EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION  
Brussels, 12.5.2010 
SEC(2010) 524 final 
  
COMMISSION STAFF WORKING DOCUMENT 
Accompanying the 
 
COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
Taking stock of the European Neighbourhood Policy (ENP) 
  
Implementation of the Europe an Neighbourhood Policy in 2009 
Progress Report Ukraine  
{COM(2010) 207 final} 
{SEC(2010) 513 final} {SEC(2010) 514 final} {SEC(2010) 515 final} {SEC(2010) 516 final} {SEC(2010) 517 final} {SEC(2010) 518 final} {SEC(2010) 519 final} {SEC(2010) 520 final} {SEC(2010) 521 final} {SEC(2010) 522 final} {SEC(2010) 523 final} {SEC(2010) 525 final} 
 
EN 2   EN 1. BACKGROUND AND OVERALL ASSESSMENT  
Ukraine and the EU first established contract ual relations in 1994 through a Partnership and 
Cooperation Agreement which entered into for ce in 1998. On that ba sis, the EU-Ukraine 
Action Plan was approved in February 2005. 
In the course of 2009 intensive negotiations were  conducted to develop an instrument to help 
prepare for and facilitate the entry into force of the EU-Ukr aine Association Agreement, 
including a deep and comprehensive free trad e area (DCFTA). The in strument, called the 
Association Agenda, was endorsed by the C ooperation Council in June and adopted by 
exchange of letters in November 2009, there by fulfilling a commitment made by both sides.  
EU-Ukraine meetings took place at the level of the EU-Ukraine Summit, the Cooperation 
Council, the Cooperation Committee and seven subcommittees. 
This document reports on progress made on th e implementation of the EU-Ukraine Action 
Plan and Association Agenda, respectivel y, between 1 January and 31 December 2009, 
although developments outside this period are al so taken into consideration when deemed 
relevant. It is not  a general review of the political and economic situation in Ukraine. In 
addition, for information on regional and multilate ral sector processes, please refer to the 
sectoral report. 
As regards the EU-Ukraine Association Agreemen t, in the course of 2009 further substantial 
progress was made in negotiations on economic and sector cooperation issues. Negotiations 
on the DCFTA part of the Agreement continued with the aim of concluding them as soon as possible. 
While the gas dispute in January 2009 tempor arily disrupted gas s upplies to the EU via 
Ukraine, a number of significant achievements took place in the course  of the year in the 
energy sphere. In March 2009 the EU and Ukra ine jointly hosted a hi gh-level investment 
conference on the modernisation of Ukraine’s gas transit system. This was accompanied by a 
Joint Declaration setting out a number of key re forms commitments in the sector. In July 2009 
the European Commission and a number of Internat ional Financial Institu tions issued a joint 
statement of intent regarding support to gas se ctor reform in Ukraine and purchases of gas 
from Russia. In December 2009 approval was gi ven for Ukraine's accession to the Energy 
Community Treaty pending adoption of a gas law in accordance with the EU acquis. 
The negotiations on the EU-Ukraine Agreem ent on a Common Aviation Area advanced. The 
dialogue on developing relevant conditions to establish a visa free regime as a long term perspective also progressed we ll. The EU-Ukraine administrative arrangement on closer 
cooperation in the field of civil protection was successfully used to help Ukraine address the 
flu pandemic.  
Ukraine cooperated constructively on Transnistria  settlement efforts, c ontinued to support the 
work of the EU Border Assistance Mission (E UBAM) and agreed with the extension of the 
mission for a second time. Cooperation on CFSP ma tters also continued as did Ukraine’s 
alignment with most EU CFSP Declarati ons. A Memorandum of Understanding for the 
Establishment of a Dialogue on Regional Policy  and Development of Regional Cooperation 
and a Strategic Co-operation Agreement between Ukraine and Europol were signed in July 
and December 2009 respectively. Negotiations on  a Memorandum of Understanding between 
 
EN 3   EN the Ministry of Health and the European M onitoring Centre for Drugs and Drug Addiction 
were concluded in 2009 and the documen t subsequently signed in January 2010. 
Just after the repo rting period, in January and Februa ry 2010, Presidentia l elections were 
conducted in Ukraine. These met most OSCE and Council of Europe (CoE) standards for 
democratic elections and underlin ed the further significant progr ess which has taken place in 
Ukraine’s democratic development. 
Overall in the course of 2009 the implementati on of key political and economic reforms was 
hampered by the continuing constitutional crisis  resulting from unclear separation of powers 
between the President, Prime Minister and Par liament and by the beginning of electioneering 
in the second half of the year. 
As in 2008, no progress was made on the issue of constitutional refo rm, which therefore 
remains a high priority. No or only limited progre ss was made with respect to judicial reform 
and anti-corruption measures. Further efforts are needed to fulfil several Council of Europe related commitments and to improve legi slation in line with  Council of Europe 
recommendations.  
Ukraine’s economic situation continued to deteriorate in 2009 in the wake of the economic 
and financial global downturn. In the course of the year Ukraine was able to benefit from a 
comprehensive economic stabilisation programme agreed with the IMF under a stand-by 
arrangement with the IMF totalling USD 16.5 billion (EUR 11.5 billion). However, towards 
the end of 2009 this agreement went off track amid election preparations and a final tranche of USD 3.8 billion (EUR 2.7 billion) was not di sbursed. The recently elected Government has 
made the release of the fourth tranche a prior ity and an IMF delegation visited Kyiv in March 
2010. While the economic outlook is improving, imme diate challenges remain, in particular 
as regards bringing social and pension expe nditure under control. The business climate 
continued to be negatively affected by inter alia unequal treatment of companies and 
bureaucratic obstacles to bus iness and investment which promotes and consolidates 
corruption.  
During 2010, to fulfil its Association Agenda comm itments, it is in the interest of Ukraine 
to make further efforts with regard to constitu tional reform; reform of the gas sector; reform 
of the public administration; the taking of e ffective measures against corruption notably 
through judicial reform as well as measures to  improve the business and investment climate. 
At the same time there remains an urgent need for Ukraine to adopt a law on public procurement which complies with international standards and the acquis . 
The Ukrainian authorities and civil society representatives participated actively in the 
multilateral framework of the Eastern Partnershi p, in particular through open dialogue and 
their contribution to the working programmes for the four thematic platforms. Together with 
the bilateral elements of the Eastern Partnershi p, this contributed to the overall strengthening 
of EU-Ukraine relations and re inforcement of the follow-up on the priorities of the Action 
Plan and the Association Agenda. Ukraine hosted the first meeting of the Eastern Partnership 
Integrated Border Management pa nel in Odessa in October 2009.  
2. P
OLITICAL DIALOGUE AND REFORM  
The EU and Ukraine maintained regular political  dialogue during the year, notably at the EU-
Ukraine Summit, the Cooperation Council and the Cooperation Committee. In addition, 
 
EN 4   EN political dialogue meetings took place betw een the Ukrainian government and the EU 
Political and Security Committee, the Council Working Group on Easter n Europe and Central 
Asia and EU Foreign Ministers and EU Political  Directors. The EU-Ukraine Parliamentary 
Cooperation Committee met in both Brussels and Ky iv. The latter included a visit to Crimea.  
Democracy and rule of law 
In July 2009 a series of amen dments to the legislation on presidential elections  were adopted 
by the Verkhovna Rada.  In October the CoE Venice Comm ission and OSCE/ODIHR issued a 
Joint Opinion on these amendments. While no ting certain positive changes, overall it 
expressed serious concerns describing the ch anges as marking a “backward step”. Among the 
issues highlighted by the report were amendments  that make it more difficult to challenge the 
election results, provisions related to the composition of electoral  commissions and those 
concerning the rules of changing the voters’  lists on Election Day. In October, the 
Constitutional Court of Ukraine ruled several of the amendments to the election legislation unconstitutional. 
In addition, controvers ial changes were made to the electoral framework between the two 
rounds of the Presidential elections concerning  the representation of parties on electoral 
commissions. The practice of amending the electo ral framework in the middle of the electoral 
process was criticised by the Intern ational Election Ob servation Mission. 
Nevertheless, according to the preliminary conclusions of the International Election 
Observation Mission, the presidential elections  were largely conducted in accordance with 
OSCE and Council of Europe commitments and consolidated progress achieved since 2004.  
While work continued on the preparation of a draft concept of public administration reform 
and on draft laws on the civil service and the re form of the state admi nistration none of these 
documents was adopted. A concept on the reform  of local self-government was approved in 
July 2009. The concept seeks to create conditions for sustainable development of territorial 
communities and to increase local pa rticipation in decision-making.  
With regard to judicial reform and rule of law , progress was limited. A draft Code of 
Criminal Procedure passed its first reading at the Verkhovna Rada . A new Code of Criminal 
Procedure was one of the cond itions for Ukraine’s accession to the Council of Europe in 
1995, originally to be enacted within a year fr om accession. The reforms enacted by the draft 
code should also enable Ukraine to ratify and implement the 2
nd Protocol to the European 
Convention on Mutual Legal Assi stance in Criminal Matters. A draft law on reform of the 
Prosecutor’s Office was passed by the Rada in April 2009 and has now been referred to the 
Venice Commission for a view as to its compatib ility with international standards. A law “on 
Amendments to Certain Legislative Acts of  Ukraine on the introduction of automated 
workflow systems in Administrative Courts” was adopted by the  Rada  in June 2009. The law 
contains measures designed to ensure impartia l allocation of cases to judges and thereby to 
reduce corruption .  
In June 2009 a package of anti-corruption laws  was adopted to give domestic legislative 
force to the Council of Europe’s Crimin al Law Convention on Corruption and the UN 
Convention against Corruption. In November thes e were referred to the Constitutional Court, 
which has yet to rule on their constitutionality. In the meantime the Rada  voted to postpone 
the entry into force of these measures from January to April 2010, and President Yushchenko 
signed this into law. In December 2009, the Government adopted 14 Resolutions covering a wide-range of anti-corruption measures. The same day, the President vetoed an important bill 
 
EN 5   EN adopted by the Rada  in November on money laundering. The draft law contains a number of 
measures needed for Ukraine to comply with the recommendations of the Financial Action Task Force on Money Laundering.  A Law on procurement of goods , works and services for 
public funds was approved in 11 February 2010. It is a condition, inter alia , of EU sector 
budget support to Ukraine that a ny law adopted on this  issue should be c onsistent with EU 
norms and standards. In 2009, Ukraine’s pos ition deteriorated in terms of perceived 
corruption in comparison with other countries.  
Human rights and fundamental freedoms 
Improvements took place as regards pre-trial de tention administered by  the Ministry of the 
Interior, in particular through the operation of Civil Society Councils on Human Rights  
(which have an advisory role and operate at national level and regional levels). The Ministry 
of Interior’s Department on Human Rights Monitoring undertook monitoring of respect for 
human rights in the police force as well as con ducting educational activities in this regard. 
The European Committee for the Prevention of Torture and Inhuman or Degrading Treatment 
or Punishment visited Ukraine in  September 2009 to carry out its 5
th periodic report. A 
National Preventive Mechanism has yet to be established in spite of the September 2007 
deadline, which was set upon ratification by Uk raine of the Optional Protocol to the UN 
Convention against Torture in 2006.  Human rights and internationa l organisations continue to 
report on complaints of torture and ill-treatment  in penitentiary and detention facilities. 
A number of cases of violations of the rights of refugees and asylum-seekers  were reported, 
including instances of forced deportation and denial of access to asylum seekers by UNHCR 
representatives. 
As regards respect of the rights of persons belonging to national minorities , reports on 
incidents of anti-Semitism continue which incl ude among others vandalising of the Holocaust 
Memorial in Mykolayiv and synagogues in Kremenchuk and Kolomyia. Other national 
minorities continue to be the object of discrimi nation and racism including in particular the 
Roma and Crimean Tatar communities. In Nove mber 2009, several articles of the criminal 
code were amended to include reference to ra cial motivation as an aggravating factor for 
crimes. Further efforts are needed to increase awareness and to counter  racial discrimination. 
No progress was reported towards the adop tion of comprehensive anti-discrimination 
legislation, as recommended by UN and Counc il of Europe monitoring bodies. Continuous 
efforts should be taken to en sure respect of the rights of persons belonging to national 
minorities in line with the Council of Europe Framework Convention for the Protection of 
National Minorities and the European Char ter for Regional or Minority Languages.  
Significant improvements in the area of respect fo r freedom of expression  have taken place in 
recent years, although progress has slowed recently. During the Presidential election 
campaign, as a result of a pluralistic media e nvironment, voters were offered a variety of 
information concerning candidates and their political programmes. However, the media 
continued to be subject to heavy financial pr essure and economic interests, in particular 
during the electoral campaign. While the Euro pean Convention on Tran s-frontier Television 
entered into force in July 2009, its implementation is still in its initial stage.  No effective steps 
were taken to establish a public service broadc aster in line with international standards. 
In June 2009 the Verkhovna Rada  adopted at first readi ng a draft law touching on freedom of 
assembly  (“Order of organising and conducting peacef ul events”), which included provisions 
restricting rallies. The draf t law was criticised by the Venice Commission. In its Opinion 
 
EN 6   EN issued in December 2009, the Venice Commission noted “several substantial shortcomings” 
in the draft law, including as regards the lack of clear standards to guide official decision-
making. The Venice Commission also stressed th at freedom of assembly should enjoy 
constitutional protection and not be restricted by subsidiary le gislation. In May 2009, the city 
authorities in Mykolayiv banne d the holding of a Rainbow Sp ring Festival to mark the 
International Day against Homophobia.  
A gender equality commission was established in December 2009. It addresses anti-
discrimination issues and investigates complaints  filed by citizens. A draft law on equal rights 
remains to be adopted. In June 2009, the Minist ry of Education and Science issued a Decree 
providing for regular gender equality lessons in Ukrainian schools. No progress can be 
reported in preventing and addressing domestic vi olence either in legal or administrative 
terms. Women’s participation in the labour market is high although a substantial gender pay 
gap remains. 
Progress was made on children’s rights  with the adoption by the Verkhovna Rada  in March 
2009 of a National Plan of Action for Child ren to Implement the UN Convention on the 
Rights of the Child 2010 – 2016 and in Octo ber of an implementing programme by the 
Cabinet of Ministers. Pr ogress was also made in the area of  adoption and fostering; in efforts 
to reduce HIV mother to child transmissi on rates and in expand ing the Baby-friendly 
Hospitals Initiative. Laws on probation in the context of efforts to develop a restorative 
juvenile justice system have been drafted but have yet to be considered by the Rada .  
No progress can be reported on  trade union  rights and core labour standards . The January 
2009 Committee of Social Rights of the Council of Europe which reviewed the 
implementation of the European Social Charter in Ukraine underlined the inadequacy of the 
level of minimum old-age pensions.  
As regards international instruments , Ukraine has extended an open invitation to Special 
Procedures. Ukraine has ratified  the International Convention on the Rights of Persons with 
Disabilities and its Optional Protocol, and it  has signed the Optional Protocol to the 
International Convention on Econom ic, Social and Cultural Rights.  It has not acceded to the 
International Convention for the Protection of All Persons from Enforced Disappearance  and the 
Convention on Migrant Workers and the Convention for the Protection of  Individuals with regard 
to Automatic Processing of Personal Data  have yet to be ratified . 
Regional and international issues, cooperation  on foreign and security policy, WMD non-
proliferation and disarmam ent, conflict prevention and crisis management  
Ukraine continued to cooperate actively with the EU on regional and in ternational issues, and 
aligned with most EU CFSP declarations open for alignment. The possibility of Ukraine's 
participation in EU naval operation Atalanta was explored, building on the positive experience of its participation in  EU operations in the Balkans. 
Ukraine cooperated constructively with the EU on all questions related to the Transnistria  
settlement efforts. It took part in informal meetings of the so-called “5+2” format. Together 
with the Republic of Moldova (hereafter refe rred to as Moldova), Ukraine continued to 
implement its customs regime based on the Join t Declaration of the Ukrainian and Moldovan 
Prime Ministers of December 2005.  
 
EN 7   EN No progress was made as regards the ra tification of the Rome Statute of the International 
Criminal Court .  
EU Border Assistance Mission to  Moldova and Ukraine (EUBAM) 
Ukraine continued to be fully committed to, and to participate constructively in, the work of 
EU Border Assistance Missi on to Ukraine and Moldova (EUBAM). With EUBAM 
support, the professional capac ities of the Ukrain ian customs and border guard services 
continued to be enhanced, as was inter-ag ency cooperation within Ukraine and between 
Ukraine and Moldova. In December 2009, followi ng constructive bilatera l talks as well as 
talks between Ukraine and the Transnistrian de facto  authorities, an important advance was 
achieved in starting the demarcation of the centr al (Transnistrian) segment of the Ukrainian-
Moldovan State border. By agreement betw een the European Commission, Ukraine and 
Moldova, the EUBAM mission was extended in November 2009 for a second time. 
3. ECONOMIC AND SOCIAL REFORM  
Macroeconomic framework and functioning market economy 
Since the onset of th e global crisis, Ukraine’s economic situation of has deteriorated 
dramatically. In 2008, Ukraine's real GDP growth  already decelerated to 2.1%. Over the first 
three quarters of 2009, real GDP is estimated  to have contracted by around 17.8% year-on-
year, while industrial output decreased by 28.4%  in the same period. High consumer price 
inflation eroded real wages and led to a fall  in purchasing power. Consequently, private 
consumption is estimated to have declined by 13%. The latest projec tions point to a 15.1% 
drop in real GDP in 2009 and only a shallow recovery for 2010. 
The fall in real GDP was driven by a reduction in external and domestic demand. Foreign 
demand for key exporting industri es fell due to the deepening global crisis. The fall in 
domestic demand occurred on the back of reduced domestic credit, resulting from a curtailed 
capability of the domestic financial system to  access external financing. Commodity prices 
fell sharply, affecting some of its key exporti ng industries such as steel. At the same time, 
imports became more expensive as Russia is phasing out its gas subsidies. 
The financial sector in Ukraine came under stra in as both state-owned and private commercial 
banks had to be recapitalised at significant cost  to the tax payer. As a consequence of falling 
depositor confidence, Ukrainian banks faced large losses on their loan portfolio. The National Bank of Ukraine reported that the share of non-performing loans incr eased to 5.4% by July 
2009, practically double the figure for January 2009. Since the second half of 2009, signs of 
recovery in the banking sector have been visi ble and indicators on industrial activity have 
suggested a return to growth.  
With respect to fiscal policy, the budget defici t increased from 3.2% of GDP in 2008 to 8.6% 
of GDP in 2009. The budgetary consolidation that had been expected to start in 2009 in line 
with donor requirements became more uncertain in the run-up to presiden tial elections. Public 
debt strongly increased in 2009, with the net public debt risi ng to some 23% of GDP. Public 
debt stock is not expected to go beyond internationally acceptable levels. 
The Ukrainian authorities and IMF negotiated a 24-month Stand-By A rrangement (SBA) for 
USD 16.4 billion (EUR 11.5 billion). This wa s approved in November 2008. By July 2009, 
USD 10.6 billion (EUR 7.4 billion) was paid out. However, since November 2009, the SBA 
 
EN 8   EN has been at a standstill as Ukrainian authorities  failed to reach an agreement with the IMF on 
a number of policy benchmarks. After the Pr esidential elections, the new Government 
signalled its intention to reac tivate the standby agreement and an IMF delegation visited Kyiv 
in March 2010. 
The European Commission adopted a EUR 610 m illion Macro-Financial Assistance (MFA) 
package for Ukraine in October 2009. The MFA - subject to the IMF' s SBA being on track 
and a number of further structural policy conditi ons - is expected to meet Ukraine's general 
balance-of-payments needs and could cover the external financing needs of Ukraine's state 
budget.  
As a consequence of crisis-related adjustment s, Ukraine's current ac count has improved; for 
2009, a current account deficit of 1.5% of GDP wa s reported. However, capital flight out of 
the hryvna , reversal of capital inflows and a reduc tion in foreign direct investment put 
pressure on reserves, which c ould only be kept at an appropr iate level with international 
assistance. 
Employment and social policy 
Official unemployment  rose to 9% in the 3rd quarter of 2009. Measures aiming at reducing 
the impact of the crisis on vulnerable people, pensioners and families with children were 
taken. The State Employment Ce ntres continued to work activ ely to address the mismatch 
between skills and jobs but a dditional sustained efforts are needed to modernise employment 
policy and administrative structur es. These should also address the reduction of the informal 
sector (estimated at 39% of GDP in the firs t half of 2009) by promo ting open and decent 
working conditions. Further actions in the fiel d of employment promotion will be undertaken 
in the period 2010-2012 particularly in view of  job opportunities to be  created by the EURO 
2012 Football Championship. The economic crisis also impacted negativ ely on the regularity 
of the payment of wages: by October 2009, th e wage arrears were estimated around UAH 
1,679 million (EUR 145 million). 
As regards social protec tion and the fight against  poverty , the Cabinet of Ministers adopted, 
in February 2009, an action plan to implem ent its poverty reduction strategy. Household 
income and real wages declined  over the reporting period as a consequence of the economic 
turmoil. In October 2009, the President signed a La w on subsistence minimum and minimum 
wage which aims to increase social standard s by about 12% by the end of 2009 as compared 
to the provisions of the 2009 budget law and nearly 30% hi gher than envisaged in the 
September 2009 version of  the draft budget 2010. 
It also foresees an increase  of 11% of the minimum monthl y wage from 669 UAH to the new 
level of 744 UAH (around EUR 67). The averag e pension was also increased during the 
reporting period from 898 UAH (EUR 77) to 946 UAH  (EUR 82). The fiscal sustainability of 
these measures and their impact on macroeconomic stability needs to be urgently ensured.As regards social dialogue , no progress can be reported on the adoption of the long-awaited 
amended draft Labour Code and the Internatio nal Labour Organisation (ILO) voiced concerns 
about the non-conformity of certain provisions with its basic standards, in particular as 
regards the right to strike. The draft law on  social dialogue is st ill under parliamentary 
examination and bipartite social dialogue still needs to be strengthened.
 The implementation 
of the Decent Work country programme c ontinued: projects over the reporting period 
included those on social dialogue, gender an d access to employment of persons with 
disabilities. 
 
EN 9   EN Further efforts are needed to ensu re the sustainability of the new pension system . In October 
2009, the Cabinet of Ministers approved the con cept for pension reform for the years 2010-
2017. However, a preliminary comprehensive analys is of the pension and tax systems has still 
not been issued. 
The regular agricultural  dialogue held two sessions in June  - at Ministerial level - and in 
November 2009. Those sessions allowed to continue  the exchange of best  practices and policy 
views to help Ukraine in implementing necessary reforms after their accession to the WTO and their process of approximation to EU po licies and standards. Supporting measures to 
agriculture, bio-fuels, statistical evaluation in  agriculture, quality and organic policies and 
rural development strategies were at the centre of the discussions. 
4. T
RADE -RELATED ISSUES , MARKET AND REGULATORY REFORM  
During the reporting period, bilateral trade  between Ukraine and the EU was adversely 
affected by the economic crisis. Ukraine’s export s to the EU decreased by 45.9% compared to 
2008 while EU exports to Ukraine dropped by 44.6 %. The decision by the State Committee 
for Veterinary Medicine of Ukraine to i ssue an order in May 2009 foreseeing mandatory 
inspections of all ente rprises exporting products of animal origin to Ukraine was a matter of 
concern. In December 2009 a new order annulling th e effects of this order was adopted. In 
March 2009 the Government issued a Resolu tion according to which automobiles and 
refrigerators were made subject to a 13% import surcharge. This measure remained in force until September 2009. Concerning its  bilateral commitments and requirements resulting from 
WTO rules, during the reporting period Ukraine di d not fulfil its obligations as regards the 
adoption or amendment of various pieces of legisl ation, in areas such as market surveillance, 
general safety of products, and safety an d quality of food produc ts (see the following 
sections). Moreover, Ukraine did not comply  with its WTO obligations as regards the 
adoption and publication of import duties for 2010. The Cust oms authorities currently apply 
WTO-bound rates even in the ab sence of the necessary amendm ents to the law on customs 
tariff. 
During the reporting period, five  rounds of negotiations for an EU-Ukraine Deep and 
Comprehensive Free Trade Area (DCFTA) took place. 
Limited progress occurred in the implementation of commitments in the area of customs . 
Measures were taken to address customs problems reported by express carriers and 
humanitarian aid agencies. Work continue d on a comprehensive customs modernization 
strategy. There are currently no major delays at border crossing points, partly due to improved 
border infrastructure and better cross-border cooperation, but also  due to a decrease in trade 
flows. In November 2009, the Verkhovna Rada adopted legislation on border control, 
introducing the rules to be applied at the Uk rainian border crossings. The State Customs 
Service of Ukraine (SCSU) continued to improve  the use of risk management. Customs ethics 
remain a matter of concern. A customs code of ethics was prepared, an d a proposal detailing a 
disciplinary statute for the SCSU is currently before the Verkhovna Rada.  A number of other 
measures was introduced to improve customs powers in the area of the protection of 
intellectual property rights. Some amendments to customs legislation were presented to the Verkhovna Rada  to harmonize the national legislation with the Revised Kyoto Convention on 
the Simplification and Harmonisation of Custom s Procedures, to which Ukraine has not yet 
formally acceded. Work is under way on concepts  of E-customs and E-declarations. Ukraine 
still does not fully respect WTO rules on cu stoms valuation. Problems also persist in 
classification and cumbersome, restrictive a nd often ungrounded control procedures which are 
 
EN 10   EN not based on risk analysis. The formal adop tion of the updated version of the Harmonised 
System for the classification of goods (HS system) has been delayed. 
On free movement of goods and technical regulations , progress remained very limited. A 
draft law on market surveillance, registered in  Parliament in early 200 8, is being revised by 
the Ministry of Economy. Meanwhile, in July 2009, two draft laws on general product safety 
and on product liability were registered in the Parliament but they have little in common with 
the corresponding EU legislation.  The adoption of some technical regulations in the priority 
sectors continued in 2009. No progress was achieved towards the institutional reform of the 
Ukrainian infrastructure for quality. The State Committee on Technical Regulation and 
Consumer Policy (DSSU) is pres ently the authority responsib le for designation of the 
conformity assessment bodies.  So far, accreditation remains the only quality infrastructure 
function separated from the DSSU. In Novemb er 2009, the National Accr editation Agency of 
Ukraine (NAAU) signed the Agreement on Mutu al Acceptance of Personnel Certification 
Certificates with Signatories of the European  Accreditation Multilateral Agreement, a first 
important step towards the inte rnational recogni tion of NAAU. 
In the area of  establishment  and company law,  a law on joint stocks companies entered into 
force in April 2009. In December 2009 the Government adopted a law on simplifying 
business conditions in Ukraine. It aims in pa rticular at facilitating the establishment and 
development of companies by easing the issuan ce of permits and reducing the quantitative 
requirements for the statutory capital of limited liability companies (see also paragraph on 
enterprise policy) . Further efforts are needed to promote corporate governance. The 
investment climate in Ukraine is assessed  negatively by investors and international 
organisations, as having one of the most bur densome regulatory systems in Eastern Europe. 
The business climate  remains unstable, and corr uption remains a major issue (see also 
chapter 2).   
Ukraine pursued efforts towards gradual approximation with EU sanitary and phyto-
sanitary  (SPS) standards. The twinning project in this area launched in 2009 will support 
these efforts. In June 2009, the Parliament a dopted a Law on the monitoring of residues of 
veterinary medicinal products and contaminants in live animals, products of animal origin and 
feed and food. This law will contribute to im proved implementation of Ukraine’s residue 
monitoring programme. In June, Parliament also  adopted a law on animal identification and 
registration and Ukraine continue d to register animals effec tively. Ukraine also adopted 
several pieces of implementing legislation. In June 2009, the European Commission’s Food 
and Veterinary Office (FVO) carried out an insp ection visit regarding poultry meat and eggs. 
In September 2009 the FVO evaluated the c ontrols in the area of dairy products, 
following up an earlier mission of 2008. In Oct ober the FVO held an inspection mission 
on controls regarding the production of fres h meat and meat products. These missions 
contribute to supporting Ukraine in addressi ng deficiencies and to prepare for the 
implementation of the future Deep and Comp rehensive Free Trade Area. In November 
2009, the European Commission relaxed, in view  of progress made by Ukraine, import 
control measures regarding sunflower oil. In 2009 the European Union and Ukraine held expert meetings aiming to combat rabies, which are present on the entire  Ukrainian territory.  
As regards financial services
, the global financial and economi c crisis undermined Ukrainian 
banks' capitalisation and profitabi lity. In July 2009, amendments to legislation were made to 
facilitate the financial rehabilitation of ba nks. Further efforts are needed to ensure the 
National Bank of Ukraine's independence and to  increase the quality of the supervisory 
systems. Furthermore, a Law on anti-crisis measures came into force in November 2009, 
 
EN 11   EN further to changes to several other laws, including those on the National Bank of Ukraine and 
on banks and banking. This law provides temporary conditions to enable banks and their customers to deal with the effects of global financial crisis until January 2011. The measures 
introduced by the law concern formation of banks ’ reserves, requirements to banks’ statutory 
funds and rules for offset of debts. The La w entitles the commercia l banks to carry out 
restructuring of credits given to natural pe rsons. Further progress is  needed to restore 
normality in the banking system. In Novemb er 2009, the NBU established a Working Group 
for the Development of a "Green Book on Enha ncing the Effectiveness of Regulation and 
Supervision of Financial Sector of Ukraine”. In the area of security markets, the Government 
adopted a Concept for Development of the Dome stic Market of Government Securities of 
Ukraine 2009-2013. Draft laws on financial serv ices and on insurance have not yet been 
adopted. The supervision of non-ba nk financial institutions, notab ly the insurance companies, 
remains problematic. The State Commission for Re gulation of the Financ ial Services Market 
issued a number of regulations on the insu rance sector in 2009. The EU funded project on 
‘strengthening of Ukrainian financial services sector’ supported the dr afting of a strategy for 
the development of the financial sector which was submitted to the Government. 
No progress can be repo rted in the field of audit and accounting.  
Further efforts are needed to ensure free movement of capital  in particular as regards the 
repatriation of profits abroad, the purchase and transfer of currency by Ukrain ian debtors to 
non-residents. As noted last y ear, notwithstanding possible jus tifications under the safeguard 
clause, measures taken by Ukraine in the context of the financial crisis may have an impact on 
the standstill provision concer ning foreign exchange rules. 
Other key areas 
Concerning the implementation of the commitments in the area of taxation , in October 2009 
an action plan for the improvement of tax ad ministration was approved by a resolution of the 
Cabinet of Ministers. The action plan foresees a series of gradual changes to the operations of 
the control and revision authorities, the improveme nt of the transnational taxation system, the 
VAT administration, as well as improvement of  tax administration for large taxpayers. A 
Strategy for the Reform of the Tax System was approved by a resolution of the Cabinet of Ministers in December 2009 and provides for the completion of tax reform in Ukraine by 2018, in particular through the adoption of a uni fied Tax Code, the simplification of the tax 
system, the introduction of a single social c ontribution tax, and harmonisation of national tax 
legislation with that of the EU.  
The issue of VAT refunds remained a syst emic problem during the reporting period. 
According to statistics provided by the Pres idential Secretariat, outstanding VAT refunds 
grew from 12.8bn UAH (1.2bn EUR) to 21.8bn UAH (2bn EUR) in 2009 (+68%), while VAT 
refund arrears (refunds for which deadline ha s passed) grew from 2.97bn UAH (0.27bn EUR) 
to 5.4bn UAH (0.5bn EUR) over January-November 2009 the same period (+82.5%). 
A draft law amending certain elements of the law on unfair competition  was adopted in 
December 2009. It introduced specific rules to pr event distribution of mi sleading information. 
A draft law amending the Economic Code, aimi ng to eliminate duplication of competition 
provisions, has been proposed to the Ministry of Justice but ha s not yet been finalised. As a 
follow-up to the OECD competition review of 2008, the Anti-Monopoly Committee (AMC) 
organised stakeholder consultations and prepared  an action plan for th e implementation of its 
recommendations. In January 2009, the AMC al so introduced three bl ock exemptions in 
 
EN 12   EN connection with the sp ecialisation of production The Inte r-ministerial Working Group on 
State Aid stopped its work after the adoption of th e concept for reform of  the state aid system. 
The AMC drafted an action plan on the concept for implementation of state aid that envisages setting up another Interministeri al Working Group to implement th e three stages of the state 
aid reform in Ukraine. For the time being, the Mi nistry of Finance (assi gned together with the 
Ministry of Economy and AMC to prepare the ac tion plan) opposes the establishment of such 
a Working Group, referring to the absence of a le gal basis for preparing a state aid inventory. 
Therefore, the Concept of the st ate aid law is not even discusse d.It should also be noted that 
the concept of the state aid law and the concep t of the state aid reform are two separate 
documents required by the Cabine t of Ministers Procedure. 
No progress can be reported on  intellectual property rights (IPR) . The adoption of the 
revised Copyright law and the new laws on Indust rial Property Rights is still pending and the 
National Coordination Council in charge of enforcement activities has not yet been 
established. In addition,  payment of royalties to right-holders is no t ensured. Ukraine also 
needs to align its legislation on data exclusivity regime. Leading pharmaceutical firms complained during the reporting period about br eaches of IPR obligations in the field of 
patents and in tendering procedures for pharmaceutical products. While ex officio  actions 
were introduced during the reporting peri od, pirated and counterfeited goods remain 
widespread. Further efforts are urgently needed  to enforce deterrent measures against IP 
crimes, if the Association agenda objectives are to be met.  
While the Parliament worked, over the re porting period, on tw o draft proposals on public 
procurement  legislation, particular atte ntion should be paid to ensu ring that draft Ukrainian 
legislation is in line with Europ ean and international standards in  particular as regards appeal 
mechanisms, transparency and non-discrimina tion principles. In December 2009, the Cabinet 
of Ministers introduced changes to the Regul ation on public procurement of goods, works and 
services for public funds. These are now proc ured from domestic producers only, thus 
excluding official representati ves of producers, their dealer s, distributors and official 
representatives of non-resident producers fr om the bids. If endorsed and effectively 
implemented, this new legislation will create a serious barrier to trade and undermine the 
business climate. 
While the State Statistics  Committee and the State Customs Service signed in August 2009 a 
Joint action plan to implement recommendati ons regarding upgrading the quality rate of 
statistical information in Ukraine, no progress can be reported as rega rds the adoption of an 
action plan to tackle the high level of  discrepancies in trade statistics. 
Ukraine made some progress in enterprise policy . In February 2009, a Small and Medium 
Sized Enterprise (SME) dialogue was initiate d between the European Commission and the 
Ministry of Economy as well as the St ate Committee for Regulatory Policy and 
Entrepreneurship (SCURPE). The second meeting took place in November 2009. The focus of the dialogue is on Ukraine’s progress in implementing the European Charter for Small Enterprises and the move towards cooperation based on the European Small Business Act, 
adopted in December 2008. So far, the implemen tation of the Charter has been limited. There 
is no SME development strategy as such. It is also essential to define the competences of 
SCURPE and the Ministry of Economy on broa der SME policy issues. In December 2009, the 
Parliament adopted a law with a view to  simplifying business conditions in Ukraine 
(see 
section on Establishment and Company Law).  Ukraine does not have an integrated system of 
e-government for enterprises. Measures such as  on-line registration are being implemented in 
isolation rather than as part of  an overall plan for e-government. 
 
EN 13   EN On public internal financial control , the Central Control and Revision Service (CCRS) 
adopted a Development Strategy for the period 2010-15 in March 2009. As consolidation of a 
draft public internal financ ial control law was postponed due to prevailing political 
circumstances, the CCRS adopted an action plan  for enhancing quality control and revision 
and a corresponding order to start developing  internal audit. In January 2010 a draft 
Government decree was adopted to  provide a clear distinction be tween inspection and internal 
audit. In addition, the CCRS adopted  a Code of Ethics in August as well as a series of draft 
secondary rules relating to internal control a nd internal audit based on INTOSAI standards.  
With regard to external audit , SIGMA provided a technical asse ssment for a twinning project 
to improve the audit functions of the A ccounting Chamber in 2009. Cooperation between 
Ministries and state agencies to prevent fraud and serious irre gularities needs ongoing 
attention. 
5. COOPERATION ON JUSTICE , FREEDOM AND SECURITY  
In the area of border management , reform of the State Border  Guard Service continued in 
line with the targets of the 2015 plan for upgrad ing legislation, infras tructure and personnel 
training. Legislation allowing for biometric control of foreign na tionals in the processing of 
visa applications was passed by the Parliame nt in November 2009. The draft Law on State 
Border Control, based on the Schengen Border  Code, was not adopted in 2009 and is now due 
for adoption during the current legislative sess ion. Local Border Traffic Agreements with 
Poland, Slovakia and Hungary are in place. FRONTEX developed an action plan for 2010-2012 to streamline cooperation and prioritize expert ise in preparation for Ukraine’s co-hosting 
of the European Football Championship in 201 2 which is still under discussion. As regards 
border demarcation  with Belarus, progress was made through bilateral discussions between 
Ukraine and Belarus which led to the ratifica tion by the Belarusian parliament in April 2010 
of the Belarus-Ukraine 1997 State Border Agreem ent. An effective implementation of that 
treaty will represent an important step pavi ng the way for final ag reement regarding border 
demarcation. Discussions on border demarcatio n continued with the Border Commission of 
the Russian Federation. Cooperation between the State Border Guard service and the Customs 
service needs to be significantly enhanced in order to improve inform ation exchange at all 
operational levels. (Aspects of border demarca tion with Moldova are re ported in the section 
on EUBAM). 
Ukraine has not yet fully fulfilled the commitments in the Action Plan or the Association 
Agenda related to migration . During 2009 there were certain vi olations of rights of refugees 
and asylum-seekers in breach of obligations unde r international human rights and refugee law, 
in particular the 1951 Geneva Convention on the St atus of Refugees, notably with regards to 
deportation of migrants to countri es despite risks of ill-treatmen t. Issues of the economic and 
social rights of asylum seekers and their acces s to the appropriate procedure remain to be 
addressed.  
In June 2009, a decree to create the State Migr ation Service was adopted. This was vetoed by 
a Presidential decree in August 2009. As a result, there is no l onger any entity competent to 
take binding decisions in asylum  matters. This led to the suspen sion of more than  600 cases of 
asylum applications, leaving migrants with und etermined status and an inability to access 
social services. 
Conditions in Migrant Custody Centres and Tempor ary Holding Facilities in Ukraine remain 
uneven and overcrowding is frequently repo rted. The responsibil ity of Ukraine in 
 
EN 14   EN safeguarding proper conditions for the detained  irregular migrants, including provision of 
adequate food, clothing and legal aid is not properly fulfilled. The issue of unaccompanied 
minors remains unaddressed, including the legisla tive changes to secure special status for 
such migrants, provide separate holding faci lities and ensure timely appointment of legal 
representatives.  
There are some indications that migrants ar e facing problems communicating with the state 
authorities due to the lack of interpretation services. 
Asylum-seekers – including those with visas - face problems with access to the territory and 
access to the asylum and the substantive refuge e status determination (RSD) procedures at 
some border crossing points. Although the natio nal law on refugees calls for the completion 
of the RSD procedure within six months, most cas es result in a final decision, inclusive of the 
appeal period, after two or three years.  The Regional Protection Programme for Ukraine, 
Moldova and Belarus will be continued in 2010. 
A visa dialogue is ongoing with the EU, to develop conditions for the establishment of a visa 
free regime as a long-term perspective. In th e course of 2009, the Vi sa Dialogue was pursued 
through expert analysis and on-s ite visits on the basis of four  blocks (document security; 
illegal migration and borders; public security and external relations). At the EU-Ukraine 
Summit it was agreed that the dialogue would “focus on sequen ced priorities of action and 
recommendations to the Ukrainian authorities” . 40% of Schengen visas are now delivered free 
of charge under the Visa Facilitation Ag reement. The Readmission Agreement was 
implemented for a second year. 
With regard to the fight against organised crime , Ukraine continues to implement its 
obligations under the 2003 United Nations Conv ention on Trans-national Organised Crime in 
the context of regional cooperation in the area of trafficking of persons and smuggling of 
migrants. As was the case in 2008, signature and ra tification of its Third Pr otocol on the Illicit 
Manufacturing and Trafficking of Firearms, th eir Parts, Components and Ammunition still 
remains outstanding. Ukraine’s capacity to tackle organised crime suffers from institutional fragmentation with several agencies sharin g areas of investigative competence. The 
development of a national stra tegy and action plan, determining and delineating institutional 
competences and cooperation between all state agencies is needed. 
In the area of trafficking in human beings , the Ministry of Family, Youth and Sport is 
responsible for coordinating national policy including prevention measures. National 
protection measures were piloted in three regions providing witne ss protection, health training 
and social assistance. The Ministry continued cooperation with civil so ciety and international 
organisations to tackle trafficking while the Mi nistry of the Interior funded a television-based 
awareness campaign. Germany, Spain and Poland re main the main EU destination countries 
for trafficking networks alongside Russia, Tu rkey, Israel, Lebanon and the United Arab 
Emirates. Ukraine cooperated closely with EU Member States and Interpol on personnel and 
technical information exchanges. The 2005 C ouncil of Europe Convention on Action against 
Trafficking in Human Beings remains un-rati fied pending the adoption of a new law by 
Parliament. A Strategic Agreement with Eu ropol was signed in December 2009. Further 
attention is needed to comb at trafficking and to deve lop prevention, protection and 
rehabilitation measures in an integrated  manner in cooperation with civil society. 
With regard to the fight against drugs , Ukraine plays an important role in lessening the opium 
trade to the EU and actively pa rticipates in regional coopera tion in this field. A Memorandum 
of Understanding on technical coop eration between the Ministry of Health and the European 
 
EN 15   EN Monitoring Centre for Drugs and Drug Addicti on was prepared for signature and signed in 
January 2010. Reductions in demand would be a ssisted through structur ed cooperation with 
civil society groups as part of an integrated ap proach to tackling this issue. Ukraine continues 
implementation of the 1988 United Nations Conven tion against the Illicit Traffic in Narcotic 
Drugs and Psychotropic Substances and is a member of the United Nations Commission on 
Narcotic Drugs. 
With regard to the fight against money laundering  and economic crimes, a new law was 
presented to Parliament after the reportin g period, in March 201 0, which intends to 
incorporate the 49 FATF Recommen dations as well as the essential elements of the Third EU 
Directive on Money Laundering. The draft deals with outstandi ng issues on the regulation of 
non-financial bodies and the arrest and freezing of su spect assets. It also incorporates the main 
elements of the CoE Convention on the Launde ring, Search, Seizure an d Confiscation of the 
Proceeds from Crime and the Financing of Terrorism. If adopted, the law will clear the way to Ukraine's ratification of the Convention. The dr aft would bring Ukrainian legislation in line 
with the Convention by introducing criminal responsibility for illegal money laundering and 
financing of terrorism. In March 2009, Moneyv al adopted a Third R ound Mutual Evaluation 
Report on Ukraine’s regime highlighting shortcomings in the criminalization of terrorism 
financing and coordination between the State Committee for Financing Monitoring and other 
law enforcement agencies on anti-corruption. Uk raine invested in the training of some 500 
judges, prosecutors and legal staff. It al so published and distri buted free manuals to 
universities and third level inst itutions on this issue. Serious efforts in the prosecution of 
money laundering cases have yet to be made. 
In the area of police and judicial cooperation , in 2009, EUBAM with the cooperation of 
Frontex, OLAF and SECI (Southeast European  Cooperation Initiative) supported the Nikoniy 
Joint Border Control Operation to improve cooperation between the Ukrainian and Moldovan 
police forces on fighting cross-border crime and irregular migrati on. Draft legislation on 
personal data protection presented to Parliament  and the President in 2008 still remains to be 
adopted. Transposing the 1981 Council of Eu rope Convention for the Protection of 
Individuals with rega rd to the Automatic Processing of Personal Data and of its 2001 
Additional Protocol into national law would en able the ratification of these instruments. 
Failure to do so would impede further developm ent of cooperation with Europol and Eurojust 
in the area of document security. In the area of  the civil judicial c ooperation, Ukraine worked 
on the implementation of the Ha gue Conventions on family la w issues (e.g. the 1980 Hague 
Child Abduction Convention) while continuing th e preparatory process for the accession to 
the Hague Inter-country Adoption Convention.  
6. 
TRANSPORT , ENERGY , ENVIRONMENT , THE INFORMATION SOCIETY , RESEARCH AND 
DEVELOPMENT  
Since November 2009, a draft comprehensive transport  sector development strategy up to 
2020 has been in consultation with other ministri es, state bodies and with the public. The draft 
strategy envisages that the Ministry will elaborate and submit to the Cabinet of Ministers shorter-term strategy implementation programmes until 2015. The approval and implementation of a national transport strate gy is a pre-condition for a EUR 65 million EU 
budget support programme in the transport sector.  
As regards infrastructure investments, Ukrain e signed a loan agreement with the World Bank, 
in April 2009, for a project on roads and safety improvements (EUR 370 million), and a 
 
EN 16   EN railway modernisation project (E UR 653 million) is still in th e pipeline. EBRD has provided 
loans for financing public transport projects in Kyiv and Odessa. A draft law on Public-
Private Partnerships was adopted at first reading in November 2009. 
In the road sector, alignment with internationa l standards continued a nd a draft “regulation on 
working time and rest period of vehicle driv ers” is under consultation. In 2009, a multi-annual 
Road Safety programme up to 2012 (replacing one that had elapsed in 2007) was drafted. The 
draft was consulted with other ministries and rejected by the Ministries of Finance and 
Economy. It is currently under revision. As regard s passenger transport, Ukraine has still not 
adhered to the Interbus Agreement.  
A railway reform programme for the peri od 2010-2015 was approved in December 2009. It 
foresees three phases: separati on of the government's regulatory function from the operational 
function of the national state-owned railway comp any; transformation of the same into a joint-
stock company; and division of  different market segments. 
Negotiations on a comprehensive aviation  agreement between the EU and Ukraine progressed 
with two rounds of negotiation in 2009 and should be finalised in 2010. To fulfil the 
commitments of the Association Agenda, Ukrain e should continue its efforts to improve its 
safety oversight system and the implementati on of relevant safety standards. A working 
arrangement with the European Aviation Safety Agency was signed at th e end of the reporting 
period, following measures taken by the aviation authorities to strengthen  their regulatory and 
oversight capacity and to ensure compliance with  international safety standards. No progress 
was made in the adoption of prim ary legislation. To integrate more  closely with the EU in the 
aviation sector the adoption of a new framew ork aviation code should be accelerated.  
The Ministry of Transport and Communications is currently elaborating a national maritime 
safety concept, which should be approved in 2010. The subsequent development of a detailed implementation plan is expected  to take until 2012. Regulatory alignment with international 
standards progresses slowly; the Ukrainian flag was st ill on the 2008 black list of the Paris 
Memorandum of Understanding on Port State Control.  
In 2009, Ukraine and the EU stepped up energy  cooperation. Ukraine is an important transit 
country but also an energy produ cer and a significant energy us er. In December 2009, the EU-
Ukraine Summit adopted a fourth progress repo rt on the implementation of the Memorandum 
of Understanding on Energy cooperation.  
As observed in last year’s report (SEC (2009) 515), relations in the energy field were tested in 
January 2009, following a conflict be tween the Russian Federation and Ukraine concerning gas. 
As a result of this dispute Russian  transit supplies to Europe via Ukraine were temporarily cut off, 
resulting in emergency si tuations in several EU Member Stat es and some neighbo uring states. The 
European Commission facilitated the resolution of the gas crisis inter alia  by dispatching a team 
to Russia and Ukraine to monitor gas transit flows. 
In March 2009, a join t EU-Ukraine conference on the modern isation of the Ukra inian gas transit 
network was held in Brussels with the participat ion of the Europe an Investment Bank (EIB), the 
EBRD and the World Bank . During the conference Ukraine tabled a master  plan on the 
modernisation of its gas transit system. The joint c onference Declaration welcomed, 
inter alia , 
Ukraine’s plan to develop by the end of 2009 a gas sector reform progra mme (approved by the 
Government in October 2 009, see below) on the ba sis of EU legislation to  be implemented during 
2010/2011 according to commitments in the context of the future EU-Ukraine Association 
 
EN 17   EN Agreement and Ukraine’s accession to the Energy Community Treaty. Following the 
Conference, a Technical Coordination Unit (TCU) was established within Naftogaz, the 
Ukrainian gas company, with the participation of the Euro pean Commission and International 
Financial Institutions (IFIs). In preparing for Ukrainian gas transit to the EU during the winter of2009/2010, the European Commission facilitated discussions between Ukraine, the EIB, 
EBRD, the World Bank and the In ternational Monetary Fund (IMF) on financing the purchase 
of gas and further reform of the Ukrainian ga s sector. In July 2009 th e European Commission 
and the four IFIs issued a “Joint  Statement of Intent regarding support to gas sector reform in 
Ukraine and the purchase of gas from Russia”, which could trigger significant additional assistance provided specific energy sector reforms are undertaken.  
In October 2009, the Government approved a Concept on the Development, Modernisation 
and Re-equipment of the Gas Transportati on System 2009-2015. Also in October, the 
Government approved a draft gas law and submitted  it to Parliament in accordance with the 
agreements reached in the course of negotiati ons regarding Ukraine’s accession to the Energy 
Community Treaty. In September 2009, the Govern ment adopted a resolution to join the 
Extractive Industry Transparency Initiative, which aims at transparency of hydrocarbons 
revenues.  
Ukraine continued efforts to enhance domes tic production including o ff-shore hydrocarbons in 
the Black Sea. It also continued work to find new energy suppliers  and supply routes 
including from the Caspian region and North Africa. Ukraine further contributed to the 
development of the Boyarka Natural Gas Metrol ogy Centre, established with EU assistance. 
In July 2009, energy companies from Ukraine, Azerbaijan, Georgia, Lithuania and Poland 
completed a study on the Euro-Asian Oil Trans portation Corridor Project. In December 2009 
the Government adopted a concep t to establish minimum oil stoc ks. However, to date there 
was no substantial progress towards the fina lisation of the draft oil stocks law. 
In October 2009, Ukraine and the European Commission concluded negotiations on the 
country’s accession to the Energy Community  Treaty and in December the Energy 
Community Ministerial approved Ukraine’s acce ssion which will be effective subject to the 
adoption by Ukraine of a gas law complying with the EU acquis  and subsequent ratification. 
Complete compliance with EU legislation releva nt for the Energy Community will need to be 
ensured by the deadlines indicated in the Protocol of Accession. 
In October 2009, a draft law on the principles of the electricity market was submitted to 
Parliament. Since 2007, Parliament has been exam ining draft laws on state regulation in the 
energy sector and on the national energy regu lating commission. The law’s objective is to 
strengthen the energy regulato r’s independence. In October 2009, the Government approved, 
for submission to Parliament, a draft law on paym ent for natural gas used for heating needs. 
In November 2009, the Government approved an Instruction "About changes to the 
comprehensive action plan on the financial stabi lisation of energy sector enterprises", which 
postpones previously planned energy prices in crease for the households and other categories 
of consumers. Energy tariffs do not yet cover costs.  
Ukraine continued to study the conditions under which it could join, together with Moldova, 
the interconnected electricity networks of c ontinental Europe (ENTSO-e, European Network 
of Transmission System Operators for Electricit y, the successor of UCTE). It further prepared 
the construction of new internal  electricity transmission lines. 
 
EN 18   EN Ukraine started work, with EU assistance, on  a Master Plan for the development of the 
Ukrainian coal mining sector. Substantial compleme ntary efforts are required in this sector to 
achieve Ukraine’s reform objectives includi ng the improvement of safety in mines. 
In April 2009, Ukraine amended several laws pr omoting energy saving as well as the use of 
renewable energy sources and bio-fuels. In ad dition, a law on the efficient use of energy 
resources is currently before Parliament and an  energy efficiency action plan was prepared. 
Ukraine needs to increase efforts to reach its objective of achieving 15% energy savings by 
2015. The Government tasked th e National Agency of Ukraine for the Efficient Use of 
Energy Resources to prepare propo sals for the participation of Ukraine in the EU Intelligent 
Energy Europe Programme. 
Regarding nuclear energy, the EU-Ukraine-International Atomic  Energy Agency project on 
the evaluation of the safety of Ukraine’s nuc lear power plants further progressed and is 
nearing its completion. In 2009, Ukraine continue d the upgrading of its nuclear power plants 
and developed a Comprehensive Programme on Nuclear Safety Improvements. Ukraine 
estimated the costs for programme implementa tion at approximately EUR 1 bn and requested 
international assistance incl uding through Euratom loans. In 2009, Ukraine pursued, with 
Euratom loans, the modernisation of the Khmelnitsky-2 Rivne-4 nuclear reactors. The 
Nuclear Regulatory Authority was further st rengthened. Ukraine further advanced the 
Chornobyl decommissioning work and inaugurate d the completed project on the industrial 
complex for solid radioactive waste management . Ukraine completed the design phase for the 
interim spent fuel storage facility and deci sions on starting the cons truction phase are in 
preparation. The design phase of the project to construct a new safe confinement progressed 
and is near to completion. Ukraine continue d to work on a draft nuclear waste strategy. 
The EU, Ukraine and bilateral donors launched, an Eastern Eu rope Energy Efficiency and 
Environment Partnership in Stockholm in No vember 2009. A multi-donor support fund is to 
be created with initia l funding of approximately EUR 90 mill ion. The partnership will initially 
focus on Ukraine and at a later stage on other EaP countries.  
In the field of climate change, Ukraine submitted its Fifth National Communication to the 
UN Framework Convention on Climate Change  in December 2009. It includes a greenhouse 
gas inventory for 2007. The inter-agency commi ssion (chaired by the Vice-Prime Minister) on  
reduction of greenhouse gas emissions continued to  meet regularly. Mitigation measures were 
identified for the energy, transport, indus try, housing, agriculture and forestry sectors.   
Legislation was adopted on  Joint Implementation (JI) projects, green investments, procedures 
to prepare greenhouse gas invent ories and on educational an d health projects to reduce 
greenhouse gas emissions. Legislation is  under preparation on emission trading.  
Ukraine also took steps to prepare and approve new  JI projects, ten of wh ich were registered 
at UN level, bringing the overall nu mber of registered projects to  18. Ukraine associated itself 
with the Copenhagen Accord and provided informa tion on the targets  that  it will implement.  
The European Commission continued to support Ukraine in implementing the Kyoto Protocol.  
In February 2010  the Prime minister signed a draft national environment strategy up to 2020, 
which now needs to be approved by the Parlia ment. Some steps were  taken to prepare a 
national environment action plan. Nonetheless, the legislative framework requires further 
development, in particular to align with the strategy and with regard to implementing 
 
EN 19   EN legislation. Presidential Decrees we re adopted on the safety of water resources and the quality 
of drinking water as well as on national parks and nature reserves . New laws on landscape and 
on integrated coastal zone management as well as amendments to the environment and 
ambient air laws and to the wa ter code are under preparation. 
A State programme on Forest  Sector Development 2010 – 2015 and a concept on a State 
Programme for Water Sector De velopment until 2020 were adopted. Amendments to the State 
Programme 2006 – 2020 on Drinking Water are under preparation. Ukraine, together with the 
other Danube countries, adopted the first Danube  river basin management plan, several sub-
basin flood action plans and a Ministerial Decl aration committing to establishing a Danube 
Climate Change Adaptation Strategy and phos phates ban for the period 2012 – 2015. It also 
continued to take steps together  with Moldova and Romania to prepare for the implementation 
of cross-border river basin management in the Danube Delta sub-basin. Continued attention is 
required to implement existing strategies and plans and to further enhance monitoring and 
enforcement. 
Further strengthening of administrative capacity at all levels of the country continues to be a 
major challenge. Coordination between author ities was enhanced to prepare for the 
implementation of EU-funded environment sect or budget support, but further improvements 
are still needed. Access to info rmation and communication issues also requires attention. 
Some steps were taken with regard to integrat ion of environmental cons iderations into other 
policy sectors such as energy and transport .  
Ukraine made no significant progress regarding the UNECE protocols1 whose ratification is 
still pending. Moreover, the implementation of several agreements already ratified requires 
particular attention. The Europ ean Commission launched projects  to assist Ukraine in the 
implementation of the Espoo, Aarhus, Danube and Ramsar Conventions.  
After the preparation of an Aarhus action plan and subsequent contacts by Ukraine, the 
Convention’s Compliance Committee decided in April 2009 that a conditional caution should 
not become effective. However, the Committee underlined that Ukraine is not yet fully in 
compliance and therefore reserved  the right to make further recommendations. The Ministry 
for Environmental protection established an inte r-ministerial working group in May, which is 
considering analyses and legislative propos als to enhance the implementation of the 
Convention. Discussions continued between the European Commission and Ukraine on a 
revised Charter and Founding Agreement to re-e stablish the Regional Environmental Centre 
(REC) in Ukraine even if in December 2009 the process stalled.  
As regards the Bystre Deep Water Canal, in March 2009 Ukraine submitted a report on the 
implementation of the Convention on Phases I an d II of the project, in April a written 
statement, and in August a report to the Espoo Convention. An independent review of 
Ukraine’s legal, administrative and othe r measures was also completed. The Espoo 
Convention’s Implementation Committee meeting of September 2009 decided that the continuation of works under Ph ase I was contrary to the earlier requirements of the 
Committee. The continuation of works on Phase II represented a further breach, because an 
                                                
 
1 the Protocol on Strategic Environmental Assessment to the UNECE Convention on Environmental 
Impact Assessment in a Transboundary Context and the following protocols of the UNECE Convention on Long-Range Transboundary Air Pollution: Protocol on Persistent Organic Pollutants; Protocol on 
Heavy Metals; Protocol on Further Reduction of Sulphur Emissions; Protocol concerning the Control of 
Emissions of Volatile Organic Compounds or their Trans-boundary Fluxes. 
 
EN 20   EN environmental impact assessment (EIA) procedure was ongoing. The Committee concluded 
that Ukraine remains in breach of the obliga tions under the Espoo Conven tion with respect to 
both phases of the Project. The Committee decide d that its conclusions  regarding the case, 
including a “final decision” in  January 2010 should be addressed at the next session of the 
Meeting of the Parties (MOP). Procedures and c onsultation with the public in the context of 
environmental assessments therefor e continue to require attention . 
Ukraine participated in the Danube - Black Sea Task Force within which a loan agreement for 
Mykolayiv water supply and wa stewater treatment project wa s signed in February 2010 with 
the EIB. A national policy dialogue continued under the EU Water Ini tiative. Ukraine also 
participated in the International Commission for the Protection of the Danube River and in the 
Commission on the Protection of the Black S ea against Pollution. Uk raine continued to 
support the objective of the European Union to accede to the Conventi on on the Protection of 
the Black Sea against Pollution.  
Cooperation and information exchange took place between the European Commission and 
Ukraine on multilateral conventions, environment strategy, water, forestry, waste management, environmental data, nature protec tion and air quality. Ot her topics, such as 
environmental communication issues and nature protection were identifie d for possible closer 
cooperation. 
Ukraine and the EU continued cl ose cooperation in the field of civil protection . The 
Community Civil Protection Mechanism was mob ilised in November 2009 to assist Ukraine 
in the flu pandemic as well as in March 2010 regarding a potential tailing dam collapse in 
Kalush. A strategy was prepared and adopted on  natural risk reduction and early recovery. 
New civil protection code is being prepared. A joint 112 emergency system was designed but 
not yet put into operation. Significant new equi pment was purchased. Ukraine participated in 
the December 2009 launch event of the Eastern Partnership flagship initiative on prevention 
on, preparedness of and response to ma n-made-made and natural hazards.  
As regards the information society , two main draft laws on el ectronic communications were 
prepared, covering the main aspects of regulation (market analysis, SMP determination, 
licensing, universal service, etc). The Nationa l Commission for Commun ications Regulation 
took several important decisions that are current ly being implemented, such as the approval of 
the List of Telecommunications Markets susceptible to price regulation, the price cap for publicly available telecoms services, and the es tablishment of the dis pute resolution procedure 
for telecoms operators. The issuance of a fu rther Third Generation mobile communications 
(3G) licence was postponed to 2010. The releva nt spectrum was freed up by the military and 
allocated to civilian use.  
Regarding audiovisual  policy, the ratification of the Eu ropean Convention on Transfrontier 
Television by Ukraine entered into force in Ju ly 2009. The Ukrainian aut horities are currently 
drafting an action plan for its implementation. In June 2009, the Ukrainian Parliament considered, but rejected, the draf t law on public service broadcasting. 
In the area of research , Ukraine continued to increase its involvement in the 7th Framework 
Programme (FP7), with higher le vels of applications and proj ects selected for funding. Some 
104 Ukrainian research organisa tions were successful in FP7, as of November 2009, receiving 
some EUR 8 million of EU fundi ng, particularly within the Ma rie Curie calls for proposals 
and the Environment, Transport, and Socio-economic sciences and the Humanities Themes.  
The FP7 BILAT-Ukraine project continued im plementation with the aim of strengthening 
S&T cooperation between the EU and Ukraine in particular through a stro nger participation of 
 
EN 21   EN Ukraine in FP7 and other programmes and initiatives. In September 2009, two BILAT-
Ukraine workshops took place in Kyiv: one contributed to the identification of concrete sub-topics of S&T cooperati on between the EU and Ukraine and the other resulted in identifying 
opportunities, future trends and obs tacles in scientific mobility. 
The bilateral S&T Cooperation Agreement is bei ng renewed for a further five years, and the 
first Joint Committee meeting under the Ag reement is being planned for spring 2010. 
In July 2009 Ukraine formally expressed its interest to discuss the terms and conditions of its 
possible association to FP7. A technical meetin g to discuss this was held in October 2009, 
which led both sides to conclude that an association needs to be  well prepared, in particular 
through increased training, information dissem ination and capacity building measures, to 
ensure that the Ukrainian research community  may fully reap the benefits offered by FP7 
association. The current work in Ukraine in nominating an increased number of FP7 contact 
points is a positive step in this regard. 
7. 
PEOPLE -TO-PEOPLE CONTACTS , EDUCATION AND HEALTH  
The direction of higher education  reform in Ukraine is determined by the need to ensure 
convergence with EU standards and implementation of the principles of the Bologna Process.  
Advances took place in the implementation of  a third-cycle for doctoral programmes under 
the Bologna Process and the European Credit Tran sfer System for the first and second cycles 
as of the academic year 2009-10. A Higher Educ ation Reforms Expert Group was established 
in August 2009 with EU support with involvement of Ministry of Education and Science of 
Ukraine and the National Tempus Office convening its first meeting in October. The Bologna 
Process Diploma Supplement, providing for greater transparency on higher education 
qualifications was (and is stil l being) gradually introduced in Ukrainian universities and 
higher education institutions during the course of 2009.  
University autonomy also advanced  with the granting of  the status of self -governing academic 
institutions and research centres to five Ukra inian universities. Howeve r, a number of major 
challenges still remain including improving equal and transparent access to higher education, 
reforming curricula to take acc ount of labour market needs, st rengthening partnerships with 
enterprises and industry, developing mechanis ms for recognition of prior learning and 
establishing a national quality assurance agenc y. In pursuing greater internationalization of 
higher education, greater attention should be paid to the professional development of 
academic and administrative staff as well as to the need to promote the active involvement of 
students in decision-making proces ses, particularly in the areas of mobility and curricular 
content.  
In the area of vocational training , a draft law on a national qualifications framework 
prepared in close cooperation with the Co nfederation of Employers was presented to 
Parliament in October. It proposes alignmen t to the European Qualification Framework 
(EQF), establishment of a national qualifications  agency and measures to empower the social 
partners in this area. The participation of ente rprises in the definition of training content in 
order to maximize the employment prospects of  trainees remains a key policy challenge. In 
July 2009, the Ministry of Economy establishe d an inter-agency working group to improve 
education and training planning towards economic and labour-market needs, benefiting from EU experience on job demand anal ysis and skills forecasting. 
 
EN 22   EN Ukraine continued to benefit substantially from its active participation in Tempus, with a total 
of 11 projects selected under th e second Call for Proposals for Tempus IV. A total of 29 
Ukrainian students and eight sc holars benefited from Eras mus Mundus Masters Courses 
scholarships during the academic year 2009-10.  Student and academic mobility to the EU 
continued to develop through the award of 98 individual mobility grants under Erasmus 
Mundus, for the academic year 2009-10. One additional Ukrainian university was selected under the Jean Monnet Programme in 2009, raising to five the total nu mber of universities 
benefitting from the programme. As yet, there are no funded Jean Monnet Chairs or Centres 
of Excellence. Ukrainian young people, youth work ers and youth organisations continued to 
benefit from the opportunities offered by the Yo uth in Action programme in youth exchanges, 
voluntary service actions and youth activities in non-formal education. The Europe Day 
Conference organised in Ter nopil in May 2009 by the EU Dele gation had a specific session 
on youth.  
In the area of culture , Ukraine ratified the 2005 UNESCO C onvention on the Protection and 
Promotion of the Diversity of  Cultural Expressions, after th e reporting peri od in January 
2010. Ratification will now enable Ukrainian cultural organisations  to participate in the Call 
for Proposals of the ENP Special Action under the Culture Programme in 2010. In the context 
of its commitment to implemen ting the above Convention, the Mini stry of Culture organised a 
forum of national cultures in October 2009 to high light the contribution of  ethnic minorities to 
future cultural development. To advance its regional cooperation in the framework of the 
Eastern Partnership and the Kyiv  Initiative, Ukrain e is encouraged to ratify the 2005 Council 
of Europe Framework Convention on the Value of Cultural Heritage for Society. 
Ukraine pursued health  sector reform, which continued to aim at quality improvement, 
financial sustainability and bett er access to health services. Uk raine further developed a basic 
health law, which is under consideration in Parliament. Ukraine took various measures, 
following the outbreak, in October 2009, of seve re respiratory diseases and influenza A 
(H1N1) in the country. Measures include d additional budget allocations, enhanced 
surveillance, quarantine, vaccination, school closures and travel advice. In June 2009, in the context of the influenza A epidemic, the European Commission proposed to Ukraine to establish communication channels for the excha nge of epidemiological information in the 
case of health crisis situations. The EU provided assistance to address the challenges 
including through the Civil Prot ection Mechanism and bilateral assistance. The European 
Centre for Disease Prevention and Control, in  close cooperation with WHO also provided 
support to Ukraine. Ukraine continued the fi ght against HIV/AIDS and tuberculosis. It 
adopted, in February and Apr il 2009, a National HIV/AIDS pr evention, support and treatment 
programme covering 2009–2013 as well as a related action plan. Ukraine pa rticipated in the 
European Commission’s HIV/AIDS  Think Tank and a Ukrainian NGO participated in the 
European Commission’s HIV/AIDS Civil Societ y Forum. In September 2009, with a view to 
implementing the Framework Convention on Tob acco Control, Ukraine adopted a programme 
aiming at the reduction of the harmful influe nce of tobacco on the population’s health. In 
October 2009, Ukraine participated in the newly established EU enlarged health information 
committee. 
8. 
FINANCIAL COOPERATION – 2009  KEY FACTS AND FIGURES  
The European Neighbourhood and Partnership Instrument (ENPI) envelope for Ukraine under 
the National Indicative Progr amme (NIP) 2007-2010 is EUR 494 million. The programme is 
geared towards supporting the achievement of ke y policy objectives as outlined in the EU-
 
EN 23   EN Ukraine Action Plan, replaced by the Associat ion Agenda in November 2009, and pursues 
three priorities: (1) Support to democratic  development and good governance, including 
public administration, public finance management and rule of law; (2) Support for regulatory 
reform and administrative capacity building, incl uding the promotion of mutual trade and (3) 
Support for infrastructure development in  areas like energy, transport and border 
management. 
The implementation of the measures covered by the 2007 and 2008 Annual Action 
Programmes, is underway. In general terms, im plementation is proceeding in line with the 
multi-annual programming, with a stronger focus on priorities 2 and 3, concentrating the bulk of sector budget support operations, and of th e Twinning instrument. Launching of sector 
budget support operations is slower than initially expected, mainly due to a long preparatory 
phase and the process of intergovernmental consultation in Ukraine.  
In 2009, the European Commission continued to  support Ukraine with programmed assistance 
of EUR 116 million. The 2009 Annu al Action Programme focused on 2 priorities: mainly 
regulatory reform (EUR 51 million) and infras tructure development (EUR 65 million). It 
included two sector budget support operations covering transport and the environment.  
Additionally, ten twinning projects  on a varied number of sector s, such as debt management, 
energy regulation, WTO SPS standa rds, training in the judici ary to name a few, were 
notified/launched for the sum of EUR 11 million.
[ 
An indicative financial envelope of EUR 470. 1 million will be available to support co-
operation activities in Ukrain e in the period 20 11-2013, based on a European Commission 
decision of March 2010. 
In addition to the bilateral allocation, Ukraine also benefited from cooperation activities 
financed under the ENPI multi-country and re gional programmes, as well as horizontal 
thematic programmes, such as  the European Instrument fo r Democracy and Human Rights 
(EIDHR) and Thematic Programme on Environmen t and Sustainable Management of Natural 
Resources including Energy (ENRTP).  Ukraine also participates in four ENPI Cross Border 
Cooperation (CBC) programmes (Black Sea Basin; Romania/Ukraine/Moldova; Hungary-
Slovakia-Romania-Ukraine; and Poland-Belarus- Ukraine) with the overall allocation of EUR 
401.163 million for programmes in the period 2007-13. The main priorities of these are 
economic and social development, including improvement of competitiveness; environmental protection and emergency preparedness; pe ople-to-people cooperation and increased 
efficiency in border management. 
Under the Neighbourhood Investment Facility (N IF), two projects in Ukraine were approved 
in 2009 for a total amount of EUR 13.6 million in  technical assistance, leveraging EUR 1.15 
billion in loans from European Finance Instituti ons in the energy sector. Ukraine also benefits 
from three NIF regional projects in the ener gy sector and support to the private sector, 
amounting to EUR 19.4 million in total.  
Ukraine is one of the main direct benefici aries of the Instrument for Nuclear Safety 
Cooperation (direct funding in 2009 amounted to EUR 29.7 million plus EUR 16.7 million 
transferred to Ukraine following a m odification of the Annual Programme 2008). 
Additionally, Macro-Financial Assistance fo r a maximum amount of EUR 610 million in 
loans has been proposed by the European Commission.  
 
EN 24   EN In 2009, the EU Delegation to Ukraine ensured the coordination of a ssistance activities and 
confirmed the EU’s role as the lead donor in both financial and technical terms due to the sector coverage ensured. Str ong coordination with EU Member States was also pursued and 
an ENP donor coordination matrix was compile d and updated. The principle of division of 
labour was applied, more generally at EU level and particularly in the development and implementation of a Joint Cooperation Initiative in Crimea.