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Ukraine Has Averted Economic Meltdown. Now What?

This is a guest post from Andrew Zvirzdin.  Originally from upstate New York, Andrew is currently finishing his second year of grad school at the Maxwell School in Syracuse.

The world has started to pay closer attention to Ukraine and it shows. Since the gas crisis in January of this year and the staggering decline of the Ukrainian economy through the first half of the year, officials in Europe and the US have worked in close collaboration with and for Ukraine. The support and attention (along with an improving global economy) has helped Ukraine avoid the calamitous economic fate I previously feared. But the real questions surrounding the country’s political identity remain.

Nearly all recent news in Ukraine seems positive. The EU announced last month that it had cobbled together a group of international banks willing to lend Ukraine $3.6 billion to buy gas in the near term. Prime Minister Yulia Tymoshenko further announced that all outstanding gas disputes have been resolved after meeting with Prime Minister Vladimir Putin on September 1. And industrial production and steel exports are starting to climb higher. With money in their pockets, gas in the tank, and happier neighbors, Ukraine appears ready to reemerge as a strong regional player. 

But underneath the surface, Ukraine remains severely divided by its two big neighbors and its two executives. Pro-west President Viktor Yuschenko continues to speak glowingly of Ukraine’s western neighbors, claiming that Ukraine would soon sign an Association Agreement with the EU. Prime Minister Tymoshenko meanwhile has appeared to grow closer to Russia in recent months, culminating with her praise of Prime Minister Putin at the September summit. The Ukrainian population appears as divided as their leaders; forging closer relations with Russia and the West are both distasteful options for a majority.

So who really speaks for Ukraine? And if there were such a person, what would they say? Hopefully, this will become clearer following the presidential elections to be held on January 17, 2010. But until then, political confusion threatens to undermine any new economic security. The EU has stipulated a number of reforms as a condition for the loans, including fighting corruption while raising the heavily-subsidized price of gas for Ukrainians. It is not at all certain that the politicians are up to the task. Institutional reform­—to explicitly delineate executive power —is even more needed and less likely. The end result is that Ukraine will remain confused and unsure of which direction to face for some time to come. As temperatures start to fall, that prospect will surely cause some Europeans to shiver.

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