Ukraine faces a moment of truth, as the first domestic energy bills to include the large increase in tariffs announced earlier this year reached hard-pressed consumers this month. We are entering the period in which the will of the country to carry out badly needed reforms will be tested against its ability to absorb the inevitable shocks and pain involved.

Raising energy tariffs to market rates is the single most important reform Ukraine has carried out so far, enabling it to root out corruption, cut waste and strengthen public finances. But the measure is deeply unpopular and unscrupulous politicians have been more than ready to exploit that fact. Read more

The European Union finds itself in the midst of multiple crises. It might be torn apart by the refugee crisis, the rise of nationalistic populism in Central Europe, the repercussions of a possible Brexit, or by the return, in some form, of the debt crisis that has been ravaging Greece for over five years now. However, the risk that these crises pose to the EU is eclipsed by their cumulative effect on the EU’s neighbours, especially Ukraine.

In all likelihood, the EU will eventually muddle its way out of its current troubles. In the process, however, it is bound to become more inward-looking and wary of engaging its eastern partners. The united front that the EU has shown in the aftermath of Russia’s invasion of Ukraine is fragile. Sooner or later, it will be replaced by a cruder form of realism that will put the immediate German or French ‘national interest’ first, effectively rewarding Vladimir Putin for his aggression. Read more

The mass movement of millions of refugees from Syria and Iraq has been perplexing politicians and exasperating economists for months. Who will take them and how many are questions that now make the Greek debt crisis look like dry rot in a house on fire – and as winter approaches, the situation is getting more serious by the day.

While western leaders quarrel over a solution, they are overlooking a country that earlier this year was the centre of yet another argument: Ukraine. Read more

Last Sunday Ukraine held elections to local councils and city mayors that the Organisation for Security and Cooperation in Europe described as “competitive and well organized overall” adding that “the campaign generally showed respect for the democratic process”.

The holding of a third democratic election in Ukraine since last year’s Euromaidan revolution in a region where free elections are uncommon is one of many signs of how far Ukraine is moving away from Russia and to what extent the actions of Vladimir Putin, Russia’s president, have accelerated this process. Read more

A $300m loan to help Ukraine fill its gas storage facilities before winter has today been approved by the EBRD’s board of directors.

The loan will enable Naftogaz, the state-owned oil and gas company, to purchase over 1bn cubic metres of gas (bcm) and so support Ukraine in reaching its target of having 19 bcm of gas in storage. It will also help the country diversify its sources of gas supply by financing purchases from its interconnections with Europe through the so-called reverse flow.

What is more, it is crucial for the wider Europe: a stronger energy security situation in Ukraine, which is still a key transit country, especially for south-eastern Europe, helps to ease a number of European energy security concerns. Read more

Ukraine’s debt restructuring plan, announced last month, is both revolutionary and evolutionary. The agreement to restructure $18bn of privately held government debt stands in stark contrast to Greece’s nearly apocalyptic showdown with the European Union this year and Argentina’s simmering standoff with holdout creditors. Ukraine’s deal showcases two important evolutionary steps: a rare case of successful investor-state coordination and the latest application of equity principles in sovereign finance.

Today, Ukraine’s parliament votes on this milestone deal. Facing an internal armed conflict and a deep economic recession, Ukraine is in dire need of debt relief. The restructuring terms include a 20 per cent haircut and a four-year maturity extension, providing Ukraine with much-needed breathing room. Yet the agreement’s favourable terms for creditors saw Ukraine’s sovereign bonds rally immediately following its announcement. Major turning points—east or west, deal or default—hang in the balance with today’s vote. But the fate of Ukraine’s debt deal also has serious implications for the broader world of sovereign finance. Read more

The annual Yalta European Strategy conference, now relocated to Kiev until further notice, is a good place to take the political temperature of Ukraine. Last weekend’s gathering saw the country’s ruling elite, from President Petro Poroshenko down, out in force and keen to talk. What regular attendees noted most was the change of mood since last year: less appetite for apportioning blame and more focus on what Ukraine can do to rebuild itself. There was even room for guarded optimism. A snap poll showed that most participants expect to see Ukraine to be stable, growing and with its conflict in the East frozen, if not solved, within three years.

There are certainly reasons to argue that Ukraine is beginning to turn the corner. Its currency has stabilised, the renegotiation of its sovereign debt has strengthened its fiscal outlook and a return to growth is widely anticipated. The government’s economic programme recently earned praise from Christine Lagarde, the IMF’s managing director. The problem is that while it is possible to detect an improvement in Ukraine’s macroeconomic position, it will take longer for this to feed through into anything resembling a feel good factor in the country as a whole. Read more

Ukraine’s economy may be battered but its agriculture is enjoying a period of record exports, defying geopolitical challenges and the conflict in the east of the country.

Despite losing control over some of its territory, Ukraine has retained its place as the world’s largest exporter of sunflower oil and was the third largest exporter of grains in 2014-15. Today, Ukrainian agriculture, which has shown overall growth during the past 15 years, is an industry worth $13.5bn. Read more

More than 20 years after the Ukraine Independence Act that created the country I love, its future hangs in the balance once again.

Hostilities have resumed in Eastern Ukraine and the number of casualties is multiplying. Following three-way talks in Berlin on Monday, the leaders of Germany, France and Ukraine all reiterated the need to implement the Minsk cease-fire agreement hammered out this year in tense late-night talks involving Russia.

“We have only one single rule today and this is the full respect and implementation of the Minsk agreement,” said French President Francois Hollande. He is not alone in this view. Many in the west still cling to the hope of a political and diplomatic solution to the conflict in Ukraine.

Yet to imagine at this stage that Russia suddenly intends to abide by the Minsk II agreement is naïve, wishful thinking. Read more

The west is in danger of losing Ukraine unless there is a significant change in the scale and nature of its engagement with the country over the coming weeks and months. That is the somber reality European and US policy makers need to grasp as Ukraine is hit by a wave of protests, terrorist attacks and continued violations of the ceasefire by separatists in the east. Against a background of deepening hardship and rising political frustration, there is a very real risk that the reformist drive of the last few months will give way to a new populism that takes Ukraine backwards and opens the door to renewed Russian influence. Complacent western leaders must act before it’s too late. Read more

The good news is that Russian and Donbas separatist leaders have called an end to the “New Russia” project, which had targeted eight Russian-speaking regions of eastern and southern Ukraine for separatist agitation and union with Russia. The bad news is that while it always was a mistake to assume Ukraine’s Russian-speakers were fans of president Vladimir Putin, Ukraine’s political vacuum and its selective “de-oligarchisation” are allowing diehards from the former ruling Party of Regions grouped in the Opposition Bloc and funded by Ukraine’s powerful gas lobby to retain influence in eastern and southern Ukraine. Read more

Germany – and its chancellor Angela Merkel – deserve credit for the continuation of the EU’s sanctions regime against Russia. But Germany happens also to be home to the energy giant E.ON, which recently signed a (non-binding) memorandum, together with Russia’s Gazprom, Austria’s OMV, and Shell from the UK and the Netherlands, agreeing to the extension of the Nord Stream pipeline, which brings Russian gas into the European Union (EU).

The extension, to be completed by 2020, would double the transit capacity of the pipeline, currently at 55bn cubic meters per year. Together with Turkish Stream, another project Gazprom is toying with, it would make gas transit through Ukraine redundant by the time the country’s current contract with Gazprom expires in 2019. Read more

The Financial Times and Bloomberg have reported that the IMF is intending to categorise a $3bn 2-year eurobond sold by Ukraine in December 2013 to a Russian sovereign wealth fund as ‘official’ government to government lending. This decision, if confirmed, will directly effect not only the implementation of Ukraine’s $40bn IMF-led bailout agreed in March 2015 but also Russia’s leverage over Kiev at a time when Russian-backed separatists are fighting the Ukrainian army and allied volunteer battalions in two breakaway oblasts in the east of the country.

Ukraine, the Financial Times argued, would be weakened by the IMF’s decision as it would compel it to service and repay the Russian bond because the IMF is not allowed to disburse funds to countries in arrears to other IMF member governments. Bloomberg argued that Ukraine’s remaining private western bondholders would have to shoulder an even greater burden of the IMF-imposed ‘debt operations’ making it more difficult for Ukraine to reach an agreement to reduce its private sovereign debt obligations.

However, the unusual structuring of the $3bn Russian eurobond and the new western-backed Ukrainian government’s policy of trying to detach itself from Russia suggest otherwise. Read more

Austria’s refusal to extradite Dmitry Firtash to the US is confirmation that Europe holds two contradictory positions on corruption. While the European Union urges Ukraine to fight corruption, some of its member states – such as Latvia, Cyprus (still the largest ‘foreign investor’ into Ukraine), the UK, Austria, France, Monaco and Switzerland, along with Caribbean offshore zones such as the Virgin Islands – continue to enjoy the fruits of corrupt proceeds that are laundered abroad.

Firtash, a Ukrainian gas mogul and former partner of Gazprom, had been charged in the US with involvement in an international racketeering conspiracy that allegedly paid $18.5m in bribes to government officials in India in exchange for permits to mine titanium for export to Boeing in Chicago. Read more

By Taras Kuzio of the University of Alberta

This week, St Petersburg hosted a bizarre gathering organized by the Rodina (Motherland) party of 150 European fascist and nationalist-populist political parties united in their opposition to the EU and US and in support of Russia’s annexation of Crimea and invasion of eastern Ukraine. Rodina is the loyal nationalist ally of President Vladimir Putin’s United Russia party and consequently plays a similar role to the Radical Party’s alliance with the Serbian Socialist party. Read more

By David Clark of the Russia Foundation

Natalie Jaresko, Ukraine’s finance minister, is in London this week to drum up support for her country’s ailing economy. It is badly needed. The physical destruction of property, the loss of production and the disruption to trade and finance caused by Russia’s military intervention mean that Ukraine has lost around a fifth of its economy in the last year. Forecasts that it will contract by a further 5.5 per cent this year are widely seen as optimistic. With the value of the hryvnia down by 70 per cent, inflation at around 35 per cent and foreign currency reserves running low, the IMF’s recently agreed $17.5bn support package already looks like a sticking plaster solution for an economy that needs a blood transfusion. Read more

It would be hard to put it another way. Volodymyr Lavrenchuk, chairman of the board at Raiffeisen Bank Aval, the biggest foreign lender in Ukraine, describes the situation on the market there as “very complicated”.

With Ukraine in economic and political crisis, with Crimea annexed by Russia and a pro-Russian rebellion in the Donbas, state and corporate finances have been badly hit with predictable effects on the country’s banks. “What we are seeing is a set of dramatic events that is hard to encounter anywhere else,” Lavrenchuk tells beyondbrics. Read more

By Matthew Duhan, Global Counsel

Despite the economic and currency crisis engulfing Ukraine, by 7 o’clock in the evening the National Bank of Ukraine (NBU) is virtually empty. But as the majority of its 12,000 employees head home, lights remain on in a few offices and footsteps echo through dark hallways as a small group of reform-minded individuals arrive for their unofficial night shift. To paraphrase the old line about the Indian economy, at the National Bank of Ukraine reform happens in the night while the government sleeps. Read more

So, how would you go about bailing out a war-zone? The IMF’s rescue plan for Ukraine, agreed by the fund’s executive board last week, has to grapple with an extraordinary combination of problems. On top of the usual party pack of issues endured by IMF borrowers – a collapsing currency, a large debt burden, a corrupt and sclerotic economy – Ukraine faces the unusual challenge of a belligerent nuclear-armed neighbour fomenting a civil war.

In this context, the critical question of whether to restructure private sector debt becomes an unusual one. The IMF made obvious mistakes in previous crisis countries such as Argentina and Greece, where debt restructurings were delayed until the situation had gone critical. This experience suggests a rapid early reduction in net present value, including a cut in face value if necessary, to tip debt dynamics towards stability. But where there is a large and completely uncontrollable risk that might instantly change the situation, there is a strong case for giving Ukraine medium-term breathing space rather than a once-and-for-all write-off. Read more

By Andrew Foxall of The Henry Jackson Society

Unwilling to go to war with Russia, the west’s main levers for persuading Vladimir Putin to back down over Ukraine are economic sanctions. Their importance was underscored last week, when the US announced new measures against 14 individuals and two entities. While the attention-grabbing name on the US list was Aleksandr Dugin, the academic-turned-policymaker whose musings on ‘Eurasianism’ has led some to refer to him as “Putin’s Brain”, another entity was the little-known Russian National Commercial Bank (RNCB). Read more