Ukraine Quarterly Digest: July–September 2023

Despite heavy fighting in the third quarter of 2023, Ukraine did not liberate huge territories, as many had expected. Russian minefields and a lack of air units in the Ukrainian army slowed the counteroffensive. However, Kyiv remains optimistic regarding the future of this campaign. At the same time, Ukraine intensified missile attacks on Russia-occupied territories, especially Crimea, and military targets in Russia. The promise by Western allies to provide F-16 military jets was a welcome development and one Ukraine had sought since the start of the war. 

Russia withdrew from the Black Sea grain deal and launched numerous attacks on Ukraine's port and grain storage infrastructure. In response, Ukraine successfully attacked the Russian fleet and started organizing Black Sea navigation of grain-carrying vessels itself. Increased overland grain exports deepened tensions with Ukraine’s immediate neighbors, which worried about Ukrainian grain entering their markets and lowering prices. Most vocal about the potential economic damage from grain exports was one of Ukraine’s closest allies, Poland. 

Ukraine ramped up preparations for a new Russian air campaign against its energy infrastructure, and Russia, somewhat as expected, launched the first strikes in September. New shipments of air defense systems from allies should contribute to better preparedness, as should increased domestic gas production in advance of winter. The Ukrainian economy showed year-over-year improvement from the same quarter in 2022. And parliament renewed the requirement for officials’ asset declarations, a move long awaited by Ukrainian society and Ukraine’s Western allies.

1. ROLLOUT OF THE WAR

General Developments during July–September
The third quarter of the year was marked by heavy fighting. Russian forces did manage to advance, if slowly, but also lost territories they had previously controlled. The key battle areas remained the Donbas, the South (Kherson and Zaporizhzhia oblasts), and Kharkiv oblast, with altogether thirty to forty combat clashes occurring daily. 

Cluster munitions provided by the United States helped the Ukrainian forces make headway in land operations. Ukraine expanded its control of the Black Sea as it regained control of offshore drilling platforms near Crimea. This made it easier to conduct strikes on military facilities in Crimea and on Russian vessels. 

The Ukrainian intelligence service reported that almost half a million Russian soldiers were deployed across occupied Ukrainian territories. However, radio intercepts revealed that the huge losses of weapons the Russian army had sustained since the start of the invasion had led to equipment shortages. As of the end of September, the General Staff of the Armed Forces of Ukraine reported that more than 630 planes and helicopters, almost 4,700 tanks, and 20 vessels of the invading forces had been destroyed.

Attacks on Russia and occupied territories. Drone attacks on Russian territories and drone and missile strikes on Russia-occupied territories, especially Crimea, became particularly frequent in the third quarter. From the beginning of the year until late summer, more than 190 drone attacks were carried out inside Russia and the temporarily occupied Crimean Peninsula. These attacks probably encouraged Russia to move its air defense system from the front line deeper into Russia, particularly to protect Moscow. They also showed the Russian population that the Russian army and air defense system are not as strong as the Kremlin purports.

The drone attacks inside Russia took place in Moscow and in regions both near and far from the Ukrainian border. For most of these attacks, no one took responsibility. In some cases the Russian Volunteer Corps and the Freedom of Russia Legion, fighting together with the Ukrainian army, took responsibility. It’s likely that at least some of the drone attacks were launched from inside Russia. Ukrainian forces took responsibility for many of the attacks on Crimea and the other occupied territories. 

The drone attacks have been designed for both military and psychological impact. On Ukraine’s Independence Day, for example, military intelligence reported that a successful raid had been conducted on occupied Crimea and the Ukrainian flag raised after air strikes the previous day had destroyed the Russian S-400 anti-aircraft system on the peninsula. 

Key Russian losses from the drone strikes include a damaged Crimean bridge; four aircraft on the airfield in the city of Pskov and the airbase Chkalovskiy in Moscow region; the submarine Rostov-on-Don and a large landing ship, Minsk, both located in a repair dock in the city of Sevastopol; a military base in Crimea; and part of the headquarters of the Black Sea fleet. In addition, numerous Russian ships in the Black Sea were damaged by Ukrainian sea drones during August and September. The list of fully successful attacks is much longer.

Russia also received a blow from an unexpected direction: a Russian helicopter pilot defected to Ukraine with an Mi-8 combat helicopter. Though some news reports in Russia initially said the pilot had lost his way, Ukraine’s intelligence agency made clear that it was a carefully planned operation by Ukraine.

Counteroffensive operations. During July–September, the Ukrainian army advanced in the Donbas and the South, liberating territories. However, progress was not dramatic, and the pace was slower than many expected, especially foreign observers and supporters. However, certain ongoing deficits in offensive and defensive capabilities, especially the lack of air cover for land operations, made it impossible for Ukrainian forces to liberate territories faster; the land operations had to be slowed to decrease personnel losses.

Minefields are another huge obstacle to a rapid land advance. The Russians heavily mined areas in front of their defensive positions, and the mines pose a significant personnel hazard, slowing Ukrainian advances.

But the counteroffensive should not be assessed only according to the square acreage of liberated territory. An important goal of the early phase of the counteroffensive campaign is to exhaust the enemy, which should help set the stage for a quick advance later. Kyrylo Budanov, among the leadership at the Defense Ministry, reinforced the wisdom of this tactic in July, saying that the counteroffensive was in progress, and success would become evident later. 

The counteroffensive campaign will probably continue during the winter despite weather-related complications. 

POW Exchanges
POW exchanges took place during the third quarter, but few Ukrainian servicepeople were returned. Most notable was the return home of the commanding officers who had defended the Azovstal plant in Mariupol. After a siege lasting months, the General Staff had commanded the defenders to stop the resistance and allow themselves to be taken prisoner. The fighters had remained in Turkey after their release, as part of a deal between Ankara and Moscow. In July President Zelensky flew to Ankara to repatriate the fighters and meet with Turkey’s president Erdoğan and the ecumenical patriarch.

Peace Negotiations
President Zelensky has repeatedly said that Ukraine will be ready for a diplomatic settlement of the war once the army reaches the internationally recognized borders of 1991. He has upheld his ten-point peace plan as the only acceptable framework for a just and lasting peace, and has ruled out a peace deal in exchange for recognizing annexed Ukrainian territory as Russian.

In late September the Russian foreign affairs minister issued a controversial statement that Russia was ready for negotiations but would not consider a ceasefire. Earlier the Kremlin had said it was not ready to end the war through negotiations.

Attacks on Critical Infrastructure
According to Ukrainian intelligence, Russia has been conducting reconnaissance of Ukraine's energy facilities in preparation for further attacks. Kyiv expects a new and massive air campaign during the winter of 2023–24. Ukraine is gearing up to take mirror actions in response.

In addition to ongoing local attacks, on September 21, a large-scale attack on the power infrastructure occurred. This attack could mark the start of Russian energy terrorism in the current autumn–winter season. Some attacks on the petrol infrastructure took place as well. 

Crimes against Civilians and Attacks on Civilian Infrastructure
Just as it has from the start of the full-scale invasion, Russia continued attacking civilian infrastructure both precisely and randomly. Several key Russian targets in the third quarter were seaports, river ports, and grain storage facilities. These attacks occurred around the time Russia withdrew from the Black Sea grain initiative and represented efforts to block Ukraine’s river and overland grain export avenues and restrict the country’s revenues. Besides affecting Ukraine directly, it also affected the global grain market and put at risk of hunger millions of people in developing countries around the globe.

Civilian objects also came under air attack, including educational institutions, cultural centers, hospitals, historical buildings and sites housing Ukraine's cultural heritage, and residential buildings.

Russia continued committing crimes against civilians in the occupied territories. Thousands of Ukrainian civilians are being held in Russian prisons, where they face torture, slave labor, sexual violence, and deportation. Russia plans to build dozens of prisons to hold both military and civilian Ukrainians. About 25,000 civilians are being held in Russia, and an additional 24,000 are registered as missing. Ukraine’s prosecutor general’s office has said about 98,000 war crimes have been recorded.

Russian Information and Psychological Operations
Russia continued its disinformation operations in an effort to divide Ukrainian society and undermine international support. In the third quarter it issued misinformation about the number of Ukrainian military personnel captured, publicized false plans to retreat, delivered wholly untrue statements suggesting friction between Ukrainian political and military authorities, and so on. Kyiv officials said that the Kremlin was preparing a disinformation campaign aimed at discrediting Ukraine abroad.

Russian spies targeted computer systems in Ukrainian law enforcement agencies to identify and obtain evidence related to alleged Russian war crimes, targeted Ukrainian soldiers’ mobile devices in a bid to steal sensitive battlefield information, and created fishing websites to collect information about Ukrainian military personnel. 

Russia’s Actions in the Occupied Territories
Russia continued its policies of forced mobilization and passportization in the occupied territories. Ukrainian citizens who refuse to accept Russian passports are subject to intimidation, restrictions on social benefits, and possible violence. Among other purposes, passportization was required for the elections Russia staged in the occupied territories in September. Kyiv condemned the sham elections and imposed new sanctions on Russia in response. 

Even as Russia is deporting Ukrainians from the occupied territories, it is encouraging Russian citizens to move there. Russians advertise online for a place by the sea in the destroyed city of Mariupol.

The kidnapping and removal of Ukrainian children continues: Russian officials stated that 700,000 Ukrainian children had been taken to Russia since the start of the full-scale invasion. Belarus continued to be involved in kidnapping children, and the country’s president, Aleksandr Lukashenko, did not deny it. Only a small number of these children can be returned to Ukraine through international cooperation. In the summer, Russia held military and training camps for teenagers from occupied territories to brainwash them with propaganda narratives in an effort to erase their identity. 

The Situation with the Zaporizhzhia Nuclear Power Plant
The situation at the Zaporizhzhia NPP remains extremely difficult, with a rising risk of accidents. The NPP is still mined, and multiple explosions near the NPP pose an ongoing risk of a nuclear accident. Russia has turned Europe’s biggest NPP into a torture chamber for plant employees and its grounds into a military encampment and training field.

At the same time, the IAEA mission is unable to comprehensively assess Russian military operations owing to restrictions imposed by Russians and the small size of the monitoring team. Therefore the IAEA is unable to guarantee the nuclear safety of the facility. 

The IAEA General Conference has approved a resolution on the immediate return of the Zaporizhzhia NPP to the full control of Ukraine. 

2. INTERNATIONAL AFFAIRS

President Zelensky’s Diplomatic Tours
President Zelensky continued his international visits, which had a twofold goal. In part the visits with leaders sought to build support for Ukraine joining NATO in advance of the NATO summit in Vilnius on July 11–12, which he also attended. But they were also part of a broader effort to drum up support for Ukraine worldwide in defending itself against Russia’s war.

In early July, he visited Bulgaria at the invitation of the country's new government. Together with the Bulgarian prime minister, Zelensky signed a declaration in support of the Euro-Atlantic integration of Ukraine and a memorandum on energy cooperation. Sofia approved new military aid to Ukraine, and the two countries agreed to deepen defense cooperation.

While the Bulgarian government strongly supports Ukraine, President Rumen Radev follows pro-Russia narratives. This difference ultimately caused a dispute between the two presidents, which became public because of the media presence in the room. 

After Bulgaria, President Zelensky paid unannounced visits to the Czech Republic and Slovakia. During his visit to Prague, he discussed with Czech prime minister Petr Fiala the weapons supply and joint weapons production. During his meeting with Slovakia’s president, Zuzana Čaputová, Zelensky expressed gratitude for Slovakia’s support and conveyed Kyiv’s readiness to purchase Slovak equipment, while also enunciating hope for longlasting and fruitful cooperation in the name of peace. However, Slovakia’s late September parliamentary elections pushed the populist politician Robert Fico’s Smer party into a commanding lead. Fico has vowed to suspend support to Ukraine in the war against Russia. Foreign observers are watching carefully the direction of Slovakia’s foreign policy as new coalitions emerge in the wake of the elections. 

In early July, President Zelensky visitedTurkey to meet President Recep Erdoğan and discuss the Ukrainian peace plan, the NATO summit, security guarantees, and the grain initiative, set to expire later that month. In Istanbul the president joined the ecumenical patriarch of Constantinople, Bartholomew I, for a memorial service in honor of Ukrainians slain in the course of Russia's war. 

The next round of trips the president made was to Sweden, the Netherlands, and Denmark.

In Sweden, President Zelensky met the royal family and the Swedish prime minister Ulf Kristersson. The parties discussed the possibility of receiving Swedish Gripen fighter jets and joint weapons production in Ukraine. Earlier the two countries had agreed to share intelligence data and speed up aid delivery. 

During his visits to the Netherlands and Denmark, Zelensky met the monarchs. Copenhagen and Denmark announced a "breakthrough agreement" to supply F-16 fighter jets to Ukraine, with the first deliveries due in early 2024. Both Denmark and the Netherlands later approved additional military aid packages to Ukraine, including tanks. 

After a historic visit to the Nordic countries, Zelensky traveled to Athens, Greece, to attend a summit on the Balkans, which was also attended by European Commission president Ursula von der Leyen. The participants signed a declaration supporting Ukraine. 

In August, Volodymyr Zelensky attended a summit in Saudi Arabia dedicated to implementing the Ukrainian peace formula, and in September he attended the United Nations to speak at the UN’s General Assembly and meet his US counterpart. 

United States and Canada
The United States has remained a key supporter in Ukraine’s war with Russia, having allocated over $66 billion in aid to Kyiv since Russia's full-scale invasion of Ukraine. 

US secretary of state Antony Blinken paid a two-day visit to Kyiv in early September to discuss the counteroffensive, future assistance, and reconstruction efforts, and to assure Kyiv of the U.S. commitment to Ukraine. During the visit, he also announced a new aid package and the first-ever transfer to Ukraine of assets seized from sanctioned Russian oligarchs, which will now be used to support Ukrainian military veterans.

President Zelensky and U.S. president Joe Biden met twice during the quarter, once during the NATO summit in Vilnius and again when Zelensky visited the United States on September 21. During the latter visit, Zelensky met with members of Congress in an effort to shore up bipartisan support; he warned Congress that Kyiv would lose without aid. So far bipartisan support remains, but the tenor in Washington has changed, and the continuing resolution passed at the eleventh hour by Congress on September 30 in lieu of a budget agreement excluded the $24 billion in aid to Ukraine that Biden had sought.

Following Zelensky’s visit to Washington, President Biden announced the decision to grant Ukraine a small batch of Army Tactical Missile Systems (ATACMS), which Kyiv had long sought, to speed up the counteroffensive. The first batch of Abrams tanks provided by the United States arrived in Ukraine in September. The two countries have agreed to launch joint weapons production.

Kyiv and Washington signed a memorandum on providing Ukraine with half a billion USD to strengthen the resilience of Ukraine’s energy system. Part of the amount will be conditioned on Ukraine implementing certain reforms. The Biden administration also appointed former commerce secretary Penny Pritzker to serve as the new U.S. special representative for Ukraine's economic recovery. In this position she will work to mobilize public and private investment, shape donor priorities, and open export markets.

President Zelensky then moved on to Canada, where he was welcomed by Prime Minister Justin Trudeau and addressed parliament, thanking Canada for its support for Ukraine. The two countries expanded an existing bilateral free trade agreement. Following the visit, Canada announced a new military aid package to Ukraine and additional sanctions against Russia. 

Relations with NATO: Excessive Expectations in Advance of the Vilnius Summit
Kyiv had large expectations in advance of the NATO summit in Vilnius on July 11–12, hoping it would mark a turning point in Ukraine’s efforts to join the Alliance. Ukraine had applied to join the Alliance in September 2022, when Russia officially annexed some Ukrainian territories. Prior to the summit, Kyiv had expected a guarantee and a corresponding roadmap to join NATO in the future, with security guarantees forthcoming by the time of admission. 

In the months preceding the summit, Kyiv increased its diplomatic outreach to NATO member states to get their support. This effort resulted in numerous declarations from different states supporting a fast-track accession for Ukraine.

At least twenty-three countries supported proposing concrete membership steps and roadmaps for Ukraine. But there was no consensus as to the wording of the decision about  Ukraine’s NATO future, and the member countries were divided, just as they were divided over potential security guarantees. The United States, Germany, and Hungary were among the key critics of proposing a membership roadmap for Ukraine because of the many unknowns in Ukraine’s future.

The Vilnius Summit communiqué again recognized that Ukraine would become a member of NATO at some time in the future, while dropping the requirement to fulfill a Membership Action Plan. According to the declaration, NATO states can extend an invitation to Ukraine to join the Alliance when the Allies agree and conditions are met—without, however, specifying the conditions Ukraine needs to meet.

A second decision emerging from the Vilnius summit was the adoption of a new, multi-year assistance program to facilitate the transition of the Ukrainian armed forces from Soviet-era to NATO standards and to help rebuild Ukraine’s security and defense sector.

A third decision established a NATO-Ukraine Commission, a joint body that would engage in consultation and decision-making on various issues, including security. Separately, President Zelensky met with G7 leaders, who committed to granting Ukraine additional military aid in the short term.

Though Kyiv’s expectation of the Vilnius summit were unmet, leading to some emotional reactions, President Zelensky subsequently characterized the summit's outcome as important because NATO had recognized that Ukraine did not need to implement a Membership Action Plan.

NATO Secretary General Jens Stoltenberg visited Kyiv in late September and promised to strengthen Ukraine's air defenses before the winter and the expected Russian attacks on Ukraine’s energy infrastructure. 

G7 Security Assurances for Ukraine

At the NATO summit in Vilnius, the G7 leaders agreed on security assurances for Ukraine, adumbrated in the "Joint Declaration of Support for Ukraine.” The G7 states recognized the security of Ukraine as integral to the security of the Euro-Atlantic region. Leaders committed to supporting Ukraine through strengthening its security, defense, and economics. Ukraine in turn committed to continue implementing reforms. Later, other states signed on to the G7’s security commitment: about twenty countries in total by the end of September. Final agreements on security guarantees are expected in a few months. 

The Fighter Jet Coalition
According to official statements, an international coalition started training Ukrainian pilots to fly F-16 fighter jets in August. The training center was set up in Romania. Other European states—Belgium, France, and Greece—also participate in training pilots on their territories. The United States agreed to train Ukrainian pilots if European states lacked the capability to do so. 

The European states confirmed granting Ukraine F-16 jets as the United States backed this transfer and pilot training. Denmark, the Netherlands, and Norway were the first states to approve sending F-16 jets to Ukraine. President Zelensky mentioned about forty-two jets. The first planes should arrive in Ukraine around New Year’s Day, 2024. 

Collapse of the Grain Deal
On July 17, Russia officially notified Ukraine it was suspending its participation in the Black Sea grain deal as of July 18. Weeks of threats to withdraw from the deal and Russia’s demands that some sanctions be lifted as a condition of its ongoing engagement preceded this step. According to the UN, the initiative has ensured the safe passage of over 32 million metric tons of food products from Ukrainian ports and helped reduce food prices by over 23 percent since March 2022. 

Countries across the globe criticized Russia’s decision. Some media outlets revealed that UN Secretary-General António Guterres had been in talks with Russian foreign affairs minister Sergey Lavrov over a proposal to lift some sanctions in exchange for Russia’s ongoing cooperation. 

Kyiv insisted that the Black Sea grain corridor had to continue in operation despite Russia’s position. The Kremlin responded with threats of "risks" to the parties involved should grain transit through the Black Sea continue without Russia's participation. Those risks did in fact materialize.

Black Sea Navigation
On July 19, Russia announced its intention to fire on any vessel proceeding through the Black Sea to Ukraine because it might be carrying weapons or other military cargo. In this way, Russia effectively started a Black Sea blockade, which it further enforced through nighttime air strikes on seaport and river port infrastructure, including grain storage facilities. Western leaders interpreted Russia’s actions as an attempt to get some sanctions lifted by causing a global food crisis. Russian food exports are not under sanctions.

On July 21, the Ukrainian navy announced mirror measures: it would deem ships headed for Russian seaports or Russia-occupied Ukrainian seaports as potential military targets. 

In early August, Ukrainian sea drones attacked and damaged a huge Russian oil tanker (supplying Syria, and sanctioned by the United States) in Ukrainian waters and a big naval ship close to the Black Sea port of Novorossiysk, the Olenegorsky Gornyak. That vessel, a landing ship, played an important role in both amphibious forces landings and conveying military cargo. The Ukrainian navy subsequently hit more Russian military ships in the Black Sea.

Kyiv declared the waters of six Russian seaports a "war-risk" zone. At the same time, Ukraine announced a “humanitarian corridor” for ships stuck in Black Sea ports. This helped some vessels leave that had been port-bound since the start of the wide-scale invasion.

In mid-September, the first ships loaded with grain left Ukrainian seaports since Russia exited the grain deal. The vessels followed a new route, sticking close to the western coast of the Black Sea and passing through the territorial waters of Romania and Bulgaria. 

Agricultural Exports Disputes
When Russia began impeding grain transit in the spring, Ukraine, supported by the EU, sought land export routes, even though they could not easily compensate for the mostly lost sea routes. The European Commission created special Solidarity Lanes that would allow Ukraine to export agriculture products without any restrictions, just as EU member states do. This led to some complications with neighboring European states, some of which, fearing lower market prices for their own products, asked the European Commission to ban imports of Ukrainian agrarian products. The EU agreed to a temporary ban on Ukraine’s export of specific grains and products through these countries, with the ban set to expire in mid-September.

When the EU lifted the temporary ban on September 15, Poland, Hungary, and Slovakia all decided to introduce unilateral bans, a move most EU member states condemned. But those countries claimed their economies were being hurt, and the leaders were not assuaged by Kyiv’s promise to impose strict controls on foodstuffs moving through their territories.

Kyiv intended to bring the matter before the World Trade Organization to arbitrage the dispute. Tensions among these neighbors are now high, risking a trade war and worse. 

Poland in particular has been voluble in rejecting Ukrainian grain shipments and the EU’s solution. Threats and counterthreats have been issued, ambassadors recalled, embargoes proposed. Poland has been among Ukraine’s staunchest supporters during Russia’s war, and a breakdown in relations is desired by neither side.

The upcoming parliamentary elections in Poland play some role in the grain dispute and related difficulties, though Polish president Andrzej Duda has said the grain dispute will never spoil the good relationship between the two countries. However, the rising strength of far right parties in Poland will likely pull the ruling coalition to the right. The grain transit issue may thus become an opening wedge in a larger separation of interests between the two countries. (See a recent Kennan Focus Ukraine piece on the risk of escalating tensions in the bilateral relationship.) 

Relations with the EU and Other European States
Surveys show that the majority of Europeans support Ukraine in the war against Russia and support Ukraine’s path toward EU membership. Kyiv expects the start of negotiations on the country's European integration process. According to EU officials, the timing of Ukraine’s path to join the EU will depend on reforms. Some of the seven criteria that Ukraine must meet have been achieved already, and the rest Kyiv has promised to fulfill shortly.

Since the start of the full-scale invasion, top-ranking official delegations from many European states have made their way to Kyiv to discuss the war and how they might help. In the third quarter, in addition, the Third Summit of the International Crimea Platform on August 23 drew many foreign attendees, either in person or online. The Crimea Platform is an international consultative and coordination format initiated by Ukraine with the goal of preparing for the de-occupation of Crimea. This year for the first time the summit was attended by representatives from the UAE, Bahrain, Serbia, and UNESCO. 

Beyond the aid agreements reached during President Zelensky’s trips abroad, foreign leaders committed to additional aid during their visits to Kyiv over the quarter. Germany continued its support, including the transfer of much-needed Patriot and Iris-T air defense systems to Ukraine, and announced a plan to provide Ukraine with $5.5 billion in annual military aid until 2027. Ukraine signed almost twenty agreements and memorandums with French arms producers when the French defense minister, Sébastien Lecornu, visited Kyiv. 

Some tensions arose in relations with Georgia. Kyiv once again protested the continued imprisonment of former Georgian president Mikheil Saakashvili, who holds Ukrainian citizenship, after a video demonstrating his deteriorating condition in the jail of a pro-Moscow regime was circulated. The Georgian security service accused a Ukrainian intelligence official who is an ethnic Georgian and who served in Georgia earlier of plotting a revolution against Tbilisi. Kyiv denied this, claiming forcefully that the Georgian administration was trying to shift blame for its internal problems to Ukraine and that Ukraine would have none of it.

Ukrainian Peace Formula Developments
In August, Saudi Arabia hosted a meeting of representatives of forty-two states, including China, India, the United States, and European countries, but excluding Russia, to discuss implementation of the Ukrainian peace formula. Most of the participating countries committed to undertake efforts to achieve peace. Though not all states agreed to all points of the formula, there was consensus that respect for Ukraine's territorial integrity and sovereignty must be at the heart of any peace agreement, as should the authority of the UN Charter. Kyiv described the talks as a “breakthrough” moment.

Later, Kyiv noted that sixty-three countries had supported the peace formula, many signing on through discussions after the conference.

3. INTERNAL AFFAIRS

The Economic Situation
The Ukrainian economy began showing signs of a recovery starting in the second quarter, when growth amounted to a 19.5 percent increase over growth in the second quarter of 2022. The explanation for such a large step up is a “low base effect”: with the start of the full-scale invasion, the economy had declined precipitously. For the first time since the invasion, business had positive expectations for the next twelve months. The National Bank lowered its interest rate from 25 percent to 20 percent in two stages.

Ukraine's foreign exchange reserves reached a record high of over $40 billion in August. This owed in part to financial support from Western partners. At the same time the national debt hit a new record, reaching $132.92 billion as of the end of August. 

The Energy Situation
The third quarter of the year saw increased maintenance and renovation of damaged power infrastructure in anticipation of renewed Russian attacks on the energy infrastructure. 

State-owned energy companies recorded increased gas production, which interrupted the falling trend of recent years. As of September, daily production reached its highest point in three years, in part because of increased drilling. The gas supplies should play a vital role in helping Ukrainians get through the winter.

Government Reshuffles
In July the Verkhovna Rada approved the resignation of Minister of Culture and Information Oleksandr Tkachenko. People had long demanded that Tkachenko resign, in the belief that he was not effective. The trigger was Tkachenko’s support for several high-profile and costly projects at a time when Ukraine was pouring all available resources into defense. Though Tkachenko urged culture as a way to bring past and present together, that argument is better made in peacetime.

In early September, following allegations of corruption lodged against the Defense Ministry and outcries from activists, Defense Minister Oleksandr Reznikov submitted his resignation. Parliament appointed Rustem Umerov the new defense minister. Originally an opposition lawmaker, Umerov became co-chair of the Crimea Platform, head of Ukraine’s State Property Fund, and a frequent negotiator in talks with Russia. He is a well-known figure with broad experience representing Ukrainian interests.

In August, President Zelensky approved a decision to dismiss the heads of all regional military recruitment centers after investigations and audits uncovered corruption and other violations. Their roles are to be filled by seasoned officers with military experience who are vetted by Ukraine’s Security Service (SBU).

The Problem of Holding Elections
From time to time, Ukrainian and Western officials have raised the issue of parliamentary and presidential elections scheduled to take place in 2024. But legislation prohibits elections while martial law is in effect. Even if the law is amended, it would be extremely complicated to hold elections and guarantee the right of all voters to participate. People accustomed to voting in person may not trust the new procedures of mail-in or electronic voting. Moreover, the elections would cost much more than in peacetime. President Zelensky said he was fine with holding elections but thought society would not support spending such large sums on elections rather than on the country’s defense.

Notable Anticrime Arrests 
Law enforcement agencies charged Ukrainian oligarch Ihor Kolomoisky with money laundering and fraud and placed him under arrest until October 31. Later, the National Anti-Corruption Bureau and SBU additionally accused him of embezzling money from PrivatBank, which he had owned before it was nationalized in 2016 because of its risky financial condition. Kolomoisky’s assets were frozen and bail was set at $14 million.

In mid-September, a court in Kyiv arrested a member of parliament, Nestor Shufrych, whom the SBU accused of high treason. Shufrych was elected a member of a pro-Russia and later banned party, Opposition Platform—For Life. He was a close ally of Viktor Medvedchuk, a pro-Russia politician who was arrested and later remanded to Russia in exchange for Ukrainian prisoners. Shufrych is considered to have spread pro-Russia narratives in Ukraine and faces up to fifteen years’ incarceration should the charges be upheld.

4. PROGRESS IN REFORMS AND SUCCESS STORIES

Renewed Asset Declaration Requirements
In September, parliament approved a law that restored the requirement for asset declarations by officials, which the IMF has considered a condition for continued lending. Such declarations were suspended when Russia invaded to limit the publishing of sensitive information, which might be stolen by Russian hackers from Ukrainian servers. However, the law as approved by parliament stipulated that only law enforcement would have access to officials’ asset declarations, not the media, the general public, or, critically, the anticorruption agencies. This prompted an immediate public outcry. President Zelensky vetoed the measure, in part because of society’s demands, and the Verkhovna Rada passed a new law stipulating that these declarations were to be made public. 

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.