Ukraine has many of the components of a major European economy -- rich farmlands, a well-developed industrial base, highly trained labor, and a good education system. After eight straight years of sharp economic decline from the early to late 1990s, the standard of living for most citizens declined more than 50%, leading to widespread poverty. In the last four years economic growth has resumed averaging 5-6% per year and personal incomes have begun to rise. The macro economy is stable, with the hyperinflation of the early post-Soviet period having been tamed. Ukraine's currency, the hryvnia, was introduced in September 1996, and has remained stable. While economic growth continues, Ukraine's long-term economic prospects depend on acceleration of market reforms. The economy remains burdened by excessive government regulation, corruption, and lack of law enforcement, and while small and medium enterprises have been largely privatized, much remains to be done to restructure and privatize key sectors such as energy and telecommunications.

Ukraine is rich in natural resources. It has a major ferrous metal industry, producing cast iron, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid. Manufactured goods include airplanes, turbines, metallurgical equipment, diesel locomotives, and tractors. It also is a major producer of grain, sunflower seeds and sugar and has a broad industrial base, including much of the former USSR's space and rocket industry. Although oil and natural gas reserves are small, it has important energy sources, such as coal, and large mineral deposits.

Ukraine encourages foreign trade and investment. The parliament has approved a foreign investment law allowing Westerners to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event that property were to be nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts and corruption stymie large-scale foreign direct investment in Ukraine. While there is a functioning stock market, the lack of protection for minority shareholder rights severely restricts portfolio investment activities. Total foreign direct investment in Ukraine is approximately $6.04 billion as of October 2003, which, at $126 per capita, is still one of the lowest figures in the region.

While countries of the former Soviet Union remain important trading partners, especially Russia and Turkmenistan for energy imports, Ukraine's trade is becoming more diversified. An overcrowded world steel market threatens prospects for Ukraine's principal exports of non-agricultural goods such as ferrous metals and other steel products, while exports of machinery and machine tools are on the rise. Ukraine imports 90% of its oil and most of its natural gas. Russia ranks as Ukraine's principal supplier of oil and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports come from Russia (which delivers natural gas as a barter payment for Ukraine's role in transporting Russian gas to Western Europe) and Turkmenistan (from which Ukraine purchases natural gas for a combination of cash and barter). While Ukraine's long running dispute with Russia over approximately $1.4 billion in arrears on past gas sales appeared to have been solved through a complex repayment agreement involving Eurobonds to be issued by Ukraine's national oil and gas monopoly (NaftoHaz Ukrainy) to Russia's GazProm by the end of 2003, Russia has not yet accepted the bonds, so the issue remains open. Reform of the inefficient and opaque energy sector is a major objective of the IMF and World Bank programs with Ukraine.

Ukraine is negotiating with the IMF on a precautionary stand-by facility. Dealing with large arrears in VAT refunds to exporters remains the principal issue hindering final approval of a facility. The GOU is also in talks with the World Bank on a Second Programmatic adjustment loan, and loans have been approved for a land registration system and to modernize tax administration. In 1992, Ukraine became a member of the International Monetary Fund and the World Bank. It is a member of the European Bank for Reconstruction and Development but not a member of the General Agreement on Tariffs and Trade/World Trade Organization (WTO). While Ukraine applied for WTO membership, its accession process has moved slowly. A working party meeting in October 2003 agreed to review elements of a draft working party report at the next meeting. The government's stated goal is to accede to the WTO by the end of 2004.

Environmental Issues
Ukraine is interested in cooperating on regional environmental issues. Conservation of natural resources is a stated high priority, although implementation suffers from a lack of financial resources. Ukraine established its first nature preserve, Askanyia-Nova, in 1921 and has a program to breed endangered species.

Ukraine has significant environmental problems, especially those resulting from the Chornobyl nuclear power plant disaster in 1986 and from industrial pollution. In accordance with its previously announced plans, Ukraine permanently closed the Chornobyl Atomic Energy Station in December of 2000. Design work as well as structural improvements to the "sarcophagus" erected by the Soviet Union are largely complete and construction on the new shelter is scheduled to begin in 2004.

Ukraine also has established a Ministry of Environment and has introduced a pollution fee system, which levies taxes on air and water emissions and solid waste disposal. The resulting revenues are channeled to environmental protection activities, but enforcement of this pollution fee system is lax.

Proposals to build a transport canal through UN protected core biosphere in the Danube Delta have become an environmental issue of international interest.