Ukraine will have three priorities in 2015: restoring economic stability; reducing the levels of corruption, and ending the conflict in the east. Equally important will be ensuring that the new ruling coalition in Parliament keeps on course without major frictions.
Ukraine’s economy is on the brink of default, with massive debts, a collapsing currency, and dwindling foreign reserves. Given the current impasse with Vladimir Putin’s Russia, a situation that has not altered significantly since the Minsk Protocol was signed last September, Ukraine cannot rely on loans or support from Russia. In turn, further loans from the IMF will entail a thorough stringency plan that brings wage freezes and cuts to public service.
Perhaps the only mitigating factor in this rather gloomy scenario is that Russia is facing similar problems, though without the devastating debt that Ukraine has incurred over the past few years, most during the Yanukovych presidency. Nonetheless, Russia’s economic predicament reduces the chances of Moscow bringing further destabilization to the eastern regions of Ukraine. It is unlikely to have much impact on changing the situation in Crimea, which Putin cannot afford to relinquish without serious threats to his popularity.
The new coalition in the Rada has a mandate to address and rectify the endemic corruption that has been evident since the sale of state assets and resources in the early postwar years. From the president downward, Ukrainian oligarchs will need to make sacrifices and alter lifestyles to which they have become accustomed. In addition to changes in the way business is conducted, the country needs legal reforms and an end to patronage, in addition to modernization and greater economic efficiency. Lustration is not necessarily the correct route, since vindictiveness towad those who have plundered the country needs to be tempered by the need for support from some of the more affluent figures in society.
The conflict in the east has been exacerbated by the costs of warfare: casualties in the thousands, some 1 million refugees, and the loss—for now at least—of the Donbas, one of the most important industrial areas responsible for 95% of Ukraine’s coal output. Ukraine will need to reach some form of solution for its far eastern territories: either the elimination of the so-called People’s Republics of Donetsk and Luhansk—which are not stable entities without Russian support—or the loss of these territories as well as Crimea.
Logic suggests that the annexation of Crimea by Russia will actually reduce Ukraine’s economic burden (Putin does not seem to have considered some of the more basic economic problems that would arise), but the secession of the Donbas would be troubling. A compromise solution would be the granting of autonomy to the two oblasts (which may in turn need to be divided further given that some districts have remained under Ukraine’s control), either within or outside Ukraine. If the Donbas remains inside Ukraine, it will bring further economic burdens associated with rebuilding and overcoming the impact of shelling and weapons.
Some of the solutions to these problems lay outside the country. In particular Russia has become an unpredictable and troublesome neighbor, seeking to exploit Ukraine’s problems to weaken the new government and ensure first and foremost that it remains outside Western structures such as NATO and the EU. To that end the frozen conflict will remain as long as Putin makes it a priority to prop up the weak separatist regimes. In my view Ukraine cannot move exclusively in one direction: it must seek compromises with Russia whether or not it chooses to develop its Association Agreement with Europe.
On the other hand, the eastern option of rapprochement and working exclusively with Moscow has been undermined—if not eradicated—as a viable longterm option: it has brought few rewards over the years and today they are likely to be even more meagre. The Putin leadership has shown little inclination to moderate his stance toward Kyiv. Increasingly his Russia has adopted the role of a regional power anxious to assert control over its neighbors.
Yet Ukraine can discern that within the Russian Federation there are considerably differences of opinion regarding the conflict. To many it seems illogical to send troops to fight their “brothers” over the border—moreover it defies the logic on which Putin claims to base his state: as the victor in the Second World War based on unity of Soviet peoples against an invader. Ukraine could exploit these contradictory patterns in Russian society. They are more prevalent than the Russian media would indicate.
The West has been generally benevolent toward Ukraine, but rhetoric has been more prevalent than hard aid, especially military support, the result of the US decision to send more lethal weaponry pending. The EU is divided on the response to Russia and that ambivalence is likely to remain. While the eastern borderlands perceive Russia as an intrusive and malevolent neighbor central Europe and to some extent Western Europe would prefer not to take measures that might appear to inflame the situation further.
Lastly, the ruling coalition in Kyiv depends on a close working relationship between two very different personalities: President Petro Poroshenko and Prime Minister Arseny Yatsenyuk. They entered parliamentary elections in late October with very different strategies. The President’s party won most seats; the Prime Minister’s the highest proportion of the vote.
The fall of one, however, may well bring down the other, such is the fragility of the coalition. If that should happen then more extreme paths could be chosen and concomitantly more extreme political figures (who remain in the background but have been prominent in the conflict) could come to the fore on both the government side and that of the opposition. It will take intricate political skills to survive given the problems the government faces. But the price of failure would be very high.