Tug of war continues as Ukraine faces cold winter

The IMF is to lend Ukraine £10.4 billion in an attempt to stabilise its economy. Although the conditions are as yet unclear, it would appear that a programme to save banks and trim costs will be required. In the face of this crisis Victor Yushchenko seems determined to continue his feud with Yulia Tymoshenko and force an early election.

Ukraine is particularly susceptible to the current financial crisis because it has borrowed heavily in order to bring its economy into line with the west. With steel exports collapsing and the hryvnia rapidly devaluing there is real risk that inflation could spiral higher than its current level of 25% (already the highest in Europe).

Divisive leadership has contributed to Ukraine’s woes and there does not appear to be any will, on Yuschenko’s part, to mend bridges in order to tackle the crisis. Economists have warned that an election will exacerbate the inflationary pressure on the hryvnia and prevent the stability which Ukraine now desperately needs being instilled.

The fissures which divide Ukrainian politics have been aggravated by pressure from the US and sympathetic members of the EU. When David Miliband called for Ukraine to move towards the EU and Nato, he hardened the resolve of someone like Yuschenko to pursue divisive policy and not to reach an accommodation with political rivals.

As Russia comes to consider how amenable it might be, as regards continuing to supply its neighbour gas below the market rate, the Ukrainian President is intent on taking his country into Nato (against the wishes of the majority of Ukrainians) and refuses even to compromise with moderates such as Tymoshenko. That does not represent much incentive for Russian flexibility.

Playing tug of war over Ukraine has very real consequences. Sponsoring Yuschenko as Ukraine’s leader has very real consequences. Unfortunately it will be the pensioners and poor of Ukraine who are on the receiving end this winter.