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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 49,537 41,380 37,600 55
GNI per capita
 US $ 970 770 720 137
Ranking is given out of 208 nations - (data from the World Bank)

Books on Ukraine

Update No: 355 - (27/07/10)

See-saw between West and East
There has long been a tug-of-war between Western and eastern influences upon Ukraine. In 1654 it fell for centuries into the Russian orbit, not to emerge until 1917, when Tsarist Russia collapsed. The new occupiers for a very brief period were the Germans.

The Germans imposed very harsh terms on defeated Russia at the Treaty of Brest-Litovsk, the surrender of Ukraine amongst them. It involved them in having to keep a million men under arms in the east at a time when it was urgent to switch troops to the west to face the mounting armies of the US, which had just entered the war. The eastern front did, thereby, contribute to the defeat of Imperial Germany - as it was later to defeat Nazi Germany.

The collapse of Imperial Germany allowed the nascent Soviet Union to repossess Ukraine. It was firmly under the control of an eastern despotism once again.

Of course 1991 changed everything. An opening to a liberal-democratic West was for the first time a possibility. It only materialised in October, 2004 with the Orange Revolution. Unfortunately it has all come to grief, with a devastated economy not being helped by misguided Western advice. The West was in a triumphalist mood in winning the Cold War. Its advocacy of shock therapy and instant privatisation undermined the shift towards liberal democracy, indeed led to a very liberal kleptocracy.

The aftermath of the Orange Revolution was dominated by infighting between its leaders, Viktor A. Yushchenko and Yulia V. Tymoshenko. They neglected constructive economic and political reforms, failing to capitalize on their immense popular support and refusing to stamp out corruption. Ukraine is currently ranked 146th out of 180 countries in the annual Corruption Perception Index published by Transparency International.

Back to Russia
In today’s Ukraine, the euphoria of the 2004 pro-democracy Orange Revolution has evaporated. In February came the victory of the pro-Russian candidate, Viktor Yanukovich, leader of the Party of the Regions, based in the east of the country adjacent to Russia. Since he was elected the Ukrainian president, journalists, local and foreign non-governmental organizations and independent television channels have come under pressure from the security services.

In June the authorities withdrew the broadcasting license from the 5 Kanal television station. If the decision is upheld, one of the last independent stations will go off the air. Valery Khoroshkovsky, a media magnate and head of Ukraine’s security services, or S.B.U., is poised to take over the frequencies, a move that will increase even further the growing powers of the security services over the dissemination of news.

Mr. Yanukovich himself has proposed reintroducing “temnyky,” official guidelines for journalists. The abolition of the temnyky was one of the gains of the Orange Revolution. The pressure on the media has become so intense that the 2010 Press Freedom Index published by Freedom House ranked Ukraine 115th out of 195 countries, alongside Kuwait and Mexico.

More significantly, relations between Ukraine and the Russian leadership, which had opposed the Orange Revolution and which has always supported Mr. Yanukovich, have greatly improved.

President Dmitri A. Medvedev agreed last April to supply Ukraine with cheaper gas in return for Russia keeping its Black Sea Fleet in the Crimea until 2042. Susan Stewart, an expert on Russia at the German Institute for International and Security Affairs in Berlin, estimates that Ukraine will save up to $40 billion over the next 10 years.

Ukraine and Russia later signed an agreement restoring the right of Russia’s counter-intelligence services to operate on the base of the Black Sea Fleet, giving them an official foothold in Ukraine. Russia’s policy toward Ukraine is about re-establishing its hegemony in the region so as to become stronger vis-à-vis the West. The Kremlin has resented Ukraine’s independence ever since the collapse of the Soviet Union in 1991.

But a new opening to a wiser West is possible
Despite using Mr. Yanukovich’s election as an opportunity to entrench itself in Ukraine, Russia has made limited inroads into Ukraine’s economy. Mr. Grätz argues that Ukraine’s oligarchs, who dominate most sectors of the economy, are prepared to challenge this aspect of Russia’s influence. They would lose out financially if Russian businesses took over the country’s energy resources and gas transit pipelines, which the Kremlin has long coveted.

This is where the E.U. could exercise some leverage. All the more reason, say analysts and diplomats, for the European Union and especially Germany to adopt a much stronger and united policy if they want to prevent Ukraine from sliding away from democracy and moving into the orbit of Russia.

“The great shame is that there is no actual German or European Union policy towards Ukraine,” said Jonas Grätz, security analyst at the Norwegian Institute for Defence Studies, Oslo. “Everything seems to be focused on the reset button with Russia,” a reference to the United States, and now the E.U., improving relations with Russia. But by making Russia its priority among the countries east of its borders, the E.U. risks losing a still democratic and stable Ukraine, say analysts.

It is willing to offer Ukraine a free trade agreement provided the government embarks on major structural reforms. Such an accord would benefit some of the oligarchs; it would give them access to more markets and make their businesses more competitive.

Since Mr. Yanukovich says he is committed to bringing Ukraine closer to the E.U., Brussels should make any free trade negotiations conditional also on press freedom, an independent judiciary and the rule of law. “After all, these are the values of the E.U.,” said Mr. Lange. “We should use conditionality in a much more forceful and convincing way,” he added.

E.U. diplomats say they have repeatedly tried to do this with all the leaders since the Orange Revolution, but with little success. “There is a massive sense of frustration in Brussels because no matter what the E.U. offers, it receives only empty promises by the Ukrainian authorities,” said Katinka Barysch, deputy director of the Centre for European Reform in London.

When the E.U. offered recently to modernize Ukraine’s inefficient energy sector, there was enthusiasm by reformers, but reluctance by the oligarchs. Modernization would mean transparency over supplies and prices, eroding the influence of the oligarchs. Russia also opposed the plan: it would make it more difficult to acquire parts of the energy sector.

No wonder then that Brussels is frustrated.

Nevertheless, the E.U., like Germany, is still too focused on Russia to really do something about Ukraine. Were Berlin to establish a separate strategy for Ukraine instead of always looking at the region through the prism of Russia, Europe might have a real chance in halting Ukraine’s slide away from democracy and into Russia’s sphere of influence.

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