Ukrainian Economy

Making Do without Russia

Donetsk Reuters
Separatist guarding a coal mine in eastern Ukraine.
  • Why it matters

    Why it matters

    Ukraine faces serious problems as a result of the war in the eastern part of the country and a deep economic crisis.

  • Facts

    Facts

    • The Ukrainian cabinet appointed Mr. Pyatnitsky as acting economy minister in October.
    • The International Monetary Fund predicts that the Ukrainian economy will shrink by 7 to 8 percent in 2014.
    • Ukraine signed an association agreement with the European Union in September.
  • Audio

    Audio

  • Pdf

Valery Pyatnitsky, an economist by training, was heavily involved in the negotiations that led to the historic association agreement between the Ukraine and the European Union.

Although the political part of the agreement was ratified in September, a compromise was reached to delay the free-trade section until 2016 due to Russian pressure. Moscow had threatened to impose harsher trade restrictions on Kiev if the deal had been implemented, as initially planned, on November 1.

Mr. Pyatnitsky said Ukraine, regardless of the ongoing talks with Russia, plans to become less dependent economically on its neighbor to the east.

Handelsblatt: There is a war in eastern Ukraine. Is the economy completely on its knees now?

Mr. Pyatnitsky: Yes, we have a war and, at the same time, are reviewing all government officials. Following the parliamentary election in late October, we will also have a new government that aims to implement new reforms. Former President Viktor Yanukovych, who fled the country, looted it before that. We don’t even have enough money to house the refugees from the Donets Basin. Our economy will shrink by 7 to 8 percent in 2014.

Isn’t there a risk of an even deeper recession?

These are numbers from the International Monetary Fund, which I consider to be real. At least we won’t go hungry this winter.

But will Ukrainians be without heat in the winter?

We are buying as much natural gas as possible in Europe and the rest from Russia. We haven’t bought any natural gas from Gazprom since we reached a compromise with Russia. Luckily, half of our electricity currently comes from nuclear power plants. And we even shut off the hot water supply in Kiev this summer to save gas. But we have a valid agreement until the spring, at which point the game with Russia will start all over again.

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