23 Mar 2012
Ukraine is in a fragile state. The country is viewed with growing nervousness by other nations in the rest of Europe and the US. Countries that once supported the vulnerable economy – injecting considerable funds to help it emerge in one piece from the ruthless global recession which reached its peak in 2009 – have seen their investments threatened in a new climate of uncertainty.
There are many reasons for trepidation. According to James Clapper, the Director of National Intelligence in the US, Ukraine is moving toward authoritarian rule under the leadership of President Viktor Yanukovych, a view he shares with other, perhaps less outspoken, authorities around the world. Other concerns are Ukraine’s crackdown on opposition, particularly the prosecution and imprisonment of former Prime Minister Yulia Tymoshenko, the heroine of the Orange Revolution. In line with general consensus, Clapper sees the charges against Tymoshenko as being politically motivated, while he and others have also criticised the way president Yanukovych’s government actively manipulated the election laws ahead of a parliamentary election in October last year.
Ukraine’s current state – wavering international reputation, faltering economy and questionable political arena – stands at odds with the progress widely acknowledged to have been made in the aftermath of the Orange Revolution in 2004, which saw the ex-Soviet republic transform itself into something resembling a functioning democracy. That progress, and the bright future it promised, has been blighted by the events of recent years. A revolving door of politicians and policy, in particular, has destabilised what was thought to be an improving system of governance.
The Orange Revolution saw Yulia Tymoshenko and her ally, Viktor Yushchenko, take to the streets of Ukraine alongside 500,000 supporters, protesting against an election that had reportedly been rigged to support pro-Russian Yanukovych. The Supreme Court stepped in and ruled in the Orange Revolutionaries’ favour, resulting in what seemed at the time to be a significant victory. The Orange alliance swiftly took power, with Yushchenko as President, and steered the ex-Soviet state in a pro-Western direction, distancing it consciously from Russia. In early 2005, Tymoshenko was appointed Prime Minister. The appointment was ratified by an overwhelming majority in parliament.
A fragile partnership
And so begun an era of upheaval, where once stability had looked very much on the cards. The partnership between Yushchenko and Tymoshenko fractured, becoming competitive rather than collaborative. In a live television address, Yushchenko dismissed his former revolutionary ally’s government.
In 2006, parliamentary elections took place, but ongoing power struggles led to the dissolution of parliament in 2007, leading to a crisis period in Ukrainian politics. Later in 2007, new elections were held early in order to resolve the problem. Eventually a coalition was agreed between Tymoshenko’s party and Our Ukraine–People’s Self-Defense Bloc, leading to the formation of the second Tymoshenko government.
But unrest was never far away, and the degradation of relations within the coalition, inspired largely by disagreements regarding the 2008 war between Georgia and Russia, prompted President Yushchenko to move for » snap elections, a decision which Tymoshenko fiercely opposed. The formation of the Orange Coalition in December 2008 brought about a temporary reprieve. This would not quell the unrest inherent in the system, however, and Tymoshenko’s cabinet had to fend off two votes of no confidence between 2008 and 2009.
International monetary support
Despite resistance, under Tymoshenko’s leadership Ukraine’s future looked tentatively promising, even if the global recession threatened to level the economy. By 2009, the country’s GDP had dropped by 15 percent, while the national currency had lost half of its value, inflation ran at a dangerous 22 percent, and unemployment rates soared at similar speed. The number of designated poor residing in Ukraine in 2009 was also cause for concern; as much as 35 percent of the population lived under the official poverty line. To make matters worse, the gas crisis that reached its peak in January 2009 saw residents wrap up in layer upon layer of clothing to fend off freezing winter temperatures, as heating systems inside their homes were sporadically cut. Russian natural gas company Gazprom, the largest of its kind in the world, refused to fulfil a supply contract until Ukrainian company Naftogaz paid off its accumulating debts. In January, gas supplies to Ukraine were cut off completely, and this had a knock-on effect in other south-eastern European countries.
Although the dispute was eventually settled, it left its mark in significant ways. Onlookers and critics claimed political motivation from both Russia and Ukraine had caused or exacerbated the dispute. The fallout would have further ramifications in 2011, when Tymoshenko would be arrested and sentenced to seven years in prison – under newly elected Prime Minister Yanukovych – for alleged abuse of power.
Although Ukraine was suffering in the 2009 downturn, it was still seen to be moving in the right direction in terms of democracy and general reform, so Europe and the US were inclined to offer a helping hand.
Coming to Ukraine’s rescue, the EU persuaded a string of banks to lend the country $3.6bn, while the IMF also got involved to help bolster the struggling economy.
The shackles of the recession began to ease. It was around this time that Tymoshenko brokered the deal with Vladimir Putin to resolve the gas conflict – at the time this was seen as another positive, although we now know where it would ultimately lead. Elsewhere, industrial production and steel exports started to gather pace. Signs were emerging that Ukraine was ready to face the world on its own again, and become an integral part of the global economy.
From candidate to convict
But the glory days were not to be enjoyed for long, and sympathy and support from the US and Europe began to dwindle in the face of ongoing political uncertainty. In 2009, Tymoshenko announced that she would run for the Presidency, something she had previously stated she would not do. Victor Yanukovych would stand against her, and when the results came in it was the latter who came out on top. Tymoshenko then challenged the result of this election in court, claiming that over one million votes were invalid as a result of widespread fraud.
A dispute raged between the two candidates, as Yanukovych claimed he would be willing to listen to Tymoshenko only if she apologised for her accusations against him. The country’s courts were forced to suspend the results of the election based on Tymoshenko’s claims. No long after, however, Tymoshenko withdrew her appeal, claiming that her attempts to investigate documentation and processes around the election had been rejected. Eventually, a vote of no confidence in her cabinet was passed, and her government collapsed. In May 2011, charges from a previous 2004 court case were reopened against Tymoshenko. Speaking to the press, Tymoshenko claimed that President Yanukovych had instructed the Prosecutor General’s Office to find any means possible to prosecute her.
The final nail in the coffin came soon after, when a number of criminal cases were opened against the former Prime Minister, including the abuse of power charge of which she was convicted in October 2011. She was sentenced to seven years in jail, in an incident which drew a great deal of international attention. The controversial verdict related to her brokering a gas deal with Russia, a move seen by some to have disadvantaged Ukraine, and one which, the court decided, was one beyond her powers as Prime Minister.
Tymoshenko maintains that the charges are a politically motivated move orchestrated by Yanukovych in a bid to keep her away from the 2012 election. Yanukovych has firmly denied any such motives, explaining that his government is merely acting to fight corruption. There are those who believe him, and those who do not. On the surface, the situation looks questionable.
Yanukovych has not enjoyed widespread public support since his coming to power in 2010, and his popularity will need to improve as the country moves closer to its next elections, which will take place in October 2012.
Passionate supporters of Tymoshenko disrupted the start of the new parliamentary season in Kiev in February 2011, chanting “Freedom for Yulia!” throughout the keynote speech made by Yanukovych. Unconfirmed reports suggest that Tymoshenko has been denied appropriate medical care during her imprisonment thus far, in relation to severe back pain that has left her bedbound. The former Prime Minister’s daughter has vocally complained about the medical treatment her mother is receiving in prison, stating that she fell unconscious for two hours after taking an unknown medicine used to treat colds. Prison wardens denied the claim, asserting that Tymoshenko had only suffered a spell of dizziness after emerging from the shower.
The new regime
Since President Yanukovych came into power in March 2010 – with Mykola Azarov serving as Prime Minister – Western-style democratic freedom has appeared to diminish. The Ukrainian President and his close-knit entourage of oligarchs have wrested control over much of the country. There have been accusations, internal and external, of corruption eating into various areas, including elections and the media, as well as the country’s industries and natural resources.
It is difficult to judge the validity of any reports coming out of the country, or those of outsiders looking in, but the country has battled against suggestions of corruption for some time. In 2000, journalist Georgiy Gongadze was kidnapped and beheaded after publishing online reports about high-level government corruption. Former Interior Minister Yuriy Kravchenko died of two gunshot wounds in 2005 while in the process of investigating the case, just hours before he was due to testify. At the time, the government was headed by President Leonid Kuchma, with Yanukovych serving as Prime Minister.
The West has put increasing pressure upon Ukraine to clean up its act or, if it has nothing to hide, to become more transparent. As a result, the country has become isolated, while also struggling to maintain a working relationship with Russia. Neither bodes well for the country’s economy.
What lies ahead
During the global recession, Ukraine’s economy slumped 15 percent, making it one of the hardest hit countries. A slump of this proportion would be a shock to any country, but it has left Ukraine particularly vulnerable to future problems, particularly as the eurozone crisis continues to rumble on and on. Significantly, the eurozone accounts for about a third of Ukraine’s trade, and the country is highly dependent on commodity exports such as steel. Analysts fear that any further financial shocks to the country will shatter its already fragile foundation.
While Ukraine enjoyed a hefty 5.2 percent GDP growth in 2011, that figure may well be halved by the end of 2012, and the stifling of GDP has already begun. Government figures released at the end of 2011 indicated that real GDP growth slowed to 4.6 percent year-on-year in the fourth quarter of 2011, compared with the 6.6 percent recorded in the previous quarter. “With the global economy unlikely to experience a recession this year like in 2009, we forecast Ukraine’s real GDP growth to slow to 2.2 percent year-on-year,” Kiev-based investment bank Dragon Capital has said in a note to investors.
Precarious GDP rates are not Ukraine’s only immediate concern. At the beginning of the year, headlines around the world told stories of Ukrainian fatalities brought on by freezing temperatures that swept much of Europe. Most of the Ukrainians who lost their lives were homeless, which is indicative of the high level of poverty found in the country today.
The resignation of Finance Minister Fedir Yaroshenko in January 2012 was another blow. His stepping down came after talks to resume a $15.6bn international bailout loan were blocked. Yaroshenko, who held the position since being appointed in March 2010 after Yanukovych won office, has been replaced by Yanukovych’s close ally Valerij Chorosjkovsjyj, the former head of security. Appointments like these suggest that Yanukovych is keen to keep his friends close to hand.
Ukraine’s ever-weakening budget is destined to plummet further as a result of frosty relations with the IMF and other international lenders. A 2010 bailout loan from the International Monetary Fund has been frozen since last March on the grounds that the government failed to increase household gas tariffs, an action that the IMF had demanded in order to reduce losses at the country’s state-owned energy company.
EU states have collectively refused to ratify an Association Agreement – which includes a free-trade agreement – between the EU and Ukraine. The news was not unexpected. The reasons given for dismissal of the agreement include the refusal to free Tymoshenko. Morover, the EU insisted that it will not ratify the agreement until it has seen the Ukrainian parliamentary election in October 2012 being conducted in a free manner, without suggestions of corruption.
In order for Ukraine to move forward and avoid further damage to its economy, it is imperative that the government fulfils the EU’s demands. The debate goes on as to whether or not they will.