How Ukraine's economic decay fueled protests
That helped Ukraine's economy grow rapidly from 2000 to 2008, but reduced pressure to modernize.
When the world economy fell into a crisis in 2008, demand for Ukraine's raw materials plunged. Then in 2009, Russia significantly raised the price of its gas supplies, further pulling the rug from underneath the country's export industries.
Pekka Sutela, an economist at Finland's Lappeenranta University of Technology who has extensively studied post-Soviet economies, calls the gas-based export boom "the Ukrainian curse."
"The economy was able to grow without making the necessary changes," he said.GAS FOLLIES: Ukraine's state gas company, Naftogaz, charges customers only about 20 percent of what it pays for imported Russian gas. That means the government spends about 7.5 percent of the entire economy's output each year on a massive home heating subsidy aimed at keeping voters happy. That results in large budget deficits that the government must borrow to cover. The International Monetary Fund tried to help Ukraine through its post-crisis troubles, with loan packages in 2008 and 2010. Each time, the IMF turned off the money tap after Ukraine refused to follow policy requirements including raising gas prices or cutting back sufficiently on generous government salaries and pensions. CORRUPTION: A recent World Bank study of the economy cited "pervasive" corruption as a major factor holding back the economy. At street level, businesses are subjected to arbitrary treatment by officials and demands for bribes. Higher up, there is widespread public skepticism over the fortunes amassed by the connected, known as oligarchs. In particular, attention has focused on the career of Yanukovych's son Oleksandr, a dentist who according to Forbes Ukraine has amassed a $510 million fortune through various business enterprises. Ukraine ranked 144 out of 175 countries in the 2013 corruption perception index compiled by Transparency International, an anti-corruption group, behind Papua New Guinea, Nigeria, and Iran.
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