Tag: EU

Post-2020 Belarusian Permanent Migration to the EU and Beyond: An Empirical Assessment

Posted on April 27, 2026 | Policy Brief

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Following the 2020 presidential election, Belarus experienced a sharp increase in outward migration, primarily to the European Union, with Poland and Lithuania becoming the main destination countries. However, the official migration statistics suffer from limitations and inconsistencies. The brief provides an empirical assessment of the scale of Belarusian migration after 2020. The results indicate that 400–418 thousand Belarusians live and/or work in the EU, Russia, and Georgia. The migration significantly affects host countries’ labour markets and social systems, particularly in Poland. In turn, for Belarus, it represents substantial forgone economic potential, with estimated output losses exceeding 3.4% of GDP.

Introduction

After the 2020 presidential election in Belarus, outward migration increased significantly. Belarusian citizens left the country for both political and economic reasons, with the European Union, particularly Poland and Lithuania, becoming one of the main destinations. Belarusian migrants have become a significant source of labour supply in Poland and Lithuania, helping alleviate labour shortages in economies experiencing demographic decline. At the same time, a sizable outward migration is likely to affect both Belarus’ demographic dynamics and the economic outcomes. In this sense, estimating the number of Belarusians residing abroad is important for both host countries and Belarus itself. However, precise data on the number of Belarusians moving abroad after 2020 remains limited.

Existing international estimates provide only a partial picture. The World Migration Report includes both recent migrants and migrants who left Belarus decades ago and later acquired citizenship in other countries (WMR, 2024). It also relies on migration statistics that are not fully comparable across countries and are often available only with a time lag. As a result, these estimates do not capture the most recent migration wave that occurred after 2020.

Belarusian national statistics also underestimate migration flows, as they mainly record individuals who officially leave the country to work abroad under formal employment contracts (MIARB, 2025) .

This policy brief aims to address this gap by providing estimates of migration from Belarus between 2020 and 2024, based on data on residence permits issued in recipient countries, national migration statistics, information on citizenship acquisition, and open-source data. It accesses the number of Belarusian migrants in the main emigration destinations, namely the European Union, Russia, and Georgia, and discusses the implications for the host countries and Belarus.

Assessing Belarusian Migration to the EU

One of the most commonly used sources for analysing migration flows to the European Union is Eurostat data on the number of first permits. These permits indicate that a foreign national has received authorisation for a long-term stay in an EU country for the first time, typically for more than three months. They include various categories such as work permits, study permits, and other forms, including long-term visas. In many cases, the number of first permits corresponds broadly to the number of migrants entering and residing in a country. However, in some countries, there are significant differences between the number of first permits issued and the actual number of migrants. For example, this concerns Poland’s issuance of Poland Business Harbor Visas to Belarusians. The visa allowed Belarusians to live and work in Poland. However, not all visa recipients moved to the country. Many used it for short-term tourism and did not subsequently obtain temporary residence permits.

According to European statistics, more than 90 percent of first permits issued to Belarusian citizens in recent years were granted by Poland and Lithuania. For this reason, estimating the number of Belarusians residing in these two countries is central to assessing the scale of Belarusian migration to the EU.

Lithuania

Assessing the number of Belarusians residing in Lithuania is relevant in light of the ongoing demographic decline and its implications for labour supply. Fertility in Lithuania remains well below replacement level—around 1.1 children per woman in 2024—while population ageing continues to reduce the size of the workforce (Statistics Lithuania; IMF, 2024). The current labour market situation is relatively tight, with unemployment around 7% in 2024. Migration helps mitigate some labour market pressures without constituting a major source of labour supply (European Commission, 2025).

In this context, Belarusians have become the second-largest migrant group in Lithuania. Their numbers increased markedly after 2020, rising from fewer than 18 thousand at the end of 2019 (Migracijos metraštis, 2020) to 57.5 thousand by the end of 2024 (Imigrantai Lietuvoje, 2026).

Estimating the number of Belarusian residents in Lithuania is relatively straightforward because the Migration Department of the Ministry of Interior Affairs publishes detailed statistics on foreigners residing in the country. These data show a close relationship between the number of first permits issued and the growth in the Belarusian population in Lithuania. Between 2020 and 2023, the number of Belarusians living in Lithuania increased slightly less than the number of first permits issued, partly because some individuals work in Lithuania on a rotational basis while continuing to reside in Belarus. An exception occurred in 2022, when the Belarusian population in Lithuania increased more rapidly than the number of first permits issued to Belarusians following Russia’s invasion of Ukraine and the expansion of humanitarian migration channels. Since 2024, the number of Belarusians residing in Lithuania has declined, partly due to the tightening of migration policy (EMT, 2025).

Poland

Compared with Lithuania, Poland has stronger labour demand and even tighter labour market conditions, with significant dependence on migration. Despite a similarly low fertility rate (1.099 in 2024), unemployment remains low at 5.6% (November 2025), even with over one million foreign workers already present (Statistics Poland, 2025, 2026). Combined with population ageing and mounting pressures on social security and healthcare systems, this results in a structurally higher demand for migrant labour than in Lithuania. Against this backdrop, Belarusians—now the second-largest group of foreign workers after Ukrainians—play an important role. Only among social security contributors, their number has more than tripled in recent years – from 42.8 thousand in 2020 to 134.8 thousand in 2024 (ZUS).

However, accurately assessing the scale of Belarusian migration is challenging. Official statistics do not provide a direct measure of Belarusian residents. First residence permits significantly overestimate migration: between 2020 and 2024, Poland issued more than 874 thousand permits to Belarusian citizens, but many were used for short-term mobility rather than permanent relocation. Figure 1 illustrates the gap between the number of first permits issued and the number of residence permits held. At the same time, residence permit data underestimate the true population. Approximately 125 thousand Belarusians held valid residence permits at the end of 2024, increasing to 141.2 thousand at the beginning of 2026; however, these figures exclude individuals awaiting decisions, whose applications may take months or years to process while they remain in the country (USC, 2026).

Importantly, statistics based on social security contributions also underestimate the total number of Belarusians permanently residing in Poland, as they exclude non-working spouses, children, students, pensioners, and other inactive groups. At the same time, combining different administrative datasets would lead to double-counting, as the same individuals may appear in multiple categories—for example, as residence permit holders, applicants awaiting decisions, and recipients of social benefits—meaning that simple aggregation would inflate the total. As a result, neither the number of permits issued nor administrative records alone provide an accurate estimate of the Belarusian population in Poland.

Approaches to Determining the Number of Belarusians in Poland

Luzgina (2025a) suggests two approaches to estimate the number of Belarusians residing in Poland.

The first approach—the gender-statistical approach—is based on estimating the number of Belarusians permanently residing in Poland by taking into account the gender structure of Belarusian citizens holding documents for permanent stay in Poland, as well as estimating the number of young Belarusians under 18, using statistical data on recipients of the 800+ child benefit, which until 2026 was paid to all children under 18. The estimate based on this approach suggests that as of the end of 2024, between 172.8 and 181.1 thousand Belarusians permanently resided in Poland.

Figure 1. Dynamics of issuing first permits and residence permits by Poland to Belarusian citizens: thousands of people.

Source: Urząd do spraw cudzoziemców; Eurostat. Note: First permits are permits issued for initial entry, including long-term visas. Resident permits include temporary residence permits, permanent residence permits, blue cards, and residence cards—that is, permits foreigners obtain for residence in the country after they’ve already entered. Due to the fact that many Belarusians received Poland Business Harbor visas (first permits), but did not use them to obtain a residence permit in Poland, the number of residence permits issued is lower than the number of first permits.

The second approach—the socio-demographic approach—is used to verify the accuracy of these estimates. This approach is based on the analysis of statistics on social security contributions, the age structure of Belarusians in Poland, and their employment status. Key components include data on the number of taxpayers, children under 18, and Belarusians aged 18 and older who are not employed in the Polish labour market. According to this second approach, the number of Belarusians residing in Poland at the end of 2024 ranged from 175.6 to 188.5 thousand individuals.

Thus, based on both approaches, between 172.8 and 188.5 thousand Belarusian citizens entitled to permanent stay were permanently residing in Poland at the end of 2024.

The Total Number of Belarusians in the EU

Based on the above assessment of the total number of Belarusians residing in Poland, the known number residing in Lithuania, and the number who obtained first permits in other countries, it is possible to estimate the number of Belarusian citizens residing in the European Union. If EU statistics are considered, it can be noted that over the period 2016–2024, the share of first residence permits issued by EU countries excluding Lithuania and Poland averaged 7%. We can assume that the number of Belarusians residing in EU countries outside Poland and Lithuania approximately corresponds to this proportion.

In this regard, the total number of Belarusians residing in the EU at the end of 2024 was calculated assuming that approximately 93% of Belarusian citizens migrated to Lithuania and Poland. This results in an estimate of 247.6 thousand to 264.5 thousand individuals.

Based on available data on Polish citizenship obtained by Belarusians in 2020–2024, the total number of Belarusian citizens who do not yet hold citizenship or who obtained it relatively recently but permanently reside in the EU is between 265 thousand and 282 thousand individuals. Moreover, the majority of these individuals relocated to the EU in 2020–2024, a period marked by a significant increase in the number of first residence permits issued to Belarusians, primarily by Poland and Lithuania.

Migration Outside of the EU

Belarusians actively migrate not only to EU countries but also to other states such as Russia and Georgia. It is not possible to calculate how many Belarusian citizens currently live and work in Russia due to the absence of customs and border barriers and the lack of additional labour market legalisation requirements for citizens of the Union State. Nevertheless, there are general figures on the employment of Belarusians in the Russian labour market. As of 2023, approximately 124 thousand Belarusians were employed in Russia. An additional more than 12,000 resided in Georgia (Luzgina, 2025b). Taking these data into account, together with data for EU countries, between 400 and 418 thousand Belarusian citizens lived and worked outside Belarus. This amounts to approximately 4.5% of the country’s total population.

Implications of Belarusian Migration for Belarus

Together with data for EU countries, between 400 and 418 thousand Belarusian citizens lived and worked outside Belarus. This amounts to approximately 4.5% of the country’s total population. Estimating the share of Belarusians of working age (16–60 years) living and working in the countries under study based on the gender-age structure of Belarusians in Poland yields approximately 355 thousand individuals. This corresponds to more than 6% of the country’s total working-age population.

The forgone economic opportunities resulting from the emigration of working-age individuals can be assessed using the Solow growth accounting framework. The potential economic impact of the emigration of working-age Belarusians can be approximated as a static output loss, assuming that capital and total factor productivity remain unchanged. Based on the share of labour compensation in GDP at current national prices for Belarus in 2023 (0.57), and the estimated 6% reduction in the working-age population residing abroad, the immediate reduction in GDP may reach up to 3.42% (PWT 11.0).

Conclusion

Belarusians constitute the second-largest group of foreign nationals in Poland and Lithuania after Ukrainians. Belarusians also make a positive contribution to the labour markets of other EU countries, as well as to those of Russia and Georgia. Consequently, their residence in the host countries has a tangible impact not only on the labour market but also on social security systems, budget, and other sectors of the economy. Accurate data on the number of migrants, their age structure, and their participation in economic activity enable more effective forecasting of pressures on social systems and facilitate better planning of migrant integration into the host country’s economy.

In Belarus itself, the long-term emigration of working-age citizens and their families remains insufficiently accounted for, which distorts assessments of the country’s internal demographic situation and associated economic losses. Large-scale migration, including flows to Russia and Georgia, indicates that up to 6% of the working-age population currently resides outside the country, which, all else being equal, may reduce potential GDP growth by more than 3.42%.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Breaking Free of Russia’s Energy Grip: How Much Will It Cost Belarus?

Posted on April 13, 2026 | Policy Brief

The competitiveness of the Belarusian economy is largely determined by its access to cheap Russian energy resources. The country’s total dependence on Russia for oil and natural gas supplies poses a major vulnerability for the Belarusian economy should its citizens strategically choose to integrate with the EU. A severe energy shock – a sharp increase in gas and oil prices – is highly likely to follow if political relations between Belarus and Russia worsen. This study assesses the sectoral and macroeconomic consequences of such a shock for Belarus using a computable general equilibrium model.
The simulation results show that primary raw material processing industries, as well as manufacturing sectors heavily dependent on cheap energy resources, could face significant output losses. In turn, export-oriented, higher-value-added sectors (mechanical engineering, communications, pharmaceuticals, and light industry) have the potential to increase production and exports through the inflow of labor and capital. Should the EU choose to provide carefully designed support – focused on targeted energy subsidies, support for Belarusian firm integration into European production chains, and productivity-oriented financial assistance – the negative short-term consequences of an energy shock could be largely mitigated.

The Need for Strategic Choice

For Belarus, one of the most important strategic choices concerns its future orientation between continued reliance on Russia and deeper integration with the European Union (EU).

At present, the Belarusian economy is strongly integrated with Russia (Kruk, 2024). More than 60% of foreign trade is linked to the Russian market; the country benefits from heavily subsidized energy imports. About 4–5% of general budget revenues come from Russia as transfers; furthermore, Belarus has the possibility to refinance its public debt due to political agreements. Structural dependence makes Belarus highly sensitive to political and institutional changes in relations with Russia, limits opportunities for productivity gains, and undermines household welfare through lower income growth relative to EU countries.

Closer integration with the EU offers a different path. It has opportunities and risks: opportunities in terms of access to larger markets, advanced technologies, and investment, and risks in terms of adjustment costs for sectors reliant on cheap Russian energy resources, and social challenges.

One of the main challenges for Belarus if the country moves toward EU integration will be an energy shock caused by dependence on Russia. Russia is currently Belarus’s sole supplier of natural gas and oil. Prices for these supplies are preferential and politically determined.

Since 2018, Belarus has been importing natural gas from Russia at a contractual price close to $130 per thousand cubic meters. For comparison, according to the World Bank, the average price of natural gas in Europe was more than $400 per thousand cubic meters in 2024–2025 (about $290 in 2010–2019).

Belarus also imports oil from Russia at a price based on Urals crude. Due to the widening discount of Urals relative to the Brent benchmark since 2022, Belarus has received an additional benefit estimated at about $5.5 bn for 2022–2025.

Low energy prices support the competitiveness of entire sectors of the Belarusian economy, at the same time making them extremely vulnerable to sustained energy price hikes. As a result, Belarus’s shift away from Russia and toward the EU could lead to significant (even if transitory) losses in output and household welfare. This study aims to estimate these losses.

CGE Model for Belarus

To assess the consequences of the energy shock, a computable general equilibrium model (CGE) was developed (BELECONOMY, 2025). CGE offers a consistent framework that links sectoral interactions, resource allocation, and household welfare in a general equilibrium setting.

A CGE includes exogenous and endogenous variables, as well as market-clearing constraints. All the equations in the model are solved simultaneously to find an economy-wide equilibrium in which, at a set of prices, the quantities supplied and demanded are equalized in every market (Burfisher, 2021). To conduct an experiment, one or more exogenous model parameters are changed, and the model is then solved to determine the new values for the endogenous variables. Such a simulation shows how the economy’s sectoral structure changes and what the new steady state looks like after an economic shock.

The Belarusian case is a clear example where such modeling is highly useful. The economy’s dependence on Russia creates vulnerabilities that cannot be understood through partial-equilibrium or sectoral analysis alone. A sharp and sustainable increase in energy prices affects not only the directly exposed sectors but also wider economy through changes in costs, relative prices, and resource allocation. A CGE framework is therefore indispensable for capturing these linkages and providing a comprehensive view of outcomes.

The model for the Belarusian economy is based on the basic postulates of the CGE modeling. The factor market supplies factors of production (such as labor and capital) to activities. Activities produce goods and services and are introduced by sectors. The commodities market distributes goods and services produced by sectors. Domestic output enters the commodities market, a part of which is exported, and the imported goods, together with the domestic output consumed domestically, create domestic demand. Commodities are purchased as intermediate consumption by activities, as final consumption by households and government, and for capital formation.

The Belarusian CGE model is implemented in two specifications. Baseline specification includes 17 production sectors, and the external sector is introduced by 4 counterparties – trade partners: Russia, the EU, China, and the rest of the world. In the alternative specification, the activities are disaggregated to 22 production sectors. and the external sector is assumed to be a single counterparty, without explicitly modeling different regions.

The key input used in the model is the 2019 Input–Output table data published by the Belarusian National Statistical Committee. The base year of 2019 is chosen since that year was the last one with compete data and without significant external shocks.

Simulation Design

The developed CGE model has been used to simulate a sharp increase in the prices of natural gas and oil imported by Belarus.

Specifically, if Belarus moves closer to the EU and exits the EAEU, the country’s gas import price is highly likely to approach the European level, regardless of the source of supply. This would mean a powerful shock, roughly equivalent to a threefold increase in the import price of gas.

Regarding oil import prices, the scenario assumes a 10% increase. This roughly corresponds to a long-run effective discount of Urals to Brent that Belarus enjoyed prior to the current sanctions. Accounting for the volumes of oil and natural gas imports, the overall price increase for the product group “oil & gas, petroleum products” will amount to 60%. A shock of this size is incorporated into the simulation scenario.

The scenario also assumes the elimination of inter-budgetary transfers between Belarus and Russia. These transfers are largely linked to obligations within the EAEU, as well as to inflows into the Belarusian budget from reverse excise taxes on oil products from the Russian budget. These transfers are likely to be eliminated if Belarus moves closer to the EU.

Simulation Results

If prices for imported energy resources increase by an average of 60%, domestic production of petroleum products practically ceases. The country’s fuel demand is met exclusively through imports (Figure 1). The near-elimination of domestic petroleum product production under such a severe price shock confirms that the viability of this sector in Belarus was primarily sustained by the redistribution of oil rents from Russia to Belarus through subsidized prices.

A significant increase in energy prices will have a strongly negative impact on industries related to the primary processing of raw materials. The chemical industry, the production of plastics and rubber products, metallurgy, the manufacture of other non-metallic products (primarily construction materials), as well as electricity generation and water supply (utilities), will experience losses in output and exports. Due to intersectoral effects from the oil refining industry, output in wholesale trade, transportation, and other services will also decline. The decrease in construction materials output is also linked to a downturn in construction (Figure 1).

Productive resources from the “losing” industries will be reallocated to sectors with higher export potential (Figure 2). Output and exports will increase in mechanical engineering (electronic, electrical, and optical devices, machinery and equipment), transportation vehicles, light industry, and woodworking, as well as in communication and computer services (ICT).

Figure 1. Exports, imports, and domestic production: results of scenario simulation

Source: Author’s calculations based on CGE.

Figure 2. Factors of production: results of scenario simulation

Source: Author’s calculations based on CGE.

As a result, under a severe energy shock, two groups of industries can be distinguished. The industries that generally produce low- or medium-technology products will suffer substantial losses in value added (Figure 3). In turn, technologically advanced sectors, such as mechanical engineering and information and communications, have the potential to increase value added thanks to their export potential, lower dependence on oil and gas, and the reallocation of labor and capital. (Figure 3).

Figure 3. Sectoral value added: results of scenario simulation

Source: Author’s calculations based on CGE.

The macroeconomic effects of implementing the energy shock scenario will manifest as declines in both public and private consumption, as well as in investment. The resulting GDP losses are estimated at 3.5% of the initial period’s real volume (Figure 4).

Figure 4. GDP and components: models’ comparison of scenario simulation

Source: Author’s calculations based on CGE.

The macroeconomic and sectoral consequences of simulating the energy shock scenario using the alternative model (22 sectors, without separate trading partners) are generally close to those of the baseline model (Figure 4). The greater sectoral disaggregation of the alternative model makes it possible to identify two more industries with potential for output growth: the production of fabricated metal products and pharmaceuticals. This result highlights that, with a significant increase in energy costs, labor and capital resources shift toward more sophisticated sectors with higher value added.

EU Financial Support: Potential Effects

The above economic effects apply over the long term as the economy adapts to new conditions. In the short term, costs will be much higher, and a collapse of energy-intensive sectors cannot be ruled out.

The impact of such a transition on the Belarusian economy can be mitigated with external help.  We conducted additional simulations, assuming the use of the EU’s currently frozen financial support package for the five areas outlined by the EU Commission in 2021, at the amount specified for these five areas – €870 million (EU Commission, 2021).

The results of simulating the energy shock scenario with EU financial support show that €870 million in EU assistance can offset about 1.2 p.p. of Belarus’s GDP decline (Figure 5). This is achieved mainly due to a smaller reduction in household consumption and investment.

If we include the entire declared potential volume of EU financial support for Belarus (€3 bn) in the simulation, then GDP losses may be avoided. Household consumption would remain below the initial level, but the gap would be significantly smaller than in the baseline scenario (Figure 5).

Figure 5. Macroeconomic effects of EU financial support

Source: Author’s calculations based on CGE.

It should be noted that the simulated effects of EU financial support depend on its composition and timing. Therefore, the results of these simulations are largely illustrative and should be seen as an assessment of the scale of assistance needed to mitigate the economic losses from the energy shock in Belarus.

Conclusion

The simulations demonstrate that a powerful energy shock would have a large-scale negative impact on output and consumption. At the same time, it would not cause a full collapse of the Belarusian economy. Without EU support, long-term GDP losses are estimated at 3–4%. The most significant losses would be concentrated in industries linked to the primary processing of raw materials – oil refining, metallurgy, production of building materials, chemical industry, and electric power supply. Nevertheless, other sectors, such as mechanical engineering, light industry, pharmaceuticals, and ICT, may benefit from the reallocation of production resources. This suggests that the economy possesses a degree of structural resilience, with certain sectors able to absorb resources and adapt to changed conditions. In the long term, this reallocation may partially mitigate the overall economic losses, although the transition period would be socially and politically challenging.

The simulation results also shed light on how EU engagement could shape adjustment outcomes, should it choose to act.

First, targeted energy subsidies from the European Union or preferential financing for energy imports during the initial adjustment period could play a crucial role in cushioning the immediate impact of higher oil and gas prices. Such subsidies would prevent an abrupt collapse of energy-intensive industries and allow time for structural adjustment.

Second, efforts to remove barriers to the participation of Belarusian firms in European value chains could significantly ease the negative short-term consequences of deteriorating trade relations with Russia. By facilitating access to new markets, technologies, and standards, integration into European supply chains could not only soften the transition but also enhance long-term competitiveness.

Third, direct financial support from the EU would have the potential to offset a substantial part of GDP and welfare losses. However, to achieve lasting results, such support would need to be targeted toward raising factor productivity through investments in human capital, digitalization, and modern infrastructure.

Fourth, social safeguards are essential. The significant energy shock will unavoidably bring sectoral declines and job displacements. EU support could therefore extend to retraining programs, measures that promote labor mobility, and social protection systems, ensuring that the short-term adjustment costs do not lead to lasting social and political instability.

Acknowledgments

This brief is based on research funded by the EU.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Strategic Integration of the Belarusian Business and Policy Implications for the EU

Posted on February 9, 2026 | Policy Brief

The forced internationalization of Belarusian businesses since 2020 has transformed a localized economic crisis into the formation of a sophisticated, high-growth-potential economic diaspora within the European Union. Drawing on a novel survey of over 114 Belarusian-rooted businesses, this brief analyzes their integration patterns and value alignment with Western markets. The findings reveal a cohort characterized by high entrepreneurial orientation, a rejection of state paternalism, and significant growth potential. This makes them a valuable asset to host-country development and a vital resource for Belarus’s future economic reconstruction.

The Context: Scale and Scope of the Exodus

Before 2020, Belarusian business migration was a predominantly economically driven phenomenon of “gradual Europeanization” – businesses strategically pursued access to larger markets, more stable legal frameworks, and new technologies. Moreover, many Belarusian companies were born-globals (Vissak & Zhang, 2016) and considered the domestic and even Russian market as a launch pad for further expansion into developed technological markets (Marozau et al., 2021). By 2020, the private sector’s contribution to Belarus’s GDP reached 55%, surpassing that of state enterprises (Daneyko et al., 2020). However, the political crisis following the 2020 elections and the 2022 invasion of Ukraine fundamentally altered this trajectory, turning migration into a “survival strategy”.

This “forced internationalization” occurred in two distinct waves. The 2020-2021 wave primarily consisted of individual entrepreneurs, top managers, and IT specialists who fled direct political repression. In turn, the post-2022 wave was driven by the relocation of entire high-tech and knowledge-intensive companies in order to preserve client bases and financial access after international sanctions were imposed on Belarus following Russia’s invasion of Ukraine.

Today, the EU has inadvertently become the custodian of a substantial portion of Belarus’s future economic potential. Over 300,000 Belarusians have emigrated, with an estimated 87% of them holding higher education degrees—a dramatic “brain drain” for Belarus that translates into a “brain gain” for the EU (Lvovskiy et al., 2025).

Figure 1. Origin of surveyed Belarusian-rooted businesses

Source: Authors’ estimation.

The number of enterprises with Belarusian founders operating across Central and Eastern Europe is estimated at approximately 10,000 (Marozau & Danilchuk, 2024).

This study utilizes a mixed-methods approach, centered on a 2024 proprietary survey of 114 founders and executives of Belarusian-rooted businesses, primarily located in Poland and Lithuania. The sample covers micro- (62%), small- (30%), and medium enterprises across ICT (39%), services/trade (48%), and manufacturing (13%).

Portrait of the Belarusian Business Diaspora

The Belarusian business presence in the EU is characterized by heavy geographic concentration on the eastern flank (Poland, Lithuania, Latvia), though it shows signs of maturing into a global network.

Nearly half (49%) of the surveyed companies were new local startups that were established from scratch in the current primary jurisdiction (Figure 1). Meanwhile, relocated firms – those that operated in Belarus and have fully or partially moved – make up 42% of the sample. Only 6% continue to operate in Belarus while opening branches abroad. This distribution underscores a shift toward local entrepreneurial formation, suggesting that the diaspora is not merely transplanting existing structures but actively generating new ones. The nearly even presence of relocated and new local startup firms reflects a dual pathway: one of continuity and adaptation, and another of innovation and reinvention.

Analysis of workforce composition reveals a heavy reliance on Belarusian talent, both from recent relocations and the existing local diaspora (Figure 2). Many businesses are still relatively small and founder-driven, with hiring networks often rooted in trusted Belarusian professional circles. However, as these companies grow and mature, many may begin to prioritize specialized skills and experience over nationality, leading to more diverse and internationalized teams over time. In their current phase, however, they continue to play a crucial role in employing and integrating Belarusian talent across EU labor markets (Lvovskiy et al., 2025).

Figure 2. Staff composition of surveyed Belarusian-rooted businesses

Source: Authors’ estimation.

Business Dynamics and Resilience

Despite the trauma of forced relocation, these businesses exhibit a remarkably entrepreneurial orientation and a focus on expansion rather than mere survival. An overwhelming 74% of firms prioritize expansion, a stark contrast to businesses remaining inside Belarus, where only about one-quarter plan to expand (BEROC, 2023). 64% of respondents anticipate increasing their staff over the next year. While they initially provide a “safety net” for other Belarusian emigrants, 40% of firms are now actively recruiting local Polish or Lithuanian specialists to help with localization.

Only 18% of firms would consider moving back to Belarus even if the political situation changed immediately. This indicates that the “exodus” has resulted in a permanent structural change; these businesses are becoming European entities with Belarusian roots.

Navigating the European Market: Challenges, Responses, and Support Needs

As the Belarusian-rooted business becomes more established in new countries, issues of initial adaptation and legalization are becoming a thing of the past.

The most frequently reported barrier is difficulty entering new markets, selected by 39% of respondents (Figure 3). This is followed by high labor costs, particularly in terms of salary expectations (30%), and disparities in treatment of companies with Belarusian origins (29%). These three factors reflect a combination of structural and perception-based challenges that affect firms’ ability to scale operations across borders.

Figure 3. Key barriers hindering growth and expansion

Source: Authors’ estimation.

A substantial share of firms, citing a lack of qualified personnel or management (25%) and noting difficulties related to the legalization of founders and employees (23%), point to significant constraints in human capital and the administrative burdens associated with cross-border employment and residency requirements.

Meanwhile, Belarusian entrepreneurs have shown a high entrepreneurial orientation, focusing on two main strategic directions: optimization of internal processes and adaptation of product/market strategy (Figure 4).

Figure 4. Steps taken to minimize the impact of risks and enhance competitiveness

Source: Authors’ estimation. Note: Several options could be selected.

When asked what would most help the company’s development, Belarusian entrepreneurs in the EU expressed a strong consensus that political and legal normalization is far more relevant than immediate economic aid or market-specific support. The end of the war in Ukraine (58.8%) as the highest-ranked factor underscores that the geopolitical instability caused by the war is the single largest drag on their business, impacting everything from security to market perception (Figure 5).

Figure 5. What would most help business development?

Source: Authors’ estimation. Note: Several options could be selected.

The Analysis of Value Alignment

In general, previous research collectively positions the entrepreneurial class – and by extension, the business diaspora – as a proactive, motivated, and democratically aligned segment of Belarusian society (Bornukova & Friedrich, 2021). The combination of a long-term societal shift toward market principles (Daneyko et al., 2023) and the unique psychological profile of Belarusian entrepreneurs has profound political implications. Their strong preference for self-reliance over state welfare, their belief in the benefits of competition, and their demonstrated risk tolerance are not merely business characteristics; they are foundational democratic values centered on individual agency and responsibility (Audretsch & Moog, 2022).

Compared to a survey of businesses inside Belarus in 2018, the 2024 the Belarusian business diaspora operating outside the country holds a stronger commitment to self-reliance, risk-taking, and core market principles than business representatives operating inside Belarus just a few years earlier (Marozau & Apanasovich, 2026). It strongly supports free pricing, the end of subsidies to uncompetitive firms, and rejection of economic paternalism (e.g., guaranteed jobs over higher salaries) (Figure 6). This alignment means that the diaspora has internalized the “European” institutional mindset, making them natural partners for EU economic initiatives and the primary “agents of transformation” for a future democratic Belarus.

Moreover, the shared experience of forced migration, combined with the resilience and adaptability of Belarusian entrepreneurs (Marozau, 2023), has fostered collaboration and ecosystem-building across Poland and the Baltic states. This commitment to market principles is evident in the rapid emergence of Belarusian business associations and informal networks across the EU (Krasko & Daneyko, 2022). While such spontaneous civil society development is atypical for Belarus, it aligns closely with the EU’s decentralized business environment (Greenwood, 2002). In contrast to post-2020 Belarus, where the state restricts independent business organizations and advocacy (Marozau, 2023), the diaspora has quickly formed self-governing, trust-based networks. These organizations substitute for weak institutional trust at home, mitigate geopolitical risks,   and   provide   advocacy,   networking,   and representation to host-country and EU institutions (Marozau & Danilchuk, 2024), demonstrating the diaspora’s capacity for democratic self-organization.

Source: Marozau & Apanasovich (2026)

Conclusion and Implications

The relocation of Belarusian entrepreneurs to the EU does not represent a break with the past so much as a fulfillment of long-standing aspirations, but these values appear to have developed before, often in defiance of a more centralized and restrictive policy environment in Belarus. Consequently, success abroad is based on the entrepreneurial principles already cultivated under challenging conditions and is not merely the result of adapting to new institutional settings. Strong alignment with liberal market values – including private ownership, individual initiative, fair competition, and transparent governance – positions Belarusian entrepreneurs as a foundational pillar of a future democratic Belarus integrated into the European family. Therefore, supporting this diaspora is not merely a question of solidarity or migration management. It is a high-return strategic investment that strengthens the EU’s economic base, supports democratic transition in its neighborhood, and affirms the values that underpin the Union itself. Tailored interventions are needed to address their legal vulnerabilities and enable their full participation in EU markets.

To unlock the full value of this asset for regional growth and long-term transformation, a strategic recalibration of policy is needed.

First, the Belarusian business diaspora should be understood as a distinct and underutilized contributor to the European economy—shaped by geopolitical disruption yet strongly aligned with EU market norms and integration pathways. The barriers these businesses face are not typical SME challenges but structural frictions that limit investment, scaling, and value creation in host countries. Addressing these frictions would deliver direct benefits to local economies through job creation, tax revenues, and industrial capacity. Fuller market participation could be supported through trust-building within local business ecosystems, consistent access to finance, greater legal predictability for founders and key staff, and appropriate risk-sharing instruments for capital-intensive sectors such as manufacturing. In parallel, regulatory clarity enabling banks to distinguish between sanctioned or state-linked entities and independent Belarusian firms would reduce unnecessary de-risking that suppresses legitimate economic activity within the EU.

Second, the Belarusian business diaspora represents a strategic asset for the future economic and democratic reconstruction of Belarus, whose value depends on being anchored and strengthened within the EU today. Operating in European markets allows these entrepreneurs to accumulate capital, managerial experience, institutional trust, and familiarity with EU regulatory and governance standards – assets that will be critical in a post-authoritarian transition. Retaining this community within the European economic space ensures that future reconstruction efforts can draw on actors already embedded in EU value chains, rather than relying solely on external assistance or ad hoc capacity-building.

Targeted funding mechanisms and professional networks can support this long-term role by enabling transparent links with the remaining private sector in Belarus, preserving skills, business relationships, and market knowledge that would otherwise erode over time. Finally, cross-sectoral initiatives involving entrepreneurs, civil society, and democratic actors can strengthen diaspora cohesion and amplify its contribution as a carrier of economic know-how and democratic practices. Joint efforts around education, skills development, and employability are particularly valuable, as they address EU labor market needs while preparing the groundwork for Belarus’s eventual reintegration into the European economic and institutional space.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

U.S. Sanctions on Rosneft and Lukoil: Pressure on Moscow, Strains on Europe

Posted on December 8, 2025 | Policy Brief

The U.S. sanctions on two Russian oil giants, Rosneft and Lukoil, came into effect on Nov 21, 2025. These sanctions affect not only companies per se but also their counterparties worldwide under the secondary sanctions clause. For the EU, these sanctions highlight a central trade-off: how to exert real pressure on Russia without fracturing political alignment among EU Member States. This brief discusses the consequences of the sanctions, including their immediate impact on the firms and Russia’s budget, the new tensions exposed in Europe’s energy policy, and the broader lessons for the next generation of EU sanctions tools.

The Threat of Secondary Sanctions

On 22 October 2025, the United States imposed sanctions on Russia’s two largest oil companies, Rosneft and Lukoil. At the time, the measures appeared symbolically significant: they were the first sanctions package introduced by the new Trump administration and were coordinated with the EU’s 19th sanctions package, giving the impression of renewed transatlantic alignment after a long period of fragmentation and uncertainty. The announcement reportedly caught Mr Putin off guard. This reaction highlights how unexpected the measures were, given President Trump’s rhetoric and the geopolitical positioning many observers had anticipated he would adopt.

Although, in retrospect, that initial sense of alignment appears more fragile, given other political developments during November, the sanctions that formally came into effect once the wind-down period ended on 21 November are likely to be consequential, both for the target companies and for the Russian federal budget. To understand this impact, it is essential to look at how U.S. sanctions operate in practice, especially the leverage created by secondary sanctions.

When the U.S. Treasury’s Office of Foreign Assets Control (OFAC) designates an entity for sanctions, it warns that any financial institution dealing with that entity may itself become exposed to penalties. In particular, OFAC notes that foreign banks engaging in significant transactions for a sanctioned person risk the imposition of so-called secondary sanctions. In practical terms, OFAC can bar such a bank from accessing the U.S. financial system if it knowingly carries out, or helps carry out, a transaction for someone under U.S. sanctions. Losing this access means losing the ability to use U.S. dollar accounts and payment channels.

This is precisely why OFAC’s sanctions are so widely feared: almost every dollar transaction in the world ultimately passes through a U.S. correspondent bank. Even two foreign banks trading dollars in Asia or Africa must clear their payments through the United States. If OFAC cuts a bank off from that system, it is effectively locked out of the dollar economy, and in the global economy, losing access to dollars is like losing access to oxygen.

The power of secondary sanctions becomes visible in how different actors react to the risk. Swiss trader Gunvor abruptly withdrew, and later publicly denied, its bid to acquire Lukoil’s international business once the sanctions exposure became apparent. In Bulgaria, the government moved to take control of Lukoil’s Burgas refinery because, once sanctions took effect, counterparties were likely to refuse payments to a sanctioned entity, forcing the refinery to shut down. This temporary state takeover has been tacitly tolerated so far, as it was deemed necessary to maintain Bulgaria’s fuel security. The same logic drove Viktor Orbán to rush to Washington to secure guarantees for Hungary’s fuel supplies, resulting in a one-year exemption from U.S. measures. In short, the threat of secondary sanctions is real and shapes major commercial and political decisions alike.

Economic Implications for the Targets

Given the far-reaching implications of OFAC sanctions, the economic impacts are potentially significant. Following the announcement in October, financial markets reacted immediately. Lukoil’s share price fell by around 9.4 percent, while Rosneft’s declined by approximately 7 percent. This asymmetry reflects the companies’ different exposure profiles. Lukoil, as a more private and internationally exposed firm, is significantly more vulnerable than Rosneft, whose operations are more domestically anchored and politically protected.

The sanctions raise the prospect of forced divestments of Lukoil’s foreign assets, likely at significantly reduced valuations due to the limited pool of potential buyers willing to engage with sanctioned entities. Even when divestment is not formally mandated, the measures can make it effectively impossible for the companies to repatriate dividends from their overseas holdings, as financial intermediaries are unlikely to process payments involving sanctioned actors. This constitutes an immediate loss of income, besides the longer-term loss of strategic presence in Europe.

Figure 1. Map of Lukoil’s foreign assets

Source: Bloomberg. The map includes the headquarters of the international marketing and trading arm, LITASCO SA, based in Geneva.

Operationally, both firms face higher costs and greater frictions. Sanctions increase the risk for suppliers, banks, insurers, and logistics partners, who now must factor in secondary sanctions exposure when doing business with Lukoil or Rosneft. This narrows the pool of potential counterparties and scares away buyers.

These dynamics are already visible in the adjustment patterns of major international buyers of Russian oil, notably India and China. There, the adjustment is expected to be sharper for India than for China. This is because India is more dependent on the dollar, given the rupee’s status, while trade with Russia is not as diversified to allow for barter-like arrangements (as Russia reportedly resorted to with China). Several major Indian refiners reportedly began planning to halt or scale back purchases of Russian crude. However, the grace period allowed India to stock up: according to tracking firm Kpler, India’s Russian oil imports reached 1.855 million barrels per day (bpd) in November, a five-month high, reflecting a rush to secure barrels ahead of the sanctions deadline. But for December, the same sources project a drop to 600,000–650,000 bpd, a three-year low in Russian oil shipments to India.

About 40-45 percent of China’s oil imports from Russia are also affected by these sanctions, and Chinese buyers, especially the smaller independent refiners but even some state-owned ones, are being more careful.

By and large, though, export volumes are unlikely to decline significantly in the near term, given the extensive circumvention networks and practices already in place. Nevertheless, financial effects are increasingly visible, not least due to another effect of the sanctions – buyers being able to extract deeper discounts, further compressing Russia’s earnings. There are already multiple reports of Urals trading at its steepest discount in a year, sometimes several dollars per barrel below Brent. The discount widened from USD11–12/bbl (before Oct 22 sanctions) to USD19–20/bbl by early November, and reportedly as wide as USD20–23.5/bbl by mid-November.

Figure 2. Urals–Brent discount, widening after sanctions.

Source: TradingEconomics.com.

 

According to CREA’s fossil fuel tracker for October 2025, “Russia’s monthly fossil fuel export revenues saw a 4 percent month-on-month decline to EUR 524 million (mn) per day — the lowest they have been since the full-scale invasion of Ukraine.” This corresponds to a 15 percent year-on-year drop in fossil fuel export revenues and resulted in a 26 percent year-on-year drop in tax revenues from oil and gas exports.

Over the medium to long term, these commercial pressures may accumulate and become consequential. Higher operating costs and lower revenues mean that both companies will have less capital available for investment. Because Russia’s upstream sector is both capital-intensive and dominated by Rosneft and Lukoil, with limited scope for independent or foreign producers to expand under current political and sanctions constraints, any sustained under-investment by these two companies is unlikely to be compensated by market reorganization. This raises the risk of faster production declines and a longer-term weakening of the entire industry.

Implications for the Russian State Budget

Lukoil and Rosneft are the two largest taxpayers in Russia, contributing through a broad range of fiscal streams and payments associated with state-owned infrastructure. In Rosneft’s case, where the state holds a majority stake, dividends are also a source of federal revenue. Any reduction in company profitability, therefore, translates directly into lower tax payments and smaller dividends.

Sanctions-driven increases in shipping, insurance, and compliance costs will further compress margins and reduce the tax base. The loss of foreign assets, or their sale at distressed prices, diminishes both current profit tax liabilities and future dividend streams.

Some taxes, such as the mineral extraction tax (MET), are based on production volumes rather than profitability, which reduces the immediate fiscal impact. But as profitability declines, and especially if the sector’s investment levels fall, the medium-term fiscal losses become more substantial as reduced investment ultimately erodes production volumes.

All in all, Rosneft and Lukoil together produce between 40 and 50 percent of the national oil output. Although the share of oil and gas revenues in the federal budget has decreased from the historical 35–40 percent to 25-30 percent, the potential fiscal impact remains substantial. According to Reuters, projected oil revenues for the current month are roughly 35 percent lower than in the same month of 2024, marking the weakest level in two and a half years.

Uneven Burden-sharing in the EU

These sanctions also carry costs for the EU itself. Their impact is felt unevenly across Member States, largely reflecting differences in pre-war dependence on Russian oil and gas. This is why EU sanctions on Russian energy have consistently included exceptions for highly dependent Member States in Central Europe, notably Hungary and Slovakia (and, before, Czechia). The Council explicitly acknowledged these exemptions were justified on the grounds of security of supply and fairness, recognizing that certain countries faced structural reliance on Russian oil and lacked immediate alternatives (Council Decision (EU) 2022/879 and the EU’s 6th package). At the same time, the financial significance of these exemptions for the EU’s pressure on Russia is very limited. According to CREA’s data for October 2025, Hungary purchased EUR 258 million of Russian fossil fuels that month and Slovakia EUR 210 million. This constitutes less than 4% of Russia’s global fossil-fuel export revenues for that month.

However, these exemptions produced asymmetric outcomes within the EU, complicating EU unity. Countries that retained access to Russian crude, typically priced below global benchmarks and substantially cheaper than LNG-based alternatives, effectively enjoyed a cost advantage over Member States that had already diversified or lost access to Russian supplies. They have avoided abrupt supply disruptions but also benefited from lower-cost inputs, while others absorbed higher market prices and the capital expenditure needed to secure alternative supply chains (including LNG terminals, new interconnectors, or upgrades to refineries).

The sanctions on Rosneft, Lukoil, and their EU subsidiaries offer a good example of how uneven the impact of energy measures can be across Member States. Rosneft holds significant shares in three German refineries, together accounting for around 12 percent of Germany’s refining capacity, but these assets have been under German state trusteeship since 2022 — meaning that Rosneft is still the legal owner, yet it no longer controls day-to-day operations. Lukoil, by contrast, directly owns major refineries in Bulgaria (Neftochim Burgas) and Romania (Petrotel Ploiești), and has a large stake in a Dutch refinery. For years, the countries hosting these assets benefited from cheaper Russian crude and gasoline, slower pressure to diversify, and more lenient implementation of EU sanctions.

As sanctions tighten and divestment of Russian-owned assets in Europe becomes unavoidable, these states now face higher prices and costly adjustments. In this sense, the current phase can be seen as a rebalancing act: the advantages these countries once enjoyed are gradually diminishing as their energy prices converge with those of other member states. At the same time, their exposure to supply disruptions may even be increasing, given the lack of earlier investment in diversifying their energy import sources.

But the politics remain contentious. Hungary’s push for renewed derogations and Slovakia’s threat in March 2025 to block EU support for Ukraine unless gas transit via Ukraine is reopened to Slovakia and Western Europe show how differing energy profiles still shape national positions on sanctions.

In the long term, however, solidarity cannot mean accepting the structurally uneven burden-sharing of sanctions costs. EU solidarity principles (reflected in the Treaties, the Clean Energy Package, and crisis-response mechanisms such as the 2022 gas solidarity regulation) imply that Member States should support one another to withstand shocks, not that some should bear permanent disadvantages. As highlighted in the energy-security literature, especially in the work of Le Coq and Paltseva (2009, 2012, 2022, or 2025), solidarity can be viewed as a mutual insurance mechanism that is most effective when tied to interconnection and diversification, enabling states with asymmetric exposure to external energy suppliers to cope with disruptions without undermining collective action.

Following this logic, solidarity should be understood as doing as much as possible to ensure that the Member States most exposed to Russian oil and gas are sufficiently integrated into the EU system—through stronger interconnections, diversified supply routes, and access to alternative sources—so that they can sustain tougher sanctions without requiring permanent derogations. The EU’s challenge, therefore, is to ensure a more even sharing of the sanctions’ burden, preventing any Member State from systematically free-riding by shifting the costs of sanctioning Russia (or other common policies) onto others, while preserving political cohesion.

Conclusion

The analysis of this episode carries important implications for EU policy.

First, it underscores both the strategic potential and the political limits of secondary sanctions as a policy tool. Legally, the EU’s treaties constrain extraterritorial action and anchor the Union in a territorial understanding of jurisdiction; furthermore, this take is consistent with the EU’s long-standing identity as a regulatory—rather than coercive—power. Practically, the Union lacks the federal-level enforcement structures needed to police foreign actors across jurisdictions. Politically, the use of secondary sanctions remains divisive: they raise concerns about infringing third countries’ sovereignty, provoking retaliation against EU trade, constraining diplomatic flexibility, and straining relations with key partners in the Global South. Member States’ exposure to international trade and to specific partners such as China, India, Türkiye, and the Gulf varies widely, making consensus difficult. At the same time, EU firms are deeply embedded in global supply chains, and the euro lacks the dollar’s reach, increasing the risk that aggressive measures, such as secondary sanctions, could accelerate de-euroization.

Within these constraints, the EU has opted for more limited, quasi-extraterritorial tools—most notably the “no-Russia clause”, which requires that EU exporters include a contractual ban on re-exporting their goods to Russia —to approximate the effects of secondary sanctions without formally adopting them. This calibrated approach has so far allowed the Union to signal resolve while limiting geopolitical and economic risks. But as U.S. secondary sanctions increasingly shape global trade patterns in ways that affect the EU, the question of whether this strategy remains sufficient is becoming harder to avoid.

Second, the episode highlights the need to make burden-sharing within common EU policies, including sanctions, more transparent and more equitable. Derogations for highly exposed Member States were justified in the short run on security-of-supply grounds, but their continuation produced persistent asymmetries in costs and benefits across the Union. These disparities have shaped national positions on sanctions, complicated collective decision-making, and, in some cases, been leveraged as political bargaining tools. As sanctions become a more permanent feature of the EU’s external action, clearer mechanisms will be needed to ensure that no Member State can systematically shift the economic or political costs of common measures onto others. This may involve revisiting the design of derogations, considering compensatory financial instruments, or more closely integrating sanctions policy with energy, industrial, and fiscal planning.

Ultimately, the credibility of the EU’s sanctions strategy will depend on its ability to align legal constraints, geopolitical ambition, and fair burden-sharing into a single, coherent framework.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Towards European Union Membership: Poland’s EU Pre-accession Funds and Infrastructure Development

Posted on October 6, 2025 | Policy Brief, Policy Papers

European Union flag waving during a public demonstration, symbolizing support and integration efforts related to EU Pre-Accession Funds.

In advance of formal membership, candidate countries are offered three pillars of EU assistance: trade concessions, stabilization and association agreements and financial support. These instruments aim both to prepare candidates economically, politically and administratively, and to signal accession’s benefits to their populations. In this paper we describe the channels in which the third pillar – the EU pre-accession funds – affected Poland’s economic and institutional development ahead of its 2004 membership. The funds were designed to accelerate institutional transformation, modernize agriculture, strengthen rural communities, improve transport networks, and promote environmental protection. In Poland, between the mid-1990s and 2003, they supported extensive investments that produced unprecedented improvements in technical infrastructure. Poland’s accession referendum in 2003 turned decisively in favor of EU membership, despite strong regional variation in support. While no causal evidence is available, we argue that without the EU-funded infrastructural transformation, its outcome would have been less certain. For current EU candidate countries, Poland serves as an excellent example of how targeted external financial assistance can support structural transformation ahead of integration with the EU.

Introduction

Seven countries are currently eligible to receive financial support through the European Union’s Instrument for Pre-Accession Assistance (IPA III): Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, and Türkiye. The funding allocated within the program for the 2021–2027 period amounts to 14.162 billion EUR (in 2021 prices; European Commission, 2024). IPA III is the successor to the former two IPA editions, which have provided support exceeding 24 billion EUR since 2007 to countries in the then EU enlargement region. IPA aims to support countries that have entered a pathway to EU membership, expected in the foreseeable future, to facilitate progressive alignment with EU rules, values, and various standards and policies enforced in the European Union before they become full members. It constitutes one of the pillars of assistance offered by the EU to countries with a prospect of membership, with trade concessions and stabilization and association agreements (SAAs) serving as the other two.

Next in line to obtain financial help through the pre-accession funding are Moldova and Ukraine, both of which were granted candidate status by the European Council fairly recently. While they have already started their accession negotiations and may benefit from trade concessions and SAAs, they still need to fulfill certain requirements to be eligible for IPA. Though formally also a candidate since late 2023, the accession process of Georgia is currently suspended due to concerns about democratic backsliding, implementation of controversial laws and disputed parliamentary elections.

In this paper, we examine Poland’s experience in utilizing the funding available prior to the 2004 EU enlargement to undergo important structural and systemic changes. Given the goals of the funding, we discuss the evolution of a number of economic indicators which can serve as evidence of the socio-economic advancement that occurred in Poland in the years leading to its EU accession. These examples illustrate different dimensions of development that societies in countries embarking on the EU accession process could benefit from on their way towards full integration.

EU Pre-accession Funding Options in the 1990s

Together with nine other countries, mainly from the Eastern European region and the former communist bloc (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Slovakia, and Slovenia), Poland joined the EU in 2004. It was the largest enlargement of the European community both in terms of the number of new countries and population-wise.

On the pathway to EU membership, these candidates benefited from a coordinated set of financial instruments designed to accelerate their political, economic, and institutional development. During the 1990s and early 2000s, three programs offered financial assistance: Phare, SAPARD, and ISPA. Each addressed a different strategic challenge that candidates faced during their accession period – many of which underwent the transition from centrally planned to free market economies.

From the pool of soon-to-be EU members, Hungary and Poland were the first among the post-communist Central and Eastern European countries to formally start the accession process as early as 1994 (Cyprus and Malta applied in 1990). These two countries also inaugurated the distribution of financial assistance among the EU applicants. They became the first beneficiaries of the Phare program, which concentrated on supporting public administration reform, improving institutional capacity, and preparing regions for effective absorption of EU structural funds. It also helped modernize local infrastructure and provided targeted assistance to sectors undergoing major restructuring. Phare was soon extended to cover all other candidate countries.

The second initiative – SAPARD, concentrated on the needs of the agricultural sector and rural communities. The goal was to raise the competitiveness of local farming and modernize food production.

The third program, ISPA, funded major environmental and transportation initiatives.

These three programs helped close the gap between the candidate countries and older EU member states by improving infrastructure and enhancing the functioning of their institutions. Formally, they also helped ensure that the new members met EU strict standards and legal directives and built the foundations for their long-term cohesion. More detailed descriptions of the objectives of each program, with a special focus on Poland, are included in Box 1.

Figure 1 presents the annual expenditures between 1990 and 2003 within each of the three analyzed instruments provided by the European Union to Poland (bars, left axis). With connected lines, we show the scope of each program in cumulative amounts over time (right axis). During the 1990s, the budget spent on Poland under the Phare program was kept under 200 million EUR annually (in the last year of the decade, it increased to almost 300 million EUR). However, after the program’s restructuring since the beginning of the 2000s, annual spending through this instrument doubled. Among the three, Phare was the major funding source for Poland, as the country received a total of 3.5 billion EUR until 2003 (equivalent to 1.9% of the Polish GDP in 2003) – almost five times more than under the SAPARD program. Poland also obtained the highest total amount of funding of all candidate countries at the time, corresponding to 30% of the overall provided financial assistance (Kawecka-Wyrzykowska & Ambroziak 2006).

Figure 1. Values of  EU pre-accession funds in Poland

Source: Own compilation based on Tables 3, 4, 6 from Kawecka-Wyrzykowska & Ambroziak (2006). Note: in 2003 prices.

In 2000, ISPA and SAPARD were introduced to further support specific areas identified during the 1990s as critical and requiring targeted funding – the agricultural sector, initiatives to enhance the transportation network, and environmental protection. Through SAPARD, projects related to farming and rural infrastructure received approximately 150 million EUR per year in Poland, accumulating to 700 million EUR over the four-year period until 2003. Since one of the prerequisites in SAPARD was national co-funding of ca. 25% of the public contribution in the investments, overall 1.1 bn EUR (0.6% of the 2003 GDP) of public money was committed to different projects in Poland through this instrument (ARiMR 2025; investments consisted in 50% of private resources).

Projects supported within ISPA on average obtained 300 million EUR annually in Poland, with total spending reaching 1.4 billion EUR until 2003 (0.8% of the 2003 GDP). Poland was still the major beneficiary of these two types of financial support, though the total share of the funding received within each of them was much lower than in the Phare program, respectively 32% in SAPARD and 34% in ISPA (Kawecka-Wyrzykowska & Ambroziak 2006).

 

Box 1. Financial instruments offered in the 1990s on the pathway to EU membership: Phare, SAPARD, ISPA

Originally known as Poland and Hungary Assistance for Restructuring of the Economy, Phare was launched in 1989 at a pivotal moment in European history. Initially designed to support the two countries in their transition from communism to democracy and a market economy, Phare quickly expanded to cover other parts of Central and Eastern Europe. Its mission was not only to help rebuild economies, but also to support political democratization. At first, it operated through national programs, but as regional cooperation gained importance, Phare introduced international initiatives to foster cross-border collaboration. The evolving challenges faced by the transforming countries led to a significant change in the program’s operation in the late 1990s. Financial support was now focused on two main pillars: investment in essential infrastructure, which consumed about 70 per cent of resources, and institutional development, which received the remaining 30 per cent. Poland benefited from several specialized initiatives within Phare. Socio-Economic Cohesion focused on modernizing regional infrastructure and preparing Polish regions to efficiently absorb EU structural funds. Cross-Border Cooperation strengthened ties between Poland and its neighbors. Institutional Building contributed to more efficient and transparent public administration.

The Special Accession Program for Agriculture and Rural Development, SAPARD, was established in 1999 to help transform the agricultural sectors and rural economies of ten countries aspiring to join the EU at the time. The goal was to prepare farmers and food processors to meet strict EU sanitary and veterinary standards. In Poland, SAPARD played a major role given the country’s vast rural landscape and the important role of agriculture in the economy – accounting for 7% of the GDP in 1995 (CSO 2014). Around 75% of the total budget was allocated from EU funds, with the remainder covered by national co-financing. However, the rules required an own contribution from each beneficiary, thus around half of the total value of all investments realized through SAPARD was private capital (Supreme Audit Office, 2002). SAPARD in Poland focused on, on the one hand, the modernization of agriculture and, on the other, on rural development. A large part of the program went into modernizing agricultural holdings, supporting farmers in buying new machinery, improving farm buildings, and upgrading agricultural production to meet EU standards. Equally important was the modernization of food processing industries, like meat, dairy, fruits and vegetables. Another significant part of the program concentrated on infrastructure in rural communities — building roads, sewage systems, and improving basic services. To encourage economic diversification, assistance was provided to develop non-farming businesses and create new job opportunities outside of agriculture (EU Council, 1999a).

Created in 1999, the main goal of ISPA was to finance large-scale projects in two critical sectors: transportation and environmental protection. Projects selected for funding were typically expensive, exceeding 5 million EUR, and had a strategic, national or at least regional impact (EU Council, 1999b). From the society’s perspective, these initiatives improved living standards, protected public health and the natural environment and promoted sustainable development. In the environmental sector, ISPA focused mainly on critical areas, including improving the quality of drinking water, building modern sewage treatment plants, managing waste more efficiently, and reducing air pollution. Given the EU’s strict environmental directives, addressing these issues was a fundamental condition for accession. ISPA concentrated also on modernizing and expanding major roadways and railway lines, especially those which were signified as part of the Trans-European Transport Network. Improved transport connections facilitated trade, mobility, and regional development, essential for increasing economic competitiveness and tightening of physical linkage with the rest of Europe.

The total amount of received funding was only one of the factors that may have played a role in the scope and pace of overall socio-economic changes in Poland. Importantly, the spatial distribution of investments provided a unique opportunity to reduce the geographical inequalities deeply rooted in Polish history and related, in particular, to the partitions of Poland lasting from the late 1700s till the end of World War I (Becker et al. 2016; Grosfeld & Zhuravskaya 2015). The eastern regions of Poland were historically much less developed, with the agricultural sector maintaining a critical position in economic activity and employment.

To illustrate the differences in regional distribution of the funding, we use a number of indicators related to investments realized with the help of the SAPARD instrument – which was specifically targeted at supporting infrastructure in rural areas and advancements in the agricultural sector. In Figure 2, we present three measures of investment allocation – the total (public+private) value of investments completed in each region (a), total value of investments per capita (b), and per hectare of agricultural land (c). Depending on the analyzed indicator, we obtain a slightly different picture of the distribution of the investments in SAPARD throughout the country. It appears that the Western regions of Poland received the least funding from SAPARD, whereas the Eastern and most rural regions were less successful in securing the funding. In all three cases, though, the Wielkopolskie Voivodship – a region in the Central-Western part of Poland – stands out as the one that collected the highest funding not only overall, but also when calculated per inhabitant or, most crucially, per area of agricultural land.

Figure 2. Spatial distribution of the SAPARD investments in Poland, total amount (public+private) for the period 2000-2003

Source: Own compilation based on Table 7.2 from Rudnicki (2008). Note: Converted from PLN to EUR using 4PLN/EUR exchange rate; c) per hectare of agricultural land. As compared to Fig. 1 the amounts for SAPARD include private resources spent

The most likely reason behind the particular allocation of the funding is related to the application process. The total amount of the funding was granted to Poland with limited distributional guidelines, and the funds were allocated on the first-come, first-served basis (ARiMR 2003). The maps in Figure 2 suggest that farmers, agricultural producers and manufacturers, and rural municipalities in Wielkopolskie region were quick and efficient when it came to funding applications. The scale and scope of the investments, though – looking at the three different measures – shows the flow of substantial benefits to all central and eastern regions.

Infrastructural Metamorphosis of Poland in the 1990s

As described above, an exceptional stream of additional funds from the EU was directed to Poland from the early days of its transition. The funding programs evolved with time during the 1990s and became more specialized closer to EU accession to address the specific needs of the candidate countries. While causal evidence of the impact of EU pre-accession funds on evolving infrastructure remains scarce and is methodologically challenging (with just a few exceptions on more recent pre-accession funding schemes, like Denti 2013), a simple overview of a number of key indicators might serve as strong suggestive evidence that the funds actually made a significant difference. In this part of the paper, we take a closer look at some examples of Polish infrastructure that underwent enormous progress in the late 1990s and early 2000s. We stipulate that the EU funding played a crucial role in the acceleration of this development.

All three analyzed EU instruments – Phare, SAPARD and ISPA – shared some common objectives, for instance, increasing access to clean water in the population, reducing pollution in lakes, rivers, and the sea, and improving road conditions, especially the low-rank ones in remote, rural areas. In Figures 3-5, we present the scale of improvement observed in these three areas on the lowest level of regional disaggregation, namely, in Polish municipalities. We compare the three selected indicators over almost a decade, between 1995, the initial year of data availability, and 2004.

We begin with Figure 3, which depicts the expansion of the water pipe network measured in kilometers per 1,000 inhabitants in each municipality. As specified in the legend, the darker the green category, the higher the density of the water pipe network. The rapid expansion of the network between 1995 and 2004 is evident, especially in some parts of the country. Most often, the upgrade to the top category happened in regions that lagged well behind the rest of the country in 1995. Here, the notable examples are the central regions of Poland (Kujawsko-Pomorskie and Lodzkie Voivodships, including the northern part of the Mazowieckie Voivodship) and the north-eastern frontiers (Podlaskie and Warminsko-Mazurskie Voivodships).

Figure 3. Length of the water pipe system (in km) per 1000 inhabitants in Polish municipalities in 1995 and 2004

Source: Own compilation based on the statistics from the CSO Local Data Bank (BDL); Geodata: National Register of Boundaries (PRG). Note: The legend is based on 2004 data: the two top and bottom categories in the legend cover 10% of observations each, and the rest of the categories cover 20% of observations each. Municipality borders marked in white, voivodship borders in yellow. Poland underwent an important administrative reform in 1999, when 49 voivodships were aggregated into the current 16. For the year 1995, we use the post-reform voivodship division of the country. Between 1995 and 2004, only negligible administrative changes took place at the municipal level.

In Figure 4, we show the share of the population enjoying access to sewage treatment plant services. The progress over time in this respect was related, on the one hand, to the construction of new treatment facilities and, on the other, to the concurrent expansion of the sewage pipeline network, which resulted in a higher share of users for the existing wastewater treatment plants. The increase in the usage of the treatment plants over time is striking, especially given that at the starting point, in 1995, only a limited number of municipalities had a wastewater treatment plant in operation. These municipalities were mainly concentrated in the northwestern corner of Poland and in the southwestern region of Silesia.

In comparison to the water pipe system in Figure 3, the development of sewage treatment plant access was concentrated in regions that were already ahead of the rest of Poland in 1995 – specifically, the northwestern and southwestern ones. However, a substantial increase in access to sewage treatment services is also visible in central and eastern parts of Poland, where in 1995 plants offering these services were extremely rare. This particular type of development can also be viewed from the perspective of the extent of pollution reduction in Poland’s internal waters. The number of scientific reports documented a sharp decline in biochemical factors of industrial, agricultural and household origin, hazardous to both humans and the environment, commonly polluting Polish rivers and lakes in the 1990s (Gorski et al, 2017; Marszelewski & Piasecki, 2020).

Figure 4. Number of residents connected to sewage treatment plants per 1000 inhabitants in Polish municipalities in 1995 and 2004

Source: see Figure 3. Note: The legend is based on 2004 data: due to high prevalence of zeros the bottom category in the legend covers 30% of observations, the rest of categories cover 10% of observations each. Municipality borders marked in white, voivodship borders in yellow (see Notes in Figure 3 for details).

The third pair of maps (Figure 5) illustrates the development of the country’s road network. The Figure shows the expansion and modernization of the lower rank roads administered by municipalities, which seem particularly important from the point of view of day-to-day transportation and quality of life of local populations.

Figure 5. Length of the municipality road network (in km) per 1000 inhabitants in Polish municipalities in 1995 and 2004

Source and Note: see Figure 3.

The data in Figure 5 cover both paved or hard-surfaced roads and dirt roads. One point to keep in mind here is that with an overall development of a municipality and of the neighboring region, the status of the municipality’s small-scale road may be updated to a higher rank, administered by the county or even by the voivodship. Figure 5 does not account for such an update of rank (in the Figure of roads), so the numbers presented are likely to represent a lower bound of the actual advancement. The maps in Figure 5 compare the length of municipal roads per 1000 inhabitants in 1995 and 2004. While a significant improvement in the road system is visible almost all over the country, the central regions seem to have gained the most, at least when it comes to this particular type of roads.

Investments and Development vs. Public Perception

Overall, all three figures above demonstrate that during the decade before Poland integrated with the EU, significant progress was achieved in terms of improving the quality of life, increasing accessibility of public utilities, reducing environmental degradation and capturing sustainable urban development. Substantial investments in rural areas had an important impact on reducing regional disparities.

Another important observation when examining all three figures together is that, while advancement occurred throughout the country, the bulk of improvement in each of the considered aspects was concentrated in slightly different parts of it, and almost all Polish municipalities recorded an important inflow of investments related to the pre-accession funding. While again we cannot provide any causal evidence, below we confront the spatial distribution of infrastructural modernization from Figures 3-5 with public support for joining the EU expressed in the referendum organized in 2003, a year before accession.

Figure 6. Support for the EU accession in the referendum in 2003

Source: Own compilation based on the statistics from the National Electoral Commission; Geodata: National Register of Boundaries (PRG). Note: The bottom category in the legend covers municipalities that voted against EU integration (12.3% of observations), the rest of the categories cover 25% of the remaining observations each. Municipality borders marked in white, voivodship borders in yellow.

In Figure 6, we present the results of the vote on the municipal level, with darker blue shades indicating higher support for EU membership. The map clearly highlights high geographical variation in support for European integration, with much stronger proportions of votes in favor of EU membership in western and northern Poland. In contrast, the support in central and eastern Poland was substantially lower, reflecting a higher degree of skepticism towards the benefits of the EU. Clearly, many factors influenced people’s choices at the time of the referendum. They depended on their economic conditions, the degree of exposure to relations with Western European countries, the level of awareness of the potential gains from integration, as well as fears concerning the future of local economies and those related to cultural influences.

Just by looking at the map of support, it is impossible to say much about the degree to which the EU pre-accession funds affected the outcome of the referendum. For that, we would need to know more about the dynamics of support across regions. Yet, while the share of votes in favor of integration in many eastern municipalities was below 50%, people in a substantial majority of localities expressed overwhelming support for joining the EU. The result of the referendum was 77,45% in favor. Although no causal analysis linked the results to EU pre-accession funds, the scale of investment and its visibility, as well as its tangible effects – the direct translation of EU funds into daily quality of life all across Poland, are very likely to have turned many people’s votes in the EU’s favor.

Conclusion

Since the early 1990s, on the path to EU membership in 2004, Poland, like other candidate countries, received generous European pre-accession financial assistance. The combination of three financial instruments in operation at the time – Phare, SAPARD, and ISPA – enabled Poland to make substantial investments in key economic sectors, including public administration, agriculture, environmental protection, and physical infrastructure. The early launch of the Phare program prepared Poland to follow various EU standards and prerequisites, and contributed to the implementation of the cohesion policy. Initiation of assistance within SAPARD and ISPA instruments since 2000 strengthened the rural economy and competitiveness of Polish agriculture, and allowed for modernization of the transportation and environmental infrastructure. In pre-accession assistance, Poland received a total of 5.5 billion euro (over 3% of the 2003 GDP), by far the highest support provided to the candidate countries at the time.

Substantial investments made during the 1990s and early 2000s, largely covered by pre-accession financial aid, had a remarkable impact on the quality of existing infrastructure in Poland. Kilometers of roads were built and renovated in Polish municipalities, thousands of households acquired a connection with the water pipe network, and hundreds of wastewater treatment plants were constructed. This is only a small subset of selected advancements that can be demonstrated using quantitative data collected in a comparable way over time. Numerous other types of infrastructure received substantial investments to support development, modernization or enhancement. On top of that, all these improvements have likely contributed to further spill-over effects through higher levels of regional growth, a boost in the labor market with the creation of new jobs, a reduction of unemployment, or enhanced labor productivity. All these changes, taken together, played a key role in determining the overall quality of life for the Polish population, reducing regional economic inequalities, and improving the quality of the local natural environment, etc.

The distribution of support for Poland’s accession to the EU, as reflected in the 2003 referendum results, differed significantly by region. Enthusiasm for the EU was significantly lower in the eastern parts of the country, while residents of many western municipalities voted overwhelmingly in favor of membership. Yet, even at a very fine geographical distribution, we see only a relatively small group of municipalities – 12.3% – where less than 50% of residents voted in favor of EU membership, and the overall outcome across the country was a decisive “YES”. Thus, although the substantial advancement in infrastructural development all across the country did not convince the majority of residents in each and every locality, the number and geographical scope of those voting in favor was very decisive. It is impossible to say how high/low the support would have been without the received support. Yet, given the scale of the resulting changes in various basic dimensions of quality of life, it seems safe to say that, thanks to the funds, many voters looked at the future integration with a higher degree of appreciation. Naturally, other factors played a role in determining people’s decisions in the referendum, with economic conditions and prospects for socio-economic development being just one factor, albeit a likely important one.

Pre-accession funds in the current candidate countries, how they are used, distributed, and how they change people’s daily lives, will again prove important in showcasing the benefits of integration. At the same time, to secure the kind of support that the Polish population expressed in the 2003 referendum, it will be important to also highlight the broader benefits of integration and address fears and concerns of various population groups.

The experience of Poland and other member countries from Central and Eastern Europe can serve not only as an example of the benefits of pre-accession funds, which we studied in this policy paper. The countries’ socio-economic success and the changes in the quality of life, both before and after accession, should be seen as a clear case of fundamental changes, which would have been highly unlikely had the countries decided to stay out of the European Union.

Acknowledgement

The authors acknowledge the support from the Swedish International Development Cooperation Agency, Sida. We are grateful to Patryk Markowski for his assistance in preparing this analysis and detailed background research.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Liberal Values in Ukraine Days Before the 2022 Invasion

Posted on September 22, 2025 | Policy Brief

Monument in Kyiv at sunrise symbolizing Ukraine liberal values of freedom, democracy, and resilience.

Just weeks before Russia’s full-scale invasion in 2022, the European Social Survey completed the 10th round of data collection on public attitudes and beliefs in Ukraine. This policy brief examines regional variation in liberal values such as attitudes toward democracy and the EU, based on that data. While respondents in Eastern Ukraine were more skeptical of democracy and EU integration, they did not consistently reject liberal social values to a greater extent than respondents in other parts of the country. The most striking divide however, lies in institutional trust, which was significantly lower in Eastern Ukraine. This suggests that trust in institutions, which may have been further negatively impacted by prolonged exposure to violence since 2014, underlie the observed regional differences in attitudes towards democracy and the EU. Understanding these differences is vital for policymakers navigating Ukraine’s reform and EU accession process.

Introduction

It has been well documented that values in post-communist countries in Eastern Europe on average, tend to be more authoritarian, more nationalistic, more in favor of state intervention in the economy, and more skeptical towards sexual and ethnic minorities and foreigners than in Western Europe (e.g., Roland 2012). Behind the averages, however, there is substantial variation in values across subgroups of populations. Even before the onset of the full-scale Russian invasion, a discussion on regional Ukrainian differences in relation to democratic values, the wish for EU integration, and similar liberal attitudes existed, both in and outside of the country.

The path towards a closer relationship with Europe and the EU started already in 2014, but since February 2022, Ukraine has politically positioned itself even closer to the EU, and an EU accession process is now underway. However, for a successful reform process in Ukraine, how public opinion is shaped and whether attitudes and values converge towards those of the EU will be important (Olofsgård et al. 2024).

With this in mind, this policy brief provides a descriptive account of public liberal values in Ukraine by analyzing data from the 10th round of the European Social Survey (ESS) conducted just weeks before the full-scale invasion on the 22nd of February 2022. Some of the differences we observe are likely long-standing and related to differences in language preferences and cultural and informational exposure from Russia and the EU, respectively. Yet, given the exposure to instability and conflict in the eastern part of Ukraine since 2014, we also discuss the role that exposure to conflict may have played in explaining several attitudinal dimensions, including satisfaction with democracy, support for liberal social values, attitudes toward Europe and EU integration, as well as levels of trust.

Data

The ESS round 10 data was collected through face-to-face interviews in Ukraine between January 18th, 2022, and February 8th, 2022. The nationally representative survey focuses on public attitudes, beliefs, and behaviors and includes questions on opinions on democracy, the EU, and similar topics commonly considered to capture liberal views.

ESS Sample Characteristics

The sample consisted of more women than men (about 59 percent and 41 percent, respectively). While the Ukrainian population is well-educated, most still find it difficult (41 percent) or very difficult (32 percent) to live comfortably on their income. 11.5 percent of the sample was unemployed, while 31 percent were retired. Broken down by location, most average outcomes are similar, albeit with the East displaying somewhat lower levels of education and greater income difficulties (see Figure 1 for an illustration of what oblasts (regions) are included in each geographical unit). Unemployment was, however, substantially higher in the West (about 15 percent), while the share of retirees was lower (26 percent).

Some heterogeneity exists when it comes to belonging to a religious denomination. In the Central and South, around 63 percent state they belong to a church/mosque/synagogue, etc. The East is roughly at par with the national average (70 and 69.5 percent, respectively), while this figure is 82 percent in the Western part of the country. Similarly, there are major differences in the language one most often speaks at home. In the country as a whole, 13.4 percent stated they speak both Ukrainian and Russian at home. In the East, this figure was as high as 27.1 percent, displaying the duality in mother tongue in this part of Ukraine. The corresponding figure for the West was 3.3 percent. On the contrary, 92.4 percent marked that they most often speak only Ukrainian at home in the West, whereas this figure was only 5.2 percent in the East.

Figure 1. Geographical Classification of Ukraine’s Oblasts

Note: The map depicts the ESS coverage at the time of data collection, excluding Crimea and Sevastopol – illegally annexed by Russia since 2014.

Key Variables of Interest

To understand the views on liberal values, ESS responses to questions in the following areas have been considered:

  • I. Merits of democracy: satisfaction with the way democracy works; importance of living in a democratic country.
  • II. Liberal democratic values: agreement with statements such as “gay men and lesbians should be free to live their own lives as they wish”; attitudes towards the merits of obedience, respect for authority, and loyalty towards leaders; attitudes towards immigrants.
  • III. Opinions about Europe and the EU: support for further EU integration; emotional attachment to Europe; vote intention in a hypothetical EU referendum.

Regional Differences

There are some clear regional divides in attitudes toward democracy, liberal values, and EU integration across Ukraine in the weeks leading up to the full-scale Russian invasion. These differences are particularly pronounced between Eastern Ukraine and the Center, South, and West – though not uniformly in the same direction.

Figure 2. Attitudes toward democracy, liberal values, and EU integration across Ukraine

Source: Authors’ creation from ESS.

On democratic commitment, only 37 percent of respondents in the East considered it “extremely important” to live in a democratically governed country. This was about 16 percentage points lower than the national average. When categories were grouped into low, medium, and high importance, the East still trailed the national average by about 10 percentage points (about 67.5 and 75 percent, respectively). Similarly, satisfaction with democracy is the lowest among respondents from the East (about 6 percent compared to a national average, including the East, of 11 percent). Geographical differences are also evident in the responses to the question on whether it is acceptable for a country to have a strong leader above the law. A smaller share rejected this in the East (about 30 percent compared to the national average of 37 percent).

However, the East stood out in the other direction on some core liberal values, as depicted in Figure 2. It had the lowest share disagreeing with LGBT rights (31 percent vs. 40 percent nationally), the weakest support for teaching children obedience (17 percent), and the highest rejection of it (41 percent). Further, only 12 percent in the East agreed that “the country needs most loyalty towards its leaders,” compared to 26 percent nationally. This question could reflect one’s view on the current leadership, warranting some caution in the interpretation. On immigration, however, the East was less liberal: only 19 percent saw immigrants as having a positive impact, versus about 30 percent nationally.

The sharpest regional divide between the East and other regions concerns attitudes toward Europe and EU membership. In a hypothetical referendum, 73 percent of respondents in the East said they would vote to remain outside of the EU, compared to 47 percent in the South, 23 percent in the Central, and just 11 percent in the West. Support for further European unification was also substantially lower in the East, with only about 17 percent in favor of further unification, as compared to the almost 50 percent national average. Similarly, emotional attachment to Europe is substantially lower among respondents from the East, with nearly all respondents stating low or medium attachment only – figures that nearly invert those of respondents from the West of Ukraine.

The Role of Trust

Turning to the measures of trust, the East clearly stands out. Trust in the parliament, the police, political parties, politicians, and the legal system was substantially lower among respondents from the East (in the ranges of 5 to 15 percentage points more respondents answered they had a low level of trust in said institutions than the national average). When asked about trust in the United Nations, the East also stood out with more than 50 percent stating low trust compared to the national average of about 37. The same pattern holds also when asked about the European Parliament – 73 percent compared to the national average of about 44 percent – stated low trust. Respondents from the South also displayed lower levels of trust across all measures, but the deviations from the average are about half as big as the East.

When asked whether people can generally be trusted, or one can’t be too careful, the East did not stand out in this way, underpinning how distrust is strongly directed toward institutions, both national and international.

Conflict Exposure

Figure 3 details the conflict intensity in the last two years leading up to Russia’s full-scale invasion of Ukraine. As can be seen, incidents of violence are concentrated in the Donbass area, including the Donetsk and Luhansk regions. While not marked by similar levels of active conflict, Kharkiv oblast – also part of the East classification – borders areas with high levels of conflict intensity in the Donbass, as well as Russia in the east.

Figure 3. Conflict intensity in Ukraine, by raion

2020

 

2021

Source: Authors’ creation from Armed Conflict and Location Data.

It should be noted that the map also depicts strategic deployments and political unrest, such as demonstrations, explaining the prevalence of “conflict” also in a few other places in Ukraine prior to February 2022. The occurrences of such incidents are, however, far less than those in Luhansk oblast and Donetsk oblast at the time. An important piece of information is that the intensity pattern holds for the time Armed Conflict and Location Data for Ukraine has been available (2018), i.e. individuals situated in the East have been exposed to incidences of violence over a prolonged period of time.

This raises the question whether this exposure to violence may have contributed to increased differences in trust in institutions and support for democracy and the EU beyond what was already there before 2014. The most immediate effect probably comes from selective migration, i.e., that individuals who remain in the eastern regions in early 2022 despite the violence since 2014 may be those who, on average, are more skeptical of the Ukrainian government and its tilt away from the authoritarian Russia and towards the EU. But previous literature and recent studies on Ukraine suggest that there may also be a direct effect coming from exposure to violence on an individual’s attitudes. This relationship has recently been mapped by Obrizan (2025). A key finding is that military solutions are preferred in the segment of the population that has experienced hardship and personal losses since the full-scale invasion in 2022.

More generally, any kind of trust – including the interpersonal one – can be affected by exposure to conflict. The relationship is complicated, and in some instances, violence can cause more pro-social attitudes and behavior. An important distinction, however, is that exposure to violence amplifies the distinctions in attitudes and behavior towards members of in- and out-groups (Olofsgård, 2025). This suggests that conflict may have further increased the differences between the East of Ukraine and the rest of the country, if many residents in the former perceive national and western institutions as being dominated by groups they do not feel strong attachments to.

Further, terror management theory (e.g., Landau et al. 2004) suggests that fear induces support for charismatic and strong leadership. In a context where liberal democracy is not everywhere well enough entrenched, this may tilt over into support for more authoritarian leadership in response to attacks triggering stronger emotions of fear. Furthermore, work by Feldman and Stenner (1997) shows that the impact of perceived societal threat on triggering stronger authoritarian preferences can depend on authoritarian predispositions. The latter is measured by, e.g., looking at attitudes towards child rearing and emphasis on obedience. In the context of the finding above, this would imply that the impact of violence on authoritarian preferences would be weaker in the eastern parts of Ukraine, compared to the rest of the country, a potentially interesting avenue for future research.

Conclusions

The findings in this policy brief nuance simple narratives about regional divides in Ukraine. While dissatisfaction with democracy and skepticism toward the EU are more common in the East, this does not necessarily correspond to a general rejection of liberal social values. In some cases — such as attitudes toward child-rearing, authority, and LGBT rights — respondents from the East even express more liberal views than elsewhere.

Not explicitly discussed in the brief is the topic of mother tongue. The data shows that Russian speakers are less emotionally attached to Europe and less supportive of EU integration. Yet, there is no consistent evidence that Russian speakers are less committed to liberal democratic values overall. The effect of language is difficult to disentangle from geography, particularly given the concentration of Russian speakers in Eastern Ukraine.

What does stand out more clearly is that trust and the general view on institutions are substantially lower and more negative in the East. Respondents from the East consistently report lower trust in national and international political institutions. Interestingly, this pattern does not extend to generalized social trust — the East does not differ markedly from the rest of the country. This contrast suggests a more focused skepticism directed at formal institutions, rather than widespread social distrust. One possible explanation, as discussed in Olofsgård (2025), is that when exposed to conflict and violence, interpersonal trust may reflect confidence in one’s in-group, while institutional trust hinges on feeling represented within the broader political system. If respondents from the East perceive themselves as excluded from the national or European in-group, this could explain their lower levels of trust in both domestic and international institutions, and exposure to violence may have further amplified this. While signs of such alienation appear in the data, one should refrain from drawing too strong conclusions from this alone. Another possible explanation is that prolonged exposure to violence has eroded confidence in the government’s ability to protect citizens, and in the effectiveness of EU support, which would turn support away from the EU option preferred by the current government.  Future research on the effects of war exposure should more carefully disentangle the various aspects and forms of trust and how they relate to liberal values in Ukraine. Rebuilding institutional trust remains a key challenge. In this context, instilling peace and decentralizing political power may be essential for increasing trust in the Eastern part of the country, if that helps residents in the East to identify with public institutions. As Ukraine advances on its path toward EU membership, fostering a shared sense of national belonging will be critical in overcoming the narrative of an East–West divide when rebuilding the country.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

A Potential Broadening of the Excise Tax on Food Products High in Sugar and Salt: The Case of Latvia

Posted on June 9, 2025 | Policy Brief

Woman holding a burger with fried chicken, donuts, and sugary foods – concept image for excise tax on sugar and salt.

Overweight and obesity are significant public health issues, contributing to various chronic diseases such as cardiovascular diseases, diabetes, and certain cancers. Latvia’s second-highest share of overweight adults in the EU is a compelling reason for public health measures. These should aim to discourage excessive consumption of high-calorie foods and beverages. Excise tax is one of the tools in a complex approach to encourage a balanced diet and promote positive health outcomes. Motivated by evidence from Hungary, currently the only country in Europe imposing a tax on pre-packaged food products high in sugar and salt, we simulate the short-term impact of the introduction of a differentiated broad-based tax on food products in Latvia. We conclude that to influence consumer behaviour, price increases should be at least 10 percent, which implies introducing tax rates that are at least 1.5 times higher than those in Hungary.

Extremely High Overweight and Obesity Rates in Latvia

Overweight and obesity are serious public health challenges across Europe. Together with an unbalanced diet and low physical activity they contribute to many non-communicable diseases (NCDs), including heart diseases, diabetes and certain cancers (WHO, 2022). For many individuals, being overweight is also linked to psychological problems.

Overweight and obesity rates are extremely high in all EU countries. In 2022, more than half of all adults in the EU (51.3 percent) were overweight (including pre-obese and obese). Latvia has the 2nd highest rate of overweight adults in the EU (60.4 percent). This puts significant pressure on Latvia’s health care system and social resources.

Recognizing that overweight and obesity has multifactorial causes, a comprehensive approach is required to effectively tackle this problem, involving experts from various fields and addressing the issue from multiple angles.

One potential tool in a complex approach is an excise tax on foods and drinks high in sugar and salt since excessive consumption of such foods and drinks represents a major risk factor for NCDs (WHO, 2015a). Such a tax could help to reduce excessive consumption, encourage healthier eating, and improve public health outcomes.

The Intake of Added Sugars

According to data from the EFSA Panel on Nutrition, Novel Foods and Food Alergens (EFSA, 2022), the main source of added sugar intake in almost all European countries is sugar and confectionery. The numbers for adults (18–64 years) range from 20 percent in Austria to 57 percent in Italy (48 percent in Latvia). For children aged 1–18 years, sugar and confectionary contribute to 36 – 44 percent of added sugar intake in Latvia.

In Latvia, other key sources of added sugar are fine bakery wares, processed fruits, and vegetables. The contribution of sweetened soft and fruit drinks to total added sugar intake is only 8 percent for adults (18–64 years) and 3–7 percent for children (1–18 years).

Excise Tax on Soft Drinks

As of 2024, 14 European countries have implemented taxes on sugar-sweetened soft drinks. In Latvia, the tax was introduced in 1999 and was mainly motivated by the financial needs of the state budget.

The evidence from international case studies (WHO, 2023) shows that taxes on sugar-sweetened soft drinks can be effective in reducing consumption in the short term, particularly when the tax leads to significant price increases that reduce affordability. However, the overall evidence on whether these taxes successfully reduce sugar intake is inconclusive. In a review by the New Zealand Institute of Economic Research (NZIER, 2017), the authors conclude that methodologically robust studies  show only small reductions in sugar intake, too small to produce significant health benefits, and easily offset if consumers switch to other high-calorie products. On the other hand, studies reporting a meaningful change in sugar intake often assume no compensatory substitution. At the same time, experience from Hungary suggests that a sugar tax imposed on a wide range of products is effective in reducing the overall consumption of products subject to the tax, and in encouraging healthier consumption habits. The impact assessment conducted 3 years after the introduction of the tax in Hungary showed that consumers of unhealthy food products responded to the tax by choosing a cheaper, often healthier product (7–16 percent of those surveyed), consuming less of the unhealthy product (5–16 percent), switching to another brand of the product (5–11 percent), or substituting it with another food item – often a healthier alternative (WHO, 2015b).

The Short-term Effect of a Broad-Based Excise Tax in Latvia

Approach

Motivated by the evidence from Hungary, we simulate the short-term impact of the introduction of a similar differentiated broad-based tax on food products high in sugar and salt using the approach applied in Pļuta et. al (2020). First, we use AC Nielsen monthly data from 2019 to 2023 on sales volume and prices of pre-packaged food products of selected categories in the modern trade retail market to estimate the price elasticity of demand for these products. The selected product categories included:

  • Pre-packaged sweetened products (e.g., breakfast cereals, cacao, chocolate bars, soft and hard candies, sweet biscuits, etc.)
  • Sweetened dairy products (e.g., ice cream, yoghurt, condensed milk, curd countlines, etc.)
  • Salted snacks (salted nuts, salted biscuits, etc.)
  • Ready-to-eat and instant foods (e.g., pizza cooled and frozen, frozen dumplings, vegetables and canned beans, etc.)
  • Condiments (e.g., dehydrated instant and cooking culinary, dehydrated sauces and seasonings, dressings, ketchup, mayonnaise, etc.)

Second, we simulate different scenarios to assess the increase in price, reduction in sales and budgetary effect using the estimated elasticities and assuming different degrees of tax pass-through rate to retail prices (100 and 50 percent, respectively). Our results represent a short-term or direct fiscal effect, meaning we do not account for any second-round effects that may arise due to changes in domestic production and employment, which could in turn generate additional tax revenues.

The Tax Object and Rates

In defining the scenarios to be considered when modelling the potential broadening of the tax base, we use the Hungarian Public Health Product Tax (PHPT) as a practice example. As a basis, we use the list of product categories under taxation by the PHPT, the two-tier tax system and the PHPT rates as of 2024. In addition, we are also looking at other product categories (such as sugar sweetened dairy products, sweetened cereals and vegetables and beans containered), expanding the tax base even more. In total, we simulated four scenarios for taxing the food products high in sugar and salt. The scenarios consider a two-tier tax system, meaning products with lower sugar or salt content are taxed at a lower rate, while those with higher content face a higher tax. For condiments, only a high rate is applied due to the, usually high, salt content. A differentiated tax rate is expected to stimulate the industry to drive down sugar and salt content in their products, i.e., offering sugar and salt-reduced options. The scenarios differ from each other in the applicable rates.

  • Scenario 1: Uses the same tax rates as Latvia’s excise tax on non-alcoholic beverages (as of March 2024) – EUR 7.40 per 100 kg (low rate) and EUR 17.50 per 100 kg (high rate).
  • Scenario 2: Uses Hungary’s PHPT rates – in the general case, the low rate is EUR 17 per 100 kg, and the high rate is EUR 54 per 100 kg.
  • Scenario 3: Sets rates 1.5 times higher than Hungary’s rates.
  • Scenario 4: Doubles Hungary’s rates.

Assumptions

Unfortunately, the retail price and sales time series used in the analysis are not disaggregated into groups according to the sugar and salt content in the product. As a result, we apply assumptions to estimate the potential range of tax impacts.

To calculate the lower bound of the expected impact, we assume that 100 percent of sales in each product category are subject to the new sugar and salt tax, but all products have low sugar and salt content and therefore qualify for the lower tax rate.

To calculate the upper bound, we assume that 25 percent of the sales volume is taxed at the lower rate (due to low sugar and salt content), while the remaining 75 percent of sales are taxed at the higher rate, reflecting higher sugar and salt levels in those products.

Results

According to our estimations, the application of an excise tax on food products high in sugar and salt could lead to a price increase and sales decrease of taxed food products. The magnitude would depend on the type of food product (i.e., average retail price in the country) and scenario assumed (i.e., tax rates). Within each single scenario, the largest impact is expected for condiments. This is because we simulate only the high tax rate applied to them (not a two-tier system), as is the case in Hungary. The tax makes up a larger share of their price, and due to high price sensitivity, the decrease in sales is also greater.

Based on previous research, we conclude that price increases need to reach at least 10 percent to meaningfully influence consumer behaviour. This level of change is achieved in Scenario 3, which assumes tax rates 1.5 times higher than those used in Hungary.

Below we present the obtained estimations under Scenario 3.  The estimates for Scenarios 1 and 2 are not included here because the price increase caused by the tax does not reach 10 percent for several product categories. Under Scenario 4 the price changes could exceed 10 percent but this scenario may also provide stronger incentives for manufacturers to reformulate their products (and in this case, the average price increase within a given product category will be lower). The results for Scenario 4 are available in a recent BICEPS report (Pļuta et al., 2024).

Under Scenario 3, with full tax pass-through (100 percent), the estimated reduction in sales volume is:

  • 3.0–8.1 percent for pre-packaged sweetened products;
  • 3.6–17.1 percent for sweetened dairy products;
  • 0.9–4.7 percent for salted snacks;
  • 10.4–54.1 percent for ready-to-eat and instant foods;
  • 11.0–11.8 percent for condiments.

If only 50 percent of the tax is passed through to retail prices, the sales reductions would be approximately half as big.

The estimated revenue from the excise tax in this scenario would range between EUR 15.0 million and EUR 54.9 million. The resulting change in VAT revenue would range from a loss of EUR 0.7 million to a gain of EUR 1.1 million.

Conclusion

Although overweight and obesity rates are extremely high in all EU countries, Latvia, in 2022, had the second highest rate in the EU. In this brief, we explore the use of the excise tax as one of the tools in a complex approach to discourage excessive consumption of foods and beverages high in sugar and salt and encourage a balanced diet and promote positive health outcomes. Based on findings from previous studies, a price increase of at least 10 percent is needed to influence consumer behaviour. In Latvia, this would require tax rates approximately 1.5 times higher than those applied in Hungary, i.e. in the general case equal to EUR 25.5 (low rate) and EUR 81 (high rate) per 100 kg of product. Under such a scenario, the estimated revenue from the tax could range from EUR 15.0 to 54.9 million. For comparison, in 2024, Latvia’s excise tax on soft drinks generated EUR 15.6 million. To remain effective, tax rates should be adjusted over time in line with growth in disposable income.

Acknowledgement

This brief is based on a study Taxation of the non-alcoholic beverages with excise tax in the Baltic countries. Potential broadening of the tax base to food products high in sugar and salt completed by BICEPS researchers in 2024 (Pļuta et al., 2024). The study was commissioned by VA Government. It was developed independently and reflects only the views of the authors.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

From Integration to Reconstruction: Standing with Ukraine by Supporting Ukrainians in Sweden

Posted on April 7, 2025 | Policy Brief

People gathered in Sweden showing solidarity and supporting Ukrainians with national flags.

Sweden has strongly supported Ukraine through both public opinion and government actions, yet there has been little discussion about the needs of Ukrainian displaced people in Sweden. The ongoing war and the rapidly shifting geopolitical landscape have created uncertainty – geopolitical, institutional, and individual. Ukrainian displaced people in Sweden face an unclear future regarding their rights, long-term status, and opportunities, making future planning or investing in relevant skills difficult. This uncertainty also weakens the effectiveness of integration policies and limits the range of policy tools that can be deployed, which hinders participation in the labor market, affecting both displaced and employers. Addressing these challenges is essential, not only for the well-being of Ukrainians in Sweden, but also for Sweden’s broader role in supporting Ukraine. Helping displaced Ukrainians rebuild their lives also strengthens their ability to contribute both to Swedish society and to Ukraine’s future reconstruction and integration into Europe.

The Swedish Approach to Displaced Ukrainians

In response to the Russian full-scale invasion of Ukraine, the Temporary Protection Directive (2001/55/EC) (commonly referred to as collective temporary protection) was activated in March 2022, granting Ukrainians seeking refuge temporary protection in EU countries, including Sweden. This directive provides residence permits, access to work, education, and limited social benefits without requiring individuals to go through the standard asylum process.

However, the practicalities of the Directive’s use differed significantly between countries. Sweden, despite its, until recent, reputation of being relatively liberal in its migration policies, has at times, lagged behind its Scandinavian neighbors in supporting Ukrainian displaced people. To illustrate this, it is useful to compare the Swedish approach to that of other Nordic states, as well as Poland.

Comparison to Other Nordic States

The Nordic countries have implemented the directive in different ways, adopting varying policies toward Ukrainians demonstrating different degrees of flexibility and support. Despite its generally restrictive immigration policy, Denmark introduced some housing and self-settlement policies for Ukrainians that were more liberal than its usual approach. Norway also initially introduced liberal measures but later tightened regulations, banning temporary visits to Ukraine and reducing financial benefits. Finland, meanwhile, has taken a relatively proactive stance, granting temporary protection to over 64,000 Ukrainians – one of the highest per capita rates in the region. Its strong intake reflects a more flexible and effective implementation of the directive, particularly from late 2022, when it surpassed Sweden and Denmark in number of arrivals.

In Sweden the so-called “massflyktsdirektivet“ grants Ukrainians temporary protection until at least March 2025. Its future beyond that, however, remains uncertain, adding to the challenges faced by refugees and policymakers alike. Sweden – considered liberal in migration policies (at least, up until 2016) – has been criticized for offering limited rights and financial support to displaced Ukrainians, making it one of the least attractive destinations among the Nordic countries (Hernes & Danielsen, 2024). Under “massflyktsdirektivet”, displaced Ukrainians were entitled to lower financial benefits and limited access to healthcare compared to refugees or residents with temporary permits. It was only in July 2023 that they became eligible for Swedish language training, and only in November 2024 could they apply for residence permits under Sweden’s regular migration laws – a pathway that can eventually lead to permanent residence.

Figure 1 illustrates significant fluctuations in the number of individuals granted collective temporary protection in the Nordic countries over the first two years following Russia’s full-scale invasion. As Hernes and Danielsen (2024) show in a recent report, all Nordic countries experienced a peak in arrivals in March-April 2022, followed by a decline in May-June. Sweden initially received the most, but aside from this early peak, inflows have remained relatively low despite its larger population (Table 1). Since August 2022, Finland and Norway have generally recorded higher arrivals than Denmark and Sweden. By August 2023, Norway’s share increased significantly, accounting for over 60 percent of total Nordic arrivals between September and November 2023.

Figure 1. Total number of individuals granted collective temporary protection in the Nordic countries

Source: Hernes & Danielsen, 2024, data from Eurostat.

Table 1. Total number of registered temporary protection permits and percent of population as of December 2023

Source: Hernes & Danielsen, 2024, data from Eurostat.

Comparison to Poland

Sweden’s policies and their outcomes compare rather poorly to those of Poland, one of the European countries that received the largest influx of Ukrainian migrants due to its geographic and cultural proximity. A key factor behind Poland’s relatively better performance is that pre-existing Ukrainian communities and linguistic similarities have facilitated a smoother integration. Ukrainians themselves played a crucial role in this regard, with many volunteering in Polish schools to support Ukrainian children. Sweden also had a community of Ukrainians who arrived to the country over time, partly fleeing the 2014 annexation of Donetsk and Crimea. Since these individuals were never eligible for refugee status or integration support, they had to rely on their own efforts to settle. In doing so, they built informal networks and accumulated valuable local knowledge. Nevertheless, after the full-scale invasion in 2022, they were not recognized as a resource for integrating newly arrived Ukrainian refugees – unlike in Poland.

However, Poland’s approach was shaped not only by these favorable preconditions but also by deliberate policy choices. As described in a recent brief (Myck, Król, & Oczkowska, 2025), a key factor was the immediate legal integration of displaced Ukrainians, granting them extensive residency rights and access to social services, along with a clearer pathway to permanent residence and eventual naturalization.

Barriers to Labor Market Integration

Despite a strong unanimous support for Ukraine across the political spectrum, there is less public debate and fewer policy processes in Sweden regarding displaced Ukrainians, most likely attributable to the general shift towards more restrictive immigration policies. The immigration policy debate in Sweden has increasingly emphasized a more “selective” migration, i.e. attracting migrants based on specific criteria, such as employability, skills, or economic self-sufficiency. This makes it puzzling that displaced Ukrainians, who largely meet these standards, have not been better accommodated. Before the full-scale invasion, Sweden was a particularly attractive destination among those who wanted to migrate permanently, especially for highly educated individuals and families (Elinder et al., 2023), indicating a positive self-selection process.

When large numbers of displaced Ukrainians arrived after the full-scale invasion, many had higher education and recent work experience, which distinguished them from previous refugee waves that Sweden had received from other countries. Despite a strong labor market in 2022, their integration was hindered by restrictions imposed under the Temporary Protection Directive, which limited access to social benefits and housing. At the same time, Sweden explicitly sought to reduce its attractiveness as a destination for migrants in general, contributing to a sharp decline in its popularity among Ukrainians after the war escalated.

In addition to the restrictiveness and numerous policy shifts over time, the temporary nature of the directive governing displaced Ukrainians – rather than the standard asylum process – creates significant policy uncertainty. This uncertainty makes it difficult for Ukrainians to decide whether to invest in Sweden-specific skills or prepare for a potential return to Ukraine, whether voluntary or forced, complicating their long-term planning. It also hinders labor market integration, increasing the risk of exploitation in the informal economy. Another key challenge is the unequal distribution of rights, as entitlements vary depending on registration timelines, further exacerbating the precarious situation many displaced Ukrainians face in Sweden.

A survey of 2,800 displaced Ukrainians conducted by the Ukrainian NGO in Sweden “Hej Ukraine!” in February 2025 provides key insights into their labor market integration (Hej Ukraine!, 2025). Survey results show that, currently, 40 percent of respondents are employed, with 42 percent of them holding permanent contracts while the rest work in temporary positions and 6 percent being engaged in formal studies. Employment is concentrated in low-skilled sectors, with 26 percent working in cleaning services, 14 percent in construction, and 12 percent in hospitality and restaurants. Other notable sectors include IT (11 percent), education (8 percent), warehousing (7 percent), elderly care (5 percent), forestry (3 percent), and healthcare (3 percent). The lack of stable permits, access to language courses (until September 2024), and financial incentives for hiring displaced persons have complicated their integration.

As mentioned above, the Swedish government has over time introduced several initiatives to facilitate the integration of displaced Ukrainians. However, assessing their effectiveness is crucial to identify persistent challenges and to formulate targeted policy solutions.

The Role of the Private Sector and Civil Society

The business sector, civil society and NGOs have also played a role in supporting displaced Ukrainians, filling gaps left by the public sector. This includes initiatives aimed at creating job opportunities that encourage voluntary return. However, broader systemic support, including simplified diploma recognition and targeted re-skilling programs, is needed to enhance labor market participation.

Moreover, there is a lack of information among displaced, potential employers and public institutions (municipality level) about the tools and programs available. For example, a community sponsorship program funded by UNHCR, which demonstrated positive effects on integration by offering mentorship and support networks, was only applied by five municipalities (UNHCR, 2025). Similar programs could be expanded to address structural barriers, particularly in the labor market. Another example is the Ukrainian Professional Support Center established to help displaced Ukrainians find jobs through building networks and matching job seekers with employers (UPSC, 2024). The center was funded by the European Social Fund, and staffed to 50 percent by Ukrainian nationals, either newcomers or previously established in Sweden, to facilitate communication. Experiences from this initiative, shared during a recent roundtable discussion –  Integration and Inclusion of Ukrainian Displaced People in Sweden, highlighted that between 2022 and 2024, about 1,400 Ukrainians participated in the project, but only one-third of participants found jobs, mostly in entry-level positions in care, hospitality, and construction.  Restrictions under the temporary protection directive, along with the absence of clear mechanisms for further integration, posed significant challenges; the lack of a personal ID, bank account, and access to housing were considered major obstacles. The uncertainty of their future in Sweden was also reported as a significant source of stress for participants.

Implications and Policy Recommendations

The lack of clarity surrounding the future of the EU Temporary Protection Directive, as well as its specific implementation in Sweden, leaves displaced Ukrainians in a precarious situation. Many do not know whether they will be allowed to stay or if they should prepare for a forced return. This uncertainty discourages long-term investment in skills, housing, and integration efforts.

Uncertainty also affects Swedish institutions, making it difficult to implement long-term policies that effectively integrate Ukrainians into society. To address these issues, the following policy recommendations are proposed.

  • Extend Temporary Protection Status Beyond 2025: Clear guidelines on the duration of protection are necessary to provide stability for displaced Ukrainians
  • Improve Labor Market Access: Introduce targeted programs for skill recognition, language training, and financial incentives for businesses hiring displaced Ukrainians
  • Enhance Civil Society and Private Sector Collaboration: Support mentorship and community sponsorship programs that facilitate integration
  • Acknowledge and Utilize displaced Ukrainians as a Resource: Recognizing displaced Ukrainians as potential assets in rebuilding Ukraine and strengthening European ties should be a priority.
  • Increase Public and Policy Debate: There is a need for greater discussion on how to integrate Ukrainians in Sweden, as an important complement to the policy priority of providing aid to Ukraine.

By implementing these measures, Sweden can provide displaced Ukrainians with greater stability, enabling them to engage in the formal labour market rather than being pushed into informal or precarious employment. This not only benefits Ukrainians by ensuring fair wages and legal protection, but also strengthens Sweden’s economy through increased tax revenues and a more sustainable labour force.

As Sweden continues to support Ukraine in its fight for sovereignty, it should also recognize the value of displaced Ukrainians within its borders, fostering their contribution to both Swedish society and Ukraine’s eventual reconstruction.

References

  • Hernes, V., & Danielsen, Å. Ø. (2024). Reception and integration policies for displaced persons from Ukraine in the Nordic countries – A comparative analysis. NIBR Policy Brief 2024:01. https://oda.oslom et.no/oda-xmlui/handle/11250/3125012
  • Hej Ukraine! (2025). Telegram channel. https://t.me/hejukrainechat
  • Elinder, M., Erixson, O., & Hammar, O. (2023). Where Would Ukrainian Refugees Go if They Could Go Anywhere? International Migration Review, 57(2), 587-602. https://doi.org/10.1177/01979183221131559
  • EUROSTAT. Decisions granting temporary protection by citizenship, age and sex – monthly data. Dataset. https://ec.europa.eu/eurostat/databrowser/view/migr_asytpfm__custom_15634298/default/map?lang=en
  • Myck, M., Król, A., & Oczkowska, M. (2025, February 21). Three years on – Ukrainians in Poland after Russia’s 2022 invasion. FREE Policy Brief. Centre for Economic Analysis (CenEA). https://freepolicybriefs.org/2025/02/21/ukrainians-in-poland/
  • Ukrainian Professional Support Center (UPSC). (2024). https://professionalcenter.se/omoss/
  • United Nations High Commissioner for Refugees (UNHCR). (2025). Community sponsorship. UNHCR Northern Europe. Retrieved [March 6, 2025] from https://www.unhcr.org/neu/list/our-work/community-sponsorship

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Human Capital Loss Among Belarusian and Ukrainian Migrants to the EU

Posted on March 31, 2025 | Policy Brief

Silhouettes of construction workers on scaffolding at sunset, symbolizing underemployment among human capital migrants in the EU.

This policy brief examines the underutilization of human capital among involuntary migrants from Ukraine and Belarus in Poland and Lithuania. Focusing on those who migrated after 2020 (Belarus) and 2022 (Ukraine), the brief investigates the factors influencing the conversion of their pre-migration skills into gainful employment in their host countries. Our findings show that despite many migrants possessing high levels of education and professional qualifications, structural barriers and low convertibility of their skills, hinder their full labor market integration. This skill underutilization not only limits migrants’ professional growth and earning potential but also deprives the host countries of valuable skills and potential economic gains.

Effective labor market integration substantially benefits both host and sending countries and migrants themselves. For host nations, successful integration can alleviate critical skill shortages, boost productivity, and drive economic growth (Boubtane, Dumont, & Rault, 2016; Boubtane, 2019; Engler, Giesing, & Kraehnert, 2023; Bernstein et al., 2022). Conversely, inadequate integration leads to underemployment, diminished potential, and economic inefficiency. Countries of origin can benefit from remittances, the return of migrants with enhanced skills, and strengthened international economic ties. However, poor integration risks an uncompensated “brain drain” (Reinhold & Thom, 2009; Barrett & O’Connell, 2001; Iara, 2006; Barrett & Goggin, 2010; Co, Gang, & Yun, 2000). For migrants, the ability to continue their careers means higher earnings and less stress from the acquisition of a new profession, while the non-utilization of existing skills results in their depreciation, potentially causing permanent wage reductions even upon return to the home country (Bowman & Myers, 1967).

Migrants can be broadly categorized into voluntary migrants or forced migrants. Voluntary migrants assess labor market prospects beforehand and often possess convertible human capital – one that can be used in a new labor market. This group often includes professionals like IT specialists and scientists and those in low-skilled but highly transferable professions. Forced migrants, on the contrary, may be utterly unprepared for changes in jurisdiction and possess skills of limited transferability. For example, even highly specialized professions requiring extensive training and substantial human capital, such as lawyers, officials, and teachers, often prove “non-convertible“ (Duleep & Regets, 1999). These individuals’ skills are frequently country specific.

Low convertibility of skills generates significant negative consequences. Highly educated professionals, for instance, may find themselves relegated to low-paying, unskilled jobs, unable to leverage their expertise. This hinders their professional development and deprives host countries of valuable skills and potential contributions to economic growth. Addressing these mismatches is crucial for maximizing the benefits of migration for stakeholders in both home and host countries.

Forced Migration from Belarus and Ukraine

The political crisis in Belarus, starting with the contested 2020 presidential elections, led to widespread repression and significant forced migration. Belarus’s role in supporting Russia’s 2022 invasion of Ukraine exacerbated this situation, resulting in approximately 300,000 Belarusians seeking refuge in the European Union (Eurostat). This number accounts for a substantial proportion of the country’s 9 million population and its approximately 5 million-strong labor force (Belstat).

Russia’s full-scale invasion of Ukraine triggered the most significant wave of migration in Ukrainian history, with over 6 million of the pre-war 44 million population fleeing to the EU (UNHCR). About 90 percent of the initial refugees were women and children due to a mobilization law preventing most men aged 18 to 60 from leaving (UNHCR).

Online Survey and Migrant Differences

To better understand the situation of migrants, their integration into the EU labor market, and to develop data-driven recommendations for improving their conditions, the CIVITTA agency, in partnership with BEROC, conducted an online survey in the summer of 2024. This brief is based on the survey results. The survey includes responses from 616 Ukrainian nationals who migrated to Poland or Lithuania after Russia’s full-scale invasion of Ukraine in 2022, as well as 173 Belarusian migrants who left their home country after 2020. The research focuses on individuals aged 28 to 42, providing insights into their experiences and challenges in the labor market in their host countries. While we acknowledge the sample’s limitations in terms of representativeness, we believe the findings provide valuable insights into the specific challenges faced by involuntary migrants and their adaptation strategies in the new labor market.

Key differences characterize these migration waves. Ukrainian migration comprises of more women, while Belarusian migrants show a more balanced gender distribution, with 47 percent women in our sample versus 62 percent for Ukrainians. Family separation is also notable, as 91 percent of married Belarusians live with their spouses, compared to only 75 percent of Ukrainians (due to the mobilization law).

Survey respondents from both groups possess high levels of human capital with 60 percent of Ukrainians and 90 percent of Belarusians holding higher education degrees. Among Belarusians, 94 percent had over five years of work experience before migration, with and 79 percent of Ukrainians stating the same.

Ukrainian return intentions are split: 38 percent plan to return, 19 percent will not, and the rest are undecided. An end to the war and changes in Russian foreign policy would increase return rates to 70 percent. For Belarusians, 35 percent plan to return, 38 percent will not, and the rest are undecided. Education level is key, as less-educated Belarusians are more likely to stay abroad. An end to repression would increase the share of those Belarusians who want to return to 70 percent, and a regime change would increase this percentage to 82 percent.

Factors Conditioning Human Capital Loss

As expected, due to the involuntary nature of migration of the two groups in focus, a large fraction of survey participants reported losing their profession after migration. As Figure one shows, 48 percent of Belarusians and 63 percent of Ukrainians in our sample reported full loss of their prior careers. The lower percentage of Ukrainians fully retaining their careers (23 percent) compared to Belarusians (44 percent) could be attributed to several factors, including the more recent and disruptive nature of the Russo-Ukrainian war leading to more significant displacement and challenges in finding comparable work. The higher percentage of Ukrainians starting their careers from scratch (49 percent compared to 29 percent among Belarusians) also supports this idea.

Figure 1. Preservation of careers in the EU

Source: Authors’ computations based on survey data.

To foster an evidence-based discussions on the smooth integration of migrants into the EU labor market and the prevention of human capital loss, it is crucial to examine the individual factors that influence career continuity for Belarusian and Ukrainian migrants. We therefore utilize a logistic regression model to identify key predictors that increase the likelihood of migrants remaining in their profession after relocating to Poland and Lithuania.

In our quantitative analysis, an outcome binary variable for staying in the profession is equal to 1 if an individual either “continued career started in a home country (in the same position)” or “remained in the same profession but started working in a position lower than the one held before emigration.” As predictors, we consider a set of sociodemographic variables reasonably related to the probability of staying in the profession and dummy variables for the most common spheres of employment (see Table 1).

Table 1. Overview of model variables

Who Maintains Their Career After Emigration?

Based on the regression coefficients in Table 2, we can identify characteristics related to losing career-specific human capital. In our regression, we control for both home and host country factors. One noteworthy finding is that, while Ukrainian migrants in our sample report significantly higher rates of career loss than Belarusian migrants, nationality itself does not emerge as a significant predictor of career loss once other characteristics are accounted for.

Our results also show that the probability of staying in a profession is higher among men, those with more extended work experience and higher income before emigration, and those who were invited to a host country by an employer. The same holds for entrepreneurs, those who do not plan to return, and those employed in the fields of Architecture & Engineering and Information and Communication Technologies.

Table 2. Results of regression analysis

Note: *** Significant at the .001 level. ** Significant at the .01 level. * Significant at the .05 level.

Conclusion

Several conclusions and policy advice can be derived from the survey results.

The higher likelihood of entrepreneurs staying in their profession suggests that supporting migrant entrepreneurship can be a valuable strategy to retain human capital. This can be done, for example, by:

  • Providing access to resources, mentorship, and funding for migrant entrepreneurs.
  • Streamlining the procedures for migrants to start and operate businesses.
  • Facilitating access to capital for migrant-owned businesses.

The research highlights the disproportionate impact of human capital loss on women.  Therefore, policies should include gender-specific programs that address women’s unique challenges in integrating into new labor markets. This could include:

  • Skills retraining and certification programs: Designed to align women’s existing skills with the demands of the host country’s labor market, with consideration for childcare needs and other barriers women may face.
  • Connecting women migrants with established professionals in their fields to facilitate knowledge transfer and career guidance.
  • Language training programs: Tailored to the specific needs of women, potentially incorporating childcare support to enable participation.

The study highlights the positive role of international companies in supporting employee relocation. Respondents who were invited by an employer demonstrated the most successful integration into the new labor market. To enhance and strengthen these networks, policies may focus on:

  • Encouraging corporations to hire and train migrant workers, potentially through tax breaks or other incentives. This could include partnerships with migrant-serving organizations to connect companies with qualified candidates.
  • Developing digital platforms that connect migrants with diaspora networks, potential employers, and relevant resources.

In addition, policies should address the non-recognition of foreign qualifications, simplifying and expediting the procedures for recognizing foreign degrees and professional certifications. Initiatives to create targeted training programs could complement such policies and allow migrants to quickly acquire any missing skills or certifications required by the host country’s professional bodies. These policy measures would enhance the utilization of migrants’ human capital, benefiting both migrants and host countries while also supporting sending countries. This could be achieved by fostering a successful diaspora or facilitating productive reintegration in the case of return migration.

References

  • Barrett, A., & Goggin, J. (2010). Returning to the question of a wage premium for returning migrants. National Institute Economic Review, 213, R43–R51. https://doi.org/10.1177/0027950110389752
  • Barrett, A., & O’Connell, P. J. (2001). Does training generally work? The returns to in-company training. ILR Review, 54(3), 647–662. https://doi.org/10.1177/001979390105400403
  • Bernstein, S., Diamond, R., McQuade, T. J., & Pousada, B. (2022). The contribution of high-skilled immigrants to innovation in the United States (No. w30797). National Bureau of Economic Research. https://doi.org/10.3386/w30797
  • Boubtane, E. (2019). The economic effects of immigration for host countries. L’Economie politique, 84(4), 72–83. https://doi.org/10.3917/leco.084.0072
  • Boubtane, E., Dumont, J.-C., & Rault, C. (2016). Immigration and economic growth in the OECD countries 1986–2006. Oxford Economic Papers, 68(2), 340–360. https://doi.org/10.1093/oep/gpv024
  • Bowman, M. J., & Myers, R. G. (1967). Schooling, experience, and gains and losses in human capital through migration. Journal of the American Statistical Association, 62(319), 875–898. https://doi.org/10.2307/2283723
  • Co, C. Y., Gang, I. N., & Yun, M.-S. (2000). Returns to returning. Journal of Population Economics, 13, 57–79. https://doi.org/10.1007/s001480050121
  • Duleep, H. O., & Regets, M. C. (1999). Immigrants and human-capital investment. American Economic Review, 89(2), 186–191. https://doi.org/10.1257/aer.89.2.186
  • Engler, P., Giesing, Y., & Kraehnert, K. (2023). The macroeconomic effects of large immigration waves. IAB-Discussion Paper. https://doi.org/10.5167/uzh-239271
  • Iara, A. (2006). Skill diffusion in temporary migration? Returns to Western European working experience in the EU accession countries (Development Studies Working Paper No. 210). Centro Studi Luca d’Agliano. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=921492
  • Reinhold, S., & Thom, K. (2009). Temporary migration and skill upgrading: Evidence from Mexican migrants. University of Mannheim, unpublished manuscript.
  • UNHCR. (n.d.). Operational Data Portal. https://data.unhcr.org/

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Agricultural Subsidies: The Case of Georgia

Posted on March 17, 2025 | Policy Brief

Fresh apples, pears, and grapes at a local market benefiting from agricultural subsidies in Georgia.

This brief explores the role of government subsidy programs in Georgia’s agricultural sector, with a focus on grapes, apples, and hazelnuts. These subsidies play a significant role in providing social assistance to the sector and in supporting farmers; however, their long-term impact on industry growth remains a subject of discussion. Key challenges include ensuring product quality, enhancing productivity, and expanding market opportunities, particularly regarding export market concentration and infrastructure constraints.

Introduction

Governments have historically intervened in agricultural markets under the pretext of promoting food security. At first, interventions aimed to provide affordable food for rapidly growing urban populations, afterwards more emphasis was put on enhancing agricultural productivity. Nowadays, agriculture remains a priority for policymakers due to its role in promoting inclusive growth and reducing poverty. Additionally, renewed concerns about food security have further driven these policy efforts (Gautam, 2015).

One of the key instruments of these interventions are subsidies in different forms – such as various input subsidies, price supports, and trade interventions. While their use has been widespread, the economic effectiveness of subsidies continues to be heavily debated. Economic theory suggests that subsidies are useful in resolving market failures; however, even in this case, the actual effect of subsidies is highly dependent on the specific implementation. Further, in many other cases, subsidies have led to distortions and have been detrimental to countries’ own economic interests (Gautam, 2015).

Another important concern arises from the political economy of subsidies use. Widening rural-urban income disparities create political pressure to implement measures that support the livelihoods of the large agricultural population. Subsidies, due to their visibility, are a convenient instrument to increase political support from this population group. Further, subsidies offer immediate or near-immediate gains to recipients, whereas public capital investments take longer to deliver results, therefore subsidies are often used as a political instrument. Since political decision-making is typically driven by short-term considerations, often aligned with electoral cycles, long-term investments do not always align with political incentives (Gautam, 2015).

Box 1. Subsidies

Subsidies are financial assistance provided by governments to support or promote specific sectors, industries, or activities within the economy. They can take various forms, including direct cash payments, tax relief, low-interest loans, and in-kind support, such as the provision of goods and services at below-market prices. Subsidies play a significant role as a tool in government expenditure policy. They influence resource allocation decisions, income distribution, and expenditure efficiency (Schwartz & Clements, 1999).

In the case of Georgia, subsidies are the main instrument for support to the agricultural sector, with direct subsidies accounting on average 45 percent of total government expenditure in the sector (2014-2024). The government provides subsidies for most of the country’s main crops, including wheat, grapes, hazelnut, tangerines and apples.

Given the scope of this policy brief, only subsidies for major perennial crops – grapes, hazelnuts and apples – are discussed. This as as the wheat sector involves additional food security considerations and due to lack of data for tangerines. Among perennial crops grapes have the highest share of total production (46 percent, including both white and red grapes), followed by tangerines at 14 percent, apples at 10 percent, and hazelnuts at 8 percent (2023, Geostat).

This policy brief firstly explains the Georgian context in more detail, followed by sub-sections discussing each major perennial crop sector, ending with conclusions and policy recommendations.

The Georgian Context

Agriculture plays a crucial role in Georgia’s economy. As of 2024, 39 percent of the population resides in rural areas (Geostat, 2024), where agriculture serves as the primary source of income. The sector employs the largest share of the country’s workforce—17 percent (Geostat, 2023)—yet it contributes to only 7 percent of Georgia’s GDP (Geostat, 2023).  At the same time, the disparity in income, and other major socio-economic indicators between the rural (agricultural) and urban population is large. For example, in Tbilisi, the capital of Georgia, the average monthly nominal earnings are 78 percent higher than the average for the rest of Georgia. Additionally, Tbilisi accounts for 70 percent of the total value added generated in the country (Geostat, 2023).

In recent year, the country has undertaken significant efforts to modernize and improve the agricultural sector, yet significant challenges remain. Georgian agriculture is largely characterized by small, fragmented family farms focused on subsistence farming with restricted market access. They are highly vulnerable to weather conditions, yet there is little awareness of or adoption of insurance and risk mitigation measures (State Audit Office of Georgia, 2023). Traditional farming methods remain dominant, with limited use of modern technology. Additionally, most farmers operate on a small scale and lack cooperation and coordination, further hindering efficiency and competitiveness. As a result, they often struggle with low productivity and have difficulty producing high-quality products in stable quantities. Lastly, a high dependency on the Russian market for most agricultural products poses significant risks, as Russia is not a stable trade partner.

Given this context, agricultural subsidies are a highly important topic in Georgia. The Georgian government implements various subsidy programs to support agricultural sectors such as fruit production, viticulture, hazelnut farming, and wheat production. These initiatives aim to promote the sales of grapes, non-standard apples, and tangerines, enhance hazelnut production, and ensure food security by subsidizing essential staples like wheat, particularly during the Covid-19 pandemic.

Starting from 2014 to 2024 (Figure 1), the share of subsidies in total agricultural expenditure has followed an increasing trend, ranging from 21.4 percent in 2014 to peaking at 67.5 percent in 2021. In 2024 the respective share is 54.1 percent.  A decline occurred in 2022–2023, following the stabilization of the Covid-19 pandemic. Apart from this, the share of subsidies within agricultural expenditures has been increasing over the last ten years.

Figure 1. Total and subsidy expenditures on agriculture, million GEL (2014-2024)

Graph showing total expenditures and agricultural subsidies in Georgia from 2014 to 2024.

Source: Geostat, 2025.

While these programs are designed to assist farmers and increase sales, how these subsidies support in addressing the mentioned structural challenges – therefore advancing the effectiveness of the sector – is under question.

The Grape Subsidy Programs

The grape subsidy programs in Georgia are primarily aimed at supporting viticulture in key wine-producing regions, such as Kakheti, Racha-Lechkhumi, and Kvemo Svaneti. These subsidies were designed to stabilize farmers’ incomes and ensure smooth harvests, to guarantee that even lower-quality grapes will be sold, particularly for grape varieties used in wine production. In general, the government uses two types of subsidies: direct and indirect. Direct subsidies involve paying farmers a certain amount of money per kilogram of grapes. Indirect subsidies are implemented through state-owned companies that are responsible for purchasing grapes from farmers.

Georgia’s grape subsidy program (direct subsidies) was introduced in 2008 and has been implemented every year except for in 2018 and 2019. Starting from 2014, the government provided substantial direct financial support to grape producers. However, starting in 2017, direct subsidies began to decline sharply, and by 2018–2019, the government announced that it would no longer directly subsidize the grape harvest. However, during this period, the state’s grape purchasing program remained in place, purchasing any surplus grapes left on the market after private acquisitions.

The Covid-19 pandemic in 2020 prompted a renewed surge in subsidies, with financial support reaching its highest levels in years. This elevated support continued until 2022 but was significantly reduced again in 2023 (by 63 percent), following a decline in production (Figure 2).

Figure 2. Grape production, subsidies and wine exports (2014-2023)

Source: Geostat, 2025.

Grape production has generally followed an upward trend, with record harvests in 2019 and 2020. Given the absence of direct subsidies in 2017 and 2018, the effect of subsidies on production levels is questionable. In more recent years, production has become more volatile, displaying a noticeable decline by 2023.

Wine exports, a crucial part of Georgia’s economy, have grown steadily, with volumes peaking in 2022, and persisting at high levels ever since. Export revenues have also increased consistently, reaching an all-time high in 2024, according to preliminary data.

The main destination for the Georgian wine sector is CIS countries. Russia accounts for the largest share among the CIS, with an average of 75.4 percent, between 2014-2024. Russia’s share has been increasing in recent years, reaching 85.8 percent in 2024 (among CIS countries). The average share of exports to the EU of total exports is 10 percent (Figure 3).

Figure 3. Wine exports by country groups (2014-2024)

Source: Geostat, 2025.

Although subsidies played a key role in revitalizing Georgia’s wine industry following the collapse of the Soviet Union, especially as grape production and processing have increased over the years, their long-term impact have been problematic (Ghvanidze, Bitsch, Hanf, & Svanidze, 2020). Since subsidies were introduced in 2008, Georgia’s grape market has become heavily distorted, with prices shaped by government support rather than supply and demand dynamics.

Even though a significant portion of government funding for the sector is allocated to subsidies, the way in which subsidies affect grape production levels is not obvious. Other sector insufficiencies, such as quality issues and exporting market diversification are inadequately addressed. Grape quality remains a key issue, as farmers lack incentives to improve production practices, knowing that the government will purchase their yield regardless. Additionally, Georgia’s heavy reliance on its main export partner, Russia, poses significant risks, and the share of exports to EU countries has not seen substantial growth. Overall, since the subsidies aim to stabilize producers’ income rather than to address structural issues in the sector, they may be considered social support.

The Apple Subsidy Program

The apple subsidy program in Georgia was introduced in 2014 to support the sale of non-standard apples after market prices dropped to a record low 0.02 GEL. Non-standard apples are damaged fruits that fall from trees due to wind, hail, or other natural factors. Typically unfit for direct consumption, these lower-quality apples are primarily used by factories to produce apple concentrate. The program aimed to stabilize prices and provide financial relief to farmers. Processing companies received financial support for each kilogram of non-standard apples purchased.

The program was discontinued between 2015 and 2019, before it resumed in 2020. The number of companies involved in purchasing non-standard apples for further processing ranges from 12 to15 over the years.

As for apple production levels, although there were significant production surges in 2016, 2018, and 2020, these increases have been volatile and unstable.

Figure 4. Apple production, subsidies and exports (2014-2023)

Source: Geostat, 2025.

In terms of exports, the volume increased sharply between 2018 and 2019, reaching its peak in 2021 before gradually declining. Most apple exports are directed to CIS countries, with Russia accounting for an average of 94 percent between 2018 and 2024. In contrast, the EU’s share remains minimal, averaging less than 1 percent, with no exports recorded to the EU in half of the considered years.

Figure 5. Apple exports by country group (2014-2024)

Source: Geostat, 2025.

While apple production is highly vulnerable to weather conditions, the adoption of insurance remains low. The provided subsidy program supports farmers in producing lower-quality non-standard apples, thus limiting the incentives to enhance product quality, productivity, or production practices, as farmers rely on the government to purchase their produce regardless. Similar to the grape industry, government support in the apple market functions more as a social assistance rather than a tool for industry advancement.

The Hazelnut Subsidy Program

Georgia introduced the Hazelnut Production Support Program in 2022 to enhance competitiveness, assist farmers, and improve disease management. The program registered hazelnut orchards in a national cadaster, enabling better monitoring and targeted support, to subsidize the purchase of pesticides and agrochemicals essential for hazelnut care and cultivation. The program has continued in 2023 and 2024, with subsidies amounting 22 and 22.6 million GEL, respectively.

Hazelnut production in Georgia has been highly volatile in the past decade. The sector experienced its most severe crisis in 2017-2018 when fungal diseases and an Asian stink bug (Pharosana) invasion devastated yields. Consequently, both the quantity and quality of hazelnut production declined. In 2019, the production began to recover, peaking in 2021. However, unfavorable weather conditions resulted in a decline in 2022, with only a partial rebound in 2023.

Figure 6. Hazelnut production and exports (2014-2023)

Source: Geostat, 2025.

Hazelnut is mainly exported to EU countries, with an average share of 65.3 percent, between 2014 and 2024. The share of CIS countries in this period is 20.2 percent. However, the share exported to EU countries has been declining 2023 and 2024, to 52.4 and 56.7 percent, respectively.

Figure 7. Hazelnut exports by country group (2014-2024)

Source: Geostat, 2025.

The subsidy scheme in the hazelnut sector seems to be more targeted at the issues the sector is facing, compared to the other discussed programs. The effects are however yet to be explored as the program began in 2022. However, several challenges remain, such as insufficient technical facilities for drying and storing goods essential for ensuring the quality of products (Gelashvili, Deisadze & Seturidze, 2023).

Conclusion and Recommendations

Although the government of Georgia provides substantial support for the agricultural sector, it still suffers from various challenges. Product quality, high vulnerability to weather events and export dependency on unstable partners are major issues for the grape and apple sectors. Further, the effectiveness of the direct financial support and the corresponding incentives within these sectors can be questioned.

For these crops, the subsidy programs seem to function more as social assistance rather than tools for industry development. In the grape sector, guaranteed government purchases reduce incentives for farmers to improve grape quality. Similarly, the apple subsidy program encourages the cultivation of non-standard apples, as farmers rely on state-backed purchases rather than market-driven quality improvements. Apple production has also shown significant volatility over the years, further highlighting the sector’s instability.

Additionally, heavy dependence on Russia as a primary export market for these crops presents economic risks. Diversification, particularly to the EU, has remained limited.

As for the hazelnut sector, the subsidy program aims to address some of the structural challenges, while this sector also relies less on the Russian market. However, some issues with infrastructural equipment remain unresolved.

Overall, the share of subsidies in agriculture is very high; further, the design of the programs mainly prioritizes short-term income stability for farmers rather than long-term market competitiveness and sectoral development. To address the discussed systemic challenges, it is essential to develop targeted policies tailored to the specific needs of each sector. While the priorities may differ across each crop, several key areas require focused attention:

  • Quality of Products – Enhancing product quality through ensuring food safety standards, improved farming and manufacturing practices, and better regulatory frameworks can help increase competitiveness in both domestic and international markets.
  • Market Diversification – Strengthening ties with new international partners and improving branding strategies can help industries access new markets and reduce risks associated with economic or political fluctuations in dominant trade partners.
  • Infrastructure Development – Poor infrastructure remains a challenge for the sector. Investments in post-harvest drying and storage facilities, as well as modern machinery and equipment, will enhance efficiency, reduce losses, and improve product quality.
  • Adoption of innovative farming practices– Adopting innovative farming practices boosts productivity, lowers costs, and enhances sustainability. It helps farmers adapt to changing weather conditions, making agriculture more efficient, environmentally friendly, and resilient.

By addressing these fundamental issues, policies can play a role in contributing to the long-term stability and growth of the agricultural sector, ultimately strengthening the economy and increasing global competitiveness.

References

  • Gautam, M. (2015). Agricultural Subsidies: Resurging Interest in a Perennial Debate. Indian Journal of Agricultural Economics.
  • Gelashvili, S., Deisadze, S., & Seturidze, E. (2022). An Overview of the Georgian Wine Sector.
  • Gelashvili, S., Deisadze, S., & Seturidze, E. (2023). Overview of the hazelnut sector in Georgia: past trends and the way forward. Tbilisi: ISET Policy Institute.
  • Ghvanidze, S., Bitsch, L., Hanf, J. H., & Svanidze, M. (2020). “The Cradle of Wine Civilization” – Current Developments in the Wine Industry of the Caucasus. Caucasus Analytical Digest, 117, 9-15.
  • Jayne, T., & Rashid, S. (2013). Input Subsidy Programs in Sub-Saharan Africa: A Synthesis of Recent Evidence. Agricultural Economics, 44, 547-562.
  • Schwartz, G., & Clements, B. (1999). Government subsidies. Journal of Economic Surveys, 13(2), 119-148. doi:10.1111/1467-6419.00079
  • State Audit Office of Georgia. (2023). Audit Report on the Development and Management of the State Agricultural Insurance Program.

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