- Language: English
- 17 Pages
- Published: September 2014
- Region: Ukraine
Country Report Estonia
- ID: 2114012
- October 2014
- Region: Estonia
- 67 Pages
- The Economist Intelligence Unit
The recent ceasefire agreement in eastern Ukraine has not prevented outbreaks of sporadic fighting. We continue to believe that Russia sees a frozen conflict in the region as its best-case scenario, meaning that no serious moves towards establishing a comprehensive and lasting settlement will be made. Despite this, we think that EU sanctions against Russia will be eased substantially when they come up for renewal in mid-2015, owing to the need for unanimity among the 28 member states, which will be harder to reach after another year of weak or negative growth for many. However, there are unusually large risks to this view, given the likelihood that the situation on the ground will not have altered significantly by mid-2015, and given the strong support from the German chancellor, Angela Merkel, for the existing measures against Russia. At present, our growth forecasts for Europe's more open economies reflect expectations of a bounce-back in regional trade volumes once the sanctions are lifted. Should this fail to materialise, our 2016 forecasts for Germany, the Netherlands, and many central and eastern European countries would probably be revised downwards.
A month has now passed since a ceasefire agreement was reached and a 12-point peace plan signed between the Ukrainian government and pro-Russian militias in Minsk, the capital of Belarus. The agreement has succeeded in reducing the intensity of the conflict. However, fighting has continued in a number of areas, concentrated in particular around Donetsk airport and the port city of Mariupol. There has also been a slight change of tack in Russia's approach to Ukraine and the West, suggesting that the focus of Russian diplomacy may now be on convincing the EU and US to ease their sanctions regime. The rhetoric of the Russian mass media-which since the Ukrainian revolution have portrayed the new government in Kiev, the Ukrainian capital, as a "fascist junta"-has been toned down. In late September Sergei Lavrov, the Russian minister of foreign affairs, said that the situation in eastern Ukraine had improved since the truce, and called for a "reset 2.0" in relations with the US. The government has also stepped back from some measures that would further isolate the country from the West. Proposals for an overflight ban for EU and US airlines have been quietly set aside.
However, the likelihood that the ceasefire arrangement will evolve into a more permanent political settlement in eastern Ukraine is very low. The peace plan has not created a political framework within which the Ukrainian government and the rebels are willing to work. In accordance with the 12-point plan, and against considerable domestic opposition, the government has adopted a presidential bill on the status of the Donbas that devolves significant powers to the Donetsk and Luhansk regions for a period of three years. This has been ignored by the separatists, who are refusing to allow the national parliamentary elections scheduled for October 26th to take place in eastern Ukraine, and remain committed to holding their own elections in November. The leaders of the self-proclaimed Donetsk People's Republic have also said that they will not allow local elections to take place on December 7th as planned by the authorities in Kiev. SHOW LESS READ MORE >
Country Report Estonia
EU sanctions on Russia will be eased in 2015
A new Transdniestr?
Sanctions will lapse in mid-2015
Unusually large risks to outlook