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An Uneasy Peace

Caught between the expansionist ambitions of a Russian President, a bleak economic outlook and a highly polarized society, Ukraine is plainly in an unenviable position. After 4 months of prolonged instability, punctuated by periodic violence, Ukraine has finally shown some signs of returning to some semblance of normalcy.
Protests in the Ukranian Capital of Kiev
The Ukranian economy has never really seen robust growth ever since the collapse of the Soviet Union in 1991. An easy pointer to it's unhealthy state is the staggering 15% contraction in GDP that it went through in the year 2009 (the aftermath of the global crisis). It's population is rapidly aging and declining (exacerbated by brain drain). It's currency is immensely overvalued which makes it's exports hugely noncompetitive and boost imports (a fatal recipe even in the best of times for it serves the purpose of sky-rocketing the current account deficit and severely deplete foreign exchange reserves).

In order to get the economy back to track, the currency must be immediately devalued but the political hazards of the move (it will spur inflation which is never a politician's friend) forced the Ukranian President Mr. Viktor Yanukovych to put it off until the next elections. But running such a country obviously demands a thick wad of cash. And the source of this cash is essentially the heart of the matter which has torn Ukraine in recent times.

In November, under pressure from Russia the President rejected an agreement he was supposed to sign with the European Union which would serve the purpose of strengthening ties besides receiving some amount of liquidity. Instead, Russia's Putin pledged to hand over to it a whopping $15 billion which the Russia-leaning Viktor readily acceded to. But this decision exposed the deep fault lines which run through the country's society.

Viktor Yanukovych
The eastern half of the country, bordering Russia has deep socio-cultural links with it in stark contrast to the European-leaning western half. This manifested itself in the 2010 presidential elections where the whole eastern half of the country consolidated in favor of Mr. Yanukovych (who hails from the region) while the rest voted from his primary opponent, Yulia Tymoshenko. The people of western Ukraine disapproved of the pro-Russian government decision and began protesting in the central square of Kiev, the national capital.

Had the protestors been controlled in a more adroit manner, perhaps the situation would not have worsened to such a degree but the police action and a particular law passed by Mr. Yanukovych which effectively banned protests inflamed people. In the past few days, the situation has taken a turn for the better with the country's parliament amending the constitution to curtail Presidential powers and shift to a parliamentary system while impeaching the incumbent President. A provisional national unity Government has been formed with Yulia's close ally becoming the interim Prime Minister. Yulia has also been released from jail (where Mr, Yanukovych had thrown her on flimsy grounds) and the outgoing President has been forced into hiding.

This peace might still be temporary. The new government has to endear itself to the masses quickly and mend the wounded pride of the pro-Russian easterners. It has to proceed with fair elections in May and repair ties with Russia besides mobilizing support among the European Union for some sort of aid. Meanwhile, international leaders must take care to prevent any major upheaval. Ultimately, the nation still remains divided, a deep chasm running between two culturally dissimilar people.

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