Introduction

Ukraine is one of the linchpins of stability in East-Central Europe. Comparable to France in both area and population, Ukraine is, after Russia, the largest and most prominent of the successor states of the Union of Soviet Socialist Republics (USSR). Ukraine's geopolitical significance stems not only from its size but also from its location and economic potential. Ukraine connects Western and Eastern Europe. It is, as political geographers say, a critical borderland. Surrounded by Russia in the East, Belarus in the North, the Black Sea in the South, and Poland, Slovakia, Hungary, Moldova, and Romania in the West, Ukraine is central to European regional security. Ukraine's continued independence will make it impossible for Russia to extend its influence west. As Zbigniew Brzezinski maintains, "It cannot be stressed strongly enough that without Ukraine, Russia ceases to be an empire, but with Ukraine suborned and then subordinated, Russia automatically becomes an empire."

With NATO expanding its borders eastward to Ukraine's western edge, the country's role in maintaining regional stability has only increased. If a newly expanded NATO does not want to find itself facing a resurgent Russia, Ukraine will have to remain independent and resist the stationing of Russia's troops on its soil. Ukraine clearly has the political desire to remain independent of Russia, but it is not clear that Ukraine has the economic wherewithal and internal stability to back up its political goals. Its turbulent history, the legacy of Soviet rule, the immaturity of its democracy, and the chaos of its economy call into question Ukraine's coherence as an independent state. Moreover, if Ukraine continues to provide a hospitable environment for organized crime, it will provide a constant source of problems for NATO and European Union (EU) countries, as problems with the drug trade and trafficking in women already demonstrate. These factors help explain the immense attention the country has received in U.S. foreign policy in recent years (in 1998, Ukraine was the third-largest recipient of U.S. foreign aid, behind only Israel and Egypt).

Ukraine became an independent state on August 24, 1991, following the dissolution of the Soviet Union, and was a founding member of the Commonwealth of Independent States (CIS). Ukraine is a country of nearly 50 million people in close proximity to Central and Western Europe and the Middle East. In terms of population (50.5 million as of January 1, 1998), Ukraine ranks fifth in Europe after Germany, Italy, the United Kingdom and France. Ukraine is the biggest Eastern European country after Russia, covering over 600,000 square kilometers. It is bordered by Belarus to the north, Russia to the east and north-east, the Black Sea to the south, Romania, Moldova, Hungary and Slovakia to the south-west, and Poland to the west. Its capital is Kyiv, situated in the north of the country along the Dnipro River.

Ukraine initially established its own military forces of about 500,000 from the troops and equipment inherited from the former Soviet Union. It aimed to reduce the force to between 250,000-300,000 by the end of the decade; considerable downsizing already has taken place. Ukraine has a "distinctive partnership" with Ukraine and has been an active participant in Partnership for Peace exercises and in Balkans peacekeeping.

The United States attaches great importance to the success of Ukraine's transition to a democratic state with a flourishing market economy. Following a period of economic decline characterized by high inflation and a continued reliance on state controls, the Ukrainian government began taking steps in the fall of 1999 to reinvigorate economic reform that had been stalled for years due to a lack of a reform majority in the Ukrainian parliament. The Ukrainian government's stated determination to implement comprehensive economic reform is a welcome development, and the U.S. is committed to strengthening its support for Ukraine as it continues on this difficult path. Bilateral relations suffered a setback in September 2002 when the U.S. Government announced it had authenticated a recording of President Kuchma's July 2000 decision to transfer a Kolchuga early warning system to Iraq. The Government of Ukraine denied that the transfer had occurred. U.S. policy remains centered on realizing and strengthening a democratic, prosperous, and secure Ukraine more closely integrated into European and Euro-Atlantic structures.

Ukraine considers Euro-Atlantic integration its primary foreign policy objective, but in practice balances its relationship with Europe and the United States with strong ties to Russia, including pursuing the Single Economic Space project with Russia, Belarus, and Kazakhstan.

Ukraine long considered membership in the European Union (EU) and other European institutions its primary foreign policy objective. The EU's Partnership and Cooperation agreement (PCA) with Ukraine went into force on March 1, 1998. The EU has encouraged Ukraine to implement the PCA fully before discussions began on an association agreement. Ukraine has aspirations for membership of the EU, but this will not be possible without better economic performance and a vigorous economic reform program. The EU Common Strategy toward Ukraine, issued at the EU Summit in December 1999 in Helsinki, recognizes Ukraine's long-term aspirations but does not discuss association. After the 2004 round of EU expansion, the EU did not signal a willingness to consider Ukraine for an association agreement, as Ukraine had hoped for, but instead included it in a new "neighbor" policy, disappointing many Ukrainians.

On January 31, 1992, Ukraine joined the then-Conference on Security and Cooperation in Europe (now the Organization for Security and Cooperation in Europe--OSCE), and on March 10, 1992, it became a member of the North Atlantic Cooperation Council. Ukraine also has a close relationship with NATO and is an active member of Partnership for Peace (PfP).

Ukraine has friendly relations with its western neighbors, especially Poland, with whom it cooperates closely. Ukraine became a member of the Commonwealth of Independent States (CIS) on December 8, 1991, but in January 1993 it refused to endorse a draft charter strengthening political, economic, and defense ties among CIS members. Ukraine is a founding member of GUUAM (Georgia - Ukraine - Uzbekistan - Azerbaijan - Moldova), the group of western-oriented former Soviet states that would prefer to limit the CIS to economic relations.

Ukraine's primary national interest lies in the management of its relationship with the Russian Federation. This relationship was troubled following Ukraine's independence in 1991. Relations with Russia were complicated by energy dependence and by payment arrears. However, the relations have improved with the 1998 ratification of the bilateral Treaty of Friendship and Cooperation. Under this treaty, Ukraine has committed itself to not joining any military blocks for the duration of Russia's 20-year lease on the naval base in Sevastopol. That way, Ukraine has ended speculations that it might apply to join NATO itself. Also, the two sides have signed a series of agreements on the final division and disposition of the former Soviet Black Sea Fleet that have helped to reduce tensions.

In September 2003 Ukraine signed an Agreement on a Common Economic Space (CES) with Belarus, Kazakhstan and Russia. The Agreement foresees closer economic relations between the four signatories, eventually leading to the formation of an economic union. Realisation of the CES is a priority for Russia in its relations with Ukraine. Bilateral trade between Russia and Ukraine has been growing strongly, underpinned by transportation of Russian energy exports through Ukraine and Russian sales of energy to Ukraine. Ukraine and Russia have recently resolved the long-running issue of a common border between the two countries.

Corruption is a significant problem. The Ukrainian Government openly acknowledges that corruption remains a major issue in society. Efforts to effectively fight corruption are hampered by the general public's widespread tolerance of its practivce, its entrenchment within the government and business community, inadequate enforcement, and lack of appropriate legislation and resources to investigate and prosecute corruption cases. Transparency International's (TI) 2008 Corruption Perceptions Index (CPI) rating for Ukraine was 2.5 (on a scale of 10) or 134th place out of 180 countries - tied with Pakistan and rated lower than Nigeria. In 2007, Ukraine's CPI rating was 2.7 and was ranked 118th place.

In the past, harassment, extortion, protection rackets, and intimidation have been reported against American investors or business interests in Ukraine. In some cases it appears that individuals with local commercial interests who may have had links to organized crime groups were behind these incidents. Although still a concern, these types of reported incidents have declined over the past few years. In 2008, there were no significant incidents reported to the Embassy of American businesses being targeted by organized crime in Ukraine.