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EU Induced Institutional Change in
Post-Soviet Space

This book analyses the role of the European Union in the process of institu-
tional change in its Eastern neighbourhood and explains why EU policies
arrive at contradictory outcomes at the sectoral level. Combining EU studies
approaches with insights from the fields of new institutionalism, international
development studies and transnationalisation, it explains how the EU policies
contribute to rule persistence or lead to institutional change.
Highlighting the importance of investigating how the policies of external
intervention interact with domestic institutions, the book also provides a
coherent presentation of the political and economic problems of Ukraine and
Moldova and a comparative analysis in key areas at critical junctures of their
development.
This book will be of key interest to scholars and students of European
Union politics and more broadly to International Relations, post-Soviet and
Russian studies.

Ryhor Nizhnikau is Senior Research Fellow in the EU’s Neighbourhood and

Russia Programme at the Finnish Institute of International Affairs, Finland.
Routledge Studies in European Foreign Policy
Series Editors: Richard Whitman, University of Kent, UK, and
Richard Youngs, University of Warwick, UK.

This series addresses the standard range of conceptual and theoretical ques-
tions related to European foreign policy. At the same time, in response to the
intensity of new policy developments, it endeavours to ensure that it also has
a topical flavour, addressing the most important and evolving challenges to
European foreign policy, in a way that will be relevant to the policy-making
and think-tank communities.

EU Security Missions and the Israeli-Palestinian Conflict

Amr Nasr El-Din

The EU and Russia in Their ‘Contested Neighbourhood’

Multiple External Influences, Policy Transfer and Domestic Change
Laure Delcour

Europe and Iran

The Nuclear Deal and Beyond
Cornelius Adebahr

EU-Russia Relations in Crisis

Understanding Diverging Perceptions
Edited by Tom Casier and Joan DeBardeleben

The European Union’s Evolving External Engagement

Towards New Sectoral Diplomacies?
Edited by Chad Damro, Sieglinde Gstöhl and Simon Schunz

EU Induced Institutional Change in Post-Soviet Space

Promoting Reforms in Moldova and Ukraine
Ryhor Nizhnikau

For more information about this series, please visit: https://www.routledge.

com/Routledge-Studies-in-European-Foreign-Policy/book-series/RSEFP
EU Induced Institutional Change
in Post-Soviet Space
Promoting Reforms in Moldova and
Ukraine

Ryhor Nizhnikau
First published 2019
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
711 Third Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2019 Ryhor Nizhnikau
The right of Ryhor Nizhnikau to be identified as author of this work has
been asserted by him in accordance with sections 77 and 78 of the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalog record has been requested for this book

ISBN: 978-1-138-56976-8 (hbk)

ISBN: 978-0-203-70410-3 (ebk)

Typeset in Times New Roman

by Taylor & Francis Books
Contents

List of tables vi
Acknowledgements vii

1 Introduction 1
2 Theorising institutional change in the Eastern neighbourhood 12
3 Reforming Ukraine: the EU’s institutional change in Ukraine’s
migration sector 46
4 The EU’s institutional change in the environmental protection
sector 100
5 Reforming Moldova: the EU’s institutional change in Moldova’s
migration sector 132
6 EU-induced institutional change in Moldova’s environmental
protection sector 170
7 EU-induced change in the neighbourhood: lessons from Ukraine
and Moldova 197
8 Conclusion 209

Index 221
Tables

2.1 The EU’s policies of institutional change: explaining the

outcomes 36
7.1 The EU strategies and the observed outcomes 200
Acknowledgements

This work was made possible only due to invaluable help, guidance and
encouragement from my colleagues and friends. Finnish Institute of Interna-
tional Affairs offered generous support and intellectually stimulating envir-
onment to develop ideas and write. I am especially grateful to Arkady
Moshes for his in-depth insights and invaluable support with this project.
I benefitted immensely from generous hospitality of Institute for Russian
and Eurasian Studies at Uppsala University and the Centre for EU-Russia
Studies at University of Tartu over the years. I am particularly indebted to
Stefan Hedlund, Viacheslav Morozov and Leonid Polishchuk for their
invaluable advice and kind support. Sofie Bedford, Tom Casier, Antoinetta
Dimitrova and Jussi Lassila offered great suggestions on this work.
I am truly indebted to my interviewees in Moldova and Ukraine, who
devoted their time and efforts to help me with this research. I also gratefully
acknowledge kind assistance of the Series Editors Richard Whitman and
Richard Youngs and two anonymous reviewers. Their comments helped to
improve this work significantly. Special thanks to Andrew Taylor, Sophie
Iddamalgoda and Julia Hanney for their assistance with this project.
On a final and most important note, this book would be impossible without
the support of my family. I am very grateful to my mother and sister for
everything.
This page intentionally left blank
1 Introduction

The story of EU-induced institutional change in Ukraine and Moldova is one

of both successes and failures. Both the EU studies literature and European
Commission’s reports have suggested that Ukraine and Moldova have been
the most active reformers in the Eastern neighbourhood. In both countries,
the EU, alongside the other Western donor institutions, attempts to induce
change by designing and transferring its sophisticated rules. Rule transfer is
backed up by a set of economic, financial, expert and knowledge assistance
and a build-up of state-of-the-art state structures, which turned Kyiv and
Chisinau into the largest recipients of EU’s external support. The external
efforts are seemingly reinforced by the positive development on the ground.
Local elites proclaim their serious determination to adhere to the EU plans
talking about ‘civilisational choices’ and pledging to ‘live anew’. Pro-EU
popular revolutions as well as shifts in societal attitudes shall guarantee the
sustainability of the reforms.
However, the results are less convincing. By 2017, despite profound
attempts to induce institutional change in Moldova and Ukraine, the EU has
arrived at contradictory reform outcomes even in sectors which are the most
susceptible to EU-induced reform – those of migration and environmental
protection. Against the background of the ‘biggest foreign policy success
ever’ – the Enlargement of the European Union to Central and Eastern
Europe in 2004, and the amounts of resources and knowledge invested – this
fact seems quite disturbing. In reality, despite significant investments by var-
ious transnational regimes in the development and transformation of the
post-Soviet countries, after more than ten years of active EU involvement in
building peace and prosperity at its borders, its induced economic and poli-
tical ‘reforms’ resulted in persistence of old rules, more conflicts and less
economic and political stability. More than that, the EU major transforma-
tive initiatives coincided with the large societal shocks and the erosion of
pluralism and even gradual power monopolisation. How the EU policies
account for these outcomes and the observed variations is one of the main
interests of this study.
This work begins with a puzzle. It is self-evident that any external policies
that endanger the status quo of the entrenched elites are expected to be
2 Introduction
counter balanced by the behaviour of domestic actors, which resist deeper
changes. However, the puzzle is that even when there is no major threat to
entrenched interests, when proposed reforms are tailor-made to ‘importing
context’ and the interests of rent seekers and the incentives overcome the costs
of compliance, the EU (Western-led) reforms do not induce compliance and
institutional change. Despite similar conditions in both contexts, very
favourable for the transfer of EU rules, including equivalent pressures and
benefits, this study shows there is a variation in institutional outcomes in the
environmental protection and the migration sectors in both Moldova and
Ukraine. The rules have been implemented to a greater extent in the envir-
onmental protection sector than in the migration sector. Given the similarity
in circumstances, what explains these diverging outcomes?
To understand and explain the puzzle, this book advances three inter-
connected arguments. First, it argues that the conventional understanding of
the externally induced change and the role of the EU is incomplete and even
misleading. The EU-centred approaches identify the key to transforming the
countries in the provision of incentives together with building partnership and
joint ownership with local elites to align EU demands with their preferences.
The external actors provide numerous incentives, often set clear lists of reform
criteria, to which local elites willingly express their utmost commitment (and
create their own sub-lists and Action Plans), and yet political and economic
reforms result only in mere illusions of free and fair elections, effective state
agencies, protected property rights, existing and functioning market economy
and independent judiciary. I argue that formal adoption of EU rules and lack
of implementation is the natural outcome of the top-down rule transfer. This
argument is valid notwithstanding the extent of benevolence and intentions of
the local elites and state actors and their ‘political will’. As is shown, domes-
tic elites know what changes are needed and what measures are expected to
be implemented, so when they do not act, it is usually not due to their
ignorance or lack of capacities.
Thus instead of arguing in favour of more of the same EU-centred solu-
tions, this study points at deficiencies of the EU-centred explanations and its
actor-based solutions. From this perspective the dominant external agenda is
counterproductive, as just the provision of incentives, joint ownership or
socialising with the elites (government, business, bureaucracy) does not
change the structures of the domestic opportunity and incentive system and
hence does not liberate domestic actors from a ‘system which saps their
opportunities and incentives’ (Acemoglu and Robinson 2011). Such approa-
ches facilitate manipulation of the EU rules, while for the rest of the societies
the access to information and organisations remains restricted and political
and economic rights limited.
Second, this study argues that to understand why interventions of interna-
tional actors (EU, US or IMF) often do not facilitate and even prevent insti-
tutional change, thorough analysis of the domestic institutions and in
particular, allocation of power is needed. To this end, it particularly points to
 Introduction 3
the necessity to study how external interventions address a central and defin-
ing institutional feature – domestic actors’ lack of political and economic
rights. The latest research on institutions increasingly points at prevalence of
structural factors, in particular access to political and economic institutions
and organisations, in explaining institutional change. Institutions, as the rules
of the game, ‘matter’ (North 1990: 3). They guide behaviour of actors, the
creation and functioning of organisations and serve as mechanisms, through
which social choices are determined (Hedlund 2013; North et al. 2009). Since
post-Soviet countries mostly suffer from inefficient and exclusive institutions,
this study specifically adheres to the view of institutional change as a constant
competition between different social groups and entrenched elites for rights
and power. If institutions emerge in response to pre-dominant forces at the
time of their creation, subsequent changes are an outcome of the social con-
flict and the result of a negotiation between individuals and groups (Bates
2014; Roland 2004).
The book suggests that one of the main problems with EU interventions so
far is that external best practices and the technocratic solutions provided to
these countries fail to address complex institutional problems and by and
large address symptoms rather than their causes. In cases of state capture and
‘privatisation’ of the state by various interest groups the EU incentives and
constraints are distorted. External templates promote institutional mono-
cropping, whereas focus on elite actors creates single gatekeepers leading to
nothing but rule persistence and institutional decay. Transfer of highly stylised
models is close to impossible and these ‘one size fits all’ solutions, which are
presumed to be universally transferrable and suitable for different local con-
texts and cultures (see Evans 2004), appear to be one of the main causes of
rule persistence.
Finally, based on the analysis of the instances where interventions have
been successful, this work carefully reassesses EU policies and presents a
novel approach to externally induced institutional change. I argue that no
institutional change is possible without reallocation of power and resources to
the broader society. External policies can facilitate institutional change by
assisting domestic actors to acquire rights, get access to rulemaking and set
up organisations and coalitions to defend their interests. This perspective
primarily highlights that structure, rather than agency, matters for institu-
tional change and argues that external interventions should emphasise the
promotion and enforcement of bottom-up solutions to domestic Ukrainian
and Moldovan problems.

Towards a new approach: explaining the variation through

empowerment and rulemaking
The book builds upon latest advances in institutional studies and argues that
the outcome of institutional change largely depends on how the policies of
international actors address the problem of lack of power and rights. It
4 Introduction
identifies causes for success and failure in domestic institutions, the allocation
of power within them, and a set of arrangements that constitute the core of
the EU strategies of inducing institutional change, and especially how the
external strategies solve the problem of access and rights. In doing so, this
study is significantly different from the normal ‘foreign policy’ approach to
EU’s neighbourhood.
This study develops two EU ideal type strategies combining studies of
EU impact on proliferation of transnational rules and their effect on trans-
formation of domestic organisations (Langbein 2015; Bruszt and McDer-
mott 2014) with studies of the political economy problem in the developing
countries (see, Jacoby 2000; Easterly 2006) to identify how the external
policies engage with domestic institutions. These strategies are defined as
‘outcome-oriented’ and ‘process-oriented’, based on the degree of access to
rulemaking and extent of empowerment of various stakeholders. Primarily
building on this re-conceptualisation of institutional change this study sets
out to explain the variation in outcomes by the external actor’s ability to re-
allocate power, engage non-state stakeholders in institution-building and
diminish the power of incumbent elites (Rodrik 1999; Evans 2004). This
approach helps us understand how external actors can facilitate institutional
change (which depends on the ability of broader societal forces to acquire
power and defend rights), create a possibility for state and non-state actors
to search for optimal institutional solutions and also erode the entrenched
elites’ hold on power .
The research framework makes it possible to identify how the EU involves
domestic actors in rulemaking and builds their capacities. Rulemaking is here
defined by degree of access and flexibility, identified as the ability to provide
input in the creation of new rules. Empowerment is defined by extent of
allocation of technical, financial and knowledge assistance between a variety
of domestic actors and their involvement in the monitoring of the rule
implementation. Two strategies are differentiated upon ability to access and
participate and acquiring resources by a variety of actors.
The process-oriented strategy is characterised by open and flexible rule-
making and broad empowerment of both state and non-state stakeholders.
Open access and flexible rulemaking promote the ability to participate in and
(re-)design domestic institutions by a broad variety of domestic actors. In the
process-oriented strategy, rulemaking is primarily based on ‘public discussion
and exchange’, which fosters the emergence of a deliberative process involving
both state and non-state stakeholders (Evans 2004: 30, 37). The process-
oriented strategy extends rights to disempowered groups, offering them
access, and stimulates competition and cooperation between domestic stake-
holders to negotiate the new rules to create more optimal solutions. Flex-
ibility particularly enables relevant state and non-state stakeholders to adapt
external models to the local context and come up with ‘hybrid’ solutions (see
also Nizhnikau 2017). Adopted rules can be consequently re-negotiated in the
future when necessary.
 Introduction 5
The involvement of a variety of stakeholders in rulemaking affects not only
efficiency but also the legitimacy of new institutions. It forms a local power
base, which generates natural interest in subsequent enforcing and monitoring
of their implementation. These actors invest local knowledge and resources in
new rules (Jacoby 2001). Last but not least, the ability to design and control
enforcement builds trust in new rules and fosters supportive social norms
(Greif and Tabellini 2010). On the whole, open access and flexible rulemaking
serves as a theoretical contrast to top-down rule transfer.
The process-oriented strategy promotes broad empowerment aimed at
building the capacity of domestic actors to more efficiently utilise their parti-
cipatory rights and defend their interests (Rodrik 1999: 19). Broad empower-
ment offers opportunity to create non-elite organisations, build broader
coalitions of domestic (and external) reformers and mutually monitor new
rules (Aspinwall 2009, 2013; Jacoby 2008). As underlined by Langbein
(2015), most domestic actors lack capacity to pursue and defend their inter-
ests. They also lack resources to engage in problem-solving. Broad empower-
ment primarily addresses the existing distortions in resources, information
and capabilities and enables a wider range of domestic actors to defend their
interests, exchange information and cooperate. Empowerment allows non-
state stakeholders to develop and engage in information gathering and mon-
itoring creating necessary checks on predatory elites. It also strengthens and
enables the institutionalisation of discussion and competition between the
state and non-state stakeholders to jointly solve emerging problems. Dis-
advantaged domestic actors, which often include state structures, can set up
viable pro-reform coalitions.
In contrast, the outcomes-oriented strategy promotes the adoption of rules
pre-selected by the EU, the transfer of external rules and templates, and is
built mainly on intergovernmental cooperation. From a theoretical perspec-
tive, restricted access to rulemaking allows entrenched elites to maintain
status quo, since ‘institutions are not necessarily or even usually created to be
socially efficient; rather they or at least the formal rules are created to serve
the interests of those with the bargaining power to devise new rules’ (North
1990: 16). Polishchuk (2012) strongly shows how new institutions are
manipulated or undermined in the absence of broadening the societal support
for the new rules via a redistribution of power.
The outcome-oriented strategy prioritises narrow empowerment primarily
targeting the build-up of capacities of state institutions. Its primary aim is to
support the elite actors to comply and facilitate the implementation of exter-
nal templates and pre-selected rules. Narrow empowerment heavily invests in
state regulatory and monitoring capacities.
Rulemaking and empowerment are interdependent and mutually reinfor-
cing. On one hand, to use their newly acquired capacities domestic actors
should be allowed to take part in rulemaking. On the other hand, without
broad empowerment participation may not be efficient. In combination,
rulemaking and empowerment contribute to greater transparency and
6 Introduction
accountability and limit opportunities of the entrenched elites to exploit state
institutions and manipulate rules.
As a result, this approach highlights the fact that the theory of institutional
change is built on (re-)distribution of political power within the society
(Haggard 2004: 75) and deliberative institution building. It shows that if
‘access’ to the creation of institutions and the formation of organisations is
restricted, institutions may be chosen by the incumbent entrenched groups to
maximise their benefits and rent extraction and as such only strengthens
power disparities.
Efficiency of new rules requires finding optimal solutions which depend on
the ability to create deliberative institutions, establishing a ‘joint planning,
problem-solving’ process in which ‘strategies and solutions will be articulated
and forged through deliberation and planning with other participants’ (Fung
and Wright 2003: 20). Participation of previously disadvantaged groups
usually representing a broader society increases legitimacy, improves enforce-
ment of rules and generates trust. Redistribution of power within the society
leads to improved accountability, more equal allocation of information and
resources and eventually fosters cooperation between societal and state actors
(North et al. 2009; Polishchuk 2012: 42; Acemoglu and Robinson 2011).
In sum, this study claims that effective institutional change results from
flexible rulemaking strategies and institutionalised involvement and empow-
erment of the state and non-state stakeholders. It shows how the external
actor can address the problems of lack of ‘access’ and power within a given
society and predatory behaviour of the domestic elites by facilitating partici-
pation in ‘joint planning [and] problem-solving’ through empowerment, open
access and flexible rulemaking.

Methodology
The study applies in-depth process tracing based on public documents, inter-
views with officials and the media reports. The empirical data combines sec-
ondary sources of information with 47 open-ended interviews conducted in
2015–2017 and the analysis of official EU, Ukrainian and Moldovan docu-
ments. Reports and analysis from non-state and state agencies and groups in
the migration and environmental protection sectors are combined with media
articles and reports. The study combines both quality broadsheets of public
record and well-reputed online media such as Ukrainska Pravda, Zerkalo
Tyzhdnya, Kyiv Post, Censor.net and Newsmaker. The reports from non-state
organisations, which consistently and closely followed and participated in
monitoring or advancing migration and environmental protection reforms,
were also selected.
Interviews were conducted mostly with state and non-state actors in Kyiv,
Lviv, Odesa, Chisinau, and to a lesser extent with EU officials and repre-
sentatives of international organisations. A quarter of the interviews were
conducted with state officials in Ukraine and Moldova and the rest of the
 Introduction 7
interviews with policy, academia, journalists and NGO experts. Several inter-
views with non-state stakeholders used Skype. Interviewees were selected
based on their responsibilities and involvement in reform priority areas.
These sources were analysed systematically using the same procedure in the
same manner from outlining the process and way of constructing the reform
agenda to analysing the process of its realisation in the same way using simi-
lar type of secondary sources by identifying mechanisms of the creation,
adoption and implementation of relevant reforms.
This work uses the most similar case, different outcome (MSDO) design,
which is combined with in-depth process tracing to identify causal factors and
explain differences in outcomes as well as to test different explanations (Berg-
Schlosser and de Meur 2009; George and Bennett 2005).
The cases are carefully selected for a cross-country, cross-sector compar-
ison. Both migration and the environmental protection sectors offer favour-
able reform conditions as presented by the EU studies literature. In both
countries, the EU proactively offered significant sectoral incentives and pro-
moted domestic reforms by setting clear agenda, benchmarks and providing
technical and financial assistance. The policy and preferential misfit between
the EU rules and domestic institutions is similar, as well as level of adaptation
costs for domestic players, their preferences and constraints.
Both governments showed willingness to allow EU-induced reforms in both
sectors and their alignment with the EU demands in exchange for significant
economic and financial assistance. Relevant agencies also had low capacities
and lacked responsibilities, professional staff and resources. By 2009, both
sectors were equally captured by vested interest groups and were turned into a
source of rents for various groups. Society fully endorsed these efforts. Dis-
cussion of the migration sector omits anti-discrimination reforms in both
countries (Block 4 of VLAP), which unlike anti-corruption reforms, lacked
public support and were too divisive.
Both migration and environmental protection sectors in Ukraine and
Moldova have been equally less politicised. In 2010, they represented little
threat for domestic elites’ core interests, and their political and economic
power. VLAP reforms included anti-corruption measures, which however
originally bore little costs. Elites in Ukraine and Moldova would not be a
target in 2009–2013, and would maintain control over the reform process. In
Ukraine, a demand and opening for far-reaching measures emerged only with
the Euromaidan Revolution, which directly clashed with the interests of
power-holders. The Euromaidan Revolution makes the case of Ukraine cen-
tral to this study.
The focus on policy sectors as the unit of analysis allows us to draw more
in-depth and nuanced conclusions. The similarities between the migration and
environmental protection sectors allow us to control for a number of impor-
tant variables, better trace the causes behind institutional changes and better
understand the role of external actors in inducing them. In turn, the com-
parison of Moldova and Ukraine as country cases can broaden the
8 Introduction
applicability of the findings and potentially generalise them to explain the role
of the EU in institutional outcomes in other countries in the region. Simila-
rities in institutional conditions, legacies and external pressures allow control
for country specific factors. The countries also face similar institutional chal-
lenges and problems of predatory corruption and bad governance. Both are
defined as limited access orders, with weak state capacity and rent-seeking
elites, similar levels of economic development, political systems and level of
democracy and competition and state structures. They have similar constitu-
tional arrangements, parliamentary-presidential systems and a major role of
oligarchs. Both in Moldova and Ukraine the total size of oligarchs’ assets was
estimated at around one-third of the economy. Ukraine and Moldova also
have similar levels of socio-economic development and poverty, being classi-
fied by the World Bank as lower-middle-income economies.
Neither Ukraine nor Moldova completed their nation-building processes.
They have divided societies on ideological, identity, language, ethnic and
religious lines. Importantly, civil society and non-state actors are more
active in Ukraine and Moldova than in any other post-Soviet country.
Though a weakness of civil society in post-communist Europe is a fact
(Howard 2003), in the studied cases non-state actors gradually stepped up
their presence and become more vibrant. In Moldova and Ukraine civil
society played a key role in monitoring and mobilising people (Lutsevych
2016; Raik 2006), spreading information and knowledge and even perform-
ing certain state functions. The changes in people’s attitudes, and in parti-
cular popular revolutions, offered an additional impetus to civil society and
elevated their role.
The developments in Ukrainian civil society included not only more active
NGOs but also the ongoing transformation of personal identity towards more
individualistic self-reliable identities (see, for example, Hrytsak 2017) and
societal values towards less paternalistic and more interpersonal, increasing
levels of civic engagement, trust, and tolerance (see, Razumkov Centre’s opi-
nion polls). Similar trends were observed in Moldova (Bădescu et al. 2004).
After the Euromaidan Revolution in 2014 and Twitter protests in 2009 the
role and impact of civil society became even bigger. Still legacies of the past
have an impact (Pop-Eleches and Tucker 2011, 2017) and civil society con-
tinues to be rather weak and dependent in both countries.
The period of time includes reforms in 2009–2017, from the inauguration
of Eastern Partnership, when the EU started to actively promote changes in
the migration and environmental sectors and provided significant incentives
to make the reforms attractive to the Ukrainian and Moldovan elites.

Structure of the book

This study is divided into eight chapters. Chapter 2 outlines the theoretical
framework and discusses the pitfalls of external interventions, in particular
institutional monocropping and elite-oriented capacity building.
 Introduction 9
The book continues with the analysis of institutional change in Ukraine in
Chapters 3 and 4, which respectively cover the migration and environmental
sectors. Chapter 3 investigates the lack of implementation of the Visa Liber-
alisation Action Plan. The discussion starts with the analysis of reforms in
document security, border and migration management under the Yanukovych
and Poroshenko administrations. The disappointing lack of transformation in
these technical areas is followed by a study of anti-corruption reforms, which
offers a remarkable insight into the relevance of flexible rulemaking and
empowerment.
Chapter 4 looks at the EU impact in Ukraine on the example of environ-
mental protection reforms. It describes the effects of process-oriented strategy,
which gives non-state actors the opportunity to participate and have an
influence in the decision-making process.
Chapters 5 and 6 cover the EU’s efforts to induce institutional change in
the migration and environmental protection sectors in Moldova. Chapter 7
summarises and compares the empirical findings in light of the theoretical
arguments. It analyses implications for the EU external policies in general,
and explains the divergent outcomes through the EU strategies.
Finally, Chapter 8 concludes with a discussion of broader theoretical and
policy implications.

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2 Theorising institutional change in the
Eastern neighbourhood

The starting point of the theoretical argument that guides this research can
be depicted by a statement by William Easterly, who, while talking about
the decades long external interventions to promote institutional change,
development and fight poverty and reform institutions, argued that lack of
change is not a result of lack of knowledge, resources or conditionality. As
he pointed out, while talking about one of the exemplary targets of external
intervention, ‘the technocratic illusion is that poverty results from a shortage
of expertise, whereas poverty is really about a shortage of rights’, thus
making the exclusion of societal actors by the external agenda the core
problem of international development policies and its ‘moral tragedy’
(Easterly 2014: 7).
The core of the main argument explains why structure rather than agency
matters for institutional change. This chapter begins with a discussion of the
EU studies literature and its major debates and shows that the analysis of the
EU’s role in inducing institutional change in the neighbouring countries is
mostly EU-centred and actor-based. This chapter highlights the limitations of
EU studies and its main approaches, which do a good job presenting the
mechanisms and analysing the EU’s and domestic elites’ preferences and logic
of action, but only offer a limited explanation of the EU’s impact on domestic
institutional change.
The critique continues with the presentation the theoretical framework of
this study, embedded in new institutionalism theory – a combination of
historical institutionalism and rational choice institutionalism approaches. It
illustrates the importance of domestic institutions in explaining the outcome
of externally induced changes. Historical institutionalism highlights the
importance of legacies and culture and is particularly useful in under-
standing why rules change or persist over time. Rational choice institution-
alism complements historical institutionalism and helps to better understand
the role of the information and strategic interactions between actors. The
central part of the chapter returns to the discussion of the main argument,
and identifies and discusses how the EU strategies can affect institutional
outcomes.
 Theorising institutional change 13
Top-down change in the EU neighbourhood: critique of the literature
At the core of EU studies lies the analysis of the impact of the European
Union’s policies on domestic structures and processes. The literature pays
considerable attention to the factors that increase their efficiency and condi-
tions under which rule transfer results in rule and norm convergence with
European rules and values (Börzel 2010). The literature uses rationalism and
constructivism including insights from post-structuralism and inter-regional-
ism to study how pressures from transnational regimes (Vachudova 2005),
voluntary diffusion and policy transfers (Börzel and Risse 2012; Delcour
2017), leverage and pre-existing linkage to the West (Levitsky and Way 2006;
2010) can be important sources of domestic change. Overall, the impact and
efficiency of the EU in the neighbourhood, is analysed primarily through
conditionality and socialisation, nature of its interests and values, joint own-
ership and coherence of EU policies as well as the influence of external (f)
actors (see for example Kostanyan 2017, for a review).
The EU studies identify a number of debates on the EU impact. The first
approach derives from the Europeanisation and external governance litera-
ture. Europeanisation is defined as ‘a special instance of policy and institu-
tional diffusion’, where ‘diffusion’ is understood as the ‘spread of normative
standards and therefore policies and institutions highlighting different norm-
promotion mechanisms in particular, conditionality based upon cost-benefit
calculation, socialization and persuasion through mutual reason-giving and
challenging’ (Börzel and Risse 2012: 5). It studies the EU mechanisms and
their efficiency, which are centred on the discussion of conditionality and
socialisation as mechanisms of transferring the EU rules and knowledge. On
one hand, the efficiency of the EU policies is analysed through the provided
incentives and constraints – the external incentive model (Schimmelfennig
and Sedelmeier 2004a; 2004b; Vachudova 2005) – and on the other, on its
ability to change the perceptions and interests of the elites – the social learning
model (Checkel 2001; Schimmelfennig and Sedelmeier 2004a & 2004b; Schim-
melfennig et al. 2004). The latter identifies the power of persuasion – legitimacy,
identity and resonance – as a key mechanism of change (Schimmefennig and
Sedelmeier 2004a: 18–19; Youngs 2009). To measure the effectiveness of external
involvement, literature looks at the resonance of EU rules, size and the cred-
ibility of external incentives, i.e. how the offered incentives or power of attraction
affect the strategies and preferences of the domestic elites, policy conditionality
and capacity-building measures through assistance projects (Börzel 2010;
Schimmelfennig and Sedelmeier 2004a, 2004b; Sasse 2008; Lavenex 2014;
Vachudova 2005).
As the study of the external dimension of Europeanisation and in parti-
cular of the EU policies, external governance turned into one of the dominant
approaches of explaining the EU impact abroad. According to Lavenex and
Schimmelfennig (2009: 795), external governance is based on rule transfer
and is ‘particularly suitable to grasp this process of rule expansion beyond
14 Theorising institutional change
formal membership in the EU polity’. It studies the projection of the EU
power and purpose beyond its normative agency and explains the expansion
of the EU ‘boundaries’ through functional cooperation and a technocratic
approach to rule and policy-making (Bosse 2009; Wolczuk 2016). In parti-
cular, the external governance approach looks at the influence of the EU’s
institutional factors and ‘power-based’ explanations of interdependence to
understand how the influence of external ‘governance providers’ extends to
the selection, adoption and implementation of rules by the target states. In
this relationship, the EU neighbouring states are the targets of top-down rule
transfer, whose implementation is regarded as the main outcome and ‘the
deepest impact of external governance’ (Lavenex and Schimmelfennig 2009:
801).
Due to the observed variation in scope of differences, interests and institu-
tional barriers, the external governance literature distinguishes primarily
between hard (hierarchical) and soft (non-hierarchical) modes of governance,
depending on the level of symmetry of relations and modes of assistance and
monitoring (Lavenex and Schimmelfennig 2009: 801). Moreover, depending
on the type of driving force behind institutional change, the literature distin-
guishes between direct and indirect mechanisms.
Hierarchical governance is characterised by asymmetry of relations
between the rule provider and the rule taker, which takes place in a for-
malised relationship of subordination based on a set of binding prescriptions
and sanctions for non-compliance. The existence of precise rules, monitoring
and sanctioning determine the effective application of conditionality – the
main mechanism of rule transfer. Its active application highlights the pre-
dominance of a top-down rule transfer on the basis of the external incentives
model (Lavenex and Schimmelfennig 2009), whereas the other modes are
either difficult to find or exist and function in the ‘shadow of hierarchy’
(Börzel 2010: 191–192, 197).
Non-hierarchical governance requires a more symmetrical relation between
the parties, which is based on intergovernmental decision-making and pro-
blem solving (Schimmelfennig and Sedelmeier 2004a). In this regard, the
emerging conflicts of interest are solved primarily by negotiation. Primarily,
the goal of non-hierarchical governance is to achieve institutional change
through a development of common interests and alteration of the target
states’ preferences through bargaining, persuasion and mutual concessions
(Lavenex and Schimmelfennig 2009; Börzel 2010). It foresees ‘more hor-
izontal forms of network governance and communication in which rule
expansion progresses in a more participatory manner’ (Lavenex and Schim-
melfennig 2009, 796).
The second approach brings domestic context into the analysis to explain
discrepancies in the implementation of the EU demands. Literature empha-
sises ‘policy’ and ‘preferential fit’ of the EU demands to explain outcomes, on
the whole arguing that ‘outcomes of compliance with EU demands are
shaped by the “importing” context as much as the “exporting” organisation’
 Theorising institutional change 15
(Delcour 2017: 7). It connects EU level factors with domestic conditions and
preferences to understand the diverging efficiency of the EU mechanisms and
diffusion of its rules (Börzel and Risse 2012). Scholars pay closer attention to
the interactions between the EU factors and domestic actors and highlight
importance of less hierarchical mechanisms in the absence of membership
perspective (see Börzel 2010; Buscaneanu 2016; Delcour 2017). The studies
pay special attention to voluntary mechanisms of policy transfer including
lesson drawing, competition and mimicry and their co-existence with more
coercive mechanisms.
The focus on domestic context, in which the EU operates, accounts for
nature of the political regimes and degree of pluralism, competing identities
and pre-ENP legacies. Presence of pro-EU identities, more free political sys-
tems and linkage with the West is supposed to make policy or rule transfer
more efficient. However, special attention is paid to a variety of domestic
actors, including government, business elites, political parties and presence of
transnationalised actors within the countries, such as civil society as well as
the influence of veto players (Ademmer and Börzel 2013; Babayan 2016;
Dragneva and Wolczuk 2016). Based on the analysis of post-Soviet space and
limited state capacities, the literature particularly points at relevance of state
capacity for implementation of the EU templates and regulatory convergence
(Langbein 2015). From this perspective, even if the EU rules resonate well
domestically and elites are well incentivised or persuaded to accept the right
rules but reforms fail, it is often due to lack of state capacity.
The weakness of the hierarchical governance under the ENP and impor-
tance of domestic elites is specifically emphasised by the partnership
approach, which positions itself as an alternative approach to the external
governance. Due to peculiarities of the Eastern Partnership countries, the
partnership approach emphasises the process of a mutual convergence of the
EU and local government’s preferences, which can take the form of either
‘specific reciprocity’ or ‘diffuse reciprocity’ (Bosse 2010: 1295). The more
symmetric and less hierarchical relationship extends the analysis to the inter-
ests and preferences of the third state and requires the EU to search for
mutual benefits and preferences in its bilateral dialogue (Bosse 2010; Kor-
osteleva 2012).
In this regard, the partnership approach, as Korosteleva (2012: 15) points
out, is ‘an act of negotiated compliance’, which is to be tailor-made for the
EU’s neighbouring countries, thus creating a special platform for discussion
aspiring ‘to bring “the others” into the process of the EU’s construction of
“self” on the international stage’. The partnership, hence, is a soft tool of the
EU policies under the ENP, which is comprised of two constitutive elements
upon which the EU relations with the neighbouring countries are built:
‘shared values’ and ‘joint ownership’ (Korosteleva 2012).
Third, studies look at the EU as a normative power or organisational
entity. The latter shows that the EU is guided in its neighbourhood policies by
a combination of its previous experience aiming at repeating the previously
16 Theorising institutional change
developed procedures and approaches in its policies towards the new neigh-
bourhood (Sasse 2008; Delcour and Tulmets 2009). The former investigates
the normative nature of the EU and defines the EU as an ‘ideational’ actor
characterised by common principles and acting to diffuse democratic or
market norms within international relations (Manners 2002; Damro 2015;
Whitman 2011). In this regard, the EU, by defining what is ‘normal’, uses its
norms as mechanisms to project power beyond its borders and to induce
domestic political and economic changes. Literature particularly looks at the
value component in the EU foreign policy and how the EU promotes its
political and socio-economic values (Börzel and van Hüllen 2014). Finally,
the presence of rival international projects and transnational actors would
only increase the costs and undermine EU’s impact. Russia’s influence in
post-Soviet space is well documented in the literature (see also Ademmer
2017; Langbein 2015).
Overall, the EU studies highlight the fact that the efficiency of EU tem-
plates and its demands depend on elite-oriented incentive-based policies that
remain at the core of the analysis of the EU’s impact (Noutcheva 2018). EU
studies point out that incentives still play a key role in transforming
domestic agendas and domestic actors’ preferences (Ademmer and Börzel
2013), but should be aligned with domestic agendas, whereas state capacity
plays a key enabling role in fostering regulatory convergence (Delcour and
Wolczuk 2015). Actor-oriented perspective focuses on how borrowing
countries – government, bureaucracies, businesses and NGOs – contribute
to the analysis of the EU-induced change. The literature either identifies the
role of the domestic actors as potential ‘veto points’, ‘learners’ or transna-
tional diffusors or looks at how the EU demands can fit the ‘importing
context’. Thus, it primarily tries to re-assess and fine-tune the mechanisms
of rule and policy transfer and roles, interests and values of various trans-
national and domestic actors.
On a practical level, since 2011 and especially in 2015, the EU also reas-
sessed its involvement and fostered reform efforts on the basis of more
incentives, joint ownership and differentiation (ENP Review 2015: 9). It also
pays more attention to domestic context, offer tailor-made demands and
conditions stimulating domestic elites through policies of ‘more for more’ and
joint ownership. Incentives are larger and commitments are clearer whereas
the EU’s new resilience strategy foresees that its goals and priorities are
agreed with each individual partner. The ‘more for more’ principle, based on
the simple imperative – the more you reform, the more support you get from
the EU – became the key instrument of the EU under the revised ENP and
the Eastern Partnership (ENP Review 2015).
Despite much greater involvement of the EU in inducing institutional
change in the ENP countries, bad performance continues to persist. Much of
the scholarly debate has explained the EU failures by insufficient incentives.
The absence of membership perspective weakens conditionality; inadequate
sectoral incentives fail to alter domestic preferences of major state and
 Theorising institutional change 17
economic stakeholders (Langbein and Wolczuk 2011: 3). The normative gap
between the EU’s ‘self ’ and the target states’ ‘other’ is too wide and under-
mines the EU’s representation as a normative power (see, for instance, Diez
2005; Ghazaryan 2016). Studies call for better analysis of domestic context
and preferences of domestic actors to fit EU policy conditionality works with
the domestic agenda (Ademmer and Börzel 2013). Finally, in the absence of
proper incentives joint ownership and differentiation in the EU policies
remain insufficient (Korosteleva 2012: 9).
However, the key explanations have larger empirical and theoretical
limitations. First, conditionality does not explain selective convergence or a
subsequent backsliding even if adequate incentives are in place (Buzogány
2013). Similarly, the partnership approach does not explain why the govern-
ments do not implement the jointly developed rules. More participatory fra-
meworks offer elites an ability to promote stability rather than change. Casier
(2011) argues that goals jointly selected by the EU and the target state gov-
ernment as well as shared ownership could reduce the potential of rule
transfer and institutional change as the entrenched domestic actors may use
the concluded bargains and package deals with the EU at the expense of
promoting and implementing institutional change in their countries.
More substantially, the ability of external rules and templates to solve
domestic problems is questionable. In general, the EU studies overemphasise
the role of EU demands and power of the EU mechanisms (see, for example,
Börzel and Risse 2012) and its ability to align its rules and templates with the
preferences of domestic elites. In its EU-centricity, the literature assumes that
the EU neighbourhood policies or rules to be transferred represent the long-
term interests of their recipients, thus failing to take into consideration the
domestic institutions and power of domestic rules (see, for example, Jacoby
2008; Bruszt and Holzhacker 2009: 8–9). Due to its ‘externalist bias’, the
literature avoids broader questions of sources of domestic institutional change
and how rulemaking can reshape (re-)allocate power domestically. Further-
more, the focus on the EU demands and a diffusion/transfer of EU rules and
templates neglects the issues of their (inevitable) institutional modifications
(Jacoby 2001) and that the transferred institutions can perform a different
function than originally intended (Polishchuk 2008). As a result, it provides
only a limited perspective of the conditions under which the EU’s policies can
lead to institutional change.
In sum, the failures of the EU to induce change can be explained by the
inability of top-down policies to address key domestic problems and the abil-
ity of the entrenched elites to manipulate EU rules and maintain the status
quo. In the next sections, I explain in detail, how the more nuanced analysis
of the interplay of external policies with domestic institutions can explain the
varying patterns of compliance with the EU rules and policies in the region.
Having identified the lack of rights and restricted access as key challenges to
institutional change, the focus turns on external strategies of how the rules are
made and what are the key empowerment targets.
18 Theorising institutional change
Alternative explanations: the Russia factor
Before the presentation of the theoretical framework, a brief discussion of the
effect of the rival transnational project is due. The failure of external inter-
ventions in Ukraine and Moldova is not solely described by the EU level
factors. Scholars also heavily point at the role of Russia, its rival policies and
its regional integration projects in the neighbourhood as an obstacle to the
effectiveness of EU governance in the Eastern Partnership countries (for
example, see Dimitrova and Dragneva 2009; Langbein and Wolczuk 2011;
Langbein 2015; Dragneva and Wolczuk 2016; Cadier 2014; Samokhvalov
2015). Literature notes that Russia policies often serve as a counterweight to
the EU’s involvement (see, for instance, Delcour 2014, 2017; Averre 2016;
Langbein 2015; Dragneva and Wolczuk 2016; Ademmer 2017).
Existing literature on Russian policy shows that Russia supports non-
democratic regimes in the near abroad (Tolstrup 2015) and tries to diffuse its
rules. Since 2014, literature pointed at Russia’s active involvement in sub-
versive measures (Pynnöniemi and Racz 2016) and discussed its involvement
in the conflict in Ukraine (Tsygankov 2015; Pikulicka-Wilczewska and Sakwa
2015). The ongoing court hearings on the Yanukovych state treason provide
us with different accounts of how Victor Yanukovych seized Ukraine’s sover-
eignty (Portnikov 2018).
Russia is indeed the dominant regional power in the post-Soviet space with
close political, economic and cultural contacts with the countries. It considers
the post-Soviet space as a zone of its special interest and developed and
maintained significant leverage on the local elites and preserving linkages
with the post-Soviet societies. Dimitrova and Dragneva (2009) point at the
interdependence of Ukraine with Russia, which results in the EU–Russia
competition for rule export to Ukraine. The extent of interdependence, which
is high in the energy sector, low in trade and medium in foreign policy, is used
to explain different patterns of EU efficiency.
Economic and energy dependency on Russia was always at the centre of the
analysis (Dragneva and Wolczuk 2016). Geo-economic accounts are also
complemented by geopolitical explanations. Korosteleva (2012) specifically
pointed at the importance of geopolitics in the progress of EU reforms in
Belarus, Moldova and Ukraine. Casier (2013) pointed at a normative gap in
EU–Russia relations as a key source of tensions between the two competing
projects in the shared neighbourhood, and described how it affected the
shared neighbourhood and hierarchy of identities in the region. In turn,
Haukkala (2015) studied the EU’s evolving hegemonic ordering and how it
led to a development of the deep crisis in EU–Russia relations, which culmi-
nated in the crisis in Ukraine.
Smith (2015) explains how Ukraine (and Moldova) is wedged between the
EU and Russia, making it vulnerable for rule promotion from both sides.
Russia’s relations with the European Union became increasingly hostile in the
context of the Eastern Partnership and the signing of the Association
 Theorising institutional change 19
Agreements with Ukraine and Moldova. In response to the EU’s policies in
post-Soviet space, Russia has reacted with increasingly aggressive policies, the
goal of which is to establish a loyal regime in Ukraine, but also in Moldova,
and keep both neighbours in Russia’s sphere of influence (Sakwa 2015).
Russia–EU geopolitical competition has been primarily described in light of
the annexation of Crimea and Russia’s involvement in the conflict in Eastern
Ukraine, yet it affects Moldova as well, which is going through a period of
instability fuelled by the support provided by Russia to their political allies
and economic and financial sanctions imposed on Chisinau.
Dimitrova and Dragneva (2009: 868–869) emphasised Russia’s critical role
in determining the effectiveness of EU governance in the shared neighbour-
hood: ‘Russia’s strongly defined … concept of sovereignty not only clashes
with EU norms in this area but leads to Russian actions which the EU is
clearly powerless to counteract with external governance tools.’
The enactment of rival Russia-led regional integration projects such as the
Eurasian Economic Union (EaU) and its predecessor the Customs Union
provided a perfect background for studying the EU–Russia clash. Dragneva
and Wolczuk (2016) explain how Russian regional initiatives have turned
Ukraine into a normative backyard and have put into question the viability of
the EU’s strategy in the Eastern neighbourhood. Delcour and Kostanyan
(2014) extend this argument, highlighting the incompatibility of the EU’s and
Russia’s integration projects and their policies towards Ukraine, thus leading
to their normative competition in the post-Soviet space.
Ukraine’s ‘pre-existing commitments’ in relation to Russia are well dis-
cussed in the literature (Dragneva and Wolczuk 2016). This study acknowl-
edges the importance of Russia and the structural dependency of, particularly,
Ukraine on Moscow prior to 2014. However, the Russian factor does not
pose a challenge due to its low effect on cost-benefit analysis in the studied
cases. First, Langbein (2015) notes that Russia’s impact on domestic changes
is mixed and differs from sector to sector. Babayan (2015) points out that
even though Russia has contributed to the stagnation of democratisation and
the ineffectiveness of democracy promotion in its neighbourhood, it acts only
when it considers its strategic interests undermined. Second, since 2014,
Ukraine cut off its dependency on Moscow.
This study is designed to study cases, which posed lesser threat to Moscow
interests. Unlike the ‘Gas, Fleet, and Russian language’ issues, which were
defined as a backbone of Russia’s leverage in Ukraine, the sectors selected for
analysis do not present a strategic interest for Russia as compared to the
economy or energy sector (Dimitrova and Dragneva 2009; Delcour 2014;
Delcour and Wolczuk 2015). The reforms in the environmental protection
and migration sectors did not affect Russia’s political and economic interests.
Because of low prioritisation and lack of strategic significance of the envir-
onmental and migration sectors for Moscow, it did not offer any incentives to
domestic elites, which would stall the reform progress. Prior to the escalation
of the EU–Russia competition in 2013, there is no evident counteracting or
20 Theorising institutional change
opposition to the visa-free reforms in both countries. Unlike the Customs
Union, Russia did not offer any alternative governance initiatives in migration
or threaten to restrict visa free regime for Ukrainians or Moldovans.
Furthermore, in the case of Ukraine, the Euromaidan Revolution, the
‘Russian Spring’ and the proxy war significantly decreased Moscow’s leverage
and linkage with Kyiv. Pro-Moscow political elites had minimal impact in
2014–2017, whereas economic and energy ties were severed. The political,
economic, cultural and humanitarian contacts have been significantly
decreased, whereas the security leverage turned into an international issue.
According to opinion polls in 2014–2017 (International Republican Institute,
Razumkov Centre), the appeal of Moscow-led projects and the positive atti-
tudes within society are at a historic low since 2014. As President Poroshenko
(2017) noted, Ukraine made a civilisation choice and finally departed from
the Russian Empire.
Even if Moscow did play a role before 2014, it is not be an issue since then.
The evidence of the similarly sluggish implementation of migration reforms
before and after the crisis in Ukraine erupted points at a rather limited
impact of Russia on the pace of migration reform process. The opinion polls
also suggest that Russia’s role in Ukraine’s problems is limited compared to
domestic factors (Mostovaia and Rahmanin 2018).
As for Moldova, its strategic importance for Moscow has been traditionally
low. Unlike Ukraine, which was the third ‘brotherly’ nation, Moldova was
largely at the sidelines of Russian foreign policy until 2015 (Nizhnikau 2016).
The ability to affect Chisinau through its control of the Transdniester region
and energy exports was seen as sufficient in Moscow. Russia’s sanctions against
Moldova’s economy, labour force and trade only facilitated pro-European
policies and minimised Russia’s leverage on the government and its selection of
policies in 2009–2015. From this perspective, the similarities in the reform
outcomes before and after 2014 only reinforce this assumption.

Theoretical framework
The limitations of EU studies and its inability to explain the varying out-
comes of institutional change in its neighbourhood require the reassessment
of the dominant approaches. To better understand how institutions evolve
over time and how the external actors can induce institutional change, this
work adopts a combination of historical institutionalism and rational choice
approaches to analyse the diverging cross-sectoral outcomes in Moldova and
Ukraine. To look beyond formal change is crucial for understanding institu-
tional change. Highlighting the issue of the deeper change and the role of
norms and culture, Nunn (2012: 122–123), points to the important interplay
between culture and domestic institutions in an effort to explain the historical
persistence of rules.
This work departs from the widely shared point that institutions – both
formal and informal ones, which allocate rights and responsibilities within the
 Theorising institutional change 21
society – matter and are deeply embedded in a society. In the process of rule
making, newly emerging formal institutions should also be supported by the
dominant norms, beliefs and expectations within the society, which requires
that external intervention shall take into account the domestic institutional
features in its reform attempts.
Institutions structure behaviour and interactions (North 2005), shaping in
converging ways the habits and expectations of individuals and society, which
derive from cultural and (multiply) legacies. Consequently, the course of
transformation is dependent not only on ‘the introduction and enforcement of
procedural rules that legitimise and guide the actions of the actors but also
their conformity with dominant social norms’ (Finnemore 1996). Rodrik
(2006: 979–980) sums this up by stating that ‘institutions are by their very
nature deeply embedded in society’.
The EU’s Eastern neighbours were not only long affected by the Soviet rule
(see, for instance, Beissinger and Kotkin 2014). Having been a part of the
Russian Empire these countries were affected by a different institutional tra-
dition, known as the ‘Muscovite matrix’ (Hedlund 2007; 2013; Sakwa 2010).
Ukraine (west of Dnieper) became part of Russia after the partitions of
Rzeczpospolita between Russia, Austria-Hungary and Poland at the end of
the eighteenth century. Moldova was included shortly afterwards in 1812 after
the Russo-Turkish War. This institutional model is characterised at its core by
unaccountable government, conditional property rights and consequently a
lack of rule of law (Hedlund 2007: 20–21).
The Muscovy rules were modernised in the Russian Empire and later in
the Soviet Union through the addition of professional bureaucracy, images
of order and due process; however, as Hedlund (2007) notes, despite the
modernisation, its main features were persevered. Subsequently, the period
of the Soviet rule might be seen ‘as the apogee of the long-term process
providing formal constitutional guarantees for rights and freedoms that in
reality were mere decorations’ (Hedlund 2007: 21). Besides the Muscovite
institutional matrix, the Soviet legacies still dominate the post-Soviet socie-
ties (Hale 2015; Beissinger and Kotkin 2014) and are reflected by the high
level of corruption, paternalism, administrative management and legal reg-
ulations (Korostelina 2013), the merging of the political and economic
spheres and state capture (Tudoroiu 2015).
Like the studies on the Muscovite matrix (see Hedlund 2007; Rosefielde
and Hedlund 2009) and the dual state (Sakwa 2010), different studies such as
that on the role of colonialism on institutions in Africa, Asia and Americas
(Acemoglu and Robinson 2011; Acemoglu et al. 2001) show the crucial role
of culture in explaining the persistence of domestic institutions. In a similar
fashion, historical choices are used to explain the observed divergence in rules
in different parts of the world in a number of studies (see, for example, Greif
1994; Putnam 1993) in order to understand how these choices resulted in
different cultural trajectories and subsequent institutional outcomes (Nunn
2012: 120–121).
22 Theorising institutional change
This work utilises historical institutionalism, which focuses on how institu-
tions develop over time, highlights the importance of history and in particular
the history of specific policy sectors or sectoral policies (Skocpol and Pierson
2002). As Thelen (2003) notes, approaches associated with ‘historical institu-
tionalism’ pay greater attention to the problems of institutional change and
the question of why a certain set of rules and institutions persists over time.
Historical institutionalism argues that the creation of new institutions is
impacted by history and in this way it underlines that societies develop dif-
ferent institutions in the long run (Hall 2010; Hall and Taylor 1996).
Historical institutionalism helps to account for legacies and institutions, of
which informal norms are an integral part, analysing how both formal and
informal institutions create constraints and opportunities of action and gradu-
ally evolve (North 1990; Easterly et al. 2003). Such a perspective sees rules and
institutions as emerging spontaneously from the social norms, beliefs and
values which are dominant within a particular society (Easterly et al. 2003). By
taking that perspective into account, historical institutionalism helps to
broaden the understanding of externally induced institutional change, its pri-
mary mechanisms, necessary conditions and underlying factors.
Following the assumption that rationality is bounded and that the future
choices may be determined by ‘increasing returns’ (Pierson 1996), the choices
of the domestic actors become dependent on institutional constellations at a
given period of time, thus pointing at the possibility that the old institutions
can persevere despite the adoption of new formal rules (Pierson 2000). Actors
invest in the ability to work within the rules and procedures of already given
structures, which may lead to domestic resistance to promoted changes and
newly created institutions.
The focus on culture and historic processes leads to the issue of path depen-
dence as cultural preferences and beliefs exercise influence over individual out-
comes (Fernández 2011). In the analysis of the sources of historical persistence,
culture plays a potentially important role because it is an incrementally chan-
ging variable whose evolution is affected by historical events and previous
choices, showing how historical shocks at critical junctures have made a long-
term impact on the distribution of cultural features (Nunn 2009, 2012).
Path dependency studies the dynamics of self-reinforcing or positive feed-
back processes in a political system – ‘increasing returns’ processes (Pierson
2000) that reinforce the recurrence of a particular pattern into the future. As
Skocpol and Pierson (2002) argue, once established, these patterns of political
mobilisation, institutional ‘rules of the game’, and even citizens’ basic ways of
thinking will often generate self-reinforcing dynamics. In addition to drawing
our attention towards ‘critical junctures’ or formative moments, arguments
about path dependence can help us to understand the powerful inertial
‘stickiness’ that characterises many aspects of political development (Skocpol
and Pierson 2002; Pierson 2000). Path dependency is further increased by a
weakness of the forces that could correct the preformed incentives, behaviour
and attitudes (Pierson 1996, 2000).
 Theorising institutional change 23
Previous choices influence future decisions and choices (Stark and Bruszt
1998; Hedlund 2013). This presence of institutional stickiness and path
dependency necessitates the exploration of how they shape transaction rules,
values, attitudes and norms and how it influences the distribution of the
resources among the elites. In this regard, the elite’s investments in preserving
a status quo represent one of the key challenges to the implementation of the
adopted reforms. As Jacoby (2004: 24) notes, history is important ‘insofar as
simply agreeing to a set of institutional changes is hardly a sufficient basis for
the ability to implement those changes’.
Historical institutionalism centres its research on the meso- and macro
levels, studying in-depth the rise and decline of institutions over time, probing
‘the origins, impact and stability or instability of entire institutional config-
urations’ or specific institutions (Skocpol and Pierson 2002: 704). However, as
the historical institutionalism model of institutional change notes, because of
the existing potential for a mismatch between prevailing institutions and
arising problems at a certain point of time, it opens up an opportunity for
institutional change. Jacoby (2004: 24) notes, history is not only a constraint
but is also potentially an untapped capacity for future changes, because in a
similar way to how ineffective institutions have their antecedents, the effective
institutions may equally have their own antecedents in the past. Bates (2014)
points at a disjuncture between institutions and societal demands as a key
precondition, while Rodrik (2006: 980) highlights the fact that major institu-
tional transformations follow major political upheavals, wars and revolutions.
In this study, historical institutionalism is complemented by rational choice
institutionalism as the combination of both can provide a more comprehen-
sive explanation. While rational institutionalism is less powerful on its own in
explaining institutional change, it complements well historical institutionalism
by providing the latter with some powerful insights into the functioning of
institutions (Hall 2010). Similarly, historical institutionalism is based on soft
rationalism, which makes both theoretical approaches potentially mutually
reinforcing. Rationality is bounded due to incomplete information (Hall and
Taylor 1996; Skocpol and Pierson 2002); hence, the choices that are made
may not lead to optimal institutional solutions.
However, it does not necessarily make these choices irrational at the point
of time when the decisions were made. Institutions originally emerge in
response to social forces and are at first endogenous (Bates 2014). Yet, both
historical institutionalism and rational choice institutionalism are united by
their understanding of institutions, which is aimed at creating a set of pre-
ferences and constraints. In this regard, institutions have to provide the con-
necting points between time periods and levels of analysis (Katznelson 1997;
Skocpol and Pierson 2002; Thelen 1999).
Rational choice institutionalism complements historical institutionalism in
specifying the relationship between institutions and individual behaviour, in
particular highlighting the key aspects of politics and the management of
uncertainty (Hall and Taylor 1996: 950–951). Specifically, for this work, it
24 Theorising institutional change
emphasises the role of the information and its flow and strategic interactions
between actors for the distribution of power and political outcomes (Hall and
Taylor 1996: 951).
Attention to informal institutions – ‘socially shared rules, usually unwrit-
ten, that are created, communicated and enforced outside of officially sanc-
tioned channels’ (Helmke and Levitsky 2004) – is crucial to the studies on
institutional change. Informality is widespread among elites and societies in
post-Soviet space and often undermines formal rules (Ledeneva 2013; Polese
2016). Studies increasingly point at how actors’ expectations and incentives,
as well as the performance of formal institutions, are shaped by informal
institutions (Helmke and Levitsky 2004); careful attention, therefore, to how
informal institutions affect expectations and behaviour of domestic actors is a
necessity for understanding institutional outcomes (Helmke and Levitsky
2004: 726).
To illustrate the importance of informal rules for institutional outcomes at
an empirical level, the issue of corruption and rent seeking serves as a good
example. As it has been already observed on a number of occasions, corrup-
tion in Ukraine and Moldova is rampant; it destroys the investment climate
and sabotages political and economic reforms. Fighting corruption has
become the central issue of current reform plans in Ukraine and Moldova
and is a typical external pre-condition for receiving external financial support.
The externally provided solution is the creation of set of independent agencies
(National Anti-corruption Bureau, Special Anti-Corruption Prosecutor),
recruiting new people and provision of resources and knowledge by the EU. It
is the central part of the EU’s Visa Liberalisation Action Plan (VLAP) pro-
vided to Moldova and Ukraine (and also Georgia).
However, if we assume that corruption is not simply a criminal activity,
which is limited to government officials, but is rather a social norm, then the
solution might not be as simple as creating a number of new agencies and
increasing the wages of the new staff members. Norm-driven behaviour does
not necessarily concur with rational cost-benefit calculations. Consequently,
corruption and rent seeking may not only be the outcome of predatory
behaviour driven by narrow interests in the absence of formal rules (or in the
presence of weak institutions and law enforcement), but instead be part of the
state’s institutional matrix (Hedlund 2013). If so, it can become the core fea-
ture of the country’s institutional system and represent more than a criminal
activity, which is to be eradicated by strengthening the capacities of the state.
It rather requires policies that would be supported by a bottom-up transfor-
mation of deeply engrained social norms.
On a practical level, individuals that are entitled to follow the new adopted
rules may be similarly reluctant to comply with them. It means that when the
recipient government formally adopts institutional reforms proposed by the
foreign donor or emulates a particular foreign ‘success story’, rule imple-
mentation may nevertheless fail, due to the divergent interests and incompat-
ibility with dominant social norms, which guide the choices of public agencies
 Theorising institutional change 25
in charge of implementing and enforcing these rules (Martens et al. 2002).
This separation between formal and informal rules and institutions only
highlights that ‘rules exist and are applied in a certain context and are not
developed or cannot function separately from the dominant social norms,
values and habits’ (North 2005: 11).
Similarly, without the understanding of the normative underpinnings, the
fight against corruption by the top-down ‘Western’ methods is less efficient.
Corruption in post-Soviet countries is more than just embezzlement or looting;
it is about (direct or indirect) state capture and a granting of the possibility to
extract rent in return for (political) loyalty. It is even at times described as a
‘market-based’ mechanism that solves the problem of lack of rights and creates
predictable rules within the economic and political system. In this regard, the
usual results of the promoted reforms, such as the fight against corruption
within the post-Soviet systems, which do not aim to change the underlying
norms alongside the formal rules of the game, is the increased amounts of
bribes as the risk from corruption increases (Movchan 2015). Moreover, as the
evidence in Chapters 3 and 5 points to, the typical outcome of fighting cor-
ruption by prescribed solutions and capacity building is often the improved
capacity of the entrenched groups to extract rents and/or the movement of the
corruption schemes higher up the government ladder as the case of the migra-
tion management reform in Ukraine shows.
In this regard, looking at how domestic institutions are shaped, next sec-
tions highlight two core pitfalls of the external interventions, which arise from
a lack of understanding of local institutions and the process of institutional
change: institutional monocropping and elite-based capacity building.

Preventing institutional monocropping: taking diversity into account

New institutionalism identifies two important influences on institutional
change that guide this study: the prevalence of the poor institutions in the
observed cases and misconstrued incentives by the EU due to an inadequate
understanding of the reform environment and a misplaced focus on elites.
Based on a more nuanced understanding of how institutions evolve, insti-
tutional change seldom results from a simple borrowing of institutional rules
and models. As Jacoby (2004: 24) highlights, ‘simply agreeing to a set of
institutional changes is hardly a sufficient basis for the ability to implement
those changes’. In this regard, the modifications and active adaptation of
external rules and models, in which the (Western) rule providers do not fully
control the process, are at the core of the creation of efficient and sustainable
institutions (Jacoby 2001, 173; Bruszt and Holzhacker 2009).
In the first place, institutional change depends on broad participation and
local knowledge. The ability to design and modify the institutions, where
external actors merely give general guidelines, rather than provide specific
models for implementations and follow strict checklist compliance of domes-
tic actors, becomes a crucial part of institutional change (Zeitlin and Herrigel
26 Theorising institutional change
2000). Participation in rulemaking and designing the institutions prevents the
imposition of pre-selected blueprints the applicability of which is presumed
‘to transcend national circumstances and cultures’ (Evans 2004: 30).
External interventions are mostly based on the experience and knowledge
of the rule provider (Easterly 2008; Rodrik 1999). Such an approach ignores
the peculiarities of domestic institutions and can hardly address the chal-
lenges that are posed by informal rules, which support the existing institu-
tional arrangements. As a result, the natural outcome of such policies is
institutional monocropping and less compliance with the transferred rules,
which creates potentially inefficient institutions (Evans 2004; Aligica 2013).
Top-down policies are particularly detrimental for successful institutional
change since, as new institutionalism highlights, the state institutions, which
are the target of external intervention, are embedded in a larger set of socie-
tally structured power relations. Institutional change should focus on creating
deliberative institutions, which, by including a variety of domestic actors in
rulemaking, rely on the unique knowledge and institutional experience of
domestic actors and facilitate coordination, contestation and experimentation
between the actors to find better institutional solutions. In its absence, the
attempts of the external rule provider to impose its idealised blueprints fur-
thermore leads to the potential disjunction between formal and informal
structures of power and practice, making the former ineffectual and poten-
tially dysfunctional (Evans 2004: 34). Thus, when the rule provider uni-
laterally chooses the rules for the target state to adopt and implement, it fails
to construct the mechanisms necessary for successful institutional change.
The focus on top-down interventions can also lead to the problem of tight
institutional coupling – mutually reinforcing institutional arrangements
(Thelen 2004). Institutional environments are highly path dependent, thus
creating obstacles to the adoption of new rules and institutional blueprints.
Different institutional traditions, the development of different institutions and
values create a problem of deep heterogeneity – lack of consensus and corre-
spondence of capabilities, preferences and beliefs (Aligica 2011; Aligica and
Boettke 2011). Cultural differences mean that target states can void trans-
ferred rules and institutions and mitigate their intended purposes.
Indeed, studies have shown a ‘bad fit’ of transferred institutions and their
inefficiency in different contexts, which may lead to their manipulation based on
the exploitation of existing asymmetries and consequent subduing of these insti-
tutions (Polishchuk 2008: 28). Institutional monocropping may result in manip-
ulation or a misfit of transferred institutions (Hellman 1998; Polishchuk 2008).
Institutional studies growingly acknowledge the importance of institutional
diversity. Ostrom (1990; 2005) departs from the literature with the assumption
of growing homogeneity through diffusion, emulation and focus on idealised
models (such as hierarchies, markets and networks promoted by external
governance), instead highlighting the variety of cultures, institutions and
norms, and makes the issues of diversity, resilience or collective action parti-
cularly important as an area of study.
 Theorising institutional change 27
The role of diversity of values and institutions, and deeper ‘informal’
transformation is paramount in reconstructing the existing institutions and
achieving sustainable institutional change. As empirical studies show, the
understanding of successful externally induced change can only be partial
without one accounting for prevalent values and beliefs. As Acemoglu, John-
son and Robinson (2001) show, cultural beliefs form institutional foundations,
which (as in the studied case of the United States) led to long-term economic
development and formed democratic institutions.
Potential solutions to institutional monocropping require a broader and
more complex process of rulemaking than simply pre-selecting formal rules.
Diversity requires broad participation. Institutional change is a complex and
embedded process, which requires local resources and knowledge in order to
gain an ‘understanding of complementarities between institutions and to
ensure that the input matches the socio-economic environment’ (Murell 2002:
86). As a result, external actors should promote flexible institutional
arrangements, relying on local knowledge and broader participation (Aligica
and Boettke 2011; Ostrom 2005).
Broad participation brings local knowledge and legitimacy, which makes
rules more durable and trustworthy, facilitates institutional adaptation and
increases sustainability of institutional change. The bottom-up involvement in
governance processes of a variety of state and non-state actors, who apply
their ‘local’ knowledge in (re)-creating rules and institutional structures, are
considered to be critical elements of the sustainable institutional solutions
(Aligica 2013). Hence, political credibility of reforms requires local input
(Murell 2002: 86; Martens et al. 2002) to co-sponsor change by other societal
actors and stakeholders and provide local knowledge, resource and
legitimisation.
The critical importance of flexibility is combined with open access,
which secures the interests of diverse groups and stakeholders. Studies
point to how restricted access to institutions and organisations result in
bad governance and a decline in prosperity (North et al. 2009; Acemoglu
and Robinson 2011). Open access supplements flexibility to satisfy the
requirements of a broader number of interest groups, raise their legitimacy,
adaptability and enforcement. It is crucial in particular at the stage where
subsequent modifications of new rules are necessary to increase their effi-
ciency (Murell 2002: 80). Adaptability is more than just ‘absorptive capa-
city’ or ‘speed of recovery’, because it opens up institutional processes of
innovation and creative socio-cultural adaptations (Aligica and Tarko
2014). The flexibility and provision of input from domestic stakeholders
facilitate local implementation and include local resources, both to gain an
understanding of complementarities between institutions as well as to
ensure that the input matches the socio-economic environment (Murell
2002: 81). Overall, open access is a crucial element of change as ability to
promote rights facilitates institutional modifications (Ostrom 2005; Aligica
2013: 105).
28 Theorising institutional change
Historical institutionalism particularly focuses on identifying how domestic
actors ‘adapt to institutions and invest in the ability to work within the rules
and procedures of given structures’ (Jacoby 2004: 24). The adaptation to
broader interests and co-sponsorship of new rules by different stakeholders
generates trust in them. Trust increases cooperation and unites different social
groups to adhere to supportive social norms of citizenship and civic partici-
pation ‘in contrast to lack of general trust and reliance on clan, family and
kinship relations’ (Gorodnichenko and Roland 2010: 4).
Therefore, the efficiency of institutional change and the emergence of civic
norms depends on the ability to participate in rulemaking as well as adapt and
modify the rules. This conclusion is confirmed by a number of studies on insti-
tutional change. For example, Aspinwall (2009; 2013) shows how the indepen-
dence of the new institutions from national control and the extent to which
citizens’ access to externally supported capacity building of both state bureau-
cracy and agencies and non-state stakeholders explains the difference of the
impact of NAFTA on environment protection and labour sectors in Mexico.
In a similar way, the processes of both CEE Enlargement and post-war
Europe transformation (Americanisation) in 1940–1950s, which aimed at
reshaping national institutions in CEE and post-war Europe, in fact resulted
in significant deviation from external (the EU and the US) paradigms at a
deeper level (see for example Djelic 1998; Zeitlin and Herrigel 2000; Bruszt
and Holzhacker 2009). In the case of US influence on post-war reconstruction
of Europe, the transformation was exercised principally through varying
combinations of negotiation, persuasion and voluntary emulation (Zeitlin and
Herrigel 2000: 22–23; Herrigel 2010). The central role of institutional adap-
tations and modifications of the EU and US rules and practices in domestic
transformations emphasises the necessity of the active adaptation of rules and
institutions to national environments in order to achieve sustainable institu-
tional change (Zeitlin and Herrigel 2000: 7).
Flexibility in rulemaking and open access to it is a crucial factor empha-
sised in the new institutionalism literature and neglected by EU studies. It
helps to account for domestic institutional peculiarities and thus suggests that
the process of institutional change should be embedded in different political,
cultural, and institutional environments (Herrigel 2010; Djelic 1998). In its
absence, the external interventions would promote institutional monocrop-
ping, excluding local participation and input, preventing competition and
further marginalising the disadvantaged domestic groups. By so doing, it
prevents an active adaptation of institutional features to a given domestic or
regional context through participation and interaction of interested stake-
holders (Bruszt 2002; Bruszt and McDermott 2011).

The capacity building problem: importance of broad empowerment

To be able to promote their interests and participate in rulemaking, domestic
actors need to possess adequate capacities. The EU as an actor and EU studies
 Theorising institutional change 29
recognise the importance of capacity building, yet they often understand it in a
narrow sense, aiming at supporting the domestic elites and building up cap-
tured state institutions. The prevailing explanations emphasise the role of elites
in implementing change and see the role of the external actors in educating and
incentivising elites and building their capacities to implement reforms. Even
‘enlightened’ oligarchs, as soon as they are sufficiently linked with the West
were occasionally presented as a key factor (Gromenko 2014).
The role of elites in selecting good institutions is a major academic focus
(see Rutland 2018). North et al. (2009) trace the origins of good institutions
in (self-)imposed restrictions on power-holders. North and Weingast (1989)
carefully studied the Glorious Revolution for the development of the political
institutions in England showing how the ‘voluntary’ extension of franchise to
broader groups solved the ‘social conflict’ problem and prevented popular
uprising against the regimes. A seminal rational choice research identified
credible commitment at the core of their emergence (Elster 2000). Lopez
(2014) in turn, with the example of Latin America, echoes the debates
arguing that business elites often choose institutions by evaluating threats
from the state and society.
Rational choice institutionalism explains institutional outcomes though
incentives provided to the key actors among the target states’ elites to change
the cost benefit analysis and preferences of interest groups and voters. Yet, it
has already been shown that incentive-based explanations alone do not fully
account for observed institutional outcomes. Moreover, the rent seeking
behaviour of domestic elites places the elites not among the promoters of
institutional change but rather as an obstacle.
‘The social conflict’ perspective is usually aggravated by the commitment
problem, since, as North et al. (2009) and Acemoglu and Robinson (2006)
show, elites generally lack a third party to enforce agreements between var-
ious groups in society, the entrenched elites would be inclined to maintain the
existing allocation of power and resources. Hence, the rise of the state as a
credible enforcer of rules first for elites is a primary solution (see also
Fukuyama 2014). The introduction of democracy and rule of law would not
threaten the elite’s core interests and it may be still beneficial long-term for
oligarchs and their likes as it significantly decreases the threat of expropria-
tion of their assets in rule-based society. External actors can invest in ‘defence
mechanisms’ and try to increase the state’s and elite’s commitment (Gehlbach
and Keefer 2012; Markus 2015).
However, these very few cases in European history also hint at the larger
detrimental role of elites and in particular their efficiency in preserving
monopoly on power. History shows only a few examples of elites’ restricting
their power, involuntarily and only under immense pressure. As Roland (2004:
10) points, entrenched elites have a vested interest in preserving inefficient
institutions to maintain their power and ‘may not agree to give up that power
because the winners of institutional change may not be able to commit to
compensation schemes for the losers’.
30 Theorising institutional change
Rutland (2018) points out that the defining concept of elite studies is sta-
bility, not change. Institutional change yet presupposes the end of the current
elite’s monopoly on political power. Elites compete for power and resources,
yet they are unified by their unwillingness to lift the restricted access to eco-
nomic and political institutions. Elites’ fear of losing political power is high-
lighted as ‘the most important barrier to institutional change’ (Acemoglu and
Robinson 2006). Even if broader social and economic forces start to regard
institutions as inefficient and the allocation of power and resources as
unequal, the current gatekeepers often efficiently prevent them from re-
designing the rules. Furthermore, even if a consensus may start building up
among elites to introduce a new set of rules due to a threat of a revolution
(for instance, the Euromaidan), a possible loss of sovereignty (for instance,
Russian intervention) or a repressing ruler (for instance, Victor Yanukovych),
the collective action problem undermines any supposed credible commitment
among elites (Ostrom 1990: 45).
The more entrenched the interests represented in a specific institution are,
the more difficult it becomes to dismantle them. Path dependency strongly
affect choices, whereas as Beckert (2010, 154) says, ‘the existing distribution
of resources re-produces the kind of political decisions that reinforce them to
support institutional continuity’. Power stakeholders or elites influence insti-
tutions and their adaptability to change, but their influence is even stronger
when the elite controls external assistance and information flows. As Bruszt
and McDermott (2009: 24) explain, institutional change may be blocked
because a variety of potential state and non-state stakeholders in different
sectors ‘lack the resources and voice in shaping existing or new institutional
domains’. Since the entrenched elites control resources and information, the
external narrow capacity building deprives non-state stakeholders of any
alternatives and contributes to the elites’ monopoly.
A focus merely on elites disregards the demand side of institutional change
and creates the grounds for potential resistance or only partial adaptation on
the lower levels (Wegerich 2001: 19–20). The focus on elites neglects other
stakeholders and may result in a lesser acceptance of institutional reforms,
because its main benefits are not realised for the majority of private actors
(Murell 2002: 115). Elites would foster patron–client relationships (Das
Gupta et al. 2000, 3–4) that would reinforce reliance on clan and kinship and
undermine further development of civic culture. The legitimacy gap and dis-
trust in institutions will also widen as non-state stakeholders and civil society
would see new rules as illegal or unfair. Thus, supporting the rent-seeking
elites, instead of aiming at gradually changing the dominant norms and in
particular promoting and cultivating the civic norms that will support rule-
based domestic political and economic environments, facilitates and some-
times aids the entrenched elites to maintain the dominant institutional matrix.
The second related dilemma concerns the state and its bureaucracy. The
EU and other international actors’ demand of the elites to almost immedi-
ately implement the adopted rules, presupposes the large external investments
 Theorising institutional change 31
in capacities of state institutions. Narrow capacity building – the creation of
new state institutions and the strengthening of existing ones (Fukuyama
2004) – is recognised by the EU studies as an important factor or even a
separate mechanism of the promotion of institutional change in the neigh-
bouring countries (Langbein and Börzel 2013). As the state capacities in the
CIS have been very low, the question of increasing capacities became crucial
and indispensable to the Eastern Partnership. It is realised through the EU’s
capacity building programmes (such as European Neighbourhood Instru-
ment), which are at the core of the European Neighbourhood Policy and the
Eastern Partnership. The understanding of the impossibility of having order
without the state and concerns about security prompted the EU to step up its
policies of building up state capacities.
State capacity is necessary to provide policy coordination, gather informa-
tion and pursue policy goals (Rueschemeyer and Evans 2002: 42) and to free
the state from entrenched interests (Bruszt 2002: 65–66). According to Bruszt
(2002: 65–66), ‘[i]f political forces are unable to accommodate diverse repre-
sentations of public good in their decisions, nothing prevents decision-makers
from advocating the wildest particularistic interests leading to dominance of
powerful groups and misuse of power’ leading to a state capture.
In limited access orders, states often lack capacity to perform the key state
functions, which include upholding the general political and economic rights
of domestic actors, preventing state capture by powerful groups, regulating
relations among actors fairly (Bruszt 2002), and are incapable of establishing
and preserving market order. Yet, on the other hand, capacity building may
benefit those using ‘the machinery of the state for private rent seeking or
other predatory purposes’ (Hedlund 2001: 226). Strong states can equally
create distortions in allocation of resources and information and thus impede
institutional change. Strong states discourage investment and participation of
society (Acemoglu 2005: 1202), while ‘a government strong enough to protect
property rights … is also equally strong enough to confiscate the wealth of its
own citizens’ (Weingast 1993: 287).
Markus (2015) points out that a failed state and inability to control
bureaucracy by the sovereign presents the largest threat to property rights in
post-Soviet space. In many countries, including Ukraine and Moldova, it led
to state capture by powerful actors (Hellman et al. 2000; Polishchuk 1997).
At the same time, post-Soviet countries are plagued with the inability to
constraint a ruler; any state building project thus becomes a part of a
power-maximisation (Gel’man 2014). Therefore, when the necessity to fix
the problem of state weakness was realised, the increasing capacities of the
institutions captured by powerful groups provided only new opportunities
for the entrenched elites to continue their exploitation of the state more
efficiently.
In this respect, if narrow interests dominate the state structures, interest
groups control state agencies, and a state bureaucracy is often nothing but a
‘service class’ with their own stake in the status quo, narrow empowerment
32 Theorising institutional change
can only result in rule persistence at the expense of pro-change groups within
the society. Fukuyama (2004) points out that the creation of well-functioning
state institutions requires more than simple capacity building of the state but
more so their adaptation to certain local habits of mind; otherwise, trans-
ferred formal rules face resistance. Furthermore, Rueschemeyer and Evans
(1985) argue that state building aimed solely at short-term efforts of building
of state agencies undermines their adaptability due to their inappropriateness
and embeddedness in political relations, which makes them dysfunctional
(ibid.: 42–43).
This study instead departs from the assumption that capacity building
should target the functioning of the state at a high level but argues that it
is necessary to primarily decrease the monopoly of the entrenched groups
on resources and empower disadvantaged actors, including civil society. As
Jacoby (2004: 34) notes, historical institutionalism expects that institu-
tional change occurs when ‘both state actors and civil society actors
already possess some ability to do the tasks required by the new
institution’.
Since in the post-Soviet space the regulatory state is weak or has been
captured by the entrenched elites and state actors are often a problem, it
makes the involvement of non-state stakeholders even more important. The
sole focus on state capacity building weakens the coordinating action by
domestic states and might promote rules that would not represent the inter-
ests of diverse domestic actors and prevent redistribution of power and
accountability. In this regard, the creation of deliberative institutions and the
search for solutions in the absence of a central decider requires empowerment
of domestic non-state stakeholders to facilitate redistribution of power and
open possibilities for learning and setting goals for one another (Cohen and
Sabel 2003; Sabel and Zeitlin 2010). Thus, external attempts to introduce
formal rules and institutions into societies require the presence of bottom-up
factors, whereby societal actors are actively or sufficiently involved and
empowered to promote their interests and rights.
As a final note, the effectiveness of institutional change does not depend
either on reliance on top-down or bottom-up solutions, but ‘a combination
of both – top down change in formal institutions and an evolution from the
bottom up’ (Easterly 2008; see also, Jacoby 2000; Sabel and Zeitlin 2010).
Such a combination addresses the ‘social conflict’ problem and facilitates
the extension of rights and power to broader groups, which would partici-
pate in designing of new institutions. It also solves the collective action
problem by improving the monitoring of compliance (Ostrom 1990) and
generating trust in new rules (Greif 2005). Based on a combination of
historical and rational choice institutionalism, this research highlights that
legacies, institutions and agency as factors are interdependent and inter-
twined. The analysis of their constellation and roles in contemporary Mol-
dova and Ukraine helps to understand better how to design, deepen and
sustain institutional change.
 Theorising institutional change 33
Accounting for the variation
Institutional change is primarily about the creation of the open access socie-
ties (North et al., 2009) or ‘empowered participatory governance’ (Evans
2004: 37), which allows to create institutions that would correspond to the
true interests of the broader society (Polishchuk 2012: 42; Hoff and Stiglitz
2001) and provide open access to organisations, resources and political and
economic rights. As noted, in the post-Soviet context, most of the actors do
not have access to institutions and cannot set up organisations and participate
in rulemaking to defend their interests. Hence, institutional change requires
redefinition of relations between stakeholders, re-allocation of power and ele-
vating the role of excluded stakeholders to be able to put pressure on reg-
ulative states to take diverse interests into account, and create various
coalitions among diverse groups to make and modify rules (Bruszt and Stark
2003; Evans 2004).
To underline the importance of the access to rulemaking and empowerment
of broader societal groups, this work suggests distinguishing between out-
come-oriented (normative) and process-oriented (functional) strategies of the
EU external policies of promoting reforms. The outcome-oriented strategy is
characterised by a top-down approach, which largely excludes domestic
actors from the decision-making process to pursue optimal end-state out-
comes (Aligica 2013: 28). The external actor pursues the adoption and the
implementation of the pre-selected rules by incentivising or altering the pre-
ferences of the government and by building state capacities. In a nutshell, it
means that the EU selects rules, goals and cooperates with state actors to
implement these reforms.
If the outcome-oriented strategy exemplifies top-down rule transfer, the pro-
cess-oriented strategy views institutional change from a rather bottom-up per-
spective. It focuses on whether the external actor can ‘encourage the active
involvement of all interested parties’ in rulemaking (Sabel and Zeitlin 2010) and
whether it erodes the power basis for entrenched groups, thereby creating less
opportunities for arbitrary decisions and the use of institutions for personal gains.
The process-oriented strategy provides open access to the designing of new
rules and supports flexibility in rulemaking. The process-oriented strategy
aims to create a more deliberative way to create new rules based on compe-
tition, negotiation and active adaptation of rules to diverse societal interests,
which can eventually lead to innovative solutions better suited to the local
context. In this setting, the EU provides domestic actors with information
and resources to solve the existing problem and fill an institutional void. It
involves domestic state and non-state actors in the designing of rules and
allows them to compete and negotiate for the best solution under the criteria
of fairness and efficiency. The external actor empowers both state and non-
state stakeholders, paying specific attention to societal actors to enable their
efficient participation in the process of making of rules and monitoring of
their implementation.
34 Theorising institutional change
To define the degree of flexibility and access to rulemaking, this study looks at
the type of institutional goals promoted by the EU. Institutional goals can be
normative or functional, which depends on whether the emphasis is on adopting
pre-selected rules or on adaptation of transnational rules and ability to find new
solutions (Bruszt and McDermott 2011: 3). In the first case, as a part of an
outcome-oriented strategy, the EU favours the state to adopt and implement its
unilaterally pre-selected normative rules and prioritises the precision and com-
pleteness of transfer (Aligica 2013; Bosse 2009). In the second case, it promotes
the adaptation of its rules or legislative guidelines into the domestic context,
often creating hybrid rules. These rules are made through joint decision-making
of the domestic actors with the EU participation. Such a type of institutional
goal is identified in this study as functional. The normative rule making is char-
acterised by a restricted access to the design of new rules, while the functional
one depends on an open access to all relevant stakeholders.
Empowerment studies the external investment in capacities of state and
non-state stakeholders to create and develop competences and skills of
domestic actors through the provision of knowledge, resources and technolo-
gies. Its goals include the enhancement of actors’ problem-solving capacities,
teaching of new techniques, and creation of better communication channels
between state and non-state actors. Capacity building is ‘a reiterative process’
through which the EU and domestic actors adapt to each other to find the
best way to foster institutional change (Bruszt and McDermott 2009; 2014).
Empowerment is analysed through the modes of assistance and monitoring.
The outcome-oriented strategy is based on the narrow understanding of
capacity-building with a mere focus on output and compliance (Kenny and
Clarke 2010: 4). From this perspective, capacity building may even be regar-
ded as a part of conditionality (Vachudova 2005; Schimmelfennig and Sedel-
meier 2004b), financial and technical support, which can be withheld or
awarded in accordance with the principle of conditionality, depending on the
outcome of compliance, or as a separate EU mechanism of promoting change
(Börzel and Risse 2012). Monitoring of new rules is restricted to inter-
governmental cooperation.
The process-oriented strategy understands empowerment as broad capacity
building of individuals and social groups, providing financial, technical assis-
tance, skills and knowledge to the stakeholders, which were previously
neglected and excluded from participation in rulemaking and society (Kenny
and Clarke 2010: 3). External policies thus aim at preventing regulative
states acting as ‘agents of social and economic exclusion’ (Bruszt and Stark
2003) and increase efficiency of non-state stakeholders. This strategy identifies
how the EU addresses the capacities of those stakeholders who were previously
excluded from promoting their interests (Kenny and Clarke 2010: 9–10) and
thus contributes to redistribution of power over resources, relationships,
information, knowledge and decision-making (Abdullah and Young 2010).
Similarly, monitoring involves state and non-state stakeholders and in parti-
cular fosters mutual monitoring between domestic actors.
 Theorising institutional change 35
To distinguish the strategies of empowerment, this book identifies the type
of actors (state and/or non-state) that benefit from the EU assistance and
monitoring of new rules. Assistance looks at capacity building efforts as well
as the amount and type of resources allocated. Monitoring looks at the extent
of involvement of domestic actors and the available feedback mechanisms. In
this regard, both assistance and monitoring can be multiplex or single
depending on whether and how the rule provider includes a diverse number of
state and non-state stakeholders within its assistance and monitoring policies
(Bruszt and McDermott 2011). Single ties would mean that the EU builds its
policies exclusively on developing intergovernmental channels of commu-
nication, which would overwhelmingly benefit the state actors. This arrange-
ment characterises outcome-oriented strategy. In turn, a process-oriented
strategy aims at creating multiplex ties that would support a wide variety of
domestic actors (Bruszt and Holzhacker 2009; Langbein 2015) and promote
mutual monitoring (Ostrom 1990).
Monitoring differs on a feedback mechanism, which shows how actors
collect and process information. It is distinguished between the checklist
compliance (outcome-oriented), which identifies failures in formal adoption
and implementation rules to correct them or joint problem solving (process-
oriented), which emphasises the correction and possible modification of rules
for mutually-beneficial solutions (Bruszt and McDermott 2011, 2014). The
checklist compliance mainly requires the rule provider to rely on its own
efforts to collect information through its evaluation mission as well as on
reports supplied by the target state’s government agencies. The joint problem
solving involves a variety of domestic actors including non-state stakeholders
(Bruszt and McDermott 2011: 9). It also limits an ability of the state to col-
lude and manipulate data to supply only partial or insufficient information.
The joint problem solving is a necessary complementary instrument to the
flexible rulemaking as the rule creators can monitor and adjust them to
accommodate for changing preferences.
Finally, the dependent variable – institutional change – requires the adop-
tion and implementation of the rule and its internalisation by the target state
(Aspinwall 2013). To understand the degree of institutional change, first, this
study distinguishes between rule adoption, when the selected rule is formally
adopted and transposed into domestic laws, and rule implementation, when
the rule is implemented by relevant state and non-state actors (Langbein and
Wolczuk 2011). Rule adoption looks at how and by whom the rule is selected
and whether and how it is transposed into the national legislation (Delcour
2017). Moreover, rule adoption looks at whether and to what degree the law
meets the requirements of the EU, if it was not unilaterally pre-selected by the
European Commission. In turn, rule implementation points at the extent to
which the domestic state and non-state actors comply with the new rules and
how they are sanctioned for non-compliance. Since this study focuses on EU
impact, compliance by domestic actors is combined with an analysis of the
level to which harmonisation with the EU standards, as identified in the EU
36 Theorising institutional change
Table 2.1 The EU’s policies of institutional change: explaining the outcomes
Independent variable Dependent variable
EU strategy Outcome
Process-oriented strategy Flexible and open Rule compliance
access rulemaking Rule is adopted and
implemented in transparent
Broad empowerment
and competitive way
Multiplex assistance
Mutual monitoring
Outcome-oriented strategy Normative and Rule persistence
restricted rulemaking Lack of transparency and
The unilateral accountability
selection of rules Even when rule is formally
adopted, it not implemented in
Narrow
practice.
empowerment
Assistance and
monitoring target the
state structures

agreements with the neighbouring countries, occurred (Langbein and Wolc-

zuk 2011; Delcour 2014).
To sum up, both empowerment and rulemaking identify how external
policies induce institutional change. The framework identifies the purpose of
the EU, highlights how it promotes it through rulemaking and empowerment,
which should help to understand outcomes at the sectoral level – how the new
rules are implemented on the ground. Outcome-oriented strategy follows a
technocratic top-down approach to institutional change, whereas process-
oriented focuses on the creation of deliberative institutions and empowered
participatory governance, which ‘inspires’ the bottom-up push for the reforms.
The outcome-oriented strategy uses new rules and assistance to change
entrenched elites and to turn the ‘state capturers’ into efficient technocrats.
The process-oriented strategy reallocates power and opportunities within
institutions to make domestic politics more prone to resisting state capture
and malign systemic features as the endemic corruption.

Summary
This chapter theorises the EU’s strategy and its limitations in the Eastern
Partnership. Based on contradictions of external interventions policies, a dis-
tinction can be made in the EU’s strategy between process-oriented and out-
come-oriented strategies, depending on the degree of empowerment involved
and the rulemaking. The process-oriented strategy, by empowering pro-
reform actors and non-state stakeholders and allowing them to participate in
rulemaking and monitoring state institutions, can facilitate the creation of
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