Spotlight: Ukraine emerges from abyss, but faces hard road ahead

Ukraine has emerged from a long crisis triggered by a series of shocks, including political turbulence, conflict in its eastern regions and an economic recession in 2016. Not surprisingly, the road toward sustainable growth and full political stability is likely to be hard.

This calls for the Ukrainian government to make resolute efforts to address the arising challenges.

END TO POLITICAL DEADLOCK

Following more than two years of political woes, Ukraine was further shaken at the beginning of 2016, when the pro-Western ruling coalition threatened to leave the country in a power vacuum.

Ukrainian President Petro Poroshenko had two ways to prevent deeper political gridlock -- either dismiss the technocratic West-supported government or dissolve the parliament.

The president decided to sacrifice the government for the sake of stability and his decision appeared to be effective -- the cabinet shift has eased the political tensions and helped the volatile country stay afloat and start recovering.

Alternatively, the early parliamentary elections might put an additional burden on the state budget and substantially prolong the period of uncertainty.

Looking ahead, the prospect for political stability remains uncertain in the East European country, although fresh political upheavals are unlikely, at least in the near term, because the interests of major political forces in Ukraine are currently quite balanced.

Moreover, Ukrainians are increasingly disappointed over the slow progress of the authorities in ending the conflict in eastern Ukraine and fighting corruption.

The growing influence of newcomers on the Ukrainian political arena complicates matters even further.

Many in Ukraine see young political activists as good alternatives to veteran politicians. It means that the president may come under increased pressure to reshape both the parliament and the government, if there are no positive changes in the country.

"If the Ukrainian authorities do not take steps to adjust their policy, unfortunately, Ukraine may face a difficult period in 2017," former Ukrainian Foreign Minister Leonid Kozhara said.

START OF ECONOMIC RECOVERY

Thanks to the normalization of the political situation, well-planned government policies and broad international support, Ukraine's immediate economic problems were solved in 2016.

After two years of a drastic contraction, the country's economy is expected to increase by 1.5 percent in 2016.

Other economic indicators have also returned to positive territory. Inflation has slowed down, the exchange rate of the local currency has stabilized, and banks have resumed lending, supporting the economic activity.

Primarily, the recovery was achieved through implementation of the policies agreed with the International Monetary Fund (IMF) and the European Union (EU) under cooperation programs.

The reforms of the energy, banking, governance and judiciary sectors have enabled the Ukrainian authorities to ease the burden on public finances and lower the risks for the economy.

Yet, a normalization of the economic performance does not mean an end to the consequences of the turmoil.

With the slow recovery of the industrial sector, instability in the global exports markets and risks of escalation of the conflict in the Donbas region in eastern Ukraine, Ukraine is teetering near the edge of another economic recession.

The huge state debt, some 9 billion U.S. dollars that should be repaid to foreign and internal creditors in 2017, is adding to the worries.

Apparently, the positive growth trend could be sustained only if Ukraine cuts its dependence on loans and starts generating funds inside the country by attracting investment.

First steps on this path have already been made. For instance, the government has drawn up a plan to privatize some 300 state-owned enterprises by the end of 2017 and abolished a total of 367 regulatory legal acts that have obstructed businesses.

The initiatives are encouraging, but analysts believe that the positive effects are unlikely to be felt anytime soon.

"We should not expect an immediate influx of foreign businesses, but the investment opportunities have definitely improved," said Volodymyr Fesenko, director of the Penta Center for Applied Political Studies.

FEW CHANGES IN FOREIGN POLICY

It was no surprise that the foreign policy of Ukraine, which heavily relies on the West for financial and political support, underwent few changes in 2016.

Kiev has been repeating that it sees the United States and the EU as key cooperation partners, and European integration as its top foreign policy priority.

Regarding Ukraine's rapprochement with the EU, some progress was made in 2016, but there was no major breakthrough.

The launch of the bilateral free trade area has not brought the anticipated results for Ukraine, as its exports to the EU rose only 2.4 percent in January-October.

The approval of the visa-free regime for Ukraine has been postponed by Brussels until 2017 despite Kiev's fulfillment of all the 144 conditions for obtaining it.

Another heavy blow to Ukraine was the Dutch rejection of the Ukraine-EU Association Agreement, which has indefinitely suspended the long-awaited deal.

Ukraine's dealings with the United States in 2016 also saw no major overhauls. Washington has continued to supply Kiev with financial and technical aid but refrained from stronger political contacts.

Kiev's relations with Moscow, which have been deteriorating since 2014, did not return to a constructive course in 2016, although there were no new big upheavals.

Even though some Ukrainian lawmakers promoted a visa regime with Russia and the severing of 300 bilateral agreements, they found no support in the parliament.

This suggests that Ukraine is keen to pursue a cautious but moderate policy toward its neighbor, avoiding a break in diplomatic relations.

Generally, Ukraine's foreign policy is facing uncertainty amid changes in the global political environment in the new year.

Britain's exit from the EU has already made it unrealistic for Ukraine to join the bloc soon, while the change in U.S. leadership is anticipated to weaken Washington's support to Kiev.

In light of this, many Ukrainians believe that the country should return to its traditional balanced foreign policy, instead of focusing only on its ties with the West.

"Most Ukrainians believe that economization of foreign policy, which envisages finding new markets for Ukrainian products, should be the main priority for the country," said Alyona Getmanchuk, director of the Kiev Institute of World Policy.

UPSURGE OF COOPERATION WITH CHINA

In 2016, Ukraine for the first time since the start of the crisis has pivoted toward Asia, launching a cargo train to China in a bid to join the famed Belt and Road Initiative.

Although the test run of the train showed that much work lies ahead to establish a regular service, Ukraine's bid has yielded fruits by attracting the attention of Chinese investors.

In 2016, Chinese investors launched talks with the Ukrainian government on the implementation of projects worth more than 1 billion U.S. dollars total in Ukraine's renewable energy, agriculture and finance sectors.

The liberalization of the visa regime, under which Chinese businessmen and tourists are granted the opportunity to get 15-day Ukrainian entry visas upon their arrival, played a role in attracting Chinese investors.

Along with the development of business ties, the initiative has also boosted people-to-people exchanges -- the number of Chinese citizens visiting Ukraine increased nearly twofold.

The social connectivity between the two nations also started a new chapter in 2016 with the establishment of the organization Diaspora of Chinese in Ukraine, whose work focuses on culture, art, science and technology.

With its fruitful results, the year 2016 could be described as a landmark year to put China-Ukraine cooperation back on track, but the main work to tap the vast cooperation potential between the two nations lies ahead.

The Ukrainian government plans to send a trade mission to China, aimed at boosting bilateral trade by a third.

More importantly, in 2017, Ukraine aims to officially join the "16+1" mechanism, a platform created by China and 16 Central and Eastern European countries.

To realize that aim, a special "Group of Friends of China" uniting more than half of Ukrainian lawmakers was created in the Ukrainian parliament. Discussions on deeper cooperation are also well underway between the experts of both countries.

"Such discussions are helping to overcome the differences, to strengthen the bilateral dialogue and to work out the further strategy for the development of China-Ukraine relations," said Viktor Shevyrev, a Ukrainian sinologist. Endi