Post-upheaval Ukraine: viable challenges

Caretaker President Alexandre Turchinov said the government’s primary task is to end conflict, restore order and prevent personal revenge. He added that priority will also be given to economic recovery and European integration.

Viable risks of social instability

Following the political upheaval, thousands of Ukrainians joined a march in the port city of Sevastopol fearing that the ex-Soviet state could collapse. They even chanted the fascists had taken power in Kiev. Fearing that Sevastopol may become a hot spot of the pro-Moscow separatist movement, the US, Germany, France, and Poland have called on Ukraine to maintain territorial integrity.

Analysts say instability will continue as Ukrainian society has long been divided into pro-Moscow and pro-Western factions. Differences between the two sides have not been resolved over the last 20 years.

Therefore, whoever becomes president will not receive the people’s full support.  

The so-called Orange Revolution has not brought about expected prospects but rather political instability, economic woes, and rifts in relations with neighboring countries.

Increased economic difficulties

Kiev is facing bankruptcy. Its public debt in 2013 increased 13% from US$73.1 billion in 2012, equivalent to 30% of national GDP. It is supposed to pay the IMF US$3 billion by the end of the second quarter of this year.

With a budget deficit of more than 8%, it will be impossible for Ukraine to pay its debts on time without foreign assistance. Russia’s US$15 billion loan disappeared with protestors’ ouster of President Yanukovych.            

Ukrainian officials announced on February 23 that the country needs US$35 billion in foreign emergency aid and asked Western donors to convene an international conference in 2 weeks’ time to discuss a financial bailout for Kiev.

Russian Prime Minister Dimitri Medvedev said extension of the Russia-Ukraine gas agreement will need to be negotiated between Ukrainian companies and their government. He added Russia will not work with any particular individual because this is a matter of bilateral relations.

Medvedev’s statement is obviously not in Ukraine’s interest. The Russian Prime Minister had previously said Russia doubts the legitimacy of the ruling Ukrainian government and that it is a mistake that some nations have recognized the Ukrainian government.

Russian Economic Minister Alexei Ulyukayev warned that Russia will raise the import tariffs on Ukrainian goods if Kiev signs a partnership agreement with the EU. Russia is currently the key consumer of Ukrainian goods.

Ukraine is worried that Russia will increase gas prices from the level of US$268.5 for 1000 cubic meters that Russia signed with former President Yanukovych. This level is one third of the US$400 Kiev had to pay in 2009.

Meanwhile, a cooperative agreement with the EU will have to wait until after the May 25 election.

In this context, many Western nations have pledged their support for Ukraine. However, in the face of financial difficulties, Ukraine needs immediate support instead of promises. Whoever rules Ukraine in the future will certainly have to deal with formidable challenges.