With rich farmlands, a well-developed industrial base, highly trained labor, and a good education system, Ukraine has the potential to become a major European economy. After a robust expansion beginning in 2000, Ukraine’s economy experienced a sharp slowdown in late 2008, which continued through 2009. Real GDP contracted 14.1% in 2009, but is forecast to grow over 3% in 2010.
Ukraine’s economy remains burdened by excessive government regulation, corruption, and lack of law enforcement, and while the government has taken steps against corruption and small and medium enterprises have been largely privatized, much remains to be done to restructure and privatize key sectors such as energy and telecommunications and to allow the free sale of farmland. Following his inauguration, President Yanukovych issued a decree creating a Committee on Economic Reform. The purpose of this committee is to work out a state strategy of economic reforms using international practices such as preparing legislative proposals for submission to parliament.
Ukraine encourages foreign trade and investment. Foreigners have the right to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event property were to be nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and particularly corruption have discouraged broad foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment from abroad. Ukraine abounds in natural resources and industrial production capacity. Although proven onshore and offshore oil and natural gas reserves are small, there is now interest in oil exploration in the Ukrainian portion of the Black Sea as well as prospecting for shale gas. The country has important energy sources, such as coal, and large mineral deposits, and is one of the world's leading energy transit countries, providing transportation of Russian gas across its territory. Ukraine imports almost 80% of its oil and 77% of its natural gas. Russia ranks as Ukraine's principal supplier of oil and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports currently come from Russia, Turkmenistan, Kazakhstan, and Uzbekistan, which deliver the gas to Ukraine's border through a pipeline system owned and controlled by Gazprom, Russia's state-owned gas monopoly. Ukraine owns and operates the gas pipelines on its territory, which are also used to transit Russian gas to Western Europe. Ukraine's laws forbid the sale of the gas pipeline network. The complex relationship between supplier, transporter, and consumer has led to intermittent bilateral tensions, resulting in severe gas supply disruptions for downstream consumers in 2006 and January 2009. In April 2010, the Rada ratified the Kharkiv gas-for-basing agreement in which Ukraine agreed to extend the Russian Black Sea Fleet’s basing rights in Sevastopol for an additional 25 years (until 2042) in exchange for concessional pricing of Ukraine’s imports of Russian gas.
While countries of the former Soviet Union remain important trading partners, especially Russia for energy imports, Ukraine's trade is becoming more diversified. The European Union (EU) accounts for about 30% of Ukraine's trade, while CIS countries account for about 40%. Steel constitutes nearly 40% of exports. Ukraine has a major ferrous metal industry, producing cast iron, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid. World demand for steel and chemicals, which make up about 40% of Ukraine’s exports, dropped sharply in the second half of 2008. Manufactured goods include airplanes, turbines, metallurgical equipment, diesel locomotives, and tractors. Ukraine is also a major producer of grain, sunflower seeds, and beet sugar and has a broad industrial base, including much of the former U.S.S.R.'s space and rocket industry.
In response to the sharp economic downturn in the country in late 2008, the International Monetary Fund (IMF) approved a $16.4 billion Stand-By Arrangement (SBA) in November 2008, conditioned on reforms in the banking sector as well as adjustments in fiscal and monetary policy. The World Bank has committed more than $5 billion to Ukraine since the country joined the Bank in 1992. Several projects are currently in the works, including a $750 million development policy loan, but these depend on a resumption of Ukraine’s IMF program, which ran off track due to political infighting ahead of the 2010 presidential election. As of May 2010, Ukraine was negotiating with the IMF over a re-start of lending and perhaps a new SBA.
Ukraine is a member of the European Bank for Reconstruction and Development (EBRD) and joined the World Trade Organization (WTO) in May 2008. In 2008 Ukraine and the European Union launched negotiations on a free trade agreement. As an interim step to an EU association agreement, , in 2010 Ukraine hopes to conclude with the EU a deep and comprehensive free trade agreement (DCFTA) as well as an agreement on visa liberalization. Some chapters, including trade, remain under negotiation.
Ukraine is interested in cooperating on regional environmental issues. Conservation of natural resources is a stated high priority, although implementation suffers from a lack of financial resources. Ukraine established its first nature preserve, Askania-Nova, in 1921 and has a program to breed endangered species.
Ukraine has significant environmental problems, especially those resulting from the Chornobyl nuclear power plant disaster in 1986 and from industrial pollution. In accordance with its agreement with the G7 and European Commission in 1995, Ukraine permanently closed the last operating reactor at the Chornobyl site on December 15, 2000. All urgent and required stabilization measures of the "sarcophagus"--the concrete shelter hastily built around the damaged reactor by the Soviet Union in the months following the disaster--including radiation and worker safety are complete. The contract for construction of a new shelter to be built around the sarcophagus was awarded in September 2007. Construction for the new shelter has begun, with the ultimate goal of its commissioning in 2012. The successful commissioning of the new shelter will provide a long-term, environmentally sound solution for the destroyed reactor. It should be noted that none of the 15 operating reactors in Ukraine, which generate about half of the country's electricity, are of the Chornobyl design. The United States Government has provided significant assistance to enhance operational and nuclear safety of these reactors. Ukraine also has established a Ministry of Environment and has introduced a pollution fee system, which levies taxes on air and water emissions and solid waste disposal. The resulting revenues are channeled to environmental protection activities, but enforcement of this pollution fee system is lax. Ukraine ratified the Kyoto Protocol in April 2004, and associated with the Copenhagen Accord on Climate Change in April 2010.
Construction of a shipping canal through a UN-protected core biosphere reserve in the Danube Delta, which began in May 2004, is an environmental issue of international interest.
Purchasing power parity GDP (2009 est.): $294.3 billion.
Nominal GDP (2009 est.): $117.1 billion.
Annual growth rate (2009 govt. est.): -14.1%.
PPP per capita GDP (2009 est.): $6,400.
Nominal per capita GDP (2006 est.): $1,746.
Natural resources: Vast fertile lands, coal, iron ore, various large mineral deposits, timber.
Agriculture: Products--Grain, sugar beets, sunflower seeds, vegetables, beef, and milk.
Industry: Types--Coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, and food processing.
Trade (2009): Exports of goods and services--$41.49 billion: ferrous and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, and food products. Imports--$45.58 billion: energy, machinery and equipment, and chemicals.
Ukraine has a parliamentary-presidential system of government with separate executive, judicial, and legislative branches. The president nominates the defense and foreign ministers, and the Prosecutor General and Chief of the State Security Service (SBU), each of whom must be confirmed by the parliament. Beginning in 2006, a majority of deputies in the 450-member unicameral parliament (Supreme Rada) forms a coalition, which then names the prime minister, who in turn nominates other ministers. The Supreme Rada initiates legislation, ratifies international agreements, and approves the budget. Its members are elected to five-year terms. Following free elections held on December 1, 1991, Leonid M. Kravchuk, former chairman of the Ukrainian Rada, was elected to a five-year term, and became Ukraine's first president. At the same time, a referendum on independence was approved by more than 90% of the voters.
Shortly after becoming independent, Ukraine named a parliamentary commission to prepare a new constitution, adopted a multi-party system, and adopted legislative guarantees of civil and political rights for national minorities. A new, democratic constitution was adopted on June 28, 1996, which mandates a pluralistic political system with protection of basic human rights and liberties. Amendments that took effect January 1, 2006, shifted significant powers from the president to the prime minister and Supreme Rada.
Freedom of religion is guaranteed by law, although religious organizations are required to register with local authorities and with the central government. There is no formal state religion. Minority rights are respected in accordance with a 1991 law guaranteeing ethnic minorities the right to schools and cultural facilities and the use of national languages in conducting personal business. According to the constitution, Ukrainian is the only official state language. In Crimea and some parts of eastern Ukraine--areas with substantial ethnic Russian minorities--local and regional governments permit Russian as a language for local official correspondence.
Freedom of speech and press are guaranteed by law and the constitution, and authorities generally respect these rights. Prior to the 2004 "Orange Revolution," however, authorities sometimes interfered with the news media through intimidation and other forms of pressure. In particular, the failure of the government to conduct a thorough, credible, and transparent investigation into the 2000 disappearance and murder of independent journalist Heorhiy Gongadze, in which then-government officials have been credibly implicated, negatively affected Ukraine's international image. Three police officers were convicted and received prison sentences in March 2008; a fourth suspect, a senior police official, was arrested in July 2009. Freedom of the media and respect for citizens' rights increased markedly in the wake of the Orange Revolution.
The Crimean peninsula is home to a number of pro-Russian political organizations that advocate secession of Crimea from Ukraine and annexation to Russia. Crimea was ceded by the RFSSR to the Ukrainian SSR in 1954, in recognition of historic links and for economic convenience, to mark the 300th anniversary of Ukraine's union with Russia. In July 1992, the Crimean and Ukrainian parliaments determined that Crimea would remain under Ukrainian jurisdiction while retaining significant political, economic, and cultural autonomy.
The campaign leading to the October 31, 2004, presidential election was characterized by widespread violations of democratic norms, including government intimidation of the opposition and of independent media, abuse of state administrative resources, highly skewed media coverage, and numerous provocations. The two major candidates--Prime Minister Viktor Yanukovych and opposition leader (and former Prime Minister) Viktor Yushchenko--each garnered between 39% and 40% of the vote and proceeded to a winner-take-all second round. The November 21 runoff election was marred by credible reports of widespread and significant violations, including illegal expulsion of opposition representatives from election commissions, multiple voting by busloads of people, abuse of absentee ballots, reports of coercion of votes in schools and prisons, and an abnormally high number of (easily manipulated) mobile ballot box votes. Hundreds of thousands of people took to the streets of Kyiv and other cities to protest electoral fraud and express support for Yushchenko, and conducted ongoing peaceful demonstrations during what came to be known as the "Orange Revolution."
The Organization for Security and Cooperation in Europe (OSCE) International Election Observation Mission found that the November 21 run-off election "did not meet a considerable number of OSCE commitments and Council of Europe and other European standards for democratic elections." Other independent observers were similarly critical. On November 24, the Central Election Commission (CEC) declared Yanukovych the winner with 49.46% compared to 46.61% for Yushchenko. The U.S. and Europe refused to accept the result as legitimate due to the numerous, uninvestigated reports of fraud. On November 27, Ukraine's Supreme Rada passed a resolution declaring that the election results as announced did not represent the will of the people. On December 1, the Rada passed a vote of "no confidence" in the government. On December 3, Ukraine's Supreme Court invalidated the CEC's announced results and mandated a repeat of the second round vote to take place on December 26. An agreement mediated by European leaders resulted in new legislation being passed by the Rada and signed by the President December 8. The electoral law was reformed to close loopholes that had permitted pervasive electoral fraud. The constitution was amended to transfer power, especially with respect to appointment of ministers, from the president to the prime minister.
The December 26 re-vote took place in an atmosphere of calm. While irregularities were noted, observers found no systemic or massive fraud. The OSCE Mission noted that "Ukraine's elections have moved substantially closer to meeting OSCE and other European standards." On January 10, 2005, after the CEC and the Supreme Court had considered and rejected numerous complaints and appeals filed by the Yanukovych campaign, the CEC certified the results: Yushchenko had won 51.99% of the votes, with 44.20% for Yanukovych. President Yushchenko was inaugurated January 23, 2005.
Ukraine held parliamentary and local elections on March 26, 2006. International observers noted that conduct of the Rada election was in line with international standards for democratic elections, making this the most free and fair in Ukraine's history. Unlike the first rounds of the 2004 presidential election, candidates and parties were able to express themselves freely in a lively press and assembled without hindrance. There was no systemic abuse of administrative resources as there had been under the previous regime. Pre-term parliamentary elections were held on September 30, 2007, and international observers judged this vote to be in line with international democratic standards in an open and competitive environment. Party of Regions finished in first place with 34.3%, and BYuT came in second with 30.7%. BYuT and Our Ukraine, which came in a distant third (14.1%), garnered enough votes to form a thin three-seat majority. The Communist Party and Bloc Lytvyn, headed by Rada Speaker Volodymyr Lytvyn, also crossed the 3% threshold.
The new coalition formed on December 18, 2007 nominated Yulia Tymoshenko as Prime Minister; she was confirmed December 18, 2007. The cabinet was split 50-50 between representatives from BYuT and Our Ukraine (which is now called Our Ukraine-People's Self Defense). For most of February 2008, there was a deadlock within the Rada due to objections by opposition leader Viktor Yanukovych and his Party of Regions to Ukraine’s request for a NATO Membership Action Plan (MAP). Beginning in 2008, the Rada experienced chronic deadlock, which was exacerbated by a feud between then-Prime Minister Yulia Tymoshenko and then-President Viktor Yushchenko.
The first round of Ukraine’s 2010 presidential election took place on January 17. International and domestic observers assessed the vote as having met most international standards. As no candidate received 50% or more of the vote, the two candidates with the most votes--opposition leader Viktor Yanukovych (35%) and Prime Minister Yulia Tymoshenko (25%)--progressed to a second-round runoff. The second round took place on February 7 in a vote that observers again assessed as largely free and fair. On February 14, the Central Election Commission announced that Viktor Yanukovych had won the election with 49% of the vote, compared to Yulia Tymoshenko’s 46%. However, on February 17, the Administrative Court of Ukraine suspended the election results in response to an appeal by Tymoshenko alleging fraud. Tymoshenko withdrew her appeal on February 20, saying that the court would not consider her appeal fairly. Yanukovych was inaugurated as President on February 25. On March 11, the Party of Regions, the Communists, the Lytvyn Bloc, and 16 non-aligned members of parliament (MPs) established the “Stability and Reform” ruling coalition in the Rada composed of 235 MPs. Also on March 11, the Rada confirmed President Yanukovych’s nomination of Mykola Azarov as Prime Minister and replaced the entire cabinet of ministers. Opposition MPs and others argued the coalition had been formed illegally, as a coalition could only be composed of factions, not individuals. The Constitutional Court of Ukraine ruled on April 8 that the Party of Regions-led coalition was constitutional, stating that individuals MPs do in fact have the right to take part in forming parliamentary coalitions. The ruling consolidated the position of the Azarov government.
After independence, Ukraine established its own military forces of about 780,000 from the troops and equipment inherited from the Soviet Union. Security forces are controlled by the president, although they are subject to investigation by a permanent parliamentary commission. Surveillance is permitted for reasons of national security. Under defense reform legislation passed in 2004, Ukraine is strengthening civilian control of the military, professionalizing its non-commissioned officer (NCO) corps, modernizing force structure to improve interoperability with NATO, and reducing troop numbers, all with an eye toward achieving NATO standards. Current force levels are approximately 150,000 (plus 50,000 civilian workers in the Ministry of Defense). NATO offered Ukraine an "Intensified Dialogue on Membership Issues" in April 2005. Ukraine had previously signed an agreement with NATO on using Ukraine's strategic airlift capabilities and has been an active participant in Partnership for Peace exercises, in Balkans peacekeeping, and in coalition operations in Iraq. Ukrainian units served in the U.S. sector in Kosovo and served in the Polish-led division in Iraq and in Afghanistan. Currently, Ukraine participates in six United Nations peacekeeping missions and has up to 50 troops serving in supporting roles in Iraq. In January 2008 Ukraine formally requested a NATO Membership Action Plan, noting that a final decision on membership would be determined by a national referendum. In April 2008, NATO allies stated that Ukraine would eventually become a member of the alliance and that its request for MAP would be considered at some point in the future. President Yanukovych and his government have stated that Ukraine is adopting a “non-bloc” approach and will not pursue membership in any defense alliances, including NATO. President Yanukovych has, however, committed Ukraine to pursing close practical cooperation with NATO.
Principal Government Officials
President--Viktor F. Yanukovych
Prime Minister--Mykola Azarov
Foreign Minister--Kostyantyn Gryshchenko
Speaker of the Rada (Parliament)--Volodymyr Lytvyn
Ukraine maintains an embassy at 3350 M Street NW, Washington, DC 20007 (tel. 202-349-2920).
Independence: August 24, 1991.
Constitution: First post-Soviet constitution adopted June 28, 1996, amended January 1, 2006.
Branches: Executive--president, prime minister, cabinet. Legislative--450-member unicameral parliament, the Supreme Rada (members elected to 4-year terms from party lists by proportional vote). Judicial--Supreme Court, Courts of Appeal, local courts, and Constitutional Court.
Political parties: Wide range of active political parties and blocs, from leftist to center and center-right to ultra-nationalist.
Suffrage: Universal at 18.
Administrative subdivisions: 24 provinces (oblasts), Crimean autonomous republic, and two cities with special status--Kyiv and Sevastopol.
Back to Top