He was not referring just to the Russian threat that is palpable in the country. Ukraine’s military forces are practically non‐existent — a fact that Vladimir Putin, Russia’s president, has already exploited in Crimea. At the same time, Ukraine’s government faces the enormously difficult challenge of saving the Ukrainian economy from bankruptcy and of delivering on people’s expectations of a radical departure from the country’s post‐Soviet past.
“Everybody knows we are on a kamikaze plane so there is little else for us to do but to try and hit the target,” the official tells us. Starting in April, the government is increasing natural gas prices for households, currently heavily subsidised, by 40 per cent.
While a portion of the blame for the price increase will go to Putin, who is ending the discount that Ukraine has enjoyed on its imports of natural gas from Russia, the increase will certainly be unpopular, especially among poorer households. Yet, to avoid a default, there is no alternative to a rapid reform of Ukraine’s unsustainable and wasteful subsidy system. Besides households, who are receiving natural gas at some 30 per cent of its full price, an arbitrary system of subsidies targets selected companies, typically with good political connections.