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Progress in Transition
Ukraine tries to restore order after crisis
By Zhang Hong | NO. 9 MARCH 3, 2016


Ukrainian President Petro Poroshenko (right), German Chancellor Angela Merkel (center) and French President Francois Hollande attend a joint press conference in Berlin, Germany, on August 24, 2015, after a trilateral summit on the full implementation of the new Minsk Agreement on resolving the conflict in east Ukraine (XINHUA)

Two years have elapsed since the outbreak of the Ukrainian crisis during which unremitting conflicts brought the European country close to disaster. But looking back on 2015, Ukraine was not as out of control as some people had asserted. Despite numerous difficulties, it achieved relative political stability, avoided economic meltdown, as well as maintained a truce in the eastern part of the country.

Political reform 

After Viktor Yanukovych was ousted from the presidency in February 2014, the political situation in Ukraine appeared to be in a state of disorder, but it began to change in 2015. President Petro Poroshenko and the Ukrainian Government controlled events and managed to combat the intervention in politics by powerful oligarchs, a long-term malady since Ukraine gained its independence after the disintegration of the Soviet Union in 1991.

In 2015, pressed by the International Monetary Fund (IMF) and the EU, the Ukrainian Government took actions to break oligarchs' control of the economy, but the efforts met strong opposition. In March 2015, the private militia of oligarch Ihor Kolomoisky occupied offices of two state-owned energy companies in Kiev after the parliament moved to retake control of the companies from him. But in response to pressure from the public and Western countries, Kolomoisky resigned from the governorship of Dnipropetrovsk Oblast following a weeklong confrontation. Soon after the incident was resolved, the government scrapped many preferential tax policies for businesses controlled by oligarchs.

With the central government viewed as weak in the political crisis after February 2014, ultra-nationalist organizations began to grow in Ukraine. Some ultra-nationalist parties won seats in the national legislature in the October 2014 parliamentary election, exerting greater influence in politics and hampering President Poroshenko and the government's attempts at political reconciliation.

But in 2015, the influence of these parties started to decline. In local elections in October 2015, moderate center-right parties gained large support as more and more voters began to realize that a rational and peaceful resolution of the conflict in east Ukraine is the best choice, and increased autonomy for the region can serve as a basis for the final political reconciliation.

In the meantime, Ukraine has appointed foreign citizens to some high-ranking government posts and promoted many young officials with a Western educational background as a means to magnify the effect of its political reform.

 International Red Cross workers distribute relief materials to residents in a village in Donetsk, east Ukraine, on February 16 (XINHUA)

Economic recovery 

Due to the gloomy global economic situation, particularly the sharp fall in international commodity prices, Ukraine's GDP shrank by 10 percent in 2015. But timely international loans and EU aid, which came as a result of the Ukrainian Government's rigid implementation of the financial and energy policies set by the IMF and World Bank, helped the country escape from economic collapse and achieve a small balance of payments surplus, despite severe domestic inflation and a decline in international trade. Ukraine also reached agreements with its main creditors to restructure the country's huge foreign debt last year, thus avoiding a sovereign debt bankruptcy.

Ukraine's economy relies heavily on the export of metallurgy, chemical and agricultural products. Looking to the future, its exports are unlikely to continue nose-diving. After the validation of the EU-Ukraine Deep and Comprehensive Free Trade Area on January 1, the EU will remove tariffs and other barriers on imports from the country, which will facilitate Ukraine's economic recovery. Another piece of good news for the Ukrainian economy is that the EU's steel consumption is expected to rise in 2016.

Russia is a traditional trading partner of Ukraine. The tensions between the two countries, however, have resulted in a significant reduction in bilateral trade. Statistics for 2015 showed the share of trade with Russia, in terms of Ukraine's aggregate imports and exports, fell from 30 percent in the past to 15 percent. Ukraine has also reduced its energy dependence on Russia.

The focus of Ukraine's economic and trade cooperation is shifting from Russia to the EU and the Asia-Pacific region. Ukraine's trade with Asian countries grew rapidly in 2015, accounting for about 26.7 percent of its foreign trade. For example, against the backdrop of a 30-percent decline in total exports, Ukraine's exports to China grew by 0.5 percent in 2015, reaching $2.13 billion.

In future, the negative factors that affect Ukraine's economy will gradually weaken and positive factors, such as EU integration and globalization, will play a bigger role. The Ukrainian economy is likely to rebound gradually in line with the slow recovery of the global economy.

Security situation 

Since the signing of the new Minsk Agreement on resolving the conflict in east Ukraine in February 2015, a truce has been achieved in the region. Though fighting on a small scale still occurs from time to time, the security situation has vastly improved.

After two years of fighting, both the government army and pro-independence insurgents in east Ukraine are unwilling to sustain higher casualties. And both sides are aware that neither of them can win a decisive battlefield victory. The lasting conflict has not only caused tremendous suffering to the Ukrainian people but also hindered the country's economic recovery.

In the meantime, the escalation of the Syrian crisis and the rapid rise of the so-called "Islamic State" extremist group in the Middle East have provided opportunities for easing relations between Russia and the West, which are behind the warring parties in Ukraine. Their frosty relations have thawed slightly in the wake of the migrant crisis in Europe and the terrorist attacks in Paris last year. The two sides have not only tried to seek common ground in combating terrorism but also engaged in increasing dialogue on the Ukrainian crisis. The call for improving relations with Russia is on the rise within the EU. France has made clear that it will try to push the EU to lift its sanctions on Russia by summer this year.

The United States and the EU have also increased political pressure on the Ukrainian Government, calling on it to advance the stalled Constitution amendment process, thus creating a legal foundation for the final settlement of the conflict in east Ukraine.

When U.S. Secretary of State John Kerry visited Moscow last December, he said that once the new Minsk Agreement was fully implemented, the West would lift sanctions on Russia and restore relations with Moscow. Shortly after Kerry's Moscow trip, Russian President Vladimir Putin appointed Boris Gryzlov, a permanent member of Russia's Security Council, as Russia's representative on the so-called Contact Group that was set up in June 2014 to implement a peace plan announced by President Poroshenko. The peace plan failed but the Contact Group has continued to function as a venue for meetings between the Ukrainian Government and pro-independence insurgents in the eastern part of the country. In an interview with Russia's Kommersant newspaper on January 17, Gryzlov said that he was optimistic about the prospect of the implementation of the new Minsk Agreement.

In short, the Ukrainian issue is sending out some positive signals, bringing new hope for a political settlement. If Ukraine can effectively curb nationalistic tendencies at home and take advantage of the improved international environment to promote national reconciliation, it is possible the crisis may soon be brought to an end.

The author is an associate researcher with the Institute of Russian, Eastern European and Central Asian Studies under the Chinese Academy of Social Sciences

Copyedited by Calvin Palmer 

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