Russia and Ukraine

Struggling Ukraine Braces For Tough IMF Medicine
KIEV, Ukraine -- The global economic crisis has hit with hurricane force in Ukraine, which faces turmoil as it seeks to comply with the terms of an emergency loan from the International Monetary Fund, experts said.
As world leaders head to Washington for a summit on the crisis this weekend, Ukraine has the dubious distinction of being the first country to get IMF help this year, having been approved for a 16.4-billion-dollar loan last week.Ukraine received the first tranche of the rescue loan Monday, boosting state efforts to prop up banks amid a broad downturn, largely caused by a drop in the price of steel, the key export of this ex-Soviet republic of 46 million people.The Washington-based fund offered assistance once Kiev adopted a package of measures including "a prudent fiscal stance," Ceyla Pazarbasioglu, IMF mission chief for Ukraine, told reporters after the loan was approved.Those steps included a bank rescue programme, a zero-deficit budget for 2009 and movement towards "a flexible exchange rate" for the hryvnia, Ukraine's embattled currency.Some experts fear that could lead to a further devaluation after the hryvnia fell about 20 percent against the dollar in recent weeks."The purchasing power of Ukrainian consumers in dollar and euro terms will become worse. Much worse," said Dmytro Boyarchuk, the head of CASE Ukraine, an economics research centre in Kiev.Meanwhile, the balanced budget along with reduced tax revenues from the steel sector means the government will have trouble paying social benefits, Boyarchuk said."Next year we can expect many backlogs in the payment of pensions," he said.And in a move likely to cause grumbling this winter, Pazarbasioglu said Kiev had pledged "to correct the pricing policies in the energy sector," meaning an end to subsidized heating bills.Ukrainians face a 35 percent rise in their gas bills starting December 1, according to media reports.All this is unwelcome at a time when mass layoffs are expected in Ukraine's industrial east, work is frozen at numerous construction sites and more than 20 banks have received help from Kiev's central bank to ease liquidity problems.Experts described the IMF's terms as painful but necessary and argued that some measures were inevitable."The rise in gas fees would have happened anyway," said Ildar Gazizullin, an economist at the International Centre for Policy Studies in Kiev.The IMF loan restored confidence in Ukraine and its conditions "will force the politicians to focus and work together," said Peter Vanhecke, chief executive of Renaissance Capital Ukraine, an investment bank."With the IMF you get an international stamp of approval for your country," Vanhecke said in an interview.The decision to accept the IMF's tough medicine was a sharp turnaround for Ukrainian politicians, accustomed to handing out government largesse after years of rapid economic growth."Politicians will have to adjust their populist rhetoric and wean the populace off the idea that the government can guarantee social benefits when the money is lacking," the Kyiv Post, a weekly newspaper, said in an editorial.Aside from the economic fallout, some also fear the crisis could undermine democracy in Ukraine, which faces an ongoing political crisis that may lead to snap parliamentary elections early next year.Kiev's ruling pro-Western coalition collapsed in September amid feuding between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, former allies in the "Orange Revolution" of 2004."The economic crisis, as well the extended political crisis... have boosted society's desire for order, for the 'strong hand' model of government," said Volodymyr Fesenko, a political analyst at the Penta think tank in Kiev.That may increase the appeal of neighbouring Russia, where former president Vladimir Putin embarked on an authoritarian path during his eight years in the Kremlin, Fesenko added."There is some demand for a Ukrainian Putin," he said. "But it's not clear whether there is such a person."
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NATO Reaffirms Close Ties With Ukraine
TALLINN, Estonia -- NATO defense ministers on Thursday reaffirmed the alliance's commitment to assist Ukraine in its goal of joining the military bloc, a move likely to further strain the West's relations with Russia.
U.S. Defense Secretary Robert Gates said the meeting with Ukrainian defense officials was "productive" but that Ukraine still faced numerous obstacles before it could become a NATO member."It's clear that ... Ukraine still has some distance to go in being ready for membership in the alliance," he said.Ukrainian leaders need to bolster public support for NATO membership and address budget constraints for financing military reform, Gates said.Even the talks, designed to assess overall bilateral cooperation and whether Ukraine has met targets, is likely to anger Russia.Russia, which borders Ukraine, is vehemently opposed to Ukrainian membership in the military alliance and generally regards NATO as irrelevant after the Soviet Union fell apart in 1991.One thing NATO members receive is a promise of mutual defense if any of them are attacked by countries outside the alliance.NATO Secretary-General Jaap de Hoop Scheffer dismissed Moscow's objections to strengthening ties between the military alliance and Ukraine."A country's right to freely choose its security alignments is an important principle ... and it is a principle that we will not compromise," de Hoop Scheffer said.Earlier this year NATO leaders said at a summit in Romania that Ukraine could eventually become a member of the alliance.However, many NATO members are tepid toward the prospect of Ukrainian membership, given the country's political turmoil and a lack of popular support among the population for the military alliance.Ukrainian Defense Minister Yury Yekhanurov acknowledged the criticism of Ukraine and that Kiev was facing an uphill struggle in integrating with the military alliance. Much of the problem, he said, boiled down to a lack of money to implement reforms."Sometimes in Ukraine there is a lack of funds for necessary reforms in the security sector," Yekhanurov said.He said 19 non-governmental organizations are working with the Ukrainian Defense Ministry to bolster public support for NATO membership.Ukraine and Russia have traded barbs in recent weeks, particularly over Russia's naval fleet in the Black Sea port of Sevastopol. Russia wants to keep its warships at the base after the current contract expires in 2017, but the current Ukrainian government insists that the ships should leave.Yekhanurov reiterated Thursday that Ukraine was unhappy with having no control over Russian ships anchored at the Sevaspotol base as this could draw the nation into an armed conflict with a third country.Russia used its Black Fleet ships stationed in Sevastopol in its war against Ukraine's ally Georgia in August.
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