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Last week Ukraine’s Foreign Minister Pavlo Klimkin stated that he expects an
expanded partnership between Ukraine and NATO will lead Ukraine to a
membership in the Alliance following a path similar to that of Montenegro.
With regard to the United States, for now President Trump’s ambiguous
positioning in Russian affairs seems to have little impact on the U.S.
Administration's Ukraine policy. The Administration is expected to continue its
support for the actions of NATO, the IMF and Secretary of State Tillerson has
reaffirmed in April 2017 that the U.S. will not lift sanctions against Russia as long
President Putin does not hand Crimea back to Kiev.
In internal politics, we would expect Mr Poroshenko, the President of Ukraine, to
sign the Association Agreement, thus improving his diminishing ratings and to
win the presidential elections in 2019. In my opinion, Mr Poroshenko is also
delaying the elections in the conflict zone of Donbass, a major requirement
featured in the Minsk Agreement, in order to avoid the negation of his good
performance on the European prospect, and then, assessing the Russian conflict
situation at that point in time, to progress with the Minsk Agreement and
effectively resolve a major part of the conflict. I do not think that Crimea will ever
find its way back to Ukraine but if all other matters are resolved, a financial
settlement would be considered.
Therefore the status of “frozen conflict” in the Donbass area would remain in the
short to medium term but the economy of Ukraine has been operating for a number
of years now without the Donbass and the annexed to Russia Crimea. All growth
estimates published by various international institutes incorporate similar
assumptions.
Banking Sector
In the past 3 years there has been a clean-up by the National bank of Ukraine
(NBU) with the support of IMF mainly as well as of EBRD and IFC. The number
of banks has been reduced from 192 to 92 and there are still banks that will be
liquidated. The most drastic action was the nationalisation of Privatbank, the
biggest bank in the country (market share 17.7% by assets, 36% of deposits of
physical persons), owned by an oligarch that was posing a systemic risk to the
country’s economy and which was found to be insolvent mainly because of bad
lending practices with loans extended to related parties. However, Privatbank is
servicing 20 million customers providing to them state-of-the-art digital banking
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