Ukraine

Although we tend to see the situation of the countries in East-Central Europe as one in which they are forced to choose between the East and the West, in reality, these countries do not have much of a choice.

On September 12, 2014, trilateral ministerial meeting of the EU, Ukraine and Russia produced quite unexpected decision to postpone the implementation of the EU-Ukraine DCFTA (Title IV of the Association Agreement) till January 1, 2016.

Ukraine is now in a completely new environment – military operations in the east and military invasion and aggression of the Russian Federation have left a significant mark on the processes taking place in the country, including the reform of the business environment.

The destiny of Ukraine, which on its own has to face the military power of Russia, paints a gloomy picture. In this context, the Eastern Partnership has failed and instead of progressing Europeanisation we witness a war with unforeseen consequences.

The survey showed that 42.3% of managers reported no change when comparing the financial situation of their company now and a year ago, 8% indicated that the situation improved, 40.7% of respondents answered that the situation has worsened, and 9% failed to answer the question.

While EU and US sanctions against Russia over its aggression in Ukraine, and Russia’s counter-sanctions, are much discussed due to their evident political significance, less attention has been given to Russia’s punitive sanctions against the three Eastern European states–Ukraine, Moldova and Georgia – that have signed with the EU Association Agreements (AA), which include Deep and Comprehensive Free Trade Area (DCFTA) provisions.

Machine building sector in Ukraine is facing a difficult situation. Recent research showed that machine building is most heavily exposed to the Russian market in terms of the percentage of output exported to Russia.

When the new president was elected and new government appointed, the legitimacy of the Parliament which fulfilled every whim of Yanukovych came into question. One of the main promises of Petro Poroshenko during his presidential campaign was to call for early Parliamentary elections with open lists.

The Institute revised downwards the forecast for 2014 and 2015 to take into account increasingly devastating effects of prolonged military conflict in Donbas.

What else is the Ukraine to do in this undoubtedly unfavourable situation? Indeed, if the military costs cannot be increased for Russia (more causalities, more losses in military equipment), one should decide on a different strategy that would make Russia cover the economical costs of this politic-military mayhem.