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Leonid Bershidsky

What the IMF Doesn't Know About Ukraine

Rebel regions in the country are nationalizing assets; Ukraine's GDP will take a hit.
Life at the blockade.

Life at the blockade.

Photographer: ALEKSEY FILIPPOV/AFP/Getty Images

The conflict between Ukraine and Russia entered a new phase on Wednesday. The separatist, pro-Russian "people's republics" of eastern Ukraine announced they were taking over Ukrainian oligarchs' assets on their territory. Few people outside Ukraine know that throughout the three-year hostilities, these factories and mines paid Ukrainian taxes, and their output was counted toward Ukraine's gross domestic product. If the takeover stands, Ukraine won't see the predicted economic growth.

Unlike the military action and its geopolitical consequences, the economic side of the conflict in eastern Ukraine has never received much attention. It was assumed that Ukraine simply lost the industry of the separatist-controlled parts of the Donetsk and Luhansk regions. The October 2016 International Monetary Fund report on the state of the IMF's $17.5 billion rescue program for Ukraine had a chart showing the eastern regions as a slice taken out of Ukraine's economic pie.