Regardless of the scale of historical injustice caused by the ongoing war, Ukraine’s place is in Europe. Jakub Karnowski, First Deputy Chairman of Kredobank (PKO Bank Polski Group) and Head of the Liberal Economics Unit at the Warsaw School of Economics shared his views on the prospects ahead, relations with Poland, and the challenges in integrating with the European Union with Kyiv Post’s Michał Kujawski.
MK: In the summer of 2024, you took over as the head of Kredobank, the largest Polish financial institution operating in Ukraine having previously served on the supervisory boards of Ukrainian Railways and Ukrposhta, Ukraine’s Postal Service. What experience have you gained over this time, and how has Ukraine itself changed?
JK: Indeed, I have been working intensively in Ukraine for 6 years. I started with major Ukrainian state-owned companies - Ukrposhta and Ukrzaliznytsia. Currently, I’m with Kredobank.
This has allowed me to observe different periods - the time before the pandemic, during the pandemic, and throughout the full-scale war. The time I spent in Kyiv, Kherson, Mykolaiv, and Odessa allowed me to see firsthand how barbaric Russia is.
I am also aware of what this means for Ukraine, Poland, the European Union, and the world. I believe there is a war of systems in Ukraine – I just showed you Anne Applebaum's book “Autocracy Inc.” which I have just finished reading. It describes how the free world struggles with regimes like Russia, and that is exactly what we are dealing with in Ukraine.
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I still recall Putin’s words from his infamous, very long speech in February 2022, just before the invasion. In it, he stated that foreigners who serve on the supervisory boards of Ukraine’s state-owned companies are proof that Ukraine does not exist – foreigners are making the decisions.
MK: Putin regularly denies Ukraine's statehood and identify.
JK: That's right. The truth is quite different.
Cooperation with foreigners and international institutions shows just how determined Ukraine is to make up for lost time and join the European Union. Ukraine aims to follow in the footsteps of those countries that have achieved so much in the 30 years since the fall of communism. The fact that Ukraine has lost a lot of time is undeniable.
MK: At what point did Ukraine lose that time? The western vector was already visible during the Orange Revolution and was reinforced by the Revolution of Dignity - as the name itself suggests - Euromaidan.
JK: It wasn’t a single moment. Ukrainians quickly grew disappointed with each of their successive presidents and governments.
Let me start by saying that on August 24, 1991, the day Ukraine became independent, I was in Khmelnitsky. I was 17 at the time, trading jeans between Ukraine and Poland. Back then, Ukraine had a higher GDP per capita than Poland. In the following years, this trend started to reverse. One of the factors influencing this was Ukraine’s geographic location.
MK: On the eve of the full-scale invasion in 2022, Ukraine's GDP was roughly five times lower than Poland's.
JK: It depends on how you measure it, but in general I agree. It shows how Poland seized its moment. If we look at the period from 1990 to 2020, we can see that Ukraine, in terms of what happened to its GDP, ranks near the bottom of global rankings, while Poland is at the top, right after China.
MK: You wrote on social media that Ukraine has the chance to replicate Poland's economic success.
JK: I am convinced that it will happen.
MK: What needs to happen?
JK: Changes are already happening.
Ukraine has had the misfortune of functioning within the Russian world. In Poland, during the period of systemic transformation, there were still people who remembered capitalism before World War II. While Poland was developing a market economy before 1939, Ukraine was experiencing the Holodomor.
During the communist era in Poland, the Catholic Church operated on a large scale, providing a certain degree of freedom. It was not infiltrated by the Soviet services to the same extent as Ukrainian religious institutions. From 1945 to 1989, small enterprises operated in Poland, and there was small land ownership — this did not exist in the Soviet Union.
What the Soviets did in Ukraine was much worse than what happened in Poland; the repression led to a lack of independent people. Ukrainians understand that they will not move forward with Russia. After nearly 400 years, after what happened in 1648 (Bohdan Khmelnytsky's submission to the Russian Tsar: ed), the vector has turned in the other direction.
Ukrainians are a free nation, which also comes with its costs that we see since the war began, but they do not agree to what the Russian regime proposes.
MK: Today, Ukraine is closer to Poland and the West.
JK: Poland is Ukraine's closest neighbor, both culturally, historically, and geographically. Both countries need each other. Of all the countries in the European Union, Ukraine has the longest border with Poland. Over a million Ukrainians live in Poland, and many of my students at SGH also come from Ukraine.
MK: Polish Ukrainian ties are strong, that’s a fact. However, incidents such as the blocking of border crossings raises certain questions. The situation has led to a significant portion of Ukrainian exports starting to go through Romania, and the port in Constanța is developing dynamically.
JK: That’s true, I’ve been following these events from the very beginning.
It was a grave mistake of the previous Polish government, of which I am very critical. The populist PiS government based its policy on social sentimens. When Poles opened their homes to Ukrainian refugees in 2022, the PiS government followed this path as well.
However, when the political need changed in April 2023, shortly after President Zelensky's visit to Warsaw, that changed. It turned out that agricultural products coming from Ukraine could negatively impact prices and Polish agricultural production. This kicked off a crisis.
MK: What could bring Poland and Ukraine closer together?
JK: Ukraine can utilize Polish experiences in integration with the EU. It is obvious that there will be contentious points. Poland also had to face similar challenges on the eve of its EU accession. There were issues with the Polish workforce, land sales, agricultural production, and the transport sector.
After years, we see how profitable all of this was. Ukraine will go through the same, and the emerging disputes are a natural occurrence. Ultimately, Poland will also benefit from this, and I think we can replicate the model of relations between Germany and Poland in the context of Poland and Ukraine.
Polish experience, starting from macroeconomics, economic management, and transformation, can prove to be valuable.
MK: Let's move on to Kredobank. What goals does the institution set for itself?
JK: Kredobank is a medium-sized bank operating in Ukraine. What is unusual is that its headquarters is in Lviv, not in Kyiv. This has certain advantages - after the invasion began, many companies relocated from eastern Ukraine to Lviv. Kredobank is a retail bank that also serves small and medium-sized enterprises.
It is the largest Polish financial institution operating in Ukraine. We want to actively participate in the reconstruction of Ukraine.
MK: How has the war affected the financial stability of an institution like your bank?
JK: It’s surprising, but the banking sector is doing very well. This is because not too many large loans are being issued. The war increases risk, and consequently, there is less business and investment.
MK: For this reason, some Ukrainian enterprises have relocated their assets to EU countries.
JK: That's right, but small and medium enterprises are still operating. Since I started working, which was about two months ago, I have signed three agreements with the EBRD, American DFC and the Polish BGK regarding guarantees. They enable collaboration with small and medium enterprises, particularly those operating close to the front lines. These are referred to as red and orange zones—respectively, 50 and 100 kilometers [30 – 60 miles] from the war zone.
Despite the challenging conditions, Ukrainian companies are able to operate with these loans. It's worth noting that the macroeconomic policy is specific - due to high interest rates and their reduction, bonds issued by the National Bank of Ukraine (NBU) aimed at the domestic market were an attractive investment. In 2023, the interest rate dropped from 25% to 13%, creating favorable conditions for investing in domestic debt.
Kredobank is part of the Polish PKO BP, which is larger than the entire banking sector of Ukraine. This positively affects our credibility and encourages the placement of deposits with us.
MK: Staying on the topic of rebuilding Ukraine; you wrote on social media of the intention to increase credit limits for Polish enterprises, which will positively impact their participation in this process. Currently, we are witnessing a large and continually growing trade exchange, and Polish exports to Ukraine account for about 30% of the EU's exports. What sectors can we expect to gain importance in the future?
JK: I would like us to have offers for all companies, especially Polish ones, that want to participate in the rebuilding of Ukraine. Due to the current scale of Kredobank's operations, we have certain limits.
However, it should be noted that larger entities operating in Ukraine are either state-owned companies or belong to oligarchs. Such entities have maintained stable relationships with specific financial institutions for years. We are also observing a process of bank privatization - in September 2024, the project had its first reading in the Verkhovna Rada.
MK: What are your predictions for the coming years, especially regarding the adaptation of the Ukrainian economy and law to EU standards?
JK: That's what I fear the least. The actual adjustment of the law is relatively straightforward. The bigger problem lies in its enforcement.
I'll share an anecdote - the most liberal constitution in the world was that of the USSR, which guaranteed all rights, yet nothing came of it. In Ukraine, I sometimes encounter various regulations that are mutually contradictory. My greatest concern is the implementation and enforcement of these regulations, not just rewriting them.
MK: Recently, we've been observing political tensions between Warsaw and Kyiv. How does this rather chilly political climate affect economic relations?
JK: I wouldn't say that the relations are tense or that the atmosphere is bad. In my opinion, it is quite positive, and the conflicting interests that arise are natural.
As I mentioned, Poland experienced similar situations on its path to the EU. The prices of agricultural products that Ukrainian producers will want to sell in the EU will decrease. That's basic economics. Besides the risks, this also creates many opportunities, such as establishing processing companies in Poland.
Polish companies, in turn, will be able to start operations in Ukraine, where wages will be lower than in Poland. Business operates alongside political discussion. It is essential to act fairly and avoid situations like in April 2023, when President Zelensky, leaving Poland, learned about the border being blocked. It doesn’t support trust.
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