michaelschn

Ukraine: Overlooked, Yet a Promising Emerging Market

The big difference between Ukraine and countries like Indonesia, Vietnam, Pakistan etc. is climate there. You need energy to produce things in these countries. In Ukraine you need a lot of energy to just survive. The only reliable energy resource Ukraine has is coal. But coal production is in horrible state. There are constant fatal accidents there. Production is in decline. On top of all this the current government considers miners its worse enemy, because they overwhelmingly support pro-Russian opposition. Ukrainian coalition parties rely on the rural and small towns electorate of the west and north of the country as well as on government employees in Kiev.

On the other hand these villages and small towns can't produce anything valuable for the West. Their agriculture can't compete with much warmer countries like Bulgaria, Romania, Hungary etc.

Ironically, it makes Ukraine dependent on Russian natural gas and oil sold with huge discounts, (compared to international prices). This put Ukraine at complete mercy of Russian political games.

With Russian policy of raising natural gas prices inside Russia itself (with the goal of reaching the world prices level by 2012) Ukraine faces a huge energy crisis. Unlike small nations like Latvia and Estonia which rely on Western financial support and on tourism (including sex tourism from UK and alcoholic tourism from Scandinavia) Ukraine is to big to get this kind of help.

Considering all this and also the fact that much of the growth there is due to worldwide real estate bubble which is not sustainable I can't see how it may be a good place to invest in.