Ukraine Quarterly Digest: October–December 2023

The end of the year saw a radical shift in Ukraine’s European integration. On November 8 the European Commission proposed opening EU accession talks with Kyiv, an important step for Ukraine; the European Council subsequently approved this decision. As a further step on the path to Europeanization, Ukraine completed synchronizing its power system with the European system, and the country’s transmission system operator became a member of the European network, ENTSO-E.

Despite heavy combat, the front line did not move. There was some concern about future military aid, the availability of which would affect war developments and Ukraine’s abilities to hold off Russian forces on the battlefield and thwart Russian air strikes on civilian targets. The concern mostly arose from the position of the United States, which has been driven by internal U.S. politicking, and the corresponding delay in providing new aid packages. The lack of weapons supplies, Kyiv claimed, slowed the counteroffensive operation, which, despite expectations, did not result in rapid and wide-scale advances. Nonetheless, there were positive achievements of the counteroffensive, particularly in taking out Russia’s naval vessels and port supplies.

1. ROLLOUT OF THE WAR

General Developments during October–December

The last quarter of 2023 was another period of heavy, intense fighting without tangible territorial advances on either side. The Armed Forces of the Russian Federation (AFRF) kept up pressure along the entire front, with key battles taking place in the vicinity of Avdiivka, Bakhmut, Kupiansk, Lyman, Mariinka, and Robotyno. The battle for Avdiivka, in Donetsk oblast, a city Russian forces have tried to capture since early October, was perhaps the costliest of the war for the AFRF, with little achieved there. At the same time, delays in  supplies of military aid from Ukraine’s Western allies affected military operations of the Armed Forces of Ukraine (AFU), which had to curtail some operations because of ammunition shortages.

Despite high expectations, the Ukrainian counteroffensive in the last quarter of the year did not result in rapid and wide-scale advances. Nonetheless, there were some critical developments. In mid-November the AFU took back some positions of the left bank of the Dnipro river in occupied Kherson oblast. Establishing bridgeheads there is a step toward being able to move forces and supplies across the river, thence to the south on a land route to Crimea. It also allows the AFU to better protect the residents of Kherson, who have been under relentless attack.

Ukrainian forces also continued their successful attacks on Russian vessels in the Black Sea: 20 percent of the Russian Black Sea fleet was destroyed during the last four months of 2023, an important achievement for a country that is not a major naval power. On land, the Ukrainian army continued successful attacks on Russian military facilities in Crimea and other occupied territories, often using unmanned drones and missiles.

President Zelensky and other top Ukrainian officials have attributed the lack of more impressive results from the counteroffensive to slow weapons deliveries, which gave the Russians time to build more fortifications and to mine territories densely. This was the opinion of Western military experts as well. Ultimately, the situation pushed the army chiefs to change tactics and emphasize building defense fortifications. At the same time, the AFU did not retreat, despite unprecedented pressure from Russian forces along the front line. Overall, the counteroffensive was successful in many respects: Russian casualties mounted, and the AFRF failed to advance, despite strenuous efforts. 

According to the AFU General Staff, from the start of the invasion to the end of 2023, the Russian army lost over 360,000 soldiers, thousands of tanks and combat vehicles, and hundreds of aircraft and helicopters. The figure on human losses is close to the UK’s intelligence bureau’s assessment. Spokesperson for Ukraine's military intelligence agency Andrii Yusov said in mid-December that around 450,000 Russian troops were deployed in Ukraine, many fewer than the 617,000 that Vladimir Putin claimed.

Ukraine’s commander-in-chief, General Valery Zaluzhny, warned about the risk of a positional war, “where both sides are dug in and not moving much.” To avoid such a deadlock and return to a war of maneuvers, he said, Ukraine would need additional weapons.

POW Exchanges

During the last quarter of the year, there was little public information about POW exchanges. In mid-November, Kyiv blamed Moscow for halting the exchanges and blocking negotiations over POWs. The previous exchange had taken place on August 7, when twenty-two Ukrainians returned home. In early December, President Zelensky said exchanges were happening without public announcements, while recognizing that Russia was throwing up barriers to the exchanges. In some cases, POW exchanges were occurring right on the battlefields. 

As of mid-November, according to official data, 4,337 Ukrainians were imprisoned in Russia, including 3,574 military personnel. The actual number of Ukrainian civilians imprisoned in Russia, according to the Ukrainian Parliament Commissioner for Human Rights, may reach 25,000.

Russian Disinformation Campaigns and Cyberattacks

Russia’s disinformation campaign in Ukraine during the quarter including disseminating deep-fake videos featuring the Ukrainian army’s commander-in-chief, fake stories about political and army leaders, and lies about Russian forces’ success on the battlefield. Russia has also continued its anti-Ukrainian information campaigns in other countries, especially Poland. These disinformation efforts are designed to spread mistrust of Ukrainians and of Ukraine’s reasons for fighting, and to decrease support. 

On December 12, one of the biggest Ukrainian mobile operators, Kyivstar, which provided cellular connection for 25 million customers and broadband internet connection for one million, came under a cyberattack that resulted in the total suspension of services for a few days. Earlier, in October, a court in Kyiv had seized the corporate rights in Kyivstar of three sanctioned businessmen, including the Russian oligarch Mikhail Fridman, in part to prevent them from setting up dummy corporations and moving assets there. Kyivstar was part of a larger holding group controlling similar businesses in Russia. 

The Russian hacking group Solntsepek claimed responsibility for the attack, but the company and Ukrainian officials said the hackers overstated their achievements, and SBU cybersecurity department head Ilya Vitiuk thought it was more likely the work of the Russian military intelligence unit Sandworm. In an interview with Reuters, Vitiuk expressed concern that the hackers had been inside Kyivstar at least since May. A big Ukrainian bank came under cyberattack at the same time as well. 

More than 4,000 cyberattacks have been reported since the invasion, which is three times the frequency of such attacks before the war began. 

Russia’s Position on the War

The Kremlin continued denying chances for the Ukrainian peace formula and said there was no basis for bilateral peace negotiations. The Kremlin has not changed its narrative on the targets of the war against Ukraine, which abounds in falsehoods and manipulative statements. Putin continues asserting that Russia did not start the war in Ukraine and expounding on the need to consider how to stop “the tragedy” in Ukraine. Russia has seen more of its armory and vehicles destroyed than it likely anticipated, but it relies on the West's potential fatigue in supporting Ukraine when spreading misinformation about Ukraine in Western countries. 

Attacks on Critical Infrastructure

In the fourth quarter, Ukraine did not face massive damage to the energy infrastructure. This could have resulted either from an effective air defense or from Russia not yet starting its expected winter assaults on the energy system. Still, there were numerous attacks on the power grid as early as November, and some energy assets were damaged by shelling and air strikes. Among them were power plants, coal mines, oil refineries, and fuel depots. One of the thermal power plants located close to the front was shelled ten times in two months. Some other critical infrastructure facilities also came under attack during the fourth quarter, including river port infrastructure and shipyard and railway facilities. Nonetheless, the scale of the damage was much less than in the fourth quarter of 2022. 

Crimes against Civilians and Attacks on Civilian Infrastructure

At the end of the year, Russians resumed massive drone and missile strikes on civil and critical infrastructure, hitting a record of such attacks in late December. Kyiv was a key target. Russia continued attacking civil infrastructure, including residential buildings, killing and wounding civilians. Among these were grain storage facilities, postal service infrastructure, kindergarten, the Odesa Fine Arts Museum, river and seaport infrastructure, foreign civil cargo ships, medical institutions, and so on.

Numerous civilians have been killed or wounded in these attacks. A particularly heinous attack on a café hosting a funeral reception in Kharkiv oblast that resulted in the deaths of fifty-nine civilians became the biggest crime against civilians in the region. On December 29, Russia launched wide-scale missile and drone attacks that resulted in the largest number of civilians killed and injured in Kyiv since the start of invasion. Russia continued such attacks in the following days, some of which were on the same massive scale. Many residential buildings were damaged during attacks at the end of the year. 

Kyiv officially confirmed the unlawful deportation of almost 20,000 Ukrainian children since the start of the war. Thousands have been taken to Belarus. Fewer than 400 children had been returned as of the end of the year, in some cases through the efforts of parents and family. During the last quarter of the year the media reported fewer than twenty children returned. Analysts assess that over 8,300 Ukrainian children taken to Russia in 2023 had been sent to “reeducation camps.”

2. INTERNATIONAL AFFAIRS

A key issue in foreign affairs in the fourth quarter was the uncertainty of international military aid to Ukraine at the level the country needs to withstand Russia’s attacks. The concern arose mostly because of internal U.S. politicking and the corresponding delay in providing new aid packages. Another factor was the rise of populist parties in parliamentary elections in some European states. Most of these populist parties, including those in Slovakia and the Netherlands, are against providing further aid to Ukraine. News that the EU was behind schedule in supplying artillery rounds did not give grounds for optimism. These various factors combined meant a critical drop in aid: between August and October, the amount of newly committed aid to Ukraine decreased by 87 percent compared to the same period in 2022.

At the same time, the leaders of some European states and the EU itself declared themselves ready to continue supporting Ukraine. European leaders warned that Ukraine’s defeat would mean serious damage to the project of United Europe and that Russia would be on the EU’s doorstep and would later move forward with war against other European states, as it has threatened.

In the larger picture, Ukraine’s inability to defend itself would mean democracy losing to tyranny. A door would open for a global parade of more powerful states annexing less powerful neighbors, and war-oriented Russia would have more resources to conduct war in the future. 

Prominent Western media have also spoken out on the necessity of providing support to Ukraine. A Financial Times article described the humanitarian disaster that would occur should Russia win, and an editorial in Bloomberg called on Western governments to continue supporting Ukraine.

President Zelensky’s Diplomatic Tours

In the last quarter of the year, President Zelensky made a few visits to allies and partner countries. In early October, he visited Spainto attend the European Political Community Summit, a forum of more than forty countries established after Russia's invasion to cope with critical challenges and threats, including Russia’s war in Ukraine. At the summit, he met with Spanish prime minister Pedro Sánchez and Italian prime minister Georgia Meloni to discuss new military aid packages. He met the Armenian prime minister Nikol Pashinyan for the first time ever, as Russia-Armenia relations had cooled after another Nagorno-Karabakh conflict in September 2023. In September, Armenia provided Ukraine with humanitarian aid for the first time since the full-scale invasion, and in late October, Armenia participated in Ukraine’s Peace Formula summit for the first time.

On October 10, President Zelensky visited Romania to meet his counterpart, Klaus Iohannis, to discuss Black Sea regional security and the transit of Ukrainian grain, an issue that has prompted some harsh tit-for-tat threats in the past. The two presidents signed a joint declaration on bilateral cooperation, including on such matters as security, Ukrainian grain exports, promoting the Ukrainian Peace Formula, and others matters related to Ukraine’s defense. 

The next day Zelensky made an unannounced visit to Brussels to attend a meeting of the Ukraine-NATO Council and a meeting of NATO defense ministers in the Ramstein Format, a group of more than fifty countries organized to provide collective support to Ukraine. The key topic during the meetings was providing weapons and air defense systems before the winter. The UK and Norway agreed to address strengthening security in the Black Sea region, and France and Germany committed to leading a new ground-based air defense coalition. 

In December, President Zelensky visitedArgentina to attend the inauguration of the country's president-elect, Javier Milei, who has expressed support for Ukraine in Russia’s war. He also met with the leaders of a few other South American states. Following this trip, he visited the United States to meet with President Biden and address U.S. senators to enlist further U.S. support for Ukraine in the war against Russia. Zelensky then made a surprise visit to Germany and later Norway to attend the Nordic States summit. The Nordic leaders committed to supporting Ukraine "for as long as it takes.”

United States

The key feature of U.S.-Ukraine relations in the last quarter of the year was uncertainty over future U.S. aid to Ukraine. Internal U.S. politicking has resulted in deferred agreement on the U.S. federal budget for 2024, and the precipitous start of Israel’s war with Hamas has confounded any consideration of aid to Ukraine as a stand-alone issue. The Ukraine aid fund was expected to run out by the end of the year.

Relations with the EU and European States

On November 8 the European Commission adopted the 2023 Enlargement package, which recommended inviting Kyiv to start talks on Ukraine’s accession to the EU. The decision was based on an assessment of Ukraine’s progress toward reforms in different areas, as detailed in a separate report. According to the report, Ukraine had taken the necessary steps and fulfilled its commitments sufficiently to be ready for negotiations. Ursula von der Leyen, president of the European Commission, called this “excellent progress.” On December 14 the European Council agreed to open Ukraine membership talks, even though Hungary and Austria expressed an intent to vote against Ukraine’s membership.

Most of the European states continued supporting Ukraine. Germany remained among the largest supporters and aid providers, with a few packages of aid provided in the last quarter of the year. Among other articles, Germany supplied some air defense systems that are crucial during the winter to protect critical infrastructure against Russian missile strikes and bombings. Ukraine and Germany agreed on a joint venture to produce armored military vehicles in Ukraine. Berlin made available funds to restore and support the Ukrainian power system before the winter. German chancellor Olaf Scholz called on the country to be prepared to increase its support for Ukraine "when others are faltering."

As expected, parliamentary elections in Slovakia were won by Robert Fico, who had promised to end military support for Ukraine should he prevail. Immediately after the elections, Slovakia halted its military aid to Ukraine, and, after being appointed prime minister, Fico confirmed this decision and canceled previously approved aid packages. Fico took the position that the war was a “frozen conflict” and Kyiv and Moscow needed to negotiate. However, he confirmed his intention to continue supplying humanitarian aid.

The pro-Russia Fico had held anti-Ukrainian views before the election. The newly appointed country’s foreign affairs minister, Juraj Blanár, in the past was known for purveying misinformation about Ukraine and repeating Russia’s propaganda narratives. Bilateral relations between Slovakia and Ukraine are likely to become strained in the near future. 

In October, Prime Minister of the Netherlands Mark Rutte visited Ukraine, promising to supply extra Patriot missiles before the winter, along with another aid package announced shortly before. Another prominent event happened in early December when the Netherlands finally returned to Ukraine some ancient Scythian artifacts the country had held on to for almost ten years. These items had previously been kept in Crimea before being sent out for exhibition. When Russia annexed Crimea, it also claimed ownership of the artifacts. In June 2023 a Dutch court ruled the gold treasures should go to Ukraine, not Crimea. In late December, the Netherlands started preparing F-16 fighter jets to be delivered to Ukraine.

The Netherlands is among Ukraine's most significant military aid providers and is committed to continuing support in 2024. But there is a risk of a Slovakia-style development: in November a far-right politician, Geert Wilders, whose platform included halting support for Ukraine, unexpectedlywon parliamentary elections. Wilders’s party, which was anti-Ukrainian ten years ago, will not have a majority, so the future country’s policy toward Ukraine may depend on what kind of political coalition gets put together.

Relations with Hungary remained strained. There was little progress in solving the agriculture export ban other than a waiver for sugar. Budapest continued creating obstacles within the EU to the vote granting Ukraine support, and the country’s prime minister, Viktor Orbán, personally criticized providing aid to Ukraine. Hungary threatened to block EU accession negotiations with Kyiv and even filed a corresponding claim with the European Commission. Prime Minister Orbán, who has maintained ties with Moscow despite the EU’s policy, said Kyiv was not ready to begin EU accession negotiations. Ukraine’s EU membership aspirations do not coincide with Hungary’s national interests, he said. 

Orbán might take the desire of most EU member states to support Ukraine as an opportunity to negotiate more for Hungary, both from the EU and from Ukraine. Budapest demands that Ukraine amend its law on education, and Kyiv says it is ready to do so. Kyiv’s position is to negotiate with countries whose minorities live in Ukraine, to fulfill the European criteria, but without making special exceptions for any minority.

Despite the threats, Hungary did not veto the vote on starting Ukraine-EU membership negotiations, but on the same day it blocked the EU’s decision for €50 billion in long-term aid for Ukraine. 

Romania became a more important partner of Ukraine, and bilateral relations grew thicker in the fourth quarter. President Zelensky visited Bucharest and signed a bilateral memorandum of cooperation with his Romanian counterpart. Romania continued taking steps to expand Ukrainian agricultural transit, which faced a potential blockade by some other neighboring states. The two countries settled the dispute over the construction of a deep-water navigation route, in which Bucharest had accused Kyiv of violating environmental standards. Bucharest welcomed amendments to the Ukrainian law on national minorities and Kyiv’s decision not to use the term "Moldovan language."

The concept of the “Moldovan language” was established by Moscow when Moldova was one of the Soviet socialist republics; it is not recognized by Bucharest, despite the large number of Moldovan immigrants in Romania. The relationship between Romania and Moldova is long and complicated, and President Zelensky felt the language issue was of less importance in a time of war.

After the dispute regarding agricultural exports and transit between Ukraine and Poland, top officials from both countries ratcheted down the tension in their public statements. The presidents of Ukraine and Poland reaffirmed good bilateral relations. Even as the agricultural dispute awaits an adequate resolution, however, a new one has cropped up: some Polish carriers started blocking border-crossing points with Ukraine (described below). 

The new Polish government, headed by Prime Minister Donald Tusk, appointed in December, gives hope for better bilateral relations with fewer conflicts. A former president of the European Council and staunchly pro-Ukraine, Tusk has demanded full mobilization of the West to help Ukraine. Poland’s new foreign affairs minister, Radosław Sikorski, paid his first official visit to Kyiv on December 22. 

Developments in Agricultural Exports Disputes

The dispute over agricultural exports with some neighboring countries was only partly solved. In early October, Kyiv suspended its complaints to the World Trade Organization against Poland, Hungary, and Slovakia, anticipating that a constructive attitude would work better toward finding a solution. During the dispute, most of the overland grain exports, 60 percent, were rerouted through Romania. Increased deliveries through Moldova also became part of the solution. In mid-October the Romanian government approved an import permit system to protect local farmers. In late November, Ukraine and Bulgaria approved a joint mechanism for agrarian exports that would avoid market distortions in the countries of transit, which feared lower prices for their own products.

At the same time, the new Slovak government announced its intention to extend the ban on the transit of Ukrainian agricultural products beyond the time permitted by the EU, which ended September 15. Slovakia also added to the list of agricultural products banned for transit. The Hungarian government amended its own ban to allow sugar imports, as the country intensely depends on imports. These unilateral country bans are against EU regulations, which maintain federated oversight of product transit.

Carriers’ Strike and Blockade of Border-Crossing Points

In November, Polish haulers started a protest and a blockade of Ukraine border crossings. Later, some carriers from Slovakia occasionally joined them. Because Ukraine suffers from lack of transportation capabilities through the Black Sea, the blockade created huge lines of thousands of vehicles at the borders and complicated the transportation of goods from and to Ukraine, including military aid. 

The Polish strikers demanded the restoration of permits for Ukrainian carriers, a ban on the issuance of licenses to non-EU transport companies, and a waiver for empty Polish trucks to register with the Ukrainian electronic queue when returning to Poland from Ukraine. 

Kyiv argued that restoration of the permits is impossible as in 2022, Ukraine and the EU signed an Agreement on the Carriage of Freight by Road that stipulates bilateral and transit traffic without permits. A representative of the European Commission called the blockade “unacceptable.” 

One of the organizers of the protest is Rafal Mekler, a member of the Polish far-right National Movement Party, also known as the Confederation party, which is skeptical toward the EU and less friendly toward Ukraine. For this reason, some believe the transport blockade was politically inspired. Despite the agreement of representatives of Ukraine and Poland on an action plan to unblock the border and the participation of the European Commission, the dispute had not been resolved as of the end of the year. The next step is agreement at the ministry level.

Ukrainian Peace Formula Developments

In late October, Malta hosted a meeting of representatives of sixty-five states to discuss the implementation of the Ukrainian peace formula. The meeting was focused on nuclear safety, energy, and food security, the liberation of POWs and deported persons, and the restoration of Ukraine's territorial integrity.

3. INTERNAL AFFAIRS

The Economic Situation

According to the IMF’s assessments, in 2023 the Ukrainian economy grew faster than expected. Annual growth is expected to come to 4.5 percent, compared to the 1−3 percent previously forecasted. But high growth rates cannot be guaranteed for the future, as the prospects of export capacities in the next year are unclear. Economic growth will also depend on the continued provision of aid, and that is also obscure. 

In early October the National Bank of Ukraine (NBU) suspended the fixed exchange rate regime and introduced a flexible one. Despite concerns, the national currency rate remained stable, though it started weakening a little toward the end of the year. Naturally, the strength of the national currency in the current circumstances is deeply dependent on international aid. Later, the NBU also lifted all restrictions on sales of foreign currencies to the public. 

The NBU also decreased a key policy rate twice in the last quarter of 2023 after a two-stage decrease earlier in the year. This was possible because inflation was low—just 5.1 percent in November.

At the end of the year, parliament approved the state budget for 2024, which is oriented toward strengthening the army but has a huge deficit: expenditures are expected to be almost double revenues. Likely as a result of this situation, parliament passed some laws stipulating steps that may increase budget incomes or funds to finance the army. These are laws on resuming tax inspections for businesses and on raising the tax rate for banks to 50 percent. A Focus Ukraine (Kennan) piece on Ukraine’s budget for 2024 is available here.

On December 11, the IMF approved releasing the third tranche of Extended Fund Facility funds, about U.S. $900 million, to Ukraine. Ukraine needs financing, but at the same time, there are risks to deepening the loan burden. The IMF expects Ukraine’s public debt to exceed 100 percent of GDP in two years.

The Energy Situation

During the summer, the energy companies undertook major maintenance campaigns to restore capacities before the winter and the anticipated onslaught of Russian air attacks. As of October, available power generation and transmission capacities, together with electricity import capacities, could barely cover peak demand.  In November the power system started experiencing a deficit such that Ukraine had to rely on electricity imports, chiefly from Romania and Poland, to meet demand. At the same time, price regulations restricted commercial imports, and the power system had to turn to technical emergency assistance, which is a specific import but usually more expensive, and without predictable availability. 

Government Reshuffles

In early November, Ukraine’s Youth and Sports Minister Vadym Gutzeit submitted his resignation, which parliament later approved. Some civil actors had criticized Gutzeit’s efficacy as a minister and were concerned about allegations of his possible involvement in embezzlement of state funds before becoming minister, although his attorney said he was not a suspect and no charges had been brought against him. Gutzeit was succeeded by his vice-deputy as acting minister, while Gutzeit himself continues in his role as head of Ukraine’s National Olympic Committee. 

4. PROGRESS IN REFORMS AND SUCCESS STORIES

Important Legislative Changes

In the fourth quarter of 2024, parliament passed some important initiatives. In December the Verkhovna Rada legalized medical cannabis. In addition, parliament amended the law on minorities to be in accord with the Council of Europe’s recommendations, which was a part of Ukraine’s obligations on its path to European integration. The amendments broaden the use of EU languages, including in an educational context, while requiring the study of Ukrainian as a state language; the minority languages affected are chiefly Romanian and Hungarian. Two other laws that parliament passed as part of the EU integration commitments deal with battling corruption. Both laws expand the capacities of the Special Anti-Corruption Prosecutor’s Office, the National Anti-Corruption Bureau, and the National Corruption Prevention Agency. The president of the European Commission positively assessed these legislative changes well.

Successful Completion of Synchronization of Ukrainian and European Power Systems

On November 28 the Continental European TSOs (transmission service operators), a regional group of the European Network of Transmission System Operators (ENTSO-E), said that the Ukrainian transmission system operator, Ukrenergo, had achieved compliance with the key technical requirements necessary to enable a permanent interconnection between the power systems of continental Europe and Ukraine. The process formally started in 2017, when Ukrenergo and ENTSO-E signed a roadmap for integrating the Ukrainian power system into the electricity system of continental Europe. In addition, the continental European TSOs have decided to increase the capacity limit for electricity trade from continental Europe to Ukraine and Moldova to 1,700 megawatts, based on system security and the results of stability simulations, reflecting an increase of 500 MW from the previous limit.

Based on this compliance, on December 14, ENTSO-E accepted Ukrenergo as the fortieth member of the association as of January 1, 2024. This means that the Ukrainian power system has become an integral part of the European system, and Ukrenergo will have equal rights with the European TSOs. The next stage is market coupling, which requires full unification of Ukrainian energy market regulation with the European set of regulations.  

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.