Ukraine: Current Issues and U.S. Policy
Steven Woehrel
Specialist in European Affairs
March 2, 2010
Congressional Research Service
7-5700
www.crs.gov
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CRS Report for Congress
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repared for Members and Committees of Congress
Ukraine: Current Issues and U.S. Policy
Summary
On February 7, 2010, Viktor Yanukovych defeated Prime Minister Yuliya Tymoshenko to win
Ukraine’s presidency. International monitors praised the conduct of the election. President
Yanukovych will try to form a parliamentary majority from parties in the current parliament. If he
cannot, new parliamentary elections will have to be held later this year.
The global economic crisis has hit Ukraine hard. Ukraine’s real Gross Domestic Product fell by
an estimated 15% in 2009. In November 2008, the International Monetary Fund approved a $16.4
billion standby loan for Ukraine to bolster its finances. The loan was conditioned on a
commitment from Ukraine to allow its currency to depreciate in a controlled way, to recapitalize
the banking sector, and to pursue more rigorous fiscal and monetary policies. Political infighting
during the presidential election campaign hindered Ukraine’s implementation of the conditions of
the IMF loan. A post-election struggle for a parliamentary majority could further delay Ukraine’s
reforms.
Under the leadership of former President Viktor Yushchenko, Ukraine sought integration into the
global economy and Euro-Atlantic institutions. In the longer term, Yushchenko set the goal of
Ukrainian membership in the European Union and NATO. Relations with Russia have been tense
over such issues as Ukraine’s NATO aspirations and energy supplies. President Yanukovych has
said he will pursue closer ties with Russia, especially in the economic sphere. He has said he will
seek reduced prices for natural gas supplies from Moscow, in exchange for giving Moscow an
ownership stake in Ukraine’s pipeline system. He has said EU integration is a key priority for
Ukraine. He has said he will drop Yushchenko’s policy calling for NATO membership for
Ukraine.
U.S. officials have remained upbeat about Ukraine’s successes in some areas, such as securing
WTO membership, as well as in holding free and fair elections and improving media freedoms,
while acknowledging difficulties in others, such as fighting corruption, establishing the rule of
law, and adopting constitutional reforms. The Bush Administration strongly supported granting a
Membership Action Plan to Ukraine at the NATO summit in Bucharest in April 2008, a key
stepping-stone to NATO membership. However, opposition by Germany, France, and several
other countries blocked the effort. On the other hand, the Allies surprised many observers by
confirming that Ukraine will join NATO in the future, without specifying a timetable.
The Obama Administration has worked to “reset” relations with Russia, but has warned that it
will not accept any country’s assertion of a sphere of influence, a tacit reminder of U.S. support
for Ukraine’s sovereignty. It has reaffirmed its support for NATO’s “open door” to NATO
aspirants such as Ukraine. In a telephone conversation with Yanukovych on February 11,
President Obama praised the conduct of Ukraine’s 2010 presidential elections and expressed a
willingness to work with President Yanukovych to promote the two countries’ shared values and
interests.
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Ukraine: Current Issues and U.S. Policy
Contents
Background ................................................................................................................................ 1
Current Political Situation ........................................................................................................... 3
Current Economic Situation ........................................................................................................ 5
Ukraine’s Foreign Policy............................................................................................................. 6
NATO ................................................................................................................................... 7
European Union .................................................................................................................... 7
Russia ................................................................................................................................... 9
Energy Issues ................................................................................................................ 10
NATO Membership....................................................................................................... 12
U.S. Policy................................................................................................................................ 12
Congressional Response...................................................................................................... 15
U.S. Aid to Ukraine....................................................................................................... 15
Other Legislation .......................................................................................................... 16
Contacts
Author Contact Information ...................................................................................................... 17
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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. The
fact that it occupies the sensitive position between Russia and NATO member states Poland,
Slovakia, Hungary, and Romania adds to its geostrategic significance. 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 source of regional stability.
From the mid-1990s until 2004, Ukraine’s political scene was dominated by President Leonid
Kuchma and the oligarchic “clans” (groups of powerful politicians and businessmen, mainly
based in eastern and southern Ukraine) that supported him. Kuchma was elected President in
1994, and re-elected in 1999. He could not run for a third term under the Ukrainian constitution.
His rule was characterized by fitful economic reform (albeit with solid economic growth in later
years), widespread corruption, and a deteriorating human rights record.
Ukraine’s 2004 presidential elections were characterized by electoral fraud and massive street
protests. The oligarchs chose Prime Minister Viktor Yanukovych as their candidate to succeed
Kuchma as President. The chief opposition candidate, former Prime Minister Viktor Yushchenko,
was a pro-reform, pro-Western figure. After the November 21 runoff vote, Ukraine’s Central
Election Commission proclaimed Yanukovych the winner. Yushchenko’s supporters charged that
massive fraud had been committed. Hundreds of thousands of Ukrainians took to the streets, in
what came to be known as the “Orange Revolution,” after Yushchenko’s chosen campaign color.
They blockaded government offices in Kiev and appealed to the Ukrainian Supreme Court to
invalidate the vote. The court invalidated the runoff election and set a repeat runoff vote.
Yushchenko won the December 26 re-vote, with 51.99% of the vote to Yanukovych’s 44.19%.
On February 4, 2005, the Ukrainian parliament approved President Yushchenko’s appointment of
Yuliya Tymoshenko. Tymoshenko is a charismatic, populist leader with a sometimes combative
political style who campaigned effectively on Yushchenko’s behalf. She is a controversial figure
due in part to her alleged involvement in corrupt schemes as a businesswoman and a government
minister during the Kuchma regime.
The “Orange Revolution” sparked a good deal of interest in Congress and elsewhere. Some hoped
that Ukraine could finally embark on a path of comprehensive reforms and Euro-Atlantic
integration after years of half-measures and false starts. However, subsequent events led to
disillusionment among Orange Revolution supporters. Yushchenko dismissed Prime Minister
Tymoshenko’s government in September 2005. The atmosphere between the two leaders was
poisoned by accusations of corruption lodged by supporters of each against the other side’s
partisans, including over the highly lucrative and non-transparent natural gas industry.
In order to secure support for a new government, Yushchenko then made a political non-
aggression pact with his opponent from the presidential election, Viktor Yanukovych, and
promised not to prosecute Yanukovych’s key supporters for electoral fraud and other crimes.
Some supporters of the Orange Revolution viewed the move as a betrayal of one of the key
principles of their movement. Some began to question whether the new government was better
than the old regime, given ongoing government corruption scandals and the perception that the
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Orange Revolution might be reduced to squabbling over the redistribution of property among the
“old” oligarchs and would-be, new “Orange” ones.
On March 26, 2006, Ukraine held parliamentary elections. The largest vote-getter in the elections
was the Party of Regions, headed by Yushchenko’s former presidential election rival Viktor
Yanukovych. Yushchenko reluctantly appointed Yanukovych as Prime Minister, and the
Ukrainian parliament approved the new government on August 4, 2006. Yanukovych’s
government and the parliamentary majority, led by the Party of Regions, worked steadily to
whittle away at Yushchenko’s powers and political influence. Hoping to stem the threat to his
power, President Yushchenko dissolved the Ukrainian parliament, despite Yanukovych’s charge
that the move was unconstititional. According to many observers, this political crisis underlined
the fact that the country still needs to make substantial progress in developing a smoothly
functioning democracy. The poorly defined separation of powers in Ukraine’s constitution has
invited conflict and needs to clarified. Another key problem is the persistence of a post-Soviet
political culture in which “winner-take-all” attitudes and unscrupulous tactics take precedence
over a genuine respect for the rule of law.
After a lengthy political stalemate, the contending sides worked out a compromise and on
September 30, 2007, Ukraine held early parliamentary elections. The Party of Regions remains
the largest party in the legislature. It won 34.37% of the vote and 175 seats in the 450-seat
parliament. The Yuliya Tymoshenko Bloc, which won 30.71% and 156 seats, is the second-
largest. Our Ukraine-People’s Defense came in a distant third, with 14.15% and 72 seats. The
Communist party received 5.39% of the vote and 27 seats. The Lytvyn Bloc was the only other
party to reach the 3% vote barrier for representation in the parliament. It won 3.96% of the vote,
and secured 20 seats. After lengthy negotiations, President Yushchenko nominated Tymoshenko
as his candidate for Prime Minister. The parliament approved Tymoshenko as Prime Minister on
December 18, 2007, by a vote of 226-0, the barest of majorities in the 450-seat assembly. The
Party of Regions, Communist Party and Lytvyn Bloc did not take part in the vote.
Over the next two years, the extreme fragility of her majority made Tymoshenko’s task as Prime
Minister difficult. Her government lurched from crisis to crisis. Perhaps the key problem was the
re-escalation of tensions between Tymoshenko and President Yushchenko. The two clashed over
economic policy (including privatization and budgetary policy), foreign policy (especially
relations with Russia), energy policy, and over the relative powers of the presidency, the
government, and the parliament. In addition to intense personal enmity and distrust between the
two leaders, the conflict was also due to jockeying for power in advance of presidential elections
in January 2010, in which both were to be candidates. At times, each sided with Yanukovych and
the Party of Regions on legislation and even proposed constitutional reforms in an effort to best
the other.
As Ukrainian leaders engaged in this three-sided political battle over the past few years, an
overwhelming majority of Ukrainians grew disgusted with the Ukrainian political class,
according to opinion polls. Observers say that this is in part due to the fact that Ukrainian leaders
continued to squabble despite the global economic crisis, which has inflicted severe blows on
Ukraine's economy.
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Current Political Situation
Ukraine held new presidential elections on
Ukraine’s Main Political Groups
January 17, 2010. As expected, Viktor
Party of Regions: The largest party in Ukraine’s
Yanukovych came in first, winning 35.32% of
parliament. It draws its support from eastern Ukraine,
the vote. Yuliya Tymoshenko, doing somewhat
where suspicion of Ukrainian nationalism is high and
support for close ties with Russia is strong. It defends the
better than some pre-election polls indicated,
economic interests of powerful oligarchic groups in
won 25.05%. Serhei Tihipko, a former Prime
eastern Ukraine.
Minister whose support was strongest in pro-
Yuliya Tymoshenko Bloc: Mainly a vehicle for the
Russian eastern Ukraine, won 13.05%. Former
ambitions of the charismatic Tymoshenko, it has little
parliament speaker Arseniy Yatsenyuk won
ideological cohesion. It became the second-largest group
6.96%. Incumbent President Yushchenko did
in the Ukrainian parliament largely because many
poorly, winning a mere 5.45%. Other
Ukrainians saw Tymoshenko as the most stalwart
candidates split the rest of the vote. Voter
defender of the populist, anti-corruption ideals of the
Orange Revolution.
turnout was 67%.
Our Ukraine-People’s Self Defense bloc: This bloc
The results set up a second round runoff vote
is composed of a number of parties favoring free market
economic reforms and a pro-Western foreign policy. It
between Yanukovych and Tymoshenko on
draws its support from western Ukraine, where
February 7. Yanukovych won 48.98% of the
Ukranian nationalism is strong. It was President
vote, beating Tymoshenko, who won 45.47%.
Yushchenko’s main base of support in parliament early in
Voter turnout was 69%.
his term. However, the group fragmented as
Yushchenko’s popularity plummeted.
As in previous Ukrainian elections, the results
Communist Party: Overtaken by the Party of Regions
showed a sharp regional split, with
in its eastern Ukraine strongholds and faced with a
largely elderly electorate. It opposes market economics
Yanukovych winning in Russian-speaking
and favors strong ties to Russia.
eastern and southern Ukraine, while
Tymoshenko prevailed in central and western
Lytvyn Bloc: A centrist bloc headed by Volodmyr
Lytvyn, the current parliament chairman. Lytvyn has
Ukraine, where Ukrainian nationalism is
changed sides several times in Ukraine’s political
stronger. However, Yanukovych’s
struggles, backing the side with the upper hand at the
overwhelming margins in the east (particularly
moment.
in his home base, the Donetsk and Luhansk
regions) more than offset Tymoshenko’s somewhat more modest victories in some western areas.
A contributing factor may have been that, after being knocked out in the first round, Yushchenko
encouraged his few supporters to vote against both candidates in the second round. (Ukraine’s
election laws give voters this option.) A substantial 4.36% voted against all in the second round,
as opposed to 2.2% in the first.
International monitors praised the conduct of the election. Joao Soares of Portugal, head of the
observer team from the Organization for Security and Cooperation in Europe, said the February 7
vote was an “impressive display of democratic elections.” In a possible hint to Tymoshenko, he
added that it was “now time for the country's political leaders to listen to the people's verdict and
make sure that the transition of power is peaceful and constructive.”1 Exit polls by independent
groups did not show a significant departure from the announced results.
Initially, Tymoshenko appeared to have ignored the hints of Soares and other EU and U.S.
officials to accept the results of the election. She charged that Yanukovych’s supporters had
1 The reports of the International Election Observation Mission can be found at http://www.osce.org/odihr/ .
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engaged in massive fraud, but that she would not call her supporters out into the streets to
challenge the result. Analysts have suggested that this is because a disillusioned public would not
turn out for mass demonstrations as they had in 2004. Nevertheless, Tymoshenko launched a legal
challenge against the result. However, on February 20, Tymoshenko reversed course and dropped
her challenge, saying that she did not believe the court would rule justly. She continued to insist
that Yanukovych’s presidency is illegitimate.
President Yanukovych faces the challenge of replacing Tymoshenko as Prime Minister and
creating a new parliamentary majority. The most likely partners for the Party of Regions are the
Communists and the Lytvyn Bloc. However, this will still leave them a few votes short of the 226
needed for a majority. As a coalition with Tymoshenko appears unlikely, Yanukovych may be
focusing on the Our Ukraine bloc as a possible partner. The Our Ukraine bloc is divided, but a
majority vote within its caucus for a coalition with Regions is possible. If this does not occur,
individual members of Our Ukraine and even the Tymoshenko Bloc would probably like to join
the new coalition, perhaps in exchange for material considerations. However, it is unclear
whether it is constitutionally valid for individual members of parliament to opt to join a new
coalition by themselves, without the support of their faction.
One key subject for discussion among the factions is who would replace Tymoshenko as Prime
Minister. Yanukovych has said that options include Tihipko and Yatsenyuk, the third- and fourth-
place finishers respectively in the presidential vote, as well as Mykola Azarov, a close aide to
Yanukovych who served as first deputy prime minister and finance minister when Yanukovych
was Prime Minister. Yatsenyuk, a former Yushchenko supporter who tried to position himself as
an independent during his presidential run, might be more acceptable to Our Ukraine than Azarov,
who is controversial, due to allegations that he used the tax police to reward political supporters
and punish opponents when he was in the government.
If he cannot secure a majority in the current parliament, Yanukovych has said that he will call
new parliamentary elections later this year. However, given his relatively modest margin of
victory in the presidential vote, it is not certain whether Yanukovych and his supporters could
secure a majority this way. Moreover, many members in the current parliament are likely to be
unenthusiastic to face the voters before they have to, given the country’s problems. This may be
particularly true for Lytvyn and his bloc, and Our Ukraine, which could fall short of the vote
threshold to receive seats in a new parliament. The likeliest beneficiaries of an election could be
new groups outside the current parliament, perhaps forming around Tihipko and Yatsenyuk, who
could prove more difficult for Yanukovych to control than the vulnerable Lytvyn and Our Ukraine
leaders.
Some observers have expressed concerns that Yanukovych may not be as committed to
democratic institutions as Yushchenko was, and that key gains that Ukraine has made in holding
relatively free and fair elections and media freedoms could be in jeopardy. Yanukovych’s
detractors point to his conduct as President Kuchma’s Prime Minister, and particularly his effort
to rig the 2004 presidential elections. Others say that weakening of the formal powers of the
presidency in the wake of the Orange Revolution, the closely divided parliament and electorate,
and changes in Yanukovych’s advisors and his own outlook argue for the irreversibility of
Ukraine’s democratic progress.
Yanukovych is likely to take steps to increase the official use of the Russian language in Ukraine,
a long-standing demand of Russian-speaking eastern and southern Ukraine. The move could
increase tensions with more nationalist western Ukraine, however.
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Current Economic Situation
Until the global economic crisis, Ukraine was experiencing substantial economic growth, with
GDP increasing by an average of 7.5% between 2000 and 2007. The growth was fueled mainly by
consumption, including an import boom fed by heavy domestic and foreign borrowing. This was
reflected in a widening trade deficit and current account deficit (7.1% of GDP in 2008). Ukraine’s
growth was also due to strong demand for products of the country’s large steel and chemicals
industries.2 Despite this growth, Ukraine remains much poorer than other European countries. Its
GDP per capita in purchasing power parity terms is only 22% of that of the EU and only 40% of
Russia’s.
Due to the unsustainable basis of its growth and the lack of confidence caused by its squabbling
political leadership, Ukraine has been hit very hard by the global economic crisis. Ukraine’s real
Gross Domestic Product fell by about 15% in 2009, according to the estimates of the Economist
Intelligence Unit. The economy is slowly improving, however. Real GDP dropped by only 7%
year-on-year in the fourth quarter, as opposed to a 15.9% drop in the third quarter, year-on-year.
The sharp decrease in domestic demand has reduced Ukraine’s serious problem with inflation,
which reached as high as 31% in May 2008, on an annualized basis. Nevertheless, annual average
inflation remained high at 15.9% in 2009. Ukraine’s currency, the hryvnya, dropped 45% against
the dollar between August 2008 and February 2009. The decline in the currency contributed to a
sharp reduction in the current account deficit from 7.1% in 2008 to 1.7% in 2009, as demand for
imports dropped as they became more expensive. Exports also dropped, but to a lesser extent. The
devaluation of the hryvnya and a pickup in foreign demand for steel should boost exports in 2010.
Another aspect of the crisis is the weakness of Ukraine’s banking sector. The sharp drop in the
hryvnya’s value has made it very difficult for borrowers to repay their loans, which were often
denominated in foreign currencies. The government has had to bail out a number of large banks,
and many others have clamped down on lending, hindering growth. Moreover, the Naftogaz, the
state-owned natural gas firm, remains near bankruptcy and also needs a bailout.
In November 2008, the International Monetary Fund approved a $16.4 billion standby loan for
Ukraine to bolster its finances. The loan was conditioned on a commitment from Ukraine to allow
its currency to depreciate in a controlled way, to recapitalize the banking sector, and to pursue
more rigorous fiscal and monetary policies. An initial tranche of $4.5 billion was disbursed, but
subsequent tranches were placed in jeopardy by the Ukrainian parliament’s passage of a budget
which ran a deficit of 3% of GDP in order to pay government salaries and make social payments.
Even this budget was based on overly optimistic assumptions, according to experts.
After weeks of backbiting, in March 2009, Yushchenko and Tymoshenko finally agreed to a
reform package in order to get the IMF aid flowing again. The budget was revised to reduce the
deficit. Consumers were required to pay more for natural gas. The budget stipulated that the
remaining budget deficit would be financed from loans and higher taxes rather than loosening
monetary policy; pension reform would be enacted; and Ukraine would stop relying on its foreign
currency reserves to defend its currency, among other provisions.3 In response, the IMF released
2 Economist Intelligence Unit Country Report: Ukraine, June 2008; “Ukraine: Slowing Growth Suggests Stagflation
Risk,” Oxford Analytica, August 14, 2008.
3 EIU Country Report: Ukraine, March 2010.
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additional tranches of the loan. However, Ukraine again fell out of compliance with the IMF’s
terms. The IMF was reportedly dissatisfied with a budget-busting social spending bill that the
parliament passed and Yushchenko signed in October. Ukraine also held off on increasing
domestic natural gas prices. Over $10 billion of the IMF loan had been disbursed by the end of
2009. A $3.8 billion tranche of the loan, scheduled for release in November 2009 was suspended.
However, perhaps in hopes of freeing up funds to help Ukraine meet its natural gas bill to Russia
(thereby preventing a shut-off of gas supplies to Western Europe), in late 2009 the IMF allowed
Ukraine’s central bank to reduce its foreign reserves by $2 billion.
President Yanukovych may have little recourse than to meet the IMF’s conditions for resuming
the loan. However, the austerity measures required by the IMF plan may increase social tensions
in Ukraine and cause unrest. Ukraine’s ability to meet the IMF’s terms might also be negatively
affected by a protracted power struggle over forming a new government or new parliamentary
elections. Yanukovych has pledged, as have previous Ukrainian leaders, to fight corruption,
strengthen the rule of law, and to improve the country’s investment climate. Even if he is sincere
(which may be open to some doubt, given the possible interest of some of his supporters in
retaining the current, corrupt, non-transparent system), he may be no more successful than
Yushchenko or other Ukrainian leaders have been.4
Ukraine’s Foreign Policy
Since achieving independence in 1991, conflict between Ukraine’s political forces has led its
foreign policy to appear incoherent, as the contending forces pulled it in pro-Western or pro-
Russia directions or simply neglected foreign policy as less important than domestic political
combat. Before the election of Yushchenko as President in 2005, leaders gave lip service to
joining NATO and the European Union, but did little to meet the standards set by these
organizations. Ukrainian leaders also promised closer ties with Russia in exchange for Russian
energy at subsidized prices, but balked at implementing agreements with Russia that would
seriously compromise Ukraine’s sovereignty, such as ceding control over Ukraine’s energy
infrastructure to Moscow.
President Yushchenko put integration into the global economy and Euro-Atlantic institutions at
the center of Ukraine’s foreign policy. Ukraine achieved one key foreign policy goal in May
2008, when it joined the World Trade Organization (WTO). In the longer term, Yushchenko
wanted Ukraine to move toward eventual membership in the European Union and NATO. He had
limited success in this area, however. Relations with Russia were troubled throughout
Yushchenko’s presidency.
President Yanukovych is likely to make some changes in Ukraine’s foreign policy. This could
include a return to the pre-Yushchenko approach of trying to balance relations between Russia
and Western countries. Yanukovych has said he will place special emphasis on improving
economic ties with Russia. In a February 2010 op-ed article in the Wall Street Journal after his
victory, Yanukovych said he was in favor of the “integration of European values” in Ukraine, and
that Ukraine should serve as a “bridge between Russia and the West.”
4 Independent International Experts Commission Report, Proposals for Ukraine: 2010 -- Time for Reforms, at
http://www.piie.com/publications/papers/aslund0210.pdf .
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NATO
Ukraine currently has an “Intensified Dialogue” with NATO, but President Yushchenko sought a
Membership Action Plan (MAP), a key stepping-stone to joining the Alliance. The MAP gives
detailed guidance on what a country needs to do to qualify for membership. NATO declined to
offer Ukraine a MAP at the April 2008 NATO summit in Bucharest, despite strong support from
the United States and almost all central European NATO members. Germany and France played
the leading role in blocking the effort. They raised questions about Ukraine’s qualifications for a
MAP and also expressed concerns that granting a MAP to Ukraine would hurt relations with
Russia. In a move that surprised many observers, the summit communique also contained an
unqualified statement that Ukraine (and Georgia) “will become members of NATO,” without
specifying when that might happen.
The conflict between Russia and Georgia in August 2008 may have had an important impact on
Ukraine’s hopes of receiving a MAP. European NATO countries that have opposed a MAP for
Ukraine may be even more reluctant to agreed to one, fearing a sharp deterioration in relations
with Moscow and perhaps even being embroiled in a military conflict with Russia in the future.
On December 2, 2008, NATO foreign ministers agreed to work with Ukraine on “annual national
programs” within the framework of the existing NATO-Ukraine Commission, which assists
Ukraine’s defense reform efforts. The Bush Administration, the main supporter of a MAP for
Ukraine, may have seen this approach as a way for Ukraine to make progress toward NATO
membership without calling it a MAP. However, France and Germany, unwilling to provoke
Moscow, warned strongly against viewing the compromise as a shortcut to NATO accession,
saying that a MAP would still be required.
In addition to concerns among some European countries about Russia’s response, domestic
political infighting in Ukraine hurt Kiev’s MAP prospects by convincing some NATO members
that Ukraine lacks political maturity required for NATO membership. Also, critics point out that
opinion polls have repeatedly shown that a large majority of Ukrainians oppose NATO
membership. President Yanukovych has said he will drop former President Yushchenko’s MAP
aspirations. He may continue cooperation with NATO in defense reform and other areas,
particularly if it is done in a way that Russia does not view as threatening.
European Union
Ukraine seeks to be recognized as a potential EU member candidate. Most EU countries have
been cool to Ukraine’s possible membership, perhaps because of the huge burden a large, poor
country like Ukraine could place on already-strained EU coffers. Indeed, EU officials have tried
to dissuade Ukraine from even raising the issue. However, Poland and the Baltic states have
advocated Ukraine’s eventual membership in the EU, in part because they see a stable, secure
Ukraine as a bulwark against Russia. Nevertheless, even the most optimistic supporters of
Ukraine’s EU membership acknowledge that it could be well over a decade before Kiev is ready
to join, but believe that formal EU recognition of Ukraine’s eligibility could speed the reform
process in Ukraine.
Ukraine currently has a Partnership and Cooperation Agreement (PCA) with the EU, as well as a
Ukraine-EU Action Plan within the context of the EU’s European Neighborhood policy. The
agreements are aimed at providing aid and advice to assist Ukraine’s political and economic
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transition and to promote closer ties with the EU. At an EU-Ukraine summit in December 2005,
the EU announced that it would grant Ukraine market economy status. The move makes it easier
for Ukrainian firms to export to the EU without facing antidumping duties.
In March 2007, the EU and Ukraine announced the opening of negotiations on a New Enhanced
Agreement to replace the PCA. Talks on an EU-Ukraine free trade area began in February 2008.
Ukraine is seeking visa-free travel between the EU and Ukraine, although the EU is offering only
visa liberalization as a goal. The EU budgeted 494 million Euro ($658 million) from 2007-2010
to support reform in Ukraine, in such areas as energy cooperation, strengthening border controls,
bolstering the judiciary and the rule of law, and addressing environmental concerns.5
In September 2008, the EU agreed to call the new Ukraine-EU accord currently under negotiation
an “Association Agreement.” However, unlike the association agreements signed by other
European countries in the past, the new accord will not contain an explicit recognition of
Ukraine’s EU membership aspirations. In May 2009, the EU launched the Eastern Partnership
program within the context of their European Neighborhood policy, which also includes non-
European countries. Although the EU insists that the regional approach taken by the Partnership
(which includes Belarus, Moldova, Georgia, Armenia, and Azerbaijan) will improve EU
cooperation with these countries, it is not clear that the initiative offers Ukraine significantly
more than previous efforts.
EU countries were angered by the January 2009 natural gas standoff between Russia and Ukraine,
which led to a cut-off of natural gas supplies to EU countries for two weeks. However, the EU did
not assign sole blame for the crisis to Ukraine, despite Moscow’s diplomatic and public relations
efforts aimed at doing so. After the stand-off, the EU took steps to try to work with Ukraine to
prevent another gas cutoff. In March 2009, the EU agreed to provide EU assistance to help
modernize Ukraine’s gas pipeline system in exchange for greater transparency by Ukraine in how
the system is run. In July 2009, the EU Commission brokered an agreement under which the
EBRD and World Bank agreed to provide loans to help Ukraine modernize its gas pipeline
system. In the short term, $300 million in EBRD loans would be aimed at helping Ukraine
improve its natural gas storage facilities and other infrastructure. The EBRD would be willing to
loan Ukraine another $450 million for Ukraine to reform its gas sector. The World Bank would be
willing to loan Ukraine up to $500 million for structural reforms, including of the gas sector.
However, the deal was shelved because of Ukraine’s inability or unwillingness to meet the EU’s
terms for the loan. Given Moscow’s strong opposition to the plan, it is unclear whether incoming
President Yanukovych will support it.
President Yanukovych has said that he favors the completion of the Association Agreement, visa-
free travel to the EU for Ukrainians, and eventual EU membership for Ukraine. However, while
integration into Euro-Atlantic institutions was the ideological centerpiece of Yushchenko’s
foreign policy, Yanukovych will take a more pragmatic approach. Progress on a free trade
agreement and other issues will likely depend in part on whether Yanukovych’s oligarchic
supporters find such agreements favorable to their business interests. Many observers are
cautiously optimistic, as these business tycoons have expanded into European markets in the past
few years.
5 “Commissioner Ferrero-Waldner Announces Substantial Increase in Financial Assistance to Ukraine,” EU press
release, March 7, 2007.
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Yanukovych made a symbolic step in the direction of the EU by making Brussels his first foreign
visit as President on March 1, 2010, preceding his first to Moscow as Ukraine’s new leader.
Yanukovych said European integration was a “key priority” for Ukraine, both in its foreign policy
and its domestic reform strategy. EU leaders urged Yanukovych to reach agreement with the IMF,
which would unlock additional EU aid of over 500 million Euro. They also urged him to reform
the gas sector, which would be followed by aid from international financial institutions and would
spur private investment. The two sides expressed hope that the Association Agreement could be
completed in late 2010.
Russia
Ukraine’s closest, yet most difficult and complex relationship is with Russia. President Putin
strongly backed Yanukovych’s fraudulent “victory” during the 2004 presidential election
campaign and reacted angrily to the success of the Orange Revolution. Russian observers with
close ties to the Kremlin charged that the Orange Revolution was in fact a plot engineered by the
United States and other Western countries. For his part, President Yushchenko offered an olive
branch to Moscow, calling Russia a “permanent strategic partner” of Ukraine.6 Nevertheless,
relations were rocky. Russia was irked by Yushchenko’s efforts to support greater democratization
in the region, impose tighter border controls on Transnistria, a pro-Moscow, separatist enclave
within neighboring Moldova, and forge closer links with Georgia.
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 form a majority in
the Crimea (a peninsula in the Black Sea in southern Ukraine), where they make up 58.3% of the
population. In the Crimean city of Sevastopol, the home base of the Russian Black Sea Fleet,
71.6% of the population are Russians. In addition, ethnic Ukrainians in the east and south also
tend to be Russian-speaking, are suspicious of Ukrainian nationalism, and support close ties with
Russia. Russian officials have tried to play on these regional and ethnic ties, not always
successfully, as demonstrated by the 2004 Ukrainian presidential election. Perhaps learning a
lesson, Russia did not intervene so openly in the 2010 Ukrainian presidential vote. While
Yanukovych was favored by Moscow, Prime Minister Putin made it clear that Russia could work
with Tymoshenko as well. President Medvedev and other Russian leaders expressed open scorn
for Yushchenko, who observers believed was destined to lose anyway.
The Russia-Georgia conflict in August 2008 had a negative impact on Russian-Ukrainian
relations. After President Yushchenko took power, Ukraine and Georgia had close ties. President
Yushchenko strongly condemned Russia’s military actions in Georgia. Ukraine’s foreign ministry
accused Russia of using Black Sea Fleet vessels based in Crimea to attack targets in Georgia
without consulting Ukraine and said Ukraine reserved the right to exclude such vessels from
Ukraine. Russian leaders charged that Ukraine had supplied Georgia with arms which were used
against Russian troops in the conflict.
On August 13, 2008, Yushchenko issued a decree requiring Russia to provide advance permission
for movement of Russian military ships, planes, and personnel on Ukraine’s territory. Russia said
the decree was anti-Russian and in contradiction to the 1997 treaty that gave Russia the right to
base its fleet in Crimea. The Russian Black Sea Fleet has ignored the decree. The Russian vessels
6 Jamestown Foundation, Eurasia Daily Monitor, January 25, 2005.
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that participated in the Georgia conflict later reportedly returned to their Crimean base. Russia
was also upset that Ukraine rejected Russian proposals to extend the Russian Black Sea Fleet’s
stay in Crimea beyond 2017. On the contrary, President Yushchenko called for starting talks on
preparing for the withdrawal of the Fleet, so as to prepare a smooth transition in 2017. In
September 2008, Ukraine’s foreign minister charged that Moscow was providing Russian
citizenship documents to inhabitants of Crimea on a large scale. He expressed fears that Russia
could use the presence of Russian citizens in Ukraine to justify military intervention in the future,
as it did in Georgia.
President Yanukovych’s top foreign policy priority is to improve relations with Russia. He will
likely de-emphasize Ukraine’s relations with Georgia. He has said that he is open to extending the
Russian Black Sea Fleet’s stay in Ukraine past 2017. However, Yanukovych continues to stress
Ukraine’s neutral, “non-bloc” status. He has said Ukraine will not join Moscow’s counterpart to
NATO, the Collective Security Treaty Organization. He has said that Kiev’s possible participation
in the Eurasian Economic Community (which includes a customs union among Russia and
several other former Soviet states), must not conflict with Ukraine’s WTO obligations or its
cooperation with the EU. These conditions may make Ukraine’s integration into this organization
difficult, if not impossible.
Energy Issues
The most severe crises in Russian-Ukrainian relations have occurred over energy. Ukraine is
heavily dependent on Russia for its energy supplies. About 80% of its oil and natural gas
consumption comes from Russia. 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. Over two-thirds of Russia’s gas exports pass through Ukraine. Until recently,
Russian firms supplied energy to Ukraine at prices far below market rates. Energy sales have
been conducted by non-transparent intermediary institutions, offering the elites of both countries
opportunities to profit.
Russia’s efforts to increase gas prices to market levels provoked crises in 2006 and 2009 that
resulted in cutoff of Russian gas to Western Europe. After Yushchenko came to power in 2005,
the Russian government-controlled natural gas monopoly Gazprom insisted on a more than
fourfold increase in the price that it charged Ukraine for natural gas. When Ukraine balked at the
demand, Russia cut off natural gas supplies to Ukraine on December 31, leading also to cuts in
gas supplies to Western Europe. The gas supplies were restored two days later after a new gas
supply agreement was signed.
Another issue has been the involvement of a shadowy company, RosUkrEnergo, as the nominal
supplier of Russian natural gas to Western Europe through Ukraine. Some analysts are concerned
about possible involvement of an organized crime kingpin in the company, as well as corrupt
links with Russian and Ukrainian officials. The U.S. Justice Department reportedly investigated
the firm.7 Tymoshenko battled to eliminate the company as a middleman in Russian gas exports
to Western Europe and in supplies to Ukraine’s domestic consumers. Yushchenko defended the
7 Glenn R. Simpson, “U.S. Probes Possible Crime Links to Russian Natural-Gas Deals,” Wall Street Journal, December
22, 2006, 1. For background on the gas crisis, see CRS Report RS22378, Russia’s Cutoff of Natural Gas to Ukraine:
Context and Implications, by Jim Nichol, Steven Woehrel, and Bernard A. Gelb.
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company, triggering charges by Tymoshenko that his supporters were profiting by the company’s
existence, which Yushchenko denied.
The second gas crisis occurred in January 2009. The state-controlled Russian natural gas firm
Gazprom stopped gas supplies to Ukraine on January 1 after the two sides failed to reach
agreement on several issues, including a debt allegedly owed by Ukraine to Gazprom and the
price that Ukraine would pay for gas supplies for 2009. The cut-off was supposed to affect only
supplies for Ukraine; Russia continued to send gas through Ukraine destined for other European
customers. However, within a few days, Russia accused Ukraine of diverting these supplies for its
own use, and by January 6 cut off all deliveries through Ukraine to the rest of Europe. The EU
sharply criticized the cutoff, calling for a rapid resumption of supplies, but refused to take sides in
what it termed a “commercial dispute.”
Many large European countries (and Ukraine itself) did not suffer greatly from the cutoff, despite
frigid temperatures, due in part to substantial amounts of gas in underground storage facilities.
However, some countries, particularly in the Balkans, were hit hard. Negotiations between Russia
and Ukraine repeatedly broke down, with each side accusing the other of bad faith and trying to
enlist European support for its views. An increasingly angry EU threatened to re-evaluate its
relationship with both countries unless the impasse was resolved. Finally, on January 18, Russia
and Ukraine reached an agreement, and gas supplies to Europe resumed on the 20th.
According to the agreement, RosUkrEnergo was eliminated as a middleman in the gas trade. In
the first quarter of 2009, Ukraine was required to pay more than double what it paid in 2008 for
gas. However, Ukraine was able to avoid this price increase by using gas in storage until gas
prices declined later in the year, as the drop in oil prices was reflected in natural gas prices. The
price that Russia would pay for gas transit remains at last year’s level. In November 2009, Russia
and Ukraine reached a revised gas deal that confirmed Moscow’s earlier pledges that Russia
would not impose fines on Ukraine for not taking enough gas from Russia. Ukraine’s gas
consumption has declined as a result of the economic crisis.
Since the collapse of the Soviet Union in 1991, Russia has sought control of Ukraine’s natural gas
pipelines and storage facilities. However, its efforts have been stymied on several occasions, due
to Ukrainian objections that Kiev could not cede control of one of its key economic assets. As a
result, Russia has worked to develop options to cut Ukraine out of gas supply to Western Europe,
at least in part. Gazprom is developing new gas pipelines under the Baltic Sea (called Nord
Stream) and through the Balkans (called South Stream) to Western Europe. Both would bypass
Ukraine. Nord Stream could be ready as early as 2012, while South Stream would not be
available until at least 2015. If successful, these efforts could sharply reduce Ukraine’s leverage
over Russia on energy supplies. Moreover, Russia could then feel it would have a freer hand to
put greater pressure on Ukraine on other issues. Key Western European countries could feel they
have less of a stake in Ukraine’s future, if they, like Russia, were no longer dependent on
Ukrainian gas transport infrastructure.
During the presidential election campaign in late 2009 and early 2010, Yanukovych criticized the
current gas agreement between Russia and Ukraine, saying that the gas was too expensive for
Ukraine. He said that he favored Russia providing gas to Ukraine at subsidized prices, in
exchange for Russia’s gaining a minority stake in Ukraine’s pipeline system. Western European
consumer countries would also gain shares in the system. However, there appear to be several
problems with such a scheme. First, it is not completely clear whether Gazprom, in its present
financial difficulties, would be willing to cut gas prices for Ukraine unless it received very
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favorable terms in buying into Ukraine’s pipeline system. Secondly, the Ukrainian parliament
would have to pass a law permitting the deal, which could prove highly controversial. Many in
the parliament could accuse Yanukovych of selling off the country’s chief strategic asset to
Moscow. Yanukovych may also revive the role of non-transparent middlemen in the gas trade.
NATO Membership
Under President Yushchenko, Russian-Ukrainian relations were strained by Kiev’s desire to join
NATO. Russian leaders were angered when the April 2008 NATO summit in Bucharest said that
Ukraine will join NATO at some point in the future. According to Russian press accounts,
President Putin reportedly told President Bush and NATO leaders that Ukraine was not a real
state, given its regional heterogeneity, and that it would cease to exist if it joined NATO. Putin’s
reported comment appeared to imply that Russia could encourage secessionist or other centrifugal
forces in eastern and southern Ukraine, especially the Crimea. Russia could make territorial
claims against the city of Sevastopol in Crimea (where Russia has a naval base) or the Crimean
peninsula as a whole. Other Russian leaders threatened possible economic and other sanctions
against Ukraine if it joined NATO. However, President Viktor Yanukovych’s rejection of NATO
membership for Ukraine will likely greatly ease Russo-Ukrainian tensions on this issue.
U.S. Policy
U.S. officials supported the “Orange Revolution” in Ukraine in late 2004 and early 2005, warning
the former regime against trying to impose fraudulent election results, and hailing Yushchenko’s
ultimate victory. President Yushchenko visited the United States from April 4-7, 2005, and had
meetings with President Bush and Secretary of State Rice. Yushchenko’s address to a joint session
of Congress on April 6 was interrupted by several standing ovations. U.S. officials have remained
upbeat about Ukraine’s successes in some areas, such as joining the WTO, holding largely free
and fair elections, and improving media freedom, while acknowledging difficulties in others, such
as fighting corruption, establishing the rule of law, and constitutional reform.
Ukraine has not contributed significant numbers of troops to Afghanistan, at least in part due to
bad public memories of the Soviet occupation of Afghanistan in the 1980s, but has supported a
provincial reconstruction team. According to the website of the NATO-led ISAF peacekeeping
force, Ukraine has eight soldiers in Afghanistan.
The United States has taken steps to upgrade its economic relations with Ukraine. On January 23,
2006, the United States reinstated tariff preferences for Ukraine under the Generalized System of
Preferences (GSP). Ukraine lost GSP benefits in 2001 for failing to protect U.S. intellectual
property, particularly CD and DVD piracy. U.S. officials hailed Ukraine’s efforts to improve its
record on this issue. On March 6, 2006, the United States and Ukraine signed a bilateral
agreement on market access issues, a key step in Ukraine’s effort to join the WTO. U.S. officials
said that Ukraine committed itself to eventual duty-free entry of U.S. information technology and
aircraft products, as well as very low or zero duty on chemical products. U.S. firms also receive
more open access in such areas as energy services, banking and insurance, telecommunications,
and other areas. The bilateral agreement addressed other key concerns such as protection of
undisclosed information for pharmaceuticals and agricultural chemicals, imports of information
technology products with encryption, the operation of state-owned firms based on commercial
considerations, and reduction of export duties on non-ferrous and steel scrap.
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The Administration was sharply critical of Russia’s behavior during the January 2006 natural gas
standoff between Russia and Ukraine. State Department spokesman Sean McCormack criticized
Russia for using “energy for political purposes.” He stressed that while the Administration
supported a gradual increase in prices to market levels, it disagreed with a “precipitous” increase
and cutoff. Secretary of State Condoleezza Rice likewise on January 5 stated that Russia had
made “politically motivated efforts to constrain energy supply to Ukraine.”8 On January 22, 2009,
after the resolution of the second major Russia-Ukraine gas crisis, a State Department spokesman
said the conflict “underscores the need for transparent, market-oriented arrangements for the sale
and shipment of natural gas and the importance of diversifying energy supplies.”9
President Bush visited Kiev on April 1, 2008. He offered “strong support” for Ukraine’s request
to receive a Membership Action Plan from NATO at the Bucharest summit. He praised Ukraine
for its contributions in Iraq, Afghanistan, and Kosovo, noting that Ukraine is the only non-NATO
country supporting every NATO mission. He praised Ukraine’s commitment to democratic values
and open markets, and offered continued U.S. support to fight corruption, support civil society
groups and strengthen Ukraine’s institutions.
The two sides signed a “roadmap” for strengthening bilateral ties in many areas, including trade
and investment, energy security, defense cooperation, technology and space cooperation, among
other issues. One document signed was a Trade and Investment Cooperation Agreement, which
Ukraine would like to see as a stepping-stone to an eventual free trade agreement between the two
countries. In order to boost U.S. investment in Ukraine, the United States has urged Ukraine to
continue to make reforms in several areas, including reducing regulation, clarifying commercial
laws, and introducing more transparency into the privatization process.10 In December 2009, the
United States Overseas Private Investment Corporation (OPIC) reopened its programs to Ukraine.
OPIC provides financing and political risk insurance for U.S. investors in foreign countries. OPIC
funding had been suspended after a commercial dispute between U.S. investors and their
Ukrainian partners in 1999 led to OPIC payment of an insurance claim to the U.S. investor. The
resolution of the issue in 2009 led to the resumption of OPIC funding to Ukraine.
Although the United States was unsuccessful in persuading NATO to give Ukraine a MAP at the
Bucharest summit, Administration officials hailed NATO’s commitment in the summit
communique to grant Ukraine membership in the future. They scored another success in getting
NATO to agree to the development of annual national plans within the context of the NATO-
Ukraine Commission, although differences continued to exist between the United States and those
countries (particularly France and Germany) on whether such plans could advance Ukraine’s
NATO membership aspirations in the absence of a MAP.
The Bush Administration sharply criticized Russia’s military actions in Georgia in August 2008.
On September 5, Vice President Cheney visited Ukraine, as part of a tour to bolster U.S. allies in
the region. Other stops included Azerbaijan and Georgia. After a meeting with President
Yushchenko, Cheney stressed the United States’ “deep and abiding interest” in Ukraine’s security.
He said Ukraine should be free of “threat of tyranny, economic blackmail, or military invasion or
8 The State Department. Statement, January 1, 2006; Daily Press Briefing, January 3, 2006; Secretary Condoleezza
Rice, Remarks at the State Department Correspondents Association’s Breakfast, January 5, 2006.
9 “Statement on Agreement to Restore Gas Flows to Europe,” January 22, 2009, http://useu.usmission.gov
10 Transcript of Remarks by U.S. Secretary of Commerce Carlos M. Gutierrez to American Chamber of Commerce in
Ukraine, June 5, 2008.
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intimidation” in the region. He said Ukraine’s “best hope to overcome these threats is to be
united—united domestically first and foremost, and united with other democracies.”11
In an effort to signal support for Kiev after its failure to secure a MAP, the United States signed a
“Charter on Strategic Partnership” with Ukraine on December 18, 2008. The charter discusses
areas of current and future cooperation between the two countries, including “a program of
enhanced security cooperation intended to increase Ukrainian capabilities and to strengthen
Ukraine’s candidacy for NATO membership.”
During a speech to the Munich Conference on Security Policy in February 2009, Vice President
Joseph Biden echoed President Obama’s call for U.S. relations with Russia to be “reset,” but
warned that the United States would not accept any country’s asserting a “sphere of influence”
and that states have the right to choose their own alliances. At a March 5 meeting of NATO
foreign ministers, Secretary of State Hillary Clinton said “we should continue to open NATO's
door to European countries such as Georgia and Ukraine and help them meet NATO standards.”
Despite these assurances, some Ukrainian analysts expressed concern that the “reset” in U.S.-
Russian relations could lead to a downgrading of U.S.-Ukrainian ties, or even the making of
concessions to Russia at Ukraine’s expense. Perhaps in order to calm these fears, Vice President
Biden visited Ukraine on July 20, 2009, in the wake of President Obama’s visit to Moscow earlier
that month. Biden expressed strong U.S. support for Ukraine’s aspirations to join NATO and
rejected the idea of a Russian sphere of influence in the region. He said that the “reset” in ties
with Russia would not come at Ukraine’s expense. He added that, on the contrary, it could help
Ukraine by defusing “zero-sum” thinking in Moscow about U.S. relations with Russia’s
neighbors.
Vice President Biden also urged Ukraine’s political leaders to overcome their differences for the
good of the country. He warned them that their country’s economic freedom depended more on its
energy freedom than any other factor. Biden said that Ukraine needs to move to market pricing
for domestic energy supplies, improve energy efficiency, and diversify its energy supplies. A
working group of the U.S.-Ukraine Strategic Partnership Commission began discussions last year
on ways to improve Ukraine’s energy security.
On February 11, after Yanukovych’s victory, President Obama called Yanukovych to congratulate
him on his victory. Obama praised the Ukrainian people’s conduct of the election and said the
vote marked another step in the consolidation of Ukraine’s democracy. He noted the “strategic
partnership between the United States and Ukraine is based on shared interests and values. These
include expanding democracy and prosperity, protecting security and territorial integrity,
strengthening the rule of law, promoting non-proliferation, and supporting reform in Ukraine’s
economic and energy sectors.”12
11 “Remarks by Vice President Cheney and President Yushchenko of Ukraine After Meeting,” September 5, 2008 from
the White House website, http://www.whitehouse.gov/news/releases/2008/09/print/20080905-3.html.
12 Press release from the White House website at http://www.whitehouse.gov/the-press-office/readout-presidents-call-
with-president-elect-yanukovych-ukraine .
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Congressional Response
U.S. Aid to Ukraine
Congress has dealt with the issue of U.S. aid to Ukraine. The FY2005 Iraq-Afghanistan
supplemental appropriations bill (P.L. 109-13) provided $60 million in aid to help the new
government in the run-up to the March 2006 parliamentary election. Including funds appropriated
in FY2005 foreign operations appropriations legislation, Ukraine received $156 million in U.S.
assistance in FY2005.
The FY2006 foreign operations appropriations legislation (P.L. 109-102) provided $84 million in
Freedom Support Act (FSA) funds to promote reforms in Ukraine. Five million of that amount
was earmarked for nuclear safety initiatives and $1 million for mine safety programs in Ukraine.
Total FY2006 U.S. aid to Ukraine was $100.1 million. In addition to Freedom Support Act funds
($82.16 million were actually allocated in FY2006, according to the Administration), Ukraine
received $2.18 million in Child Safety and Health (CSH) funds; $10.89 million in Foreign
Military Financing (FMF); $1.75 million in IMET military training funds; and $3.1 million in
NADR funding to fight terrorism and proliferation. In FY2007, U.S. aid to Ukraine was $96.5
million. Of this total, $80 million was in FSA funding, $9.5 million in FMF, $2.17 million in
Child Survival and Health funding, $1.86 million in IMET, $1.36 million in NADR, and $1.63
million in Global HIV/AIDS Initiative funding.
According to the FY 2010 Foreign Operations Congressional Budget Justification, U.S. aid to
Ukraine totaled $119.31 million in FY2008. This amount included $72.409 million in aid for
political and economic reform in the Assistance for Europe, Eurasia, and Central Asia account
(AEECA, formerly FSA). Ukraine also received $34.5 million in Economic Support Fund (ESF)
aid, $6.036 million in FMF, $2.391 million in Global Health and Child Survival funds; $1.874
million in IMET military training funds; and $2.1 million in NADR assistance. In FY2009, the
Obama Administration estimated Ukraine will receive $89.419 million in U.S. aid, including
$71.5 million in AEECA funding; $7 million in FMF, $1.75 million in IMET; $7.369 million in
Global Health and Child Survival funds; and $1.8 million in NADR aid.
For FY2010, the Obama Administration requested a total of $118.953 million in aid for Ukraine,
including $90.125 million in the AEECA account, $16 million in FMF, $8.178 million in Global
Health and Child Survival aid, $2.15 million in IMET, and $2.5 million in IMET. The
Consolidated Appropriations Act 2010 (P.L. 111-117) includes FY 2010 foreign aid
appropriations. The conference report for P.L. 111-117 recommends $89 million for Ukraine in
the AEECA account, and $11 million for FMF.
U.S. aid to Ukraine is focused on anti-corruption and rule of law efforts, stopping trafficking in
persons, media and civil society development, energy sector reform, and fighting HIV/AIDS. Aid
will help Ukraine improve its electoral system and improve local governance, particularly in
eastern and southern Ukraine. The United States also seeks to increase exchange programs
between the two countries. Other programs include efforts to help Ukraine implement WTO
accession as well as prepare for a free trade agreement with the EU, encourage the growth of
small business and strengthen export and border controls. Security assistance for Ukraine is
aimed at helping Ukraine’s defense reform efforts, improving operability with U.S. and NATO
forces, as well as taking steps to boost Ukraine’s military capabilities.
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In 2005, the Millennium Challenge Corporation (MCC) selected Ukraine for Millennium
Challenge Account (MCA) Threshold status. MCC funding in Ukraine is focused on fighting the
country’s severe corruption problem. In November 2006, Ukraine was made “compact-eligible”
by the MCC board. The MCC is spending about $45 million on anti-corruption efforts in Ukraine
as part of a two-year program. The current program is slated to be completed at the end of 2009.13
Other Legislation
During the 2004-2005 Ukrainian presidential election campaign and during the ensuing electoral
crisis, the 108th Congress approved legislation calling for free and fair elections in Ukraine and
urged the Administration to warn Ukraine of possible negative consequences for Ukraine’s
leaders and for U.S.-Ukraine ties in the case of electoral fraud. The 109th Congress passed
resolutions after President Yushchenko was inaugurated. On January 25, 2005, the House passed
H.Con.Res. 16 and the Senate passed S.Con.Res. 7 on the 26th. The identical resolutions included
clauses congratulating Ukraine for its commitment to democracy and its resolution of its political
crisis in a peaceful manner; congratulating Yushchenko on his victory; applauding the candidates,
the EU and other European organizations and the U.S. Government for helping to find that
peaceful solution; and pledging U.S. help for Ukraine’s efforts to develop democracy, a free
market economy, and integrate into the international community of democracies.
Congress dealt with a long-standing stumbling block in U.S.-Ukrainian relations by passing
legislation to terminate the application of the Jackson-Vanik amendment to Ukraine, granting the
country permanent Normal Trade Relations Status. On March 8, 2006, the House passed H.R.
1053 by a vote of 417-2. It was approved by the Senate by unanimous consent on March 9, and
was signed by the President on March 23.14
On April 17, 2007, Representative Alcee Hastings introduced H.Con.Res. 115, which called on all
sides in Ukraine’s political crisis to solve the issue peacefully and in accordance with the rule of
law. The resolution reaffirms U.S. support for Ukraine’s transition to democracy and a free
market economy, as well as for the country’s independence, sovereignty, and territorial integrity.
A Senate version of the resolution (S.Con.Res. 30) was introduced by Senator Dodd on May 2.
On July 23, Representative Hastings introduced H.Con.Res. 189, which called on Ukrainian
leaders to abide by the May 27 agreement to hold new parliamentary elections, and to hold those
elections in accordance with OSCE standards.
On September 21, 2007, the Senate passed S.Res. 320. The resolution expressed hope that
Ukraine will hold its September 30 parliamentary vote in a way that is consistent with OSCE
standards, urges Ukrainian leaders to work together to solve Ukraine’s problems, and pledges
continued U.S. friendship for and assistance to Ukraine. On October 4, Representative Hastings
introduced H.Res. 713, which congratulated Ukraine on conducting the September 30 elections in
accordance with OSCE standards and pledging continued U.S. support for Ukraine’s efforts to
achieve a democratic political system, a free market economy, and full integration with the West.
13 FY2010 Congressional Budget Justification for Foreign Operations, from the State Department website,
http://www.state.gov.
14 CRS Report RS22114, Permanent Normal Trade Relations (PNTR) Status for Ukraine and U.S.-Ukrainian
Economic Ties, by William H. Cooper.
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Congress has expressed support for Ukraine’s possible membership in NATO. The NATO
Freedom Consolidation Act was passed by the Senate on March 15, 2007, and the House on
March 26. The bill (S. 494) expresses support for further enlargement of NATO and authorizes
U.S. aid to Ukraine to assist it in preparing for possible NATO membership. President Bush
signed the bill into law on April 9 (P.L. 110-17). On February 14, 2008, the Senate passed S.Res.
439, which expresses the “strong support” of the Senate for a MAP for Ukraine and Georgia. On
February 25, 2008, Representative Wexler introduced H.Res. 997, the House version of S.Res.
439. It was passed by the House on April 1, 2008.
After the NATO summit, the Senate passed S.Res. 523 on April 28. The resolution expresses the
“strong support” of the Senate for the statement of the Allies at the Bucharest summit that
Ukraine and Georgia will become members of NATO. It also urges NATO to grant a MAP to
Ukraine and Moldova at the NATO foreign ministers’ meeting in December 2008. On May 19,
the Senate passed S.Res. 570, which reiterated the Senate’s strong support for Ukraine and
Georgia’s NATO aspirations.
On January 13, 2010, just before the first round of the Ukrainian presidential election, the House
agreed to H.Res. 981 by voice vote. The resolution, sponsored by Representative Howard
Berman, hailed the “strong relationship” between the United States and Ukraine and urged
Ukraine to hold free and fair elections.
Author Contact Information
Steven Woehrel
Specialist in European Affairs
swoehrel@crs.loc.gov, 7-2291
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