LegiStorm

Summary:

Two years ago, in February 2014, the Kremlin-supported government of Ukrainian President Viktor Yanukovych collapsed. The demise of the regime 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 emergence of new government leadership, the pro-Western 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 have resulted in the resignations of a popular, reform-minded economy minister and a deputy prosecutor, two political parties quitting the coalition government, and warnings from the head of the International Monetary Fund (IMF) and several European nations that Ukraine risked losing continued international financial support if a new government was not formed and progress was not made. The resignations were followed by calls by some in the political opposition and the general public 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, who many accused of running a corrupt office. Shokin offered his resignation, which was accepted in March, but Yatsenyuk took his case to the Rada (Ukraine's parliament) and barely survived a vote of no confidence on February 16, 2016. Despite surviving the vote, Yatsenyuk's coalition government has not been reconstituted and his term as prime minister is likely coming to an end. Contributing to Kyiv's problems have been Ukraine's rampant corruption (ranked 130 out of 168 by Transparency International), the refusal of a small group of old-time oligarchs to relinquish power or influence, the government's apparent reluctance to seriously challenge these oligarchs, and other shortcomings in the rule of law. The confluence of these factors, according to some, has stifled the implementation of democratic best practices, hindered strong democratic institution building, and exacerbated long-standing 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 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 United States 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 in 2014 by seizing Ukraine's Crimea region and annexing it on March 18, 2014. In April 2014, armed pro-Russian separatists supported by Moscow seized parts of the Donbas region of eastern Ukraine. A 12-point agreement to end the conflict, known as Minsk-2, was signed in Minsk, Belarus, in late 2014 by the leaders of Russia, Ukraine, France, and Germany. The agreement took effect in February 2015. More than one year later, however, Crimea is still in Russian hands, approximately 7% of Ukrainian territory remains under the control of the separatists and the influence of Moscow, and most 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 EU, the United States imposed sanctions against Russian individuals and key firms initially for seizing Crimea. These sanctions have continued and were 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 its efforts to destabilize Ukraine. In April 2014, President Obama signed H.R. 4152 into law, which authorized aid to help Ukraine carry out reforms; provided 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 Ukrainian military, but the Obama Administration rejected the idea, viewing it as risking a further escalation of the conflict. Additional legislation supporting Ukraine is likely to be considered by the House and Senate in 2016. This report provides an overview of the situation in Ukraine.