Why the reform direction became irreversible, and what irreversible actually means

Ukrainian policy direction changed sharply in 2004, changed back in 2010, and changed again in 2014. On that record, no observer in 2015 should have expected the post-2014 direction to hold.

It has held, through a change of president, several changes of government, and a full-scale war. The reasons are structural rather than political, and they illustrate what makes any policy direction durable.

Legal commitments with external counterparties

The association agreement with the EU is a ratified international treaty with obligations, timetables and a dispute mechanism. Reversing it is not a matter of policy preference; it requires denouncing a treaty, which carries costs that ordinary policy change does not.

The same applies to the WTO commitments, the IMF programme conditionality and the various financing agreements attached to reconstruction support.

Institutions with independent standing

The central bank's independence is written into law and reinforced by the conditionality of every external programme. The anti-corruption agencies, whatever their conviction record, have statutory independence and their own appointment procedures. The electronic procurement system is operated as public infrastructure and its data is open.

An institution with independent standing cannot simply be redirected. It must be legislatively dismantled, which is a visible act with visible consequences, both domestically and with external partners.

Trade reorientation

This is the most underrated of the four. Ukrainian exports shifted decisively toward the EU, and the businesses that made the shift invested in EU-standard certification, EU-facing logistics and EU customer relationships.

Those businesses now have a direct commercial interest in the direction continuing. They are a domestic constituency for the policy, which is entirely different from a policy that depends on a government's preference.

A constituency created by a policy is what makes the policy self-sustaining. Every certification investment, every EU distribution agreement, every plant upgraded to a European standard adds a company that would lose money if the direction changed.

The change in the underlying question

Before 2014 the European direction was a contested question in Ukrainian politics with genuine constituencies on both sides. That is no longer the case, and the reason is not persuasion.

The alternative direction was removed as a viable option by events, and public opinion moved decisively and permanently. A policy question with only one answer is not a policy question any more.

What irreversible does not mean

It does not mean the reforms will be completed. Judicial reform has been attempted repeatedly under every administration and remains the outstanding failure. Anti-corruption enforcement produces indictments more readily than convictions. State enterprise privatisation has barely moved.

Direction and pace are different variables. The direction has held; the pace has been slower than any of the timetables promised, and the gap between formal adoption and actual implementation remains wide in several areas.

Why it matters commercially

For a company making a ten-year investment decision, the relevant question is not what this government will do. It is whether the legal and regulatory framework the investment depends on will still be there under the next three.

On that question, Ukraine's answer is considerably more solid than its political history would suggest, and it is solid for reasons that do not depend on any election outcome.

Related in this archive

• Visa-free travel: the economics of a queue that disappeared
• When a free trade area actually starts working, and why it takes longer than the signing
• What external partners can actually deliver, and what they cannot
• Ukraine Annual Review 2018: growth against a rising wage floor

A direction becoming irreversible is not politics settling but contracts accumulating — the same holds in business. A firm that has once built a production line to a European standard does not go back once it prices the cost of going back. Irreversibility is not a guarantee; it only means reversing has become expensive.