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Tuesday, September 25, 2012

Ukraine: Current Issues and U.S. Policy

Steven Woehrel
Specialist in European Affairs

Since Viktor Yanukovych defeated Prime Minister Yuliya Tymoshenko to win Ukraine’s presidency in 2010, many observers have expressed concern about Ukraine’s democratic development, including the government’s use of the courts to neutralize opposition leaders, including Tymoshenko, who was sentenced to a seven-year prison term in 2011. These actions have led to serious doubts about whether parliamentary elections scheduled for October 28, 2012, will meet international standards.

The global economic crisis hit Ukraine hard. Ukraine’s real Gross Domestic Product (GDP) fell by an estimated 15% in 2009. The economy began to recover in 2010, and GDP increased by 4.7% in 2011, due in part to a surge in demand for Ukrainian steel exports. However, living standards for many Ukrainians remain low, leading to a rapid drop in Yanukovych’s popularity when compared to the period soon after his inauguration. Expected slow growth in Western Europe will likely result in slower growth in 2012 for Ukraine as well.

President Yanukovych has pursued closer ties with Russia, especially in the economic sphere. A major focus of his policy has been to seek reduced prices for natural gas supplies from Moscow. In April 2010, he agreed to extend the lease of the Russian Black Sea Fleet in Ukraine for 25 years in exchange for a reduction in gas prices. However, the impact of the deal on gas prices has been less than anticipated, as oil prices (on which Ukraine’s gas price is calculated) have soared due to unrest in the Middle East. As a result, Ukraine has sought additional gas price cuts from Moscow, so far without success. Ukraine has so far fended off Russian pressure to sell it control of its gas pipeline system and join Russia-led political and economic integration structures.

Yanukovych has said that EU integration is a key priority for Ukraine, but EU criticism of what it views as the politically motivated conviction and imprisonment of Tymoshenko and others has called into question whether a long-awaited association agreement with the EU (including a free trade agreement) will be signed and enter into force. Yanukovych has made clear that his country is not seeking NATO membership, but will continue cooperation with NATO, including the holding of joint military exercises.

The Obama Administration has worked to “reset” relations with Russia, but has warned that it will not accept any country’s assertion of a sphere of influence, a reminder of U.S. support for Ukraine’s sovereignty. The Administration has not publicly expressed concern about what some observers view as the pro-Russian tilt of Ukraine’s foreign policy under Yanukovych. The Administration has focused on helping Ukraine rid itself of its supplies of highly enriched uranium, assisting Ukraine with the clean-up of the Chernobyl nuclear site, and diversifying Ukraine’s sources of energy, including advice on developing Ukraine’s shale gas reserves. Administration officials have expressed concerns about regression in Ukraine’s democratic development since Yanukovych took power, including in such areas as media freedoms and selective prosecution of the government’s political opponents.

Several pieces of legislation have been introduced in the 112th Congress calling for Tymoshenko and other victims of politically motivated prosecutions to be released from prison. Two of them, S.Res. 466 and H.Res. 730, call for sanctions against Ukrainian leaders responsible for selective prosecutions.

Date of Report: September 10, 2012
Number of Pages: 15
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