Ukraine is poised on the verge of radical economic reform. Until recently it has had no coherent economic policy: the budget deficit ran out of control, reaching 30 percent of the gross domestic product. After a period of hyperinflation of more than 10,000 percent in 1988, the central bank made a valiant attempt to control the money supply, but the effect was merely to leave wages and other obligations unpaid. Regulations impeded economic activity and the official economy was largely incapacitated. The GDP fell by no less than 39 percent in the three years 1991–93 and a further 24 percent in the first half of 1994. Energy supplies became intermittent while Ukraine accumulated an unpaid debt of some $6bn against Russia and Turkmenistan. The shadow economy flourished but, even so, the decline in living standards was much more severe than in Russia.

The previous president, Leonid Kravchuk, realized that the problems were bigger than his ability to cope with them and therefore did not even try. The new president, Leonid Kuchma, elected by a narrow majority on July 10, is made of sterner stuff. He is aware that Ukraine cannot survive as an independent country without firm direction and is ready to take touch decisions.

Fortunately, the G7 heads of state threw a lifeline to Ukraine at their Naples summit by promising $4bn in aid if Ukraine undertakes economic reforms. President Kuchma is determined to seize that lifeline. Ukraine signed a structural transformation facility agreement worth $371m as early as September 23 and is working with the International Monetary Fund to reach a stand-by agreement before Christmas, which should eventually provide a further $1.2bn.

The donor organizations held a pledging session in Winnipeg on October 27, and subsequently the US committed $70m for immediate balance of payments support to be increased to $100m if the European Union provided matching funds. The funds are needed before the end of 1994 in order to assure continuing gas supplies from Russia and Turkmenistan. But within the EU, the UK, supported by France, resisted German pressure to provide matching funds. Its argument was that this would create an undesirable precedent because in the past the EU chipped in only after a stand-by agreement had been agreed with the IMF.

The issue will come up again at the Ecofin meeting of the EU on December 5. The net amount to be provided by the EU before the end of 1994 is only $20m, because $80m of the $100m is to be withheld to settle outstanding liabilities. This $20m barely exceeds the amount I provided in aid to Ukraine through my foundations during 1994. Japan has made its contribution conditional on action by the European Union and so did the US to the tune of $30m.

I find it inconceivable that the UK would allow the aid package to unravel and endanger the revival of the Ukraine as an independent, democratic and reform-minded country. The disintegration of Ukraine would have consequences too horrendous to contemplate.