Bellerbys Economics - Mr Stephenson

Wednesday, May 24, 2006

Ukraine Update

The haggling over coalition partners in the new government is still continuing. Both Bloc Yuliya and Our Ukraine are both now talking to the Socialist Party. As time passes, the lack of stability will continue to deter investor confidence from overseas.

Meanwhile, at the GUAM summit of Russia, Ukraine, Moldova, Georgia and Azerbaijan, all the countries except Russia signed a free trade agreement. It's not clear at this stage what this will mean (free trade agreements have often been signed at summits involving former members of the Soviet Union and then been left to rot away on the desk) but if it becomes genuinely active, this could be of benefit to the Ukraine. It may provide them with easier access to Azeri oil and gas - helping them to become a bit less dependent on Russia.

However, the Russians quite rightly pointed out at the summit that they are the dominant partner in the region - the biggest market and the biggest producer. It's simply unrealistic in the short term for any of the other countries to believe they can continue to operate if they have a bad relationship with Russia.

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