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Apr 21, 2016 | 09:30 GMT

6 mins read

In Ukraine, the Cycle of Uncertainty Churns On

Forecast Highlights

  • A leadership change in Ukraine will bring stability in the short term, but political infighting could resume as long as domestic and foreign challenges linger.
  • If public dissatisfaction over the economy and the slow pace of reform grows in the next few months, Ukraine may hold early elections.
  • Early elections could keep the new government from implementing reforms, which could halt or reverse Ukraine's efforts to integrate with the West.

Two years after the Euromaidan uprising, the process of reorienting Ukraine's foreign policy and pursuing ambitious economic and political reforms has taken its toll on the government. Growing discontent with the slow pace of economic recovery and reform forced the pro-West government in Kiev to replace Prime Minister Arseniy Yatsenyuk with Volodymyr Groysman on April 14. The replacement at once brought a much-needed pause to Ukraine's political infighting and raised questions about the country's trajectory. Even for a country characterized by periodic shifts in its international alliances, there are more doubts than certitudes over Ukraine's future. Will the country continue its political transition and pass reforms, or could domestic divisions and foreign challenges stall these efforts? Has Ukraine truly entered a new era of alignment with the West, or are isolation and even an eventual return to Russia's fold just as likely?

No stranger to cyclical changes in its political allegiances, Ukraine has cozied up to Russia or the West at times throughout its history. The most recent phase in this cycle began when former Ukrainian President Viktor Yanukovich decided to abruptly suspend negotiations over an association and free trade agreement with the European Union in November 2013. Because the president's decision coincided with Russia's promise of a $15 billion loan to Ukraine, many in the country and the West saw the loan as a bribe to keep the Ukrainian government from strengthening ties with Europe. Protests erupted, followed by a police crackdown, which in turn brought out larger crowds, eventually leading to a violent uprising that culminated in Yanukovich's ouster.

Elections swiftly ushered in a new government, led by Yatsenyuk as premier and Petro Poroshenko as president. Both prioritized integration with the West, reversing Yanukovich's pro-Russia policies. But their actions were not without consequence: Ukraine soon lost control of Crimea, and a separatist rebellion sprang up in eastern Ukraine. Russia supported both of these developments, seeking to counter what it considered a Western-backed coup against its ally Yanukovich. Still, the upheaval also rallied Ukraine against a common foe in Russia and unified the population in ways that had not been seen since the fall of the Soviet Union.

Meanwhile, Ukraine signed a $17.5 billion financial assistance program with the International Monetary Fund in April 2014. The program entailed significant austerity measures to stabilize the country's economy amid war and recession. Simultaneously, the government sought legal and judicial reforms, spurred by a popular desire to distance the country from the perceived corruption of Yanukovich's administration. Public opinion over these changes — as difficult as they were — was largely supportive.

Support Sours

But more than a year into the new government's term, little progress had been made in the war in eastern Ukraine. Ukrainian security forces failed to dislodge Russia-backed separatists in the Donetsk and Luhansk regions, and military and civilian casualties piled up. Ukraine's economy also contracted by 10 percent in 2015, while its currency tumbled after entering into a free float in accordance with IMF stipulations. Furthermore, many citizens viewed Kiev's judicial reforms as too little, too late. Support for Yatsenyuk, who was leading reform efforts, and his Popular Front party began to decline.

Consequently, the ruling coalition, holding 288 of 450 seats in parliament, crumbled. In August 2015, the Radical Party left over deliberations on a controversial constitutional change related to political decentralization in eastern Ukraine, which the party saw as conceding too much to the separatists in Donbas in return for security guarantees. Later, in February 2016, the Self Reliance and Fatherland parties departed, depriving the remaining Petro Poroshenko bloc and Popular Front of their parliamentary majority. Then, on April 10, Yatsenyuk finally succumbed to pressure from his remaining allies and resigned. Following Yatsenyuk's resignation, parliamentary speaker Groysman won a majority of votes, becoming the country's new prime minister.

Groysman's takeover is a chance for Ukraine to get back on track in the wake of the infighting, which led the IMF to delay aid disbursement and engendered general political malaise in the country. After all, Groysman has pledged to revitalize the reform efforts derailed by the ruling coalition's collapse, and he has received political backing from the United States and European Union. Aside from a new prime minister, the Cabinet has also changed substantially: As Ukraine's newly appointed finance minister, Oleksandr Danyliuk will be responsible for restarting negotiations with the IMF.

Ukraine's Future

Despite its fresh start, however, the new Ukrainian government faces many lingering challenges. The parliament remains so politically divided that the success of Groysman's nomination depended on the vote of independents and lawmakers from oligarch-linked parties. At the same time, the Self Reliance, Radical and Fatherland parties have all opted not to rejoin the coalition. And now that Yatsenyuk and his party will no longer be the target of public discontent, any blame will fall squarely on Poroshenko and his bloc. If progress on economic growth and political reforms continues to elude the country, Poroshenko's and Groysman's positions will weaken, and early parliamentary elections cannot be ruled out.

Such an outcome would not only compromise the IMF assistance package and the reforms that have already been passed, but it could also threaten the broader pro-West direction that Ukraine has chosen to take in recent years. After similar public support for sweeping pro-West changes in the immediate aftermath of the 2004 Orange Revolution, political infighting quickly disillusioned Ukraine, eventually leading to Yanukovich's election. Of course, the loss of territory and the ongoing war in eastern Ukraine are without precedent in the country's cycle of allying alternately with Russia and the West; the conflict has turned the general public against a return to Russia's camp. Nevertheless, it is not a certainty that Ukraine's pro-West policies will continue. Ultimately, the economic, security and political choices that the government makes in the coming months will decide the country's future.

Lead Analyst: Eugene Chausovsky

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