×

Ukraine warns of rising risk of war with Russia

Hopes that Ukraine can get back on track were hit on Wednesday, when the country's president warned that the probability of war with Russia had risen and its economy minister resigned in protest at what he saw as endemic corruption.

Ukrainian President Petro Poroshenko said the risk of "open war" with Russia was "more serious than last year," in an interview with Germany's Bild newspaper published on Wednesday.

"We can see 8,000 Russian soldiers with Russian commanders in our country, new military sites directly along the border and constant military training. Russia is investing a lot in these war preparations. And we are not getting any explanations for this," Poroshenko said.

The president added that Russia had failed to implement any aspect of 2015's Minsk Agreement, a ceasefire pact between Kiev and Moscow in Belarus. This came a year after Russia sent troops to annex Ukraine's Crimea region.

Today, fighting continues in the east of Ukraine between government forces and pro-Russian rebels, despite the ceasefire.

On Monday, Poroshenko met in Berlin with German Chancellor Angela Merkel, who was party to the Minsk Agreement last year.

Following the meeting, he told Bild newspaper on Wednesday that Russia and its president, Vladimir Putin, posed a risk to all of Europe and that he had asked Germany for more weapons to help defend Ukraine.

"Everyone knows: If Russia threatens Ukraine and also has its sights on other states, this concerns the global security of Europe," Poroshenko said in the interview.

Political risk consultancy, Teneo Intelligence, noted on Monday that clashes in Donbass had intensified in the past two weeks, but so had diplomatic negotiations to resolve them.

"It is likely that Ukraine's international backers will put pressure on Poroshenko to deliver on his part of the bargain to facilitate crisis resolution," Otilia Dhand, senior vice president at Teneo Intelligence, said in a report.

Open corruption?

On top of its external threats, Ukraine's internal politics remain troubled, although its economy is seen expanding slightly in 2016, following a deep and lengthy recession in the wake of Russia's 2014 incursion.

On Wednesday, Aivaras Abromavicius, Ukraine's minister of economic development and trade, resigned. He accused a close ally of Poroshenko of blocking his reform efforts, which are a condition of Ukraine's $40 billion aid deal championed by the International Monetary Fund (IMF), the U.S. and the European Union.

"My team and I have no wish to be a cover for open corruption, or puppets under the control of those who want to establish control over state money in the style of the old authorities," Abromavicius told reporters on Wednesday, according to Reuters.

"I can't be effective under such a system. It is impossible for technocrats to work with guys that want to usurp power and make processes un-transparent," he added.

Lithuanian-born Abromavicius was one of several outside experts brought in to help Ukraine's new government reform.

On Wednesday, he accused Ihor Kononenko, a lawmaker close to Poroshenko, of lobbying to get "his people" positions in government and as heads of state companies. Kononenko denied the accusations, suggesting Abromavicius was attempting to shift the blame for his failures, according to Reuters.

In a joint statement, Ukrainian ambassadors from the U.S., Canada, U.K., France, Germany, Italy, Lithuania, Sweden and Switzerland, said they were "deeply disappointed" by Abromavicius's resignation.

"Abromavicius and his professional team have made important strides, implementing tough but necessary economic reforms to help stabilize Ukraine's economy, root out endemic corruption, bring Ukraine into compliance with its IMF program obligations and promote more openness and transparency in government… It is important that Ukraine's leaders set aside their parochial differences, put the vested interests that have hindered the country's progress for decades squarely in the past, and press forward on vital reforms," the diplomats said in a statement published online.

Verisk Maplecroft, a political risks consultancy, said that prospects for reform were bleak following Abromavicius' resignation.

"Abromavicius' departure will fatally undermine what little confidence investors still had in the Poroshenko administration and Ukraine's economic prospects in general," Daragh McDowell, principal Russia analyst, said in a note on Wednesday.

—Follow CNBC International on Twitter and Facebook.