By Phil Clarke
When Ukraine declared independence from the Soviet Union in 1991, it seemed likely to be the most viable of the ex-Soviet states aside from Russia itself. The country had a hugely productive domestic agriculture, enabling it to produce over 1000kg of grain per head of the population (by comparison, the figure for Germany is 445kg). It possessed a large population (52 million), only slightly smaller than that of Britain or France. More decisively, it was the site of a disproportionate share of the industry of the former Soviet Union, producing 34% of the USSR's steel, 46% of its iron ore and 36% of its televisions.
Today, however, Ukraine is in deep economic and political crisis, and could even disintegrate as a unitary state.
There is a deepening conflict between east and west Ukraine over relations with Russia, and the danger of a military conflict over the future of the Crimean peninsula, the majority of whose population is Russian-speaking and which was part of the Russian Federation until "given" to Ukraine by Soviet leader Nikita Khrushchev in 1954.
It is the current fight over the future of the Crimea which is causing alarm in the West; Crimea is the base of the Black Sea Fleet, disputed between Russia and Ukraine, and Ukraine remains a major nuclear power, with more nuclear missiles than any country other than Russia and the US.
Independence has not brought the economic bonanza which Ukrainian nationalists hoped for. Ukraine's economy functioned by exporting industrial goods to Russia and importing nearly all the oil and gas it needed in exchange.
With the crisis of the Russian economy, Ukrainian exports to Russia have collapsed and not been replaced by other markets. However, the country still imports Russian energy, for which the Russian government now demands world prices, rather than the subsidised prices used within the USSR.
The result is a massive balance of payments deficit, and with Western investors hesitant to invest and a consequent lack of capital, privatisation has taken the form of "spontaneous" privatisation — in other words, the simple robbery of state property by high-ranking bureaucrats.
The state budget deficit caused by the exports collapse has resulted in the government simply printing money. The cost of living has risen a staggering 7000 times in the last three years. Sixty per cent of Ukrainians are estimated to survive by growing their own food on small plots of land.
The government of President Leonid Kravchuk, an old-style Soviet apparatchik who in 1991 suddenly turned himself into a Ukrainian "nationalist" to survive, has attempted to balance the budget by high taxation on the profits of companies. In response, a huge fraudulent economy has grown up to hide company profits. The divide between legal and illegal business is blurred; the most successful entrepreneurs are literally gangsters.
In an attempt to curb inflation, the National Bank, advised by the International Monetary Fund, has refused to print any more money. This in turn has led to a chronic shortage of credit for state enterprises to pay one another or their workers.
The economic problems of Ukraine therefore are a direct consequence of the break-up of the Soviet Union, and the refusal of the Western countries to provide alternative markets or credit.
Economic chaos leads to political instability; but there is a grave danger that this will take the form of ethnic or regional conflicts. While a small majority of the Crimean population voted for Ukrainian independence in 1991, the peninsula's president Yuri Meshkov, and the majority of the Crimean parliament voted on May 20 for union with Russia, and declared that the Crimea had sovereign rights, excepting only those voluntarily ceded to the Ukrainian government in Kiev. In effect, this was a declaration of secession from Ukraine which would block off Ukrainian access to the Black Sea Fleet.
A more fundamental fault line is the historic divide between western Ukraine and the industrial east of the country, site of the Donbass mining region, which is predominantly Russian-speaking.
In 1991 a majority of even Russian speakers in eastern Ukraine voted for independence; the Donbass miners had waged a bitter battle against the Soviet central government in 1989, and expectations of higher living standards in an independent Ukraine were widespread even there. But in parliamentary elections held at the end of March and in early April 1993, a majority of east Ukrainians voted for the Communist Party, enabling it to become the biggest single party in the Kiev parliament.
Key spokesperson for the east Ukrainian alliance in parliament, which includes the Communists, is Leonid Kuchma, like Kravchuk a long-time Stalinist apparatchik, former head of the world's biggest missile factory at Dnipropetrovsk. According to Kuchma, in Ukraine "the attempt to build a state on the basis of a national idea has collapsed. I am deeply convinced that if there is no change in our political system, Ukraine will face harder times than Yugoslavia."
Kuchma's words may be an attempt to threaten the central government to give east Ukraine economic concessions, but they contain an important element of truth. Many observers believe that sentiment in east Ukraine for unity with Russia is widespread. Any conflict in Crimea could spark a country-wide upheaval.
Presidential elections are due in Ukraine this month. Incumbent Leonid Kravchuk is trying to postpone them, using the excuse of the crisis over Crimea. Whoever wins will not be able stop the slide towards chaos and collapse caused by the dislocation of the planned economy and the collapse of the Soviet Union.