Ukraine country profile

28 August 2006
by eub2 -- last modified 30 January 2017

The EU cooperates with Ukraine in the framework of the European Neighbourhood Policy and its eastern regional dimension, the Eastern Partnership. The key goal is to bring Ukraine closer to the EU. The European Neighbourhood Instrument is the EU financial instrument dedicated to the Neighbourhood for the period 2014-2020. Other funding sources are the thematic programmes, focused on human rights and civil society. EU assistance to Ukraine takes the form mainly of country Action Programmes funded every year under the ENI. Ukraine also benefits from regional and multi-country Action Programmes, also funded under the ENI.

Ukraine

Member of Schengen area: No

Political system: Republic

Capital city: Kiev

Total area: 603 700 km²

Population: 45.7 million

Currency: hryvnia

Country overview

On 5 March 2014, the European Commission announced a large support package for Ukraine to help stabilise the economic and financial situation of the country. All measures combined could bring overall support of €11 billion over the next seven years from the EU budget and the international financial institutions, including up to €1.4 billion in grants from the Member States.

On 9 April 2014, the Commission decided to create the Support Group for Ukraine. It ensures that Ukrainian authorities have all the support they need to undertake political and economic reform and stabilise the country.

For more information, please see the Frequently Asked Questions on support to Ukraine.

On 17 July 2014, the Commission released an information note to EU businesses operating and/or investing in Crimea/Sevastopol. It explains the risks related to the economic and financial situation in Crimea/Sevastopol, after its illegal annexation by Russia.

Since taking office, Commissioner Johannes Hahn has visited Ukraine five times, participating, among others, in the International Conference on Support for Ukraine on 28 April 2015 and the 12th Annual Meeting of the Yalta European Strategy in Kyiv on 10-12 September 2015.

On 13 and 14 July 2015, the first meeting of the EU-Ukraine Association Committee reviewed Ukraine's reform progress and the challenges ahead. In the margins of this event, the Ukrainian delegation participated in a study visit to the EU institutions organised by the Support Group for Ukraine. The visit was designed to deepen working-level relations in crucial reform areas.

In 2015, Ukraine became fully associated with the Commission's Horizon 2020 programme. Its researchers, businesses and innovators can now participate under the same conditions as EU Member States a multinational programme dedicated to research and innovation, equipped with a total budget of almost € 80 billion for 2014-2020..

Economy overview

After Russia, 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 black soil generated more than one-fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied unique equipment, such as, large diameter pipes and vertical drilling apparatus, and raw materials to industrial and mining sites in other regions of the former USSR.

Shortly after independence in August 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Outside institutions - particularly the IMF –encouraged Ukraine to quicken the pace and scope of reforms to foster economic growth. Ukrainian Government officials eliminated most tax and customs privileges in a March 2005 budget law, bringing more economic activity out of Ukraine's large shadow economy. But more improvements are needed, including fighting corruption, developing capital markets, and improving the legislative framework. From 2000 until mid-2008, Ukraine's economy was buoyant despite political turmoil between the prime minister and president.

Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to external shocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirements and 100% of its nuclear fuel needs. In January 2009, after a two-week dispute that saw gas supplies cut off to Europe, Ukraine agreed to 10-year gas supply and transit contracts with Russia that brought gas prices to "world" levels. The strict terms of the contracts further hobbled Ukraine's cash-strapped state gas company, Naftohaz. The economy contracted nearly 15% in 2009, among the worst economic performances in the world. In April 2010, Ukraine negotiated a price discount on Russian gas imports in exchange for extending Russia's lease on its naval base in Crimea.

Ukraine's oligarch-dominated economy grew slowly from 2010 to 2014. After former President YANUKOVYCH fled the country during the Revolution of Dignity, the international community began efforts to stabilize the Ukrainian economy, including a March 2014 IMF assistance package of $14-18 billion. Ukraine has made significant progress on reforms designed to make the country a prosperous, democratic, and transparent country.

Russia's occupation of Crimea in March 2014 and on-going aggression in eastern Ukraine have hurt economic growth. With the loss of a major portion of Ukraine's heavy industry in Donbas and ongoing violence, Ukraine's economy contracted by 6.8% in 2014 and by an estimated 10.5% in 2015. Ukraine and Russia have engaged in a trade war with sharply reduced trade between the countries by the end of 2015. The EU-Ukraine Deep and Comprehensive Free Trade Area finally started up on 1 January 2016, and is expected to help Ukraine integrate its economy with Europe by opening up markets and harmonizing regulations.

Useful links

Delegation of the EU to Ukraine
Ukrainian Government
Tourist information

Source: European Commission, CIA World Factbook