Ukraine

Timothy AshBy Timothy Ash of Standard Bank

This time last year I was asked to contribute an article for beyondbrics on the outlook for 2014, and I chose Ukraine (see Hello 2014: Ukraine’s crisis may run and run, December 20, 2014). That post turned out to be prescient, although even I could never have imagined the remarkable turn of events in that country this year.

For 2015 I think Ukraine will remain in the headlines, but its future is likely at least partially to be determined by events in its eastern neighbour, Russia. The new reform administration in Kiev can succeed, if Moscow gives it some breathing space and scales back its own direct intervention in Ukraine. Read more

By Taras Kuzio of the University of Alberta

A year ago I took the seven hour Hyundai Rotem intercity train from Kiev to Donetsk, introduced on this and two other routes for the Uefa Euro 2012 football championship to carry supporters to Ukraine’s newly built stadiums. The journey is now two hours shorter as the train only goes as far as Slovyansk and Kramatorsk, situated 30 kilometres from the front line of the Russian occupied enclave of the Donetsk People’s Republic (DNR). Read more

Ukraine’s prime minister said Thursday his cash-strapped government, currently in a race to unlock and boost bailouts from the donors including the International Monetary Fund, needs some $15bn in fresh aid for the war-torn and recession-battered country to avert default and rebuild, Roman Olearchyk reports from Kiev, fast FT reports.

“In order to survive, in order to prevent a default, we need an international donor conference, the adoption of a Ukrainian recovery plan at this conference and the help of our Western partners,” said Arseniy Yatseniuk (pictured), addressing lawmakers before they approved his newly appointed government’s reform action plan. Read more

By Olena Bilan of Dragon Capital and VoxUkraine

Despite securing sizeable financial support from western lenders in April — $27bn for two year — Ukraine is again finding itself precipitously close to a financial meltdown. The national currency lost 50 per cent of its value this year despite the central bank attempting to curb devaluation pressures through exchange controls and FX interventions. Foreign reserves have fallen close to $8bn, the lowest level in a decade and equivalent to a mere 1.3 months of imports. Ukraine needs $12-15bn of additional external funding next year, on top of the $16bn scheduled under the current support package, in order to repay $9bn of maturing FX debt, pay $8-9bn for imported gas and build up reserves to at least 2 months of import cover.

Were Ukrainian authorities solely responsible for pushing the country to the brink of disaster? Not this time. Read more

By Alan Riley of City Law School

Following South Stream’s demise the Danube nations must look again at their energy vulnerability. These low income states, locked into antique energy infrastructure and facing high renewable bills, face a major energy dilemma – a dilemma shared, in a less acute form, with the rest of the European Union. One way forward is to look again at whether a deal on gas between Russia and the EU could be made to work as a means of encouraging economic growth and helping to settle the dispute over Ukraine. Read more

By David Clark of the Russia Foundation

Marcos Sefcovic, the new European Commission vice-president responsible for energy, was in optimistic mood last week when he predicted a winter without any disruption to gas supplies from Russia. In truth, the trilateral agreement on gas signed by Russia, Ukraine and the European Union in Brussels five weeks ago has yet to be tested and the underlying tensions that made the agreement necessary are far from resolved. Ukraine and Russia remain in a state of undeclared war and this week’s manoeuverings over the proposed South Stream pipeline show that Russia’s desire for a controlling influence over the European energy market is undiminished. To imagine that Vladimir Putin will refrain from playing the energy card as demand for Russian gas reaches its annual peak requires a bold leap of faith, especially since he has just cut off coal supplies to Ukraine. Read more

“Today it is clear that Ukraine’s non-aligned status, proclaimed in 2010, cannot guarantee our security and territorial integrity. We must abolish it. This position has led to serious losses. That is why we have decided to return to the course of Nato integration.”

So said Petro Poroshenko, Ukraine’s president (pictured), in a speech to the new parliament in Kiev last week. It came just a fortnight after Moscow described the possibility of Ukraine joining Nato as a “red line” in its relations with the west and demanded, in the words of a Russian presidential spokesman, a “100 per cent guarantee that no-one would think about Ukraine joining Nato.” Read more

Two foreign-born investment fund managers and a reform-minded former official from the Caucasus republic of Georgia were on Tuesday appointed to top ministerial posts in Ukraine’s newly-formed, pro-EU integration coalition government.

The three “foreigners” were swiftly granted Ukrainian citizenship on Tuesday hours before being approved as ministers by lawmakers.

Their unorthodox appointment is seen as a desperate attempt by the war-torn and recession-battered country to jumpstart reforms, crack corruption and avert default by unlocking billions of dollars in bailout funds from the International Monetary Fund (IMF). Read more

By Taras Kuzio of the University of Alberta

US President Barrack Obama dare not utter the word ‘invasion’ and asks his advisers why Ukraine is so important. Russia denies it has troops in eastern Ukraine while Ukraine itself describes its own military actions there as an “anti-terrorist operation”. In reality, Europe is witnessing a war that is producing casualties for the Russian army on a scale not seen since the Soviet invasion of Afghanistan. It is time to recognise it as such. Read more

Timothy AshBy Timothy Ash of Standard Bank

The media will be focusing on the one year anniversary of the Maydan, what has changed, and whether it was all really worth it. Here is my two penneth worth.

It it easy to be critical and say little has really changed. But Russia’s annexation of Crimea and its intervention in eastern Ukraine have provided a cruel head wind. Most Ukrainians, I would wager, would argue that these developments were not of their making and, as a sovereign and independent country now since 1991, i.e. for 23 years, they have a right to self determination and to not be bullied by east or west over their choices of geopolitical orientation. Read more

Leaders from Kiev and Brussels were busy this weekend warming up their energy ties as Vladimir Putin bailed out early from the G20 summit in sunny Australia where he faced one could shoulder after another from international leaders over his actions in Ukraine.

Ukrainian president Petro Poroshenko spent Saturday and Sunday receiving a warm welcome from Visegard state leaders meeting in Slovakia (he is pictured above with his Czech, Polish, Slovakian and Hungarian couterparts). He also received guarantees from Bratislava that his country – still at odds with Moscow over fair natural gas prices – would be guaranteed what officials said could amount to 21bn cubic metres of annual reverse flow inflows, enough to meet a majority of the country’s import needs. Read more

Ukraine’s international reserves are drying out rapidly. According to the central bank, in October they plunged by 23.2 per cent to $12.6bn, the lowest level since 2005. Even greater decline is expected by the end of the year. Kiev must pay a $3.1bn gas bill to Russia’s Gazprom alone. The situation could get even worse, should the central bank find itself forced to sell foreign currency to support the hryvnia, and with further hefty gas payments likely over the forthcoming winter.

Emergency funding from international donors, primarily the IMF, could provide a lifeline. But experts believe any such measures would depend on the authorities in Kiev showing a real commitment to fast and effective economic reform. Yet three weeks have passed since snap parliamentary elections last month, and the indication is that the pro-western camp in Kiev is far from taking such steps. Read more

One of the most powerful emerging markets fund managers in the US is accusing the west of acting “capriciously” by imposing sanctions on Russia.

Justin Leverenz, who controls the $42.3bn Oppenheimer Developing Markets fund, and who has put 7.2 per cent of his fund into Russian stocks, questioned the wisdom and the motives of a confrontation with the Kremlin over the Ukraine. Read more

By Taras Kuzio of the University of Alberta

Internationally unrecognised ‘elections’ held on November 2 in the so-called Donetsk and Luhansk People’s Republics (DNR and LNR) have entrenched Russia’s annexation of the eastern Donbas region and established a de facto new border with Ukraine. A proposed Russian treaty with the DNR and LNR is suspiciously similar to its September 2008 recognition of the independence of South Ossetia and Abkhazia. Read more

By Mohammad Zahoor of Istil Group and the Kyiv Post

I have been investing and doing business in Ukraine since its independence in 1991. I first arrived, aged 19, from Karachi on a scholarship to study metallurgy at Donetsk Technical University and after the break up of the Soviet Union stayed on and eventually invested $150m in Istil Ukraine, creating the most technically advanced steel facility in the CIS. I left the steel business in 2008, and today Istil Group is a Ukrainian conglomerate operating in many areas including real estate, media, manufacturing and coal enrichment.

Now, like many entrepreneurs in Ukraine I find myself depressed by the conflict, which potentially will cut GDP by 7 per cent this year and continues to cost lives every day. However, as an entrepreneur I am also excited by the investment opportunities in Ukraine. But for these opportunities to be fully realised it is essential that the pro-western parties who dominated last week’s parliamentary elections address the long-running issue of corruption. Read more