entrepreneurship will be a key determinant of national prosperity over the coming years as we emerge from this pandemic. The UK and Ukraine are two of the most entrepreneurial countries in the world and the output from their partnership has the potential to more than make up for Hetman Pavlo Polubotok’s lost gift to independent Ukraine.
James Hart is co-managing partner of Hillmont Partners and a former advisor to the prime minister of Ukraine and first vice prime minister – minister of economic development and trade of Ukraine on matters of reform, trade and investment.
