ANALYSIS: Ukraine in 1996

by David R. Marples

Relations with Russia will dominate events in Ukraine in 1996 and in several spheres in particular: the continuing discussions over the division of the Black Sea Fleet between the two countries; the future of the Crimea; and perhaps most important, Ukraine's relative isolation between the two military blocs of NATO and the Commonwealth of Independent States.

One can anticipate a slight economic upturn, but the country is unlikely to meet its targets for inflation or its budget deficit. The Chornobyl question may approach resolution for the first time in a decade.

International perspective

In 1995, Ukraine attained stability within the European environment with its acceptance into the European Union in November. It also maintained good relations with the United States, with visits to Kyiv by both President Bill Clinton and Secretary of Defense William Perry. Ukraine and the United States declared themselves publicly committed to a vision of Europe as a shared and undivided entity and in what was termed an "evolutionary" approach to the proposed expansion of NATO.

It is the latter question that is likely to become the focus of attention in relations between Ukraine and Russia. At the CIS summit in Tbilisi on October 17, President Leonid Kuchma declared that Ukraine strongly opposed the division of Europe into two military camps and that Ukraine would not join a CIS military block. The question, however, is whether Ukraine can continue to develop as a sort of buffer state between the two sides.

Though relations with Russia will be determined largely by the outcome of the December 1995 Duma elections and the proposed summer 1996 presidential elections, there is no question that Russia will seek greater commitment from Ukraine on military and security questions. The Black Sea Fleet is one such question as is the status of the city of Sevastopil.

Russia can be expected to oppose strongly any attempt by Ukraine to integrate more closely with the EU, if such integration appears to isolate Russia further. As the Chechnya situation stabilizes, Russia will turn to the question of relations with its neighbors, and Ukraine in particular.

In this respect, Russia is likely to become involved again in the question of Russian or dual citizenship for ethnic Russian citizens of the Crimea. In 1995, Ukraine-acted very firmly toward its autonomous republic, abolishing the post of president in March and annulling the Crimean Constitution. Between March and June, when President Kuchma relented, the Crimea was, ruled directly from Kyiv. Such firmness will be necessary in the coming year when several Crimean questions are likely to resurface, including the future of the growing Crimean Tatar population, less than half of whom are Ukrainian citizens.

Economic prospects

Ukraine adopted a government program for macroeconomic stabilization in October 1995 which promised a gradualist rather than revolutionary approach to economic reform. Prime Minister Yevhen Marchuk, who was also elected a parliamentary deputy in December, anticipated a 0.6 percent rise in industrial output in 1996, with a drop in the GNP of only 1.5 percent The plan hopes to limit average monthly inflation to 2 percent in the coming year. If these figures are adhered to, then it would be an exceptional achievement. The chances, however, are slim.

The prognosis is not catastrophic for Ukraine, and the economy has shown significant improvement over the past year. It is nonetheless one that will continue to contract, albeit at a much decreased level.

As for inflation, Ukraine will see further wage demands by coal miners, steelworkers and other groups, many of whom are paid irregularly and work in difficult conditions. The year 1996 then, will probably not see the introduction of the long-awaited hryvnia currency.

Thanks to three issuances of stand-by credit from the IMF, Ukraine should be able to finance adequately its debts to Russia for oil and gas. However, because of the serious decline of its own coalfields, it will continue to import coal from Poland.

Chornobyl

For several reasons, the question of the future of the Chornobyl plant should be resolved definitively in 1996.

First, the year will mark the 10th anniversary of the disaster that destroyed the fourth reactor at the station.

Second, the G-7 summit in 1996 will be held in Moscow, with Chornobyl at the center of attention.

Third, Ukraine's good relations with the European Community will be made dependent on resolution of the Chornobyl question.

Fourth it is becoming imperative for Ukrainian authorities to reseal the damaged reactor, and this process requires significant international aid.

In accordance with a memorandum of understanding and aid package, the G-7 will provide $2.3 billion in compensation and assistance to close the Chornobyl plant by the year 2000.

The G-7 countries will offer assistance in finding new sources of energy and will help with the expansion of existing nuclear power plants at Khmelnytsky and Rivne.

Political perspectives

The year 1995 appeared to resolve the power dispute between the president and the Parliament, with some concessions on both sides. The new Ukrainian government is more oriented toward reform than its predecessor, but will face some opposition from the strong Left faction within the Parliament.

The appointment of Prime Minister Marchuk; the reappointment of Viktor Pynzenyk as deputy prime minister for economic reforms; and the appointment of Serhiy Holovaty as the minister of justice, in June, August and September 1995, respectively, are all positive signs that the Kuchma government i5 committed to continuing the reform process.

President Kuchma's main problems will come from the parliamentary Left, and he will likely take steps to re-establish the good relations with the nationalist Right that were tarnished by the unseemly events around the burial of Patriarch Volodymyr last July. The hardline Right, as represented by the Ukrainian National Assembly Ukrainian National Self-Defense Organization (UNA-UNSO) are unlikely to be assuaged, but the support of Rukh and Centrist groups is essential for future political stability.

There appear to be no serious political challenges to the president, however.

Border disputes

The current dispute with Romania over the ownership of Serpent Island appears a minor affair, but in reality it is being used as a test case by the Romanians for further demands on Ukrainian territory. Ukraine will reject all Romanian claims to the island, despite the fact that it was ruled by Romania for more than a century.

Were Ukraine to concede ownership of the insignificant island, Romanian claims to Bukovyna and Ukrainian regions of Bessarabia would be renewed. In turn, the regions of the Donbas and Transcarpathia might also present demands for greater autonomy.

Conclusion

Ukraine will continue its cautious approach to economic reform; the privatization process will continue in the economy generally and will be accelerated in agriculture. There will be no significant economic upturn in 1996, but the rate of economic decline will be reduced, with GDP falling by only 2 to 5 percent. Unemployment is likely to remain at around 4 million, and one can anticipate some militancy among the work force, particularly in eastern regions.

However, domestic reform will be overshadowed by an increasingly complex international picture, and by relations with Russia in particular. President Kuchma will attempt to tread a fine line between two military blocs, whereas Russia will press for greater commitment from its neighbor to the CIS or specifically Russian strategic interests. These latter render the Black Sea and the Crimea of critical concern.

Finally, Ukraine must move on closing the Chornobyl station in order to maintain its present excellent standing within the European Union and its solid relationship with the United States.

David R. Marples is professor of history at the University of Alberta in Edmonton

Copyright © The Ukrainian Weekly, January 7, 1996, No. 1, Vol. LXIV

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