This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Ukraine's Economy Caught Between West and Russia

NEW YORK (TheStreet) -- Ukraine has received a $27 billion financial lifeline from the International Monetary Fund.

Two other factors, however, could offset the effectiveness of this aid from the West: the economic reforms mandated by the IMF and Russia's control over everyday expenses in Ukraine.

The country is a pawn in Russia's new cold war with the West, and Russia's recent annexation of Crimea has heightened geopolitical tensions.

The agreement announced Thursday expedites transfers of funds, giving Ukraine a buffer to help pay for military costs should Russia push further into Ukrainian territory.

The agreement announced Thursday includes $14 billion to $18 billion in loans for two years, contingent on the country's ability to enact tough economic reforms. The IMF estimates those reforms, in combination with the aid, will prevent economic contraction of up to 10% this year. Ukraine  remains on the edge of bankruptcy, however, something new Prime Minister Arseny Yatsenyuk has reiterated to parliament the past few weeks.

The terms of the deal have also led the country to adopt a flexible exchange rate, something the IMF estimates could fuel inflation of 12% to 14% this year.

This move was made in an effort to stop Ukraine from depleting its foreign exchange reserves by propping up its currency, the hryvnia, and attempting to stave off public discontent over a declining currency.

Meanwhile, the cost of Russian natural gas could add significantly to Ukraine's inflation problem.

Russian leaders have backed an end to Ukraine's discount from Gazprom, Russia's largest natural gas company.

Ukraine has said it believes Moscow will charge Kiev as much as $480 per 1,000 cubic meters of gas starting April 1, instead of the current $268.50. That's a 79% increase.

The move could worsen Ukraine's economic woes and cause more political instability in the days leading up to the country's presidential election scheduled for May 25.

The West's priority in resolving the Ukraine crisis was to support the country financially, while isolating Russia from the rest of the world. What the West apparently failed to appreciate, however, is the extent of Russia's financial reach in the region.

At the time of publication, the author had no position in any of the funds mentioned.

Follow @macroinsights

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs