Ukraine

Economic difficulties

Ukraine’s postindependence economic performance—in sharp contrast to its relatively successful efforts at state building and diplomacy—was markedly poor. The social dislocation brought about by economic “shock therapy” in Russia dampened the Ukrainian government’s desire for rapid change; it opted instead for a gradualist approach toward achieving a mixed economy. Economic decline followed, since Ukrainian industry was already suffering from the disruption of trade with former Soviet republics in the wake of the U.S.S.R.’s demise. Ukraine’s heavy dependence on foreign energy sources also strained the economy, particularly because Russia, Ukraine’s main supplier, moved to raise the previously subsidized price of fossil fuels to world levels. As a solid monetary policy had not been established, Ukraine experienced hyperinflation, which reached a rate of at least 4,735 percent in 1993. Meanwhile, corruption increased as political insiders grabbed state assets for themselves or took unfair advantage of low-interest loans available to industry and agriculture. A sustained attempt at economic reform came with the appointment of Leonid Kuchma as prime minister in October 1992. His efforts, however, were strongly opposed by a majority of parliamentarians and, to a degree, undermined by President Kravchuk himself. An exasperated Kuchma resigned in 1993.