It might not be a radical shift in foreign policy yet, but there are plenty of indicators that Ukraine is going to making an overture towards joining the Russia-led Customs Union soon.
President
Viktor Yanukovych is set to travel to Moscow on Dec. 17-18, and is expected to
make a new offer to President Vladimir Putin – most likely something in between
full membership alongside Russia, Belarus and Kazakhstan, and the 3+1 scheme
that Ukraine has suggested before.
Unaffordable
gas prices on Russian imports are, as usual, the impetus for trying to cozy up
to the Kremlin. Yanukovych has been unable to bring down those gas prices much
since coming to power in 2010, a year before his defeated presidential rival,
Yulia Tymoshenko, went to prison for what the administration has called a
ruinous 2009 gas deal with Russia she brokered as prime minister.
Yanukovych,
along with other senior officials, have made numerous statements about “looking
East” in recent months. During both of his latest foreign trips – to Kazakhstan
in early December and the current one to India – Yanukovych has said Ukraine is
bound to lose out if it ignores the giant trade organization led by Russia.
In a recent
interview to The Hindu newspaper, Yanukovych said Ukraine has already moved
beyond just talk.
“We’re
currently harmonizing our laws, rules and regulations with those of the Customs
Union,” the newspaper quoted him as saying. “It’s a long road but if we don’t
do it, our producers will face discrimination and lose the market. Time will
show how far we will go in integrating with the Customs Union.”
But Western
diplomats are saying Ukraine may still be bluffing.
“The
Customs Union still seems to be Ukraine’s bluff. In order to join the union
there needs to be all kinds of legal and normative adjustments made by Ukraine.
And as we know none of this work is underway in the Ukrainian government,”
said a Western diplomat, who spoke on condition of anonymity.
However,
the current plan doesn’t seem to be full membership in the Customs Union but
rather some form of cooperation that would stop short of Ukraine signing the
statutory documents of the super-state organization.
Iryna
Akimova, deputy head of the president’s administration and a key economic
adviser, said in a recent TV talk show that it was the economic part of the
agreement Ukraine would like to join.
“To develop
the country, to develop the markets for our export-oriented economy, we have to
make friends and work, in the good sense of the word, with everyone. But this
does not mean a change in the political vector,” she told Inter channel’s
Velyka Polityka talk show on Dec. 7.
In their
public statements, both Akimova and Yanukovych have stressed that Ukraine’s
trade turnover with Russia and the former Soviet Union stands at $60 billion,
while the turnover with Europe amounts to $15 billion less. They conclude that
the risk of losing the Eastern markets and not gaining the Western markets are
too high.
But would
Russia react well to Ukraine’s offer of partial integration? The most likely
answer is “no.”
So far,
Russia has at best ignored Ukraine’s offer of the so-called 3+1 initiative by
Ukraine, which offered to give a special privileged status to members of the
union, but would not accept membership. Sergei Glazev, President Vladimir
Putin’s aide, also said recently that Russia expects to see Ukraine as a full
member of the Customs Union by 2015.
In Ukraine,
Viktor Medvedchuk, a strongly pro-Kremlin politician with strong personal ties
to Putin, also said that Ukraine will join the union by 2015.
Putin
himself has in the past waved a carrot in front of Ukraine, saying it would buy
gas at “domestic prices” should it join the CU. And it seems that those gas
prices are what triggered the new round of discussions within Ukraine about the
format of joining the Customs Union.
The nation
paid more than $850 million for Russian gas imported in November at $430 per
1,000 cubic meters. In his interview to The Hindu, Yanukovych said the price is
unbearable.
“We just
don’t have the money to pay for Russian gas almost $200 more than what
Europeans pay,” he said.
Akimova
also indicated that Ukraine expects some economic perks from a closer
relationship with the Customs Union.
“Cooperation
with the Customs Union could give us additional credit resources, and without
the involvement of political issues,” she said.
Ukraine
needs external financing badly. Its current trade balance is deeply in the red,
the economy shrank by 1.3 percent in the third quarter, and more than $10
billion of external payments are due next year. At the same time, a lifeline
from the International Monetary Fund is nowhere in sight. Negotiations with the
fund will only start in late January.
A full
membership in the union, however, would require a change to the Constitution,
for which the ruling Party of Regions has no support. However, a new national
referendum law has paved the way for amending the constitution by public vote.
One
official from the president’s administration, who spoke on condition of
anonymity because he is not authorized to comment on the issue, said that so
far, there is no plan to use it to approve membership in the Customs Union.
“This is like a nuclear weapon. It’s better to have it, but never to use it,”
he said.
Some
Western analysts are amazed that Ukraine would favor the Customs Union over a
free-trade pact with the European Union.
“The Customs
Union will kill EU free trade: Do you want a Customs Union with a $2 trillion a
year economy or do you want to go to the largest economy in the world,
(representing) some $15 trillion to $16 trillion a year?” asked former U.S.
Ambassador to Ukraine Steven Pifer at the Kyiv Post Tiger Conference.
Kyiv
Post staff writer Yuriy Onyshkiv contributed to this story.
