Towards a peaceful future for Ukraine’s Donbas region.
Date: 2020-08-07
Institutions: European University Institute
Subjects: European University Institute, Ukraine, economic forecasting, economic integration, establishment of peace, international organisation, multi-level governance

TOWARDS A PEACEFUL 
FUTURE FOR UKRAINE’S 
DONBAS REGION 

EXECUTIVE SUMMARY

The third High-Level Policy Dialogue (HLPD) on the Don-
bas  region  was  organised  by  the  School  of  Transnation-
al  Governance  (STG)  of  the  European  University  Institute 
(EUI) in Florence, on 8-9 February 2020, in cooperation with 
a Ukraine-based team involved in supporting the Minsk ne-
gotiations. Building on discussions at the first two HLPD edi-
tions of December 2018 and July 2019 that had addressed the 
post-conflict  economic  perspectives  for  the  Donbas  region 
as a whole and the issue of the institutional framework for 
reintegration, this dialogue focused on designing a vision for 
Donbas reintegration and on the possible role of the interna-
tional and business communities in achieving it. It brought 
together  high-level  Ukrainian  decision-makers  and  policy 
influencers, leading economists, academics, actors from civil 
society as well as representatives from European and US in-
ternational institutions and businesses. Under the Chatham 
House rule, they provided analysis and discussed policy rec-
ommendations that stand as expert advice for Ukrainian pol-
icy-makers and the international community.

Authors:
Jonas  Brendebach  (Teaching  Associate,  EUI  School  of  Transnational  Gov-
ernance),  Dmytro  Khutkyy  (Policy  Leader  Fellow,  EUI  School  of  Transna-
tional Governance) and Luigi Narbone(Part-time Professor at EUI School of 
Transnational Governance, and Director of the Middle East Directions Pro-
gramme at the EUI Robert Schuman Centre for Advanced Studies)

The opinions of the authors represent personal opinions and do not repre-
sent the position or opinion of the European University Institute. 

The  analysis  and  policy  recommendations  presented  in  this  policy  brief 
draw on the input of participants of the High-Level Policy Dialogue organ-
ised  by  the  EUI  School  of  Transnational  Governance  which  took  place  in 
Florence, Italy on 8-9 February 2020. 

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Issue 2020/05
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INTRODUCTION

With the election of Volodymyr Zelenskyy to the 
Ukrainian presidency in April 2019 and his par-
ty’s subsequent absolute majority in Parliament – 
a first-time achievement in the country’s history 
– Ukraine’s policy stance towards the conflict in 
Donbas shifted significantly. 

In June 2019, following through on its core elec-
toral  pledge,  the  new  leadership  took  steps  to 
revitalise the conflict settlement process. It initi-
ated or carried out high-profile exchanges of con-
flict-related detainees (so far, in September 2019, 
December 2019, and April 2020), reanimated the 
policy of limited military disengagement, recon-
structed  the  only  crossing  point  in  the  Luhansk 
region  (the  pedestrian  bridge,  damaged  in  2015 
near the Stanytsia Luhanska village) and, in a dif-
ferent  register,  held  high-profile  Investment  and 
National Unity Forums in Mariupol, which raised 
international attention to the region. The govern-
ment  also  started  delivering  on  its  intention  to 
reach  out  to  all  stakeholders,  from  the  Russian 
leadership to the Donbas residents. 

This new attitude towards conflict resolution and 
social  and  territorial  integrity  was  echoed  in-
ternationally  on  9  December  2019  by  the  “Nor-
mandy  Four”  summit  in  Paris,  the  first  in  three 
years,1  in  which  the  Normandy  leaders  tasked 
the conflict participants with pursuing all of the 
priorities  previously  chosen  by  Ukraine:  cease-
fire consolidation, military disengagement, pris-
oners  exchange,  and  the  consideration  of  local 
elections, within a foreseeable future, in the ter-
ritories  outside  the  control  of  the  constitutional 
authorities, as the first step towards their politi-
cal and administrative reintegration. At the same 
time, the Ukrainian leadership’s new attitude cre-
ated  the  conditions  for  addressing  the  multiple 
issues of reintegration at the official level, such as 
the  definition  of  adequate  institutional  tools  or 
the design of an inclusive vision of post-conflict 
economic revival. 

uneven,  and  the  Paris  summit  did  not  deliver 
results  as  quickly  as  expected,  partly  as  a  result 
of  the  COVID-19  pandemic.  Nevertheless,  the 
Zelenskyy  presidency  has  created  new  opportu-
nities to consolidate the positive trend: the hold-
ing  of  a  next  summit  has  been  put  on  the  Nor-
mandy  leaders’  agenda  and  the  decentralization 
reform is nearing completion, to be followed by 
nation-wide local elections towards the end of the 
year. 

Political  and  international  efforts  to  resolve  the 
Donbas  conflict  are  mostly  focused  on  short-
term objectives, but the situation has grown ripe 
for preparing a peaceful mid- and long-term vi-
sion for the future of the region. The development 
of a comprehensive and implementable approach 
for the re-integration of the eastern regions em-
bedded in a broader and cohesive political vision 
for Ukraine as a whole could be decisive in facili-
tating conflict resolution and peacebuilding. The 
international  and  business  communities  have  a 
crucial role to play in supporting the implemen-
tation of such a vision. 

The third meeting of the HLPD was organised by 
the School of Transnational Governance (STG) of 
the European University Institute (EUI) in Flor-
ence, on 8-9 February 2020, in cooperation with 
a Ukraine-based team involved in supporting the 
Minsk negotiations. The dialogue focused on de-
signing a vision for Donbas re-integration and on 
the possible role of the international and business 
communities in achieving it. It brought together 
high-level Ukrainian decision-makers and policy 
influencers,  leading  economists,  academics,  ac-
tors  from  civil  society  as  well  as  representatives 
from European and US international institutions 
and  businesses. The  discussion  built  on  the  first 
two editions of December 2018 and July 2019 that 
had  addressed  the  post-conflict  economic  per-
spectives  for  the  Donbas  region  as  a  whole  and 
the issue of the institutional framework for re-in-
tegration. 

The policy shift has not been exempt from criti-
cism from parts of the Ukrainian public or expert 
circles.  Military  realities  on  the  ground  remain 

The  government  reshuffle  of  February  2020 
brought about some key institutional 

1 A follow-up summit was planned for April 2020 but postponed due to the COVID-19 global crisis, the foreign ministers met in 
a virtual Normandy format meeting on 30 April.

2

STG    Policy Brief    Issue 2020/05    July 2020changes which had been discussed at the second 
and  the  third  HLPD  meetings  (see  for  instance 
point 3 of the key conclusions and recommenda-
tions  below).  It  reaffirmed  the  reintegration  ob-
jective, reconstituted the the Ukrainian Ministry 
for  Reintegration  of  the  Temporarily  Occupied 
Territories  (MTOT),  thereby  establishing  its  co-
ordinating role.

To ensure a free and open discussion, the HLPD 
was a closed-door event run under the Chatham 
House rule. The analysis and policy recommen-
dations presented in this policy brief draw on the 
input  of  participants  and  stand  as  expert  advice 
for Ukrainian policy-makers and the internation-
al community. 

KEY CONCLUSIONS AND RECOMMENDATIONS

VISION AT THE NATIONAL LEVEL

1.  The new political momentum aiming at relaunching the political process for 
the resolution of the Donbas conflict needs to be accompanied by the devel-
opment of a comprehensive and implementable long-term approach for the 
reintegration of the Donbas region.  The approach should outline the political, 
economic, and social policies which can support reintegration and peace-
building in the Donbas and should be developed in the context of a broader 
and cohesive political, economic, and social vision for Ukraine as a whole.

2.  The  approach  is  necessary  to  win  the  “hearts  and  minds”  of  the  public  on 
both the sides of the contact line and has to go hand in hand with establish-
ing  people-centered  political  processes  that  allow  the  political  buy-in  of  a 
broader  spectrum  of  political  groups.  An  effective  communication  strategy 
should accompany these processes, fully taking into consideration the lack 
of access to Ukrainian media in non-government-controlled areas (NGCA).

3.  The  re-constitution  of  a  “Ministry  for  Reintegration  of  the  Temporarily  Occu-
pied  Territories”  (MTOT)  offers  an  opportunity  to  deepen  and  streamline  the 
policy formulation on the Donbas region. It should address the definition of 
the  central  government’s  priorities;  the  search  for  low-hanging  fruits  to  be 
urgently pursued in government-controlled areas (GCA); as well as the co-
ordination with relevant political and civic actors at the local, national, and 
international level. 

4.  To operationalise this policy, five institutional measures would be recommend-

able: 

a.  Giving the head of the MTOT the status of a Deputy Prime Minister, with the 
authority to supervise and coordinate all government action (including in 
the defense area) to serve the set policy goals;

b.  Ensuring  sufficient  interaction  with  the  Minsk  process  of  the  government 
departments placed under the supervision of the Deputy Prime Minister in 
charge of reintegration;

c.  Nominating Deputy Ministers in all other Ministries to contribute to the deliv-

ery of policies for the re-integration of the Donbas region;

d.  Nominating Deputy Heads of Oblast administrations responsible for the im-
plementation of reintegration and economic recovery policies in close in-
teraction both with the central government and with local self-governing 
entities;

e.  Establishing a “Coordination Council” in the Ukrainian Parliament to enable 
cross-party dialogue (or nominate a charismatic political champion to that 
end). 

3

STG    Policy Brief     Issue 2020/05     July 2020COORDINATION OF THE INTERNATIONAL COMMUNITY 

5.  Secure and sustainable re-integration of the whole Donbas region requires that 
the  international  community  unites  in  its  efforts  to  facilitate  dialogue  with  the 
Russian  Federation,  not  only  on  the  return  of  the  Donbas  territories  of  Ukraine 
and  the  peaceful  settlement  of  the  Donbas  conflict,  but  also  on  post-conflict 
reconstruction.

6.  The expansion of humanitarian work in the Donbas region has the potential to 

become a driver and facilitator of the peacebuilding process. 

7.  Among the major challenges for international aid to the Donbas region is the 
limited absorption capacity of regional and local administrations. As a first step 
in  addressing  it,  existing  attempts  at  cooperation,  such  as  the  “Water  in  the 
East” regional cooperation project, should be unblocked and used to their full 
potential. 

8.  The  reinforced  powers  and  responsibilities  of  the  Reintegration  Ministry  will  re-
quire qualified support and advice to MTOT’s head and services, from analysing 
policy proposals to the modelling of the ways the territories that will be reinte-
grated will be managed.

9.  The set-up of temporary development institutions with a limited duration (e.g. 
20  years)  and  carefully  designed  management  structures  and  controls  could 
enhance  the  implementation,  supervision,  and  coordination  of  projects  rele-
vant to the region’s post-conflict recovery and revitalisation. In addition to the 
International Partnership Support Fund initiated by the World Bank, participants 
also discussed the benefits of a Regional Investment and Development Agency, 
set up by law and endowed with the authority and technical capacity to over-
come existing administrative hurdle. The Agency should be under the inclusive 
supervision of an independent Supervisory Board to ensure accountability and 
the quick achievement of results. The possibility of concurring private initiatives, 
such as the establishment of a Regional Development Bank mandated with a 
limited, mid-range timeframe, was also raised by participants.

ACTION ON THE GROUND

10. Expanded humanitarian activities should include efforts in de-mining, providing 
access to medical services and post-traumatic stress disorders support, and in-
creasing people-to-people contacts.

11. To create a more favorable environment for recovery, it is advised to:

a.  re-build regional infrastructure, including roads, railroads, public facilities, and 

telecommunications;

b.  establish a risk-mitigating insurance fund, together with international partners;
c.  concentrate efforts in areas and sectors with major economic potential for the 
region: agriculture, metal industries, and the production of high value-added 
goods, including Information and Communication Technologies (ICT) sector;
d.  build  up  the  region’s  human  capital  by  creating  education  opportunities 

through action on the national and local government levels.

12. To lay the ground for peace, security, and the rule of law, the government is ad-
vised to put in place a transitional justice policy. It would outline the model of a 
transitional administration, local elections, and amnesty issues regarding com-
batants and non-combatants in NGCA. For example, the transitional adminis-
tration  could  include  international  representatives  and  have  the  mandate  to 
organise local elections. Combatants – and non-combatants alike -- suspected 
of unlawful actions or activities would be subject to court trials, while all other 
categories would be granted amnesty.

4

STG    Policy Brief    Issue 2020/05    July 2020VISIONS FOR THE FUTURE OF DONBAS
1. PARADIGM SHIFTS IN THE SETTLEMENT/REINTEGRATION PROCESS 
AND ITS IMPLICATIONS FOR THE DONBAS’ FUTURE
1.1  A  new  but  versatile  political  land-
scape 

Since the presidential and parliamentary elections 
in April and July 2019, the political landscape in 
Ukraine has undergone significant changes. The 
election  of  the  “anti-system  candidate”  Volody-
myr  Zelenskyy  and  the  absolute  parliamentary 
majority of his “Servant of the People” party cre-
ated  an  unprecedented  window  of  opportunity 
to relaunch the process of conflict resolution and 
reconstruction. The Re:Think investment forum, 
the  first  in  five  years,  convened  on  30  October 
in  the  city  of  Mariupol  upon  the  personal  ini-
tiative  of  President  Zelenskyy  and  was  followed 
by a National Unity Forum. It sent a strong mes-
sage  about  the  new  leadership’s  determination 
to  follow  through  on  core  electoral  pledges,  by 
bringing  peace  and  reconciliation  and  ending 
poverty  in  the  country.  In  economic  terms  (be-
fore  the  COVID-19  crisis),  the  government  had 
announced  ambitious  GDP  growth  goals  to  be 
achieved through increasing the country’s invest-
ment attractiveness, including in the Donbas re-
gion.  In  political  terms,  the  President  continues 
to promote national unity, as it appeared promi-
nently in his 2020 New Year address, in which he 
promoted social reconciliation against deep-root-
ed  divisive  cultural  patterns  and  socio-political 
sentiments. 

Yet, the President faces serious challenges. Critical 
social media reactions to his unconventional New 
Year address showed that part of the public opin-
ion harbors negative feeling against disrespecting 
patriotism2. Pro-Russian media in turn are equal-
ly antagonistic and expanding their influence us-
ing funds of undisclosed provenance. Despite his 
landslide election victory, the President is strug-

gling to rally popular support around his reform 
agenda. Zelenskyy’s popularity, strongly correlat-
ed with his claim to ‘cease the war’ in the Don-
bas, had dropped shortly before the third HLPD 
Meeting to around 50%.3

These  political  obstacles  were  evidenced  on  5 
February 2020, when legislation on the payment 
of  pensions  for  Internally  Displaced  Persons 
(IDPs)  and  residents  of  the  non-government 
controlled  areas  (NGCA)  was  discussed  in  the 
Ukrainian  Parliament.  While  the  need  for  relief 
through such payments to the people concerned 
was  widely  acknowledged,  neither  the  propos-
al of the opposition nor that of the “Servants of 
the People” party garnered sufficient support. The 
majority appeared divided and even members of 
the  government  voiced  public  criticism  on  the 
draft amendments. This underscored the difficul-
ty  of  finding  cross-party  consensus  on  essential 
matters related to the Donbas region, but also the 
deep fissures within the party and the government 
of  President  Zelenskyy  over  such  issues.  Some 
Members of Parliament showed highly indepen-
dent attitudes, in sharp contrast to the President’s 
declared commitment to consensus and unity. 

Moreover, scandals like the “Honcharuk tapes”, in 
which  then-Prime  Minister  Honcharuk  mocked 
the  President’s  lack  of  economic  knowledge,  the 
mistakes  of  inexperienced  government  person-
nel,  and  Zelenskyy’s  overreliance  on  close  ad-
visors  and  rotation-based  style  of  management 
have  provided  ammunition  to  his  critics.  Infor-
mal  vested  interests  and  influential  actors  have 
resurfaced  to  limit  his  space  for  manoeuvre,  as 
evidenced  by  the  configuration  of  the  Shmyhal 
government, appointed on 4 March 2020. 

2“President Zelenskyy’s New Year message misreads Ukraine’s patriotic progress”, Taras Kuzio, Atlantic Council, 
January 9, 2020 [URL: https://www.atlanticcouncil.org/blogs/ukrainealert/president-zelenskyys-new-year-mes-
sage-misreads-ukraines-patriotic-progress/, this and all following URLs last accessed 01.03.2020, except where 
indicated otherwise].
3 “Zelensky’s approval rating falls below 50%,” Alexander Query, Kyiv Post, February 3, 2020 [URL: https://
www.kyivpost.com/ukraine-politics/zelenskys-approval-rating-hovers-at-51.html]. Six months later, President 
Zelenskyy’s rating had dropped to 43%, recording for the first time a negative trust balance (-8.9%) accord-
ing to an opinion poll  [URL: https://smc.org.ua/monitoryng-gromadskoyi-dumky-naselennya-ukrayiny-cher-
ven-2020-1247/ (in Ukrainian only)]. For the record, Zelenskyy garnered a 73% majority in the presidential 
elections.

5

STG    Policy Brief     Issue 2020/05     July 2020  
1.2  A  new  momentum  in  the  Donbas 
peace process

Other factors, however, have injected new energy 
into the Donbas conflict settlement process. The 
resumption of military disengagement, high-lev-
el  prisoner  exchanges,  and  “Normandy  Four” 
summits, like in Paris on 9 December 2019, have 
renewed endorsement of the Minsk agreements. 
In Paris, President Zelenskyy’s first personal en-
counter  with  Russian  President  Putin  re-ani-
mated  the  search  for  a  settlement,  despite  some 
criticism back home directed at Zelenskyy having 
been  “too  compliant”  during  the  talks4.  The  gas 
transit  agreement  with  Russia  (that  committed 
Moscow to pay a USD 5 billion upfront payment) 
and the take-over of the conflict management file 
by  the  First  Deputy  Head  of  the  Russian  Presi-
dential Administration Dmitriy Kozak5, have also 
indicated  greater  readiness  on  the  Russian  side 

to consider Ukraine’s conditions for a re-integra-
tion  of  the  Donbas  region.6  On  the  ground,  the 
reconstruction  of  the  pedestrian  bridge  across 
the Siverskyy Donets river near the Stanytsia Lu-
hanska village (the only checkpoint in operation 
between the Luhansk part of NGCA and the rest 
of Ukraine) has significantly improved the cross-
ing conditions of the 200,000 people or so, most 
of them elderly people, who have to traverse the 
river every month to collect their pensions or buy 
first necessity products.

With  a  next  “Normandy  Four”  meeting  agreed 
for the coming months to discuss, as announced, 
the holding of local elections in NGCA, and lo-
cal  elections  in  the  rest  of  Ukraine  taking  place 
around the end of 2020, new wind has been blown 
in the sails of the settlement process, allowing to 
look further into a peaceful and a fair re-integra-
tion process. 

2. THE NEED FOR A VISION AND A PEOPLE-CENTRED POLITICAL PROCESS

2.1 Strategic vision vs. settlement process 

At the “National Unity Forum” in Mariupol, Pres-
ident Zelenskyy stated that “after five years of war 
in  eastern  Ukraine,  a  state  strategy  for  the  safe 
reintegration of Donbas and Crimea must final-
ly  emerge.”7  Critics,  however,  hold  that  no  clear 
strategy  has  yet  been  presented  by  the  govern-
ment. Based on the concept of “secure reintegra-
tion”8,  under  which  reintegration  steps  should 
not pose a threat to Ukraine’s national sovereign-
ty  or  violate  its  social  peace,  such  a  strategy  is 
needed  to  guide  governmental  efforts  as  well  as 

non-governmental and international partners in 
pursuing reintegration efforts. The Targeted State 
Programme  for  Recovery  and  Peacebuilding  in 
Eastern Ukraine for 2017-2020  is about to expire 
soon.9 

Until  recently,  the  conflict  settlement  agenda 
was  dominated  by  a  short-term,  conflict  man-
agement-based  approach,  and  the  political  dis-
cussions were essentially about the return of the 
NGCA  territories  into  Ukraine.  With  the  new 
emphasis on people, a new approach should put 
greater focus on creating more favorable oppor-

4 According to diplomatic sources, the Ukrainian delegation rather succeeded in having the pre-agreed sum-
mit conclusions modified to its liking.
5 Dmitriy Kozak is considered to be more open to compromise than the previously responsible Putin aide, Vla-
dislav Surkov.
6 To this point, recent studies suggest that Russian economic gains from the region are negligible while the 
support of pro-Russian groups in NGCA produces costs, which would increase further if Russia claimed formal 
sovereignty over any territory in the Donbas. See “Kremlin Aggression in Ukraine:  The Price Tag,” Anders Åslund, 
Atlantic Council, March 2018 [URL: https://www.atlanticcouncil.org/wp-content/uploads/2018/03/Kremlin_Ag-
gression_web_040218_revised.pdf].
7  “President: State strategy on reintegration of Donbas and Crimea must include transparency, consensus, 
realism and implementation of decisions,” President of Ukraine: Official website, October 30, 2019 [URL: https://
www.president.gov.ua/en/news/prezident-derzhavna-strategiya-z-reintegraciyi-donbasu-ta-kr-58121].
8 “What is “secure reintegration” and why it matters for Ukraine” (“Shchto take “bezpechna reintehratsi-
ya” i chomu tse vazhlyvo dlya Ukrainy”), Volodymyr Lupatsiy, 2020 [URL: https://www.pravda.com.ua/col-
umns/2020/06/24/7256974/ (in Ukrainian only)]. 
9 “Targeted State Programme for Recovery and Peacebuilding in Eastern Ukraine,” Ministry of Temporarily 
Occupied Territories and Internally Displaced Persons, 2016 [URL: https://mtot.gov.ua/files/uploads/PRO-
GRAMA-Dodatok-1.doc].

6

STG    Policy Brief    Issue 2020/05    July 2020tunities  for  those  living  in  the  conflict-affected 
areas. Irrespective of the status of the settlement 
process,  the  Donbas  needs  to  become  part  of 
Ukraine’s development and decentralization pro-
cesses. In the short term, those living in NGCA 
ought to have access to support and the same 
opportunities as the other citizens of Ukraine.

What is needed is a peacebuilding vision for the 
Donbas  that  will  articulate  the  ideas  of  recon-
struction  and  development  with  that  of  reinte-
gration. Based on policies to repair the economic 
space and foster social cohesion in the region and 
the country as a whole, it should address the re-
gion’s social and economic specificities. These in-
clude the need to transit away from overreliance 
on  the  steel  industry  to  a  more  diversified  and 
productive  economy,  the  fight  against  the  deep 
structures  of  organised  crime,  and  the  tackling 
of key social factors such as the loss of workforce 
due to the conflict, a rapidly aging population and 
the lack of educational offers. The consequences 
of on-going “passportization” (i.e. the issuance of 
Russian passports to NGCA residents), as well as 
questions of identity, add to the complexity of the 
task at hand. 

A vision for the Donbas’ future in Ukraine should 
take due account of the region’s weaknesses, which 
include,  among  others,  its  obsolete  infrastruc-
ture and factories, mono-industry cities, logistic 
complications due to the de facto blockade of the 
Azov  Sea  by  the  Russian  navy,  and  the  chronic 
lack  of  investments  over  the  past  six  years.  The 
vision should also build on the Donbas’ compet-
itive advantages and industrial strengths, such as 
the rich deposits of metal ores, the availability of 
important, integrated production chains, the tra-
ditional abundance of skilled local workforce, or 
the potential attractiveness for international busi-
ness. 

2.2 Giving people a future 

Once the political settlement is in place, the ob-
jectives of rebuilding regional infrastructure and 
increasing  employment  opportunities  can  be 
achieved  by  commissioning  road,  railroad,  so-
cial  housing,  and  utilities  construction  works. 
Such  massive  infrastructural  projects,  especially 
if supported by international development agen-
cies, can attract business interest – starting with 
those activities that require the least fixed capital 
such as, for instance, ICT development activities, 
one of Ukraine’s leading industries nation-wide – 
and  boost  commercial  activity  in  the  region.  To 
increase the level of  investment and their trans-
parency, such projects could use several co-fund-
ing  schemes,  some  of  which  have  proved  their 
efficiency in the Ukrainian context.10 During the 
post-conflict  political  transition,  the  demand 
for funding is likely to largely exceed the offer at 
hand.  Economist  Anders  Åslund  estimated  the 
cost of reconstruction at around US$20 billion11.

At the Mariupol Investment Forum, and again at 
the February 2020 Munich Security Conference, 
President  Zelenskyy  invited12  the  business  com-
munity to engage in an investment fund for the 
region.  The  World  Bank  is  already  operating  a 
multi-donor  trust  fund,  in  which  the  Ukrainian 
government is a key stakeholder, as a model to be 
expanded to cover the Donbas region’s future in-
frastructure  and  business-support  development 
needs.  Participants  also  referred  to  the  possibil-
ity  (and  the  will)  for  the  private  business  sector 
to leverage the funds available for future invest-
ment in the region’s post-conflict re-development 
through a regional investment and development 
bank, in which the role of the State remained to 
be defined. 

Although  these  approaches  were  sometimes  be-
lieved  to  be  potentially  competing  for  the  same 

10 “Community-Based Development Approach to Local Development in Ukraine: Results of Sociological 
Research “Evaluation of Impact of Community Based Development Approach to Local Development Imple-
mented by the UNDP Projects in Ukraine Financed by European Union and Other Donors,”” Volodymyr Paniot-
to, Dmytro Khutkyy, Anton Grushetskyi, and Vitaliy Kisil, 2011 [URL: http://cba.org.ua/images/stories/Impact_As-
sessment_CBAapproach_KIIS_Jan2011_ENG.doc].
11 A study of the Vienna Institute for International Economic Studies released in June 2020 set this cost at a very 
close US$ 21.7 billion, on the basis of a very detailed methodology. [URL: https://wiiw.ac.at/ukraine-reconstruc-
tion-of-donbas-will-cost-at-least-usd-21-7-billion-or-16-of-ukraine-s-gdp-n-448.html]. 
12 “Volodymyr Zelenskyy urged foreign business to join Donbas reconstruction and reintegration projects,” Pres-
ident of Ukraine: Official website, February 15, 2020 [URL: https://www.president.gov.ua/en/news/volodimir-zel-
enskij-zaklikav-inozemnij-biznes-doluchitisya-d-59861]. 

7

STG    Policy Brief     Issue 2020/05     July 2020resources,  under  carefully  designed  conditions 
they could operate as complementary initiatives, 
targeting  different  local  needs  and  development 
priorities (or emergencies). There was consensus 
among  the  participants  that  job  creation  would 
have to be the top priority for the Ukrainian au-
thorities after they re-gain control of gravely de-
pressed territories. 

In  any  case,  any  development  initiative,  be  it 
state-sponsored or privately funded, will have to 
operate in a radically reformed rule-of-law envi-
ronment which provides robust legal guarantees 
to investors. Transitional justice measures will be 
key  to  enforcing  “secure  reintegration”,  as  they 
will make it possible to restore justice and human 
rights and bring to justice those who have com-
mitted crimes. The vision should also consider the 
possibility of establishing a special judicial regime 
(an exceptional model of court proceedings) that 
would enhance the protection of property rights, 
thereby helping stimulating the investment flow.

The availability of skilled labor in the Donbas will 
have  to  increase  to  facilitate  the  technological 
upgrade of local industries. Training of the local 
workforce,  starting  with  government-controlled 
areas, should be prioritised through open online 
courses  offered  by  the  government,  internation-
al educational projects, and on-the-job training. 
Civil  society  institutions  can  contribute  to  dis-
seminating  soft  skills  while  business,  as  part  of 
its  corporate  social  responsibility,  can  sponsor 
specialised  education  in  management,  adminis-
tration, or information and communication tech-
nologies.

The strategy should also seek  to promote peace-
ful  social  reintegration  of  the  local  population 
through educational opportunities supported by 
public and private scholarships, or exchange visits 
to other regions of Ukraine. Of equal importance 
is the provision of broadcasting of Ukrainian na-
tional  TV  channels  and  radio  stations,  as  well 
as  broadband  and  satellite  internet  connection 
for  the  whole  territory  of  the  Donbas,  although 

some of the participants warned that the current 
NGCA  de  facto  leadership  would  try  to  thwart 
such  initiatives.  Visions  for  the  future  can  also 
be supported by success stories produced as us-
er-friendly audio-visual material, brochures with 
infographics,  interviews,  and  video  clips.  It  was 
also  recommended  to  commission  sociological 
surveys  from  reputable  research  organisations 
that  inquire  about  the  contemporary  needs  and 
aspirations of the local population. Experts in the 
field,  including  from  NGCA,  can  contribute  to 
data-driven policymaking, generating sound pol-
icy solutions to existing issues.

The Donbas re-development strategy should also 
address  pressing  environmental  issues,  whose 
importance has come to the fore during the con-
flict due to lack of investment and the reversal of 
environmentally  sound  policies  in  NGCA.  For 
instance, one priority objective would be to  sys-
tematicly  evacuate  infiltrated  water  from  highly 
mineralized and, in some instances, nuclear-con-
taminated closed coal mines to prevent contam-
ination of the groundwater table. Ukraine could 
also aim to gradually reduce reliance on coal con-
sumption  for  energy  generation  and  replace  it 
with green energy, such as wind and solar, which 
are  abundant  resources  in  south-east  Ukraine. 
once the conflict is resolved, environmental sus-
tainability  can  help  promoting  innovation  and 
long-term investment in the Donbas region.

A conceptual vision developed by the government 
could be transformed into an actionable program 
with  clear  deliverables  by  drawing  on  the  sup-
port  of  international  development  agencies  and 
the expert community. To reach a consensus and 
pave the way for a successful implementation of 
a  strategy,  the  government  should  arrange  con-
sultations with local self-government bodies, civil 
society  organisations,  business  representatives, 
and  individual  citizens.  Consultations  can  take 
on the form of online crowdsourcing of ideas or 
on-the-spot fora and workshops to shape policies, 
thus offering voice both to popular opinion and 
independent expert knowledge13.

13 Although all of these approaches have not yet been put to practice, it is encouraging to see that the 
Ministry for Reintegration of the Temporarily Occupied Territories launched in May 2020 an inclusive initiative 
to design Ukraine’s economic re-vitalization strategy for the Donbas, implementing the main recommenda-
tion of the first HLPD meeting (“Minreintehratsiyi rozpochalo robotu nad proektom stratehiyi ekonomichnoho 
vidnovlennya Donbasu”, MTOT, May 26, 2020 [URL: https://mtot.gov.ua/ua/minreintegraciii-rozpochalo-ro-
botu-nad-proektom-strategiii-ekonomichnogo-vidnovlennja-donbasu]).

8

STG    Policy Brief    Issue 2020/05    July 2020In  addition  to  the  focus  on  reconstruction  and 
transformation of the economy, the vision should 
also concentrate on a new branding and marketing 
strategy for the region. Its competitive advantages 
should be identified, packaged, and communicat-
ed to potential national and international inves-
tors. The aim is to shift Donbas’ association away 
from war, destruction and political extremism, to 
an  image  of  a  high-tech,  export-oriented  region 

with potential in agriculture, agro-business, met-
al, and ICT industries. This can be reflected in a 
brand  book,  promotional  publications,  and  vid-
eos  in  Ukrainian  and  foreign  languages.  For  in-
stance, online-publications and TV commercials 
can be co-sponsored by EU mass media partners 
and support programmes.

3. ESTABLISHING A PERFORMING INSTITUTIONAL ARCHITECTURE

The formulation and subsequent implementation 
of  a  comprehensive  vision  for  the  Donbas  and 
Ukraine  requires  a  well-functioning  institution-
al architecture, designed to meet the very specific 
purpose of secure reintegration, starting with re-
construction and following with social, econom-
ic,  and  political  rehabilitation  and  reform.  This 
means  building  and  strengthening  institutional 
structures  capable  of  formulating  and  executing 
the  appropriate  policies  at  the  national  and  re-
gional levels. This is also important for the inter-
national community, which needs effective mech-
anisms to implement its assistance programs. 

To  achieve  this,  Ministers  should  be  directed  to 
nominate  Deputy  Ministers  who  would  be  re-
sponsible  for  the  design  and  implementation  of 
reconstruction  and  reintegration  policies  within 
their areas of competence, under the coordination 
of the Deputy Prime Minister for Reintegration. 
Likewise, at the level of the regional administra-
tions in eastern Ukraine, the nomination of Dep-
uty Heads responsible for the implementation of 
recovery and reintegration policies on the ground 
would improve the interaction between regional 
authorities  and  local  self-governing  entities  and 
the central government. Within the national par-
liament, in the absence of an ad hoc parliamenta-
ry committee, a formal or informal “coordination 
council”, could invite all parties to participate in 
the formulation of Donbas policies.  This would 
broaden the political ownership and social accep-
tance by all political groups.

To move towards reconstruction, security in the 
whole Donbas region will be needed, and this in-
cludes  the  restoration  of  control  over  Ukraine’s 
easternmost  border,  and  of  legal  central  gov-
ernment  offices  and  functioning  local  self-gov-
ernment  in  NGCA.  Legal  provisions  will  also 
be required to facilitate the re-integration of the 
population in the Donbas. 

A  transitional  administration  could  initially  be 
supported by international experts and represen-
tatives  of  international  institutions  to  increase 
trust  and  legitimacy.  In  addition  to  the  OSCE 
presence,  a  UN  mission  could  facilitate  the  po-
litical transition until the Ukrainian government 
takes  full  administrative  control  of  NGCA.  At 
the administrative level, especially in the govern-
ment-controlled  areas,  the  absorption  capacity 
of regional and local authorities of both national 
and international supported measures and fund-
ing need to be increased.

In implementation of the Minsk agreements, the 
Parliament  should  adopt  clear  and  fair  laws  for 
peaceful and socially acceptable re-integration of 
all NGCA residents. Such laws should particular-
ly address the issues of legal prosecution, requests 
for  selective  amnesty,  and  the  challenge  of  the 
de-facto  dual  citizenship  of  many  Donbas  resi-
dents, forbidden under Ukrainian law.

As far as international cooperation is concerned, 
the  international  community  can  lead  by  exam-

14 “Drafting the development strategy for the Luhansk oblast and the Sievierodonetsk city for 2021-2027,” Sy-
evyerodonetsk City Council, November 21, 2019 [URL: https://sed-rada.gov.ua/strategiya-socialno-ekonomich-
nogo-rozvitku-mista/rozrobka-proektu-strategiyi-rozvitku-luganskoyi-oblasti-ta-mista-sievierodonecka-na-peri-
od-2021-2027-roki].

9

STG    Policy Brief     Issue 2020/05     July 2020ple by developing a unified approach in offering 
and  executing  support  measures  in  the  Donbas. 
Attention should also be paid to the strategies for 
regional  development  for  the  period  2020-2027 
recently  announced  by  the  regional  administra-
tions  in  Sievierodonetsk  (Luhansk  region)14  and 
Kramatorsk  (Donetsk  region)15  as  well  as  to  the 
need for local administrations to better commu-
nicate internally and externally about their plans. 
A discussion among participants about a specif-
ic project – concerning priority railway develop-
ment projects for the Luhansk region – illustrated 
the  latter  point,  by  revealing  enduring  diver-
gences of information and opinion between local 
actors, and between them and the representatives 

of the international donor community.

Furthermore,  effective  and  transparent  mecha-
nisms for the cooperation between all actors on 
the ground are of central importance. The Inter-
national Partnership Support Fund for the recon-
struction  and  future  reintegration  of  the  Don-
bas,16  announced by the President in Mariupol in 
cooperation with the World Bank, could also in-
volve  more  international  organizations  and  take 
the  form  of  an  “all-embracing”  Regional  Invest-
ment  and  Development  Agency  responsible  not 
only for the planning, preparation, and monitor-
ing of projects but also for their funding.

4. INTERNALISING THE ROLE OF, AND SUPPORT TO, THE BUSINESS SECTOR

Prospects for the economic recovery of the Don-
bas  continue  to  face  great  challenges.17  Even 
though the situation is said to have stabilised in 
NGCA in the last couple of years thanks to budget 
support  from  abroad,  the  fundamentals  remain 
highly problematic.  Industrial production in the 
government-controlled  areas  of  the  Donetsk  re-
gion has dropped to 47% (2016) compared with 
its  pre-conflict  level  (2013),  the  GDP  per  capita 
fell by 58% from 2013 to 2015. In the Luhansk re-
gion, industrial production has declined to 27%, 
and  the  GDP  per  capita  sunk  by  70%. The  con-
flict has cost some 1.6 million jobs in the Donbas, 
with the heavy industry taking the biggest hits.18 
At  the  same  time,  the  exodus  of  people  fleeing 
the conflict areas has depleted its workforce. The 
closing of educational institutions has particular-
ly  spurred  young  residents  to  leave.  Within  the 
remaining  population,  about  one  third  are  pen-
sioners. Unemployment and forms of illegal em-
ployment  remain  high. The  absence  of  jobs  and 

economic opportunity on the one hand and the 
lack of human capital on the other continue to be 
mutually  re-enforcing  factors  hindering  the  re-
gion’s recovery. 
Economic  activity  also  continues  to  be  limited 
by destroyed infrastructure and the ban on eco-
nomic relations across the contact line, which has 
disrupted the region’s external trade and internal 
supply  chains.  In  addition,  the  region  still  faces 
problems  arising  from  the  lack  of  structural  re-
forms in the previous thirty years of the post-So-
viet era. 

Given  these  multiple  challenges  and  their  em-
beddedness  with  socio-economic  conditions  in 
Ukraine as a whole, re-development of the Don-
bas  region,  starting  with  government-controlled 
areas,  could  become a model  case for other un-
derdeveloped  regions  in  Ukraine.  While  draw-
ing on the traditional economic strengths of the 
Donbas “macro-region” and aiming at developing 

15 “The strategy of the Donetsk region until 2027,” Donetsk Regional State Administration, March 27, 2019 [URL: 
https://dn.gov.ua/ua/projects/strategiya-rozvitku-doneckoyi-oblasti-na-period-do-2027-roku].
16 “President announced the launch of the International Partnership Support Fund for the reconstruction and 
future reintegration of Donbas,” President of Ukraine: Official website, October 29, 2019 [URL: https://www.pres-
ident.gov.ua/en/news/prezident-u-mariupoli-ogolosiv-pro-zapusk-fondu-mizhnarodnoy-58105].
17 See “What economic model for a post-conflict Donbas? How economic measures could play a role 
in exiting the negative scenario,” STG Policy Brief, June 2019 [URL: https://cadmus.eui.eu/bitstream/han-
dle/1814/63510/STG_PB_2019_06-EN-EN-N.pdf?sequence=1].
18 “Maintaining the Momentum of Decentralisation in Ukraine,” OECD, June 15, 2018 [URL: https://www.oecd-il-
ibrary.org/docserver/9789264301436-en.pdf?expires=1581943921&id=id&accname=ocid195734&check-
sum=A50679A4F270BD51616C46E009D77164].

10

STG    Policy Brief    Issue 2020/05    July 2020new ones, a set of measures will be necessary to 
increase the area’s attractiveness for people, busi-
nesses and investment.

Among the most potent measures to create a more 
favorable  climate  for  investment  is,  besides  the 
transition to robust rule of law, the improvement 
of the regional infrastructure (connectivity). This 
includes the re-building of railroads, automobile 
roads  and  other  public  facilities,  including  tele-
communications.  The  government’s  new  “Great 
Construction Project” and Zelenskyy’s comments 
at  the  “Knit  Ukraine  Together:  Security,  Con-
struction,  Financing”  event  at  the  State  Agency 
of Automobile Roads of Ukraine can be seen as a 
promising start in this direction.19  

insufficient 

Beside 
infrastructure,  businesses 
in  Eastern  Ukraine  face  difficulties  in  securing 
loans. The lack of international recognition hin-
ders businesses in NGCA, while businesses near 
the contact line equally struggle in securing fund-
ing due to the latent potential of renewed hostili-
ties. A risk mitigation insurance fund established 
by the national government in cooperation with 
international  partners  has  the  potential  to  en-
hance economic recovery considerably. 

As mentioned before, regional development pol-
icies,  embedded  in  national  industrial  policy, 
should  focus  on  those  industrial  sectors  of  the 
Donbas  with  most  economic  potential:  agricul-
ture, metal industries, and the production of high 
value-added  goods  (including  ICT).  The  goal 

should be a close integration into European sup-
ply  chains  and  markets.  Besides  these  core  sec-
tors, special attention ought to be given to small 
and  medium-sized  enterprises  (SME),  as  they 
bring  specific  knowledge  and  motivation  to  the 
task due to their close links with the local realities. 
Small business incubators and access to credit for 
SME should be prioritised. Furthermore, the cre-
ation of accessible educational opportunities and 
pieces of training to produce skilled labor in the 
Donbas will assist the increase of human capital 
and thus underwrite sustainable economic recov-
ery in the region.

The  participants  discussed  the  issue  of  creat-
ing  “special  economic  zones”,  where  businesses 
would  be  granted  tax  holidays.  They  concluded 
that such initiatives would present more risks and 
disadvantages than benefits for Ukraine – and the 
region – in terms of economic development. Be-
sides,  the  historical  track  record  of  such  special 
economic  zones  in  Ukraine  was  bad  enough  to 
substantiate this conclusion.

Finally,  likely  political  head-wind  should  not 
deter  the  national  government  from  evaluating 
whether a gradual lifting of the ban on economic 
relations with NCGA might enhance the region’s 
prospects  for  economic  recovery  and  the  build-
ing-up of personal connections across the contact 
line, contributing thereby decisively, in the medi-
um  term,  to  its  successful  reintegration  into  the 
Ukrainian economy and society.

19 See the official press statement on 11 February [URL: https://www.president.gov.ua/en/news/v-ukray-
ini-z-bereznya-rozpochinayetsya-realizaciya-masshtabn-59709].

11

STG    Policy Brief     Issue 2020/05     July 2020The  School  of  Transnational  Governance  (STG) 
delivers  teaching  and  high-level  training  in  the 
methods,  knowledge,  skills  and  practice  of  gov-
ernance  beyond  the  State.  Based  within  the  Eu-
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The  STG  Policy  Brief  Series,  published  by  the  School 
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doi:10.2870/955361
ISBN:978-92-9084-845-5
ISSN:2599-5928
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