Emergency workers inspect a damaged bridge near Kuznetsovka village in eastern Ukraine’s Zaporizhzhya region Wednesday. An overnight blast destroyed the bridge, cutting a railway link between the city of Mariupol and Ukraine’s west. Ukraine’s state security service said suspects had been identified in relation to the blast, and were currently being sought. | REUTERS

The VoxUkraine Brief:

Debt, Default and Dire Measures in Ukraine

#VoxUkraine weekly selection of best articles on Ukraine.

by Olena Bilan (Dragon Capital) and Oleksandr Talavera (University of Sheffield), VoxUkraine Editorial Board

produced by Maxim Eristavi

Talks about Ukraine’s financial problems have been highlighted in financial media for the last two weeks. The conflict in the Eastern Ukraine has escalated again. Furthermore, Russia not only sends troops but also creates additional financial burden.

Russia raised the pressure again, saying it may demand early payment of a $3 billion bond.

In this article The Economist provides excellent summary of major problems and challenges Ukraine faces and shows why 2015 is not going to be better for the country than nightmare 2014. Without a lot more Western help, Ukraine faces default

The war in the east eats up $10m a day, according to Ukraine’s president, Petro Poroshenko. And far from abating, it is hotting up: rebel shelling of a bus near Donetsk this week killed 12 people.

Default is a very hot topic in Ukraine these days. Tom Coupe made a small summary for VoxUkraine regarding what is usually meant by ‘default’, how defaults happened in different countries and what effect it had on their economies

Defaulting is not something one does for fun, but if really needed, it can be done in an orderly way, does not have to imply the collapse of an economy

VoxUkraine’s most popular piece this week by Sasha Borovik, with 35% of all traffic on the site, argues that Ukraine should take a proactive approach and initiate default on Russia’s bonds. It also offers an ingenious, albeit risky legal strategy to bring claims against Russia to courts.

The world’s financial markets are preparing for Ukrainian default. And so should Ukraine.

However, not everyone agrees that default is the way out for Ukraine in 2015. Igor Buinyi of Democratic Alliance Party argues that the country is on the verge at the moment, and default may lead to further worsening of the economy in the near future that can endanger the very existence of the state.

Additional financing from Western donors is coming in pieces, but there is no clarity if this is enough to fit Ukraine’s funding needs. Following EU announcement of EUR 1.8bn macro-financial support and EUR 500m German guarantee, the U.S. has pledged as much as $2 billion in loan guarantees to Ukraine as long as its government adheres to the IMF’s demands (paywall).

Another article by The Economist provides an update on recent efforts of the EU Commission to ensure free flows of gas through its member states. Russia and Ukraine are important pieces of the European gas market puzzle.

The European Union heads into battle with national governments on energy. The EU is pressing Ukraine to reform its energy business, in particular to put gas meters on the border with Russia rather than rely on measurements taken at pumping stations inside the country.

Also, this week on #VoxUkraine

Restructuring the Ukrainian railway is low hanging fruit for the country’s fiscal needs. Russell Pittman, a U.S. government economist and a visiting professor at the New Economic School (Moscow) writes in VoxUkraine op-ed that the current railway system of Ukraine suffers from aging locomotives and rolling stock as well as a badly depreciated infrastructure and endemic corruption. However, a proper reform plan that would restructure Ukrzaliznytsia, government-owned monopoly, has a huge potential in attracting private money and fostering economic growth of Ukraine


We visualized the evolution of Poroshenko’s thinking. Since the Inauguration on June 7, 2014 Petro Poroshenko has spoken publicly 44 times. According to the content analysis, the President has been concerned about the following: the war in Eastern Ukraine, moving towards “Europe” , corruption, importance of parliament and coalition. But “reform” is mentioned as a long-term goal (2020) or not mentioned at all.


Lack of political management and poor communication strategy endanger Ukraine’s reforms, thinks Ivan Miklos, former Deputy Prime Minister and Minister of Finance of Slovakia (2002–2006, 2010–2012), member of the Advisory Board of VoxUkraine.


Ukrainian business will continue using offshores as the only means to survive. To tackle tax avoidance, the state should focus not only on tax specific measures, but also on reduction of other incentives for businesses for work from offshore.


Ukrainians already pay for gas much more than they should. Technically, Ukrainians pay for gas less than in Europe and even gas-rich Russia, write in op-ed Dragon Capital’s Denis Sakwa and Olena Bilan (Bilan is also a part of VoxUkraine). But in fact, they suggest, it is much higher price, if you think of economic distortions caused by the way gas price is calculated, energy inefficiency, corruption and macroeconomic vulnerability.


Budget 2015 is an opportunity to decrease corruption in Ukraine agriculture. In 2015 the Ukrainian agricultural sector will receive its lowest level of state subsidies over the past 10 years, writes Oleg Nivievskyi from Institute for Economic Research and Policy Consulting in his VoxUkraine op-ed. Overall, however, this will not have an impact on the sector, but it gives an opportunity to reduce corruption, Nivievskyi suggests.


Also check out our first Ukraine reforms index iMoRe. Its mission is to help us understand the effectiveness of reforms in Ukraine. The first index showed lower than ‘acceptable’ pace of reforms:

VoxUkraine weekly TwitterBook

among many people who followed our Twitter this week, were:

Geysar Gurbanov
Rotary Peace Fellow @UNC & @DukeU. Patient Investor. @HarvardSummer Alum. I write occasional opinion articles.

Ian Bateson
Journo. Co-host of the Sunday Show on @Hromadske. Ex-@Reuters in Moscow.

Ian Kearns
Director, @theELN. Writing on the future of Europe. Co-editor, Influencing Tomorrow.

Gerard Roland
I am a Belgian economist, professor at the University of California Berkeley

Ukr World Congress
International coordinating body promoting the interests of over 20 million Ukrainians in 47 countries

Plus a Ukraine default GIF of the week:

Have a great weekend!

VoxUkraine: Best Minds. Ukraine Analysis.

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