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Ukraine may have retreated from the headlines over the
past few weeks but, with controversial elections in two key disputed
areas, the risks associated with this troubled country have not
diminished.
Last week saw the signing of a gas deal between Russia, Ukraine and the European Union – a relief to many as most of the EU's natural gas comes from Russia via Ukraine. However, while the risk of a cold winter across Europe has lessened, the deal appears to
have moved Kiev to the sidelines in what looked like a Brussels rapprochement with Russia through the back door.
Last week saw the signing of a gas deal between Russia, Ukraine and the European Union – a relief to many as most of the EU's natural gas comes from Russia via Ukraine. However, while the risk of a cold winter across Europe has lessened, the deal appears to
have moved Kiev to the sidelines in what looked like a Brussels rapprochement with Russia through the back door.
One of the few bright spots for Ukraine-watchers is, there
seems to be enough lawmakers in the new Ukrainian parliament to make a
strong pro-reform majority government under President Petro Poroshenko
and existing Prime Minister Arseny Yatseniuk.
Nonetheless, as economists and analysts put together their forecasts for next year, Ukraine is still seen as a major geopolitical risk.
Nonetheless, as economists and analysts put together their forecasts for next year, Ukraine is still seen as a major geopolitical risk.
The outcome of two rebel elections held last weekend in
the troubled Donetsk and Luhansk regions of Ukraine, in which insurgents
who want closer ties with Russia claimed victory, have been disputed by
Ukraine and the White House. The elections have been condemned as a
"clear violation" of the fragile ceasefire in eastern Ukraine, agreed in
September, by U.S. Secretary of State John Kerry. All of the candidates
in the elections are pro-Russian separatists, and many of those who
support continuing as part of Ukraine have fled the region.
The timing of the elections, when elections could be held
in December under the terms of the ceasefire, could be seen as "a
further and direct challenge to the authority of Kyiv," Timothy Ash,
head of emerging markets research at Standard Bank, wrote in a research
note.
Poroshenko has called those elected "bandits who crown themselves" and will meet with his security chiefs Tuesday, sparking fears that the ceasefire could break. Reports of military convoys from Russia crossing the border into the region comprising Donetsk and Luhansk add to nervousness in Kiev.
"Unless Ukraine can militarily retake the regions controlled by rebels, the impact will be limited in terms of events on the ground," according to Ash.
And with military spending in Ukraine under pressure, as the rest of the economy continues in deep recession, that seems unlikely.
- By CNBC's Catherine Boyle.
Poroshenko has called those elected "bandits who crown themselves" and will meet with his security chiefs Tuesday, sparking fears that the ceasefire could break. Reports of military convoys from Russia crossing the border into the region comprising Donetsk and Luhansk add to nervousness in Kiev.
"Unless Ukraine can militarily retake the regions controlled by rebels, the impact will be limited in terms of events on the ground," according to Ash.
And with military spending in Ukraine under pressure, as the rest of the economy continues in deep recession, that seems unlikely.
- By CNBC's Catherine Boyle.
Catherine BoyleStaff Writer and On-air Correspondent, CNBC
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