JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report : Ukraine  JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country Report : Ukraine
Date: 2011-05-25
Institutions: European Commission, High Representative of the Union
Subjects: European neighbourhood policy, State aid, Ukraine, association agreement, bilateral agreement, democracy, economic reform, human rights, political cooperation, political reform

EUROPEAN COMMISSION 

HIGH REPRESENTATIVE OF THE
EUROPEAN UNION FOR 
FOREIGN AFFAIRS AND 
SECURITY POLICY

Brussels, 25.5.2011 
SEC(2011) 646 final 

JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country Report : Ukraine 

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JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country Report : Ukraine 

1. 

OVERALL ASSESSMENT  

Ukraine and the EU first established contractual relations in 1994 through a Partnership and 
Cooperation  Agreement  (PCA)  which  entered  into  force  in  1998.  On  that  basis,  an  EU-
Ukraine Action Plan (AP) was adopted in February 2005 and progress in its implementation 
was  monitored  and  reported  on  until  November  2009,  when  it  was  replaced  by  the  EU-
Ukraine Association agenda. The Association agenda builds on the substantial progress made 
in negotiating the EU-Ukraine Association Agreement (AA). This Agreement is conceived by 
both  parties  as  illustrating  the  most  advanced  and  ambitious  approach  to  the  Eastern 
Partnership  vision  of  association,  including  a  Deep  and  Comprehensive  Free  Trade  area 
(DCFTA) and a comprehensive programme of approximation to the EU acquis. 

In 2010 an intensive and varied range of EU-Ukraine meetings took place, most formally at 
the level of the EU-Ukraine Summit, the Cooperation Council and the seven subcommittees. 
In  addition  progress  in  implementing  the  Association  agenda  was  reviewed  at  the  level  of 
Joint  Committee  of  Senior  Officials.  More  broadly,  Ukrainian  authorities  and  civil  society 
representatives participated actively in the multilateral framework of the Eastern Partnership, 
and  contributed  to  the  working  platforms.    On  a  bilateral  basis,  Ukraine  and  the  EU  also 
discussed  institutional  capacity  building  in  the  framework  of  the  Eastern  Partnership 
Comprehensive Institution Building Programme. 

This  document  reports  on  the  overall  progress  made  in  implementing  the  EU-Ukraine 
Association  agenda  between  1  January  and  31  December  2010,  although  developments 
outside  this  period  are  also  considered  when  deemed  relevant.  It  should  be  noted  that  in 
addition and complementary to the Association agenda, the EU side provided Ukraine with a 
‘matrix’  of  reform  priorities  with  a  view  to  providing  further  guidance  to  Ukraine’s  reform 
efforts.  Correspondingly the EU focused, in its highest-level dialogue with Ukraine, on a set 
of  core  ‘reform  priorities’,  such  as  an  inclusive  constitutional  reform,  electoral  and  judicial 
reform and energy sector reform. 

This report effectively assesses progress made in preparing for the entry into force of the EU-
Ukraine  Association  Agreement,  since  the  Association  Agenda  is  designed  to  pave  the  way 
for  this.  It  is  not  a  general  review  of  the  political  and  economic  situation  in  Ukraine.  For 
information on regional and multilateral sector processes, readers should refer to the sectoral 
report. 

In 2010 Ukraine took positive steps to establish a framework for potential reforms, notably by 
bringing  the  IMF  Standby  Agreement  back  on  track,  adopting  a  Comprehensive  Economic 
Programme (under the supervision of the Committee on Economic Reforms established by the 
Presidential  decree  of  17  March  2010)  and  achieving  significant  fiscal  consolidation,  with 
promises of more to come if tax and pension reforms could be successfully implemented. The 
existence of a more stable political situation suggested that, with the right motivation and will, 

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the  government  could  take  forward  a  set  of  core  reforms  with  the  potential  to  bring  the 
country closer to European standards and values as enshrined in the Association Agenda.  

Particular  achievements  in  2010  include  the  adoption  of  a  Public  Procurement  Law  which 
should play an important role in curbing corruption and in increasing competitiveness, and the 
adoption  of  a  Gas  Sector  reform  law  which  paved  the  way  for  Ukraine’s  accession  to  the 
Energy  Community  in  February  2011,  providing  significant  potential  to  modernise  and 
restructure its energy industries and infrastructure, and with potentially very large economic 
benefits. 

These  reforms  go  in  the  right  direction  and  have  been  bolstered  by  EU  technical  support. 
Their  success  rests  on  implementing  regulations  and  measures,  which  will  need  to  be 
monitored closely if these advances are to be consolidated. In the case of  public procurement, 
for  example,  respect  for  international  norms  is  needed  in  all  implementing  regulations  and 
amendments if there is to be no further disruption to the substantial portion of EU assistance 
channeled through budget support. 

Economic  reforms  did  not  extend  to  all  areas:  perceptions  of  the  business  and  investment 
climate  continued  to  be  adversely  affected  by  a  series  of  obstacles  and  irritants  such  as 
corruption, non-transparent tax (particularly Value Added Tax) and customs regimes, and the 
absence of an independent judiciary and a reliable legal environment. 

As  regards  the  political  domain,  there  are  fewer  positive  signs.    Ukraine  has  experienced  a 
deterioration  of  respect  for  fundamental  freedoms  notably  as  regards  the  freedom  of  the 
media,  freedom  of  assembly  and  democratic  standards.  Regarding  democracy  in  particular, 
after  the  generally  good  conduct  of  presidential  elections  at  the  beginning  of  the  year,  the 
local elections in October were heavily criticised by international and domestic observers, in 
particular as regards the legal framework and the poor administration of the electoral process. 
The  adoption  of  an  election  code  which  meets  European  standards  and  which  is  supported 
across the main political groupings is crucial to the democratic legitimacy of future elections 
in Ukraine. This issue is at the top of the EU’s agenda in Ukraine. 

An  Action  Plan  on  Visa  Liberalisation  was  announced  at  the  EU-Ukraine  Summit  in 
November 2010. This Action Plan gives rise to a comprehensive range of legislative and other 
measures linked to verifiable benchmarks, and its implementation has started. 

A comprehensive reform of the judiciary and fight against corruption remain key challenges. 
Respect for rule of law in criminal investigations and prosecutions, including the principle of 
a fair, impartial and independent legal process, must be guaranteed in order to ensure that the 
criminal  law  is  not  used  for  political  ends.  It  is  important  to  ensure  that  the  process  of 
Constitutional  reform  is  transparent  and  inclusive.  As  regards  the  EU-Ukraine  Association 
Agreement,  2010  saw  further  substantial  progress  in  negotiations  on  Political  Dialogue  and 
Reform, Political Association, and Cooperation and Convergence in the Field of Foreign and 
Security  Policy.  Progress  was  also  made    on  Institutional  Provisions,  General  and  Final 
Provisions  and  on  economic  and  sector  cooperation  issues,  which  have  been  provisionally 
closed. The Justice, Freedom and Security chapter is close to final agreement. Negotiations on 
the  DCFTA  part  of  the  agreement  continue  and  both  sides  have  reiterated  their  intention  to 
conclude these negotiations in 2011. 

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2. 

POLITICAL DIALOGUE AND REFORM 

The EU and Ukraine maintained regular political dialogue during the year, notably at the EU-
Ukraine  Summit  and  the  Cooperation  Council.  In  addition,  political  dialogue  meetings  took 
place  between  the  Ukrainian  government  and  the  EU  Political  and  Security  Committee,  the 
Council Working Group on Eastern Europe and Central Asia, the EU Foreign Ministers and 
the  EU  Political  Directors.  The  EU-Ukraine  Parliamentary  Cooperation  Committee  met  in 
both Brussels and Kyiv. The latter included a visit to Odessa.  

Democracy and rule of law 

No  progress  was  noted  in  the  reporting  period  with  respect  to  promoting  an  inclusive 
constitutional  reform.  The  National  Constitutional  Council,  set  up  in  2007  to  work  on 
drafting a new Constitution, was disbanded in April 2010. In September 2010, following an 
appeal  by  252  MPs  from  the  ruling  coalition,  the  Constitutional  Court  ruled  that  the 
constitutional  amendments  of  December  2004  had been  adopted  in  violation  of  the  relevant 
constitutional  procedure.  On  these  legal  grounds,  the  1996  Constitution  has  been  reinstated. 
Subsequently,  the  parliament  adopted  a  new  law  on  the  Cabinet  of  Ministers  as  well  as 
amendments to the parliamentary Rules of Procedure and to 32 other laws, aimed at bringing 
the  legal  framework  in  line  with  the  1996  Constitution.  Experts  consider  that  a  number  of 
these  amendments  gave  even  wider  powers  to  the  President  and  further  weakened 
parliamentary control over the executive. 

In December 2010, the Venice Commission  issued an opinion which concluded that the 1996 
Constitution  does  not  provide  sufficient  checks  and  balances  and  encouraged  the  Ukrainian 
authorities  to  engage  in  a  comprehensive  process  of  constitutional  reform  based  on 
established procedures and involving all the relevant players. 

In  November  2010,  the  President  established  a  Commission  for  the  Strengthening  of 
Democracy  and  Rule  of  Law  which  was  tasked  “to  unite  efforts  of  the  state  authorities, 
political  parties,  civil  society  organisations,  other  institutions  of  the  civil  society  for  the 
strengthening of democracy and rule of law”. Its main task was to follow up on constitutional 
amendments (in particular those required to further reform the judiciary and the prosecutor’s 
office), the Venice Commission recommendations and the fulfilment of Ukraine’s obligations 
before  the  Council  of  Europe  (CoE).  Just  after  the  reporting  period,  the  President  set  up  a 
special working group to prepare the concept of the future Constitutional Assembly that will 
draft amendments to the Constitution.  

As  reported  in  the  previous  year,  the  overall  conduct  of  the  presidential  elections  in  early 
2010 was positively assessed by the International Election Observation Mission. At the same 
time, the practice of amending the electoral framework in the middle of the electoral process 
was criticised. Local elections were postponed from spring to October 2010. In July 2010 the 
parliament adopted a new version of the law on local elections, which was widely criticised 
by local and international election experts. In August, at an extraordinary plenary session, the 
parliament  adopted  additional  amendments  to  that  law.  These  amendments  addressed  a 
number  of  issues  but  left  some  important  ones  untouched.  Most  independent  domestic  and 
international  election  observers  criticised  the  conduct  of  the  local  elections  as  being  a  step 
backwards compared with other post-2005 elections. The Election Observation Mission of the 
Congress of Local and Regional authorities of the CoE highlighted a number of weaknesses 
and noted in particular that the local elections were ‘not of a standard [we would have] wished 
to see’ as Ukraine ‘had already shown it can do better’.  

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In November 2010, the President set up a working group to improve the electoral legislation 
with the aim of bringing it into line with international democratic standards and speeding up 
its codification. Since 2002, the Organisation for the Security and Cooperation in Europe — 
Office for Democratic Institutions and Human Rights (OSCE/ODIHR) has recommended the 
adoption of a single election code. For its part the EU has funded the drafting of an election 
code (drawing on expertise from the OSCE/ODIHR), which has been registered in parliament 
and has been positively assessed by the Venice Commission. However, the working group has 
not used this draft election code as a source document for preparing future draft legislation. 
The  working  group  did  not  include,  as  full-fledged  members,  either  independent  experts  or 
representatives  of  civil  society  organisations,  nor  does  it  include  a  significant  number  of 
representatives of the opposition.  Subsequent to the reporting period, assurances have been 
given to the EU concerning the broadening of representation in the working group, and this 
aspect will be closely followed in 2011.  

The  reinstatement  of  the  1996  Constitution  has  led  to  uncertainty  regarding  the  date  of 
parliamentary  elections.  In  February  2011,  just  after  the  reporting  period,  the  parliament 
adopted a series of constitutional amendments proposed by the governing coalition whereby 
the  term  of  office  of  the  national  parliament  and  of  local  government  councils  is  extended 
from  four  to  five  years.  The  draft  amendments  also  envisage  that  the  next  parliamentary 
elections should take place in October 2012 and the next presidential elections in March 2015. 
Some  provisions  of  the  current  legislation  on  political  parties  continue  to  contradict  other 
legislative provisions as well as the provisions of the European Convention on Human Rights 
and European standards in the field of political parties. The dependence of political parties on 
private funding is a problem which remains to be solved.  

The  legislation  on  judicial  reform  was  rapidly  drawn  up  by  the  new  presidential 
administration  and  adopted  in  July  2010,  without  waiting  for  the  opinion  of  the  VC.  In 
October, the Venice Commission issued its opinion on the law on the Judicial System and the 
Status of Judges. The opinion acknowledged some progress in a limited number of areas but 
contained  strong  criticism  of  a  number  of  points,  notably  the  risk  that  the  executive  would 
have  greater  control  over  the  judiciary.  The law  weakens  the  powers  of  the  Supreme  Court 
and at the same time gives the High Council of Justice more authority to appoint and dismiss 
judges.  These  shortcomings  need  to  be  addressed  urgently.  A  start  was  made  when,  in 
December, the removal of the head of Ukraine’s Internal Security Service from membership 
of  the  High  Council  of  Justice:  this  action  eliminated  an  important  potential  conflict  of 
interest and a risk for the independence of the judiciary. No progress can be reported on the 
adoption  of  a  draft  Code  of  Criminal  Procedure  or  on  the  law  reforming  the  Prosecutor’s 
Office,  which  passed  in  first  readings  in  the  parliament  in  2009.  Similarly  no  progress  was 
made  in  reforming  the  Bar  and  setting  up  a  professional Bar  Association.  At the end of the 
year a number of criminal investigations were initiated against former government officials — 
including  the  former  Prime  Minister.  These  actions  have  drawn  criticism  regarding  the 
potential use of the criminal justice system for political purposes. 

With regard to the fight against corruption, no progress was achieved in 2010. Regrettably, 
in  December,  parliament  abolished  the  anti-corruption  package  of  legislation  and  other 
measures  which  had  been  adopted  in  2009  but  never  implemented.  On  the  same  day,  the 
parliament approved in first reading a draft law on the principles of preventing and combating 
corruption. Shortly after the reporting period, the commission in charge of fighting corruption 
was abolished. 

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Only limited progress can be reported on strengthening local self-government. In September 
2010, amendments were adopted to the Law on the City of Kyiv, separating the post of the 
elected  Mayor  from  the  post  of  the  Head  of  the  City  State  Administration.  The  latter  is 
appointed directly by the President and holds the main executive powers.  

With  regard  to  public  administration  reform,  work  continued  on  drafting  framework 
legislation on the civil service, ministries and central executive bodies, but without presenting 
a comprehensive strategy for reform in this area. In October 2010 the president announced a 
far-reaching  re-structuring  of  the  central  executive  apparatus.  This  announcement  was 
followed in December by decisions to reduce radically the number of ministries and executive 
agencies and their respective staff and to recast a number of government agencies as ‘central 
executive bodies’. While these reforms have the potential to increase efficiency by reducing 
the  levels  of  bureaucratic  control  in  Ukraine,  it  is  important  to  ensure  they  are 
counterbalanced by appropriate inter-institutional checks and balances. 

The  Ombudsman’s  activities  need  further  support  to  strengthen  the  independence  and 
effectiveness of the office and to raise its profile. In August 2010 a position of Ombudsman 
for Children’s Rights was created, as a deputy to the Parliamentary Ombudsman for Human 
Rights.  

Human rights and fundamental freedoms 

A deteriorating situation was observed in the field of human rights, fundamental freedoms 
and  the  rule  of  law.  The  EU  expressed  concern  over  the  deteriorating  respect  for 
fundamental freedoms and democratic principles in Ukraine. Such trends were also criticised 
by the OSCE Representative on Freedom of the Media, in the October resolution on Ukraine 
issued  by  the  Parliamentary  Assembly  of  the  CoE  and  in  statements  from  international  and 
domestic  human  rights  organisations.  There  were  reported  cases  of  harassment  and 
prosecution of human rights activists.  

Just after the reporting period, in January 2011, the parliament adopted the law on access to 
public  information  which  was  welcomed  by  the  OSCE  Representative  on  Freedom  of  the 
Media. Other commitments related to laws on public service broadcasting, media ownership 
transparency and privatization of print media, and the abolition of the “public morality law” 
remain unfulfilled. 

As  regards  media  freedom,  during  the  reporting  period,  the  number  of  cases  of  violence 
against  and  intimidation  of  journalists  increased,  and  little  progress  was  reported  in 
investigating such cases. Increasingly frequent controls were reportedly carried out at media 
premises both in Kyiv and the regions. The investigation into the disappearance of a Kharkiv 
journalist Vasyl Klymentiyev in August has not been completed. 

Implementation of the judgments of the European Court of Human Rights remains an area 
of  concern.  The  high  number  of  pending  cases  against  Ukraine  reflect  structural  problems 
within the judiciary system in dealing with human rights issues. 

Civil society organisations and opposition parties have complained about  restrictions  on the 
freedom  of  assembly.  In  particular,  opposition  parties  complained  that  the  police  gave 
preferential  treatment  to  supporters  of  the  Party  of  Regions.  People  who  took  part  in  a 
peaceful  demonstration  against  the  new  Tax  Code  are  being  prosecuted  for  damaging  the 
pavement  of  the  square  where  they  gathered.  In  June  2010  the  parliament  adopted,  at  first 

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reading,  a  draft  law  on  peaceful  assemblies  which  was  criticised  by  some  civil  society 
organisations  for  imposing  restrictions  on  the  freedom  of  assembly.  In  October  2010  the 
Venice Commission  welcomed the new draft as an improvement over the previous one but 
identified  a  number  of  issues  still  to  be  addressed  to  make  it  compliant  with  European  and 
international standards. No progress can be reported regarding the adoption of a new law on 
civil society organisations, despite numerous debates on the issue. The existing law, adopted 
in 1992, has a number of shortcomings.  

No progress was reported on the adoption of comprehensive anti-discrimination legislation, 
as recommended by UN and CoE monitoring bodies. 

As regards respect for the rights of persons belonging to national minorities, there continued 
to  be  sporadic  reports  of  incidents  of  anti-Semitism,  including  the  use  of  anti-Semitic 
messages  by  one  of  the  candidates  in  the  presidential  elections.  Other  national  minorities 
continued to be the object of discrimination and racism including, in particular, the Roma and 
the  Crimean  Tatar  communities.  Further  efforts  are  needed  to  increase  awareness  of  racial 
discrimination and to fight it. In February 2010, an Action Plan for 2010-2012 was adopted by 
an  Inter-agency  Working  Group  set  up  to  tackle  xenophobia,  interethnic  and  racial 
intolerance. In November, people watching a film on the Transgender Day of Remembrance 
were attacked by masked men. The local police classified the attack as ‘hooliganism’ but the 
victims were pressing the police to register the acts as ‘hate crime’. The event was followed 
by  an  EU  demarche.  No  steps  have  been  taken  to  develop  a  modern  legal  framework  on 
ensuring the rights of minorities, and continuous efforts are needed to ensure implementation 
of the CoE Framework Convention for the Protection of National Minorities and the European 
Charter for Regional or Minority Languages. The ministry of education and science reversed 
the  decision  of  the  previous  government  to  carry  out  school  leaving  tests  only  in  Ukrainian 
and re-introduced the option of pupils taking these tests in national minority languages. Just 
after the reporting period, Ukraine submitted a draft law on languages for the review of the 
Venice Commission.  

Poor conditions in detention facilities leading to cases of torture and ill-treatment remained 
serious,  and  systemic  human  rights  violations  by  law-enforcement  agencies  continue  to  be 
reported. Impunity in this regard is a matter of concern. The ministry of interior’s department 
on Human Rights Monitoring, whose job it was to monitor respect for human rights within the 
police  force,  was  abolished  despite  the  positive  results  achieved  in  2009.  A  National 
Preventive  Mechanism  has  yet  to  be  established  in  spite  of  the  September  2007  deadline, 
which  was  set  when  Ukraine  ratified  the  Optional  Protocol  to  the  UN  Convention  against 
Torture in 2006.  

Institutional  capacity  in  implementing  equal  treatment  policies  has  improved  and  some 
progress  can  be  reported.  A  department  for  the  Family  and  Gender  Policy  was  established 
within the ministry for family, youth and sport and an inter-ministerial commission was set up 
to address claims of gender discrimination. In the course of the year, the authorities launched 
a substantial raft of gender initiatives and coordination exercises among executive agencies in 
order to implement national gender polices. Domestic violence remains at high levels. 

In  March  2010,  the  UN  Convention  on  the  Rights  of  Persons  with  Disabilities  and  its 
Optional  Protocol  came  into  force.  Progress  has  been  achieved  especially  in  ensuring  that 
national legislation complies with the Convention and its Optional Protocol. However, overall 
progress on access to social services for the disabled remained uneven throughout the country, 
as it depends on effective decisions and policies at local level. 

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Some progress has been achieved in the area of children’s rights. The national legislation has 
been  brought  into  line  with  the  UN  Optional  Protocol  on  the  Sale  of  Children,  Child 
Prostitution  and  Child  Pornography  (UN  CRC  OPSC),  as  was  recommended  by  the  UN 
Committee  on  the  Rights  of  the  Child  in  2007.  In  January  2010,  Ukraine  adopted  a  law  to 
combat child pornography. For its part, the EU helped organise a series of regional seminars 
aimed  at  better  implementing  The  Hague  Convention  on  the  Civil  Aspects  of  International 
Child Abduction. 

Progress  was  made  in  the  area  of  trade  union  rights  and  core  labour  standards:  in 
November 2010 the government, trade unions and employers signed a new general agreement 
which will apply for the next two years (2011 -2012). The agreement is intended to increase 
labour productivity, create new jobs and raise the average salary by 17.8 % in 2010, by 15 % 
in  2011  and  by  16 %  in  2016.  The  government  undertook  to  create  an  advisory  tri-partite 
committee working with central executive bodies.  

Regional and international issues, cooperation on foreign and security policy, WMD non-
proliferation and disarmament, conflict prevention and crisis management  

Ukraine continued to cooperate actively with the EU on regional and international issues, and 
aligned itself with 26 out of 44 CFSP declarations in which it was invited to take part.  

Ukraine's  participation  in  the  EU's  ‘Atalanta’  naval  operation  was  initited,  building  on  the 
positive  experience  of  its  participation  in  EU  operations  in  the  Balkans.  In  November  2010 
the  EU  and  Ukraine  reached  agreement  on  financing  activities  under  the  project  on  ‘Bio-
safety  and  bio-security  improvement  at  the  Ukrainian  anti-plague  station  (UAPS)  in 
Simferopol’.  

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.  

No  progress  was  made  on  ratifying  or  implementation  of  the  Rome  Statute  of  the 
International Criminal Court. For the EU, this remains a core element for the foreign policy 
titles of the Association Agreement, and will therefore be pursued in the negotiations.  

Ukraine  and  the  Republic  of  Moldova  failed  to  find  a  negotiated  solution  to  their  few 
remaining disagreements over the demarcation of the northern and southern segments of their 
common  border.  More  effort  and  attention  to  this  issue  are  needed  in  the  ongoing  visa 
dialogues between the two countries and the EU. 

EU Border Assistance Mission to the Republic of Moldova and Ukraine (EUBAM) 

Ukraine  continued  to  be  fully  committed  to,  and  participated  constructively  in,  the  work  of 
EU  Border  Assistance  Mission  to  the  Republic  of  Moldova  and  Ukraine  (EUBAM).  With 
EUBAM  support,  the  professional  capacities  of  the  Ukrainian  customs  and  border  guard 
services were further enhanced, as was inter-agency cooperation within Ukraine and between 
the  Republic  of  Moldova  and  Ukraine.  EUBAM  supported  the  demarcation  of  the  central 
(Transnistrian) segment of the Moldovan-Ukrainian state border on the Ukrainian side.  

3. 

ECONOMIC AND SOCIAL REFORM  

Macroeconomic framework and functioning market economy  

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Ukraine was among the countries in the EU neighbourhood that were hardest hit by the global 
economic  and  financial  crisis.  However,  in  2010  Ukraine’s  economic  fortunes  improved  in 
parallel  with  the  rebound  in  other  regions  and  in  the  context  of  a  more  stable  domestic 
political  situation  following  the  presidential  election  and  the  subsequent  formation  of  a 
majority  government.  Re-establishing  a  Stabilisation  Agreement  with  the  IMF  and  agreeing 
on an Economic Reform Programme, under the Supervision of the President’s Committee on 
Economic Reforms, were important achievements in 2010. 

The  Ukrainian  recovery  was  initially  export-led,  but  spread  to  consumer  demand  over  the 
course of 2010. Investment also recovered in 2010, albeit only in the second half of the year 
and  relatively  timidly,  considering  the  favourable  base  effect  stemming  from  its  drastic 
contraction during the crisis. This in part reflected problems in the operating environment for 
businesses,  as  well  as  companies’  continued  difficulties  with  access  to  finance  (loans  by 
domestic banks to non financial companies barely increased in real terms in 2010).  

On the external front, the positive adjustment of the current account that had resulted from the 
crisis-related  contraction  of  imports  during  2009  continued  through  the  first  half  of  2010, 
before  starting  to  reverse  as  domestic  demand  picked  up.  The  current  account  slipped  back 
into  deficit.  The  full  year  current-account  deficit  is  estimated  at  USD  2.9  billion  (2,1 %  of 
GDP. 

Nonetheless,  2010  was  a  successful  year  overall  for  Ukraine  in  terms  of  external  economic 
stabilisation. The country was able to tap various sources of external financing. Notably, this 
included a return to capital markets with a combined USD 2.5 billion of sovereign Eurobonds 
issued  in  September  and  December  2010.  The  government  also  secured  a  USD  2  billion 
revolving loan from a Russian state-owned bank and, most importantly, a new USD 15 billion 
Stand-by Arrangement (SBA) with the IMF. This began in July 2010 and runs until the end of 
2012. (The previous SBA stalled in November 2009 over Ukraine’s lack of compliance with 
agreed  programme  parameters).  Meanwhile,  negotiations  between  Ukraine  and  the  EU  on  a 
macro-financial  assistance  loan  of  EUR  610  million  were  launched,  but  not  concluded,  in 
2010. 

The combination of multilateral, bilateral and private external borrowing by the government, 
along with a gradual return of external lending to private borrowers in Ukraine, allowed the 
National  Bank  of  Ukraine  (NBU)  to  replenish  its  foreign  exchange  reserves  from  a  low  of 
USD  24.1  billion  (EUR  17.6  billion.)  in  February  2010  to  USD  34.6  billion  (EUR  26.2 
billion) at year-end.  

Domestically, the NBU managed to control inflation relatively well in 2010. Following three 
years of double-digit increases in consumer prices, the year-average headline inflation in 2010 
came to 9.4 %. Core inflation was slightly lower, at 8.6 %, reflecting the fact that part of the 
price  pressure  stemmed  from  increases  in  excise  taxes  and  administered  prices,  notably  for 
gas  and  communal  heating  services.  These  were  implemented  in  line  with  the  reform 
programme  agreed  between  Ukraine  and  the  IMF  with  a  view  to  gradually  bringing  retail 
energy prices to cost recovery levels, thereby reducing the need for state transfers to Naftogaz. 
In  its  fiscal  policy,  Ukraine  broadly  followed  the  consolidation  course  agreed  with  the  IMF 
under the July 2010 SBA. At just over 5 % of GDP, the general government deficit was even 
lower than the initial  IMF  programme target, although this  positive development was offset 
by the higher-than-mandated deficit of Naftogaz, which occurred despite the gas price hikes 
implemented under the programme. 

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In 2010 Ukraine adopted a new Budget Code, on the basis of which the authorities drew up a 
2011  budget  in  line  with  the  consolidation  benchmarks  agreed  with  the  IMF.  Then,  in 
December 2010, the IMF completed its first programme review under the SBA and released 
the  second  tranche  of  its  programmed  financial  support  of  USD  1.5  billion  (or  EUR  1.2 
billion).  

Employment and social policy 

The economic recovery positively influenced the employment situation. According to official 
labour market figures, unemployment declined from 9.6 % in 2009 to 8.8 % in 2010, while the 
number of jobs rose slightly. However the informal sector still represents a substantial share 
of  employment.  At  the  end  of  2010,  564 000  persons  were  officially  registered  as 
unemployed,  of  which  55 %  were  women  and  42 %  young  job  seekers.  The  2010  budget 
specifically supported, for the first time, young job seekers and people looking for their first 
job.  Some  323 000  people  benefited  from  this.  In  September  2010  the  Cabinet  of  Ministers 
approved a resolution on the national employment policy for the period 2010-2011. 

Under  the  state  insurance  scheme,  the  State  Employment  Services  (SES)  supported  people 
who had lost their job and assisted those who were looking for a new job. In 2010 the SES 
opened seven vocational educational training centres to train and retrain people according to 
the  demands  of  the  labour  market,  and  there  are  plans  to  open  ten  more.  The  government 
drafted  a  decree  ‘On  rules  governing  agreements  concluded  by  the  economic  operators 
concerning  training,  retraining  and  better  qualifications  for  workers’.  The  draft  law  on  a 
national qualification system, submitted to the parliament in May 2010, uses the SES labour 
market analysis as the basis for the annual educational plan to be implemented by the ministry 
of education and science and other ministries.  

As regards social protection and the fight against poverty, Ukraine prepared amendments to 
laws  on  social  protection  and  the  rehabilitation  of  disabled  people.  The  draft  amendments 
promoted  equal  employment  opportunities,  the  fight  against  discrimination  and  barrier-free 
access  for  the  disabled.  The  government  continued  to  support  persons  with  difficult  living 
conditions  and  who  face  difficulties  competing  on  the  labour  market.  The  minimum  salary 
rose slowly during 2010, reaching 922 UAH (or EUR 88) per month in December. Pensions 
were also increased during the reporting period. The concept for reforming and improving the 
delivery of social services is under discussion at the ministry of labour and social policy. 

In June 2010, the Committee for Economic Reforms, operating under the President, endorsed 
a draft social protection reform programme. This aims to give poor people better access to 
the  social  protection  system  and  ensure  that  social  assistance  is  targeted  more  effectively. 
Only 56.8 % of those living below the absolute poverty line currently receive social assistance 
and only 23 % of social transfers reach the poor.  

Ukraine  adopted  the  law  on  social  dialogue,  which  was  promulgated  by  the  President  in 
January 2011. The law is expected to improve the institutional framework and the functioning 
of social dialogue.  

No  progress  can  be  reported  regarding  the  adoption  of  the  long-awaited  amended  Labour 
Code. Concerns were expressed by the ILO on the non conformity of certain provisions with 
its basic standards, notably regarding the right to strike. 

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Ukraine  signed  international  agreements  on  mutual  employment  with  Latvia,  Lithuania, 
Poland  and  Portugal  and  on  mutual  social  protection  with  Bulgaria,  Estonia,  Spain,  Latvia, 
Lithuania, Slovakia and Czech Republic.  

In the area of agriculture, in June 2010, the ministry of agrarian policy issued an instruction 
on a departmental programme for the socio-economic development of rural communities. 

In order to improve the competitiveness of agricultural production, as well as quality schemes, 
the  ministry  established  the  Agricultural  Wholesale  Markets  Development  Group  and 
organised  an  International  Agricultural  Wholesale  Market  Investor  Forum  with  the 
participation  of  experts  and  representatives  from  EU  member  states.  During  the  reporting 
period Ukraine adopted the law on the ‘Wholesale Markets of Agricultural Products’. 

In the field of regional policy dialogue changes first in the government and then in ministerial 
structures  meant  that  no  progress  was  made  in  implementing  the  agreed  work  plan  for  the 
Memorandum of Understanding on Regional Policy dialogue signed in July 2009, other than 
the launching of an OECD Territorial Review. When ministerial structures will be finalised, 
the Regional Policy dialogue and implementation of a revised programme will be continued 
as of 2011. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

During the reporting period, bilateral trade between Ukraine and the EU rebounded, although 
total trade did not reach its 2008 level. EU exports to Ukraine increased by 24.5 % compared 
to 2009 and Ukraine’s exports to the EU increased by 43.4 %. Five rounds of negotiations for 
a EU-Ukraine DCFTA were held during the reporting period. 

There  was  very  limited  progress  on  implementing  the  customs-related  priorities  of  the 
Association agenda. Customs procedures are being computerised, but the risk-based customs 
control system still needs to be substantially upgraded. An updated version of the harmonised 
system for the classification of goods (HS) was adopted in January 2011. . The State Customs 
Service  of  Ukraine  (SCSU)  took  preparatory  steps  to  join  the  common  transit  system. 
Preparations  are  under  way  for  special  customs    controls  during  the  EURO  2012  football 
championship, and in particular for action to protect intellectual property rights. Further steps 
are  needed  to  tackle  the  problems  arising  from  cumbersome,  bureaucratic  and  restrictive 
customs  controls  .  The  procedures  for  verifying  customs  valuation  are  still  not  in  line  with 
World  Trade  Organisation  (WTO)  rules,  as  transaction  values  are  routinely  questioned  and 
minimum prices arbitrarily used. Integrity remains an area of serious concern.  

On  free  movement  of  goods  and  technical  regulations,  in  May  2010  the  government 
adopted  a  decree  ‘on  approving  the  plan  for  priority  measures  regarding  the  reform  of  the 
system of technical regulation’. In December 2010 the President signed the Laws on Market 
Surveillance and General Product Safety. A draft law on ‘liability for damage rendered by the 
defect of a product’ was submitted to Parliament. Under the administrative reform announced 
by the President in December, the State Committee on Technical  Regulation and  Consumer 
Policy (DSSU) would be reorganised as the State Service on Technical Regulation. It is not 
clear  whether  the  reform  will  address  the  long-standing  institutional  challenges  in  the 
Ukrainian system of technical regulation.  

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There  are  concerns  over  measures  relating  to  the  export  of  grain.  The  introduction  of 
additional  grain  quality  checks  by  Ukrainian  customs  and  the  quotas  for  grain  exports 
imposed in October by the Ukrainian government go against the spirit of trade provisions in 
the PCA. They also raise serious concerns in terms of WTO compatibility. 

In the area of establishment and company law, the Parliament adopted a law on licensing. 
This law clarifies which types of economic activities are subject to licensing procedures. The 
Parliament  also  adopted  two  laws  on  the  state  registration  process  —  one  concerning  the 
registration  of  legal  entities  and  the  other  relating  to  plans  for  an  electronic  registration 
system.  

Ukraine continued gradually bringing its sanitary and phyto-sanitary (SPS) standards into 
line with the EU's, and there was progress on  the  SPS  negotiations for the DCFTA. In July 
2010, Ukraine adopted rules on the frequency of veterinary-sanitary inspections at enterprises, 
applying  strengthened  hygiene  rules  based  on  the  Hazard  Analysis  Critical  Control  Point 
(HACCP)  system.  Ukraine  established  a  working  group  that  started  work  on  reforming  the 
food  safety  inspection  system  on  the  basis  EU  standards.  It  further  modernised  laboratories 
and  trained  SPS  staff.  In  2010,  the  European  Commission’s  Food  and  Veterinary  Office 
(FVO)  carried  out  four  inspection  visits.  Two  missions  in  the  poultry  sector  concerned, 
respectively, animal health issues and animal production. The other missions focused on the 
dairy  sector  and  on  checking  for  residues  and  contaminants  in  live  animals  and  animal 
products,  including  checks  on  veterinary  medicinal  products.  In  August  2010,  the  EU's 
veterinary  emergency  team  carried  out  a  mission  to  help  Ukraine  develop  control  and 
eradication  measures  for  African  swine  fever.  Additional  attention  should  be  paid  to 
transparency  when  amending  or  proposing  legislation.  The  new  procedure  for  authorising 
imports  of  animal  products  deserves  special  attention,  as  does  the  draft  legislation  on  water 
and on the certification of meat, dairy and poultry products. 

Negotiations on services continued in the context of the overall DCFTA negotiations.  

As regards financial services, Ukraine is recovering from the global financial crisis, although 
the  banking  sector  in  Ukraine  remains  fragile.  Financial  sector  reforms  are  focused  on 
ensuring  an  adequate  level  of  capitalisation  and  strengthening  the  independence  of  the 
National Bank of Ukraine (NBU). In 2010, the financial sector regulators developed several 
concept  papers  and  actions  plans  for  prudential  supervision,  insurance,  implementing 
International  Financial  Reporting  Standards  (IFRS)  in  non-bank  financial  institutions, 
protecting  consumers  of  financial  services  and  developing  credit  cooperation  systems.  In 
November  2010,  a  draft  law  amending  the  existing  Law  on  Financial  Services  Market  was 
submitted to the Cabinet of Ministers. It aims to establish the legal framework for a unified 
public  financial  policy  on  financial  services,  to  strengthen  the  coordination  between  and 
accountability of financial sector regulators and to strengthen their operational independence.  

Insurance  markets  remain  problematic  in  Ukraine.  As  part  of  the  President’s  reform  plans, 
Ukraine decided to draft a new insurance law in 2011 in order to bring Ukrainian legislation 
into line with Solvency II requirements.  

In the field of accounting, banking institutions are legally required to issue IFRS statements, 
but not all of them have complied. The mandatory use of IFRS for all banking institutions by 
2011  is  a  condition  of  the  IMF  Stand-By  agreement.  Legislative  and  non-legislative 
preparatory work is under way to extend IFRS reporting to non-banking financial institutions.  

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No progress can be reported in the field of audit and accounting. 

Ukraine  and  the  IMF  assessed  regulatory  restrictions  to  the  free  movement  of  capital.  In 
October 2010, the NBU re-instated the requirement for banks to deposit there for six months 
20 % of the foreign currency credits or deposits received from non-residents.  

The  Ukrainian  business  and  investment  climate  remains  unstable,  reflecting  unpredictable 
and non-transparent decision-making by the authorities and the economic operators and lack 
of trust in the judiciary. Controversies between the business community and the government 
arose over the issuance of VAT bonds and the new proposed Tax Code (see below). Ukraine’s 
failure  to  respect  WTO  rules  on  customs  valuation  has  created  considerable  problems  for 
European companies across various sectors throughout 2010, contributing to the perception of 
a  deteriorating  business  climate.  A  study  ordered  by  the  European  Business  Association 
indicates  that  the  apparent  stability  resulting  from  the  presidential  elections  makes  Ukraine 
more  attractive  for  investment,  though  this  is  mitigated  by  the  negative  perceptions  of 
increased government and customs interference in business, worsened corruption and lack of 
progress with court system reform. 

Other key areas 

Concerns remain in the taxation area. In particular, tax legislation and the functioning of the 
administration  are  not  fully  in  line  with  the  principles  of  good  governance  and  fair  tax 
competition. A final, comprehensive strategic plan for tax administration is still lacking. On 2 
December,  the  parliament  approved  the  Tax  Code  incorporating  presidential  amendments. 
The  revised  law  integrates  various  earlier  laws  and  regulations  in  a  single  document,  keeps 
intact  the  existing  simplified  taxation  regime  for  individual  entrepreneurs  and  limits  the 
powers  tax  authorities  can  exercise  vis-à-vis  business,  with  the  aim  of  rectifying  some 
problematic  issues.  Implementation  of  the  new  code  will  require  a  close  monitoring, 
especially  as  regards  the  application  of  fines  and  fees  for  tax  violations,  the  registration  of 
newly-established  entities,  the  taxation  of  intermediaries  and  the  mechanism  for  comparing 
the value of products. 

Indirect taxation has been a focus of interest during 2010. The government made an effort to 
settle VAT refund arrears by the end of 2010, issuing VAT bonds in August with a face value 
of UAH 16.4 billion (EUR 1.44 billion) or 1.6 % of GDP. This measure cleared a large part of 
the  arrears  that  the  state  had  built  up  on  VAT  refunds  to  companies.  Nevertheless,  it  was 
controversial within the business community, both domestically and abroad, as companies felt 
compelled  to  register  (seeing  the  bond  scheme  as  the  only  way  of  being  paid  at  all),  even 
though  the  bonds  offered  a  coupon  inferior  to  market  yields  from  comparable  government 
bonds.  Indeed,  companies  in  need  of  cash  for  their  operations  had  to  sell  the  bonds  at  a 
discount  of  reportedly  20-30 %  of  face  value.  There  were  also  complaints  about  the 
preferential treatment of companies with close ties to the authorities, while other enterprises 
reported that part of their VAT refund claims were not recognised and remained unpaid. 

According  to  the  new  Code,  compliant  taxpayers  will,  from  March  2011,  be  eligible  for 
automatic  VAT  refunds  aimed  at  simplifying  the  refund  procedures  and  making  them  more 
transparent.  The  maximum  periods  for  VAT  refunds  under  a  regular  system  have  been 
established. Some of the compliance criteria for automatic VAT refunds cause concern.  

In the field of competition policy, two draft laws had their first reading in parliament — one 
raising  the  notification  thresholds  for  concentrations  and  the  other  introducing  criminal 

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liability for serious competition infringements. A third draft law under consideration aims to 
increase  the  powers  of  the  Anti-Monopoly  Committee  to  collect  evidence  in  investigations. 
Steps  towards  better  transparency  are  also  being  taken  with  the  publication  of  decisions 
online, open hearings and improved access to documents. Ukraine has no law regulating state 
aid, but in early 2010 the government issued a decree to increase transparency and reform the 
concept of state aid.  

Ukraine reinforced its international commitments in the field of intellectual property rights 
(IPR)  with  the  entry  into  force  of  the  Singapore  Treaty  and  the  Strasbourg  Agreement. 
Authorities  continued  their  ex  officio  actions,  carrying  out  a  number  of  seizures,  and  50 
criminal responsibility court cases were opened in 2010. Nevertheless, pirated and counterfeit 
goods  remain  widespread.  At  85 %,  Ukraine  shares  13th  place  in  an  independent  expert 
organisation’s ranking of the countries with highest prevalence of software piracy. 

A new law on public procurement came into force on 30 June 2010. Among other things, it 
set  up  the  Anti-Monopoly  Committee  as  the  new,  independent  review  body  providing 
remedies  and  review  procedures  which  are  now  closer  to  EU  standards.  Further legislative 
proposals in  line  with  European  and  international  standards were  also  prepared  in  2010  but 
have yet to be adopted. In addition, legislative amendments giving rise to possible exclusions 
from  public  tendering  were  a  source  of  concern  in early  2011.  This influenced  the  overall 
assessment  of  public  financial  management  in  Ukraine,  so  that  disbursements  from  sectoral 
budget support operations were suspended. 

In  the  framework  of  a  twinning  programme,  the  State  Statistics  Committee  of  Ukraine 
(SSCU)  assessed  its  own  work  in  the  light  of  the  European  Statistics  Code  of  Practice  and 
found  its  activity  to  be  in  line  with  international  practice.  Improvement  of  methodology 
continued.  Ukrainian  experts  met  their  Polish  counterparts  to  compare  trade  data  and 
identified  possible  reasons  for  discrepancies.  In  August  2010,  SSCU  signed  a  protocol  with 
the  customs  authorities  to  obtain  more  complete  information  on  cargo  declarations  with  a 
view to improving trade statistics.  

On  enterprise  policy,  there  were  several  initiatives  in  support  of  Small  and  Medium-sized 
Enterprises  (SMEs)  in  2010.  The  state  registry  for  companies  is  being  simplified,  as  are 
checks on businesses. A draft law on bankruptcy and licensing is before Parliament. In May 
2010, the State  Committee of Ukraine for Regulatory Policy and Entrepreneurship prepared 
the presidential ordinance necessary for Ukraine to take part in the European Small Business 
Act initiative. 

The government cancelled the planned draft law on public internal financial control, opting 
instead to widen the scope of the Budget Law to facilitate the development of internal audit.  

With  regard  to  external  audit,  a  Peer  Review  with  the  support  of  SIGMA1  took  place  in 
2010, providing a basis for future policy decision-making. As in 2009, there is still a need for 
closer  cooperation  between  Ministries  and  state  agencies  to  prevent  fraud  and  serious 
irregularities. 

1 

Sigma  (Support  for  improvement  in  Governance  and  Management)  is  a  joint  initiative  of the OECD and  the  European  Union  , 
principally financed by the EU. 

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5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

In the field of mobility, an Action Plan towards visa liberalisation was announced at the EU-
Ukraine  Summit  in  November  2010.  The  implementation  of  the  Visa  Facilitation  and 
Readmission  Agreements  with  Ukraine  has  continued.  The  Commission  has  adopted  in 
October  2010  draft  negotiating  directives  for  the renegotiation  of  the  Visa  Facilitation 
Agreement in order to align it with the new Visa Code and to introduce further facilitations. 
The negotiating directives were approved by the Council on in April 2011. 

The State Border Guard Service pursued border management reforms in line with the targets 
of the 2015 plan in terms of infrastructure, career development and personnel training. In May 
2010, it signed an 18-month cooperation agreement with FRONTEX covering risk analysis, 
joint  operations  and  management.  In  October  2010,  Ukraine  adopted  an  Integrated  Border 
Management  Concept  followed  by  an  Action  Plan.  Even  closer  cooperation  is  still  needed 
between  the  State  Border  Guard  Service  and  the  Customs  Service  to  optimise  information 
exchange at all operational levels. In the framework of Ukraine's preparations to co-host the 
2012 European Football Championship, an EU-funded twinning project on public order and 
crowd control completed its activities in March and a security meeting was held with Poland 
in February 2010. 

Ukraine continued discussions on border demarcation with the Republic of Moldova under 
the  auspices  of  the  EUBAM,  but  ongoing  tensions  concerning  in  particular  the  region  of 
Palanca continue to have a negative impact on regional security. A Common Border Security 
Assessment Report (CBSAR) is issued jointly by both countries every month and a customs 
data exchange (PAIES) is in place.  

Important shortcomings in the field of migration and asylum remain both in the legislation 
and  in  its  implementation.  Ukraine  has  to  improve  substantially  its  refugee  protection  and 
asylum system. Ukraine still does not have appropriate asylum legislation in place and recent 
administrative  changes  regarding  the  asylum  authority  contributed  to  the  increase  of  the 
backlog in dealing with asylum requests. The rights of recognized refugees are not respected 
(i.e. housing, education, access to the labour market).  . 

Ukraine continued to fight against organised  crime, implementing its obligations under the 
2003  United  Nations  Convention  on  Trans-national  Organised  Crime  through  regional 
cooperation  to  tackle  the  trafficking  of  persons  and  the  smuggling  of  migrants.  However, 
Ukraine’s  capacity  to  tackle  organised  crime  continued  to  suffer  from  institutional 
fragmentation.  A  national  strategy  and  action  plan  are  urgently  required  to  determine  the 
powers and responsibilities of the various law enforcement agencies and to ensure that they 
work together. As in 2009, the Third Protocol on the Illicit Manufacturing and Trafficking of 
Firearms, Their Parts, Components and Ammunition remains unsigned. 

In  September  2010,  Ukraine  ratified  the  CoE  Convention  on  Action  against  Trafficking  in 
Human  Beings.  The  various  law-enforcement  agencies  are  still  discussing  a  draft  law  that 
would  provide  more  severe  penalties  for  trafficking  crimes  and  give  victims  greater 
protection. Ukraine continued cooperating with EU member states and Interpol on technical 
information  exchanges.  Cooperation  with  civil  society  also  continued  apace.  Further  efforts 
are  needed  to  combat  internal  trafficking  and  to  develop  protection  and  rehabilitation 
measures  for  victims  of  forced  prostitution  and  labour  exploitation  particularly  in  the 
construction and agriculture sectors  

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In  January  2010  the  ministry  of  health  signed  a  Memorandum  of  Understanding  with  the 
European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) and in September it 
adopted a National Drugs Strategy for 2010-15. Meanwhile, cooperation continued with civil 
society  organisations  on  demand  reduction.  There  is  an  urgent  need  for  better  financing  of 
drug  monitoring  and  for  more  reliable  information  on  drug  prevalence,  particularly  among 
youth  and  other  high-risk  groups.  The  absence  of  a  drug-substitution  programme  within 
prisons  and  detention  facilities  is  a  cause  for  concern.  It  remains  crucial  for  the  Ukrainian 
authorities  to  work  systematically  with  civil  society  groups  on  developing  an  integrated 
approach  to  this  problem.  Ukraine  took  part  in  the  ENP  regional  seminar  on  the  EU  drug 
monitoring system organised by EMCDDA and the Commission in Brussels in October 2010.  

In the area of the fight against money laundering and economic crimes, Ukraine continued 
implementing  its  national  control  regime  in  the  light  of  the  recommendations  made  by 
Moneyval’s 2009 Third Round Mutual Evaluation Report in relation to coordination between 
law enforcement agencies on anti-corruption. The 2005 Council of Europe Convention on the 
Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the Financing 
of  Terrorism  was  ratified  in  November  2010  and  a  low  on  prevention  and  countermeasures 
against the laundering of the proceeds of crime and the financing of terrorism was adopted in 
May  2010.  Serious  inroads  into  the  prosecution  of  money  laundering  cases  have  yet  to  be 
made. In March 2010, Ukraine acceded to the Council of Europe Criminal Law Convention 
on Corruption and its Additional Protocol. 

In  the  area  of  police  and  judicial  cooperation  the  parliament  adopted  the  law  on  Personal 
Data Protection in June 2010 which entered into force in January 2011. In September Ukraine 
ratified the 1981 Council of Europe Convention for the Protection of Individuals with regard 
to  the  Automatic  Processing  of  Personal  Data.  Ratification  of  the  former  and  its  Additional 
Protocol  on  supervisory  authorities  and  trans-border  data  flows  will  enable  further 
development  of  cooperation  with  Europol  and  Eurojust.  Cooperation  between  the  EU  and 
Ukraine is based on the Conventions of the Hague Conference on Private International Law 
and  concentrates  on  family  law.  In  this  context  Ukraine  has  recently  signed  the  2007 
Maintenance Convention  

6. 

TRANSPORT, ENERGY, ENVIRONMENT, THE INFORMATION SOCIETY, RESEARCH AND 
DEVELOPMENT 

the  context  of  broader  administrative  reform, 

In 
the  Ministry  of  Transport  and 
Communications was re-named the Ministry of Infrastructure and will now cover tourism in 
addition to transport and communications. 

In  October  2010,  the  Cabinet  of  Ministers  approved  the  transport  strategy  to  2020.  To 
implement  the  strategy  the  ministry  will  have  to  submit  to  the  Cabinet  a  shorter-term 
implementation programme covering the period until 2015.  

Under  the  UNECE2-AETR  agreement  on  driving  times  and  rest  periods,  Ukraine  made 
substantial  progress  on  introducing  the  digital  tachograph.  In  June  2010  the  acceptance  of 
applications  for  the  provision  of  cards  for  digital  control  devices  started..  Ukraine  plans  to 
draw up a road safety strategy.  

2 United Nations Economic Commission for Europe 

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The Presidential Programme of Economic Reforms for 2010-2014 stipulates that action plans 
are to be drawn up in 2011 for implementing the 2009 railway reform programme. 

One  round  of  negotiations  on  a  comprehensive  aviation  agreement  between  the  EU  and 
Ukraine  took  place  in  March  2010.  Ukraine  has  not  replied  to  the  latest  Commission 
proposals.  In  November  2010  the  Ukrainian  parliament  passed  the  draft  Air  Code  at  first 
reading.  

Ukraine needs to ensure that its inland waterway fleet will meet recent UNECE requirements. 
Maritime safety also remains an issue of concern: Ukraine has not yet approved the national 
maritime safety concept. Ukraine will need to step up enforcement if it wants to be removed 
from the black list of the Paris Memorandum of Understanding on port state control.  

Ukraine  and  the  EU  consolidated  their  energy  cooperation  during  2010.  In  July,  Ukraine 
adopted  a  new  gas  law,  which  the  EU  considers  a  sound  basis  for  the  alignment  of    the 
Ukrainian gas market with EU and Energy Community rules. In September, the Protocol on 
Ukraine’s  accession  to  the  Energy  Community  Treaty  was  signed.  In  November,  the  EU-
Ukraine Summit adopted the fifth progress report on the implementation of the Memorandum 
of  Understanding  on  Energy  cooperation.  In  December,  Ukraine  ratified  the  Treaty,  paving 
the way for its membership in February 2011.  

In August 2010, Ukraine increased by 50 % its gas tariffs for households and municipal heating 
companies.  This  is  a  significant  step  towards  improving  the  financial  viability  of  Naftogaz. 
Further action is needed to restructure Naftogaz, to increase transparency in the gas sector and to 
ensure  full-cost  coverage  for  gas  supplies  to  industry.  Ukraine  continued  to  work  towards 
membership  of  the  Extractive  Industry  Transparency  Initiative,  aiming  at  transparency  of 
hydrocarbons revenues. Ukraine took some steps to strengthen the regulator, including through 
EU-supported training. New laws  are  being  drafted  on  electricity,  energy  sector  regulation, 
the  compulsory  installation  of  gas  meters  and  gas  and  electricity  settlements.  In February 
2010,  Ukraine  began  the  process  of  corporatising  the  electricity  transmission  operator 
‘Ukrenergo’. An energy reform programme is being prepared. 

Following-up the joint 2009 EU-Ukraine conference on the modernisation of the Ukrainian gas 
transit system, the EU agreed to support a feasibility study and environmental and social impact 
study  on  the  modernisation  of  gas  networks  and  underground  gas  storage.  This  study,  which 
started in February 2011, is part of the due diligence process of the European Investment Bank 
(EIB), the European Bank for Reconstruction and Development (EBRD) and the World Bank. 
In  September  2010,  the  involved  donors  also  agreed  to  consider  a  ‘fast  track’  project  on  the 
reconstruction  of  sections  of  the  Urengoy-Pomary-Uzhgorod  gas  pipeline.  Ukraine  further 
developed its plans to construct a Liquefied Natural Gas terminal at the Black Sea coast and 
continued  working  on  a  draft  oil  stocks  law.  Together  with  Azerbaijan,  Georgia,  Lithuania 
and Poland, Ukraine continued to develop a Euro-Asian Oil Transportation Corridor. Ukraine 
moved ahead with preparations to assess the possibility to join, together with the Republic of 
Moldova,  the  interconnected  electricity  networks  of  continental  Europe.  Ukraine  further 
upgraded its electricity networks. 

In March 2010, Ukraine adopted an energy efficiency programme for the period 2010-2015, 
aiming  at  a  20 %  decrease  in  Ukraine’s  energy  intensity,  a  15 %  decrease  in  the  volume  of 
harmful  emissions  into  the  environment  and  a  50 %  decrease  in  heat  losses  in  the  housing 
sector  compared  to  2008.  Ukraine  worked  on  draft  laws  on  energy  efficiency  and  energy 
efficiency in buildings. In July 2010, Ukraine adopted a law establishing by January 2011 a 

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regulatory  commission  for  communal  services  with  the  power  to  set  communal  services 
tariffs. Ukraine continued to work towards a restructuring strategy for coal.  

Regarding  nuclear  energy,  the  EU-Ukraine-International  Atomic  Energy  Agency  (IAEA) 
evaluation  of  the  safety  of  Ukraine’s  nuclear  power  plants  was  completed.  Generally,  it 
concluded that they are fully compliant with most of the IAEA’s standards. Ukraine is making 
progress in addressing the identified shortcomings. In 2010,  it further upgraded the safety of 
its  nuclear  power  plants  as  part  of  the  €
 1.5  billion  upgrade  package  for  2010-2017.  It 
expressed interest in applying for Euratom and EBRD loans to help finance this package. It 
continued  strengthening  its  Nuclear  Regulatory  Authority  and  made  good  progress  in 
restoring the Chernobyl site to an environmentally safer condition.  

In  the  field  of  climate  change,  further  steps  were  taken  to  draft  legislation  on  emission 
trading. Ukraine took steps to prepare and approve new Joint Implementation projects, 30 of 
which were registered at UN level, bringing the overall number of registered projects to 48. 
The  European  Commission  continued  to  support  Ukraine  in  implementing  the  Kyoto 
Protocol.  Ukraine  is  encouraged  to  fully  implement  the  Cancun  agreement  and  in  particular 
devise a low carbon development strategy including update information on target or actions 
that it will implement. 

Ukraine adopted a  national environment strategy to 2020, and started to prepare a national 
environment  action  plan.  Ukraine  amended  its  legislation  (Land  and  Water  Codes)  on 
integrated  coastal  zone  management  and  adopted  a  new  law  prohibiting  the  felling  of 
woodland  areas  in  and  around  Kyiv.  Amendments  to  the  State  Programme  2006  –  2020  on 
Drinking Water are being prepared. Ukraine actively participated in developing an Integrated 
River  Basin  Management  Plan  for  the  Tisza  river,  which  was  adopted  by  the  parties  in 
December  2010.  Ukraine  took  some  steps  to  promote  the  integration  of  environmental 
considerations  into  other  policy  sectors  such  as  energy.  Continued  efforts  are  needed  to 
develop  legislation,  to  implement  existing  strategies  and  plans  and  to  further  enhance 
monitoring  and  enforcement.  Ukraine  still  faces  a  major  challenge  in  strengthening  its 
administrative  capacity  at  all  levels.  Coordination  between  authorities  continues  to  require 
particular attention.  

Ukraine made no significant progress on the UNECE protocols,3 which it still has not ratified. 
Moreover, it must give attention to implementing several agreements it has already ratified.  

In September 2009, the Espoo Convention’s Implementation Committee meeting decided that 
its  conclusions  regarding  the  Bystroe  Deep  Water  Canal  should  be  addressed  at  the  next 
session of the Meeting of the Parties scheduled for June 2011. In 2010 several meetings were 
held with the Romanian side on the disputed issues. As regards Aarhus Convention, an action 
plan  on  the  implementation  of  the  Convention  and  a  decree  on  public  participation  were 
adopted in December 2009. Ukraine continued to cooperate in a compliance review of both 
conventions, a final project report of which was submitted in August 2010 to the Ukrainian 
side  

3  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. 

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While  some  steps  were  taken  to  improve  procedures  and  consultation  with  the  public, 
continued efforts are needed including in the context of environmental assessments.  

Ukraine  took  part  in  the  EU  Water  Initiative,  through  (for  example)  a  national  policy 
dialogue. It also took part in the International Commission for the Protection of the Danube 
River  and  in  the  Commission  on  the  Protection  of  the  Black  Sea  against  Pollution. 
Cooperation  and  information  exchange  took  place  between  the  European  Commission  and 
Ukraine,  including  on  water,  forestry,  waste  management,  management  of  environmental 
information, nature protection and air quality. 

During  the  reporting  period  there  was  no  significant  development  on  civil  protection. 
However, in February 2011 Ukraine ratified the 1993 ILO Convention on the Prevention of 
Major  Industrial  Accidents  which  is  expected  to  provide  a  framework  for  mapping  and 
cleaning  up  various  industrial  sites  where  large  quantities  of  hazardous  chemicals  are 
currently stored in unsupervised conditions.  

In the information society sector, limited progress can be reported in the field of electronic 
communications  regulation.  The  parliament  still  needs  to  adopt  several  draft  laws,  notably 
those simplifying market entry procedures for some electronic communications services and 
strengthening the regulator’s independence. At present the regulator does not have the powers 
to  establish  a  level  playing  field  in  the  telecommunications  market.  Ukraine  prepared 
amendments to the telecommunications law. In the absence of an appropriate legal framework 
for  interconnection,  the  Antimonopoly  Committee  established  that  eight  operators  hold  a 
monopoly  in  the  call  termination  markets.  Subsequently,  the  National  Commission  for 
Communications  Regulation  (NCCR)  set  termination  rates  for  dominant  operators.  In  July 
2010, the parliament adopted a law which introduced number portability. The implementation 
of number portability will be important for improving the functioning of the market and for 
consumers. 

In October 2010 the government formally launched the tendering procedure for privatising the 
state-owned  fixed-line  incumbent  operator  Ukrtelecom.  (The  government  retains  a  92.8 % 
stake in the company).  

Regarding the audiovisual sector, the Ukrainian parliament is currently reviewing a draft law 
which envisages giving 'must carry' status to all Ukrainian TV channels on pay-TV platforms. 
The  draft  law  would  have  the  effect  of  seriously  limiting  freedom  of  reception  and 
retransmission  as  established  in  the  Convention  on  Transfrontier  Television  ratified  by 
Ukraine  and  the  Audiovisual  Media  Services  Directive,  the  EU  audiovisual  acquis  on 
audiovisual. If adopted, the draft law would be a serious step backwards in the alignment of 
Ukrainian legislation with european standards on media. 

Ukraine  continued  to  update  its  research  and  innovation  policy  with  more  direct  and 
sustainable  economic  development  objectives.  Ukraine’s  participation  in  the  7th  Research 
Framework  Programme  (FP7)  continued  to  be  encouraging  with  an  increased  number  of 
successful proposals in 2010. As of November, 91 Ukrainian research entities were involved 
in successful FP7 research projects, receiving an EU contribution of EUR 8.08 million.  The 
possibility  to  associate  Ukraine  to  FP7  is  being  explored.  The  ongoing  bilateral  ‘Bilat-Ukr’ 
project organised various seminars and workshops supporting Ukraine’s participation in FP7. 
As  part  of  this  project,  analysis  has  been    carried  out  on  the  issues  of  scientists’  mobility, 
research  infrastructures  and  innovation  as  a  basis  for  fostering  EU-Ukraine  collaboration  in 

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these areas. The EU-Ukraine Science and Technology (S&T) cooperation agreement is in the 
final stages of being renewed for a further period of five years.  

Ukraine  continued  to  participate  actively  in  the  International  Science  &  Technology 
Cooperation Network for Eastern European and Central Asian countries (FP7 IncoNet EECA 
project),  which  aims  to  support  a  bi-regional  EU-EECA  policy  dialogue  on  science  and 
technology  and  to  increase  EECA  participation  in  FP7.  In  October  2010,  an  IncoNet 
Brokerage  Event  for  the  FP7  energy  theme  was  organised  in  Kyiv  by  the  FP7  National 
Information Centre.  

Ukraine took an active part in the Black Sea ERA-NET project which aims to help coordinate 
national  research  programmes  (from  EU  member  states  and  partner  countries)  targeting  the 
Black  Sea  region  as  a  whole.  The  project  consortium  for  the  Black  Sea  ERA-NET  project 
recently  launched  a  first  joint  call  for  proposals  to  promote  collaborative  research  on 
innovative approaches to sustainable development in the region. 

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

In 2010, particular attention was given to all levels of education, with new reform plans to 
accelerate  convergence  with  the  developments  in  the  EU.  Reform  objectives  include 
strengthening  educational  governance,  improving  quality  and  accessibility,  and  ensuring  the 
continuity of education levels and financing. In August, the government identified pre-school 
education as a new reform priority. It adopted a concept for a state programme of pre-school 
education development to 2017, with objectives and benchmarks closely aligned with those of 
the EU's Education and Training 2020 targets.  

The ministry of education and science initiated secondary curriculum reform in August with 
the  adoption  of  two  state  programmes  2010-15  to  improve  ICT,  science  and  mathematics 
education  and  to  enhance  teaching  skills.  Secondary  education  was  reduced  from  12  to  11 
years.  

The  draft  law  on  higher  education  encompasses  key  aspects  of  the  Bologna  Process 
including  implementing  the  three-cycle  system,  enhancing  university  autonomy  and 
facilitating  student  involvement  in  university  governance,  as  well  as  providing  a  legal  basis 
for  external  assessments.  In  March,  the  Cabinet  issued  an  order  on  diploma  supplements  to 
university  degrees  to  better  facilitate  degree  recognition  and  student  mobility.  Most  higher 
education  institutions  achieved  the  Bologna  Process  goals  of  implementing  a  two-cycle 
system, quality assurance measures, ECTS and recognition of diplomas. However, there are 
still  major  challenges  as  regards  implementing  the  third  cycle,  adapting  curricula  to  labour 
market needs and setting up an independent quality assurance agency.  

After a break of five years the ministry of education revived the work of the National Inter-
Sector Committee on vocational education and training, ensuring employer and trade union 
input into policy discussions. The draft law on a national qualifications framework, prepared 
by  the  Confederation  of  Employers  in  2009,  was  re-submitted  to  parliament  following  the 
input of other stakeholders. The Tri-partite Committee on Vocational Guidance convened in 
November 2010. One key challenge that remains is to get businesses involved in defining the 
content of training courses, so as to maximise trainees' employment prospects. The ministry 
demonstrated strong commitment to the Torino Process, which analyses vocational education 
and training policy. The ministry assessed its own work using the agreed methodology. 

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Ukraine continued to benefit substantially from its active participation in Tempus. Five new 
projects were selected under the third Tempus IV Call for Proposals, including support for the 
development  of  doctoral  studies.  A  total  of  28  Ukrainian  students  benefited  from  Erasmus 
Mundus  Masters  Course  scholarships  during  the  2010-11  academic  year.  Student  and 
academic  mobility  to  the  EU  continued  to  develop  through  the  expected  award  of  99 
individual mobility grants under Erasmus Mundus Action 2, for the 2010-11 academic year. 

Three  new  Ukrainian  projects  were  selected  under  the  Jean  Monnet  Programme  in  2010, 
including,  for  the  first  time,  two  Jean  Monnet Chairs  in  Kyiv  (Kyiv-Mohyla  Academy)  and 
Donetsk (State University) — on EU relations and economic issues, respectively.  

Ukrainian young people, youth workers and youth organisations continued to benefit from the 
Youth  in  Action  programme  in  youth  exchanges,  voluntary  service  actions  and  youth 
activities  in  non-formal  education.  Further  national  efforts  promoting  intercultural  dialogue 
and  drug  prevention  activities  through  youth  exchanges  and  informal  education  would  be 
welcome. 

In  the  area  of  culture,  Ukraine  ratified  the  UNESCO  Convention  on  the  Protection  and 
Promotion  of  the  Diversity  of  Cultural  Expressions  in  March  2010.  During  the  year, 
Ukrainian  cultural  organisations  took  part  in  three  projects  under  the  ENP  Special  Action 
which forms part of the Culture Programme. To advance its regional cooperation within the 
framework  of  the  Eastern  Partnership  and  the  Kyiv  Initiative,  Ukraine  is  once  again 
encouraged to ratify the 2005 CoE Framework Convention on the Value of Cultural Heritage 
for Society. 

The  Presidential  Programme  on  Economic  Reform  announced  an  ambitious  reform  of  the 
health  sector,  aiming  at  better  quality  healthcare  services,  greater  financial  sustainability, 
improved  access  to  services  (in  particular  in  rural  areas)  and  a  healthier  lifestyle. 
Implementation requires sustained effort. In April 2010, in the context of last year’s influenza 
(H1N1)  epidemic,  the  Commission  and  Ukraine  established  communication  channels  for 
exchanging  epidemiological  information  in  the  event  of  a  public  health  emergency  of 
international  concern. 
the 
Commission under which the EU's pictorial health warnings could be displayed free of charge 
on tobacco packaging. Ukraine continued the fight  against  HIV/AIDS  and  tuberculosis,  and 
took part (as in previous years) in the Commission’s HIV/AIDS think tank. The health sector 
dialogue  between  the  EU  and  Ukraine  was  enhanced  by  –  among  other  things  –  Ukraine’s 
participation in the EU’s global health conference in June 2010. 

In  2010,  Ukraine  signed  a 

license  agreement  with 

8. 

FINANCIAL COOPERATION — 2010 KEY FACTS AND FIGURES 

Cooperation framework 

The  Mid-Term  Review  of  the  programming  document  confirmed  that  the  Country  Strategy 
Paper  adopted  in  2007  remains  a  valid  framework  for  cooperation  with  Ukraine.  The  new 
National Indicative Programme (NIP) 2011-2013 for Ukraine was adopted in March 2010 and 
has  a  budget  of  EUR  470.1  million.  The  programme  is  geared  towards  supporting  the 
achievement of key policy objectives, as outlined in the EU-Ukraine Association agenda, and 
pursues three priorities: (1) good governance and the rule of law, (2) facilitation of the entry 
into force of the EU-Ukraine AA (including the DCFTA and (3) sustainable development. 

The NIP 2011-2013 includes a specific appropriation to finance new actions under the Eastern 
Partnership, notably  a Comprehensive Institution Building programme (CIB) (a minimum of 

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EUR  43.4  million)  and  Cohesion  Policy  (a  minimum  of  EUR  30.8  million).  The  CIB 
Framework  Document  was  signed  in  October  2010.  It  sets  out  the  four  priority  areas  for 
support: one is ‘horizontal’ (the steering and implementation process for the AA and DCFTA) 
and  three  are  ‘vertical’  (sanitary  and  phyto-sanitary  regulations,  state  aid  control  and 
migration).  

Implementation 

Implementation of the measures covered by previous Annual Action Programmes (AAP) from 
the period 2007-2009 is underway. The three sectoral budget support operations (1) ‘Support 
to the implementation of Ukraine’s energy policy’, (2) ‘Promoting mutual trade by removing 
technical barriers to trade between Ukraine and the European Union’ and (3) ‘Support to the 
implementation of Ukraine’s strategy in the area of energy efficiency and renewable sources 
of  energy’  are  being  implemented,  although  one  disbursement  was  delayed  pending  timely 
confirmation of the improved situation in the country regarding public financial management, 
notably  in  the  field  of  public  procurement.4  Two  further  sectoral  budget  support  operations 
‘Support to the implementation of an environmental strategy in Ukraine’ and ‘Support to the 
Implementation of the transport strategy of Ukraine’ were agreed at the end of the year. The 
two  Twinning  and  ENP  Support  Technical  assistance  projects  are  being  implemented,  as  is 
the project on ‘Readmission-related assistance and EUBAM-flanking measures’.  

Support for the reform of the judiciary was one of the priority areas for EU assistance. It also 
provided for an intensive training programme attended by 2 029 judges, court administrators 
and auxiliary court staff. 

In  2010,  the  EU  continued  to  support  Ukraine's  national  reform  efforts  and  committed 
assistance for a total amount of EUR 126 million under the bilateral envelope of the European 
Neighbourhood and Partnership Instrument (ENPI). The 2010 AAP focused on the following 
priorities:  justice,  local  and  regional  development,  energy  efficiency  and  environment, 
technical  assistance  and  border  management.  Of  the  overall  amount  committed,  EUR  10 
million was allocated to the justice sector, EUR 17 million to community based approaches to 
local development, EUR 12 million for  a  joint cooperation initiative in Crimea and EUR  10 
million for energy efficiency. The 2010 AAP includes one sectoral budget support operation 
on  border  management,  worth  EUR  66  million.  Additionally,  a  twinning  and  technical 
assistance project has been identified for the sum of EUR 11 million. 

In addition to the bilateral allocation, Ukraine benefited from cooperation financed under the 
ENPI  cross-border,  inter-regional  and  regional  programmes.  Ukraine  took  part  in  the 
following  four  ENPI  Cross-Border  Cooperation  (CBC)  programmes:  (i)  Poland-Belarus-
Ukraine  (EUR  186.2  million  for  the  whole  programme  in  2007-13).  The  priorities  are  to 
increase  competitiveness  of  the  border  area,  improving  the  quality  of  life,  networking  and 
people-to-people cooperation; (ii) Hungary-Slovakia-Romania-Ukraine (EUR 68.6 million for 
the  whole  programme  in  2007-13).  The  priorities  are  to  promote  economic  and  social 
development, enhance environmental quality, increase border efficiency and support people-
to-people  cooperation;  (iii)  Romania-Ukraine-Republic  of  Moldova  (EUR  126.7  million  for 
the  whole  programme  in  2007-13).  Priorities  are  competitiveness  of  the  border  economy, 
environment,  emergencies  and  interaction  between  people  and  communities  living  in  the 

4  

EUR 12 million were released as a first tranche under the ‘Support to the implementation of Ukraine’s 
strategy in the area of energy efficiency and renewable sources of energy’ sector budget support.  

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border areas; (iv) Black Sea Basin (EUR 21.3 million for the whole programme in 2007-13). 
The main priorities of this programme are to support cross-border partnerships for economic 
and  social  development  based  on  combined  resources,  to  share  resources  and  competencies 
for  environmental  protection  and  conservation,  and  to  support  cultural  and  educational 
initiatives for the establishment of a common cultural environment in the Basin. There is as 
yet no specific national legislation to promote cross-border and regional cooperation. Existing 
CBC  programmes  at  local  and  regional  levels  have  aimed  to  facilitate  civil  society 
cooperation as well as other external cooperation programmes.  

Ukraine  also  participates  in  the  ‘Central  Europe’  and  ‘South-East  Europe’  Transnational 
Cooperation  Programmes  developed  under  the  European  Regional  Development  Fund 
(ERDF) to which the country was admitted in May 2008.  

Under  the  ENPI-financed  Neighbourhood  Investment  Facility  (NIF),  two  feasibility  studies 
were  approved  in  2010  for  EUR  2.5  million.  These  are  expected  to  leverage  loans  from 
European  financial  institutions  for  modernising  Ukraine’s  gas  transit  corridors  and 
underground gas storage facilities.  

Other  EU  Instruments  supplement  the  ENPI  assistance  package.  Ukraine  benefited  from 
cooperation activities financed under horizontal instruments such as the European Instrument 
for  Democracy  and  Human  Rights  (EIDHR)  and  the  Development  Cooperation  Instrument 
(DCI) thematic programmes: ‘Environment and sustainable management of natural resources 
including  energy’  and  ‘migration  and  asylum’.  Ukraine  remained  one  of  the  main  direct 
beneficiaries  of  the  Instrument  for  Nuclear  Safety  Cooperation  (INSC).  Funding  in  2010 
amounted to about EUR 21.1 million for supporting radioactive waste management, assisting 
the State Nuclear Regulatory Committee of Ukraine (SNRCU) and enhancing the Operational 
Effectiveness,  Safety  Performance  and  Human  Resources’  effectiveness  of  NNEGC 
Energoatom and its nuclear power plants.  

Negotiations  for  the  disbursement  of  about  EUR  610  million  of  macro-financial 
assistance to Ukraine were launched in 2010, but have not yet been concluded.  

In 2010 the European Investment Bank (EIB) agreed to lend Ukraine about EUR 15.5 million 
for  the  Mykolayiv  Vodokanal  project,  which  is  aimed  at  modernising  water  supply  and 
treatment in the town of Mykolav.  

Donor coordination 

In 2010 the EU Delegation in Ukraine regularly coordinated assistance cooperation with the 
EU  member  states  and,  in  the  absence  of  a  structured  government-led  mechanism, 
coordination with other development partners. The EU Delegation contributed actively to the 
major donor group’s work as well. Poland and the United Kingdom agreed to provide some 
bilateral support for the preparatory phase of the CIB programme, working together within the 
framework of enhanced EU coordination. Furthermore the Commission and 14 member states 
have  launched  the  Joint  Cooperation  Initiative  in  Crimea  (JCIC),  aimed  at  promoting  the 
development of the region.  

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