The
first point is that Tymoshenko was not convicted for graft, but for exceeding
her authority in signing the 2009 gas price agreement with Russia. Now that
agreement has been slated as a bad agreement for Ukraine – recently I heard
suggestions that the deal could have cost Ukraine $10-$20 billion in higher
energy import costs. In response I would counter that two years after her
jailing, and despite the weight of the prosecutors’ office focusing on the fine
detail of that agreement, no evidence from what I can make out has been gleaned
of graft related to the 2009 agreement. It may have been a bad agreement, but
likewise the 2006 agreement concluded by the Viktor Yushchenko administration
was equally questionable (perhaps worse) for Ukraine. I think many politicians
in Europe have signed bad agreements – they may even have exceeded their
authority in signing such agreements, indeed I would contend that this may have
been common through the current Eurozone crisis, however I cannot think of any
who have been jailed as a result.                                                                       

And
the impact and cost of the 2009 agreement?                                      

Well
the claims of losses of $10-$20 billion from 2009 are based on the premise that
Ukraine, pre-agreement, was paying $180 per 1,000 cubic meters for gas, and
subsequently has been paying prices of $300 to more than $450, and on 30
billion cubic meters of annual imports it is easy to get to the $10-$20 billion
price tag. The reality though is that the existing pricing structure, post the
2006 agreement, was unsustainable, in early 2009 Ukraine faced the prospect of
another gas price war with Russia, and Russia wanted a higher price for gas.
The global mood was concern over gas supply/energy security and the assumption
was that gas prices were going higher – the idea of locking in certain supply
(42 billion cubic meters) at that time did not appear that wacky. She could
perhaps have agreed to a lower price, but she would have had to give Russia
something in return – that little something (pipeline control) would probably
have diminished Ukraine’s sovereignty. The plus from the 2009 deal was though
that it set a proper system for ensuring timely payment of gas – until very
recently Ukraine has managed to settle the gas bill on time, and on the 7th of
every month. And the annual gas price supply/crisis, which were a feature of
the post-Soviet space, were largely avoided in the period 2010–2012. I would
also argue that the market pricing of gas, post the 2009 agreement, has
actually been good for Ukraine, as it has broken the dependency on Russia, and
forced more rational use of gas/efficiency gains, and also forced Ukraine to
finally look to energy diversification. Over the longer term this will be good
for Ukraine, and will surely decisively change the energy supply equation in
Ukraine – I would contend that without the 2009 agreement all this would not
have happened, i.e. no gas shale agreements with foreign majors, because  Ukraine would have still been looking to
Russia for cheap gas and bail-outs.                                 

Second,
and returning to the issue of the importance of Tymoshenko and the link with
the free trade agreement with the EU. I think you have to ask yourself why she
is in jail. Was it really because of the signing of the 2009 gas deal, or for
other reasons, i.e. that she poses a political threat to the incumbent regime.
If you think it was the latter, then this implies the selective application of
justice, and it is surely only right that the EU plays very tough over the Tymoshenko
issue and links to the free trade agreement.                                                                      

Third,
again if you assumed the latter in term of point two above, I think the EU
softening its approach for the sake of getting the free trade agreement signed
would be at a huge detriment to Ukraine and indeed to the basic principles of
the EU in terms of respect for basic democratic rights. If the EU signs the free
trade agreement with Tymoshenko still in jail this would suggest that EU
principles in terms of respect and support for basic democratic rights are
somehow up for negotiation. And, that regimes that do not abide by EU
principles still get rewarded with favorable trade and association (it is not
just about trade, but about setting a perspective towards membership of the EU,
i.e. taking on the EU’s basic principles) deals.                                                              

Fourth,
I think if the EU signs the free trade agreement with Tymoshenko still in jail
there is a real danger that the 2015 election will not be free and fair – the
EU will have sent totally the wrong signal to the Yanukovych administration,
and will have revealed that its sanction has no teeth. There have been legislative
efforts recently to preclude another opposition leader, Vitali Klitchko, from
running in the 2015 election, and I think the risk is that other opposition
leaders will face similar pressures. And this is important not just for
Ukraine, but for other countries across the CIS, but globally – a clear
precedent will have been set.                                                                                                      

Fifth,
there is this desire that the free trade agreement has to be signed to ensure
Ukraine stays out of the Russian fold, is protected from Russian bullying, and
keeps a European perspective. I think however the European perspective is all
about the protection of basic democratic rights, which is center stage in the Tymoshenko
case.    

So
concluding, I would argue that the Tymoshenko case is actually not about an
individual, but a key principle which is a very foundation of the EU and
everything it stands for, i.e. the protection and indeed promotion of basic
democratic rights. Hence, I would contend that the Tymoshenko issue should be
linked to the free trade agreement, and that this is key both for the future of
democracy in Ukraine, but is similarly important for the EU and the basic
tenets which underpin the very foundations of the EU itself, and for its global
partners.                    

Timothy Ash is
head of emerging market research at the London office of Standard Bank.