Thursday, October 13, 2016

Ukraine Update: September 1 - October 13, 2016

By Franklin Holcomb and Nicholas Conlon

Key Takeaway: The U.S., EU, and IMF took steps in September and October to support Ukraine’s economy while the Ukrainian government launched economic and judicial reforms aimed at curbing corruption and attracting foreign investment. Ukrainian President Petro Poroshenko came to power after the Euromaidan revolution in May 2014 on promises of economic growth and closer integration with Europe. Ukraine has made progress on its reforms, but it has been slow and the Ukrainian electorate has grown increasingly dissatisfied with the current government. High levels of corruption and low confidence in government have slowed foreign investment and the privatization of state-owned industries, leaving the Ukrainian economy weak and the government with a shortage of capital. The U.S. and IMF provided Ukraine with over $2 billion of loans in September but placed significant pressure on the government to enact anti-corruption amendments of its tax code and judicial system to ensure sustainability. The EU supported Ukraine’s integration with Europe by making progress in establishing a visa-free regime and increasing economic cooperation. The support from the U.S. and Europe will bolster Ukraine’s ongoing effort to develop a self-sufficient national economy and reduce economic dependence on Russia. 

The leader of the Russian-backed separatist Luhansk People’s Republic (LNR) reported an attempted coup on September 20 following an assassination attempt on his life on August 6. Members of the LNR loyal to Plotnitskiy as well as the Russian Federal Security Service (FSB) arrested former LNR officials over the coup plot. The internal discord among the highly corrupt leadership of separatist-occupied Luhansk is likely a power struggle over control of increasingly scarce resources. Backers in Russia who maintain authority over the separatist regions may support the removal of Plotnitskiy and his loyalists within the leadership of the LNR. Russia may seek to replace him or integrate the LNR into the more established neighboring Donetsk People’s Republic in an effort to reassert control over local proxies and legitimize their governments through elections and political negotiations with Ukraine.