Ukraine Country Brief

Introduction/overview

Ukraine is the second largest country in Eastern Europe. It borders Russia to the east, Belarus to the north, Poland, Slovakia and Hungary to the west, Romania and Moldova to the southwest, and the Black Sea and Sea of Azov to the south. Kyiv is the capital of Ukraine.

Ukraine became an independent, democratic state following the Rada’s passing of the Act of Declaration of Independence on 24 August 1991 and a subsequent referendum held on 1 December 1991 in which approximately 90 per cent of voters expressed support for the Act. Shortly after, Ukraine’s independence was recognised internationally, including by Australia. Ukraine’s population of 46 million celebrates 24 August as the country’s national day.

Political overview

Ukraine is a unitary state composed of 24 oblasts (provinces), one autonomous republic (Crimea), and two cities with special status (Kyiv, its capital, and Sevastopol, which is home port to the Russian Black Sea Fleet). Ukraine is a republic under a semi-presidential system with separate legislative, executive, and judicial branches.

At the end of 2004, the country underwent extensive constitutional reform. The President is elected for a five-year term and is the Head of State. Power over the security structures rests in his or her Office. Ukraine’s parliament – the Verkhovna Rada – has 450 seats, with members also serving five year terms. The Rada adopts legislation, ratifies international agreements, and approves the budget. The Prime Minister heads the Cabinet.

The current President, Viktor Yushchenko, was elected following three rounds of elections in October–December 2004, in what became known as the ‘Orange Revolution’. The first round in October 2004 resulted in neither of the frontrunners, Mr Yushchenko and then-Prime Minister, Viktor Yanukovych, gaining an outright majority. A run-off vote between the two was held in November 2004 but the result, which gave victory to Mr Yanukovych, was annulled by Ukraine’s Supreme Court following large protests in Ukraine and reports by international observer missions of widespread voting irregularities and fraud. A re-run of the second round of elections, held on 26 December 2004, was won by Mr Yushchenko. International and Ukrainian election monitors assessed the outcome of the re-vote to be credible. President Yushchenko was inaugurated on 23 January 2005, after the Supreme Court had considered and rejected a number of appeals by the Yanukovych side.

Under President Yushchenko, Ukraine has been governed by a series of short-lived coalitions. Repeated elections and re-alignments of political parties have failed to bring political certainty. At the start of 2009, Prime Minister Tymoshenko’s minority government was in a fragile coalition comprising her own bloc, the Speaker’s bloc and half of President Yushchenko’s bloc.

On 3 March 2009, Ukraine's Parliament dismissed Foreign Minister Mr Volodymyr Ohryzko, a pro-Western ally of President Yushchenko. Of the 450 members of parliament, 250, including members of Prime Minister Tymoshenko's party, supported the dismissal. Mr Volodymyr Khandohiy, previously Deputy Minister of Foreign Affairs, served as Acting Foreign Minister until October 2009. President Yushchenko proposed Dr Petro Poroshenko, a millionaire businessman, as Ukraine’s new Foreign Minister on 7 October. The Ukrainian Parliament confirmed the appointment on 9 October.

The political gridlock that has characterised Ukrainian politics over the last several years is likely to continue, at least until the Presidential elections in January 2010. The front runners for the Presidency are Viktor Yanukovich, leader of the opposition Party of the Regions (PoR) and Prime Minister Yulia Tymoshenko, leader of the Bloc of Yulia Tymoshenko (BYUT).

Economic overview

The transition to a market economy has been difficult for Ukraine, stricken with eight consecutive years of economic decline following its independence from the Soviet Union. It has since experienced economic growth but remains reliant on Russian energy imports, especially natural gas. Following independence, the Ukrainian Government freed up most prices and began a program of privatisation. These policies met with considerable domestic resistance. Industrial production in the period 1992-98 fell to less than half the 1991 level. A financial crisis in Russia in 1998 had a depressive effect on Ukraine's economic growth. However, from 2000 the economy grew strongly, albeit from a low base.

Ukraine has suffered considerably from the global economic crisis. In late 2008, the global slump saw demand collapse for Ukraine’s export commodities like steel and chemicals. By January 2009 industrial production had fallen by 34 per cent year on year. Fears of a run on the banks and currency collapse led the Ukrainian government to negotiate a US$16.4 billion loan from the International Monetary Fund (IMF).

Ukraine is facing a mounting fiscal deficit this year, exacerbated by diminished revenues, high social expenditure, generous state subsidies, and the poor financial situation of the State gas company Naftogaz. At the beginning of 2009, the IMF predicted that Ukraine’s GDP would contract by 8 per cent, but in July this was revised to a 14 per cent contraction.

Ukraine’s long-term economic prospects depend on improving governance, building investor confidence through acceleration of market reforms, and replacing and upgrading infrastructure.

Bilateral relationship

Ukraine opened an Embassy in Canberra in March 2003. Responsibility for diplomatic relations with Ukraine lies with the Australian Embassy in Vienna. Australia and Ukraine have an Agreement on Trade and Economic Cooperation, signed in March 1998. In May 2009, AUSTRAC signed a Memorandum of Understanding with Ukraine on the Exchange of Financial Intelligence.

The 2006 Census recorded 13,665 Ukrainian-born persons in Australia. Most Ukrainian migrants to Australia arrived in the post-World War II period. Many originated from western Ukraine, where they acquired Polish citizenship during the Polish occupation of 1920-1940. This year marks the 60th anniversary of Ukrainian settlement in Australia.

The small but active Ukrainian community in Australia plays an important role in developing bilateral relations. In 2002 the Australian Federation of Ukrainian Organisations helped establish Ukrainian-Australian House in Kyiv to promote commercial ties.

Parliamentary delegations from Ukraine visited Australia in 1995 and 1997, and a joint parliamentary business delegation visited in an unofficial capacity in 2004. An Australian Parliamentary delegation, led by Mr Graeme Campbell, visited Ukraine in 1995, and another, led by the Speaker of the House of Representatives, Mr Neil Andrew, visited in June 2004. In December 1996, the former President of Ukraine, Leonid Kravchuk, undertook a private visit to Australia.

Bilateral economic and trade relationship

Australia’s trade relationship with Ukraine is modest but growing. Merchandise exports from Australia were valued at A$316 million in 2008 and, in the same period, Australia imported A$132 million worth of products from Ukraine, mainly rubber tyres and fertilisers. Australia’s main exports to Ukraine in 2008 were manganese ore and concentrates and aluminium ores.