Ukraine: Current Issues and U.S. Policy
Steven Woehrel
Specialist in European Affairs
February 12, 2015Vincent L. Morelli
Section Research Manager
February 22, 2016
Congressional Research Service
7-5700
www.crs.gov
RL33460
Ukraine: Current Issues and U.S. Policy
Summary
A pro-reform, pro-Western government has emerged in Ukraine after the collapse of the
government of Ukrainian President Viktor Yanukovych on February 21, 2014. Russia responded
to the change of government in Kyiv by seizing Ukraine’s Crimea region and annexing it on
March 18, 2014. Since April 2014, armed pro-Russian separatists have seized parts of the Donbas
region of eastern Ukraine, which was made possible by men, weaponry, and leadership from
Russia. A cease-fire agreement signed in Minsk, Belarus, in September 2014 failed to halt the
fighting. After a summit meeting of the leaders of Russia, Ukraine, France, and Germany in
Minsk, the sides agreed on February 12 on a new cease-fire to take effect on February 15.
Ukraine has long-standing problems in attracting foreign investment, in part due to rampant
corruption and other shortcomings in the rule of law. The war has added to these problems,
including the destruction of infrastructure in the Donbas region and a steep drop in the value of
Ukraine’s currency. On February 12, 2015, the International Monetary Fund (IMF) and Ukraine
agreed on a new loan package of $17.5 billion to Ukraine, bringing the total IMF commitment to
Ukraine to $22 billion over four years. In 2014, the European Union unveiled an 11.1-billionEuro (about $15.5 billion) aid package for Ukraine and is considering further funding. The IMF
estimates that the total commitment to Ukraine could come to $40 billion, when money from the
European Union (EU), the United States, and other sources is included.
In February 2015, the Administration said that the United States has provided over $355 million
in aid to Ukraine over the previous year to help the new government in Kyiv carry out political
and economic reforms and bolster the capabilities of its security sector, including its army. In
addition, in May 2014 the United States provided a $1-billion loan guarantee to Ukraine. The
Administration has strongly condemned Russia’s annexation of Crimea and its incursion into
eastern Ukraine. The United States and the European Union have imposed sanctions against
Russian individuals and key firms for destabilizing Ukraine.
Congressional action has focused on providing assistance to the new Ukrainian government and
supporting sanctions against Russia for its occupation of Crimea and efforts to destabilize
Ukraine. H.R. 4152 authorized aid to help Ukraine carry out reforms; authorized security
assistance to Ukraine and other Central and Eastern European countries; and required the
President to impose visa bans and asset seizures against persons in Ukraine and Russia who are
responsible for violence or undermining the peace, security, stability, sovereignty, or territorial
integrity of Ukraine. On April 3, 2014, President Obama signed H.R. 4152 into law, as well as S.
2183, a related bill requiring Radio Free Europe-Radio Liberty and Voice of America to increase
broadcasting in eastern Ukraine, Crimea, and Moldova. The FY2015 omnibus appropriations bill
(P.L. 113-235) appropriated aid for Ukraine.
On December 18, 2014, President Obama signed H.R. 5859, the Ukraine Freedom Support Act.
The measure permits the President to impose sanctions on Russian defense, energy, and other
firms and foreign persons; authorizes increased military and economic assistance for Ukraine;
authorizes funding for U.S. Russian-language broadcasting in the region; authorizes support for
Russian civil society and democracy organizations; and requires a report on Russian
noncompliance with the Intermediate Nuclear Forces (INF) Treaty. Some Members of Congress
are urging the President to provide defensive weaponry to Ukraine.
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Contents
Background ...................................................................................................................................... 1
The EuroMaidan and the Collapse of the Yanukovych Regime ................................................ 1
Russia’s Seizure of Crimea and Support for Insurgents in Eastern Ukraine ............................. 2
Ukraine’s Current Political Situation ............................................................................................... 4
Current Economic Situation............................................................................................................. 5
Ukraine’s Foreign Policy ................................................................................................................. 6
Russia ........................................................................................................................................ 6
Energy Issues....................................................................................................................... 9
European Union ....................................................................................................................... 10
EU Aid to Ukraine ............................................................................................................. 10
EU Sanctions ..................................................................................................................... 11
U.S. Policy ..................................................................................................................................... 12
U.S. Sanctions Against Russia................................................................................................. 13
Congressional Response .......................................................................................................... 14
U.S. Aid to Ukraine ........................................................................................................... 14
Other Legislation ............................................................................................................... 15
Congressional Debate........................................................................................................ 17
Figures
Figure 1. Ukraine ........................................................................................................................... 18
Contacts
Author Contact Information........................................................................................................... 18
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Ukraine: Current Issues and U.S. Policy
Background
Ukraine, comparable in size and population to France, is a large, important, European state. It
occupies the sensitive position between Russia and North Atlantic Treaty Organization (NATO)
member states Poland, Slovakia, Hungary, and Romania. Many Russian politicians, as well as
ordinary citizens, have never been fully reconciled to Ukraine’s independence from the Soviet
Union in 1991, and feel that the country belongs in Russia’s political and economic orbit. The
U.S. and European view (particularly in Central and Eastern Europe) is that a strong, independent
Ukraine is an important part of building a Europe whole, free, and at peace.
Since Ukraine achieved independence in 1991, Ukraine’s political scene has been dominated by
“oligarchs” (powerful, politically well-connected businessmen, mainly based in eastern and
southern Ukraine), which have divided up the country’s economic assets among themselves and
raided the government budget for their own profit. President Viktor Yanukovych, who was elected
in February 2010, drew his main support from oligarchs from the Donets Basin (Donbas) region
of eastern Ukraine. His government was criticized for massive high-level corruption, in part
committed by Yanukovych’s own family and close associates. U.S. and European Union (EU)
officials expressed strong concern over the government’s human rights record, especially the
targeting of opposition leaders for selective prosecution.
The EuroMaidan and the Collapse of the Yanukovych Regime
Many observers have believed that, despite growing dissatisfaction with the government, there
was little likelihood of public unrest in Ukraine, given widespread disillusionment with the
political class as a whole. However, in November 2013, the government made a last-minute
decision to not sign an Association Agreement with the European Union that would have aligned
Ukraine more toward Europe, at least in the areas of economics and trade, due to Russian
pressure. The about-face sparked anti-government demonstrations. On November 30, Ukrainian
special police attacked peaceful protestors (many of them young people) in Kyiv’s central
Maidan Nezalezhnosti, or Independence Square. The action outraged many Ukrainians and
resulted in a massive upsurge in participation in the protests in Kyiv. Smaller protests occurred in
other Ukrainian cities, mainly in opposition strongholds in western and central Ukraine.
Observers noted that demonstrators were not just protesting against Ukraine’s failure to sign the
Association Agreement, but against the government’s lack of respect for the basic human dignity
of Ukraine’s citizens.
Through the next three months, the Yanukovych government alternated between attempted
crackdowns and conciliatory gestures. On February 18, the government embarked on its most
violent crackdown attempt against the Maidan, one that quickly resulted in the regime’s own
demise. Elite “Berkut” riot police attempted to clear protestors from the Maidan and other areas
of Kyiv, with the support of roving gangs of street thugs hired by the government. Over 100
persons were killed. Many hundreds more were injured. Many casualties were caused by
firearms, mainly used by the police, including by snipers. The death toll may have caused support
in the Ukrainian parliament for the crackdown and the regime to collapse. On February 20, it
approved a resolution calling for the pullout of the Interior Ministry and military forces from
Kyiv to their bases and a ban on the use of firearms. Once the police and military complied with
the resolution, groups of protestors seized key government buildings. Yanukoyvch and many of
his supporters in the government and parliament fled the capital by February 21. Many of them
are currently being harbored by Russia.
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After Yanukovych and his supporters fled Ukraine, the Ukrainian parliament, now composed
mainly of opposition deputies, rapidly passed sweeping measures. The parliament deposed
Yanukovych as president on February 22 for abandoning his duties. Oleksandr Turchynov, a longtime top aide of Yuliya Tymoshenko, was elected as speaker of the parliament and made acting
president until new presidential elections were held on May 25. The parliament restored the
provisions of the 2004 Ukrainian constitution, eliminating changes made by Yanukovych to
strengthen the presidency. On February 27, the Ukrainian parliament approved a new
government, headed by Arseniy Yatsenyuk, a former prime minister. The government included no
key figures from the former ruling regime. Nevertheless, many Maidan protestors viewed the new
government skeptically, suspecting that they are nearly as opportunistic and corrupt as the
Yanukovych regime.
Russia’s Seizure of Crimea and Support for Insurgents in
Eastern Ukraine
Russia responded to the change of government in Kyiv by seizing Ukraine’s Crimean peninsula.
Starting on February 27, heavily armed Russian-speaking troops poured into Crimea, seizing
airports and other key installations throughout the peninsula. At the time, Russian President
Vladimir Putin claimed that the troops were not Russian Federation military forces, but only local
Crimean self-defense forces. In April 2014, Putin admitted that Russian Federation military forces
did in fact invade Crimea. On March 16, the Crimean authorities held a referendum on Crimea’s
annexation to Russia. According to Crimean officials, Crimea’s union with Russia was allegedly
approved by 96.77% of those voting, with a turnout of 83.1%. Ukraine, the United States, the
European Union, and other countries denounced the referendum as illegal and not held in a free
or fair manner. Russian President Vladimir Putin signed a “treaty” with Crimean leaders on
March 18 formally incorporating Crimea into Russia.
In addition to Russia’s annexation of Crimea, the Ukrainian government struggled to establish
control over eastern and southern Ukraine. In March 2014, thousands of pro-Russian protestors
demonstrated in the region, especially in the cities of Donetsk and Luhansk in the Donbas region
and in Kharkiv. Some demonstrators favored union with Russia, others only greater autonomy
from the government in Kyiv. Demonstrators seized government buildings. They also faced off
against pro-Maidan demonstrators. Unrest in eastern Ukraine soon took an even more ominous
turn in April 2014. Armed men stormed and occupied key government buildings and broadcast
facilities in the key cities of Donetsk and Luhansk, as well as in Slovyansk and more than a dozen
other towns in the Donbas region.
The Ukrainian government said Russian intelligence agents orchestrated the separatists’ attacks
and released video, photographs, and audio recordings allegedly identifying them. Senior U.S.
officials and NATO Supreme Allied Commander General Philip Breedlove have also said that
they believe Russia is playing a leading role in the activities of the armed separatist groups in
eastern Ukraine.
On May 11, the armed separatist forces, in the guise of the “Donetsk People’s Republic” and the
“Luhansk People’s Republic,” held “referendums” on their “sovereignty.” According to the
organizers, the question was approved by 89% of those voting in Donetsk region, and by 96% in
Luhansk region, with a turnout of 75%. No international observers monitored the vote, and
witnesses reported rampant irregularities. The leaders of the “Donetsk People’s Republic” and the
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“Luhansk People’s Republic” declared their entities to be sovereign states after the vote. The
Ukrainian government denounced the referendums as illegal.
After a brief unilateral cease-fire by Ukraine in late June failed to lead to progress on a peace plan
put forward by newly elected Ukrainian President Petro Poroshenko, Ukraine restarted its “antiterrorist operation” against the separatist forces. In July and August, Ukraine routed the gunmen
from strongholds in Slovyansk, Kramatorsk, and other towns, and besieged separatist forces in
the key cities of Donetsk and Luhansk.
However, in late August and early September, U.S. and NATO officials said that Russia massively
stepped up its support to the separatists, including by deploying thousands of Russian troops to
fight in Ukraine. Both the Russian troops and the separatists were supplied with hundreds of
tanks, armored personnel carriers, artillery, surface-to-air missiles, and other military equipment
from Russia. As a result, Ukrainian forces lost ground and suffered heavy casualties.
Perhaps fearing further casualties and lost territory, Ukraine agreed to a 12-point ceasefire plan
during talks with separatist representatives and Russian officials in Minsk, Belarus on September
5. Among other provisions, the plan calls for a cease-fire along the then-current lines of control,
an exchange of hostages and/or prisoners, the monitoring of the cease-fire and of the RussianUkrainian border by the Organization for Security and Cooperation in Europe (OSCE), and the
withdrawal of “illegal armed groups, militants, as well as militants and mercenaries from the
territory of Ukraine.” The Minsk agreement also called for Ukraine to adopt a law on amnesty for
those involved in the war in the Donbas; a law on “special status” for separatist-held areas that
will allow them greater self-rule for three years; the organization of local elections in those areas;
and plan for the economic recovery of the region.1
The signing of the agreement led to the end of the massive Russian-led offensive on Ukrainian
forces. However, none of the points of the Minsk protocol has been implemented fully. Sporadic,
sometime intense, fighting has continued, resulting in over 1,300 deaths since the Minsk protocol
was signed. (According to U.N. officials, over 5,500 persons have died in the fighting since the
conflict began in April 2014.) Ukrainian officials have said that the separatists had seized over
500 sq. km of Ukrainian territory since the Minsk protocol’s signature. In January 2015, President
Poroshenko said Russia had 9,000 troops inside Ukraine, along with hundreds of tanks, armored
fighting vehicles, and artillery pieces.2
The United States and the European Union made its full implementation of the Minsk protocol a
precondition for easing their sanctions on Russia. A particularly violent flare-up of attacks by the
pro-Russian gunmen against Ukrainian-held territory in late January and early February 2015 led
the United States and the EU to warn Russia that it faced possible additional sanctions for its
military intervention in Ukraine.
1
For an English-language translation of the Minsk protocol, see http://www.kyivpost.com/opinion/op-ed/osce-releasesthe-12-point-protocol-agreements-reached-between-ukraine-russia-and-separatists-in-minsk-363816.html. For the
Russian-language original, see http://www.osce.org/ru/home/123258?download=true.
2
Some experts believe Russian troop levels in Ukraine are significantly lower. U.S. Ambassador to NATO Douglas
Lute has said Russian troops in Ukraine are mainly intelligence officers serving a command and control function and
Russian servicemen operating highly sophisticated, specialized equipment, such as that used for electronic warfare and
air defense. See http://www.reuters.com/article/2015/02/04/us-ukraine-crisis-nato-usa-idUSKBN0L81S220150204.
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The presidents of France, Russia, and Ukraine and Chancellor Merkel of Germany met in Minsk
on February 11 in Minsk to try to secure an agreement to stop the fighting. On February 12, a
cease-fire agreement was signed, to take effect on February 15. The agreement calls on both sides
to pull back their heavy weapons to create a “security zone” of 50 to 70 km, depending on the
range of the weapons system and OSCE monitoring of the cease-fire. The separatists apparently
will remain in effective control of the areas they have seized since the first Minsk agreement was
signed in September.
The agreement calls for local elections in rebel-held regions and legal and constitutional reforms
to be negotiated with the rebels to give a special status to the region. The elections and reforms
are to be implemented before the end of this year. The return of control to Ukraine of the RussiaUkraine border is conditioned on the carrying out of these decentralization reforms agreed with
the separatists. Ukraine is also required to resume financial flows to the rebel-held regions.
Foreign forces and equipment, mercenaries, and illegal armed groups are supposed to be
removed, under OSCE monitoring. (It should be noted that Russia still contends that none of its
forces and equipment are in Ukraine, despite overwhelming evidence to the contrary.)3 The terms
of the agreement are similar to those of the original Minsk protocol last September. Some
observers have expressed skepticism about whether this agreement is more likely to be
implemented than the previous one was.
Ukraine’s Current Political Situation
Since the fall of the Yanukovych regime, Ukraine has elected a new pro-Western president and a
parliament with a pro-Western majority. On May 25, 2014, Ukraine held a presidential election.
The winner, Petro Poroshenko, took 54.7% of the vote. Poroshenko is a pro-Western billionaire
whose holdings include Roshen, a leading chocolate brand in the region. His nearest competitor,
former Prime Minister Yuliya Tymoshenko, won 12.81%. Voter turnout for Ukraine as a whole
was 60.29%. The lowest turnout was in Donetsk region (15.37%) and Luhansk region (38.94%),
where Russian-backed separatist gunmen seized polling places and used threats, kidnappings, and
other forms of intimidation to stop the vote. An International Election Monitoring Mission, which
included several Members of Congress, observed the elections. A preliminary statement from the
mission said that the vote was “largely in line with international commitments and with a respect
for fundamental freedoms in the vast majority of the country” despite the “hostile security
environment” in Donetsk and Luhansk.
Ukraine held an early parliamentary election on October 26, 2014. The result was a victory for
forces in favor of closer ties with the EU and the United States. Half of the seats were allocated
by voting for party lists, the rest by voting in individual districts. However, due to the inability to
hold elections in districts held by Russian-backed separatists, 29 of the 450 seats in the parliament
will remain unfilled. The results were an overwhelming victory for pro-Western forces.
The main victors were the Petro Poroshenko Bloc with 132 seats and the People’s Front, led by
outgoing Prime Minister Viktor Yatsenyuk, with 82 seats. In a surprise, the pro-reform
Samopomich (self-help) Union won 33 seats. The unpredictable, populist Radical Party of Oleh
Liashko won 22, while Batkivshchina, the party of former Prime Minister Yuliya Tymoshenko,
3
For an unofficial translation of the Russian-language original, see, for example, http://www.ft.com/intl/cms/s/0/
21b8f98e-b2a5-11e4-b234-00144feab7de.html#axzz3RXfwD5VC.
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won 19. The Opposition Bloc, composed of supporters of the Yanukovych regime, won 29 seats.
Far-right groups, often held up by Russian propaganda as dominant in Ukraine, did very poorly.
One key group, Svoboda, won only six seats, while another, Right Sector, won only one.
On December 2, the new parliament approved a new government led by Yatsenyuk, who returned
as prime minister. Figures selected by the Poroshenko Bloc, People’s Front, Samopomich, and
Batkivshchina are represented in the new government. The government has the support of over
300 seats, which will enable it to pass amendments to the Ukrainian constitution.
Prime Minister Yatsenyuk has said Ukraine’s main goal was to adopt European standards, with
the ultimate objective of European Union membership for Ukraine. He called for sharp budget
cuts, including in social programs, but increases in defense spending. He said a key focus of the
new government would be to fight corruption, including by reducing government regulation and
the size of the bureaucracy. He said Ukraine would cut the number of taxes it collects and would
devolve more budgetary power to local authorities.
In an important symbolic move, Natalie Jaresko, a U.S. citizen and former State Department
official who has lived in Ukraine for over two decades, is Ukraine’s finance minister. The
economy minister is a Lithuanian citizen, and the health minister is from Georgia. These moves
may have been meant to signal that the new government is dedicated to moving the country
toward the West and that these key figures are not from what many Ukrainians believe is the
country’s morally compromised political elite.
The government is currently setting up an Anti-Corruption Bureau that will investigate corruption
among government officials. New anti-corruption laws passed last year, including stricter
provisions against bribery and conflicts of interest, and require annual disclosures of income by
public officials. Nevertheless, opinion polls have shown that public skepticism is high about the
new government will make a serious impact in fighting the country’s deeply ingrained, crippling
problem with corruption.
Current Economic Situation
Some observers have warned that Ukraine is close to economic collapse. Ukraine’s currency, the
hryvnia, has plummeted by more than 50% against the dollar in the past year. This has increased
Ukraine’s real debt burden (which is denominated in foreign currencies) and has hurt ordinary
Ukrainians, in part because it makes imported consumer items more expensive. Ukraine’s gross
domestic product (GDP) dropped by 8.2% in 2014, according to the World Bank. The World
Bank projects a drop in GDP of 2.3% in 2015. Ukraine’s government statistics office estimated
inflation in 2014 at 24.7%.
The economic situation in the rebel-held regions is also poor, due to the disruption caused by the
conflict. Ukraine’s decision to cut off financial flows (including pensions) to the region in order
to avoid subsidizing the rebellion has also had a negative impact, as has Ukraine’s increasingly
strict controls over movement into and out of the rebel-held areas to prevent the movement of
spies and saboteurs into the rest of Ukraine. For its part, aside from “humanitarian convoys”
staged for public effect, Russia has so far appeared unwilling to offer massive subsidies to the
rebel-held areas itself, instead insisting that Kyiv restore its financial flows to the region. Indeed,
the February 2015 cease-fire agreement contains such a provision. Some observers claim that this
effectively requires Kyiv to subsidize the forces that are trying to break Ukraine apart.
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In April 2014, the IMF approved a $17 billion loan for Ukraine, but Kyiv only received $4.5
billion of the amount. On February 12, 2015, the IMF and Ukraine agreed on a new loan package
of $17.5 billion, bringing the total IMF commitment to Ukraine to $22 billion over four years.
The IMF estimates that the total international commitment to Ukraine could come to $40 billion
when money from the EU, the United States, and other sources is included.
In announcing the agreement, the IMF noted that Ukraine has shown strong fiscal discipline—
cutting the budget deficit to 4.6% of GDP, maintaining a flexible exchange rate for its currency,
and increasing household gas prices to 56% of the import price and heating prices to about 40%
of the import price in 2014. The IMF pointed out areas where Ukraine has committed to make
rapid progress on reforms, including further energy price increases, bank restructuring,
governance reforms of state-owned enterprises, and legal changes to implement the anticorruption and judicial reforms.4
Ukraine’s Foreign Policy
The Ukrainian government’s main foreign policy priorities are to secure international support for
Ukraine’s sovereignty and territorial integrity, including non-recognition of Russia’s annexation
of Crimea, as well as international assistance to ameliorate the country’s dire economic situation.
In December 2014, the Ukrainian parliament overwhelming renounced Ukraine’s former neutral,
“non-bloc” status. President Poroshenko has said that Ukraine will eventually seek NATO
membership but will first embark on needed reforms to become a viable membership candidate,
culminating in a public referendum on joining NATO at the end of this decade. Many observers
have noted that key European NATO countries are opposed to NATO membership for Ukraine, or
even a key stepping stone to membership, a Membership Action Plan for Ukraine. They
reportedly fear that such a move would further provoke Russia.
Ukraine has requested assistance from NATO for its military. At the September 2014 NATO
summit in Wales, the alliance agreed to set up four trust funds to help Ukraine’s military in such
areas as logistics, command and control, military personnel issues (including wounded soldiers),
and cyberdefense.5 NATO is leaving the issue of supplying weapons and other possible lethal and
non-lethal aid to Ukraine’s armed forces to individual member countries. NATO as an
organization hasn’t provided lethal military aid to Ukraine, leaving that to each member state to
decide for itself. France and Germany have expressed opposition to providing arms to Ukraine.
However, some experts believe other European countries may provide such assistance, but only if
the United States does so first.
Russia
In some ways, recent Russian actions in Ukraine are the culmination of long-standing Russian
resentment of the outcome of the Cold War. In 2005, Russian President Vladimir Putin called the
4
See https://www.imf.org/external/np/sec/pr/2015/pr1550.htm.
For more on NATO’s response to the Ukraine crisis, see CRS Report R43478, NATO: Response to the Crisis in
Ukraine and Security Concerns in Central and Eastern Europe, coordinated by Paul Belkin. See also
http://www.nato.int/cps/en/natohq/news_112695.htm.
5
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collapse of the Soviet Union “a major geopolitical disaster.” Russian leaders have also asserted
that the post-Soviet region is an area of privileged interests of Russia. Part of the justification for
that assertion is an alleged right to protect Russian citizens and “compatriots” (persons deemed to
be linked to Russia by language, culture, or ethnicity).
Moreover, Ukraine has a particularly important place in Russian psychology, according to many
experts. Putin has referred to Ukrainians as “brothers” of the Russian people. Eastern Orthodox
civilization, in which Russians see themselves as the leading force, got its start in Kievan Rus (a
state centered on what is now part of Ukraine) when Prince Vladimir converted to Christianity in
988. Russians often point out that their ancestors spilled a great deal of blood to incorporate
Crimea and most of the rest of Ukraine into the Russian empire, and a great deal more to keep it
within the empire (and its successor, the Soviet Union) through many wars.
Ethnic Russians make up 17.3% of Ukraine’s population, according to the 2001 Ukrainian census.
They are concentrated in the southern and eastern parts of the country. They make up 58.3% of
the population in the Crimea (a peninsula in the Black Sea in southern Ukraine). In addition,
many ethnic Ukrainians in the east and south also tend to be Russian-speaking, are suspicious of
Ukrainian nationalism, and support close ties with Russia. Soviet leaders concentrated important
heavy industries (including defense industry) in eastern Ukraine, which tied the region to Russia
economically and fostered what many analysts have viewed as a lingering Soviet-style mindset
there. This is particularly true of the Donbas region, on the border with Russia.
Until the collapse of the Yanukovych regime in February 2014, Putin preferred using indirect
methods of influence in Ukraine. These included “carrots,” such as lucrative business deals with
Ukrainian politicians and oligarchs, but also “sticks,” such as de facto economic sanctions and
using Russian media (which are very popular in Ukraine) to attack uncooperative leaders.
Russia reacted with great hostility to the emergence of a new, more pro-Western leadership in
Ukraine in February 2014. A Russian foreign ministry statement on February 24 claimed that
“terroristic methods” were being used to suppress dissent in the Russian-speaking regions of the
country. The statement also criticized “Western partners” for acting not out of concern for the
people of Ukraine, but out of “unilateral geopolitical considerations.” Russian forces occupied
Ukraine’s Crimea region in late February and annexed it in March. Beginning in April 2014,
Russian intelligence operatives and other Russian troops have been involved in fighting in eastern
Ukraine. Russia has also supplied separatist forces with artillery, tanks, and other heavy
weaponry. Nevertheless, Russia continues to deny that it has intervened militarily in eastern
Ukraine.
Many experts on Russia have speculated that Putin’s key objective in Ukraine is to weaken and
discredit the pro-Western government in Kyiv and Western policy generally. A successful, proWestern Ukraine could pose unwelcome comparisons with the authoritarian, kleptocratic regime
at home in Russia.
Moscow has so far declined to recognize the Donetsk and Luhansk “people’s republics” as
independent countries or annex them to Russia. However, Russian official statements and the
February 2015 cease-fire agreement view the separatist regimes as legitimate interlocutors for
Kyiv in determining the future of Ukraine. Russia has made also strident demands on the subject
of Ukraine’s political future. Russian Foreign Minister Lavrov has called for making Russian the
second official language in Ukraine and for constitutional reforms that would confirm Ukraine’s
neutral status. Moscow has also insisted on “federalization” of Ukraine, under which the various
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regions would have wide autonomy in the areas of the economy, finances, culture, language,
education, and external economic and cultural ties with neighboring countries or regions.
Like its military support for the separatists, Russia’s federalization proposal appears to many
analysts to be an effort to permanently cripple the central government in Kyiv, giving forces in
eastern Ukraine under Moscow’s sway a veto power over important decisions, including on
Ukraine’s current pro-Western orientation. Russia’s plan appears to be broadly similar to the
Dayton Peace Accords in Bosnia or the Kozak Memorandum, a 2003 Russian federalization
proposal for Moldova. Federalization could also be used to give Russia enhanced control over
economic assets in the east.
However, it appears highly unlikely that Ukrainian leaders or the public would accept the
constitutional changes needed to create such a federation. It is unclear whether the
“decentralization” called for in the February 2015 cease-fire agreement will be more acceptable
to Ukrainians. Some analysts believe that official Russian rhetoric about an alleged “party of
war” in Kyiv centered around Prime Minister Yatsenyuk may indicate another possible strategy—
to pit the prime minister and President Poroshenko against each other and perhaps bully or cajole
President Poroshenko into enter into an accommodation with Moscow.
What has largely disappeared from official Russian rhetoric in recent months is the concept of
“Novorossiya;” that is, expanding the Russian-controlled area to include most of eastern and
southern Ukraine, perhaps linking Russian-controlled areas in southern Ukraine with Crimea.
This goal may have seemed easily achievable to Putin last spring when he first used the term.
Since then, however, Ukrainian forces have become somewhat more capable, and it may appear
to Putin than such an objective would now likely require a massive, and perhaps politically
unacceptable, infusion of Russian military forces to realize. There may also be financial
considerations. Moscow has so far provided very meager financial support for the regions in
eastern Ukraine that it has effectively seized. This may signal that Russia doesn’t want to incur
major new expenses in the current economic environment created by falling oil prices and
Western sanctions. Possible concern about intensified sanctions in the event of a more massive
intervention could also be a factor. Nevertheless, given Putin’s past unpredictability, even this
scenario cannot be ruled out.
If Russia does not want to continue the war in eastern Ukraine indefinitely, it could genuinely
implement the military provisions of the February 2015 cease-fire, thereby creating a “frozen
conflict,” as it has done in Moldova’s Transnistria region and Georgia’s Abkhazia and South
Ossetia regions. The outcome would likely at best amount to a cease-fire in place with Russia
continuing to have control over the Russia-Ukraine border, given the unlikelihood of an
agreement between Kyiv and the separatists on elections and decentralization. Such an outcome
could still provide Moscow with leverage over Kyiv but might not afford the same opportunity to
destabilize Ukraine as continuing the war would. On the other hand, an effective cease-fire could
provide an opening for Putin to secure an easing of sanctions in a few months, particularly from
sympathetic European countries.
Russia has taken other steps against Ukraine, including imposing some de facto trade sanctions
against Ukrainian imports. Russia could decide to expand these sanctions into economic warfare
against Ukraine. Ukrainian government servers have been hit by sophisticated cyberattacks,
which may have come from Russia, although no proof of this has been publicly disclosed so far.
Russia could harass or expel some of the large number of Ukrainian citizens living and working
in Russia.
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Energy Issues
Energy is a key factor in Ukraine’s relations with Russia as Ukraine is heavily dependent on
Russia for its energy supplies. In 2012, 63% of Ukraine’s natural gas consumption came from
Russia, as well as nearly three-quarters of its oil and other liquid fuels.6 However, Ukraine’s
vulnerability to Russian pressure has been mitigated by the fact that the main oil and natural gas
pipelines to Central and Western Europe transit its territory. In 2014, about 40% of Russian
natural gas destined for Europe transited Ukraine. (Just two years earlier, the figure had been
about 60%.) Past Russian efforts to greatly increase gas prices for Ukraine provoked a crisis that
resulted in a cutoff of Russian gas to Western Europe for several days in January 2006. A second
gas crisis occurred in January 2009, resulting in a gas cutoff of nearly three weeks.
Until recently, Russia had long sought control of Ukraine’s natural gas pipelines and storage
facilities. Moscow’s efforts were unsuccessful, even with friendly governments in Kyiv, due to
Kyiv’s refusal to cede control of one of its key economic assets. This fact, as well as the 2006 and
2009 gas cutoffs, has led Russia and some European countries to plan and build pipelines to
bypass Ukraine. Gazprom has developed gas pipelines under the Baltic Sea (called Nord Stream)
and through the Balkans (called South Stream) to Western Europe. Nord Stream made its first gas
deliveries in 2011. On the other hand, Russia cancelled the South Stream project in December
2014, annoyed by EU objections that the project as planned violated EU rules. Russia now plans
to build a pipeline through Turkey to the Greek border (dubbed Turkish Stream), leaving the EU
the task of transporting gas on EU territory. Gazprom says that it will phase out gas transit via
Ukraine by 2020, but many experts are skeptical as to whether this is feasible.
Russia has also used gas prices as a tool in its policy toward Ukraine. Russia had raised the
natural gas price for Ukraine from $268 per thousand cubic meters (tcm) while President
Yanukovych was in power to $485 per tcm of gas when Ukraine’s new government took power,
an increase of about 80%. Ukraine refused to pay the increased amount and demanded a new gas
contract with a lower price. Russia responded in June 2014 by cutting off natural gas supplies to
Ukraine for non-payment of debts. (Ukraine continued to allow gas destined for Western Europe
to transit its territory.) In October 2014, the EU brokered a deal between Gazprom and Ukraine on
gas supplies at a lower price through March 2015 in exchange for Ukraine’s repayment of some
of its debts to Gazprom.
Ukrainian leaders acknowledge that the current deal with Gazprom is only a temporary expedient.
In order to avoid likely future Russian efforts to use energy supplies as a political weapon,
Ukraine has to sharply reduce its dependence on Russian gas. However, Ukraine has few shortterm alternatives. Ukraine began last year to import significant amounts of gas from Poland,
Hungary, and Slovakia. However, Ukrainian officials admit that these “reverse flow” supplies
alone will not suffice to meet demand in Ukraine.
In the long term, Ukraine could develop its own shale gas deposits and improve exploitation of its
conventional gas reserves; import liquefied natural gas; or import gas from Azerbaijan, Central
Asia, and elsewhere via pipelines through the EU’s planned Southern Energy Corridor. Ukraine
will also to have to make much greater strides in energy conservation, which has required a steep
and politically unpopular hike in natural gas prices, including for households.
6
U.S. Energy Information Agency Country Brief: Ukraine, http://www.eia.gov/todayinenergy/detail.cfm?id=15411.
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European Union
The European Union’s main instrument to promote European values and deepen economic ties
with Ukraine is the Association Agreement. The agreement includes a free trade agreement with
the EU, formally known as a Deep and Comprehensive Free Trade Agreement (DCFTA).
Although the DCFTA further opens potentially lucrative EU markets to Ukraine, it also requires
Ukraine to adopt EU legislation and standards and to gradually expose Ukrainian firms to tough
competition from EU imports. Approximation to EU norms could also lead to increased foreign
investment in Ukraine. Under intense pressure from Russia, which strongly opposed Ukraine’s
intention to sign the AA, the Ukrainian government announced on November 21 that it would not
sign the agreement, the first in a series of events that led to the regime’s demise three months
later.
The collapse of the Yanukovych regime improved prospects for a closer relationship with the EU.
The EU and Ukraine signed the parts of Ukraine’s Association Agreement dealing with political
issues in March 2014, and the parts dealing with economic issues (including the DCFTA) were
signed on June 27.
Ratification of the pact was delayed due to Russian threats to block Ukrainian imports from its
markets unless the pact was modified to protect Russia’s interests. The EU and Ukraine refused to
do so, and the European Parliament and the Ukrainian parliament ratified the accord on
September 16. However, the EU and Ukraine did appear to bow to Russian threats by agreeing to
postpone implementation of the DCFTA until 2016. Ukraine will continue to enjoy unilateral
trade preferences from the EU until then.
As part of an international effort involving international financial institutions, the United States,
and other countries, the EU has also offered substantial assistance to Ukraine to reform its
political and economic system and to shore up its finances. In addition, the EU has imposed
sanctions on Russia and separatists in Ukraine in conjunction with the United States and other
countries. Although the sanctions are supposed to help persuade Russia to agree to a peace
settlement in Ukraine, the EU as an organization does not play a major role in brokering peace
talks. Instead, EU member states Germany and France have taken the lead in that effort.
EU Aid to Ukraine
On March 5, 2014, the European Commission unveiled an 11.1-billion-Euro (about $15.5 billion)
aid package for Ukraine. The package included 1.6 billion Euro (about $2.2 billion) in macro
financial assistance loans to support Ukraine’s government finances. The EU will also provide
1.565 billion Euro (about $2.17 billion) in grant aid between 2014 and 2020 to assist Ukraine’s
reform efforts. The package includes up to 3 billion Euro (about $4.16 billion) in loans from the
European Investment Bank and 5 billion Euro (nearly $7 billion) from the European Bank for
Reconstruction and Development. In addition, the EU will establish a High Level Investment
Forum/Task Force; help modernize Ukraine’s natural gas transit system and work on reversing
the flow of pipelines through Slovakia so that Ukraine can receive gas from the west; accelerate
its Visa Liberalisation Action Plan; and provide technical assistance on a number of areas from
constitutional to judicial reform and preparation of elections.7
7
See http://europa.eu/rapid/press-release_MEMO-14-159_en.htm.
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The war in eastern Ukraine and the sharply negative impact it has had on Ukraine’s economy has
led the EU to consider additional aid to Ukraine. The EU is reportedly considering providing as
much as 2.5 billion Euro ($2.8 billion) in additional macrofinancial assistance loans this year,
depending on whether Ukraine can reach a new loan agreement with the IMF and keep reforms
on track.
EU Sanctions
On March 17, 2014, the day after Crimean authorities held a referendum on joining Russia, the
European Union imposed a visa ban and an asset freeze on 21 figures from Ukraine and Russia
who played roles in Russia’s seizure of Crimea. On March 21, the EU imposed sanctions on 12
additional Russian leading figures, after President Putin signed an agreement with Crimean
leaders incorporating the region into Russia. On April 28, the EU added 15 more names to the list.
On May 12, 2014, the EU added 13 additional names of Russian officials and two companies
based in Crimea.
The EU list included some senior government officials and members of the Russian parliament,
but also fairly low-level figures directly involved in the Crimea operation and efforts to
destabilize Ukraine. In contrast to the United States, the EU has stopped short of sanctioning
Putin’s “inner circle” or key firms associated with them.8
However, the political mood in many EU countries changed after 298 people (mainly EU
citizens) were killed as a result of the July 17 shootdown of Malaysian Airlines flight MH17 over
separatist-held territory. On July 22, EU foreign ministers agreed to expand Ukraine-related
sanctions against Russia by adding individuals and companies to the existing travel ban and asset
freeze list, including some persons in Putin’s inner circle.
On July 29, the EU agreed to impose sanctions on Russia’s financial, defense, and energy sectors.
These sanctions were strengthened in September, in response to a massive Russian-supported
offensive in Ukraine. The sanctions barred EU nationals and companies from providing loans to
five major Russian state-owned banks and barred trade in new bonds, equity, or similar financial
instruments with a maturity exceeding 30 days, issued by the same banks. The same restrictions
were also extended to three major Russian defense companies and three major energy companies.
The EU banned certain services necessary for deep water oil exploration and production, Arctic
oil exploration or production, and shale oil projects in Russia. The EU has also banned exporting
dual use goods and technology for military use in Russia. The EU also added new persons to its
travel ban and asset freeze list.
In December 2014, the EU banned or restricted most European investment, trade, and tourism
with Russian-occupied Crimea. As of January 2015, the EU has sanctions on 132 persons and 28
entities. The EU is currently considering additional sanctions in response to Russian support for a
separatist offensive in eastern Ukraine in January and February 2015.
8
For the sanctions decision and the initial list of names, see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=
CELEX:32014D0145&rid=5. For the March 21 additions, see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?
uri=CELEX:32014D0151&rid=2. For the April 28 additions, see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?
uri=CELEX:32014D0238&rid=1. For the May 12 additions, see http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=
uriserv:OJ.L_.2014.137.01.0009.01.ENG.
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However, observers have noted that the sanctions have been crafted to reduce the economic harm
to EU countries, for example by not targeting the sensitive natural gas sector; the sale of dual use
technologies to civilian firms; or France’s planned (now indefinitely postponed) delivery of two
Mistral amphibious assault ships. Observers have also noted that the sanctions were imposed for a
one-year period only. It is therefore possible that EU countries sympathetic to Russia could block
renewal of sanctions as they come up for consideration this year. In January 2015, the EU decided
to extend the sanctions on individuals and entities until September 2015. Key sectoral sanctions
do not expire until July.9
U.S. Policy
During the upheaval in Ukraine in the past year, Administration officials have tried
unsuccessfully to reassure Russia that the United States was not in a geopolitical competition with
Moscow over Ukraine. The United States has strongly condemned the Russian military invasion
of Crimea and Russia’s ongoing efforts to destabilize eastern Ukraine as violations of
international law. Over the past year, the United States, in coordination with the EU and other
countries, has imposed sanctions against Russia to increase the costs to Russia of its aggression,
with the objective of pressing it to implement a genuine political settlement with Ukraine.
However, the Administration has appeared leave the leading role in negotiating such a settlement
to France and Germany, whose representatives have met with those of Russia, Ukraine, and the
rebels in the so-called “Normandy format,” named after the place where they first occurred last
year. Nevertheless, President Obama and Administration officials have been in regular contact
with the main figures in the talks, including President Putin, President Poroshenko, German
Chancellor Merkel, and President Hollande of France.
Another focus of U.S. efforts has been to support Ukraine’s efforts to reform and increase its
cooperation and integration with the European Union. The United States, in cooperation with the
EU and international financial institutions, is providing financial and technical assistance to
Ukraine. The United States has also provided non-lethal aid to Ukraine’s security sector,
including its army, but has declined so far provide weapons to Ukraine, out of concern of
escalating the conflict and making a political settlement less likely. Nevertheless, President
Obama said in February 2015 that providing defense weapons to Ukraine is an option the
Administration is considering if diplomatic efforts fail.
Secretary of State John Kerry issued a statement on February 12 expressing support for the ceasefire agreement reached in Minsk earlier that day. He said that the United States would consider
rolling back sanctions against Russia when the agreement (and the previous Minsk agreement of
September 2014) are fully implemented.10
9
For more on the EU’s policy on Ukraine, see CRS Report IN10129, U.S.-EU Cooperation on Ukraine and Russia, by
Kristin Archick and Derek E. Mix.
10
See http://www.state.gov/secretary/remarks/2015/02/237439.htm.
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U.S. Sanctions Against Russia
The United States has suspended most bilateral cooperation with Russia. On April 2, the
Administration announced that it was suspending several projects planned under the aegis of the
U.S.-Russia Bilateral Presidential Commission as well as some law enforcement cooperation
activities and planned to use that funding for aid instead to Ukraine. The United States has also
placed additional restrictions on defense-related exports to Russia.
On March 6, the Administration issued an executive order imposing visa bans and asset freezes
against persons who “undermine democratic processes and institutions in Ukraine; threaten its
peace, security, stability, sovereignty, and territorial integrity; and contribute to the
misappropriation of its assets.... ”11 On March 17, the Administration announced visa bans and
asset freezes against several senior figures from Russia and the secessionist Crimean government.
On March 16 and 20, after Russia moved to annex Crimea, the Administration issued two
additional executive orders expanding the scope of sanctions. They permit the Administration to
freeze the assets of persons working in key areas of the Russian economy, including “financial
services, energy, metals and mining, engineering, and defense and related materiel.”
On March 20, the Administration announced asset freezes on 16 high-ranking Russian
government officials and members of parliament. Four additional persons, all wealthy
businessmen, were sanctioned as members of Putin’s “inner circle.” One bank, Bank Rossiya,
was also sanctioned due to its role as the personal bank of senior Russian officials.12
On April 28, the Administration imposed asset freezes on an additional seven senior Russian
officials. They include Igor Sechin, the president of Rosneft, Russia’s leading oil company, and
former chief of staff to Putin. The Administration also sanctioned 17 entities, including banks and
other businesses. The companies appear to have been chosen due to their links to sanctioned
persons in Putin’s inner circle, such as energy trader Genneddy Timchenko and bankers Arkady
and Boris Rotenberg, or to Bank Rossiya.13 Due to privacy laws, the names of those receiving
visa bans have not been made public, but it is likely that they include those persons under asset
freezes.
On July 16, 2014, the United States imposed sanctions unilaterally on key firms in Russia’s
financial, energy, and military technology sectors—including Gazprombank, Vnesheconombank
(VEB), Novatek, and Rosneft. U.S. firms and persons are barred from dealing in new equity or
loans of greater than 90 days maturity for these companies. After the Malaysian airlines tragedy
on the 17th, the EU largely matched and even in some cases went beyond these sanctions. On July
27, the Administration responded by adding Bank of Moscow, VTB Bank, and Russian
Agricultural Bank to the list of companies with restricted access to U.S. capital markets. In
addition, the U.S. assets of United Shipbuilding Company were frozen.
11
See http://www.whitehouse.gov/the-press-office/2014/03/06/executive-order-blocking-property-certain-personscontributing-situation.
12
For a list of Russian figures sanctioned in March, see http://www.treasury.gov/press-center/press-releases/Pages/
jl23331.aspx. For the text of the executive order greatly expanding the scope of sanctions, see
http://www.whitehouse.gov/the-press-office/2014/03/20/executive-order-blocking-property-additional-personscontributing-situation.
13
For a list of Russian figures sanctioned in April, see http://www.treasury.gov/press-center/press-releases/Pages/
jl2369.aspx.
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In September 2014, in response to a separatist offensive in Ukraine massively supported by
Russian combat troops, the United States imposed sanctions against additional key Russian
companies, including Transneft, Lukoil, Gazprom Neft, Rostec, Surgutneftegaz, and Sberbank.14
On December 19, 2014, the President issued an executive order to bar any U.S. person from
participating in new investment in Crimea; imports from and exports to the Crimea region; and
any financing, facilitation, or guarantee of any related transaction by a U.S. person.15
Congressional Response
U.S. Aid to Ukraine
According to the U.S. Aid for International Development (USAID) “Greenbook” website, the
United States obligated over $4 billion in aid to Ukraine from FY1990 through FY2012.16
According to other State Department figures, the United States allocated $92.4 million in aid for
Ukraine in FY2013 and $88.1 million in FY2014.
According to a State Department statement on February 5, 2015, the United States has provided
over $355 million in U.S. aid to Ukraine over the previous year. In addition, the United States
provided a $1 billion loan guarantee to Ukraine. The government of Ukraine issued the bond in
May 2014. Ukraine was able to price the five-year bonds at 28 basis points over Treasury bonds.
Ukraine has committed to using the loan to compensate about 2 million vulnerable households
from the impact of increases in gas and heating prices.17
U.S. technical assistance has been aimed at helping Ukraine stabilize its financial sector; carry out
reforms in the agricultural sector; improve the business climate; help Ukraine hold free and fair
parliamentary and presidential elections; support constitutional reforms; bolster civil society to
participate and monitor the reform process; and support independent media.
Assistance is also devoted to helping Ukraine develop laws and regulations to fight corruption,
one of Ukraine’s biggest challenges. Technical assistance is also being used to improve its energy
security, including by enhancing energy efficiency. U.S. aid also provides humanitarian assistance
to Ukraine in cooperation with the U.N. High Commissioner for Refugees (UNHCR) and other
international organizations to improve Ukraine’s ability to assist internally displaced persons
(IDP.) U.S. aid has been used by Radio Free Europe/Radio Liberty and Voice of America to
produce Russian-language news broadcasts that are aired in Ukraine.
U.S. aid has also gone into helping bolster Ukraine’s security sector. Over $120 million has been
allocated for this purpose. The assistance includes providing body armor, helmets, vehicles, night
14
See http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20140912.aspx.
For more on U.S. sanctions on Russia, see CRS Report IN10048, U.S. Sanctions on Russia in Response to Events in
Ukraine, coordinated by Dianne E. Rennack. For more on the economic impact of sanctions on Russia, see CRS Report
R43895, U.S. Sanctions on Russia: Economic Implications, by Rebecca M. Nelson.
16
See https://eads.usaid.gov/gbk/.
17
See http://www.state.gov/r/pa/prs/ps/2015/02/237203.htm.
15
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and thermal vision devices, heavy engineering equipment, advanced radios, patrol boats, rations,
tents, counter-mortar radars, uniforms, and first aid equipment and supplies.18
In February 2015, Lt. Gen. Ben Hodges announced that a U.S. Army battalion would begin
training Ukrainian forces in Poland, including on how to operate against Russian electronic
warfare and how to protect themselves from Russian and rebel artillery.
However, some critics have claimed that this aid has been slow to arrive in Ukraine due to
bureaucratic impediments. Moreover, some Members of Congress have expressed support for
going beyond the non-lethal support given by the United States so far to provide “defensive
weapons” such as man-portable anti-tank weapons. Other suggested assistance includes
additional non-lethal items, such as secure communications equipment, reconnaissance drones,
and radars capable of tracking longer-range heavy artillery, not just mortars. 19
The FY2015 omnibus appropriations bill (P.L. 113-235) appropriates aid for Ukraine. The bill
includes $47 million in Foreign Military Financing (FMF) and $139.283 million in Economic
Support Fund (ESF) aid, which can be used for technical assistance and for additional loan
guarantees for Ukraine. In addition to this amount, Ukraine will likely also receive a portion of
Europe and Eurasia regional funding to fight Russian aggression, including $502 million in ESF;
$15.8 million in International Narcotics Control and Law Enforcement (INCLE) aid; $5.85
million from the Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR)
account; and $29.55 million in FMF funding.20
In its FY2016 Congressional Budget Justification, the Administration requested $154.1 million in
ESF funding for Ukraine in its base request. The Administration also requested $31.615 million in
Global Health funding; and $2.9 million in IMET military training funds. The Administration
requested an additional $275 million in ESF from the Overseas Contingency Operations (OCO)
account to fund possible additional loan guarantees for Ukraine. The Administration request also
includes $42.3 million in FMF aid for Ukraine from the OCO account.21
In January 2015, Secretary of the Treasury Jack Lew announced Administration plans to provide
another $1 billion in loan guarantees in the first half of 2015, if Ukraine makes progress on
reforms. He also said that the Administration would also seek Congressional approval for yet
another $1 billion guarantee, making $3 billion in loan guarantees in all.22
Other Legislation
The 113th Congress passed legislation in response to the crisis in Ukraine. On January 7, 2014, the
Senate passed S.Res. 319. Among other provisions, the resolution sponsored by Senator Murphy
urges the United States and EU to work together to promote a peaceful resolution of the crisis that
moves Ukraine toward a future in the Euro-Atlantic community; encourages all parties to avoid
18
See http://www.whitehouse.gov/the-press-office/2014/11/21/fact-sheet-us-assistance-ukraine.
For a report by former senior U.S. officials advocating U.S. defensive arms for Ukraine, see
http://www.thechicagocouncil.org/sites/default/files/UkraineReport_February2015_FINAL.pdf.
20
See the Explanatory Statement on H.R. 83 at https://www.congress.gov/congressional-record/2014/12/11/housesection/article/H9307-1.
21
http://www.state.gov/documents/organization/236395.pdf
22
See http://www.treasury.gov/press-center/press-releases/Pages/jl9751.aspx.
19
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violence and engage in dialogue; and states that, in the event of further government violence
against peaceful protestors, the President and Congress should consider whether to apply targeted
sanctions, including visa bans and asset freezes, against individuals responsible for ordering or
carrying out the violence.
On February 10, 2014, the House passed H.Res. 447 by a vote of 381-2. The resolution,
introduced by Representative Eliot Engel on December 16, 2013, contains provisions broadly
similar to those of S.Res. 319, including raising the possibility of sanctions against Ukrainian
leaders if they use violence against protestors. The House Foreign Affairs Committee approved an
amended version of H.Res. 447 on January 29. The new version takes into account the events that
had occurred since the resolution’s introduction. The resolution expresses support for the visa
bans that the United States has already imposed on Ukrainian officials responsible for violence
against protestors, and urges the Administration to consider additional sanctions against those
responsible for the use of force.
On March 11, the House of Representatives approved H.Res. 499 by a vote of 402-7. Among
other provisions, the resolution calls on NATO allies and European Union member states to
immediately suspend military cooperation with Russia, including arms sales; calls for the United
States and its allies to adopt visa, financial, trade, and other sanctions on senior Russian
Federation officials, Russian and Ukrainian oligarchs, and others complicit in Russia’s
intervention and interference in Ukraine, majority state-owned banks and commercial
organizations, and other state agencies, as appropriate; and calls on the United States to work with
its allies and other countries to aid Ukraine’s economic recovery efforts.
On March 6, the House passed H.R. 4152 by a vote of 385-23. The bill funds the loan guarantees
requested by the Administration for Ukraine from the amounts appropriated for FY2014 for the
Economic Support Fund, and from unobligated balances for State Department and Foreign
Operations funding for prior years.
On March 27, the Senate approved an amended version of H.R. 4152 by voice vote. The bill
includes the loan guarantees for Ukraine, but also provisions of S. 2124, which had been
approved by the Senate Foreign Relations Committee on March 12. These portions of the Senatepassed version of H.R. 4152 require the U.S. government to assist Ukraine to recover assets
stolen by the previous regime through corruption; authorize $50 million in U.S. aid in FY2015 to
help Ukraine carry out political and economic reforms; authorize $100 million in security
assistance for Ukraine and other Central and Eastern European countries for FY2015-FY2017;
and require the President to impose visa bans and asset seizures against persons in Ukraine and
Russia who are responsible for violence or undermining the peace, security, stability, sovereignty,
or territorial integrity of Ukraine. The bill also “encourages” the President to impose these
sanctions on Russian figures responsible for corruption in Russia and requires an annual report by
the Secretary of Defense on military and security developments involving the Russian Federation.
On April 1, the House passed the Senate-amended version of H.R. 4152 by a vote of 378-34.
Representative Royce, who introduced a broadly similar bill (H.R. 4278) passed by the House on
March 27, expressed his preference for the “more comprehensive” H.R. 4278, but supported
passage of the Senate version of H.R. 4152 to “demonstrate bipartisan support for Ukraine.”
President Obama signed the bill into law on April 3.
On April 1, the House also passed S. 2183, which requires Radio Free Europe-Radio Liberty and
Voice of American to start a programming “surge” to provide accurate information to eastern
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Ukraine, Crimea, and Moldova in order to counteract inflammatory Russian propaganda. The bill
authorizes up to $10 million in appropriations for this effort. The provisions of S. 2183 were
originally part of H.R. 4278, and were passed by the Senate as a separate bill on March 27 by
unanimous consent. President Obama also signed S. 2183 into law on April 3.
On December 11, the House passed H.R. 5859, the Ukraine Freedom Support Act. The Senate
passed the bill on December 13, and the bill was signed by the President on December 18 (P.L.
113-272). On December 18, 2014, President Obama signed H.R. 5859, the Ukraine Freedom
Support Act. The measure permits the President to impose sanctions on Russian defense, energy,
and other firms and foreign persons; authorizes increase military and economic assistance for
Ukraine; authorizes funding for U.S. Russian-language broadcasting in the region; authorizes
support for Russian civil society and democracy organizations; and requires a report on Russian
noncompliance with the Intermediate Nuclear Forces (INF) Treaty.
The FY2015 National Defense Authorization Act (P.L. 113-291) bars the use of Department of
Defense funds for military cooperation with Russia until the President certifies that Russia has
ended its aggression against Ukraine; requires detailed reports by the Administration on U.S.
military assistance to Ukraine; and authorizes $75 million in security assistance to Ukraine as part
of the European Reassurance Initiative.
Congressional Debate
One issue that has sparked significant Congressional debate in recent months has been whether
the United States should supply defensive weapons to Ukraine. On February 3, 2015, a bipartisan
group of 15 Senators sent a letter to President Obama urging him to act on the authorization
provided by the Ukrainian Freedom Support Act to supply an “immediate infusion of effective
defensive military equipment and financial aid to thwart Putin’s naked aggression. Defensive
military assistance—such as anti-tank weapons, counter-battery radars, armored Humvees, and
increased training—are all critical to ensuring Ukraine has the capabilities to defend its territory
and its citizens.” 23
Advocates of arming Ukraine say that sanctions alone are unlikely to stop Russian aggression and
that boosting Ukraine’s defense capabilities are essential to stop further Russian conquest of
Ukrainian territory and to pressure Putin to agree to a genuine peace agreement. Those opposed to
arming Ukraine say that Putin could use the move as an excuse to escalate the conflict beyond our
desire to respond, thereby increasing the level of violence. Some experts say escalation could
even result in a new Cold War, eliminating the possibility for U.S.-Russian cooperation on key
issues elsewhere. It could also split Western unity on Russia policy, they claim, as France and
Germany are strongly opposed to arming the Ukrainians.24
23
See http://www.durbin.senate.gov/newsroom/press-releases/durbin-portman-lead-bipartisan-senators-calling-forincreased-military-assistance-to-ukraine.
24
See for example http://www.brookings.edu/research/opinions/2015/02/06-aiding-ukrainian-military-goad-putin-wargaddy-hill.
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Figure 1. Ukraine
Author Contact Information
Steven Woehrel
Specialist in European Affairs
swoehrel@crs.loc.gov, 7-2291
Congressional Research Service
18Ukraine entered 2016 two years after the February 2014 collapse of the Kremlin-supported
government of President Viktor Yanukovych. The collapse was brought about by bitter protests
that had erupted in Kyiv’s Maidan Square in late 2013 over a decision by the government to reject
closer relations with the European Union. What followed the turmoil of early 2014 was the
emergence of a pro-Western, pro-reform government and an energized public generally anxious
to lessen Moscow’s influence, committed to addressing the need for serious reform and
determined to draw closer to Europe and the United States.
Despite the changes in government leadership, the political and economic reorientation, and the
emergence of a vibrant civil society dedicated to the implementation of change, Ukraine remains
far from achieving the political and economic stability and internal security sought by the
supporters of the Maidan. In fact, 2016 has already proven to be a very unsettling time for the
current government as frustrations have mounted over the slow pace of political reform and
economic progress. These shortcomings resulted in the resignation of a popular, reform-minded
economy minister and a deputy prosecutor. This was followed by a call by some in the opposition
to replace the current pro-reform prime minister, Arseniy Yatsenyuk, and a decision by President
Petro Poroshenko to ask for the resignations of Yatsenyuk and Prosecutor General Viktor Shokin.
Shokin did resign, and Yatsenyuk barely survived a vote of no confidence in the Ukrainian
parliament on February 16, 2016.
Contributing to Ukraine’s problems have been Ukraine’s rampant corruption, other shortcomings
in the rule of law, and the reluctance of a small group of old-time oligarchs who refuse to
relinquish power or influence. The confluence of these factors has stifled the implementation of
democratic best practices, hindered strong democratic institution building, and exacerbated longstanding problems in attracting foreign investment.
In 2014, as the new government in Kyiv, led by President Poroshenko and Prime Minister
Yatsenyuk, sought international financial assistance, the International Monetary Fund (IMF)
estimated Ukraine could require some $40 billion to address the needs of the country. Since then,
the IMF and Ukraine have agreed on a loan package of close to $22 billion over four years, some
$6.7 billion of which has been disbursed. The European Union (EU) has committed over €11
billion (about $15.5 billion) in aid for Ukraine and is considering further assistance. In January
2016, a new free trade agreement between the EU and Ukraine went into effect, potentially
opening new opportunities for Ukraine’s economic development.
According to the Department of State, the United States has committed over $550 million in
assistance to Ukraine since the emergence of the new, pro-reform government, in addition to two
$1 billion loan guarantees to help the new government carry out political and economic reforms
and bolster the capabilities of its security sector, including its army. With continued progress on
economic reforms and as conditions warrant, the Obama Administration could ask for a third loan
guarantee of up to $1 billion in 2017. U.S. economic and technical experts advise almost a dozen
Ukrainian ministries and localities. The U.S. has provided some $69 million in humanitarian
support to help displaced Ukrainians through international relief organizations and local
nongovernmental organizations (NGOs).
Ukraine’s problems, however, are not solely political and economic. Russia responded to the
change of government in Kyiv by seizing Ukraine’s Crimea region and annexing it on March 18,
2014. In April 2014, armed pro-Russian separatists seized parts of the Donbas region of eastern
Ukraine aided by personnel, weaponry, and leadership from Russia. A cease-fire agreement was
signed in Minsk, Belarus, in late 2014 by the leaders of Russia, Ukraine, France, and Germany.
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Minsk-2, which took effect in February 2015, outlined a 12-point plan to end the conflict. One
year later in February 2016, however, Crimea is still in Russian hands, approximately 7% of
Ukrainian territory remains under control of the separatists and Russia, and most of the provisions
of the Minsk-2 agreement have yet to be implemented. The Russia-supported conflict in the
eastern part of the country has added an additional element of instability that has kept the
government distracted from solving its internal problems. The prospects for a long-term political
settlement of the crisis in eastern Ukraine remain remote, and the term “frozen conflict” is being
heard more and more.
The United States strongly condemned Russia’s annexation of Crimea and its incursion into
eastern Ukraine and, along with the European Union, imposed sanctions against Russian
individuals and key firms initially for seizing Crimea. These sanctions have continued and have
been enhanced in response to Russia’s continued aggression and activity in eastern Ukraine.
Congressional action has focused on providing assistance to the new Ukrainian government and
supporting sanctions against Russia for its occupation of Crimea and efforts to destabilize
Ukraine. In April 2014, President Obama signed H.R. 4152 into law, authorizing aid to help
Ukraine carry out reforms; authorized security assistance to Ukraine and other Central and
Eastern European countries; and required the President to impose visa bans and asset seizures
against persons in Ukraine and Russia who were responsible for violence or undermining the
peace, security, stability, sovereignty, or territorial integrity of Ukraine. The President also signed
S. 2183, a related bill requiring Radio Free Europe-Radio Liberty and Voice of America to
increase broadcasting in eastern Ukraine, Crimea, and Moldova.
In December 2014, President Obama signed H.R. 5859, the Ukraine Freedom Support Act. The
measure authorized the President to impose sanctions on Russian defense, energy, and other firms
and foreign persons; authorized increased military and economic assistance for Ukraine;
authorized funding for U.S. Russian-language broadcasting in the region; and offered support for
Russian civil society and democracy organizations. The legislation also urged the Administration
to provide weapons to the Ukraine military, but the Obama Administration rejected the idea,
viewing it as risking a further escalation of the conflict.
This report provides an overview of the situation in Ukraine.
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Contents
Background ..................................................................................................................................... 1
Ukraine’s Current Political Situation............................................................................................... 3
Ongoing Challenges .................................................................................................................. 4
Current Economic Situation ............................................................................................................ 6
Energy Issues ...................................................................................................................... 7
Foreign Policy ................................................................................................................................. 8
Relations with the European Union .......................................................................................... 9
Relations with Russia .................................................................................................................... 10
Conflict in Eastern Ukraine ...................................................................................................... 11
A Second Attempt at a Ceasefire ...................................................................................... 14
EU and U.S. Sanctions ............................................................................................................ 15
Relations with the United States.................................................................................................... 16
U.S. Aid to Ukraine........................................................................................................... 17
Congressional Response to Ukraine Crisis.................................................................................... 18
Outlook .......................................................................................................................................... 19
Figures
Figure 1. Ukraine ............................................................................................................................. 1
Figure 2. Separatists Areas in Ukraine .......................................................................................... 12
Appendixes
Appendix. U.S. Sanctions on Russia ............................................................................................. 21
Contacts
Author Contact Information .......................................................................................................... 22
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Figure 1. Ukraine
Sources: Map created by CRS. Map information generated by Hannah Fischer using data from the National
Geospatial Intelligence Agency (2016), Department of State (2015), Esri (2014), and DeLorme (2014).
Background
Ukraine, comparable in size and population to France, is a large, important, European state. It
occupies the sensitive position between Russia and North Atlantic Treaty Organization (NATO)
member states Poland, Slovakia, Hungary, and Romania. Because many Russian politicians, as
well as ordinary citizens, have never been fully reconciled to Ukraine’s independence from the
Soviet Union in 1991, there was strong support for the annexation of Crimea and a continuing
belief that the country belongs in Russia’s political and economic orbit. It has been reported that
in 2008, Russian President Putin told U.S. President George W. Bush that Ukraine was not a state
and that while the western part of the country may belong to Eastern Europe, eastern Ukraine was
Russia’s.1 On the other hand, the U.S. and European view (particularly in Central and Eastern
Europe) is that a strong, independent Ukraine is an important part of building a Europe whole,
free, and at peace.
Since Ukraine achieved independence in 1991, Ukraine’s political scene has been dominated by
“oligarchs” (powerful, politically well-connected businessmen, mainly based in eastern and
southern Ukraine), which had divided up the country’s economic assets among themselves and
regularly manipulated the government budget for their own profit. President Viktor Yanukovych,
1
Stephen Blank, “Perspectives on Russian Foreign Policy,” Army War College Strategic Studies Institute, September
2012.
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who was elected in February 2010, drew his main support from oligarchs from the Donets Basin
(Donbas) region of eastern Ukraine. His government was criticized for high-levels of corruption,
in part committed by Yanukovych’s own family and close associates. U.S. and European Union
(EU) officials expressed strong concern over the government’s human rights record, especially
the targeting of opposition leaders for selective prosecution.
Many observers had believed that, despite growing dissatisfaction with the Yanukovych
government beginning in 2013, there was little likelihood of public unrest in Ukraine, given the
failure of the government that emerged after the 2004/2005 pro-democracy “Orange” revolution
as well as widespread disillusionment with the political class as a whole. However, in November
2013, the Yanukovych government, under pressure from Moscow, made a last-minute decision to
not sign an association agreement with the European Union that would have aligned Ukraine
more toward Europe, at least in the areas of economics and trade. The decision sparked antigovernment demonstrations in Kyiv’s central Maidan Nezalezhnosti, or Independence Square.
Smaller protests occurred in other Ukrainian cities, mainly in opposition strongholds in western
and central Ukraine. Observers noted that when government security forces took forceful actions
against the demonstrators, public reaction shifted from just protesting against Ukraine’s failure to
sign the association agreement to the government’s lack of respect for the basic human dignity of
Ukraine’s citizens.
In February 2014, when the Yanukovych government embarked on its most violent crackdown
against the Maidan, resulting in over 100 persons being killed, it quickly sealed its own demise.
The death toll likely caused support in the government-controlled Ukrainian Rada (parliament)
for the crackdown, and ultimately for the regime, to collapse. On February 20, 2014 the Rada
approved a resolution calling for the withdrawal of the Interior Ministry and military forces from
Kyiv to their bases. As protestors began occupying government buildings and as the situation in
the streets became more chaotic, Yanukoyvch and many of his supporters in the government and
parliament fled to Russia. After Yanukovych fled Ukraine, the Ukrainian parliament, now
composed mainly of opposition deputies, rapidly passed sweeping measures. The parliament
deposed Yanukovych as president on February 22 for abandoning his duties. The parliament
restored the provisions of the 2004 Ukrainian constitution, eliminating changes made by
Yanukovych to strengthen the presidency and ordered new presidential elections to be held on
May 25, 2014. On February 27, 2013, the Ukrainian parliament approved a new, interim
government, headed by Arseniy Yatsenyuk, a former prime minister. Despite the rapid changes
and formation of a new government, many Maidan protestors viewed the new government
skeptically, suspecting that they were nearly as opportunistic and corrupt as the Yanukovych
regime.
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Ukraine’s Current Political Situation2
On May 25, 2014, Ukraine held a
presidential election. The winner, Petro
Poroshenko, a pro-Western billionaire,
took 54.7% of the vote. Voter turnout for
Ukraine as a whole was around 60%. The
lowest turnout was in the Donetsk and
Luhansk regions in eastern Ukraine, the
stronghold of former President
Yanukovych and where pro-Russia
separatist gunmen seized polling places
and used threats, kidnappings, and other
forms of intimidation to stop the vote.
Ukraine: Basic Facts
Area: Land area approximately 315,028 sq. mi.; slightly
smaller than Texas. Capital: Kyiv
Population: approximately 44.4 million (CIA, The World
Factbook, July 2015 est.).
Ethnicity: 78% Ukrainian; Russian: 17%
Languages: Ukrainian is the official language and first
language of 67% of the population. Russian is spoken by 29%.
Religion: 67% Orthodox Christian
Gross Domestic Product: $371 billion; per capita GDP is
$8,700 (CIA,The World Factbook, 2014 est.).
Political Leaders: President: Petro Poroshenko (since 2014);
Prime Minister: Viktor Yatsenyuk (since 2014); Foreign Minister:
Pavlo Klimkin; Defense Minister: Sepan Poltoral; Parliament
Chairman Volodymyr Groysman
In October 2014, Ukraine held a national
election for the 450-seat Rada. The main
victors were the Petro Poroshenko Bloc
with 132 seats and the People’s Front, led
by outgoing Prime Minister Viktor Yatsenyuk, with 82 seats. Poroshenko and Yatsenyuk
subsequently formed a coalition of pro-West parties that included the Samopomich (Self
Reliance), the populist Radical party, and the Fatherland party. This gave the incoming
government a 288-seat majority.
The Opposition Bloc, composed of supporters of the Yanukovych regime, won 29 seats. Far-right
groups, often held up by Russian propaganda as neo-Nazis gangs dominant in Ukraine, did very
poorly. One group, Svoboda, won only six seats, while another, Right Sector, won only one. Due
to the inability to hold elections in districts threatened by Russian-backed sympathizers, several
of the 450 seats in the parliament remain unfilled.
The overall result was a victory for forces in favor of closer ties with the EU and the United
States. On December 2, 2014, the incoming parliament approved a new government again led by
Yatsenyuk, who returned as prime minister. Representatives of the leading political groups were
all included in the government. With the Poroshenko/Yatsenyuk coalition commanding the
majority of seats, many believed the government would be able not only to adopt much needed
reform legislation but would be in a strong position to garner the 300 votes needed pass
amendments to the Ukrainian constitution in order to strengthen democracy and rule of law.
Prime Minister Yatsenyuk maintained that Ukraine’s main goal was to adopt European standards,
with the ultimate objective of European Union membership for Ukraine. He had consistently
reiterated that a key focus of his government would be to fight corruption, including by reducing
government regulation and the size of the bureaucracy along with minimizing the influence of
certain elements of Ukraine’s society. He stated that the government would cut the number of
taxes it collects and would devolve more budgetary power to local authorities.
In an important symbolic move, Natalie Jaresko, a U.S. citizen and former State Department
official who has lived in Ukraine for over two decades, was named Ukraine’s finance minister. A
Lithuanian citizen was appointed the economy minister. The former president of Georgia, Mikhel
Saakashvili, was appointed mayor of Odessa, and the health minister is also from Georgia. These
2
Some of the information in this report appeared in previous versions of CRS33460 written by Steven Woehrel.
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moves may have been meant to signal that the new government was dedicated to moving the
country toward the West and that these key figures were not from what many Ukrainians believe
was the country’s morally compromised political elite.
Ongoing Challenges
Since taking office, President Poroshenko has launched several political, economic, and judicial
reform initiatives designed to reassure the population that the changes they demanded would be
implemented. The record to date has been mixed. In testimony before the Senate Foreign
Relations Committee in October 2015, Assistant Secretary of State Victoria Nuland stated that the
government is setting up an Anti-Corruption Bureau that will investigate corruption among
government officials. New anti-corruption laws were passed last year, including stricter
provisions against bribery and conflicts of interest, and will require annual disclosures of income
by public officials. With U.S., EU, and UK help, new local prosecutors are being hired, old ones
are tested and retrained, and all will now submit to periodic performance evaluations to root out
corruption and malfeasance.3
On the other hand, some reforms have been slow. According to Secretary Nuland, much difficult
work remains to clean up endemic corruption throughout government and society, at every level;
to stabilize the economy; break the hold of corrupt state enterprises and oligarchs; and reform the
justice system. She also noted that currently only 5% of the Ukrainian population completely
trusted the judiciary. Secretary Nuland stated, “like Ukraine’s police force, the Prosecutor
General’s Office (PGO) has to be reinvented as an institution that serves the citizens of Ukraine,
rather than ripping them off.” For the secretary, that means the PGO “must investigate and
successfully prosecute corruption and asset recovery cases – including locking up dirty personnel
in the PGO itself.” And, the newly created Inspector General’s Office within Ukraine’s
prosecution service must be able to work independently and effectively, without political or
judicial interference.4 Nuland’s comments were given renewed importance when on February 14,
2016, the reform-minded deputy prosecutor resigned, complaining that his efforts to address
government corruption had been consistently stymied by his own prosecutor general, Viktor
Shokin, as well as other government officials. This led to the February 16 resignation of Shokin
after President Poroshenko complained that Shokin was taking too long to clean up corruption
even within the PGO itself.
Others have also observed that it has been very difficult to keep the reform progress moving
forward. According to the Economist Intelligence Unit (EIU), dismantling ingrained structures of
corruption will continue to meet with considerable resistance from organized business-politicalcriminal networks, including some that are still influential in the pro-Western government.5 A
recent example of the difficulties some reformers in the government are experiencing in moving
the process forward was the resignation in early February 2016 of the economy minister, Aivaras
Abromavicius, who complained of political interference from advisors to the president and
members of the Rada and accused some of the political elites of systematically blocking muchneeded reforms and interfering in the fight against corruption.
There were other signs of potential trouble ahead for the governing coalition. In August 2015, the
first reading of a controversial constitutional amendment on administrative decentralization for
3
Testimony of Assistant Secretary of State Victoria Nuland before the Senate Committee on Foreign Relations,
October 8, 2015.
4
Ibid.
5
Economist Intelligence Unit, Country Report on Ukraine, January 18, 2016.
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the Donbas region was passed by the Rada, but not with the 300 votes necessary to amend the
constitution. According to some, the debate opened up serious splits within the governing
coalition.6 Such tensions inside the Rada appear to have made it harder for the decentralization
law to muster the 300 votes needed for its inclusion in the constitution as required by the Minsk-2
agreement (see below). Poroshenko has found himself in the middle of a struggle between those,
including the EU and United States, who want to move forward toward a settlement of the
conflict in the east at all costs and those more hardline elements in the country who do not want
to make any further concessions to Russia or the separatists until they take significant steps to end
the conflict and reunify Ukraine.
In September 2015, the Radical Party quit the governing coalition over the decentralization issue.
In January 2016, the leadership of the Self Reliance Party called for a no-confidence vote against
Prime Minister Yatsenyuk, threatening to leave the coalition if the vote was not held. The same
day, parliament chairman Volodymyr Groysman announced that the legislature would conduct a
review of the work of the cabinet beginning February 16, which could precede a vote of no
confidence on the Yatsenyuk government. At that point, questions arose as to whether the prime
minister could retain his position as his detractors began to accuse him of treating some of the
wealthy oligarchs, whom Yatsenyuk vowed to reform, with deference. Some believed that
changes would have to be made in the government in order to retain any semblance of stability.7
On February 15, President Poroshenko asked for Yatsenyuk’s resignation over the slow pace of
reform and because he felt the prime minister no longer enjoyed the support of the government
coalition or the Rada. However, on February 16, Yatsenyuk barely survived a vote of no
confidence in the Rada when only 194 of the required 226 Members of Parliament voted against
him. The outcome of the vote has further complicated the political environment because while
Poroshenko argued that change may be necessary to reassure the public, a majority in the Rada,
including many in Poroshenko’s own political bloc, refused to support the ouster of Yatsenyuk.
After the vote, Yatsenyuk noted that while he would not step down, he would consider replacing
some of his cabinet.
For some Ukraine observers, the recent shift among the various political leaders has triggered fear
among reformers that Ukraine might repeat the failure of the earlier Orange Revolution, the
leaders of which, Prime Minister Yulia Tymoshenko and President Victor Yushchenko, quarreled
bitterly after attaining power. Their mutual hostility paralyzed the government, alienated voters,
and delivered the presidency to Victor Yanukovich in 2010.8 For these observers, history may be
about to repeat itself.
Despite the recognized progress made in some areas of reform, opinion polls have shown that
public skepticism remains high regarding the Poroshenko/Yatsenyuk government’s commitment
to make a serious impact in fighting the country’s deeply ingrained, crippling problem with
corruption and to adopt other legislation seen necessary to move Ukraine forward. As evidence of
what appears to be a growing trend of disenchantment, some point to the October 2015 local
elections held throughout the country where Yatsenyuk’s People’s Front did not even participate
because polls indicated that the party had experienced a significant decline in support in some
regions of the country. And, in a public opinion poll conducted in November 2015 for the
6
Ibid.
“Ukraine: What Happens in the East Starts in Kiev,” Stratfor, February 4, 2016.
8
Elizabeth Pond, “Gunfight at the Ukraine Corral,” Institute for International Strategic Studies, February 4, 2016.
7
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International Republican Institute, only 27% of those polled expressed a favorable view toward
President Poroshenko, and only 12% looked favorably on Prime Minister Yatsenyuk.9
Whether a revamped government under the continued leadership of Yatsenyuk or a new
government, led by a new, consensus prime minister, can be formed quickly, thus avoiding a snap
general election, it is unclear just how much success in addressing corruption can be achieved. In
the interim, a new level of disenchantment on the part of an already skeptical public could spell
trouble for Poroshenko.
Current Economic Situation
After Russia proper, the Ukrainian republic was the most important economic component of the
former Soviet Union, producing about four times the output of the next-ranking republic. Its
fertile soil generated more than one-fourth of Soviet agricultural output.10 (According to the U.S.
Department of State, this remains the case as Ukraine exported a record 33.5 million tons of grain
in 2014.11) In addition, Ukraine’s diversified heavy industry, concentrated in the eastern portion
of the country, supplied equipment and raw materials to industrial facilities and mining sites
within Ukraine and Russia.
Although its economy was in decline in 2013, some believe Ukraine’s primary economic
challenges are not all self-inflicted. Many are the result of Russia’s aggressive actions against
Ukraine. Russia’s annexation of Crimea in March 2014 seized 4% of Ukraine’s GDP.
Subsequently, Russia’s support for separatists in eastern Ukraine, a region that accounted for 10%
of the country’s GDP in 2013, resulted in the region’s production plummeting by 70%, costing
Ukraine some 7% of its 2013 GDP.
Since 2013, Russian trade sanctions have slashed Ukraine’s exports to Russia by 70%—
accounting for a drop of 18% in Ukraine’s total exports. Last year alone, Ukraine’s exports to
Russia—which included machinery, steel, agricultural goods, and chemicals—fell by half.
Logistical issues, the lack of commercial links, and the specialization of some products meant that
Ukrainian goods could not be redirected in the short term away from the Russian market to other
markets, particularly in Europe. It is estimated that the loss of the Russia market likely resulted in
a 6% decline in Ukraine’s GDP. In addition, with Russia’s aggression in Ukraine still unsettled,
few want to invest in what could become an extended war zone. As a consequence, Ukraine’s net
foreign direct investment, which was slightly over 3% of GDP before the start of hostilities, has
evaporated.12
Since 2014, some good news has been noted. According to the Economist Intelligence Unit’s
(EIU’s) most recent assessment,13 during 2015 signs of financial and economic stabilization
began to appear as a result of a series of measures, including a new $17.5-billion program loan
approved by the IMF in March 2015, a steep rise in interest rates that helped to support the
hryvnya (Ukraine’s currency). In August 2015, the government announced that a deal on the
restructuring of up to $18 billion of Ukraine’s public debt had been reached with private creditors.
In December 2015, the IMF tweaked its rules regarding lending to countries in arrears to other
9
Public opinion survey of residents of Ukraine conducted between November 19-30, 2015, by the Rating Group of
Ukraine for the International Republican Institute.
10
CIA, The Word Factbook, January 5, 2016.
11
Secretary Nuland’s testimony before the Senate Foreign Relations Committee, October 2015.
12
Anders Aslund, “Russia’s War on Ukraine’s Economy,” July 9, 2015.
13
Economist Intelligence Unit, Country Report on Ukraine, January 18, 2016.
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states, allowing Ukraine to continue to receive IMF funding even though the government has thus
far refused to repay a $3 billion bond, issued by the previous government and held by Russia.
In December 2015, the Rada adopted a 2016 budget that included changes to the tax code. The
approved budget would attempt to reduce the budget deficit target to 3.7% of GDP, down slightly
from the 2015 target of 4.3% of GDP. According to the EIU, this is in line with the government’s
commitments made as part of its April 2014 IMF loan of $17 billion. Passage of the budget will
allow the IMF to continue to lend money to Ukraine. Other commitments made to the IMF
included maintaining a flexible exchange rate for its currency, increasing household gas prices to
56% of the import price and heating prices to about 40% of the import price in 2014. The IMF
also wanted a commitment to make rapid progress on reforms, including further energy price
increases, bank restructuring, governance reforms of state-owned enterprises, and legal changes
to implement anti-corruption and judicial reforms.14 In February 2016, IMF Director Lagarde
warned Prime Minister Yatsenyuk that reforms were taking too long and that continued IMF
support for Ukraine was in jeopardy unless the pace of reforms was increased.
The budget debate in the Rada was difficult as many parliamentarians noted that the fiscal
austerity focus of the budget, the ongoing conflict in the east, and recession have all contributed
to a downturn in living standards, leading to a rapid decline in public support for the government.
In late December 2015, the central bank of Poland announced that it would establish a
zloty/hryvnya currency swap line with the National Bank of Ukraine. The main purpose of the
initiative was to strengthen Ukraine’s financial system, stabilizing the hryvnya and promoting an
increase in bilateral trade between the two countries.
As noted above, when the free-trade agreement with the EU went into effect in January 2016,
Russia suspended its own free-trade deal with Ukraine and banned imports of Ukrainian food—to
which Ukraine has responded in kind. In the short term, any positive impact of the EU free-trade
deal could be offset by Russia’s countermeasures. In 2016, the EIU expects a weak economic
recovery, owing to the effect of Russia’s trade bans and still high domestic political risk, which
could dampen the recovery. The EIU forecasts a growth of around 1% in 2016.15 On January 25,
2016, the Ukrainian Central Bank issued its own revised forecast, estimating that growth would
only reach 1.1% in 2016.
Energy Issues
Energy has long been a key factor in Ukraine’s relations with Russia as Ukraine has historically
been heavily dependent on Russia for its energy supplies. In 2012, 63% of Ukraine’s natural gas
consumption came from Russia, as well as nearly three-quarters of its oil and other liquid fuels.16
However, Ukraine’s vulnerability to Russian pressure has been mitigated by the fact that the main
oil and natural gas pipelines to Central and Western Europe transit its territory. In 2014, about
40% of Russian natural gas destined for Europe transited Ukraine. Past Russian efforts to greatly
increase gas prices for Ukraine provoked a crisis that resulted in a cutoff of Russian gas to
Western Europe for several days in January 2006. A second gas crisis occurred in January 2009,
resulting in a gas cutoff of nearly three weeks.
Until recently, Russia had long sought control of Ukraine’s natural gas pipelines and storage
facilities. Moscow’s efforts were unsuccessful, even with friendly governments in Kyiv, due to
14
See https://www.imf.org/external/np/sec/pr/2015/pr1550.htm.
Op. cit.
16
U.S. Energy Information Agency, Country Brief: Ukraine, http://www.eia.gov/todayinenergy/detail.cfm?id=15411.
15
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Kyiv’s refusal to cede control of one of its key economic assets. In recent years, Russia, in an
attempt to pressure Ukraine over the pipelines, negotiated with several European countries to
build pipelines that would bypass Ukraine. Gazprom (Russia’s state-controlled energy company),
having reached an agreement with Germany, constructed a gas pipeline under the Baltic Sea
(called Nord Stream). Moscow had also proposed a pipeline through the Balkans (called South
Stream) to Western Europe. However, annoyed by EU objections that the project, as planned,
violated EU rules, Russia cancelled the South Stream project in December 2014. Russia then
announced that beginning in 2019, it would no longer ship gas to Europe through Ukraine and
would build a pipeline through Turkey to the Greek border (dubbed Turkish Stream).
Russia has also used gas prices as a tool in its policies toward Ukraine. Russia had raised the
natural gas price for Ukraine from $268 per thousand cubic meters (tcm) while President
Yanukovych was in power to $485 per tcm of gas when Ukraine’s new government took power,
an increase of about 80%. Ukraine refused to pay the increased amount and demanded a new gas
contract with a lower price. Russia responded in June 2014 by cutting off natural gas supplies to
Ukraine for non-payment of debts. (Ukraine continued to allow gas destined for Western Europe
to transit its territory.) In October 2014, the EU brokered a deal between Gazprom and Ukraine on
gas supplies at a lower price through March 2015 in exchange for Ukraine’s repayment of some
of its debts to Gazprom. That agreement was further extended to the end of 2015.
Ukrainian leaders acknowledge that in order to avoid likely future Russian efforts to use energy
supplies as a political weapon, Ukraine would have to sharply reduce its dependence on Russian
gas. In 2015, Ukraine began to import more significant amounts of gas from Poland, Hungary,
and Slovakia by reconfiguring the pipelines to “reverse flow” supplies.
By November 2015, buoyed by lower energy consumption due to the economic slowdown in
Ukraine, greater availability of gas from EU countries, increases in the price of gas to its
consumers, and the fact that the government no longer had to supply the energy-consuming
region of the Donbas, the Ukrainian government ordered Naftogaz, the state-run gas monopoly, to
cease buying gas from Russia. The Ukrainian government’s decision to stop buying gas from
Gazprom is part of a broader trend toward the dismantling of bilateral Russia-Ukraine economic
ties. However, according to the EIU, Ukraine is currently only able to do without Russian gas
because a deep economic contraction has reduced demand.17
In the long term, some believe Ukraine could develop its own shale gas deposits and improve
exploitation of its conventional gas reserves; import liquefied natural gas; or import gas from
Azerbaijan, Central Asia, and elsewhere via pipelines through the EU’s planned Southern Energy
Corridor. Ukraine will also to have to make much greater strides in energy conservation, which
has required a steep and politically unpopular hike in natural gas prices, including for households.
Foreign Policy
Given the significant domestic problems facing the Poroshenko/Yatsenyuk government, the scope
of Ukraine’s foreign policy is focused on a few main foreign policy priorities. These include to
secure international support for Ukraine’s sovereignty and territorial integrity, including nonrecognition of Russia’s annexation of Crimea; to reorient its economy as quickly as possible
toward Europe; and to seek continued international assistance to ameliorate the country’s dire
economic situation.
17
Economist Intelligence Unit, Country Report on Ukraine, December 2015.
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In December 2014, the Ukrainian parliament overwhelmingly renounced Ukraine’s former
neutral, “non-bloc” status and indicated a preference for closer relations with NATO. After taking
office, President Poroshenko requested assistance from NATO for its military. At the September
2014 NATO summit in Wales, the alliance agreed to set up four trust funds to help Ukraine’s
military in such areas as logistics, command and control, military personnel issues (including
wounded soldiers), and cyberdefense.18
Relations with the European Union
Ukraine has been a priority country within the EU’s Neighborhood Policy and the Eastern
Partnership for several years. The EU policy is intended to forge a close relationship that
encompasses political association and economic integration that could prepare Ukraine for
eventual membership in the union. The desire by a least some segments of the Ukrainian public
for stronger relations with the EU and the West fueled the initial protests in late 2013 that
culminated in the collapse of the former Yanukovych regime.
In response to the crisis in Ukraine, in March 2014, the European Commission unveiled an initial
support package of €11 billion (about $15.5 billion) focusing on the comprehensive reform
process initiated by the new government in Ukraine. The package included €1.6 billion (about
$2.2 billion) in macro financial assistance loans to support Ukraine’s government finances. The
EU also agreed to provide some €1.5 billion (about $2.17 billion) in grant aid between 2014 and
2020 to assist Ukraine’s reform efforts. The package includes up to €9 billion (about $11.16
billion) in loans from the European Investment Bank and the European Bank for Reconstruction
and Development. The package also included close to €110 million (approximately $112.5
million) aimed at developing the private sector, including small and medium enterprises.
The European Union’s main instrument to promote European values (such as human rights,
fundamental freedoms, rule of law, political dialogue and reform) and deepen economic ties with
Ukraine is the association agreement (AA). The AA includes a free trade agreement with the EU,
formally known as a deep and comprehensive free trade agreement (DCFTA). Although the
DCFTA further opens potentially lucrative EU markets to Ukraine, it also requires Ukraine to
adopt EU legislation and standards and to gradually expose Ukrainian firms to tough competition
from EU imports. Approximation to EU norms could also lead to increased foreign investment in
Ukraine.
The EU and Ukraine signed the parts of Ukraine’s association agreement dealing with political
issues in March 2014, and the parts dealing with economic issues (including the DCFTA) were
signed on June 27. Ratification of the pact was delayed due to Russian threats to block Ukrainian
imports from its markets unless the pact was modified to protect Russia’s interests. The EU and
Ukraine refused to do so, and the European Parliament and the Ukrainian parliament ratified the
accord on September 16, 2014. Moscow responded by closing off the import of selected
Ukrainian products. However, the EU and Ukraine did appear to bow to Russian threats by
agreeing to postpone implementation of the DCFTA until 2016. In the interim, Ukraine was
granted unilateral trade preferences from the EU.
The association agreement with the EU came into effect on January 1, 2016, with the promise of
a gradual improvement in the Ukrainian economy once the trade relationship begins to take hold
18
For more on NATO’s response to the Ukraine crisis, see CRS Report R43478, NATO: Response to the Crisis in
Ukraine and Security Concerns in Central and Eastern Europe, coordinated by Paul Belkin. See also
http://www.nato.int/cps/en/natohq/news_112695.htm.
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and matures. As expected, as soon as the agreement went into force, Russia suspended its own
long-standing free-trade deal with Ukraine and banned imports of Ukrainian food.
In addition to the aid package and the association agreement, the EU established a High Level
Investment Forum/Task Force and created a dedicated Ukraine Support Group, composed of
experts from EU institutions and member states in different sectors to provide advice and support
to the Ukrainian authorities in the mentioned reform sectors.19 The EU also committed to help
modernize Ukraine’s natural gas transit system and to work on reversing the flow of pipelines
through Slovakia so that Ukraine can receive gas from the west. Finally, the EU agreed to
accelerate its Visa Liberalization Action Plan to allow Ukrainians to travel throughout the EU.
Relations with Russia
Ukraine was the center of the first eastern Slavic state, Kyivan Rus, which during the 10th and 11th
centuries had become one of largest and most powerful states in Europe. Kyivan Rus was
eventually incorporated into the Grand Duchy of Lithuania and subsequently into the PolishLithuanian Commonwealth. During the latter part of the 18th century, most Ukrainian territory
was absorbed by the Russian Empire. Following the collapse of czarist Russia in 1917, Ukraine
achieved a short-lived period of independence (1917-20), but was reconquered and endured
Soviet rule until Ukraine achieved independence in 1991following the dissolution of the Soviet
Union. Although independent, Russian political and economic influence over Ukraine remained
strong with Moscow determined to ensure that despite any changes in the government in Kyiv,
Ukriane would remain on good terms with Russia.
In some ways, recent Russian perspectives on Ukraine are seen as the culmination of longstanding Russian resentment of the outcome of the Cold War. In 2005, Russian President
Vladimir Putin called the collapse of the Soviet Union “a major geopolitical disaster.” Russian
leaders have also asserted that nations in the post-Soviet region should remain of privileged
interest to Russia. Part of the justification for that assertion is an alleged right to protect Russian
citizens and “compatriots” (persons deemed to be linked to Russia by language, culture, or
ethnicity).
Moreover, Ukraine has a particularly important place in Russian psychology, according to many
experts. Putin has referred to Ukrainians as “brothers” of the Russian people. Eastern Orthodox
civilization, in which Russians see themselves as the leading force, got its start in Kyvin Rus
when Prince Vladimir converted to Christianity in AD 988. Russians often point out that their
ancestors spilled a great deal of blood to incorporate Crimea and most of the rest of Ukraine into
the Russian Empire, and a great deal more to keep it within the empire (and its successor, the
Soviet Union) through several wars.
Ethnic Russians make up around 17% of Ukraine’s population, according to the 2001 census.
They are concentrated in the southern and eastern parts of the country. They make up
approximately 58% of the population in the Crimea. In addition, many ethnic Ukrainians in the
east and south also tend to be Russian-speaking, are suspicious of Ukrainian nationalism, and
have supported close ties with Russia. Soviet leaders concentrated important heavy industries
(including defense industries) in eastern Ukraine, which tied the region to Russia economically
and fostered what many analysts have viewed as a lingering Soviet-style mindset there. This is
particularly true of the Donbas region, on the border with Russia.
19
See http://europa.eu/rapid/press-release_MEMO-14-159_en.htm.
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Until the collapse of the Yanukovych regime in February 2014, Putin preferred using indirect
methods of influence in Ukraine. These included “carrots,” such as lucrative business deals with
Ukrainian politicians and oligarchs, but also “sticks,” such as de facto economic sanctions and
using Russian media (which was and is still popular in Ukraine) to attack uncooperative leaders.
Russia reacted with great hostility to the emergence of a new, more pro-Western leadership in
Ukraine in February 2014 by seizing Ukraine’s Crimean peninsula. Starting on February 27,
heavily armed Russian-speaking troops poured into Crimea, seizing airports and other key
installations throughout the peninsula. At the time, Russian President Vladimir Putin claimed that
the troops were not Russian Federation military forces, but only local Crimean self-defense
forces. On March 16, the Crimean authorities held a referendum on Crimea’s annexation to
Russia. According to Crimean officials, Crimea’s union with Russia was allegedly approved by
96% of those voting, with a turnout of 83%. Ukraine, the United States, the European Union, and
other countries denounced the referendum as illegal and not held in a free or fair manner. Russian
President Vladimir Putin signed a “treaty” with Crimean leaders on March 18, 2014, formally
incorporating Crimea into Russia. In April 2014, Putin suggested that Russian Federation military
forces did in fact invade Crimea.
Since then, the Crimea front has been relatively stable as the reality of its return to Ukraine
continues to fade. Recently, however, an incident involving a disruption in the supply of
electricity from Ukraine to Crimea resulted in recriminations and accusations of sabotage and a
discontinuation of trade between Ukraine and the peninsula.
Conflict in Eastern Ukraine
In addition to Russia’s annexation of Crimea, in March 2014, thousands of pro-Russian protestors
began organized demonstrations in eastern Ukraine, especially in the major cities of Donetsk and
Luhansk in the Donbas region and in Kharkiv. Some demonstrators favored union with Russia,
others only greater autonomy from the government in Kyiv. Demonstrators seized government
buildings. They also faced off against pro-Maidan demonstrators. Unrest in eastern Ukraine took
an even more ominous turn in April 2014, when armed men stormed and occupied key
government buildings and broadcast facilities in Donetsk and Luhansk, as well as in Slovyansk
and more than a dozen other towns in the Donbas region. The government in Kyiv responded
with military force and employed local militias to help push back the separatists.
The Ukrainian government said Russian intelligence agents orchestrated the separatists’ attacks
and released video, photographs, and audio recordings allegedly identifying them. Senior U.S.
officials and NATO Supreme Allied Commander General Philip Breedlove stated that they
believed Russia had played a leading role in the activities of the armed separatist groups in
eastern Ukraine.
On May 11, 2014 the armed separatist forces, in the guise of the “Donetsk People’s Republic”
and the “Luhansk People’s Republic,” held “referendums” on their “sovereignty.” According to
the organizers, the question of independence from Ukraine was approved by 89% of those voting
in Donetsk region, and by 96% in Luhansk region, with a turnout of 75%. No international
observers monitored the vote, and witnesses reported rampant irregularities. The leaders of the
“Donetsk People’s Republic” and the “Luhansk People’s Republic” declared their entities to be
sovereign states after the vote. The Ukrainian government denounced the referendums as illegal.
After a brief unilateral cease-fire by Ukraine in late June failed to lead to progress on a peace plan
put forward by newly elected Ukrainian President Poroshenko, Ukraine restarted an “anti-terrorist
operation” against the separatist forces. In July and August 2014, Ukraine successfully dislodged
the gunmen from strongholds in Slovyansk, Kramatorsk, and other towns, and began to move on
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separatist forces in the key cities of Donetsk and Luhansk. It was during this time that the tragedy
of Malaysian Airlines Flight 17 occurred. The plane flying over Ukraine was downed by a
surface-launched missile on July 17, 2014. Accusations flew on both sides as to who fired the
missile, but for some it was clear, and later determined by the Dutch government after it
conducted a lengthy investigation, that the missile was fired by the separatists forces using a
Russian-supplied Buk missile.20
In late August and early September, Russia stepped up its support to the separatists, including by
deploying thousands of Russian troops to fight in Ukraine (a contention that Russia still denies
despite overwhelming evidence to the contrary).21 Although mostly denied by Moscow, Russian
troops and the separatists were apparently supplied with tanks, armored personnel carriers,
artillery, surface-to-air missiles, and other military equipment from Russia. As a result, Ukrainian
forces lost ground and suffered heavy casualties.
Figure 2. Separatists Areas in Ukraine
Sources: Map created by CRS. Map information generated by Hannah Fischer using data from the National
Geospatial Intelligence Agency (2016), Department of State (2015), Esri (2014), and DeLorme (2014).
20
“MH17 Ukraine Disaster: Dutch Safety Board Blames Missile,” BBC News, October 15, 2015.
For an unofficial translation of the Russian-language original, see, for example, http://www.ft.com/intl/cms/s/0/
21b8f98e-b2a5-11e4-b234-00144feab7de.html#axzz3RXfwD5VC.
21
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Perhaps fearing further casualties and the loss of more territory, Ukraine agreed to a ceasefire
plan during talks with separatist representatives and Russian officials in Minsk, Belarus, on
September 5, 2014. Among other provisions, the plan (Minsk-1) called for a ceasefire along the
then-current lines of control, an exchange of hostages and/or prisoners, the monitoring of the
cease-fire and of the Russian-Ukrainian border by the Organization for Security and Cooperation
in Europe (OSCE), and the withdrawal of “illegal armed groups, militants, as well as militants
and mercenaries from the territory of Ukraine.” The Minsk agreement also called for Ukraine to
adopt a law on amnesty for those involved in the war in the Donbas and other provisions.
The signing of the agreement led to the end of the massive Russian-led offensive on Ukrainian
forces but did not fully end the fighting. Nor were any of the points of the Minsk-1 protocol fully
implemented. Sporadic, sometime intense, fighting continued, resulting in over 1,300 deaths since
the Minsk protocol was signed, and Ukrainian officials indicated that the separatists had seized
over 500 sq. km of Ukrainian territory since the protocol’s signature. In January 2015, President
Poroshenko said Russia had 9,000 troops inside Ukraine, along with hundreds of tanks, armored
fighting vehicles, and artillery pieces.22
In response to the Russian annexation of Crimea and the conflict in the Donbas region, both the
United States and the European Union initiated a series of sanctions and travel bans against
Russian and Ukrainian personnel who were identified as being part of the destabilization of
Ukraine (see below). Both made the full implementation of the Minsk protocol a precondition for
easing sanctions on Russia.
A particularly violent flare-up of attacks by the pro-Russian separatists against Ukrainian-held
territory in late January 2014 and early February 2015 led the United States and the EU to warn
Russia that it faced possible additional sanctions for its military intervention in Ukraine.
While actively engaged with our allies in Europe in seeking a resolution of the crisis, the
Administration had, for the most part, left the leading role in negotiating such a settlement to
France, Germany, and Ukraine, whose representatives have met with those of Russia and the
rebels in the so-called “Normandy format,” named after the place where the meetings first
occurred in 2014. Nevertheless, President Obama and Administration officials have been in
regular contact with the main figures in the talks, including President Putin, President
Poroshenko, German Chancellor Angela Merkel, and President Francois Hollande of France.
22
Some experts believe Russian troop levels in Ukraine are significantly lower. U.S. Ambassador to NATO Douglas
Lute has said Russian troops in Ukraine are mainly intelligence officers serving a command and control function and
Russian servicemen operating highly sophisticated, specialized equipment, such as that used for electronic warfare and
air defense. See http://www.reuters.com/article/2015/02/04/us-ukraine-crisis-nato-usa-idUSKBN0L81S220150204.
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A Second Attempt at a Ceasefire
Recognizing the failure of the Minsk-1
protocol to end the conflict and begin the
process of achieving a political resolution to
the Donbas crisis, the presidents of France,
Russia, and Ukraine and Chancellor Angela
Merkel of Germany met again in Minsk in
early February 2015 to try to secure a new
agreement to stop the fighting. On February
12, a cease-fire agreement was signed to take
effect on February 15. The Minsk-2 agreement
entered into force on February 15, 2015 (see
box).23
As most of the terms of the agreement were
similar to those of the original Minsk-1
protocol, which failed to secure the peace,
some observers expressed skepticism about
whether this agreement was any more likely to
be implemented than the previous one.
Minsk-2
1. Immediate, full bilateral ceasefire as of February 15.
2. Withdrawal of all heavy weapons by both sides, to be
completed within 14 days.
3. Effective monitoring regime for the ceasefire and
withdrawal of heavy weapons by the OSCE.
4. Launch of dialogue on modalities of local elections in
accordance with Ukrainian legislation.
5. Pardon and amnesty of figures involved in the conflict.
6. Release of all hostages and other illegally detained
people, based on the “all for all” principle.
7. Safe delivery of humanitarian aid to those in need,
based on an international mechanism.
8. Restoration of full social and economic links with
affected areas.
9. Full Ukrainian control over its border with Russia
throughout the conflict zone.
10. Withdrawal of all foreign armed groups, weapons,
and mercenaries from Ukrainian territory.
11. Constitutional reform in Ukraine with
decentralization as a key element; a new constitution by
the end of 2015.
12. Local elections in Donetsk and Luhansk regions to be
held according OSCE standards.
Some expressed concern that the Minsk-2
agreement amounted to a step toward
transforming the occupied parts of Donbas
into a new Transnistria,24 and that the main difference between the Minsk-1 agreements and the
Minsk-2 agreement is that more conditions had been placed on Ukraine. Another point made by
skeptics was the fact that Putin, the architect of the crisis, managed to avoid binding himself
through the agreement. In fact, Minsk-2 contains no obligations whatsoever for Russia, which is
not even mentioned in the agreement. It was not even signed by Putin but by Mikhail Zurabov,
Russia’s ambassador to Ukraine.25
By the beginning of 2016, little had been accomplished in fully implementing the Minsk-2
provisions despite the commitments by both sides to do so. The cease-fire continues to hold,
although sporadic fighting does flare up and Ukrainian soldiers and rebels continue to be killed.
Some of the rebel’s heavy weapons and military personnel supplied by Russia have been
withdrawn from the front lines but have not been removed from Ukraine altogether. And while
President Poroshenko won a hard-fought victory in initially moving legislation to grant more
autonomy for the Donbas called for in the Minsk-2 agreement through the Rada, he does not have
the necessary votes to pass this as an amendment to the constitution and is unlikely to secure
those votes unless major progress is made by the other side. On the other hand, the separatists
appear to have no intention to ensure free and fair elections in the disputed regions, and Russia
seems little inclined to push for a resolution of the conflict even though some observers have
23
For an English-language translation of the Minsk protocol, see http://www.kyivpost.com/opinion/op-ed/oscereleases-the-12-point-protocol-agreements-reached-between-ukraine-russia-and-separatists-in-minsk-363816.html. For
the Russian-language original, see http://www.osce.org/ru/home/123258?download=true.
24
Transnistria is a strip of eastern Moldova that separated from Moldova and is supported by Moscow, including with
some 1,500 Russian military personnel on the ground.
25
Anders Asland, “Minsk-2: President Putin’s Tactical Victory,” RBC Daily, February 13, 2015.
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suggested that Putin may have been moving in that direction—offering his actions in Syria as the
quid pro quo.
Moscow has so far declined to recognize the Donetsk and Luhansk “people’s republics” as
independent countries or annex them to Russia. However, Russian official statements and the
Minsk-2 cease-fire agreement view the separatist regimes as legitimate interlocutors for Kyiv in
determining the future of Ukraine. Russia has also made demands on the subject of Ukraine’s
political future. Russian Foreign Minister Lavrov has called for making Russian the second
official language in Ukraine and for constitutional reforms that would confirm Ukraine’s neutral
status. Moscow has also insisted on the decentralization of Ukraine, under which the various
regions would have wide autonomy in the areas of the economy, finances, culture, language,
education, and external economic and cultural ties with neighboring countries or regions.
Many experts on Russia have speculated that Putin’s key objective in Ukraine has been and
continues to be to weaken and discredit the pro-Western government in Kyiv and Western policy
generally. And, according to some, Moscow’s policy in Ukraine’s east is starting to look more
likely to strengthen the so-called Donetsk (DNR) and Luhansk People’s Republics (LNR). For
instance, according to the International Crisis Group, after showing little interest in building
political institutions in the DNR and LNR or enthusiasm for funding social policies, Moscow has
begun in the past four or five months to bankroll pensions, social benefits, and salaries to local
officials and the separatist military, suggesting that the measures are increasingly clear signs
Moscow has decided to transform the crisis into a frozen conflict.26 The outcome would likely at
best amount to a cease-fire in place, with Russia continuing to have control over the RussiaUkraine border, given the unlikelihood of an agreement between Kyiv and the separatists on
elections and decentralization. Such an outcome could still provide Moscow with leverage over
Kyiv but might not afford the same opportunity to destabilize Ukraine as continuing the war.
On another note, what has largely disappeared from official Russian rhetoric for now is the
concept of “Novorossiya;” that is, expanding the Russian-controlled area to include most of
eastern and southern Ukraine, perhaps linking Russian-controlled areas in southern Ukraine with
Crimea. This goal may have seemed easily achievable to Putin in mid-2014 when he first used the
term. Since then, however, Ukrainian forces have become somewhat more capable, and it may
appear to Putin than such an objective would now likely require a massive, and perhaps
politically unacceptable, infusion of Russian military forces to realize. There may also be
financial considerations in that Russia does not want to incur major new expenses in the current
economic environment created by falling oil prices and Western sanctions as well as Russian
commitments in Syria. Nevertheless, given Putin’s past unpredictability, such a scenario cannot
be ruled out.
Russia has taken other steps against Ukraine, including imposing trade sanctions against
Ukrainian imports and cutting all gas and coal deliveries to Ukraine. Ukrainian government
computer servers have been hit by sophisticated cyberattacks, which some experts suggest may
have come from Russia.
EU and U.S. Sanctions
The United States and the European Union strongly condemned the Russian military invasion and
annexation of Crimea and Russia’s ongoing efforts to destabilize eastern Ukraine as violations of
international law. Since 2014, the United States, in coordination with the EU and other countries,
26
“Russia and the Separatists in Eastern Ukraine,” International Crisis Group Briefing No. 79, February 5, 2016.
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has imposed sanctions against Russia in order to increase the costs to Russia of its aggression,
with the objective of pressing it to implement a genuine political settlement with Ukraine.
On March 17, 2014, the day after Crimean authorities held a referendum on joining Russia, the
European Union imposed a visa ban and an asset freeze on 21 figures from Ukraine and Russia
who played roles in Russia’s seizure of Crimea. In March 2014 after President Putin signed an
agreement with Crimean leaders incorporating the region into Russia, the EU imposed sanctions
on 12 additional Russian figures. By May 2014, the EU had added at least 28 additional names of
Russian officials and two companies based in Crimea.
The EU list included some senior government officials and members of the Russian parliament,
but also fairly low-level figures directly involved in the Crimea operation and efforts to
destabilize Ukraine. In contrast to the United States, the EU has stopped short of sanctioning
Putin’s “inner circle” or key firms associated with them.27
For its part, the United States suspended most bilateral cooperation with Russia. On April 2,
2014, the Administration announced that it was suspending several projects planned under the
aegis of the U.S.-Russia Bilateral Presidential Commission as well as some law enforcement
cooperation activities and planned to use that funding for aid instead to Ukraine. The United
States has also placed additional restrictions on defense-related exports to Russia.
In March 2014, the Administration issued an executive order imposing visa bans and asset freezes
against persons who “undermine democratic processes and institutions in Ukraine; threaten its
peace, security, stability, sovereignty, and territorial integrity; and contribute to the
misappropriation of its assets.... ”28 The Administration then issued two additional executive
orders (EO) expanding the scope of the sanctions and announced visa bans and asset freezes
against several senior figures from Russia and the secessionist Crimean government. The EOs
permit the Administration to freeze the assets of persons working in key areas of the Russian
economy, including “financial services, energy, metals and mining, engineering, and defense and
related materiel.”
Observers have noted that sanctions have been crafted to reduce the economic harm to EU
countries, for example by not targeting the sensitive natural gas sector or the sale of dual-use
technologies to civilian firms. Since January 2015, the U.S. and EU have extended the sanctions
on individuals and entities three times. Current key sectoral sanctions are set to expire in June
2016, unless renewed again (for more details on additional sanctions imposed on Russia by the
EU and United States, see Appendix).
Relations with the United States
The United States established diplomatic relations with Ukraine in 1991, following its
independence from the Soviet Union. According to the U.S. Department of State, U.S. policy is
centered on strengthening a democratic, prosperous, and secure Ukraine more closely integrated
into Europe and Euro-Atlantic structures. The U.S.-Ukraine Charter on Strategic Partnership,
27
For the sanctions decision and the initial list of names, see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=
CELEX:32014D0145&rid=5. For the March 21 additions, see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?
uri=CELEX:32014D0151&rid=2. For the April 28 additions, see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?
uri=CELEX:32014D0238&rid=1. For the May 12 additions, see http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=
uriserv:OJ.L_.2014.137.01.0009.01.ENG.
28
See http://www.whitehouse.gov/the-press-office/2014/03/06/executive-order-blocking-property-certain-personscontributing-situation.
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established in 2008, highlights the importance of the bilateral relationship and outlines enhanced
cooperation in the areas of defense, security, economics and trade, energy security, democracy,
and cultural exchanges. The United States has granted Ukraine market economy status giving
Ukraine permanent normal trade relations status. The United States and Ukraine have a bilateral
investment treaty. The U.S.-Ukraine Council on Trade and Investment was established under the
trade and investment cooperation initiative and works to increase commercial and investment
opportunities by identifying and removing impediments to bilateral trade and investment flows.29
According to the Office of the U.S. Trade Representative, Ukraine is the 80th largest trading
partner of the United States, with $2.2 billion in total trade in 2014. U.S. exports to Ukraine
include coal, machinery, vehicles, agricultural products, fish and seafood, and aircraft. U.S.
imports from Ukraine include iron and steel, inorganic chemicals, oil, aircraft, and agricultural
products. U.S. foreign direct investment in Ukraine amounted to $931 million in 2013 (latest year
data is available).
Since the beginning of the crisis in Ukraine in late 2013, the focus of U.S. efforts has been to
support Ukraine’s efforts to reform and increase its cooperation and integration with the European
Union. The United States, in cooperation with the EU and international financial institutions, is
providing financial and technical assistance to Ukraine.
The United States has also provided non-lethal aid to Ukraine’s security sector, including its
army, but has declined so far to provide weapons to Ukraine, out of concern of escalating the
conflict with Russia and making a political settlement less likely. Nevertheless, President Obama
said in February 2015 that providing defensive weapons to Ukraine was an option the
Administration was continuing to consider if diplomatic efforts fail. In a late 2015 visit to
Ukraine, Vice President Biden, while restating U.S. support for Ukraine, warned that the
government had a window of opportunity to implement systemic changes to deepen reforms in all
aspects of life and at all levels of government but that Ukraine had to seize the moment and press
forward and deliver on the promise of the Maidan.30
U.S. Aid to Ukraine
According to the U.S. Agency for International Development (USAID) “Greenbook” website, the
United States obligated over $4 billion in aid to Ukraine from FY1990 through FY2012.31 Since
the crisis that began in late 2013, the United States has committed to provide over $548 million in
assistance to Ukraine, in addition to two $1 billion loan guarantees. With continued progress on
economic reforms and as conditions warrant, the Administration is likely to provide a third loan
guarantee of up to $1 billion, making the total U.S. commitment $3 billion.32 U.S. economic and
technical advisors advise almost a dozen Ukrainian ministries and localities.33
In its FY2017 budget request, the Administration asked for $192.4 million in Economic Support
Funds (ESF) for Ukraine to continue to address corruption, government reform, support for civil
society, and other initiatives. The Administration also requested $15 million in International
Narcotics Control and Law Enforcement (INCLE) funding to support justice and law enforcement
29
U.S. Department of State, Country Notes: Ukraine, 2015.
Vice President Biden’s meeting with Ukraine President Poroshenko.
31
See https://eads.usaid.gov/gbk/.
32
See http://www.treasury.gov/press-center/press-releases/Pages/jl9751.aspx.
33
Testimony of Assistant Secretary of State for Europe and Eurasia, Victoria Nuland, before the Senate Foreign
relations Committee, October 2015.
30
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reform. The request also included $2.9 million in International Military Education and Training
(IMET) funds and $42 million in Foreign Military Financing (FMF) aid for Ukraine from the
Overseas Contingency Operations (OCO) account.34
U.S. technical assistance has been aimed at helping Ukraine stabilize its financial sector; carry out
reforms in the agricultural sector; improve the business climate; support constitutional reforms;
bolster civil society to participate and monitor the reform process; and support independent
media.
Assistance is also devoted to helping Ukraine develop laws and regulations to fight corruption,
one of Ukraine’s biggest challenges. Technical assistance is also being used to improve its energy
security, including by enhancing energy efficiency. In addition, the United States aid also
provides humanitarian assistance to Ukraine in cooperation with the U.N. High Commissioner for
Refugees (UNHCR) and other international organizations to improve Ukraine’s ability to assist
internally displaced persons (IDP). U.S. aid has been used by Radio Free Europe/Radio Liberty
and Voice of America to produce Russian-language news broadcasts that are aired in Ukraine.
U.S. aid has also gone to helping bolster Ukraine’s security sector. The assistance includes
providing body armor, helmets, vehicles, night and thermal vision devices, heavy engineering
equipment, advanced radios, patrol boats, rations, tents, counter-mortar radars, uniforms, and first
aid equipment and supplies.35
In February 2015, Lieutenant General Ben Hodges announced that a U.S. Army battalion has
been training Ukrainian forces in Poland, including on how to operate against Russian electronic
warfare and how to protect themselves from Russian and rebel artillery.
Some critics have claimed that U.S. military aid had been slow to arrive in Ukraine due to
bureaucratic impediments. Moreover, some Members of Congress have expressed support for
going beyond the non-lethal support given by the United States so far to provide “defensive
weapons” such as man-portable anti-tank weapons. Other suggested assistance includes
additional non-lethal items, such as secure communications equipment, reconnaissance drones,
and radars capable of tracking longer-range heavy artillery, not just mortars.36
Congressional Response to Ukraine Crisis
The U.S. Congress has been an active participant in the effort to address the Ukraine crisis. As
early as January 2014, the Senate passed S.Res. 319. Among other provisions, the resolution
urged the United States and the EU to work together to promote a peaceful resolution of the crisis
that moves Ukraine toward a future in the Euro-Atlantic community; encouraged all parties to
avoid violence and engage in dialogue; and stated that, in the event of further government
violence against peaceful protestors, the President and Congress should consider whether to apply
targeted sanctions, including visa bans and asset freezes, against individuals responsible for
ordering or carrying out the violence. On February 10, 2014, the House passed H.Res. 447 by a
vote of 381-2. The resolution, contained provisions broadly similar to those of S.Res. 319,
including raising the possibility of sanctions against Ukrainian leaders if they use violence against
protestors.
34
http://www.state.gov/documents/organization/236395.pdf
See Congressional Budget Justification Fiscal Year 2017, Department of State, February 9, 2016.
36
For a report by former senior U.S. officials advocating U.S. defensive arms for Ukraine, see
http://www.thechicagocouncil.org/sites/default/files/UkraineReport_February2015_FINAL.pdf.
35
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Several other pieces of legislation were adopted by the House and Senate over the period of the
crisis, including urging NATO allies and European Union member states to immediately suspend
military cooperation with Russia; to adopt visa, financial, trade, and other sanctions on senior
Russian and Ukrainian officials and oligarchs complicit in Russia’s intervention and interference
in Ukraine; requiring the U.S. government to assist Ukraine to recover assets stolen by the
previous regime through corruption; requiring Radio Free Europe-Radio Liberty and Voice of
American to start a programming “surge” to provide accurate information to eastern Ukraine,
Crimea, and Moldova in order to counteract inflammatory Russian propaganda; authorizing
increased military and economic assistance for Ukraine; and authorizing support for Russian civil
society and democracy organizations.
Perhaps the most important piece of legislation passed near the end of the 113th Congress was the
Ukrainian Freedom Support Act (P.L. 113-272). In it Congress called on the President to increase
the pressure on Russia by targeting Rosoboronexport and Gazprom, and prohibiting ExportImport Bank programs, government procurement contracts, exports of arms and dual-use goods
and services, access to property, the U.S. banking system, or entry into the United States. The act
also authorized the President to target Russian financial institutions and foreign financial
institutions that engaged in Russia’s defense and energy sectors. At its signing, the President
stated that while he did not intend to make use of the additional authorities, he would continue to
work with international allies to respond to developments in Ukraine.
One issue that sparked significant Congressional debate was whether the United States should
supply defensive weapons to Ukraine. In February 2015, a bipartisan group of 15 Senators sent a
letter to President Obama urging him to act on the authorization provided by the Ukrainian
Freedom Support Act to supply an “immediate infusion of effective defensive military equipment
and financial aid to thwart Putin’s naked aggression. Defensive military assistance—such as antitank weapons, counter-battery radars, armored Humvees, and increased training—are all critical
to ensuring Ukraine has the capabilities to defend its territory and its citizens.”37
Advocates of arming Ukraine stated that sanctions alone were unlikely to stop Russian aggression
and that boosting Ukraine’s defense capabilities were essential to stop further Russian conquest of
Ukrainian territory and to pressure Putin to agree to a genuine peace agreement. Those opposed to
arming Ukraine argued that Putin could use the move as an excuse to escalate the conflict beyond
the desire to respond, thereby increasing the level of violence. Some experts concluded that
escalation could have resulted in a new Cold War, eliminating the possibility for U.S.-Russian
cooperation on key issues elsewhere. Others felt it would also split Western unity on Russia
policy as France and Germany were strongly opposed to arming the Ukrainians.38
Outlook
While the intensity of the fighting between Russian-supported pro-separatists and the Ukrainian
military along the demarcation line has significantly receded, sporadic fighting has occurred, and
fatalities/casualties continue to result. In addition, not all of the rebel-held medium and heavy
military weapons have been completely withdrawn, and there have been periodic reports that
weapons and ammunition continue to cross into eastern Ukraine from Russia. Nevertheless, many
37
See http://www.durbin.senate.gov/newsroom/press-releases/durbin-portman-lead-bipartisan-senators-calling-forincreased-military-assistance-to-ukraine.
38
See for example http://www.brookings.edu/research/opinions/2015/02/06-aiding-ukrainian-military-goad-putin-wargaddy-hill.
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analysts believe that the resumption of large-scale fighting in eastern Ukraine is not likely in the
short term, at least not until President Putin feels he can turn his attention back to Ukraine once
his objectives in Syria begin to be realized.
On the other hand, the pro-separatist rebels in the Donbas do not seem to be moving forward at
all in implementing their parts of the Minsk-2 agreement. Although elections are supposed to take
place in the disputed territory, it appears unlikely at this time that the pro-separatists will allow a
totally free or fair election. It appears unlikely that pro-Kyiv political candidates will actually be
permitted to campaign in the region nor, does it seem, that the separatists will allow government
officials from Kyiv into the region to help organize the elections, print ballots, and monitor
polling places. And, although President Putin apparently told the Normandy Group that the OSCE
would have total access to the area to monitor the elections, many seem doubtful that the rebels
will allow such access to all voting places or guarantee the election observers safety.
In Kyiv, two challenges face the government. First is the growing discord among the governing
coalition and others, between those who do not want to implement parts of Minsk-2 or
accommodate the separatists at all and those who want to keep the process moving forward as
long as the other side appears willing to do so. The second appears to be the reemergence of
powerful oligarchs, and others with entrenched interests in not seeing too much change,
attempting in subtle ways to derail the reformist agenda. By the beginning of 2016, both
challenges threatened the ability of the Poroshenko/Yatsenyuk government to address other
pressing reforms. This intensified infighting within the government and the Rada and the growing
resistance to reform by some influential figures close to the government resulted in the call for the
resignation of Yatsenyuk as prime minister, including by Poroshenko himself. The failure of the
close vote on a no-confidence motion saved Yatsenyuk for the moment. However, with little
public confidence in his willingness to seriously tackle some of the oligarchs who seem to be the
root cause of much of the corruption, and Poroshenko’s supposed loss of support for the prime
minister, the stage could be set for a potentially significant period of instability and the possible
necessity for a new national election, which could stall important legislation as well as the overall
reform process.
All of this, whether it is the internal political dynamics in Kyiv or the evolution of a “frozen
conflict” in the east, makes it more difficult for the government in Kyiv to address political
reform, corruption, and economic growth. If the current government shows weakness or loses its
base of power and thus its ability to get things done, a new political crisis could arise among the
frustrated general public, which is becoming increasingly skeptical of the ability of any political
figures in Kyiv to significantly address problems facing the country. Any such political crisis
could also result in a slowing of the implementation of Minsk-2 and further movement toward a
“frozen conflict” in the east in which Russia would be able to manipulate the intensity of political
unrest and future fighting in order to further hinder Ukraine’s economic and political
consolidation, as well as its integration with the West.
According to some, the growing political crisis in Kyiv could tempt Moscow to make further
efforts to undermine Kyiv’s efforts to reform the country and pose substantial risks for the
interests of the United States and the EU to promote stability, security and economic development
in Ukraine.39
39
Steven Pifer, “Crisis over Ukraine,” Council on Foreign Relations, October 2015.
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Appendix. U.S. Sanctions on Russia
After an initial round of sanctions imposed on Russia for its annexation of Crimea and military
activity in eastern Ukraine, the United States and the EU continued to add additional travel
freezes, visa restrictions, and economic sanctions on Russia for its failure to cease its support for
the pro-separatists actions in the Donbas regions of eastern Ukraine.
On March 20, 2014, the Administration announced asset freezes on 16 high-ranking Russian
government officials and members of parliament. Four additional persons, all wealthy
businessmen, were sanctioned as members of Putin’s “inner circle.” One bank, Bank Rossiya,
was also sanctioned due to its role as the personal bank of senior Russian officials.40
On April 28, the Administration imposed asset freezes on an additional seven senior Russian
officials. They include Igor Sechin, the president of Rosneft, Russia’s leading oil company, and
former chief of staff to Putin. The Administration also sanctioned 17 entities, including banks and
other businesses. The companies appear to have been chosen due to their links to sanctioned
persons in Putin’s inner circle, such as energy trader Genneddy Timchenko and bankers Arkady
and Boris Rotenberg, or to Bank Rossiya.41 Due to privacy laws, the names of those receiving
visa bans have not been made public, but it is likely that they include those persons under asset
freezes.
On July 16, 2014, the United States imposed sanctions unilaterally on key firms in Russia’s
financial, energy, and military technology sectors—including Gazprombank, Vnesheconombank
(VEB), Novatek, and Rosneft. U.S. firms and persons are barred from dealing in new equity or
loans of greater than 90 days maturity for these companies. On July 27, the Administration
responded by adding Bank of Moscow, VTB Bank, and Russian Agricultural Bank to the list of
companies with restricted access to U.S. capital markets. In addition, the U.S. assets of United
Shipbuilding Company were frozen.
In September 2014, in response to a separatist offensive in Ukraine supported by Russian combat
troops, the United States imposed sanctions against additional key Russian companies, including
Transneft, Lukoil, Gazprom Neft, Rostec, Surgutneftegaz, and Sberbank.42
On December 19, 2014, the President issued an executive order to bar any U.S. person from
participating in new investment in Crimea; imports from and exports to the Crimea region; and
any financing, facilitation, or guarantee of any related transaction by a U.S. person.43
After the Malaysian Airlines tragedy on July 17, 2014, the EU largely matched and even in some
cases went beyond U.S. sanctions. On July 22, EU foreign ministers agreed to expand Ukrainerelated sanctions against Russia by adding individuals and companies to the existing travel ban
and asset freeze list, including some persons in Putin’s inner circle.
40
For a list of Russian figures sanctioned in March, see http://www.treasury.gov/press-center/press-releases/Pages/
jl23331.aspx. For the text of the executive order greatly expanding the scope of sanctions, see
http://www.whitehouse.gov/the-press-office/2014/03/20/executive-order-blocking-property-additional-personscontributing-situation.
41
For a list of Russian figures sanctioned in April, see http://www.treasury.gov/press-center/press-releases/Pages/
jl2369.aspx.
42
See http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20140912.aspx.
43
For more on U.S. sanctions on Russia, see CRS Report IN10048, U.S. Sanctions on Russia in Response to Events in
Ukraine, coordinated by Dianne E. Rennack. For more on the economic impact of sanctions on Russia, see CRS Report
R43895, U.S. Sanctions on Russia: Economic Implications, by Rebecca M. Nelson.
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On July 29, the EU agreed to impose sanctions on Russia’s financial, defense, and energy sectors.
These sanctions were strengthened in September, in response to a massive Russian-supported
offensive in Ukraine. The sanctions barred EU nationals and companies from providing loans to
five major Russian state-owned banks and barred trade in new bonds, equity, or similar financial
instruments with a maturity exceeding 30 days, issued by the same banks. The same restrictions
were also extended to three major Russian defense companies and three major energy companies.
The EU banned certain services necessary for deep water oil exploration and production, Arctic
oil exploration or production, and shale oil projects in Russia. The EU has also banned exporting
dual-use goods and technology for military use in Russia. The EU also added new persons to its
travel ban and asset freeze list.
In December 2014, the EU banned or restricted most European investment, trade, and tourism
with Russian-occupied Crimea. As of January 2015, the EU has sanctions on 150 persons and 28
entities. The EU is currently considering additional sanctions in response to Russian support for a
separatist offensive in eastern Ukraine in January and February 2015.
In an announcement published in the U.S. Federal Register on September 2, 2015, the U.S.
Administration said it was adding 29 people to its sanctions list. Some of those added have ties to
Kremlin-linked insiders and companies who were previously sanctioned, including Gennady
Timchenko, a wealthy oil trader believed to be close to President Vladimir Putin.
A total of 33 companies or other entities were cited, including subsidiaries of state-owned oil
giant Rosneft, headed by Putin ally Igor Sechin, and the company that manufactures Kalashnikov
assault rifles.
Author Contact Information
Vincent L. Morelli
Section Research Manager
vmorelli@crs.loc.gov, 7-8051
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