Early steps
Ukraine entered a Partnership and Cooperation Agreement with the EU
in 1998, and in May 2009, It joined the Eastern Partnership Project, an
initiative of Poland and Sweden that also encompassed six of the EU
border states: Armenia, Azerbaijan, Georgia, Belarus, Moldova, and
Ukraine. Ironically, aside from Moldova, all of them were founding
states of the Soviet Union in December 1922, though at that time the
three Caucasian states formed a single bloc. In December 2011, at the 15th
EU-Ukraine summit, the two sides entered final negotiations to
establish a political association and economic agreement to replace the
original PCA, namely the Association Agreement (AA).
On 30 March 2012, the partners initialed the AA, which included a
Deep and Comprehensive Free Trade Agreement. The EU requested a number
of reforms in Ukraine to be in place before the final signing. They
included improvements to the legal and juridical systems, prison
confinement, changes to the election laws, and positive steps toward the
release of former Prime Minister Yulia Tymoshenko, whose arrest the EU
perceives as politically motivated and based on “selective justice.” The
release earlier this year of another high profile political prisoner,
the former Minister of Interior Yuri Lutsenko, on 7 April 2013, appeared
to be a major step in the right direction, but his case was less
problematic for the Ukrainian leadership. Still, the stage seems set for
three of the state in the Eastern Partnership—Ukraine, Moldova, and
Georgia—to sign Association and DCFT agreements with the EU at the
Vilnius Summit on 28-29 November.
Political Situation in Ukraine
Ukraine’s political situation was only made more complicated by the
parliamentary elections of 2012, in which the ruling Regions Party
attained a plurality, but overall a clear minority of votes, and five
parties attained the minimum percentage required to enter the
parliament: Batkivshchyna (Fatherland), Udar (The Blow), the Communist
Party of Ukraine, and Svoboda (Freedom). Western observers pointed out
several flaws in the election and considered it “not completely free.”
The Ukrainian Cabinet today is dominated by ministers from Donetsk
region, which us also the home base of the country’s president, and
Regions Party member, Viktor Yanukovych. In July 2012, at the latter’s
behest, parliament accepted a controversial language law, guaranteeing
regional status of languages where 10% of more of the population speaks
them. Specifically the law empowered Russian speakers in the southern
and eastern regions of Ukraine, where they predominate. Though the
president had long threatened to introduce such a law, he was not
necessarily expected to do so because of the polarizing impact it was
likely to have.
Notably over recent weeks, Yanukovych has also quelled dissidence in
his own party ranks on the issue of signing the Association Agreement,
though earlier this summer opinion polls highlighted substantial
opposition to it within the parliamentary party. The Communists
unsurprisingly are even more adamantly opposed. On 17 September,
however, the Ukrainian Central Election Commission refused permission to
the Communists and the Ukraine Choice movement, which is led by
pro-Putin oligarch Viktor Medvedchuk, permission to hold a meeting
concerning a referendum on whether Ukraine should sign the Agreement.
Yanukovych has thus eliminated protests and exploited support from
Ukraine’s oligarchs for closer cooperation with the EU. In so doing, he
has taken away from the opposition its key policy, which will leave the
three parties more vulnerable in the next elections unless they turn to
an alternative platform.
Such a move will leave Yanukovych in a good position to contest the
presidential election of 2015, though the move westward will leave space
for a pro-Russia candidate to fill. In that case, the president may
form a temporary alliance with the opposition—a situation similar to
that in 1999 when Leonid Kuchma ran against the Communist leader Petro
Symonenko, and received most of his votes in regions that traditionally
opposed him. One problem for the president currently is that he is
losing support in the main party strongholds of the east and south
because of economic difficulties and a failure to fulfill election
promises. In turn his predicament may benefit the Communists or even
UDAR, a party that has some support in these regions. Thus the goal for
the Regions is to ensure that the signing of the Agreement pays quick
dividends before the presidential elections.
Opinion polls suggest that support in Ukraine for closer ties with
the EU has finally surpassed that for the Russian-led Customs Union.
Minister of Economy Petro Poroshenko has declared that the gap is over
50% compared to 30%. Other polls suggest the gap is smaller: joint
Ukrainian-Russian public opinion polls have 36% supporting the EU and
38% the Customs Union with Russia, Belarus, and Kazakhstan. The regional
divide is itself deeply worrisome, though it is evident in each of the
state of the Eastern Partnership.
Relations with Russia
Ukraine’s relations with Russia are difficult and strained. As far as
relations with Ukraine are concerned, there are three people who deal
with Ukraine. The first is Vladimir Putin himself, who has made Ukraine
his key target in relations with what used to be termed the “Near
Abroad.” In this respect, particularly revealing was the Russian
president’s visit to Ukraine on 27-28 July, in conjunction with the 1025th
anniversary of Kyivan Rus’, when Russian Patriarch Kirill I accompanied
him in attending celebrations at the Pecherska Lavra. Also in Kyiv,
President Putin attended a round-table conference entitled
“Orthodox-Slavic Values: the Foundation of Civilized Choice of Ukraine,”
organized by the Ukrainian Choice Movement of Medvedchuk, who was
formerly head of the presidential administration of Leonid Kuchma. A
powerful oligarch (though only the 57th richest!), Medvedchuk
supports Ukraine joining the Common Economic Space customs union and is
an active opponent of the Association Agreement with the EU.
The second figure is economist Sergey Glazyev, the advisor of the
Russian president for Customs Union issues and relations with Ukraine,
who has been particularly outspoken and aggressive, declaring that if
the AA is signed, Russia will exclude Ukraine from the Free Trade area
of the CIS. He also stated that the Eurasian Commission would impose a
single customs tariff on Ukrainian goods, particularly as good from the
EU, and no longer subject to import duties, would likely flood the
Ukrainian market. In this way, Glazyev continued, Ukraine will be pushed
toward default; hence signing the agreement will be tantamount to
“euthanasia.” He was believed to be responsible for the ban on Ukrainian
products that started with the Rozhen chocolate company in the summer
of 2013, and which extended incidentally to Moldovan wines last month.
Though outspoken, Glazyev is regarded by some analysts as a peripheral
statesman.
The third figure is a familiar one to Russia watchers, namely
Vladislav Surkov, a 49-year old English-speaking businessman and
ideologue with enormous influence over the Russian government and Putin
in particular. His impact has been compared with that of Mikhail Suslov,
the so-called “grey cardinal” for many years in the Soviet leadership
from Stalin to Brezhnev. On 20 September, Surkov received the
appointment of presidential aide. In a recent paper, analyst Roman
Rukomeda speculated that his installation was specifically for future
relations with Ukraine. The position returns him to his former
prominence following his earlier spell as Deputy Chief of Staff to Putin
in 2004. Surkov is the architect of the prevailing economic system in
Russia that has been termed “sovereign democracy” and he is close to
extremist factions such as Nashi. Many regard him as the Kremlin’s chief ideologue.
These current prominence of these strongly nationalist leaders
suggests that Russia will put considerable pressure on Ukraine both
before the Vilnius Summit—though the Russian side expects the agreement
to be signed—and especially afterward. Most important will be the 2015
presidential election campaign, though Russia’s past attempts to
influence Ukrainian elections have been spectacularly unsuccessful.
Economic situation in Ukraine
Ukraine’s economic situation is very difficult. One can begin with
the catastrophic decline in population since independence from 52.5 to
the present 44.5 million, a drop of over 15% in 22 years. Its GDP fell
by 1.3% in the second quarter of 2013, though over the entire year a
modest growth of 0.5% is anticipated. The Russian scenario that Ukraine
will face a serious crisis after signing the Association Agreement is
not exaggerated. In the short term, Ukraine faces continued depletion of
its hard currency reserves, which fell by 30% over the past year, and
now has barely enough to cover 2.3 months of imports. The inflow of
European goods expected after the agreement may reduce current export of
Ukrainian products to Russia.
The issue is whether the largely unreformed Ukrainian economy can
compete. That is not to say that there have been no attempts at reform.
One year ago, Poroshenko announced that 1,200 factories would be removed
from the list of strategic assets that could not be privatized. The
list was assumed to include coalmines, oil and has pipelines, and grain
silos among other assets. On 11 September 2013, the Ukrainian State
Property Fund announced that 45 coalmines belonging to various
state-owned enterprises would be privatized in an effort to raise coal
production through modernization of mines using private capital.
This sector is perhaps the best example of Ukraine’s current economic
dilemmas: the state mining sector ran up losses of over $1 billion in
the first seven months of 2013: 70% of the mines are state-owned and 80%
of them reply on subsidies to stay afloat. Thus the question needs to
be asked: why would private businesses risk investing in an industry
with falling productivity and for which demand is weak? The law of 2012
also stipulates that any privatization must come with guarantees of the
social security of the coalminers through creation of trade unions and
other safeguards. Despite the passage of the law, there has been little
movement on privatization in Ukraine; rather, companies have been
auctioned off to the main financial backers of the Regions
Party—oligarchs Rinat Akhmetov and Dmytro Firtash. These business
leaders, intent on building personal empires—Akhmetov’s net worth is
estimated at 15.4 billion—have continued to exploit Ukraine’s assets
following a similar pattern to that in Russia in the 1990s.
The recent lowering of Ukraine’s credit rating by Moody’s to Caa1 and
the current need for foreign loans may put pressure on currency. All
these factors, added to the very real threat of Russian economic
responses to Ukraine signing the AA, suggest that over next five years
Ukraine will undergo deep economic recession—we have already seen the
lowering of GDP forecasts already for next year. Some of the demands of
the Europeans will have immediate and distressing effects—two analysts
pointed out earlier this week that the requirements needed for large
combustible plants would cost about half of Ukraine’s current annual
budget to implement. But with reforms, over the long term the country
can recover and will do better outside the Russian orbit, which is based
largely on non-renewable resources and demands for closer integration.
Moreover, the EU is prepared to make some compromises. It may permit
the benefits of free trade to begin at once rather than waiting for
ratification of the AA by all 28 member-states. In other words, the EU
link may be the best way to introduce a form of shock therapy in Ukraine
that can reduce past dependence on Russian goods and, even more
important, bring in economic reforms that have been almost fatally
delayed in the entire period of independence. Finally, trade with the EU
will eventually be more useful and profitable for Ukraine, than trade
with the oil and gas dependent Russia.
The EU perspective
Concerning the EU’s attitude to signing the Association Agreement
with Ukraine, one can start with recent quote from president of
Gorshenin Institute in Kyiv, Vadym Omelchenko, that the AA might become
the main geopolitical accomplishment for current leaders of European
structures. The statement illustrates the fate of several EU initiatives
and their general failure to have an impact in two of the countries of
the Eastern Partnership where the issue of human rights violations has
precluded close cooperation, namely Belarus and Azerbaijan. Conversely,
the EU has opted to ignore some of the glaring issues in domestic
Ukraine and may circumvent some problems by choosing, as suggested
earlier, to ratify the AA separately at a later date—it has already been
accepted by the Ukrainian Cabinet—as well as allowing Ukraine to make
some token gestures without following up with meaningful reforms.
We will deal with the EU side in more depth tomorrow. Here let us
focus for a moment on the most critical issue between the two sides,
namely the continuing incarceration of opposition leader and former
Prime Minister, Yulia Tymoshenko, jailed for seven years in 2011 for
negotiating a deal with then Russian PM Putin on gas prices for Ukraine
that, according to the court, brought harm to Ukraine. The sentence also
banned her from any role in politics for a 10-year period. The EU has
hardly presented a united front on the issue—though at the recent
economic summit in Yalta Lithuanian president Dalia Grybauskaite, stated
clearly that: “The request from the European Union on Tymoshenko’s case
is still on the table and, without a solution, I do not see a
possibility for the signature.” The issue has divided Western analysts,
whereas Tymoshenko’s her erstwhile Orange partner, former president
Yushchenko has called for the Agreement to be signed whether or not
Tymoshenko is released first.
As Taras Kuzio has pointed out in a recent commentary, it is
impractical for the Ukrainian president to release Tymoshenko either
fully or for medical treatment in Germany—Canada has made a similar
offer. Given a direct choice between her release and pardon—and there
are further impending charges about her involvement in the 1996 murder
of businessman Yevhen Shcherban—and a potential failure of the Vilnius
summit, Yanukovych would opt for the latter, whatever its implications
for Ukraine’s integration with the Russian-led Customs Union. Yanukovych
is not a politician in the Western sense of the word. He does not care
particularly about his place in history, or taking a dramatic westward
step. Rather like the Regions Party leaders with whom he keeps company
and rules Ukraine, the Ukrainian president puts survival and his
personal future ahead of that of the national interest.
In short, after many meetings at different levels, it is still not
apparent to the EU leaders that their Ukrainian counterparts are more
concerned about power than a European future. British analyst Andrew
Wilson has stated that Yanukovych is ignorant of how the EU works,
believing that the crucial matter is a balance of power and that the
EU’s concern for Tymoshenko is ritualistic. The agreement with the EU is
simply a business solution that will keep Russian oligarchs out of
their domain. In turn, the Ukrainian opposition perceives its task as
supporting what it terms the “criminal government” in its path toward
Europe before defeating it in the elections. Implicitly, the EU is for
the moment at least enhancing the reelection chances of the Regions
leader simply by dealing with him.
At the same time, the potential of Ukraine and its $330 billion
economy for the Europeans seems obvious. Yet they fear the creation of
two hostile trading blocs, using high tariffs, quotas and other
restrictive measures that will impede the free flow of goods. And many
European leaders are wary of such an impasse, including newly reelected
German Chancellor Angela Merkel. On the other hand, the Europeans have
shown great patience in keeping the agreement afloat in the face of the
Ukrainian government’s painfully slow progress on the suggested
reforms—most of which were rushed through parliament hurriedly in
September as the summit approached, though they remain more on paper
than reality.
Conclusion
In the long term, can Ukraine become a potential member of EU?
Questions arise over the expedience of further EU expansion given the
recent crises in member states. There are fears also over the likely
impact of adding a country of over 40 million to the mix, one with deep
internal problems and divisions. The irony is that an anti-Orange and in
many respects anti-Ukrainian government is leading the way toward
western integration and for reasons that may have little to do with any
form of commitment to democracy and economic reforms. In the future it
will be necessary to ensure several things for success:
Fundamental economic reforms, including privatization (without
restrictive conditions attached) and revamping of obsolete industries
that require subsidies to survive.Oligarch investment in the Ukrainian economy rather than in private
bank accounts abroad, which may require a fundamental assault on
corruptionEnsuring that the presidential elections of 2015 are free and
fair—it will require careful monitoring of election commissions, likely
lowering the minimum percentage required to get seats in parliament (the
new quota of 5% would likely mean that even the Communists or Svoboda
may not get seats in the elections, and many smaller parties would be
excluded), the first past the post system would likely favor the Regions
Party. There is a need also to maintain a national vote for president
rather than a parliamentary one and to reassess the ways in which
election commissions are put together.Monitoring of human rights in Ukraine must be made a priority for
the EU, especially given the increased chances for a continuation of
Yanukovych in office.As noted, the signing of the AA and subsequent deeper integration
that may ultimately end with EU membership will undermine the purpose
and tactics of the Ukrainian opposition, which taken together won the
majority of votes in the last election. On the other hand a united
opposition with a single leader running in the next presidential
election might profit from the declining economic fortunes of Ukraine in
2014 and early 2015.
Finally, if one can separate the Association Agreement from economic
and human rights issues, it will mark a fundamental turning point for
the Ukrainian state, and a path oriented away from the Soviet legacy
toward a European future. In itself this will be a significant
achievement, one that has been attained in a stumbling and often
uncertain manner, and in spite and in part because of Russian truculence
and threats. When the Orange Revolution occurred in late 2004, many
observers felt that this might be the logical direction for Ukraine to
take. For a variety of reasons the Orange presidency of Viktor
Yushchenko failed in spectacular fashion. The corruption endemic during
the time of Leonid Kuchma’s leadership not only remained in place; it
became deeper and more endemic under Yushchenko. It is markedly worse
under Yanukovych. And yet the paradox is that it is this government and
president who may take Ukraine into Europe. It is a mixed blessing that
has resulted from compromises on the side of Brussels, and intransigence
on the part of Kyiv. But it may happen, and in the long term, despite
all the caveats cited, it may be for the best.
David R. Marples is a professor at the University of Alberta in Edmonton Alberta. This column was posted in Current Politics in Ukraine here.
