Ukraine 2019 elections could shift Ukraine to EU and US

The Russia-Ukraine war has continued from 2014 to today. Russian troops in uniforms without identifying insignia occupied and took Crimea. Russian intelligence and military services provided leadership, funding, ammunition, heavy weapons and regular units of the Russian army to launch and sustain a separatist conflict in Donbas.

More than 10,500 have died.

A substantially improved Ukrainian military has managed to stabilize the line of contact that separates it from Russian and Russian proxy forces.

Ukraine’s 2019 elections could shift Ukraine to the EU and US but will the reforms in Ukraine happen and will the EU and the US make the financial commitments?

Sea of Azov

The Sea of Azov increasingly represents a point of contention between Ukraine and Russia. On March 25th Ukraine’s maritime border guards detained a Crimean-registered fishing vessel, Nord, charging the captain with entering illegally from Crimea (special immigration procedures are in place between Ukraine and Crimea). Since the end of April, Russia has been conducting a concerted campaign of detentions and inspections of commercial vessels in the area. The shallow-water ports of the Sea of Azov are generally used by small ships to supply Ukrainian- and Russian-produced grain, mainly to Turkey. The fact that the Sea of Azov is legally shared by Ukraine and Russia complicates the issue, making the prospect of a resolution of the conflict remote.

The latest controversy adds to existing issues caused by Russia’s construction of the Kerch Strait Bridge, which has allegedly restricted some Ukrainian sea traffic. The bridge allows for the transit of ships with a maximum height of 33 metres—much lower than is customary for such bridges. Russia claims that it took ship dimensions into account when it built the bridge. In return for fewer maritime restrictions, Russia could well be trying to force Ukraine into resuming water supplies to Crimea, cut off by Ukraine in 2014 after Russia’s illegal annexation of the peninsula. Crimea relied heavily on these supplies, and drought on the peninsula is currently a concern.

Economics and Politics

In March 2018, Ukraine gas company, Naftogaz, was awarded $2.5 billion in a lengthy, ugly legal battle with Russian gas behemoth Gazprom. The Stockholm Arbitral Tribunal ruled in favor of Naftogaz. The tribunal in Stockholm found that Gazprom defaulted on its shipment obligations and awarded damages of $4.63 billion. The award means Gazprom has to make payments to Naftogaz in the order of $2.56 billion after residual payments for gas delivered in 2014 and 2015 have been settled.

Ukraine has a GDP of about $120 billion. About $2-4 billion depends on Russia’s natural gas.

Talks between the European Commission, Russia and Ukraine are working on Russian gas transit via Ukraine post-2019.

Moscow hopes to have its 55 Bcm/year Nord Stream 2 pipeline and its 31.5 Bcm/year TurkStream link ready to flow gas to Europe by the end of 2019, leaving only limited volumes for transit via Ukraine.

Russian gas company Gazprom estimated its sales to Europe and Turkey may reach 205 Bcm or more in 2018.

The Danish government has come under fierce lobbying by Russia, EU allies and the United States over the 9.5 billion euro (£8.5 billion) Nord Stream 2 project led by Gazprom (GAZP.MM) and financed by five Western firms. The United States opposes the project while some eastern European countries fear it will make the EU a hostage to Russian gas. Sweden has given a permit. Russia thinks they can get a route for the pipeline that would avoid Denmark.

In Sept 13 2018, the US said it repeated threats to impose sanctions over the construction of Nord Stream 2 between Russia and Germany, U.S. Energy Secretary Rick Perry has said.

Gazprom sent 94 Bcm through Ukraine to Europe last year, the highest amount since it brought its 55 Bcm/year Nord Stream gas pipeline to Germany online in 2011.

Gazprom has previously said volumes through Ukraine could fall to 10-15 Bcm/year after 2019, assuming Nord Stream 2 and TurkStream come online before then.

Economic reforms in 2014-2015 helped secure a program with the International Monetary Fund worth $17.5 billion in low interest credits over four years.

The pace of reform, however, slowed in 2016 and has not rebounded. As Ukraine has failed to deliver on measures such as land privatization and harmonization of gas prices, the IMF’s program has disbursed no money for 10 months. IMF officials now seem especially concerned about the need for more effective steps to combat corruption, which continues to plague many areas of Ukrainian life. They have focused in particular on establishing a special court to try corruption cases.

Ukraine will have elections in 2019. Polling shows the current President Poroshenko in third place with 9.4 percent—a dramatic decline from the 55 percent he won in 2014.

Tymoshenko is in the lead with 18-20%. She wants for Ukraine’s integration into the European Union and strongly opposes the membership of Ukraine in the Eurasian Customs Union. Yulia Tymoshenko supports NATO membership for Ukraine.

She says that Ukraine must complete anti-corruption reforms and obtain more precise defensive lethal weapons. Ukraine must become stronger economically. Economic growth is the soft power that can convince people to stay in Ukraine.

Anatoliy Stepanovych Hrytsenko is in second place with about 10%. He is in the current Ukrainian parliament, former Minister of Defence, member of the Our Ukraine political party and leader of the Civil Position party.

In April, 2018, Ukraine received $250 million in actual military aid from the USA. They got some Javelin anti-tank missiles and other weapons.

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