MHP (MHPC: LSE) is a vertically integrated poultry company based in Ukraine. The company grows its...
Translated from Ukrainian, Ukraina means “at the border” or “borderland”— a description that to this day fits the reality of the country’s culture and politics. Modern Ukraine has been an independent state for a relatively short amount of time— less than thirty years— but throughout its history in the Russian Empire and the Soviet Union, it always served as a buffer zone of sorts between west and east, Europe and Eurasia. Today, this identity is more relevant than ever, as Ukraine stands between the post-Soviet region, known for its corruption, authoritarianism, and rich history of human rights violations, and the European Union, where liberal democratic values are prized at the supranational level - even though there are a few outliers among national politicians. In the wake of the Euromaidan revolution, polling shows a majority of Ukrainians see their political future with Europe, not Eurasia.
But this topline statistic ignores Ukraine’s complex cultural make-up, and the political faultlines that run through issues like language, religion, and historical legacy. Historically, the Western and Central parts of modern day Ukraine have belonged to Poland and Lithuania, while its Eastern regions have been a part of the Russian Empire. The former is predominantly Ukrainian-speaking and has a significant Catholic population, while the latter is mainly Russian-speaking and has an Eastern Orthodox population. Not coincidentally the Ukrainian language, although written in cyrillic, is a balanced mixture of Polish and Russian.
Present-day Ukraine emerged after the First World War when the Bolsheviks establish Ukraine as an “independent” republic within the larger USSR. In the 1920s, the Ukrainian SSR leadership implemented korenization policy, which aimed to promote Ukrainian identity, culture, and language. This would later be reversed under Joseph Stalin—a decision that reverberates today. The strong Russification policy pursued by Stalin and his successors downgraded the status of Ukrainian language and culture, making it appropriate only for village folk dances and songs rather than for conducting official government business. Ukrainian universities only taught subjects in Russian, and this practice continued until after Ukraine declared independence in 1991.
The post-Soviet period has seen a resurgence of patriotism and even nationalism, mixed with a passive approach to the national question. These attitudes have come in waves, and are generally a reaction to prevailing political trends at the national level. While early post-communism saw excitement by some citizens at having a truly independent Ukrainian state, other suffered from phantom limb syndrome, considering their identity more Soviet, Russian, or regionally-defined than Ukrainian. However, it was after the 2004 Orange Revolution—anti-corruption protests that saw the pro-Western Viktor Yushchenko ultimately claim the presidency in 2004 that a liberal democratic strand of pro-EU politics firmly entrenched itself in a portion of civil society. There was hope that the old ways of post-Soviet corruption could be abandoned in favor of a more ‘European’ path. As well as identifying EU membership as a strong strategic goal for Ukraine, Yushchenko attempted to forge a stronger national identity by making Ukrainian the mandatory language of instruction in all public schools. The rule, however, has not been completely followed, as Russian is still widely used.
Many citizens from the Eastern and Southern regions remained hostile to this vision however, preferring a closer association with Russia. For this reason, as well as Yushchenko’s unpopularity from the financial crisis and unresolved national corruption, the pro-Russian Viktor Yanukovych was elected in 2010. For most of his presidency, Yanukovych actually tried to hedge the question of his country’s geopolitical orientation—seeing it as a toxic political issue that would infuriate both pro-European and pro-Russian citizens. He showed interest in signing an EU association agreement and in entering a Russian-led Customs Union —two mutually exclusive geopolitical paths. At the eleventh hour, he chose the latter, provoking outrage among pro-EU citizens that ultimately culminated in the 2013-2014 Euromaidan revolution. The ousting of Viktor Yanukovych—who fled the country—and the pro-EU optimism on the streets of Kyiv in early 2014 was dampened by Russia’s unexpected annexation of Crimea. This was followed by Russian military fighting in Ukraine’s Eastern Donbass region, which continues to this day.
A key geopolitical struggle for Ukraine has been its position as a major state in both European and Russian spheres of influence. Ukraine’s governance is a litmus test for whether post-Soviet states living in the shadow of Russian authoritarianism and corruption can truly become liberal, democratic societies. Ukraine’s ability to forge a strong national identity is also made more challenging by the large number of ethnic minorities residing within it—not only Russians, but also it also continues to be at the border between cultures, with multiple ethnic minorities, like Belarusians, Tatars, Poles, Hungarians, Moldovans, and Romanians.
Poor economic opportunities and a poor quality of life are a significant hindrance to effective state-building. Millions of Ukrainians have moved abroad to Europe, Canada, and the United States in search of a better life. This—along with low birth rates—is of great concern, with the country’s population declining steadily. Internal problems include rampant corruption, substantial oligarchic influence over the country’s political and legal systems, crippling bureaucracy and the lack of political appetite for robust economic reform.
While Ukraine boasts highly-fertile land, valuable natural resources and a burgeoning services sector (particularly IT), the above concerns limit its attractiveness to foreign investors. Recent geopolitical instability has further dampened investor appetites. Reforms of the judiciary, public spending and oligarch-controlled monopolies on industry will be crucial to reversing this trend. But while some progress has been made in these areas, the vested interests pushing back in the opposite direction are powerful and well-funded. Ukraine’s lawmakers will need to go further to unlock the growth and investment their country so badly needs.
|Country Population||45 million|
|Largest City (Population)||Kyiv (2.8 million)|
|2nd Largest City (Population)||Kharkiv (1.4 million)|
|3rd Largest City (Population)||Odessa (1.0 million)|
|4th Largest City (Population)||Dnipro (990,000)|
|5th Largest City (Population)||Donetsk (900,000)|
|President (Dates)||Petro Poroshenko (2014-Present)|
|Prime Minister (Dates)||Volodymyr Groysman (2016-Present)|
|Prime Minister||Volodymyr Groysman|
|Freedom House Score (1=Free, 7=Not Free)||3|
|Ruling Party||Petro Poroshenko Bloc|
|Past Presidents (Dates)||Oleksandr Turchynov** (acting, 2014)
Viktor Yanukovych (2010-2014)
Viktor Yushchenko (2005-2010)
Leonid Kuchma (1995-2004)
Leonid Kravchuk (1991-1995)
|Past Prime Ministers (Dates)||Arseniy Yatsenyuk (2014-2016)
Serhiy Arbuzov (2014)
Mykola Azarov (2010-2014, 2005)
Oleksandr Turchynov (2010)
Yulia Tymoshenko (2007-2010, 2005)
Viktor Yanukovych (2006-2007, 2002-2005)
Yuriy Yekhanurov (2006-2007)
Vasyl Durdynets (1997)
Pavlo Lazarenko (1996-1997)
Yehven Marchuk (1995-1996)
Vitaliy Masol (1994-1995)
Leonid Kuchma (1992-1993)
Vitold Fokin (1991-1992)
Anatoliy Kinakh, 2001-2002;
Viktor Yushchenko, 1999-2001;
Valeriy Pustovoitenko, 1997-1999;
|How Central Banker is Appointed||Appointed by Verhovna Rada|
|Average Voter Turnout in Last 5 Elections
(% of Total Population)
|10 Major Import Partners
(% of Total Imports)
|Top Exports||Sanctioned by
(and Start Date)
(and Start Date)
|1. Russia (17%)
2. China (11%)
3. Germany (11%)
4. Poland (9.9%)
5. Belarus (7.5%)
6. Hungary (4.1%)
7. Turkey (3.3%)
8. Italy (3.2%)
9. Kazakhstan (2.4%)
10. Czech Republic (2.3%)
|1. Russia (11%)
2. Turkey (6.5%)
3. China (6.4%)
4. Italy (6.3%)
5. Germany (5.8%)
6. Poland (5.5%)
7. Egypt (5.3%)
8. India (5.2%)
9. Hungary (3.3%)
10. Spain (3.2%)
Machinery/ Transport Equipment
|February, March, April 2014: EU;
March 2014: UK;
March 2014: Norway;
April, May 2014: Switzerland;
March, April 2014: Canada;
March, April, May 2014: US
|Largest Sources of FDI by Country||1. Cyprus
|Largest Ethnic Groups
(% of Total Population)
(% of Total of Population)
|Russian Orthodox (65%)
Other Christian (7.1%)
Greek Rite Catholics (6.5%)
|2||Council of Europe–1995|
|6||NATO Partnership for Peace–1994|
|7||Euro-Atlantic Partnership Council–1997|
|8||The Central European Initiative–1996|
|10||GUAM Organization for Democracy and Economic Development–1997|
When Ukraine voted for independence from the Soviet Union on December 1, 1991, it did so with 92.3 percent voter support. After centuries of territorial disputes, wars, political setbacks, and infighting, Ukrainians finally had a sovereign state. But the country’s attempts to transition to a market-economy and liberal democracy have been tedious, intermittent, and turbulent. Corruption, bribery, and the establishment of an oligarchic system of control has stalled progress.
Most of the systemic issues that Ukraine faced in 1991 are still relevant to this day. Freedom House has rated the country as “Partly Free” since its records began in 1999. In 2017 Transparency International ranked Ukraine 130th out of 180 countries for corruption, down from 118th in 2007. Oligarch control of business and politics was consolidated during the early years of Ukraine’s independence and remains uncontested to this day. Many political parties, politicians, television stations, newspapers, magazines, and other media sources are bankrolled by tycoons seeking to protect their business interests.
This notwithstanding, Ukraine has a degree of political freedom that is rarely seen in the post-Soviet region. Elections are competitive, and notwithstanding oligarchic ownership, there is a wide plurality of media available. Freedom of speech is higher than in Russia and Belarus, and journalists face less political pressure than in some EU states. Ukraine has elected more presidents than most of its post-Soviet counterparts—5—each with distinctive and varying goals. The transfers of power, however, have not always been so smooth.
Indeed it is in these varying policies and goals that the strength and resilience of the civil society in Ukraine has been tested. The Orange Revolution of 2004, where demonstrators protested a rigged electoral victory by Viktor Yanukovych, and the Euromaidan revolution, where they marched against Yanukovych’s refusal to sign an EU Association Agreement, proved to be pivotal moments in government-citizen relations. Both events happened to surround pro-Russian policy choices, but they also signaled a desire to democratize and to embrace liberalizing EU-style reforms.
Many politicians rode this wave of pro-European optimism all the way to the top. President Petro Poroshenko, known as the “Chocolate King” due to his ownership of confectionary conglomerate Roshen, was one of them. Despite being an oligarch and a former Yanukovych minister, Poroshenko’s pro-European, anti-corruption, and anti-Russian platform won him many plaudits in the 2014 presidential election. His manifesto pledged to sign an Association Agreement with the EU—which was accomplished in June 2014— with hopes of securing Ukraine a long-term path to EU membership. Defending Ukraine’s territorial integrity in its Russia-backed Eastern regions was another popular promise.
Ultimately however, Poroshenko has failed to liberate Donetsk and Lugansk from Russian occupation, and war fatigue in Ukraine is at an all-time high among voters. Voters also remain dissatisfied at the country’s enduringly-high levels of corruption. Some reforms have been made by the Poroshenko administration to address this issue, such as a law pledging the creation of an independent anti-corruption court. However, more reforms are needed to successfully address this issue. In 2019, Ukrainians will vote both in presidential and parliamentary elections, which are likely to lead to a change of the president and the government, exposing the gap between the hopes and results of Ukraine’s 2014 EuroMaidan revolution.
Ukraine’s swing between pro-western and pro-Russian policies is deeply tied to its history under different empires. The Mongol invasions fragmented the once powerful Kievan Rus into different kingdoms—the Grand Duchy of Muscovy ultimately grew to be the most powerful (which is why Kyiv is known as the “mother of all Russian cities”). After the splintering, the domains of Kievan Rus were parts of various empires, but for centuries most of western Ukraine was under Polish and Austro-Hungarian rule, while eastern Ukraine became part of the Russian empire. The different historical experiences endure to this day in the distribution of Russian and Ukrainian speakers, party affiliations, and views of what should be Ukraine’s geopolitical orientation. Both the Orange Revolution and Euromaidan gained much more widespread support in Ukraine’s western parts, where Ukrainian nationalism is stronger, while the pro-Russian Viktor Yanukovych and his Party of Regions are rooted in the still strong post-Soviet identity of eastern Ukraine.
The president is the most powerful person in Ukrainian politics. Since Ukraine gained independence in 1991, it has had 5 presidents. Transitions have been smooth twice (after the 1993 and 2010 elections) and very rocky twice. Not coincidentally, every time a pro-Western leaning leader has taken the presidency, it has come only after mass protests.
The president’s power depends largely on who sits in Mariyinsky (the Ukrainian equivalent to the American White House). Some, such as President Leonid Kuchma, were completely controlled by the oligarchs and other elites, while others, such as Poroshenko himself, are more independent. Others still, like Yanukovych, were more interested in enriching their own families than the country’s traditional elite—causing secret consternation among various oligarchs. The Ukrainian presidency provides a lot of power to its holder, but rarely are two presidents alike in policy goals, loyalty, or foreign orientation. Because of that, Ukraine’s direction has zigged and zagged several times in the last quarter century and will probably continue to do so.
Ukraine’s legislative branch has one house, the Verkhovna Rada, often referred to as simply the Rada. There are 450 members of the Rada. Unlike many of the other post-Soviet states the Rada has real power to check the executive, which has been used to successfully undermine a succession of presidents.
For most of Ukraine’s independent history, the judiciary has not been an impartial institution. With the 2016 reforms, that now appears to be changing. Too much power had previously be given to judges in certain regards, like ordering detentions without cause, and having no precedent for recusing one’s self (thus allowing massive corruption to stew) for example. But also, in other regards, the judges did not have enough power to act independently of the president or the Rada—politics had entered the judiciary. To make matters worse, little recourse was taken against corrupt judges who took bribes. Moreover, judges previously acted as investigators, working hard themselves to uncover the truth rather than allowing the counsels on either side to paint the picture for him/her. The 2016 reforms aim to change that, but they do not, however, do enough on their own to weed out the politicalization of the judiciary. But now at least, judges are no longer immune from prosecution, as they once were.
In Ukraine, there are four levels of courts, and one court that sits on an island. There are Local Courts, Courts of Appeals, the Supreme Court, and the Constitutional Court. Each more powerful than the one before it. Appeals can only be made to the Constitutional Court if the case in question deals with matters that concern the Ukrainian constitution. The fifth court, an island so-to-speak, is the High Anti-Corruption Court, which will be established by the year’s end. Judges are appointed by the president of Ukraine, and are very difficult to dismiss once confirmed. Ukraine does not have juries, cases are heard a judge, or group of judges, and then assessed.
In 2018, Ukraine adopted a law on establishing a new High Anti-Corruption Court of Ukraine, which started its functions in March 2019. The new court is tasked with dealing with corruption cases, where the illicit sum in question exceeds US$ 31 000. The new court is meant to bypass the other courts, which have been ineffective in dealing with corruption cases because of corrupt judges. The judges and their family members will receive around the clock protection.
Media, NGOs, and Civil Society
Ukraine enjoys a thriving civil society. Protests in 2004 forced another round of elections after enraged Ukrainians took to the streets to voice their discontent with sham elections. In 2014, protests again erupted, this time defenestrating corrupt President Yanukovych. Beyond forcing regime change, civil society plays an important role in everyday politics. About 60% of Ukrainians believe involvement in civil society is the best way to spur change in their country, which is a marked contrast to other post-Soviet countries such as Russia. Media and NGOs also thrive in Ukraine. They have independence from the state, and several outlets have achieved renown for investigative reporting on big business and the government. In 2015, Ukraine’s media went from being rated not free to partly free by Freedom House. It currently enjoys a media freedom rating that is similar to countries like Japan, Poland, and Argentina.
Poroshenko genuinely sought to solve Ukraine’s major problems upon arriving in office. His lack of success in bringing peace to the East and fixing corrupt practices throughout the country do not demonstrate his lack of capability or his own deficiencies. Instead, it reveals a troubling fact: Ukraine’s problems are too big for one reformer to solve. Poroshenko has not had enough time, legislative aid, or popular support to reform the country effectively. Once internal support is achieved, international institutions like the IMF will be more than willing to step in and assist as well, but the impetus must first originate from within.
Ukraine is Europe’s second-largest country, with a strategic position on the Black Sea. Ukraine borders 4 EU countries (Poland, Slovakia, Hungary, and Romania) and 3 former Soviet states (Belarus, Russia, and Moldova). Its central position in Eastern Europe is optimal for trade, increasing its attractiveness to be dominated by outside empires. Ukraine has been conquered many times from Western and Eastern forces, including the Mongols, Poles, Russians, Germans, and Soviets. Recently, in response to a new wave of Russian aggression, Kyiv has pursued friendly and cooperative relations with the United States, Canada, the EU member states and China. Russia—Ukraine’s largest neighbor— has traditionally been a geopolitical partner, but since 2014 and the start of Russia’s military aggression in Ukraine, the relationship has effectively broken down.
Territorial disputes on Ukrainian soil took place predominantly before and during the Second World War, with Poland and Russia each occupying chunks of today’s Ukraine. It was only after the war, and after Nikita Khrushchev, (the leader of the Soviet Union from 1953 to 1964), transferred Crimea to Ukraine in 1954 that it acquired its present territorial form - with the obvious exception of Russia’s annexation of Crimea in 2014.
During the post-Soviet period, Ukraine has been a shuttlecock of sorts between Western powers— the U.S. and EU— and Russia. Ukraine maintains immense significance for Moscow: it is part of Russia’s early and modern history and therefore occupies an important position in the Russian consciousness. Ukraine also serves as a geopolitical goal for Moscow, because dominating such a large country guarantees Russia’s continued regional influence in Eastern Europe. The U.S. and E.U. view Ukraine in opposite terms, worrying about Russian influence over such a large country on the E.U.’s doorstep. Maintaining influence in Ukraine is, therefore, not as important to the West as it is to Russia, but rather a strategic goal for containing Russian expansion.
It is also important to consider Ukraine’s own geopolitical vision. Since the fall of the Soviet Union, it has been a buffer state between NATO and Russia. It enjoyed close relations with both entities, always oscillating between West and East. In the 90s under Kuchma, Russophilia was rife among senior government officials, although the official policy under Kuchma was multi-vector in nature. Kyiv reached out to partners in all directions, trying to be a friend to all. In the 1990s, Ukraine was put in the center of global politics briefly because of the nuclear arsenal left in the country from Soviet times. Hundreds of warheads were left on the Ukrainian territory after the collapse of the USSR, and all outside powers wanted to make sure that they would be safe and returned to Russia. Ukraine received a lot of economic aid from the West to that end. In the 1994 Budapest Memorandum, outside powers guaranteed Ukraine's sovereignty and territorial integrity in exchange of the return of the nukes to Russia.
After the Orange Revolution, the pendulum began swinging back towards the West. Then under Yanukovych it swung eastward, and now under Poroshenko it is once again swinging westward. At its furthest points though, Ukraine has been far closer to full integration with Russia than it has been to integration with the West. However, with that being said, Russia has tried continuously to get Ukraine to join the Eurasian Economic Union to no avail. Ukraine is much more keen to join the EU, but Brussels is less excited about that prospect. Ukraine is too big, too poor, too corrupt, and too vulnerable.
In the past five years, Ukraine’s government, led by Poroshenko, has been staunchly pro-European, responding to pro-EU sentiments of large swaths of its population, who see the democratic development, rule of law, and high standard of living in Europe as more attractive than the situation in Russia. Since the annexation of Crimea and the war in the east, many Ukrainians have become pessimistic about their chances of joining Europe. Russia has demonstrated its will and ability to curb Ukraine’s development. Moscow has signaled that it has no intention of letting Ukraine become closer with Brussels at its own expense.
Outside the Euro-Atlantic sphere, Ukraine remains largely inactive. It enjoys diplomatic relations with a number of Asian, Latin American, Middle Eastern, and African states, but these pale in significance compared to the importance of its relationships with the EU, the US, and Russia.
The Ukraine-Russia relationship is the result of a centuries’ long joint history—both peaceful and aggressive. Russians, Belorussians, Ukrainians all trace their histories of nation and statehood to the Kievan Rus. Like a tree with three branches, none are more or less legitimate in their claims to Ukraine as their place of origin. But Russia has historically tried to assert an exclusive right to represent itself as the successor to the Kievan Rus.
Directly after the Euromaidan Revolution of 2013-2014, Ukraine found itself the victim of annexation and then war. Moscow publicly claimed to be taking back its ancestral homeland, where Slavic Orthodoxy originated. The southern and eastern sections of the country were and continue to be at greatest risk of military assault and ideological and political destabilization because many are ethnic Russians and an overwhelming majority are native Russian-speakers. Russia has used this cultural reality to undermine these regions through heavy propaganda. The war and annexation have also made it exceedingly unlikely that NATO members will accede to the Ukrainian leadership’s wish to join NATO. This is of strategic importance for Russia, which is loathe to accept a NATO naval or military base on Ukrainian territory or on the Black Sea. Any such scenario would severely limit Russia’s ability to maneuver in the East European region. Any Western presence in Ukraine would also undermine Putin’s credibility at home, where the country is seen by citizens as the natural dominion of Russia.
During the conflict in Eastern Ukraine, Russia’s view of Ukraine as a mere offshoot of itself, as Malorossiia, has arguably backfired. Many analysts have argued that Russia’s plan was to instigate an uprising in the Donbass region, which would then spread across of the regions of eastern and southern Ukraine. This did not happen, and the vast majority of Russian speaking Ukrainians have continued to support the Ukrainian state against what they see as Russian aggression. A new front in the war is fought in the cultural and historiographical sphere. Ukraine considers the disastrous famine in the 1930s as an intentional genocide committed by the Soviet leadership to Russia’s furious disagreement. Even a deeper rift was opened in 2018, when many of Ukraine’s Orthodox parishes, which were under the Moscow patriarchate, declared autocephaly, establishing the Ukrainian Orthodox Church as ecumenically independent.
Crimea and Donbass (Donetsk and Luhansk)
The two regions currently occupied by Russia provide vulnerabilities for Ukraine. Some claim that they serve as a mobilization point from which a further Russia-led invasion of the country could be initiated, and impede Kyiv’s access to vital natural resources such as coal, but that seems highly unlikely, and even pointless for Russia. More likely, is that these frozen conflicts’ very presence within Ukrainian territory will block Ukraine’s western integration, just as South Ossetia and Abkhazia have in Georgia. Despite sympathy, NATO will not take on Ukraine if parts of the country are in dispute.
The loss of Crimea has also been difficult, since the region has been historically vital for both Ukraine and Russia. It is home to what was Ukraine’s largest Black Sea port, though Russia has long regarded it as being of paramount geostrategic importance because it houses the Russian Black Sea fleet. Through Crimea, Russia has access to international waters, and has a space for greater maneuvering in the the Caucasus, South-Eastern Europe and the Middle East. Additionally, Crimea’s long history in the Russian empire, its Russian-speaking population and the fact it became part of the Ukrainian SSR much later than the rest of the country has meant that many citizens have often felt more Russian than Ukrainian. However, with that being said, it is notable that Crimea, along with the rest of Ukraine, voted for Ukrainian independence from Moscow in 1991.
Once an industrial powerhouse of the Soviet Union, the Donbass no longer holds the same economic potential. However, the region, like Crimea, has a high proportion of ethnic Russians. This region is significant to Russia because it can be used to pressure the Ukrainian government as a whole. If the regions were to be reintegrated—and given the radically anti-Western politics of its citizens—Donbass could be used to tip Ukraine’s electoral balance towards pro-Russian parties, serving Moscow’s geopolitical ambitions.
The Ukrainian government’s current aim—in theory—is to stop the war in the east and hopefully take back Crimea, either by diplomatic or military means. As of yet, neither seems to be working, and international sanctions placed on Russia have done little to reverse the damage. In September 2014, the two sides (Russia and Ukraine) signed the Minsk Protocol to bring peace to the region. However, that quickly failed, and by January 2015 fighting had resumed. Ukraine’s stance was to put security before politics. Kyiv thought that there should first be a ceasefire, Russian troops should withdraw, and under the Ukrainian authority, there should be a free and fair vote in the region about its future. Russia, on the other hand, held that politics should come first, then security. Moscow argued that first there should be a vote about the future, and only then should the people’s republics would disarm. The dissonance between the two sides guaranteed the failure of the protocol.
The European Union
In order to help preserve its territorial integrity and to reform the country, Ukraine sees the European Union as a valuable and trustworthy partner. But the EU is actually internally fragmented. Of course, nearly every Union state is opposed to Russian aggression, but before Maidan, Poland and Sweden alone were the lone driving force behind attempts to get the association agreement done with Ukraine. Germany has traditionally been a lot more cautious.
Nonetheless, Germany along with France are heavy hitters with the ability to hold Russia accountable, even if their success in this regard thus far has been limited. Both states were intermediaries at the Minsk I and Minsk II accords, which sought a diplomatic solution to the war in the Donbass. They have also been at the forefront of the European sanctions initiative against Russia. The perceived unity of EU states also serves as a front against Russian aggression in Eastern Europe. Suspecting Russian meddling in European elections has also strengthened the EU-Ukraine partnership, as both are framed as victims of Russia’s increasingly disruptive political actions. However, Ukraine also realizes that EU unity is fragile.
Commerce is vital for the EU-Ukraine relationship. Ukraine’s biggest trading partner is the EU, which provides more than 30 billion euros of revenue thanks to the Association Agreement that was signed in 2014. EU countries and institutions also play a vital role in supporting Ukraine’s reform agenda by training officials, advising on policy, and funding a multitude of civil society, economic and political projects.
Ukraine’s prospects for joining NATO and the EU are slim, but it believes that fostering closer ties short of membership are nonetheless beneficial in both economic and international security terms. In this sense, the Ukraine-EU relationship is one of the most important for Ukraine. And progress has been made. Kyiv got its first little “carrot” in 2017 when all Ukrainian passport holders got visa freedom within the EU, which is something many Russians have dreamed of for the past 25 years.
The United States
The United States is another key player in Ukraine’s geopolitics. Much like the EU, Ukraine sees the U.S. as a guarantor of sovereignty abroad. Without US support for Ukraine through rhetoric, sanctions, and supply of defensive weapons, Ukraine would have had limited options. But the US is just as unlikely as any EU country to go to war over Ukraine.
Ukraine sees a stronger relationship with the U.S. as a win in itself against Russia. Since Russia considers the U.S. to be a hegemon and its greatest geopolitical enemy, closer ties between the U.S. and Ukraine anger Moscow, but do little else: as of yet, U.S. support has not caused Russia to retreat from the Donbass.
Like the EU, the U.S. needs a consistent anti-Russia policy to put pressure on Moscow. This has been erratic under the Trump administration. Kyiv finds Trump’s lax and friendly attitude towards Russia worrying. To keep Russia at bay, Ukraine needs an aggressive anti-Russian U.S. foreign policy. Despite worries that the U.S. would “give up,” so to speak, on Ukraine, the U.S. has extended and expanded sanctions, continued to provide military support and supplies, and the State Department has continued to use the same rhetoric it has used in the past regarding Ukraine’s territorial sovereignty.
Ukraine also relies on collective anger for purported Russian involvement and hacking of the 2016 presidential election. While this issue has split voters in the U.S., it sends a signal to lawmakers that Russia is not only a regional threat, but a global threat as well. Ukraine depends on mutual solidarity to protect its territory, and sees the U.S. as a capable - albeit flakey - partner to provide it.
The Ukraine-China relationship is a relatively new one, based primarily on economic considerations. China has recently begun investing heavily in Ukraine, with numerous infrastructure projects planned as part of China’s Belt and Road Initiative. Beijing believes that Ukraine is a vital stepping stone to the European market. In the first nine months of 2017, trade between China and Ukraine increased by 14.5 percent, topping $5.5 billion. Another sign of the growing relationship is Ukraine’s supplanting of the U.S. as China’s top supplier of corn. China is now also the leading purchaser of Ukrainian military equipment. Overall, China is projected to invest around $10 billion into Ukraine over the next five years.
While Ukraine firmly relies on Europe and the U.S. politically speaking, Ukraine’s new relationship with China is beginning to raise eyebrows. Beijing is currently trying to bring Ukraine into its fold. China is keen to draw both Russia and Ukraine to its side. This would also be in Russia’s interests, prying Ukraine away from the West. Ukraine may just fall for this scenario, as closer economic cooperation with the EU will depend on its ability to carry out strong liberalizing reforms. China on the other hand, has no reform conditionality embedded in its trade relationships, and is ready to invest in risky and non-democratic markets.
While Ukraine has been making strides in developing Western relationships, it also sees benefit in closer dealings with China. This is a risk however, considering Russia’s fervent desire to develop ever-closer ties with China.
Ukraine’s key geopolitical concerns stem from Russian aggression in the east of the country. Due to the aggression, closer ties have been fostered with the U.S. and the EU. Its relations with these nations are based primarily on a desire for security and higher standards of living. Were it not for Russia’s destabilizing acts in 2014, Ukraine would have been more likely to strike a balance between Russia and the West, and the EU and the U.S. would not have supported it so unconditionally. Euromaidan has changed all that. In the EU and U.S., Ukraine sees sporadic guarantors of democratic freedoms and relative stability. Without these two entities, Russia would have a much freer hand to do as it pleases in the post-Soviet region.
There are also several domestic concerns that reverberate into the international. First, there is a substantial East-West divide in Ukraine. Western Ukraine was heavily influenced by Hapsburg and Polish influence. As a result, they associate more closely in cultural terms with Central Europe, whereas the Eastern part of the country has mostly been under Russian control. Because of these historical facts, Western Ukraine is much more rooted in the ethnic-nationalist idea of the Ukrainian state for Ukraine, much like late 18th century France during the French Revolution. The East, on the other hand, has a more post-Soviet identity. In that view, Ukraine is not necessarily seen as part of Russia, but there is an awareness that the two share a common heritage and therefore a common fate.
Second: Ukraine’s internal problems and weaknesses put it into a tough spot. The West talks of bringing Ukraine into European institutions, but there’s never going to be enough pull from Europe to single-handedly get this done. Internal issues of corruption keep the door to the West shut as much as Russia’s aggression. The Association Agreement (which finally came into force in 2017) establishes deeper ties between Ukraine and the EU, but is not a road to EU membership in itself. Ukraine must deal with its own problems if it is to make further inroads with the West. The pace of domestic reforms, especially the fight on corruption, has tested the patience of Ukraine’s western partners. For example, Ukraine only adopted the law on the establishment of the anti-corruption court after the IMF mounted pressure by threatening Kyiv that it would not provide further credit unless Ukraine took more serious steps in the fight against corruption.
Ukraine’s internal problems are also what have left it vulnerable to Russia’s destabilizing efforts. Russia did not really have to flex its muscles to get Crimea when Ukraine was in such disarray. Russia’s “success” in eastern Ukraine has been based substantially on plausible deniability. If Ukraine had, in the spring of 2014, had a functioning security apparatus even equivalent to that of a midsize European country like Poland, the operation would have resulted in 10 times more Russian casualties, and perhaps even a Ukrainian victory. In that case, Russia would have been unable to even semi-credibly claim that it did not have troops in Ukraine. Hybrid war would not have been an option, and Russia would not have wanted to launch a conventional war (although Russia would of course win), because it would come at too high of a cost, and with less tangible results.
Ukraine appears to have the foundations for a prosperous national economy: rich farmland, a large industrial sector, natural resources, and a growing services industry centered on technology. But these advantages are overshadowed by an elephant in the room. Corruption and inefficiency dampen prospects for stabilization and growth. In 2011, 40% of output was generated in the shadow economy, choking government revenues, and public spending and investment. Many Ukrainians move abroad to neighboring countries like Poland, where they earn can earn higher wages. In doing so however, they further reduce the government’s tax base. The war in the Donbass has also had a drastic effect on the economy, destroying a region which was the country’s leading industrial and coal mining hub.
Though Ukraine has clear growth potential, nominal GDP in 2018 was $119.1 billion and the GDP per capita (PPP) was $8,656 in 2017. Ukraine has also had its fair share of recessions, the most recent of which started in 2013 and was exacerbated by the war in the east. Since 2016, there has been modest growth, as the economy has recovered from war-related shocks and the IMF has provided much-needed foreign aid. Closer trade ties between the EU and Ukraine through the Deep and Comprehensive Free Trade Area have also helped boost the economy. Loosening its trade relations with Russia and embracing larger and more dynamic markets has been the main driver of higher national output.
Like most post-Soviet states in the 1990s, Ukraine battled hyperinflation and sharply falling living standards. This was likely caused by declining output, Ukraine’s lack of access to foreign financial markets and government spending funded by enormous monetary expansion. The subsequent growth period that Ukraine experienced between 2000 and 2008 was almost exclusively driven by higher export volumes of natural resources, chemicals, and foodstuffs. However, this trend was up-ended by the 2008 global financial crisis, due to a drought in foreign investment and capital flow into Ukraine. As it eased, so did Ukraine’s economic situation. The recovery would be cut short again when the economy shrank 6.8% in 2013 and 2014 after the annexation of Crimea and the war in the Donbass. In 2014-2015 the Hryvnia lost 70% of its value against the US Dollar. Ukraine reduced its trade with Russia in 2014 in response to continued aggression, and while the decision served a clear political purpose, the economy suffered dramatically, as Russia was Ukraine’s top trade partner. While trade still exists today—indeed, Russia is Ukraine’s top export partner— the scale of the relationship has fallen dramatically. Trade volume not only fell with Russia but also with other countries, with the Donbass conflict being responsible for a 40%decline in total trade. Additionally, the political risk of investing in a turbulent country dampened foreign investment flows. Ukraine’s recovery would only begin to be felt in 2016, as foreign aid helped to kickstart the economy.
Ukraine’s anemic economic profile is responsible for the high numbers of Ukrainians who continue to move abroad for work. Due to the country’s proximity to the European Union, and its higher wages and living standards, Ukrainians have been finding ways to move abroad for work - either permanently, or temporarily as seasonal workers. Poland has taken in millions of Ukrainians for jobs that Poles do not wish to do. And while remittances from abroad totalled close to $2.5 billion in 2015, Ukraine has been missing out economically due to the high volume of unregistered income. Without workers paying taxes, pension funds grow smaller, which threatens economic stability.
Bringing workers back to Ukraine and expanding industry and production would greatly benefit the country’s economy. Cheap labor, fertile land, and Ukraine's willingness to welcome foreign companies are enticing, yet, most capital allocators do not see Ukraine as a safe place for business, especially since 2013. Adding on monopolistic control of markets by oligarchs, poor property rights and bureaucracy and corruption, many would-be investors continue to steer clear of Ukraine. It is no wonder that in 2018, the country ranked 76th on the World Bank’s “Ease of doing business” chart, compared to Belarus’ 38th and the United States’ sixth place.
Structure of the Economy and Key Markets
Ukraine has investment opportunities in its key economic sectors, such as power generation, fuel, mining, metallurgy, a growing IT industry, machine building and metalworking, and transportation. Agriculture remains a significant source of national income, with close to six percent of the total labor force employed in the industry. Services account for the highest percentage of the labor force, with close to seventy percent.
Ukraine’s fame as a “breadbasket” of Europe— once applicable to the Soviet Union, is now more relevant to its trade relationship with the EU. Having the most fertile land in Europe, and perhaps the world, Ukraine continues to supply Europe and Asia with high quality grain and corn. Ukraine recently surpassed the U.S. as China’s top supplier of the foodstuff. Additionally, its proximity to the EU is another advantage for trade, and its relatively diversified economy serves as a benefit. As mentioned, the Deep and Comprehensive Free Trade Area agreement has only served to strengthen that relationship. Trade ties with Russia recently have been tense, but endured throughout the conflict, and Ukraine and Russia continue to rely on each other for the import and export of certain goods.
Ukraine enjoys strong trade relationships with a range of international partners, including Russia, Germany, and China. Ukraine’s top imports in 2016 were $3.3 billion of refined petroleum and $1.37 billion of packaged medicaments. The most important partner was Russia, with totals of $6.27 billion, and top imports being $1.39 billion of mineral products, $1.55 billion of chemical products, and $815 million in machinery. China came second with imports totalling $4.21 billion, including $1.39 billion in machinery, $589 million in textiles, and $442 million of metals. Germany followed with imports totalling $4.06 billion, including $1.2 billion in machinery, $568 million in cars and parts, and $860 million in chemical products. In fourth place was Poland, with imports totalling $3.76 billion, including $765 million in machinery, $425 million in transportation and vehicles, and chemical products and plastics and rubbers both at $405 million. Belarus closed out the top five with $2.83 billion in imports, including $1.88 billion in refined petroleum, $229 million in chemical products, and $181 million in transportation.
Although the EU is Ukraine’s top export partner by bloc, its top export partner is Russia. Exports totalled $3.85 billion in 2016, composing of $1.03 billion in metals, $884 million in machines, and $597 million in chemical products. Turkey followed with $2.28 billion, including $1.04 billion in metals, $492 million in vegetable products. China was in third place with $2.2 billion in exports from Ukraine, including $812 million in mineral products, $636 million in vegetable oils, and $507 million in vegetable products. Italy followed closely behind with $2.05 billion, of which $991 million are from metal exports, $322 million of vegetable products, and $247 million in vegetable bi-products. Finally, Germany imported products from Ukraine totalling $1.92 billion, with $685 million in machines, $215 million in textiles, and $214 million in metals.
Foreign Money Flows
Ukraine only adopted the current currency, the hryvnia, in 1996, as a response to the hyperinflation associated with its old currency, the karbonavets. Since 2014, the National Bank moved the hryvnia to a free floating currency at the urging of the IMF, in order to stabilize it on the foreign exchange market. As a result, the hryvnia was devalued by almost three-fourths to the dollar.
The IMF has also been helping Ukraine financially since 2014. Several tranches of assistance have been disbursed - two parts in 2015, a third in 2016 and a fourth in 2017. Due to a lack of reforms since then, in particular Ukraine’s unwillingness to scrap heavy gas subsidies and move towards a market-determined pricing system, there have been no further IMF tranche payments since then.
Ukraine relies significantly on FDI, and encourages foreign investment into various economic sectors. Total FDI in 2017 was $2.3 billion, compared to 2016’s $3.8 billion. Ukraine saw its largest ever FDI deal in 2013, when Shell invested $10 billion in the country for shale gas exploration. Since the Maidan revolution and the war in Donbass, foreign companies have been more worried about investing into an unstable political and economic system. In 2017 the largest sources of FDI came from Cyprus, Russia, and the Netherlands, which invested $506 million, $396 million, and $263 million, respectively. To bolster the economy, Ukraine needs a minimum of $10 billion of investment, a sum far higher than what it is reasonably expected to achieve within the next few years.
Tax and Tariff Law
Tax and Tariff Law
Another important source of government funding is taxation, an area where Ukraine is relatively lax, like most other post-Soviet states. Tax evasion is common, occurring predominantly in large businesses. $10-15 billion in tax avoidance is siphoned offshore, starving the government of much-needed revenue. At present, the government is focused more on pursuing tax evasion in SMEs, instead of applying the same tax rules to large corporations. Many tax-avoiding oligarchs who control these businesses have significant influence over the Ukrainian political and legal systems, creating a vicious cycle where certain business elites are literally above the law.
Ukraine has 18 national and 5 local tax rates. The most important sources in 2017 were unified social security contributions, value added tax (VAT) at 20%, individual income tax—currently at 18%— which altogether contributed to 23% of the GDP. Other taxes include the inheritance and gift tax, the corporate income tax, excise duties, and real estate tax.
Just before the collapse of Communism, Ukraine led Poland slightly in GDP per capita. 25 years later, Poland’s GDP per capita is more than five and a half times greater than Ukraine’s. In the 1990s, Warsaw acted purposefully and resolutely, whereas Kyiv took a series of half-hearted measures. Poland endured many years of economic hardship to emerge into the booming economy it is today. If Ukraine wishes to emerge from its current rut, Kyiv must unwaveringly act to achieve these ends. Otherwise, its economic stagnation fuelled by corruption, stifling regulation and oligarchic monopolies over certain industries will continue in perpetuity and drag on investment and growth.
Culture & Society
Ukraine is well known for its folk culture, vyshyvanki, or embroidered shirts, and cuisine— think borscht and varenyki. While these physical cultural attributes have existed for centuries, a more philosophical conception of national identity has eluded Ukraine for the majority of its existence, with regional splintering and Russian cultural and linguistic influence from the east, and European influence from the west. Finding an identity has been the main underlying, and at times, pressing concern for politicians and ordinary citizens alike. The debate about what being Ukrainian means continues to this day, but has been exacerbated by military conflict with Russia. At the same time, the conflict has caused a upswing in patriotism and fresh definitions of what it means to be Ukrainian.
Regional discrepancy is perhaps the most significant factor in establishing a uniform Ukrainian identity. While the western part of Ukrainian and cities like Lviv and Ternopil are predominantly Ukrainian-speaking, the east parts of Ukraine, like Donetsk, Luhansk, and Kharkiv are Russian-speaking. The center is a mix of both, with some speaking only Russian or Ukrainian, and some speaking Ukrainian in public but Russian at home. These linguistic differences correspond more or less to political and cultural associations that Ukrainians desire for their country. In general, those from the west and ethnic Ukrainians have favored closer ties to Europe, while those in the east and those with ethnic or linguistic Russians ties have favored closer cooperation with Russia. At least, that was true until 2014: the conflict in the Donbass has made most of the country skeptical of Russia ties - even many of the traditional pro-Russian areas. The center has always proven to be a difficult region to grasp, and perhaps one that speaks for the general state of confusion regarding identity in Ukraine today. At times thoroughly Ukrainian, but also speaking Russian, it symbolizes the Ukraine that has emerged since the Euromaidan revolution in 2013 and as a result of the Russian aggression since 2014.
Identity, Religion, and Holidays
While some scholars argue that President Putin ordered the invasion of Ukraine to split and further destabilize Ukrainian society, in the end, his tactics seemed to do exactly the opposite: unite a country against a common enemy. While being Ukrainian before 2013 was seen as predominantly speaking the language and having other similar Ukrainian qualities related to folk culture, after the shocking events, being Ukrainian expanded to include anyone showing patriotism for their nation and anti-Russian sentiments. Religion also plays a role in allegiance, with Catholics and Ukrainian Orthodox are more likely to be pro-Ukrainian/European, while Russian Orthodox in the east more likely to be pro-Russian, although this is not necessarily a hard and fast rule. The Donbass conflict changed this as well. Outside of Lugansk and Donetsk, anti-Russian sentiment is seen nationwide, regardless of religious affinity.
Religion is undoubtedly important for Ukrainians, and is sometimes used as a tool to consolidate support by the government. It is used successfully in the political sphere because of its deep roots within society. The church has spoken against violence in the east, but it does not play as substantial a role for Ukrainians as in other post-Soviet countries, namely Russia. Although Kyiv has made a push to distance Ukrainian culture from Soviet legacies, Ukrainians still celebrate Victory Day on May 9th, albeit putting a greater emphasis on the role of all the Allies’ contributions against the Axis powers. New Year’s Eve, as in Russia is without a doubt the most important holiday of the year, yet one that, again, strives to distance itself from Soviet traditions.
Independence Day, celebrated on August 24, has become one of the major holidays, in light of the events since 2014. Featuring a military parade and other celebrations made poignant with the tens of thousands of lives lost since the war began, this holiday marks the union of Ukrainians and is understandably the most patriotic holiday of the year.
Carving an Independent Ukrainian Identity The theme of distance from Russian and Soviet culture has permeated much of society. This is most visible in the music and entertainment industries. Ukrainian features more prominently in music and almost exclusively in TV shows, and artists have forged a new path emulating the current European and American styles, oftentimes choosing more alternative and minimalist directions. Ukrainians have also developed a sense of self deprecation based on their turbulent political history, with late night comedy shows often parodying and critiquing politicians with a degree of freedom comparable with the U.S.
Ukrainians have also begun to acquire what they believe to be European values, such as an abhorrence of corruption. However, issues such as anti-semitism, gender equality and feminism, as well as LGBT+ rights, are still underdeveloped and rarely discussed as political issues. While some citizens have been making strides to help achieve equality among the various genders, sexual identities, races, and religions, it remains an issue that most Ukrainians would rather not talk about.
Amidst these perceived positive and negative influences from the West, and in moving away from Russia, Ukraine’s government has attempted to combine a modernizing state with a traditional conception of Ukrainian identity. This has resulted in a somewhat unclear, yet diverse understanding of the term. At once more open to the world and contemporary, Ukrainians also remain highly traditional and retain the ideal of family values and of conservatism. Ukrainians are at once welcoming to foreigners, yet they also judge those who stray too far from their social norms, although this too is changing. This dynamism is perhaps a product of Ukraine’s geography. While it experiences European influence, it also is grounded in Slavic and Soviet conservatism, with the two strains of being constantly in flux.
While most would assume that Ukraine is a homogenous nation, with few immigrants and foreigners, they would wrong. Ukraine does not have as large a share of residents from Asia, Africa or the Middle East, it does have significant Tatar and growing Central Asian populations. There are also Hungarian, Belarusian, Moldovan, and Romanian populations. Yet the most important minority are of course Russians, who make up 17% of the population. While most have lived in Ukraine their entire lives, some continue to feel a strong allegiance to Russia, due to geographic proximity and language. They also play a large role in influencing the direction of Ukrainian identity and above all, politics, as was clear in the annexation of Crimea. The Russian population is perhaps the biggest barrier to solidifying a common Ukrainian identity, proving that language continues to be a considerable political and cultural issue. Despite these facts, there are still a large number of ethnic Russians in Ukraine that identify as Ukrainian patriots and support Ukrainian statehood, including heads of the Ukrainian armed forces who hail from the Donbass.
Ukraine’s rich history has a paradox: Ukrainians are proud of their ethnicity and culture, yet most cannot say what it means to be Ukrainian. Due to centuries of foreign domination and rule, with varying language laws and those forbidding the use of Ukrainian, to those promoting Ukrainian folk culture like the korenization laws of the 1920s, Ukrainians have had cultural whiplash, so to speak. Throughout the Soviet Union, the language and culture were repressed, only to experience a revival after the USSR’s fall. Yet it was not until 2004, and finally 2014 that Ukrainians became truly occupied with determining what it means to be Ukrainian. Behind a common enemy, and renewed hope for a brighter future, Ukrainian pride has grown and grown to accept Ukrainian and Russian speakers alike. Patriotism has become inclusive, rather than limited. Now only time can tell how history and tradition will inform the future and develop a concrete understanding of what it means to be Ukrainian.
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