Ukraine: The pain is far from over

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Ukraine may have retreated from the headlines over the past few weeks but, with controversial elections in two key disputed areas, the risks associated with this troubled country have not diminished.

Last week saw the signing of a gas deal between Russia, Ukraine and the European Union – a relief to many as most of the EU's natural gas comes from Russia via Ukraine. However, while the risk of a cold winter across Europe has lessened, the deal appears to have moved Kiev to the sidelines in what looked like a Brussels rapprochement with Russia through the back door.

On Tuesday, Reuters cited NATO as saying that Russian troops were moving closer to the border with Ukraine. The newswire also reported that Ukraine's Poroshenko had authorized the military to send in new troops to protect towns against a possible attack by separatists.

One of the few bright spots for Ukraine-watchers is, there seems to be enough lawmakers in the new Ukrainian parliament to make a strong pro-reform majority government under President Petro Poroshenko and existing Prime Minister Arseny Yatseniuk.

Nonetheless, as economists and analysts put together their forecasts for next year, Ukraine is still seen as a major geopolitical risk.

The outcome of two rebel elections held last weekend in the troubled Donetsk and Luhansk regions of Ukraine, in which insurgents who want closer ties with Russia claimed victory, have been disputed by Ukraine and the White House. The elections have been condemned as a "clear violation" of the fragile ceasefire in eastern Ukraine, agreed in September, by U.S. Secretary of State John Kerry. All of the candidates in the elections are pro-Russian separatists, and many of those who support continuing as part of Ukraine have fled the region.

The timing of the elections, when elections could be held in December under the terms of the ceasefire, could be seen as "a further and direct challenge to the authority of Kyiv," Timothy Ash, head of emerging markets research at Standard Bank, wrote in a research note.

Poroshenko has called those elected "bandits who crown themselves" and will meet with his security chiefs Tuesday, sparking fears that the ceasefire could break. Reports of military convoys from Russia crossing the border into the region comprising Donetsk and Luhansk add to nervousness in Kiev.

"Unless Ukraine can militarily retake the regions controlled by rebels, the impact will be limited in terms of events on the ground," according to Ash.

And with military spending in Ukraine under pressure, as the rest of the economy continues in deep recession, that seems unlikely.

- By CNBC's Catherine Boyle.