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Ukraine Defence and Security Report 2013

Ukraine Defence and Security Report 2013

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Additional Information

Price	$1,175.00
Publisher	Business Monitor International
Date of Report	May 12, 2012

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Quick Overview

In 2013, BMI expects Ukrainian defence spending to increase 0.43% year-on-year (y-o-y) to US$4.67bn,
a less-dramatic rise than in recent years but still a massive increase on the recent low of US$3.24bn seen
in 2009 at the height of the global financial crisis. The country’s economy is currently stagnating in mild
recession but received a boost from the influx of foreign tourists visiting in June 2012 when Ukraine cohosted
the Euro 2012 international soccer championship with neighbouring Poland. Defence spending
accounts for 2.7% of GDP and has done for much of the last decade, a figure that is notably higher than
that of most other economically developed nations. Ukraine has been gradually downsizing its total
number of military personnel in recent years, however. From a high of 165,000 in 2006, the country had
just 139,000 members of its armed forces in 2012. Theoretically, Ukraine has 48.32% of its population
available for active service, with 21.6mn men and women from its total population of 45.7mn aged
between 16 and 49.
Ukraine is nevertheless involved in a number of UN peacekeeping operations overseas, notably posting
133 servicemen and 35 vehicles patrolling in Kosovo and 22 servicemen in Afghanistan. It also has a
number of personnel posted in an observational capacity in countries such as the Democratic Republic of
Congo, Sudan and Liberia.
The country remains reliant on Russia for gas and energy imports but its relationship with its neighbour
continues to be fractious. Russia cut gas supplies to Ukraine during the harsh Januarys of 2006 and 2009,
demanding higher fees, and is not above demonstrating its power over Ukraine in this way to ensure its
co-operation in other areas. Russian president Vladimir Putin and his Ukrainian counterpart Viktor
Yanukovych most recently met in Yalta in July 2012 to discuss the latter’s plans for the establishment of
a multilateral gas consortium in Europe. The continent currently receives around 20% of its natural gas
from Russia, 80% of which passes through Ukrainian pipelines. Yanukovych took the opportunity to say
his country’s current gas contract with Russia was ‘not profitable’ and pressed for renegotiations.
Ukraine has been roundly condemned by governments and human rights organisations around the world
in 2012 for its treatment of former Prime Minister Yulia Tymoshenko, imprisoned in 2011 on corruption
charges relating to an import contract signed with Russian energy company Gazprom during her time in
office. Many felt the case against Tymoshenko was politically motivated and she has since reportedly
been subjected to beatings and 24-hour surveillance in her cell. New president Yanukovych and
Tymoshenko’s former coalition partner and rival Viktor Yushchenko both testified against her but the
trial was accused of dealing in ‘selective justice’ by international observers and media coverage of
Tymoshenko’s plight has done a great deal of damage to Ukraine’s reputation internationally.

Table of Contents

Executive Summary ........................................................................................................................................ 5
SWOT Analysis ............................................................................................................................................... 6
Ukraine Security SWOT ........................................................................................................................................................................................ 6
Ukraine Defence Industry SWOT .......................................................................................................................................................................... 7
Ukraine Political SWOT ....................................................................................................................................................................................... 8
Ukraine Economic SWOT ..................................................................................................................................................................................... 9
Ukraine Business Environment SWOT .................................................................................................................................................................. 9
Global Political Outlook ............................................................................................................................... 10
Europe Security Overview ............................................................................................................................ 15
The Strategic Outlook For The 2010s ...................................................................................................................................................................... 15
Europe In A Global Context ................................................................................................................................................................................ 15
Europe's Key Security Issues Over The Coming Decade ......................................................................................................................................... 15
The Future Of The Eurozone And EU ................................................................................................................................................................. 15
EU Expansion ..................................................................................................................................................................................................... 16
NATO Expansion And Relations With The US .................................................................................................................................................... 16
Post-Qadhafi Libya ............................................................................................................................................................................................. 17
Relations With Russia ......................................................................................................................................................................................... 17
Relations With Turkey ......................................................................................................................................................................................... 18
The Balkans ........................................................................................................................................................................................................ 19
Organised Crime................................................................................................................................................................................................. 19
Islamist Terrorism ............................................................................................................................................................................................... 19
The Greater Black Sea Region ............................................................................................................................................................................ 20
The Armenia-Azerbaijan Dispute ........................................................................................................................................................................ 21
Security Risk Analysis ................................................................................................................................. 22
BMI’s Security Ratings ............................................................................................................................................................................................ 22
Table: Europe Security Risk Ratings ................................................................................................................................................................... 22
Table: Europe State Terrorism Vulnerability To Terrorism Index ....................................................................................................................... 23
Political Overview ......................................................................................................................................... 25
Domestic Politics ..................................................................................................................................................................................................... 25
Long-Term Political Outlook ................................................................................................................................................................................... 27
Security Overview ......................................................................................................................................... 31
Russia ................................................................................................................................................................................................................. 32
The US, Europe And NATO ................................................................................................................................................................................ 34
Commonwealth Of Independent States ................................................................................................................................................................ 36
Border Security ................................................................................................................................................................................................... 36
Serpent/Zmeiny Island ........................................................................................................................................................................................ 37
Tuzla Island ........................................................................................................................................................................................................ 37
Latest Developments ........................................................................................................................................................................................... 38
Armed Forces And Government Spending ................................................................................................. 40
Army ................................................................................................................................................................................................................... 41
Navy .................................................................................................................................................................................................................... 41
Air Force............................................................................................................................................................................................................. 43
Industry Trends And Developments .................................................................................................................................................................... 44
Weapons Of Mass Destruction ............................................................................................................................................................................ 45
Market Overview ........................................................................................................................................... 47
Procurement Trends And Developments ............................................................................................................................................................. 48
Latest Developments ........................................................................................................................................................................................... 49
Industry Forecast Scenario .......................................................................................................................... 51
Armed Forces ........................................................................................................................................................................................................... 51
Table: Ukraine’s Armed Forces, 2002-2008 ('000 personnel, unless otherwise stated) ....................................................................................... 51
Table: Ukraine’s Manpower Available For Military Services, 2010-2017 (aged 16-49, unless otherwise stated) ............................................... 51
Defence Expenditure ................................................................................................................................................................................................ 52
Table: Ukraine’s Defence Expenditure, 2010-2017 ............................................................................................................................................ 52
Table: Ukraine’s Defence Expenditure Scenario – Changing % Of GDP, 2010-2017 (US$mn) ......................................................................... 53
Macroeconomic Forecast......................................................................................................................................................................................... 54
Table: Ukraine – Economic Activity, 2011-2016 ................................................................................................................................................ 55
Methodology ................................................................................................................................................. 56
How We Generate Our Industry Forecasts ......................................................................................................................................................... 56
Defence Industry ................................................................................................................................................................................................. 56
Sources ............................................................................................................................................................................................................... 57