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Ukraine as a Military Power
Ukraine entered World War I on both of the Central Powers side (German Empire, Austro-Hungarian Empire, Ottoman Empire and the Kingdom of Bulgaria) under Austria, and the Triple Entente (Great Britain, France and Russia), under Russia. There were 3.5 million Ukrainians that fought with the Imperial Russian Army, and 250,000 fought for the Austro-Hungarian Army. During the war, Austro-Hungarian authorities established the Ukrainian Legion to fight against the Russian Empire. This legion was the foundation of the Ukrainian Galician Army. The Ukrainian Galician Army reached its greatest strength in 1919, it had 70,000 to 75,000 men, including reserves. It had very limited cavalry but artillery was their strength. They had 2-3 armored cars and two armored trains. Their air force fielded 40 airplanes, and until April 1919 had air superiority over the Poles.
Ukraine’s commitment to regional and global security has been consistently demonstrated. From 2003 to 2005, Ukraine participated in Operation Iraqi Freedom from 2003 to 2005, deploying a mechanized brigade of 1,650 servicemen. Ukraine also currently participates in the NATO Training Mission in Iraq. In Afghanistan, Kiev (Capital of Ukraine) granted over flight rights to NATO aircraft flying en route to Afghanistan in support of Operation Enduring Freedom. Today, its servicemen participate in the International Security Assistance Force. Ukraine is the only non-NATO country participating in these four current NATO-led Operations and Missions. It’s also recognized for contributions to the United Nations (UN) peace support operations around the World, including operations in Liberia, Sudan, and Georgia.
Ukraine's geostrategic location is significant for its location at the crossroads between Europe and Asia, its status as the largest country in Europe outside Russia, and a population of 46 million. Ukraine serves as a key transit country for European energy, occupies an important position in the region of the Black Sea country, and provides a port for Russia's Black Sea Fleet. Ukraine declared its independence from Soviet Union on 24 August 1991 and chose the path toward democracy and developed ties with the North Atlantic Treaty Organization (NATO). In February 1994, it became the first member of the Commonwealth of Independent States (CIS) to join NATO's Partnership for Peace. In December 1995, Ukrainian Soldiers were deployed as part of the NATO-led peacekeeping force in Bosnia and Herzegovina and continues to be a great contributor to NATO and other international operations.
Major Adversary – Ukraine currently has no major adversary.
Minor Adversary –Multi-culturalism has caused conflicts with the national identity between Ukraine and Russia. There is a large amount of different ethnic groups that make up Ukraine, such as Russians, Jews, Romanians, Polish, Hungarians and others. Most ethnic Ukrainians live in Ukraine and make up over three-quarters of the population. The largest population of ethnic Ukrainians outside of Ukraine consists of about 2.9 million Russians citizens. There are millions of others in southern Russia and Siberia that have some Ukrainian ancestry. Ukrainian and Russian are the principal languages, although Russia has been known to discourage and even ban the use of Ukrainian language.
United States Interest – The basic parameters of U.S. policy toward Ukraine have remained consistent since its Declaration of Independence in 1991, supporting Ukraine’s efforts to secure its future as a sovereign nation capable of determining its domestic and foreign policies. The United States believes Ukraine can be a contributor to European security. It can be a thriving regional leader that serves as an example to the countries around it. In December 2008, the United States recognized Ukraine’s strategic significance by implementing the U.S.-Ukraine Charter on Strategic Partnership, which affirms the strategic partnership between the two countries and emphasizes shared values and interests. The charter also reaffirms the security assurances that the United States provided to Ukraine when it gave up its nuclear weapons and acceded to the Nuclear Nonproliferation Treaty on 5 December 1994.
The Ukrainian parliament passed a declaration of sovereignty in July, 1990, and in Aug 1991, Ukraine declared its independence of the Soviet Union. Ukraine became a charter member of the Commonwealth of Independent states in Dec 1991. The president, who is the head of state, is popularly elected for a five-year term and is eligible for a second term. The government is headed by the prime minister, who along with the cabinet is named by president. The unicameral legislature consists of the 450-seat Supreme Council, whose members are elected to serve five-year terms. All parties that win at least 3% of the national vote in the parliamentary election are awarded seats on a proportional basis. Administratively, Ukraine is divided into 24 provinces, two municipalities with province status (Kiev the Capital and Sevastopol a city in southern Ukraine), and one autonomous republic (Crimea).
The courts have legal, financial and constitutional freedom guaranteed by measures adopted in Ukrainian law in 2002. Judges are largely well protected from dismissal (except in the instance of gross misconduct). Court justices are appointed by presidential decree for an initial period of five years, after which Ukraine's Supreme Council confirms their positions for life in an attempt to insulate them from politics. The Supreme Court is regarded as being an independent and impartial body, and has on several occasions ruled against the Ukrainian government. This has largely come about as a result of a Ukraine-Ohio Rule of Law Program which was established in 1994, and brought together lawyers and judges from the American state of Ohio (including members of the Ohio Supreme Court) with their Ukrainian counterparts.
Major Adversary – The country's bilateral relationship with Russia has sunk to its lowest level since the disintegration of the Soviet Union, testimony to the Russian state control of the media and its ideological crusade against Ukraine. The Ukrainian Security Service (SBU) is openly raising the question of the intensification of Russian intelligence activities within Ukraine, and Russia's return to Soviet KGB tactics. The Levada Center (Russian independent, non-governmental polling and sociological research organization) recently found that 62 percent of Russians hold a negative view of Ukraine with only the United States and Georgia being seen in a worse light. The Ukrainian Security Service (SBU) is openly raising the question of the intensification of Russian intelligence activities within Ukraine, and Russia's return to Soviet KGB tactics. Russia views the state of Ukraine as "artificiality" and "fragility" and remains deeply rooted within the Russian mindset, and depicts Ukraine as a "failed state" that requires international supervision. It is believed that Russia's ultimate aim is to "destroy Ukrainian statehood" (Den, May 26).
Minor Adversary- Ukraine minor adversary is within. AnOrganization was established of Ukrainian Nationalists (OUN), a Ukraine political organization movement created in 1929 in Western Ukraine. The OUN accepted violence as an acceptable tool in the fight against foreign and domestic enemies of their cause as revenge for the occupation of Ukraine by Poland and Russia. The OUN's stated immediate goal was to protect the Ukraine population from repression and exploitation by Polish governing authorities in particular; its ultimate goal was an independent and unified Ukrainian state that would include Polish, Soviet, Romanian, and Czechoslovak territories. The Polish–Ukrainian War of 1918 and 1919 was a conflict between the forces of the Second Polish Republic (Republic of Poland between World War I and World War II) and West Ukrainian People’s for the control over Eastern Galicia (region currently divided between Poland and Ukraine) after the dissolution of Austria-Hungary.
United States Interest – Ukraine has been open to security cooperation with the United States. In the absence of their former ideological differences and united by common interests in preserving international peace and fighting terrorism, Ukraine and the United States have established constructive and mutually beneficial military cooperation. The United States has been interested in engaging post-Soviet Ukraine in security cooperation and clearly articulated what it wanted to achieve from this cooperation. It was in U.S. interests to have a strong, independent, stable, and democratic Ukraine as a partner in Eastern Europe. Guided by such a vision, the United States consistently has demonstrated initiative in supporting Ukraine in building its national military by engaging it in peacetime military-to-military contacts. The Ukrainian government unhesitatingly accepted U.S. leadership in bilateral military cooperation, which has provided it with an opportunity to learn useful approaches to defense reform, raised Ukraine’s international prestige, and strengthened the country’s position vis-à-vis the pressure for regional influence exerted by its neighbor (and regional dominant power), Russia.
Ukraine’s security defense problem is of vital national interests and remains extremely complicated. The Ukrainian authorities have not managed to achieve notable success in formulation and implementation of an effective national security policy. Signs of crisis evident in next to all sectors of domestic life of the country and foreign relations clearly demonstrate the absence of a long-term strategy and strategic management in the authorities’ activity.
One example is presented by the critical state of the Armed Forces of Ukraine as the guarantor of military security of the country and one of the main attributes of statehood. Actual failure of the key programs of reformation and rearmament of the army, regular underfunding of the needs of maintenance and combat training of the Armed Forces compromise their ability to fulfill the tasks of defense of the state.
Building and maintenance of a professional army cannot be considered beyond the context of transformations of the other power structures, economic and social development of society and implementation of the foreign political course of the state. All those processes should be coordinated in terms of time, resources and results. There is an urgency of the issue of the state defense capability; therefore, it was decided to raise the Armed Forces strength by 12 thousand men. The planned structure and strength of the Armed Forces of Ukraine are intended to suit participation of the country in a collective security system. Impracticability of implementation of the foreign political course of Euro-Atlantic integration in the short run may question the chosen model of the Armed Forces and bring about substantial financial and strategic losses.
Defense Interests – Ukraine is strengthening civilian control of the military, professionalizing its non-commissioned officer (NCO) corps, modernizing force structure to improve interoperability with NATO, and reducing troop numbers, all with an eye toward NATO standards.
The main goal is the establishment of modern Ukrainian Armed Forces, optimum in strength, mobile, well equipped, supported and trained, capable of fulfilling their missions in any environment and at the same time not a burden on country's budget.
General management over Armed Forces reform and development will be executed by the President of Ukraine, being the Supreme Commander-in-Chief. Coordination and control over the respective executive power activities is laid on the National Security and Defense Council. Funding, material, weapons and military equipment, food and other supplies are provided by the Cabinet of Ministers. The Minister of Defense directly controls the State Program implementation.
This system clearly defines military-political and military-strategic forecasts all over the world and nearby Ukrainian borders. Based on this, a conclusion was drawn that the usage of a full-scale military force against Ukraine has little probability. But in some cases a possibility to involve Ukraine into a local conflict at its borders or a regional conflict will remain. Therefore, a decision was made to shift from the principle of "territorial circular defense of the country" and concentrate efforts on preventing a possible aggression only in some operational areas, where under certain circumstances one cannot neglect a military threat.
Based on this in the near future with respect to the mentioned threats and challenges the Parliament of Ukraine will legally update the Armed Forces functions as the following: deterrence of military aggression against Ukraine and its suppression, protection of the ground, air space and territorial seas of Ukraine.
Based on the Armed Forces functions, details of the Armed Forces missions are as the following: capability to deal with low intensity conflict with peacetime force structure and provide mobilization readiness for a local or regional war. At the same time, the Armed Forces have to be permanently ready to participate in peacekeeping and humanitarian operations under the auspices of international organizations with a brigade-size force (up to 2 or 3,000 personnel).
Economic Interests - Ukraine is relatively rich in natural resources, particularly in mineral deposits. Although oil and natural gas reserves in the country are largely exhausted, it has other important energy sources, such as coal, hydroelectricity and nuclear fuel raw materials. It is a major producer of grain, sugar, meat and milk products. With rich farmlands, a well-developed industrial base, highly trained labor, and a good education system, Ukraine has the potential to become a major European economy. Ukraine’s economy experienced a sharp slowdown in late 2008, continuing into 2009. Real GDP growth dropped from 7.7% in 2007 to 2.1% in 2008.
The economy remains burdened by excessive government regulation, corruption, and lack of law enforcement, and while the government has taken steps against corruption and small and medium enterprises have been largely privatized, much remains to be done to restructure and privatize key sectors such as energy and telecommunications and to allow the free sale of farmland. Ukraine encourages foreign trade and investment. Foreigners have the right to purchase businesses and property, and receive compensation in the event that property was to be nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts and particularly corruption have discouraged broad foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment from abroad.
Ukraine abounds in natural resources and industrial production capacity. Although proven onshore and offshore oil and natural gas reserves are small, there is now petroleum exploration interest in the Ukrainian portion of the Black Sea. The country has important energy sources, such as coal, and large mineral deposits, and is one of the world's leading energy transit countries, providing transportation of Russian and Caspian oil and gas across its territory. Ukraine imports almost 80% of its oil and 77% of its natural gas. Russia ranks as Ukraine's principal supplier of oil and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports currently come from Russia, Turkmenistan, Kazakhstan, and Uzbekistan, which deliver the gas to Ukraine's border through a pipeline system owned and controlled by Gazprom, Russia's state-owned gas monopoly. Ukraine owns and operates the gas pipelines on its territory that are also used to transit Russian gas to Western Europe. Ukraine's constitution forbids the sale of the gas pipeline network. The complex relationship between supplier, transporter, and consumer has led to intermittent bilateral tensions, including Russia's decision to significantly reduce gas supplies in March 2008, and almost completely cut them off for approximately three weeks in January 2009.
While countries of the former Soviet Union remain important trading partners, especially Russia and Turkmenistan for energy imports, Ukraine's trade is becoming more diversified. The EU accounts for about 30% of Ukraine's trade, while CIS countries account for about 40%. Steel constitutes nearly 40% of exports. Ukraine has a major ferrous metal industry, producing cast iron, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid. World demand for steel and chemicals, which make up about 40% of Ukraine’s exports, dropped sharply in the second half of 2008. Manufactured goods include airplanes, turbines, metallurgical equipment, diesel locomotives, and tractors. Ukraine is also a major producer of grain, sunflower seeds, and beet sugar and has a broad industrial base, including much of the former U.S.S.R.'s space and rocket industry.
World Order Interests - Ukraine is presently experiencing a difficult period of transition to a democratic style of life. Ukraine became a member of the Council of Europe in 1994. It took steps that led to the creation of well-developed ties with the North Atlantic Treaty Organization (NATO). In February 1994, Ukraine became the first member of the Commonwealth of Independent States to join NATO’s Partnership for Peace. In December 1995, Ukrainian soldiers were deployed as part of the NATO-led peacekeeping force in Bosnia and Herzegovina. Ukraine has continued to be a steadfast contributor to NATO and other international operations.
Ideological Interests – Traditions are a heart of the national culture and the life values are its foundation and vary regionally within Ukraine. There are significant cultural differences between city and village, West and East Ukraine. They determine the way people live: their language, religious belief, life values, and social relationships. Ukrainian customs are heavily influenced by Christianity, which is the dominant religion in the country. Ukraine is an equal participant in the international community and actively promotes the strengthening of universal peace and international security, directly participates in the European process and European structures; recognizes the priority of human values over class, priority generally recognized norms of international law over state law provisions and solemnly declares its intention to become in the future permanently neutral state which does not participate in military blocks and adheres to three non-nuclear principles: not to use, manufacture or acquire nuclear weapons
Following independence, Ukraine declared itself a neutral state. The country has had a limited military partnership with Russia, other CIS countries and a partnership with NATO since 1994. In the 2000s, the government was leaning towards the North Atlantic Treaty Organizations, and a deeper cooperation with the alliance was set by the NATO-Ukraine Action Plan signed in 2002. During the 2008 Bucharest summit NATO declared that Ukraine will become a member of NATO, whenever it wants and when it would correspond to the criteria for the accession.
Major Adversary – Russia is fiercely opposed to any eastward expansion of NATO. On February 12, 2008 (then) Russian President Vladimir Putin said Russia may target its missiles at Ukraine if it joins NATO and accepts the deployment of a Us missile defense shield. Ukrainian President Viktor Yushchenko has stated more than once his country will not allow foreign military bases on its territory; as of December 2009 NATO is not planning to deploy military bases in Ukraine.
Minor Adversary – Ukraine has no minor threats of National Interest.
United States Interest – The United States is a key supporter of Ukraine’s defense reform and the bilateral defense relationship has indeed been a key component of this strategic partnership. The Department of Defense (DoD) assists Ukraine in furthering defense and security reform, fostering the development and implementation of defense planning, policy, and strategy, as well as its national security concepts. DoD provides expert-level assistance in the development of Ukraine’s Strategic Defense Review—a document that is roughly analogous to the U.S. Quadrennial Defense Review—and its Annual National Program. The United States provides Foreign Military Financing, which supports improvements in the capacity of the Ukrainian military to train its personnel and to interoperate with NATO forces. DoD also aids these efforts by providing communications equipment and advanced training aids such as the Multiple Integrated Laser Engagement System (MILES). Ukraine is also working, with U.S. assistance, to build a professional non-commissioned officer corps which would improve the career development of professional soldiers by creating better human resources management, and to improve supply management and acquisition procedures by conducting logistics reform. To date, U.S. grant money has allowed Ukraine to purchase $85 million worth of defense articles and services.
To provide a western model of professional military education, the United States sends Ukrainian military officers to U.S. military schools through the International Military Education and Training (IMET) program. Under IMET, Ukrainian officers study at educational institutions such as the U.S. Army Command and General Staff College at Fort Leavenworth, Kansas, the U.S. Navy War College at Newport, Rhode Island, or the Industrial College of the Armed Forces in Washington, DC. These schools offer advanced instruction and further professional development in military art and science, and officers that attend gain valuable experience through their interactions with U.S. military officers in programs that typically last several months. Since 1992, when the United States established an IMET program for Ukraine, 903 Ukrainian officers, including four graduates who were later promoted to general officer rank, have participated in IMET with an impressive 98 percent completion rate. Moreover, the DoD has provided the Ukrainian armed forces with seventeen English language laboratories to build English language proficiency.18 These laboratories enable Ukrainian officers to participate in U.S. military schools and greatly enhance the ability of Ukrainian personnel to interact with U.S. and NATO forces during multinational and coalition exercises.
While countries of the former Soviet Union remain important trading partners, especially Russia for energy imports, Ukraine's trade is becoming more diversified. The European Union (EU) accounts for about 30% of Ukraine's trade, while CIS countries account for about 40%. Steel constitutes nearly 40% of exports. Ukraine has a major ferrous metal industry, producing cast iron, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid. World demand for steel and chemicals, which make up about 40% of Ukraine’s exports, dropped sharply in the second half of 2008. Manufactured goods include airplanes, turbines, metallurgical equipment, diesel locomotives, and tractors. Ukraine is also a major producer of grain, sunflower seeds, and beet sugar and has a broad industrial base, including much of the former U.S.S.R.'s space and rocket industry.
Ukraine is also an electricity exporter. Its power sector is the twelfth largest in the world. Today, in Ukraine, four nuclear power plants consisting of 15 nuclear power generating units operate. These nuclear power plants represent an important component in movement towards energy independence of Ukraine, as nuclear power plants supply about half of Ukrainian electricity. Actualization of Ukraine’s plans to develop its own nuclear fuel sources will be critical to the further development of Ukraine’s energy independence.
Geographic element:At 603,700square kilometers (233,100 sqmi) and with a coastline of 2,782kilometers (1,729 mi), Ukraine is the world's 44th largest country. It is the largest wholly-European country and the second largest country in Europe. The landscape consists mostly of fertile plains and plateaus, crossed by rivers that flow south into the Black Sea and the smaller Sea of Azov. To the southwest, the delta of the Danube (Europe’s second longest river notable for being classified as an international waterway) forms the border with Romania. The country's only mountains are the Carpathian Mountains in the west, of which the highest is the Hora Hoverla at 2,061meters (6,762 ft), and those on the Crimean peninsula, in the extreme south along the coast.
Significant natural resources in Ukraine include iron ore, coal, manganese, natural gas, oil, salt, sulfur, graphite, titanium, magnesium, kaolin, nickel, mercury, timber and an abundance of arable land. Despite this, the country faces a number of major environmental issues such as inadequate supplies of potable water; air and water pollution and deforestation, as well as radiation contamination in the north-east from the 1986 accident at the Chernobyl Nuclear Power Plant.
According to the State statistics Committee of Ukraine, 2009 ethnic Ukrainians make up 77.8% of the population. Other significant ethnic groups are Russians (17.3%), Belarusians (0.6%), Moldovans (0.5%), Crimean Tatars (0.5%), Bulgarians (0.4%), Hungarians (0.3%), Romanians (0.3%), Poles (0.3%), Jews (0.2%), Armenians (0.2%), Greeks (0.2%) and Tatars (0.2%). The industrial regions in the east and southeast are the most heavily populated, and about 67.2percent of the population lives in urban areas.
Ukraine has a mostly temperate climate that changes between summer and winter and are generally relatively moderate, rather than extreme hot or cold temperatures. Variations in temperature are due to the lack of significant bodies of water nearby. Often winter temperature is cold enough to support a fixed period of snow each year, and relatively moderate precipitation occurring mostly in the summer. Although a climate that is characterized by warm to hot, dry summers, mild to cool, and wet winters is found on the southern Crimean coast. Precipitation is disproportionately distributed; it is highest in the west and north and lowest in the east and southeast. Western Ukraine, receives around 47 in of precipitation annually, Crimea receives around 15 in. Winters vary from cool along the Black Sea to cold farther inland. Average annual temperatures are between 41°F and 55°F.
Demographic element: Ukraine has been in a crisis since the 1980s because of its high death rate and a low birth rate. The population is shrinking 150,000 a year because of the lowest birth rate in Europe combined with one of the highest death rates in Europe.
In 2007, the country's population was declining at the fourth fastest rate in the world.
Life expectancy is falling. The nation suffers a high mortality rate from environmental pollution, poor diets, widespread smoking, extensive alcoholism, and deteriorating medical care. According to the United Nations poverty and poor health care are the two biggest problems Ukrainian children face. More than 26 percent of families with one child, 42 percent of families with two children and 77 percent of families with four and more children live in poverty, according to United Nations International Children’s Emergency Fund. In November 2009 Ukrainian human rights ombudsman Nina Karpacheva stated that the lives of many of Ukraine’s 8.2 million children remain tough.
Political element: Ukraine is a republic under a mixed semi-parliamentary semi-presidential system with separate legislative, executive, and judicial branches. The President is elected by popular vote for a five-year term and is the formal head of state.Ukraine's legislative branch includes the 450-seat legislative parliament. The parliament is primarily responsible for theformation of the executive branch and the body of state executive powers, which is headed by the Prime Minister. However, the President still retains the authority to nominate the Ministers of the Foreign Affairs and of Defense for parliamentary approval, as well as the power to appoint the Prosecutor General and the head of the Security Service.
Laws, acts of the parliament and the cabinet, presidential decrees, and acts of the Crimean parliament may be abolished by the Constitutional Court, should they be found to violate the Constitution of Ukraine. Other normative acts are subject to judicial review. The Supreme Court is the main body in the system of courts of general jurisdiction. Local self-government is officially guaranteed. Local councils and city mayors are popularly elected and exercise control over local budgets. The heads of regional and district administrations are appointed by the President in accordance with the proposals of the Prime-Minister. This system virtually requires an agreement between the President and the Prime-Minister, and has in the past led to problems, such as when President Yushchenko used a legally controversial ways to evade the law by appointing no actual governors or the local leaders, but so called 'temporarily acting' officers, thus evading the need to seek a compromise with the Prime-Minister. This practice was very controversial and required review by the Constitutional Court. Ukraine has a large number of political parties, many of which have tiny memberships and are unknown to the general public. Small parties often join in multi-party coalitions (electoral blocs) for the purpose of participating in parliamentary elections.
Military element: After the collapse of the Soviet Union, Ukraine inherited a 780,000 man military force on its territory, equipped with the third-largest nuclear weapons arsenal in the world. In May 1992, Ukraine signed the Strategic Arms Reduction Treaty (START) in which the country agreed to give up all nuclear weapons to Russia for "disposal" and tojoin the NuclearNon-Proliferation Treaty as a non-nuclear weapon state. Ukraine ratified the treaty in 1994, and by 1996 the country became free of nuclear weapons.
Ukraine took consistent steps toward reduction of conventional weapons. It signed the Treaty on Conventional armed Forces in Europe, which called for reduction of tanks, artillery, and armored vehicles were reduced to 300,000. The country plans to convert the current conscript-based military into a professional voluntary military not later than in 2011.
Ukraine has been playing an increasingly larger role in peacekeeping operations. Ukrainian troops are deployed in Kosovo as part of the Ukrainian-Polish Battalion. A Ukrainian unit was deployed in Lebanon, as part of UN Interim Force enforcing the mandated ceasefire agreement. In 2003–05, a Ukrainian unit was deployed in Iraq, as part of the Multinational force in Iraq under Polish command. The total Ukrainian military deployment around the world is 562 servicemen. Military units of other states participate in multinational military exercises with Ukrainian forces in Ukraine regularly, including U.S. Military forces.
Economic element: With rich farmlands, a well-developed industrial base, highly trained labor, and a good education system, Ukraine has the potential to become a major European economy. After a robust expansion beginning in 2000, Ukraine’s economy experienced a sharp slowdown in late 2008, which continued through 2009. Real GDP contracted 14.1% in 2009, but is forecast to grow over 3% in 2010.
Ukraine’s economy remains burdened by excessive government regulation, corruption, and lack of law enforcement, and while the government has taken steps against corruption and small and medium enterprises have been largely privatized, much remains to be done to restructure and privatize key sectors such as energy and telecommunications and to allow the free sale of farmland. Following his inauguration, President Yanukovych issued a decree creating a Committee on Economic Reform. The purpose of this committee is to work out a state strategy of economic reforms using international practices such as preparing legislative proposals for submission to parliament.
Ukraine encourages foreign trade and investment. Foreigners have the right to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event property were to be nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and particularly corruption have discouraged broad foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment from abroad. Ukraine abounds in natural resources and industrial production capacity. Although proven onshore and offshore oil and natural gas reserves are small, there is now interest in oil exploration in the Ukrainian portion of the Black Sea as well as prospecting for shale gas. The country has important energy sources, such as coal, and large mineral deposits, and is one of the world's leading energy transit countries, providing transportation of Russian gas across its territory. Ukraine imports almost 80% of its oil and 77% of its natural gas. Russia ranks as Ukraine's principal supplier of oil and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports currently come from Russia, Turkmenistan, Kazakhstan, and Uzbekistan, which deliver the gas to Ukraine's border through a pipeline system owned and controlled by Gazprom, Russia's state-owned gas monopoly. Ukraine owns and operates the gas pipelines on its territory, which are also used to transit Russian gas to Western Europe. Ukraine's laws forbid the sale of the gas pipeline network. The complex relationship between supplier, transporter, and consumer has led to intermittent bilateral tensions, resulting in severe gas supply disruptions for downstream consumers in 2006 and January 2009. In April 2010, the Rada ratified the Kharkiv gas-for-basing agreement in which Ukraine agreed to extend the Russian Black Sea Fleet’s basing rights in Sevastopol for an additional 25 years (until 2042) in exchange for concessional pricing of Ukraine’s imports of Russian gas.
The economy of Ukraine was the second largest in the Soviet Union, being an important industrial and agricultural component of the country's planned economy. With the collapse of the Soviet system, the country moved from a planned economy to an economy based on growth total output and trade (market economy). The transition process was difficult for the majority of the population which plunged into poverty. Ukraine's economy contracted severely following the years after the Soviet collapse. Day to day life for the average person living in Ukraine was a struggle. A significant number of citizens in rural Ukraine survived by growing their own food, often working two or more jobs and buying the basic necessities through the barter economy.
The country imports most energy supplies, especially oil and natural gas, and to a large extent depends on Russia as its energy supplier. While 25percent of the natural gas in Ukraine comes from internal sources, about 35percent comes from Russia and the remaining 40percent from Central Asia through transit routes that Russia controls. At the same time, 85percent of the Russian gas is delivered to Western Europe through Ukraine.
Ukraine maintains peaceful and constructive relations with all its neighbors; it has especially close ties with Russia and Poland. The main purpose of Ukraine’s foreign policy is its national interests, rights and interests of its citizens abroad, to create good conditions for socio-economic development of our country. The government has stated that it intends to pursue European integration, while also improving relations with Russia and strengthening its strategic partnership with the United States.
Major Adversary– None
Minor Adversary – None
United States Interest – The US commitment to Ukraine is evidenced by an assistance program -- $123 million in FY2010. The goals of the assistance is to bolster peace and security, strengthen democratic institutions, promote economic growth and energy efficiency, enhance security and non-proliferation, secure Chernobyl, fight AIDS and HIV, and improve child health.
The United States is committed to policies that contribute to a democratic and prosperous Ukraine and stands ready to help Ukraine reach agreement with the International Monetary Fund as soon as possible. The path to recovery and renewed prosperity runs through the IMF, which can help offer Ukraine a way out of the current crisis and open the door to lending from other international financial institutions and the European Union. That will require resolute leadership and hard decisions to undertake the critical reforms needed to cut the budget deficit, revive the banking system and phase out energy subsidies.
An important policy area for Ukraine’s long-term prosperity and economic freedom is energy sector reform. A gas sector based on transparency, competition, realistic pricing, and more energy-efficient gas distribution and consumption will be key, and the United States is coordinating closely with the European Union on this issue. Ukraine uses energy three times less efficiently than the EU average; the country consumes 50-60% more gas than it should. The United States is helping with a three-year pilot program designed to increase energy conservation and efficiency at the municipal level.
The United States is ready to work to strengthen the business side of U.S.-Ukraine relations, which is weaker than we would like it to be. The United States remains Ukraine’s 8th largest foreign investor, with $1.4 billion in foreign direct investment. We welcome President Yanukovych’s remarks in favor of creating incentives for investors, such as lowering taxes and reducing red tape. Our business community tells us that much remains to be done to make Ukraine more attractive to investors, from tax code reform to increased transparency, from greater rule of law protection to serious action against corruption. The payment of VAT refunds would be a big step forward. One area where the U.S. private sector could do more is in Ukraine’s nuclear power industry.
Another area of cooperation lies in nuclear security. The United States and Ukraine must continue to work together to reduce the threat of the spread of nuclear materials and technology to dangerous regimes or terrorist groups, while safeguarding the peaceful uses of nuclear energy.. Ukraine is an important partner in the Global Initiative to Combat Nuclear Terrorism, which brings their experience and expertise together with those of over 70 other countries to fight nuclear terrorism.
Finally, the United States wishes to strengthen bilateral security and defense cooperation, which is an essential component of our strategic partnership. Ukraine is a huge contributor to international security. As part of this effort, it is in hope that Ukrainian parliament will pass legislation to allow joint military exercises on its territory in order to facilitate mutually beneficial military training activities. With regard to NATO, Ukraine’s is cooperating to meet its objectives in the NATO-Ukraine Commission and in its Annual National Program, regardless of Ukraine’s intentions regarding membership.
Ukraine's Chernobyl nuclear plant remains an urgent threat due to lagging safety measures, on the 24th anniversary of the world's worst nuclear disaster. The plant's fourth nuclear reactor still presents an active danger after work to replace an ageing sarcophagus around the facility was delayed due to a shortage of funds last year, Yanukovych said according to a statement. The problem "is urgent not only for Ukraine but also for our neighbors." "We must of course unite our partners, donors and all our neighbors around the question because it is highly dangerous." The atomic fallout from the 1986 accident at Chernobyl, when one of the reactors exploded, spread to neighboring European states, leaving some two million people still suffering from contamination, Yanukovych said.
There are still more than two million people suffering from harmful effects of radiation exposure, of whom 498,000 are children. The death toll from the Chernobyl disaster is bitterly disputed, with a United Nations toll from 2005 setting it at just 4,000, but non-governmental groups suggesting the true toll could reach tens or even hundreds of thousands. According to Ukrainian official figures, more than 25,000 people known as "liquidators" from then-Soviet Ukraine, Russia and Belarus have died since taking part in the bid to limit radioactive fallout after the catastrophe.
Many children and adolescents touched by the nuclear fallout have suffered from thyroid cancer -- the most common illness from the radiation. While the Chernobyl power plant was finally closed in 2000, the dead reactor is still a threat because the concrete cover hastily laid over some 200 tons of spilled radioactive material is cracking.
Capabilities – The Ukrainian armed forces are largely made up of conscripts. The total personnel (including 41,000 civilian workers) numbers at the end of 2010 will be 200,000. The branch structure is as follows:
Ground Forces: 73,300 personnel,
Air Force: 46,000 personnel,
Navy: 15,000 personnel
Ukraine maintains a number of Guard units, tracing their traditions from Soviet armed Forces service. Women make almost 13% of the armed forces (18,000 persons). There are few female high officers, 2.9% (1,202 women). Contractual military service counts for almost 44% of women. However, this is closely linked to the low salary of such positions: men refuse to serve in these conditions when women accept them.
Intentions – Ukrainian officials discussed creating an independent Ukrainian army even before the state became independent. The Declaration on State Sovereignty adopted by the Parliament of the Ukrainian SSR on July 16, 1990, defined the building of the army as a major task and a natural right of the future Ukrainian independent state.1 The declaration was designed not to actually create an army, but rather to legitimize Ukraine’s intentions to have armed forces separate from those of the Soviet Union. Moreover, by announcing the right to maintain its own army, Ukraine took a significant step toward independence from the USSR.
The idea of creating a Ukrainian army appeared to be the basis for political compromise and cooperation between the official leadership (communists-turned-nationalists) and the
(See the full text of the Declaration in Golos Ukrainy, February 11, 1993, page 2.)
Ukraine’s military policy also concentrated on the problems of developing military cooperation with neighboring countries. Close political and military ties within the region were supposed to create the atmosphere of mutual confidence, which would serve as the basis for the creation of a peaceful security environment for Ukraine. To this end, Ukraine tried to demonstrate that its intent to maintain its non-bloc status would not impede political-military cooperation in the region ( Kharchenko, Igor. “The Prospects Of Ukraine’s National Security”, Non-published report. George Marshall Center for Security Studies, Garmish- Partenkirchen, June 1993, page 8.)
Fears of military attack led Ukraine to start building its own army on the second day of independence. Today this army is the second largest in Europe. In addition to the armed forces, Ukraine also keeps Border Guard troops, the National Guard, and troops of Civil Defense
and special police forces, trained as paratroopers.
(The Ukrainian Military: Instrument for Defense or Domestic Challenge?)
(Kharchenko, Igor. “The Prospects Of Ukraine’s National Security.” Nonpublished
report. George Marshall Center for Security Studies, Garmish-Partenkirchen, June 1993, page 8.)
Risks – Human rights in Ukraine are better than those in most former Soviet republics. Ukraine has been labeled as "free" by organizations such as Freedom House. In their 2009 report on Ukraine they stated: "Ukraine has one of the most vibrant civil societies in the region. Citizens are increasingly taking issues into their own hands, protesting against unwanted construction, and exposing corruption. There are no limits on non-governmental organization (NGO) activities. Trade Unions function, but strikes and worker protests are infrequent, even though dissatisfaction with the state of economic affairs was pervasive in the fall of 2008. Factory owners are still able to pressure their workers to vote according to the owners’ preferences."
On October 20, 2009 experts from the Council of Europe stated "in the last five years the experts from the Council of Europe who monitor Ukraine have expressed practically no concerns regarding the important [process of the] formation of a civil society in Ukraine. Ukraine is one of the democratic states in Europe that have securing human rights as a national policy, as well as securing the rights of national minorities."
One of the risks in the sphere of international cooperation exists in the absence of the political will for the adoption of the Law of Ukraine On the Civil Service (a new version) in the nearest future.This discredits Ukraine in the opinion of the international partners in administrative reform.
Other risks include slowing down, from 2008, of the European and Euro-Atlantic integration of Ukraine; weakening and inactive role of Ukraine in the international organizations dealing with the issues of the civil service and public administration; and significant cutting down, beginning from 2009, of expenditures of the State Budget of Ukraine in result of the world financial crisis. ( International Cooperation Strategy of The Main Department of Civil Service of Ukraine for 2009–2011) ( Main Department of Civil Service of Ukraine, Policy Analysis and Civil Service Development Strategy Department, By MDCSU’s Order No.165 dd. 4 June 2009)
Major Adversary – None
Minor Adversary - Romania is a potential enemy of Ukraine, as Bucharest politicians frequently question the legality of the current borders of the Ukrainian state.
Russia is also a great danger to Ukraine’s territorial integrity. There are questions about Crimea and there is speculation of a regional security problem.
United States Interest - The United States and Ukraine signed a new Trade and Investment Cooperation Agreement (TICA) on April 1, 2008. The TICA establishes a forum for discussion of bilateral trade and investment relations and will help deepen those relations. U.S. policy remains centered on realizing and strengthening a democratic, prosperous, and secure Ukraine more closely integrated into Europe and Euro-Atlantic structures. In December 2008, the United States signed the U.S.-Ukraine Charter on Strategic Partnership. The Charter highlights the importance of the bilateral relationship and outlines enhanced cooperation in the areas of defense, security, economics and trade, energy security, democracy, and cultural exchanges. The Charter also emphasizes the continued commitment of the United States to support enhanced engagement between NATO and Ukraine.
Geopolitical constraints prevent Ukraine from ever achieving absolute energy independence. However, economic and political integration into the Euro-Atlantic community promises greater political leverage in negotiations with major energy exporters, especially Russia. Three basic facts determine Ukraine's desire for energy independence.
First, the Ukrainian economy is highly dependent on energy. Coal and ore mining, chemical refining, and electricity production constitute 60 percent of GDP.
Further, Russia is pursuing a strategy to diversify its supply routes to Europe. Its Blue Stream gas pipeline will circumvent Ukraine. So will its Nord Stream gas pipeline to Germany, which will also bypass the Czech Republic, Belarus, Slovakia, and Poland.
Second, energy costs are rising. As of January 1, 2007, the average price for gas in Ukraine increased 70 percent. With transportation fees and shipping fees, the average price for enterprises and businesses is $160 per 1000 cubic meters. Energy costs will continue to rise as Russia consolidates its monopoly on oil and gas and exercises its monopoly power to raise prices.
Third, Ukraine's energy supply is heavily concentrated. Therefore, Ukraine needs to diversify its energy supply. Integration into the Euro-Atlantic community will provide Ukraine with the political muscle to improve its economic situation. It will be better situated to negotiate with Russia--as a European country, not a former Soviet puppet.
A good example of possible Ukrainian energy diversification is the Georgia-Ukraine-European Union gas pipeline project through the Black Sea. The GUEU project would use the Ukrainian transit network's spare capacity to deliver Caspian gas to Ukraine, Poland, and beyond
Business–There are positive trade effects. Abolition of existing tariffs will reduce final product costs by an estimated 5 percent to 10 percent. This presents a significant advantage. Lower costs will attract more trade, and the increased trade flow will more than make up for the loss of domestically captured tariff revenue, which the government kept for itself in the first place.
Ukrainian businesses and foreign businesses in Ukraine will become more efficient and more price competitive. Companies will be able to choose their workers from a larger and more diverse workforce, increasing productivity due to economies of scale. The lowered transaction costs will attract competition into Ukraine and force Ukrainian firms to improve quality and lower prices, operating closer to at-cost levels.
There are economic benefits to having a single business environment. When manufacturing companies in the 27 EU member countries produce goods according to the same standards, that means less red tape, a smaller regulatory burden, and faster consumer adaptability.
Other Eastern European countries have gained from joining the EU single market. studies estimate that Eastern European countries have received welfare gains of anywhere from 3.4 percent to 18.8 percent of GDP. The latest survey among EU members prior to the 2004 accession shows that many components of the single market had a positive effect on business: The elimination of customs documentation was reported to be the most beneficial (48 percent of respondents said it had a positive effect on business); followed by the abolition of border controls (42 percent); the harmonization of value-added tax procedures for sales within the EU (34 percent); and the harmonization of European product standards (33 percent).
Ukraine's Economic Benefits from Integration into the Euro-Atlantic Community
Published on September 28, 2007 by Ariel Cohen, Ph.D. (heritage.com)
Ukraine has a wealthy supply of agricultural products and oil that boosts the economy of the country. The main agricultural products produced by Ukraine are grain, sugar beets, sunflower seeds, vegetables, beef and milk. The main industries are coal, electric power, ferrous and non ferrous metals, machinery and transport equipment, chemicals, and food processing, especially sugar.
The import and Russia, Germany and Turkmenistan and their main export partners are Russia, Germany, Turkey, Italy, and the United States. The main import commodities of Ukraine are energy, machinery, equipment and chemicals and the main export commodities are ferrous and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, and food products.
Ukraine's economic growth has been very stable over the few past years, with an average GDP growth rate of 12%. The GDP per capita was $6,300 in 2004, the GDP was $299,1 billion, and the inflation rate was 12%.
Ukraine's main investment sectors are: services, textiles, chemicals, food and food related industries, machinery, and energy based projects (Ukraine.com)
Doing business in Ukraine is different from doing business in other countries, especially the U.S., England, Germany, and other northern and central European countries.
Except for organizations with managers who tyrannize their employees, relationships between Ukrainians at work tend to be somewhat warmer and more openly emotional than in Protestant western countries where distance and formality are the norm. Employees usually celebrate their birthdays at work by treating coworkers to chocolates, champagne, cake, or even more elaborate buffets, and companies often allot money to be spent on birthday gifts for employees. Ukrainians tend to make emotional bonds easily and find moral support and comradery in their work relationships. (www.tryUkraine.com)
Interest groups: Domestic influential groups represent a rather narrow segment of organized interests; they have a designated hierarchical structure and are based on the principles of corporatism. Formal existence of group entities pertaining to civic initiatives, i.e. trade unions, environmental, cultural and other organizations, is practically inconspicuous at the level of real policymaking. Neither the "third sector", nor employers' organizations or trade unions, or political actors proper, i.e. political parties and leaders, do not exert organized influence on decision making centers, and most of them cannot be considered independent social phenomena at all. Under such conditions socium as a whole cannot develop steady requirements from political system, and the latter is unable to articulate the whole body of social interests. Absence of dynamic and sanguineous correlation between the authorities and society practically reduces the political process to administration, and political activities - to participation in functioning of the State machinery at its top levels. Existing interest groups position themselves at the intersection of spheres of activities of top levels of the State machinery on the one hand, and private business based on big capital, primarily financial one, on the other hand. Hereinafter such groups are referred to as politico-economic interest groups.
Politico-economic groupings have become not only the most significant subject, but also an instrument of effective participation of their members in the permanent redistribution of constantly diminishing public goods. Before acquiring current oligarchic forms, the relationship between administrative machinery and private business went though a number of separate stages without loosing symbiotic correlation, however. The ratio between the "administrative" and "business" components is different in each of the present-day groups, as is subordination between them, but it is the former component that can be regarded as initial and structurizing
Two major types of influential groups, fostered in administrative market of late socialism, are still authoritative in Ukraine: sectoral lobby and regional groups. Whereas the former are getting increasingly marginalized, the latter, with certain metamorphoses, have fully adjusted themselves to the new conditions. Regional groups are increasingly claiming to represent interests of entire population of "their" regions, in addition to political and economic merely corporative interests.
Media – Private media outlets operated free of state control; however, both the independent and government owned media continued at times to demonstrate a tendency toward self censorship on matters that the government deemed sensitive. Although private newspapers were free to function on a purely commercial basis, they often depended on political patrons.
There were reports of intimidation of journalists, including by local officials. According to IMI, at least 27 journalists were subjected to physical attacks or intimidation as of November. The majority of these cases, however, did not appear to be centrally organized and were often attributed to local politicians, businessmen, or organized criminal groups
Licensing provisions require that national media outlets broadcast at least 75 percent of their programs in Ukrainian, a policy that many citizens whose first language was not Ukrainian regarded as discriminatory.
The law limits the amount of damages that may be claimed in libel lawsuits and allows the press to publish inoffensive, nonfactual judgments, including criticism, without penalty; however, media watchdog groups continued to express concern over extremely high monetary damages that were demanded, and sometimes awarded, for alleged libel. Government entities and public figures, in particular, continued to use the threat of civil suits based on alleged damage to a "person's honor and integrity" to influence or intimidate the press. According to the UHHRU, during the year the amounts awarded for successful suits on these grounds increased, although the number of such lawsuits dropped.
In some instances media representatives experienced problems gaining access to court hearings and governmental meetings. In June the Donetsk Oblast prosecutor's office initiated a criminal case against policemen who severely beat a journalist of the Ostriv newspaper, Ihor Nezhurko, while he was reporting on an open court hearing in the Voroshylivskiy district of Donetsk.
Human rights groups noted that the current law on refugees does not provide protection for war refugees, victims of indiscriminate violence, or failed asylum seekers who could face the threat of torture or loss of life or freedom if deported. Informed observers reported that the government may have repatriated Chechen refugees to Russia.
According to the UNHCR, an overly complicated and burdensome system of registration often left asylum seekers without registration documents during the protracted review of their cases and the appeal process. This left them vulnerable to frequent police stops, detention, and fines. Refugees and asylum seekers, who frequently came from Africa and Asia, were the victims of a growing number of xenophobic attacks. Asylum seekers in detention centers were sometimes unable to apply for refugee status within prescribed time limits and had limited access to legal and other assistance. The problem was further complicated by the lack of access to qualified interpreters, often needed to complete registration documents.
A wide variety of domestic and international human rights groups generally operated without government restriction, investigating and publishing their findings on human rights; however, government officials were not uniformly cooperative and at times resisted taking the views and recommendations of nongovernmental groups into account
In Ukraine’s provinces numerous, anonymous attacks and threats persisted against journalists, who investigated or exposed corruption or other government misdeeds. The US-based Committee to Protect Journalists concluded in 2007 that these attacks, and police reluctance in some cases to pursue the perpetrators, were “helping to foster an atmosphere of impunity against independent journalists.”
Ukraine's ranking in Press Freedom Index has in the latest years been around the 90th spot (89 in 2009, 87 in 2008), while it occupied the 112th spot in 2002 and even the 132th spot in 2004.
Since Presidential Administration and President Yanukovych himself.
Public opinion - Freedom of speech and press are guaranteed by law and the constitution, and authorities generally respect these rights. Prior to the 2004 "Orange Revolution," however, authorities sometimes interfered with the news media through intimidation and other forms of pressure. In particular, the failure of the government to conduct a thorough, credible, and transparent investigation into the 2000 disappearance and murder of independent journalist Heorhiy Gongadze, in which then-government officials have been credibly implicated, negatively affected Ukraine's international image. Three police officers were convicted and received prison sentences in March 2008; a fourth suspect, a senior police official, was arrested in July 2009. Freedom of the media and respect for citizens' rights increased markedly in the wake of the Orange Revolution
The constitution and law provide for freedom of speech and the press; the government generally respected these rights in practice.
There were instances of violence and other harassment of journalists. On March 16, unknown assailants severely beat Serhiy Tsyhipa, an independent investigative journalist, in Kherson Oblast. Tsyhipa was known for critical reporting about local authorities. On December 1, in an open letter to Prosecutor General Medvedko, Tsyhipa claimed that local prosecutors refused to investigate his beating because he allegedly had not provided confirmation that he was a journalist. Tsyhipa disputed this claim and complained to the PGO. At year's end no one had
been arrested for the attack.
Major Minor Adversary - None
United States Interest - Although Russian influence in Ukraine has decreased
drastically, Ukraine’s energy dependence on Russia remains critical. The United States, together with its European allies, could help the country address this problem by means of introducing energy-saving technologies
and rearranging the system of direct energy transit between Europe and western Caspian areas.(UKRAINE:DOMESTIC CHANGES AND FOREIGN POLICY RECONFIGURATION Arkady Moshes)
Declaratory – Since the late 1990s, Ukraine has expressed the intention of joining the European Union and has sought the mere prospect of EU membership. Despite repeated declarations by the political leaders asserting the country’s European choice,, Ukraine has failed to face up to the challenge of transforming itself into a fully European country. Ukraine appeared to fundamentally underestimate the implications of the demands of the PCA, as well as the ramifications of violations of laws and agreements by which it had bound itself. Ukraine’s political leaders have sometimes acted as if they could achieve integration by declaration, or simply by joining and participating in international organizational and political clubs rather than by undertaking concrete structural changes. By the spring of 2003 the gap between the desire to integrate and failures the implementation of the entry level agreement, the Partnership and Co-operation agreement, let alone the actual efforts to accelerate the domestic transformation to give credibility to Ukraine’s European aspirations has been hardly closed. So it appears that while the benefits of participation in European integration are not lost on the Ukrainian elites, they have been incapable and/or unwilling to bring about the reforms to prove these intentions. (EuroJournal.org) Ukraine’s Policy towards the European Union: A Case of ‘Declarative Europeanization’, (Kataryna Wolczuk. Jean Monnet Fellow (2002-03), Robert Schuman Centre for Advanced Studies, the European University Institute, Florence, Italy
And Centre for Russian and East European Studies, European Research Institute,
the University of Birmingham, Birmingham, UK)
Ukraine is a medium-sized state whose foreign policy interests and ambitions are of a regional nature and lie primarily in the region of Central and Eastern Europe1. From the first days of its independence in 1991, Ukraine has attached particular importance to its relations with the post-communist Central and Eastern European (CEE) states, first of all with immediate geographic neighbors. These relations have been seen in Kyiv as crucial for the ultimate success of Ukraine’s transition and for the shaping of the country’s geopolitical future. Ukraine has preferred to identify itself as CEE as opposed to CIS/Eurasian country, and has cultivated an ambition to establish itself as an integral and essential part of Central and Eastern Europe. Ukraine has also declared that its long-term strategic goal is integration into European and Euro-Atlantic institutions, with priority given to getting full membership in the EU. Having decided about joining the European integration process, Ukraine views its relations with other, especially more advanced, CEE states as an important and necessary component of its European integration.
Contractual– In January 2009, this disagreement resulted in supply disruptions in many European nations, with eighteen European countries reporting major drops in or complete cut-offs of their gas supplies transported through Ukraine from Russia. In September 2009 officials from both countries stated they felt the situation was under control and that there would be no more conflicts over the topic, at least until the Ukrainian 2010 presidential elections. However, in October 2009, another disagreement arose about the amount of gas Ukraine would import from Russia in 2010. Ukraine intended to import less gas in 2010 as a result of reduced industry needs because of its economic recession; however, Gazprom insisted that Ukraine fulfill its contractual obligations and purchase the previously agreed upon quantities of gas.
Gas trading was conducted under a framework of bilateral intergovernmental agreements which provided for sales, transit volumes, gas prices, gas storage, and other issues such as the establishment of production joint ventures.] Commercial agreements were negotiated between the relevant companies within the guidelines and dictates of that framework and supplemented by annual agreements specifying exact prices and volumes for the following year. Gas sales prices and transit tariffs were determined in relationship to each other. Commercial agreements and trade relations have been non-transparent and trade has been conducted via intermediaries such as Viktor Yushchenko
According to a contract between Gazprom and Naftohaz signed on June 21, 2002, payment for the transfer of Russian natural gas through the Ukrainian Btu). This price was constant notwithstanding the gas prices in the European markets. According to the addendum the price was not subject to change until the end of 2009. Gazprom argued that this addendum was only applicable provided that the two countries sign an annual intergovernmental protocol that has higher legal status for specifying the terms of gas transit. According to Gazprom, the addendum becomes void as the annual protocol had not been signed for 2006 under the required terms. Russia claimed that Gazprom's subsidies to the Ukrainian economy amounted to billions of dollars
Ukrainian natural gas it sells to Ukrainian.
On April 21, 2010, Russian Sevastopol for an additional 25 years with an additional five-year renewal option (to 2042-47). As of June 2010 Ukraine pays Gazprom around $234/mcm (thousand cubic meter).
This agreement was subject to approval by both the Opposition members in Ukrainian and Russia expressed doubts the agreement would be fulfilled by the Ukrainian side.
Yanukovych has defended the agreement has a tool to help stabilize the state budget. Opposition members in Ukraine described the agreement as a sellout of national interests.
Major Adversary – Initial disputes concerning gas debts and non-payment appeared immediately after the collapse of the Soviet Union. As a result of disputes over non-payments by Ukraine, Russia suspended natural gas exports several times between 1992 and 1994. This led to the illicit diversion of Russian natural gas exports from transit pipelines by Ukrainian companies and institutions in September 1993 and November 1994.] The siphoning of gas was acknowledged by Ukraine, while accusations of other diversions were disputed. In September 1993, at a summit conference in Verkhovna Rada, Ukraine's parliament, adopted a law prohibiting the privatization of oil and gas assets.
On January 2, 2009, Hungary, Stockholm Tribunal of the Arbitration Institute. Ukraine also filed lawsuits with the tribunal. According to Naftohaz, RosUkrEnergo owes the company $40million for services in transportation of natural gas. On January 5, 2009, Kiev's economic court banned Naftogaz from transshipping Russian natural gas in 2009 at the price of $1.60per 1,600cubic meters per 100kilometers. The court declared contracts made by Naftogaz for the transit of natural gas through Ukraine void because the contracts were signed by Naftogaz without authorization from the Cabinet of Ministers of Ukraine. On March 30, 2010, the Stockholm tribunal ordered Naftohas Ukrainy to pay RosUkrEnergo around $200million as a penalty for various breaches of supply, transit, and storage contracts. On June 8, 2010, the tribunal ordered Naftohaz to return 11 bcm of natural gas to RosUkrEnergo. The tribunal further ordered that RosUkrEnergo would receive from Naftogaz a further 1.1 bcm of natural gas in lieu of RosUkrEnergo's damages for breach of contract.
(Russia–Ukraine gas disputes, From Wikipedia, the free encyclopedia)
Minor Adversary - None
United States Interest – Even though the US has not neglected EU energy security,
it has adopted a temperate approach to supporting its allies. The Senate has held several hearings European Commission, Statistical Pocketbook 2010, 2010, , EU Commission p. 14. ( John S. Duffield, “Germany and energy security in the 2000s: Rise and fall of a policy issue?,” John S. Duffield, Energy Policy 37 (2009); p. 4287, accessed September 27, 2010. 15 Ibid). 16 Bruce Pannier, “Russia, Azerbaijan Achieve Gas Breakthrough,” June 30, 2009, accessed September 27, 2010,
17 US Energy Information Administration, Arctic Oil and Natural Gas Potential, October
19, 2009, accessed September 27, 2010,
during the 110 Congress on Europe’s dependence on Russia. Additionally, Senator Richard Lugar was dispatched to Turkey to represent the US for the signing of Nabucco. But the U.S. needs to be more vocal about this issue in order to bolster EU efforts and recognize its own interdependence with Europe.
2. US-EU Energy Council. Since its inception in November 2009, the US-EU Energy
Council has not taken further significant steps, leading one to doubt its effectiveness and the
credibility of the bilateral agreements. The EU Delegation to the United States declined to
comment on the Energy Council. The State department has also not responded to requests for
information on the Council’s activities. But if the Council is utilized to coordinate US-EU action
on energy security, it could play a significant role in coordinating U.S-EU efforts to strengthen
transatlantic energy and economic security.
Promote energy efficiency. Russia is not energy efficient but wants to improve. Gas
flaring during oil production, in particular, is harmful to both the environment and the economy.
The Accounts Chamber of the Russian Federation has estimated that Russia lost $5.7 billion in
revenue from gas flared into the air in 2009.19 The country has already taken steps to reduce its
waste: in 2009, Prime Minister Vladimir Putin signed a decree “setting the target of 95 percent
APG utilization by 2012.”2 0 , 2 1 The EU and US both have an interest in sharing their experience
and expertise with Russia to achieve this goal. Greater energy efficiency benefits Russia, its
citizens, and the exchange of information and technology between it, the US and the EU.
Promoting energy efficiency would not be perceived as threatening by Russia since this would
increase energy revenues by improving Russia’s oil and gas output capacity. Ultimately, such
US-EU assistance would build confidence and strengthen relations with Europe’s key energy
The same approach can be applied to the Central Asia region, where transatlantic
cooperation in promoting energy efficiency can lead to increased production and revenue for
Azerbaijani, Kazakh, and Turkmen gas production, making them more economically prosperous
and competitive. This aligns well with US and EU interests in the region and would not exclude
Russia since it would encourage (much like the official US stance) the Caucuses to be
economically competitive in the oil and gas market and to diversify their exports. The EU has
already established the INOGATE financing program, which works to finance energy efficiency
projects, as a part of its engagement policy with Central Asia. The United States could formulate
a similar policy and encourage investment in energy efficiency projects in the region.
19 Adam Newman, “Energy efficiency: Russia’s hidden reserve,” O&G Next Generation,
March 24, 2010, accessed September 27, 2010, http://www.cisoilgas.com/news/energy-
20 APG: associated petroleum gas.
21 Adam Newman, “Energy efficiency: Russia’s hidden reserve,” O&G Next Generation,
March 24, 2010, accessed September 27, 2010, http://www.cisoilgas.com/news/energy-
efficiency-russias-hidden-reserve.Adam Newman, “Energy efficiency: Russia’s hidden
Substantial transatlantic economic cooperation necessitates the development of an
equally robust support relationship for energy supply security. The US and the EU participate in the largest bilateral trade relationship in the world.2 Their interdependent partnership is evidenced by the fact that EU direct investment flows to the US in 2008 amounted to €121.4 billion and US investment flows into the EU accounted for €50.5 billion. Trade in goods and services in 2009 reached equally high levels.3 It is therefore in the United States’ interest to ensure a secure supply of energy to Europe since a supply shock in Europe risks creating an unstable economic situation in the US The gas dispute between Ukraine and Russia in January 2009 is an example of the volatile atmosphere that can quickly develop and of the effects it can trigger in the economy. While the dispute caused minor disturbances in most Western countries, many Eastern member states greatly suffered from the shortage of gas. Slovakia and Bulgaria,
for instance, rely on Russia for more than 95% of their gas imports. Bulgaria was forced to scale down production in key plants across the country, while Slovakia declared a state of emergency.4 If a similar crisis occurs on a Europe-wide scale, production in all countries would be jeopardized, and consequently, so would trade
2 European Commission, “Trade Bilateral RelationsCountries: The United States,” accessed
September 27, 2010, http://ec.europa.eu/trade/creating-opportunities/bilateral-
and investment between the United States and the European Union.
There has not been much discussion on European energy security in the United States, but the recent Eurozone crisis, with its risk of contagion to the United States, exposes the level of linkage between the two economies. If a large-scale gas crisis were to occur, partially shutting down not only production in Eastern but also in Western Europe, then the US would be vulnerable to economic instability. Increasing transatlantic cooperation and ensuring European energy security would, at the very least, help minimize the economic impact that such an event would have on the US
U.S. Senator Richard Lugar has been a vocal supporter of a transatlantic approach to
solving the EU energy crisis. He argues that if individual European states continue to conclude bilateral agreements with Russia, this sends the signal of a divided Europe and enables Russia to bully some of its European clients. If transatlantic cooperation were strengthened, then Russia would abstain from such "soft" aggression as it would fear a coordinated transatlantic response. A key tool in creating such a unified stance is the Nabucco pipeline, which would link the eastern border of Turkey and Austria and bypass Russia. In 2008, US special representative to the EU Boyden Gray affirmed the United States’ support for the Nabucco project even though the US will not directly benefit from the energy supplies. He also expressed the United States’ hope "that the [Caspian] region and Europe both benefit and that we, as a trading nation, will also indirectly benefit and we very much want for [Europe] to have a strong independent existence to promote your own economies to their fullest potential."5
The geopolitical benefits of transatlantic cooperation in this area include the gradual
democratization and development of Central Asian economies. Azerbaijan, Kazakhstan, and
Turkmenistan hold rich reserves of natural gas and will be the future sources of energy for Russia and the European Union. They are also relatively new countries and have a history of unstable democracy. If the United States and Europe do not actively seek engagement with the Caucasus and Central Asian republics, they risk losing influence in the region to Russia and thus hindering chances of transition to the establishment of democratic rule. US Special Envoy for Eurasian Energy Richard Morningstar has been vocal about these links: in the beginning of 2010, he stated that by encouraging diversification, “it is clear we further US interests in raising global oil and gas production, in having secure energy supplies to our allies in Europe, and in supporting sovereignty and independence in Central Asia.”6 Robust economic relationships would also extend US and EU influence in the region. Morningstar has continued to emphasize this as recently as June 2010 by stating that: “A Southern Corridor would provide commercial benefit for the countries of the Caucasus and Central Asia and also create a long-term partnership based on mutual interests with Europe.”7
8 Leigh Phillips, “EU oOn Track To Meet Renewable Energy Target,” EU Observer, March
9 “EU Sees Solar Power Imported from Sahara in Five Years,”E u r Ac t iv, June 23, 2010, Energy
10 Select Committee on Energy Independence and Global Warming, 110th
Congress (2008) (Testimony of Amy Myers Jaffe, Wallace S. Wilson Fellow for Energy Studies,
Rice University), June 11, 2008.
11 Congressional Research Service, “The European Union’s Energy Security Challenges,”
January 30, 2008.
12 European Union Delegation to the United States, “New EU-US Energy Council to Boost
Transatlantic Energy Cooperation,” November 4, 2009, accessed September 27, 2010,
Since independence, Ukraine has based its military policy on two general aims. First, it wishes to diminish the threat of the army’s disobedience and prevent its involvement in national political affairs--including using force against civilians. Second, it wants to develop the army as an instrument to protect the country, integrating it as a major factor in Ukraine’s national security system. The current political philosophy of the country continues to reflect these aims; however, the emphasis has changed. The army is no longer perceived to be a security challenge as it was during the first stages of Ukraine’s independence. Rather, Ukraine’s leadership is primarily concerned with strengthening the army’s ability to guarantee the sovereignty and territorial integrity of the country. Despite the government’s diminished preoccupation with the potential threat of the military to domestic security, the Ukrainian army continues to present a challenge to national interests. In addition to the army’s inability to defend Ukraine from outside military aggression, it also poses the challenge of weapons proliferation and miniaturization of the economy, and of a growing dependence on Russia, both as a security partner and as a purveyor of social welfare needs. In these ways the Ukrainian military endangers the society it is meant to protect.
The military’s current involvement in the political life of the country remains insignificant. The country is endangered, however, by the potential demoralization and breakdown of discipline within the army. This has already led to increased crime (not only within the army, but by servicemen against civilians), weapons smuggling to organized crime elements, and commercial speculations involving military facilities and finances. The army is demoralized because it lacks appropriate tasks. Its mission has changed significantly since 8 the first years following independence, from defense against potential outside (primarily Russian) aggression, to reliance on Russia as a security partner and provider of necessary social welfare goods. This change came about following the new government’s accession to power in 1994. The result is a Ukrainian military that is becoming more independent from the Ukrainian state in terms of economic and business activities.
The Ukrainian government must recognize that while military cooperation with Russian is more lucrative than military confrontation, there are still basic needs that it must provide to the army to prevent over-reliance on its big neighbor. A more accurate threat assessment would lead to a reduction in the size of Ukraine’s army, thereby insuring better care of the smaller force. Political and civil control of the military must concentrate on the most acute problems, to include lawlessness, black marketeering, and collaboration with paramilitary forces. This can be accomplished by simultaneously strengthening civil control over the military, and increasing the army’s reputation and prestige within society. The Ukrainian state must recognize that true sovereignty rests on economic and social pillars as well as military. Overemphasis on military independence is understandable for a new state, but must be gradually corrected. In this way Ukraine can maintain its political independence from Russia while providing a quality way of life to a military that serves to protect that independence.
Following the breakup of the Soviet Union, Ukraine inherited two divisions of the Strategic Rocket Forces, 43rd Rocket Army, the 19th Rocket Division and the 46th Rocket Division. Ukraine voluntarily gave up these and its other nuclear weapons during the early 1990s. This was the first time in human history that a country voluntarily gave up the use of strategic nuclear weapons, though the Republic of South Africa was destroying its small tactical nuclear weapons program at about the same time.
Ukraine has plentiful amounts of highly enriched uranium, which the United States wanted to buy from the Kharkiv Institute of Physics and Technology. Ukraine also has two uranium mining and processing factories, a heavy water plant, a technology for making electronic to determine the isotopic composition of fissionable materials. Ukraine has deposits of uranium that are among the world’s richest. In May 1992, Ukraine signed the Strategic Arms Reduction treaty (START) in which the country agreed to give up all nuclear weapons, and to join the Nuclear Non-Proliferation Treaty as a non-nuclear weapon state. Ukraine ratified the treaty in 1994, and as of January 1, 1996, no military nuclear equipment or materials remained on Ukrainian territory.
On 13 May 1994, the United States and Ukraine signed a Memorandum of Understanding on the Transfer of Missile Equipment and Technology. This agreement committed Ukraine to the Missile Technology Control Regime (MTCR) by controlling exports of missile-related equipment and technology according to the MTCR Guidelines.
Ukraine has been playing an increasingly larger role in peacekeeping operations. Since 1992, over 30,000 soldiers took part in missions in former Yugoslavia, Middle East, and African Continent.
Since 1997, Ukraine has been closely working with NATO, and especially Poland. A Ukrainian unit was deployed in Iraqi, as part of the multinational force in Iraq under Polish command. Ukrainian troops are also deployed as part of the Ukrainian-Polish Battalion in Kosovo. The total Ukrainian military deployment around the world as of 1 August 2009 is 540 servicemen participating in 8 peacekeeping missions.
The first battle of a regular formation of the Ukrainian Armed Forces happened on April 6, 2004 in Kut, Iraq, when the Ukrainian peacekeeping contingent was attacked by militants of the Mahdi Army. The Ukrainians took fire, and over several hours held the objectives they had been assigned to secure.
Major Adversary– None.
Minor Adversary - none
United States Interest -
During the past two years Ukraine’s democratic political transition has progressed on many fronts. Some important political institutions have been strengthened and have placed the country on a course toward a European-style representative democracy. The parliamentary election of March 2006 was deemed free and fair by international monitors and was characterised by a lively campaign and genuine political competition.
Another positive development is the improvement in media freedom and civil society development. These are notable achievements; however, they must be balanced against the still sizeable challenges Ukraine faces in building a unified, law-governed democratic state. First among them is the need to strengthen the judiciary and courts system and reduce corruption. Democratic consolidation will take time. Achieving it will entail converting the broad consensus in pro-European values, which is evident in society as well as in the agendas of the major political parties, into a workable program of political and economic reform.
At the top of the agenda is the need to clarify the respective powers of the President, the Cabinet and the Parliament, as contained in the amendments to the Constitution which went into effect in 2006. Ongoing disputes over the meaning and intent of these changes have resulted in political stalemate and have placed limits on policy effectiveness.
Nevertheless, Ukraine’s overall progress in transition to democracy has had a positive impact on investor sentiment and some aspects of the business environment. Over the last two years Ukraine has experienced a strong increase in foreign direct investment, including market entry by several foreign financial institutions. Significant progress was made in the negotiations to join the WTO. The economy has rebounded from the temporary slump that followed the Orange revolution. Real GDP growth was an estimated 7.1 per cent in 2006, compared with 2.6 per cent in 2005.
Contrary to the past, when growth was export-led, domestic investment and private consumption, fuelled by credit growth and generous increases in wages and pensions, became the key drivers of growth in 2006. The economy showed a high degree of resilience to higher energy prices, absorbing a near-doubling in the price of gas imported from Russia since 2005.
Major Adversary– None.
Minor Adversary– None.
United States Interest– The US continues to encourage and support Nigeria’s interaction with the international community.
The principal provisions on the Ukrainian foreign policy are legalized by both the Constitution of Ukraine and Laws in force. The Verkhovna Rada has adopted a resolution, The Basic Directions of Ukraine's Foreign Policy, which is a basic documents outlining priorities for the Ukrainian state in its activities in the international arena, and the law of Ukraine, On Ukraine’s International Agreements.
Ukraine takes active part in all the processes taking place in both Europe and the world. Ukraine’s major task is to revive its European identity that means in the first place the priority of its integration into European structures, in particular, the European Union, in strengthening of European and Atlantic partnership, and active participation in regional initiatives and mechanisms of cooperation.
Ukraine’s full-scale participation in European integration processes make it necessary for it to gain membership in the World Trade Organization (WTO), which is also bound up with gaining broader access to world markets and improving people’s lives. Ukrainian commodity producers have much to offer to the world market.
Ukraine’s Europe-oriented foreign policy does not restrict development of bilateral collaboration. Of great importance is the cooperation with Ukraine's strategic partners: the USA, Russian Federation, Poland, Azerbaijan, and Uzbekistan. Ukraine will continue to develop equal and mutually beneficial bilateral relations with neighboring and other states, in particular, with those of the Middle East, Central and South Asia, and the Asian-Pacific region on the basis of partnership and openness.
Major Adversary– Ukraine has pursued improved relations with Russia. Ukraine’s relations with Russia have recently focused on several bilateral issues including energy security, natural gas prices, and issues related to the stationing of the Russian Black Sea Fleet in Sevastopol.
Minor Adversary– None
United States Interest– A cornerstone for the continuing U.S. partnership with Ukraine and the other countries of the former Soviet Union has been the Freedom for Russia and Emerging Eurasian Democracies and Open Markets (FREEDOM) Support Act (FSA), enacted in October 1992. Ukraine has been a primary recipient of FSA assistance. Total U.S. assistance since independence has been more than $3.8 billion. U.S. assistance to Ukraine is targeted to promote political, security, and economic reform and to address urgent social and humanitarian needs. The U.S. has consistently encouraged Ukraine's transition to a democratic society with a prosperous market-based economy.
The United States attaches great importance to the success of Ukraine's transition to a democratic state with a flourishing market economy. Following a period of economic decline characterized by high inflation and a continued reliance on state controls, the Ukrainian Government began taking steps in the fall of 1999 to reinvigorate economic reform. Ukraine's democratic "Orange Revolution" led to closer cooperation and more open dialogue between Ukraine and the United States. The United States granted Ukraine market economy status in February 2006. In March 2006, the United States terminated the application of the Jackson-Vanik amendment to the Trade Act of 1974 to Ukraine, providing Ukraine permanent normal trade relations status. The United States and Ukraine signed a new Trade and Investment Cooperation Agreement (TICA) on April 1, 2008. The TICA establishes a forum for discussion of bilateral trade and investment relations and will help deepen those relations. U.S. policy remains centered on realizing and strengthening a democratic, prosperous, and secure Ukraine more closely integrated into Europe and Euro-Atlantic structures. In December 2008, the United States signed the U.S.-Ukraine Charter on Strategic Partnership. The Charter highlights the importance of the bilateral relationship and outlines enhanced cooperation in the areas of defense, security, economics and trade, energy security, democracy, and cultural exchanges. The Charter also emphasizes the continued commitment of the United States to support enhanced engagement between NATO and Ukraine. May 24, 2010Bureau of European and Eurasian Affairs:Background Note: Ukraine free
Ukraine Recent Economic Performance
Until mid-2008, Ukraine recorded strong economic growth, but signs of overheating became increasingly apparent. In 2001-2008, growth averaged 7.5 percent, among the highest in Europe. Greater amounts of investment, both foreign direct investment and bank lending, flowed into the country, which together with strong improvements in the external terms of trade due to high steel prices sustained double digit growth in domestic demand. However, with a pre-crisis fixed exchange rate and pro-cyclical fiscal policy, buoyant international liquidity translated into increasing domestic overheating and high inflation (over 30 percent by mid-2008), with the current account widening by 17 percentage points of GDP between 2004 and 2008.
The global economic and financial crisis hit Ukraine particularly hard given pre-existing macroeconomic imbalances, structural weaknesses, and policy shortcomings. By the fourth quarter of 2008, capital inflows came to an abrupt stop, the terms of trade reversed as steel prices tanked and export markets shut down. The crisis also accentuated the vulnerabilities of the banking sector, leading to a systemic liquidity and solvency crisis, including the leakage of deposits. GDP contracted by 15 percent in 2009, with fixed investments falling by 46 percent. Since October 2008, the national currency has lost about 40 percent of its value against the US dollar.
Ukraine’s economy resumed growth in 2010 on the back of moderate improvements in external demand and the low base of the first half of 2009. Real GDP grew by 4.9 percent year on year in the first quarter of 2010, and by 6 percent year on year in the second quarter. The balance of payments pressures have eased and the current account has been almost balanced thanks to growing export demand and higher prices for core exports. At the same time, improved roll-over rates on external commercial debt (from around 85 percent in 2009 to 96 percent in 2010 to date) supported net inflows on the capital account. Deposits in the banking system have been increasing from the lows of 2009. Consumer price inflation decelerated to single digits by mid-2010 due to the large ‘output gap’ and depressed domestic demand
Ukraine has many of the components of a major European economy -- rich farmlands, a well-developed industrial base, highly trained labour, and a good education system. At present, however, the economy remains in poor condition. While Ukraine registered positive economic growth in both 2000 and 2001, these came on the heels of 8 straight years of sharp economic decline. As a result, the standard of living for most citizens has declined more than 50% since the early 1990s, leading to widespread poverty. The macro economy is stable, with the hyperinflation of earlier in the decade having been tamed. Ukraine's currency, the hryvnia, was introduced in September 1996, and has remained fairly stable. The economy started growing in 2000, and growth has continued. GDP grew nearly 6% in 2000 and 9% in 2001. Inflation has been moderate, with 6% in 2001. While economic growth is likely to continue in 2002, Ukraine's long-term economic prospects are dependent on acceleration of market reforms. The economy remains burdened by excessive government regulation, and while small and medium enterprises have been largely privatized, much remains to be done to restructure and privatize key sectors such as energy and telecommunications.
Ukraine is rich in natural resources. It has a major ferrous metal industry, producing cast iron, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid. Manufactured goods include metallurgical equipment, diesel locomotives, and tractors. It also is a major producer of grain and sugar and possesses a broad industrial base, including much of the former USSR's space industry. Although oil reserves are largely exhausted, it has important energy sources, such as coal and natural gas, and large mineral deposits.
Ukraine encourages foreign trade and investment. The parliament has approved a foreign investment law allowing Westerners to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event that property is nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and corruption all continue to stymie large-scale foreign direct investment in Ukraine. While there is a functioning and fairly well-regulated stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment activities. Total foreign direct investment in Ukraine is approximately $4.9 billion (4.9 G$) as of October 2002, which, at $101 per capita, is still one of the lowest figures in the region.
Most Ukrainian trade is still with countries of the former Soviet Union, principally Russia. An overcrowded world steel market threatens prospects for Ukraine's principal exports of non-agricultural goods such as ferrous metals and other steel products. Although exports of machinery and machine tools are on the rise, it is not clear if the rate of increase is large enough to make up for probable declines in steel exports. Ukraine imports 90% of its oil and most of its natural gas.
Russia ranks as Ukraine's principal supplier of oil, and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports come from Russia--which delivers natural gas as a barter payment for Ukraine's role in transporting Russian gas to western Europe-- and Turkmenistan, from which Ukraine purchases natural gas for a combination of cash and barter. Although Ukraine's long-running dispute with Russia over about $1.4 billion in arrears on past gas sales appeared to have been solved through a complex repayment agreement involving Eurobonds to be issued by Ukraine's national oil and gas monopoly (NaftoHaz Ukrainy) to Russia's Gazprom, Russia has not yet accepted the bonds, so the issue remains open. Reform of the inefficient and opaque energy sector is a major objective of the International Monetary Fund (IMF) and World Bank programs with Ukraine.
The IMF approved a $2.2 billion Extended Fund Facility (EFF) with Ukraine in September 1998. In July 1999, the 3-year program was increased to $2.6 billion. Ukraine's failure to meet monetary targets and/or structural reform commitments caused the EFF to either be suspended or disbursements delayed on several occasions. The last EFF disbursement was made in September 2001. Ukraine met most monetary targets for the EFF disbursement due in early 2002; however, the tranche was not disbursed due to the accumulation of a large amount of VAT refund arrears to Ukrainian exporters which amounted to a hidden budget deficit. The EFF expired in September 2002, and the Ukrainian Government and IMF began discussions in October 2002 on the possibility and form of future programs.
In 1992, Ukraine became a member of the IMF and the World Bank. It is a member of the European Bank for Reconstruction and Development but not a member of the General Agreement on Tariffs and Trade/World Trade Organization (WTO). While Ukraine applied for WTO membership, its accession process was stalled for several years. In 2001, the government took steps to reinvigorate the process; however, there was less concrete progress in 2002. The WTO Working Party on Ukraine met in June 2002. The government's stated goal is to accede to the WTO by the end of 2004.
Ukraine and NATO
It is often forgotten that Ukraine’s bid to join NATO was made before the 2004 Orange Revolution that ushered in President Viktor Yushchenko, a vocal and determined advocate of NATO membership for Ukraine. In May 2002, former Ukrainian President Leonid Kuchma made Euro-Atlantic integration a formal goal when he announced that Ukraine intended to seek membership in NATO. The United States has long been an advocate of engagement between Ukraine and NATO, arguing that such a relationship will contribute to a more stable transatlantic community by promoting NATO’s values of democracy, individual liberty, and rule of law. Integrating Ukraine into the NATO community strengthens the overall web of bilateral and multilateral ties that make NATO one of the most secure, peaceful, and prosperous communities of states. NATO engagement has also provided Ukraine an important means for advancing democratization and modernization efforts. To become an Alliance member, countries are expected to meet a number of key benchmarks, which include:
- A functioning democratic political system based on a market economy.
- The treatment of minority populations in accordance with guidelines established by the Organization for Security and Cooperation in Europe.
- A commitment to peaceful resolution of disputes with neighbors.
- The ability and willingness to make a military contribution to the Alliance and to achieve interoperability with other members’ forces.
- A commitment to democratic civil-military relations and institutional structures.8
Attaining these benchmarks requires aspirant countries to meet performance-based goals that support important reform efforts. For Ukraine, one major accomplishment has been its successful transition from a nation under the umbrella of a Soviet-controlled military to a nation with democratic institutions that check the power of the armed forces. As a next step, Ukraine plans to transition from a conscript-based army to an all-volunteer, professional force. While plans initially called for building a fully professional military by 2010, budget shortfalls have caused a delay until 2015.9
Following the Orange Revolution, NATO allies gave a clear signal of support for Ukraine’s membership aspirations through the creation of an “Intensified Dialogue” in 2005. Five priority areas of reform were identified, helping Ukraine focus its efforts on key areas, including: strengthening democratic institutions, enhancing political dialogue, intensifying defense and security sector reform, improving public information, and managing the social and economic consequences of reform.10 This new framework for cooperation offered a way for the Allies to identify areas where they could help Ukraine’s reform efforts by providing advice, assistance, and practical support. Then-NATO Secretary General Jaap de Hoop Scheffer underscored NATO’s commitment and open door policy at a 2006 meeting of the NATO-Ukraine Commission: “Our commitment to the Intensified Dialogue underscores that NATO’s door remains open and that Ukraine’s aspirations are achievable.”11 Additionally, de Hoop Scheffer stressed the primacy that Ukraine’s own efforts must play on its path to membership, stating, “Ultimately, the primary responsibility for success rests with the Ukrainian people and their elected leaders.”12
Several important steps in NATO-Ukraine relations took place in 2008 at the Bucharest summit when NATO heads of state and government formally agreed that Ukraine would become a member of NATO. The relevant language in the final communiqué states that,
NATO welcomes Ukraine’s and Georgia’s Euro-Atlantic aspirations for membership in NATO. We agreed today that these countries will become members of NATO. Both nations have made valuable contributions to Alliance operations.13
At the subsequent December meeting of NATO foreign ministers in Brussels, the Allies offered Ukraine an Annual National Program (ANP) that was intended to serve as a “roadmap to membership.”14 The ANP provides a framework through which the Allies can provide advice, assistance, and support for Ukraine’s reform efforts, and the NATO-Ukraine Commission will have a central role in “supervising the process set in hand at the Bucharest Summit.”15 Despite the fact that progress remains to be made in both Ukraine and Georgia, NATO has made clear that its door remains open if Ukraine can meet NATO’s performance-based measures and have popular support for membership.
U.S. Support for Ukraine’s Defense Reform
Kiev remains committed to meeting its reform goals and adhering to NATO’s performance-based measures. In 2009, Ukraine completed its first ANP and has made significant progress on its 2010 version. Despite chronic underfunding for the defense budget and a severe economic crisis gripping the country, Ukraine has made notable progress in transforming its military into a “modern, professional, and NATO-interoperable force” that can protect Ukraine’s borders and contribute to international operations.16 Ukraine has restructured its Ministry of Defense and Armed Forces General Staff to reflect NATO standards, created a Joint Operations Command to exercise control over its deployed forces, and begun work to establish a special operations command.
The Russia Factor
Russia has significant strategic interests in Ukraine. Ukraine serves as a transit hub through which Russia supplies its natural gas to Europe. Ukraine also controls the port of Sevastopol which has been home to Russia’s Black Sea Fleet since 1783.19 But cultural and historical factors also explain why Russia casts a long shadow over Ukraine, perhaps more so than any other country in the former Soviet space. Moscow traces its political lineage to Kievan Rus’, the medieval state of the Eastern Slavic people that was centered in Ukraine. The Rus’ was the early predecessor to the modern day nations of Belarus, Russia, and Ukraine. Tsarist Russia incorporated much of modern day Ukraine into its empire, and Ukraine spent decades as part of the Soviet Union. Indeed, many Russians do not even view Ukraine as a separate nation. Prime Minister Vladimir Putin once argued to President George W. Bush that Ukraine was not a real country; speaking to reporters in late May 2009, he read approvingly from the diaries of an imperial general who referred to Ukraine as “Little Russia.”20 In consequence, Moscow views Ukraine as part of what Russian leaders call a “sphere of privileged interest.”21 Indeed, Ukraine’s western aspirations challenge Russia’s desired role as a regional hegemon, and Moscow would like nothing better than to see the democratic forces of the Orange Revolution reversed and the installation in Kiev of a government willing to do Moscow’s bidding.
Russia wants to keep Ukraine under its tight control, and Moscow demonstrated in its August 2008 conflict with Georgia that it is willing to use a wide variety of tools, including military force, to impose its will over former Soviet states. One form of dependence Russia has nurtured is in the field of energy. During gas disputes in 2006 and 2009, Russia cut off supplies to Ukraine in the middle of winter, freezing out not only Ukrainian households, but many homes in Europe as well. While this tactic has helped Moscow to maintain energy distribution to its advantage, it also demonstrates Moscow’s tendency to overplay its hand. A return to the Russian orbit is not in the interest of Ukrainian sovereignty, independence, and territorial integrity. To win against Moscow, Ukraine needs to reduce its financial and economic dependence. This means being more competitive and attractive to outsiders and developing a more robust democracy and further opening market economy.
In the interests of European and global security, Russia should cease viewing the world in zero-sum terms. European security in the 21st century is best enhanced by engagement among countries and by building communities of shared interests, not by the destructive balance of power politics of the past. Neither Russia nor any other country should view Ukraine’s integration with the West, let alone its engagement with NATO, as a threat. As Vice President Biden made clear at the Munich Security Conference in February 2009, “The United States rejects the notion that NATO’s gain is Russia’s loss, or that Russia’s strength is NATO’s weakness.”22 Ukraine provides an example of the right of sovereign nations to make their own decisions, to chart their own foreign policy, and to choose their own alliances. Ukraine’s integration into the rest of Europe, rather than pose a threat, would contribute to peace and stability. It is only certain elements of Russia’s leadership that sees Ukraine’s European future otherwise.
In the public commentary, pundits have indulged in speculation about the Obama administration’s “reset” with Russia and implications for important regional partners such as Ukraine. Will an improvement in U.S.-Russian relations come at Ukraine’s expense? Will the United States accept Russia’s red lines in order to keep the reset on track? Such interpretations should be corrected unequivocally. First, the “reset” is a clear-eyed, realistic and focused approach which recognizes that important disagreements with Russia will remain. Vice President Biden made this point clear during his appearance at the February 2009 Munich Security Conference, during which he gave the first major speech outlining the Obama’s administration’s foreign policy goals:
We will not agree with Russia on everything. For example, the United States will not—will not recognize Abkhazia and South Ossetia as independent states. We will not recognize any nation as having a sphere of influence.23
While the intent is to find mutual areas of cooperation, the reset harbors neither overly optimistic nor unrealistic expectations.
Second, U.S. support for Ukraine reflects basic principles that the United States considers inviolable. In his remarks at Munich, Biden said, “It will remain our view that sovereign states have the right to make their own decisions and choose their own alliances.”24 To demonstrate the point, Vice President Biden paid an official visit to Kiev in July—just two weeks after President Obama’s trip to Moscow. He explained:
My visit to Kiev comes soon after President Obama’s visit to Moscow. As a matter of fact, they were planned simultaneously. And I know there was some speculation that our decision...to press the reset button with Moscow...created some speculations that improving relations with Russia would somehow threaten our ties with Ukraine. Let me say this as clearly as I can. As we reset the relationship with Russia, we reaffirm our commitment to an independent Ukraine.25
To further demonstrate U.S. support, the DoD maintains a parallel track of high-level engagement with Ukraine even after having renewed military-to-military cooperation with Russia following the Moscow summit.26 After the vice president’s trip to Kiev, Ambassador Alexander Vershbow, the assistant secretary of defense for International Security Affairs, traveled to Kiev in September to co-chair the annual U.S.-Ukraine Bilateral Defense Consultations. He met with Acting Minister of Defense Valery Ivashchenko and other senior Ukrainian officials. Ambassador Vershbow’s trip was followed in October by a visit from Dr. Celeste Wallander, the Deputy Assistant Secretary of Defense for Russia, Ukraine, and Eurasia. These visits help underscore the United States commitment to Ukraine and the importance of their strategic relationship. In a speech at the Ukrainian Diplomatic Academy, Ambassador Vershbow called the security and defense partnership between the United States and Ukraine an important component of Ukraine’s efforts to become a strong, independent, and secure nation and active contributor to international peace.27
The Way Forward
Ukraine has recently wrapped up a presidential election in which former prime minister and opposition leader Viktor Yanukovych emerged the victor. The campaigning was spirited, heated, and raucous; in a word, “democratic.” The conduct of the election was free and fair. Indeed, observers from the Organization for Security and Cooperation in Europe described the vote as an “impressive display of democracy.”28 The United States supports the choice of the Ukrainian people, which demonstrated another positive step in strengthening democracy in Ukraine.29 While Yanukovych is likely to seek a more balanced relationship with Russia and take a more circumspect view toward NATO membership, it is unlikely that the choices for democracy and integration with European and Euro-Atlantic institutions will be reversed. Being an integral part of Europe is Ukraine’s best guarantee for security and prosperity. Ukraine’s citizens have chosen: there will be no “back to the future” moment, Ukraine will not return to being a client state of Moscow.
Furthermore, engagement with the United States and NATO is of paramount importance for the Ukrainian military’s ability to transform into a truly modern and professional 21st century force. This is a commonly held view in defense spheres and, regardless of political outcomes, this strategic orientation is unlikely to change. While membership in NATO is unlikely in the foreseeable future—indeed, only 20 percent of the population currently supports membership—engagement with NATO will continue to be leveraged as a vehicle for addressing common security concerns.30 For Ukraine to enjoy sovereignty, independence, and territorial integrity, it must have effective armed forces with modern defense capabilities. The United States and Ukraine have nurtured a robust defense and military-to-military relationship for almost twenty years, reaping benefits for Ukraine’s armed forces and for greater Euro-Atlantic security. To sustain and enhance these benefits, this fruitful relationship of shared experiences, combined exercises and training, and participation in NATO and other international operations must continue unabated.
Ukraine's geostrategic significance derives, in part, from its location at the crossroads between Europe and Asia, its status as the largest country in Europe outside Russia, and its population of 46 million. (2) Ukraine also serves as a key transit country for European energy, occupies an important position as a littoral Black Sea country, and provides a port for Russia's Black Sea Fleet. In addition to Ukraine's overall geostrategic significance, a number of other factors also render it of great importance to the United States. Since independence, Ukraine has chosen the path toward democracy and integration into European and Euro-Atlantic institutions. Following the collapse of the Soviet Union and Ukrainian independence in 1991, Ukraine took steps that led to the creation of well-developed ties with the North Atlantic Treaty Organization (NATO). In February 1994, Ukraine became the first member of the Commonwealth of Independent States to join NATO's Partnership for Peace. In December 1995, Ukrainian soldiers were deployed as part of the NATO-led peacekeeping force in Bosnia and Herzegovina. Ukraine has continued to be a steadfast contributor to NATO and other international operations.
Ukraine's commitment to regional and global security has been consistently demonstrated. From 2003 to 2005, Ukraine participated in Operation Iraqi Freedom, deploying a mechanized brigade of 1,650 servicemen. During this deployment, eighteen Ukrainian soldiers were killed and forty-four others were wounded in combat operations. (3) Ukraine also currently participates in the NATO Training Mission in Iraq. In Afghanistan, Kiev granted overflight rights to NATO aircraft flying en route to Afghanistan in support of Operation Enduring Freedom. Today, Ukrainian servicemen participate in the International Security Assistance Force. (4)
In addition to NATO missions in Iraq and Afghanistan, Ukraine takes part in NATO's Kosovo Force and Operation Active Endeavor, and its maritime counter-terrorism activity in the Mediterranean. Indeed, Ukraine can boast that it is the only non-NATO country participating in these four current NATO-led operations and missions. (5) Ukraine also contributes to United Nations (UN) peace support operations around the world, including operations in Liberia, Sudan, and Georgia.
- The views expressed in this article belong entirely to Colonel Espinas and do not reflect the official position of the United States government or the Department of Defense.
- Central Intelligence Agency, “Ukraine,” The World Fact Book, July 2009.
- Information provided to the author by U.S. Central Command.
- Ukraine declined to take part in combat operations in Operation Enduring Freedom due to political sensitivities stemming from the disproportionately high number of Ukrainian casualties in the Soviet war in Afghanistan.
- North Atlantic Treaty Organization, “NATO’s Relations with Ukraine,” NATO-Topic, 27 October 2009, http://www.nato.int/cps/en/natolive/topics_37750.htm.
- Joseph R. Biden, “Remarks by Vice President Biden in Ukraine” (speech, Ukraine House, Kiev, Ukraine: 22 July 2009).
- Hillary Rodham Clinton, “Remarks with Ukrainian Foreign Minister Petro Poroshenko after Their Meeting,” (speech, Washington, DC: 9 December 2009).
- NATO Public Diplomacy Division, “NATO-Ukraine: An Intensified Dialogue” (Brussels: NATO, 2006), 7.
- Comment made by then-defense minister Yuriy Yekhanurov at the November 2008 meeting of the NATO-Ukraine High-Level Consultations in Tallinn, Estonia (from author’s notes).
- Ibid, 6.
- Ibid, 17.
- Ibid, 17.
- NATO Press Release, “Bucharest Summit Declaration,” 3 April 2008.
- The offer of an ANP demonstrated that there are multiple paths to membership for countries wishing to join the Alliance. While the countries that joined NATO in 2004 (Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia), and in April 2009 were offered a Membership Action Plan, Ukraine and Georgia were offered an ANP in 2008.
- NATO, “Final Communiqué: Meeting of the North Atlantic Council at the level of Foreign Ministers held at NATO Headquarters, Brussels,” NATO Press Release, (153: 3 December 2008).
- Alexander R. Vershbow, “Remarks of Ambassador Alexander R. Vershbow Assistant Secretary of Defense for International Security Affairs” (speech, Kiev: 29 September 2009).
- The establishment of a professional noncommissioned officer corps, a feature of all NATO military forces, is a prerequisite to the development of a volunteer army.
- Lieutenant Colonel Shannon McCoy, U.S. Army, Chief of the U.S. Office of Defense Cooperation, (discussion with the author, Kiev; 2009).
- Under the agreement between Ukraine and Russia, the lease is set to come up for renewal in 2017.
- Philip P. Pan, “Kremlin Intensifies Pressure as Ukraine Prepares for Vote: Russia Lodges List of Complaints Against Neighbor,” Washington Post, 14 September 2009.
- Interview given by Dimitri Medvedev to Television Channels Channel One, Russia, NTV, 31 August 2008.
- Joseph R. Biden, “Remarks by Vice President Biden at 45th Munich Conference on Security Policy” (speech, Munich: 7 February 2009).
- Joseph R. Biden, “Remarks by Vice President Biden in Ukraine” (speech, Ukraine House, Kiev: 22 July 2009).
- During the 6-8 July 2009 summit in Moscow, the two presidents reached agreement on a number of issues including military-to-military cooperation. The Chairman of the Joint Chiefs of Staff Admiral Mullen and Russian Chief of the General Staff General Makarov signed a Framework Understanding and a work plan for resuming cooperation between the U.S. and Russian armed forces.
- Alexander R. Vershbow, “U.S.-Ukraine Security and Defense Relations” (speech, Diplomatic Academy of the Ministry of Foreign Affairs of Ukraine, Kiev: 29 September 2009).
- Luke Harding, “Yanukovych Set to Become President as Observers Say Ukraine Election was Fair,” Guardian, 8 February 2010.
- According to the White House, President Obama phoned President-elect Yanukovych on 11 February to congratulate him and to commend the Ukrainian people on the conduct of their 7 February vote.
- Gwynne Dyer, “Whether Yanukovych or Tymoshenko, Next President Left with Little Room to Maneuver,” Kyiv Post, 21 January 2010. Russia’s Influence over Ukraine
A study of Russia’s involvement in the former Soviet republic of Ukraine highlights Russia’s successes in creating an exclusive zone of influence in its region.
In its efforts to ensure widespread control over Ukraine, Russia’s leaders have created a Russia-dependent Ukrainian economy. Prior to Ukraine’s 2004 presidential elections, the West was uninterested in investment in Ukraine. Various factors, such as restrictive regulations, corruption, and conflict within the government, drove Western investors away for much of Ukraine’s sixteen years of independence.17 One example, the “Kuchma-gate” scandal in 2000,
highlights the vicious circle of isolation that plagues Ukraine in its post-Soviet existence.
“Kuchma-gate” revealed the corruption in Ukraine’s government and resulted in Western governments’ isolation of Ukraine’s president – which was followed by Western investor’s isolation of Ukrainian industry.18 As a result, Ukraine opened its economy up to an eager Russia and by 2002 forty to fifty percent of Ukrainian industry was Russian-owned.
Russia is the number one consumer of Ukraine’s exports and, under the guidance of President Putin, has contributed to Ukraine’s constant economic growth since 2000. 20
Furthermore, Russia is Ukraine’s number one provider of oil and gas resources. With seventy percent of Ukraine’s natural gas resources and ninety percent of its oil reserves imported from Russia, Ukraine is entirely dependent on Russia for its energy resources.21 In the early 1990’s Ukraine had some power of coercion over Russia as Ukraine was an important transportation route for Russian resources. However, in September 2001 Russia built a new pipeline to Western
Europe, which bypasses Ukraine completely – thereby offering Russia a significant bargaining tool over the Ukraine on issues such as tariffs on oil transportation.22
Also in 2001, Russia negotiated its ongoing military presence in Ukraine by finalizing a cooperation treaty which gave Russia unlimited rights to organize military exercises, form joint naval units and produce joint weapons in the Ukraine. These rights limit Ukraine’s ability to actively participate in NATO partnership programs and ensure that NATO’s enlargement does not extend to the Ukraine. In addition, the creation of a Joint Command Desk of Russia and Ukraine to monitor the Black Sea also serves Russia’s agenda in preventing any cooperation between NATO and Ukraine in the Black Sea area.
Political Influence Stable and positive relations with Ukraine within the context of the CIS are a priority for Russia in the modern international order. After the collapse of the Soviet Union, Ukraine followed the example of other Eastern European states and attempted to pull away from Russia’s influence in 1992 by refusing Russia’s Common Security Treaty and participating in the formation of GUUAM. Under the leadership of Leonid Kuchma Ukraine advocated a ‘multivector’ approach to international relations which allowed for close relations with Russia without closing the door to the rest of Europe and the West. Although the relationship between Russia and Ukraine deteriorated through the late 1990’s, within Putin’s first two years as president relations between the countries started to improve.
In 2001, Viktor Chernomyrdin (Russia’s former prime minister) was appointed as
ambassador to Ukraine as Putin explained, “the time has arrived when we have to seriously consider the development of relations with one of our partners – Ukraine.” Chernomyrdin quickly reiterated the importance of a strategic alliance with Ukraine. “Ukraine is not a western country… it belongs to Slavic civilization… Hundreds of years living together makes Ukraine Russia’s natural partner.”29 The appointment of one of Russia’s most prominent and powerful
politicians as ambassador to Ukraine signaled the importance of Russia’s relationship with Ukraine to the world.30 Furthermore, relations between the countries were aided by the participation of both Putin and Kuchma in various bilateral summit meetings during which they agreed to the increased cooperation and integration of their respective countries.
Finally, in its attempt to maintain a significant political influence over Ukraine, Russia
intervened in the events leading up to and following Ukraine’s 2004 presidential elections.
First, in 2002 the Russian media fuelled allegations of a Western conspiracy to unseat Kuchma and install an anti-Russia, pro-United States government.32 By the time of the presidential elections in 2004, President Putin openly supported the campaign of Viktor Yanukovich, the heir to Kuchma’s regime and the Russia-oriented candidate.33 Moreover, Putin’s own political team, was an integral part of Yanukovich’s campaign machinery and as many believe, responsible for the “dirty tricks” that occurred during the campaign.34 Finally, Putin was the first international president to declare Yanukovich the winner of the November 2004 elections – even when the rest of the world expressed concern over election conduct and Ukrainians protested the result.
All of Russia’s political actions during this period were aimed at preventing Yushchenko’s victory because a pro-EU, possibly pro-United States president was contrary to Russia’s security interests in Ukraine.
Russia’s military, economic and political activities in Ukraine are designed to keep
Ukraine within Russia’s sphere of influence and to maintain Russia’s strategic advantage over its western neighbours. By monopolizing influence over Ukraine, Russia strives to maintain a buffer zone between itself and the West.
Since their independence from Soviet Russia, it faces a number of challenges, including territorial border issues, economic crisis, and a tumultuous political system. Adispute developed over the price of natural gas purchased from Gazprom, Russian largest gas monopoly company and the largest extractor of natural gas in the world, resulting in a deadlock and could not reach an impasse on the negotiations in late 2005. Ukraine had been purchasing gas at very favorable rates under a contract signed before Yushchenko won the presidency (former Ukraine President), and Gazprom now demanded a higher, market rate. A year later Gazprom halted its Ukrainian shipments, a move that also partially affected other European customers. Although the dispute was soon resolved, the event was generally regarded as an excessive Russian response to Yushchenko's victory a year before. Opposition parties subsequently won a no-confidence vote against the cabinet over the agreement, but constitutional ambiguities made it unclear whether the vote had any validity or not.
There was tension over the Crimean peninsula which is linked to Ukraine’s mainland, and is a former Russian territory with a majority Russian population that was ceded to Ukraine in 1954. Thereafter, in 1995 Crimea challenged the Ukrainian government's sovereignty and threatened to secede, therefore, Ukraine placed Crimea's government under national control. Ukraine and Russia signed a treaty in Jan., 2003, that defined their common borders everywhere except in the Sea of Azov (Northern part of the Black sea).
Political contentions developed in the 2004 presidential election and appeared to mark a significant turning point for Ukraine, and led to the events known as the "Orange Revolution." The government candidate, Prime Minister Viktor Yanukovych, advocated close ties with Russia (and his candidacy was supported by Russian president Putin) while the opposition candidate, former Prime Minister Viktor Yushchenko, called for closer ties with the European Union.
Yushchenko won the presidency through a repeat runoff election between him and Yanukovych. The Ukrainian Supreme Court called for the runoff election to be repeated because of widespread election fraud in favor of Yanukovych in the original vote. Yushchenko won in the revote (52% to 44%). Public protests prompted by the electoral fraud played a major role in that presidential election and led to Ukraine's Orange Revolution. After the 2004 election, Yanukovych continued to serve as Prime Minister for a second time from August 4, 2006 to December 18, 2007 under President Yushchenko. In Yanukovych was the top vote-getter in the first round of the January 2010 presidential election, and faced Yulia Tymoshenko in the second round of the election. Yanukovych won the second round of the election with 48.95% of the vote against Tymoshenko's 45.47%. He is the first directly elected president in Ukraine's history to win with less than 50% of the vote.