Index trend
Previous quarterly editions
Expropriation Risk: 68 83 78 78 ►Political Violence Risk:90 90 90 85 ▼Terrorism Risk:24 24 24 24 ►Exchange Transfer and Trade Sanction Risk: 64 45 54 54 ►Sovereign Default Risk:92 92 83 83 ►
Overall Risk Temperature: 75 (High -1) TREND ▼
Special topic: Gray zone aggression
Degree to which the country relies on outbound gray zone action to achieve its strategic objectives1 = Not at all5 = Gray zone action is a core tactic
3
Impact of inbound gray zone attacks on the country1 = Negligible impact5 = Significant impact on economic growth and/or political stability
5
In February 2022, Russia invaded Ukraine. This has resulted in a war of attrition between the two countries, mostly fought on Ukrainian soil until Ukraine began small-scale incursions into Russia’s home territory this year.
Open warfare between the two countries makes the gray zone designation inappropriate, though both sides conduct gray-zone-like actions against each other alongside conventional military action. This includes Moscow’s rolling disinformation campaign against Ukraine, which aims to cause destabilization by lowering Ukrainian morale and raising expectations of a Russian victory. Russia has shown a noteworthy ability to infiltrate Ukrainian social networks to spread Moscow’s narratives.
Ukraine meanwhile has conducted drone attacks on military bases and infrastructure deep inside Russia’s territory, including fuel depots and oil refineries. These operations have become particularly frequent in recent months and are an important part of Ukraine’s overall efforts to degrade Russia’s war-fighting capability — though Ukraine’s government does not take responsibility for each of them, giving them a gray-zone-like element. It has also been claimed that Ukraine might have been behind the disruption to the Russian Nord Stream gas pipeline in September 2022; Ukraine’s government denies this. In August this year, German media reported that police had issued an arrest warrant for a Ukrainian national.
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Due to the war, the risk of expropriation is relatively high, although it mostly involves the nationalization of assets owned by the Russian state and its citizens. Ukraine is not known to have applied nationalization as a punitive action to other countries, even those supporting Russia in the war — such as Belarus or Iran.
Since the start of the war, Ukraine has confiscated over 50 companies belonging to Russian citizens and Ukrainians found to have collaborated with Russia in the war. The confiscation process normally goes through such stages as initial adoption of a sanction by the National Security and Defense Council and a subsequent filing of the case to Ukraine’s High Anti-Corruption Court. The confiscated assets are technically owned by the government’s privatization arm, the State Property Fund, and can therefore be put on sale, once privatization is fully resumed, with a view to generating funds for post-war reconstruction.
In late January, Ukraine’s Supreme Court recognized that the state owns the Ukrainian part of the Samara-westbound oil pipeline (the “Medvedchuk pipe”). For many years since independence, this part of the Soviet-built pipeline had been used by the Russian company Transneftprodukt before Kyiv began a decade-long fight in courts to bring the asset under state control.
That said, not every move to nationalize Russian assets has resulted in a clear and favorable legal outcome for the government. Also in late January, the Ukrainian High Anticorruption Court rejected a lawsuit filed by the Justice Ministry in October 2023 to recover assets from Alyans Holding. This company runs the local network of petrol stations under the Shell logo and belongs to European Union- and Ukraine-sanctioned Russian businessman Eduard Hudainatov. The Justice Ministry plans to appeal the verdict.
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The risk of political violence has historically been relatively low, even at the time of Ukraine’s domestic political crises, and the war with Russia has only minimized it further. Martial law was introduced when the Russian invasion began and remains in force, being extended every three months. This forbids mass gathering and manifestations.
However, even in the rare instances when the ban on mass gathering may be considered formally violated — most often by flash-mob style actions conducted in support of a certain public cause — none of these actions appears to pursue political goals nor have they been violent.
During wartime, with no elections on the horizon, the main domestic opposition parties continue to refrain from any street activism, as they essentially stick to a de facto political truce with the current administration.
Over the years, Ukraine has been spared terrorist attacks similar to those often seen in other countries and carried out by various extremist groups. Today, the threat of such terrorism to Ukraine remains extremely low, apparently reflecting the fact that the country has no direct external enemies except for Russia. However, Russia has attempted to conduct many kinds of subversive and sabotage operations inside Ukraine, recruiting Ukrainians ready to collaborate for money.
The Ukrainian currency — the hryvnya — has regained relative stability after sliding down almost non-stop for several months. In mid-July, the currency fell to an all-time low against major currencies and since then has fluctuated a little below that level. Apart from the fact that the hryvnya remains fundamentally weak, such a serious and prolonged but eventually interrupted devaluation can also be attributed to the policies of the central bank, which allowed the hryvnya to slide down to a certain point.
Ukraine’s trade sanctions risk relates to Russia almost exclusively, but the two countries have exhausted their scope for further sanctions. Contrary to fears that arose earlier in the year, there has been no further aggravation in Ukraine’s trade relations with some East European countries over its agricultural exports.
Ukraine’s debt payment situation has improved after the government concluded a restructuring deal with Eurobond holders in late August. The restructuring process involves the replacement of nearly all Ukraine’s outstanding Eurobond issues, altogether worth about $24 billion and maturing in the 2024 – 2026 period, with new issues for a total of $15 billion maturing in 2029 – 2036 (mostly in 2034 and later).
In early September, the International Monetary Fund and the Ukrainian government reached a staff-level agreement on a sixth tranche of lending worth $1.1 billion as part of a four-year, $15.6 billion Extended Fund Facility agreed in March 2023.
Ukraine’s central bank still holds ample foreign reserves, amounting to $42.3 billion as of September 1, but prefers to avoid depleting these reserves and to explore alternative options.
The content of this document is believed to be accurate at the time of publishing but due to the rapidly evolving situation, changes are occurring frequently and this information may have been superseded. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include coverage relating to the Ukraine crisis. WTW is not in a position to provide any advice in relation to sanctions. Please ensure you are taking advice from your own legal and/or other professional advisors before taking any action. The views expressed in the section are the opinion of Oxford Analytica and do not necessarily reflect those of WTW.
