This
is further evidence of the shift westward, and I guess reflects a combination
of factors, including:
* A bias amongst the main oligarchic groups to a westward orientation,
given they play and invest personal assets in European capitals, educate their
kids over here, and see their businesses as being more focused now on global
markets, than say on Russia.
*
An irritation over what they perceive as Russian bullying tactics, and a
patronising approach from Russian business/political elites towards Ukraine –
perhaps never really accepting of Ukrainian independence. There is a sense that
joining the CIS Customs Union would inevitably mean domination by Russian
business interests – they are looking nervously at developments in neighbouring
Belarus. Ukrainian oligarchs likely see themselves as relatively big fish in a
medium sized pool in Ukraine, whereas they would likely be small fish in a huge
pool in a CIS market.
*
A feeling perhaps that they can negotiate better/more easily with the EU, than
with Russia, with the EU-28 somehow seen as being “soft”, and easily
divided/distracted.
On the latter note I
still sense that the Yanukovych administration thinks that on the hitherto red
line detailed by the EU, i.e. selective application of justice, with particular
reference to Yulia Tymoshenko, the EU-28 will not hold their current line come
Vilnius, where the imperative will be to lock in Ukraine to the
Western-orientation, “while it can” and in the face of perceived
Russian bullying – or at least that is the line likely to be plied by the
administration in Kyiv. My sense is still that, “when pushed” the
administration is willing to release Tymoshenko for medical treatment in
Germany, or elsewhere in the EU, but if Tymoshenko herself sets conditions,
then this might see more EU-28 states falling into the Yanukovych camp, i.e.
sign the DCFTA in November – “on the promise” of a Tymoshenko release.
Note
the DCFTA still has to be signed by the EU-28, and ratified by all EU-28 EU
parliaments, so perhaps some in the EU might argue that this will still give
the EU come leverage over the Tymoshenko issue beyond November. I am not sure Kyiv
thinks that way – the goal/prize will be the signing of the DCFTA in November,
and implementation/ratification is likely to be a much lower priority. They
will likely assume that just signing the document in Vilnius will yield
substantial aid/loans (IMF?) from the EU and improved market access, funding
the Yanukovych administration
through to the March 2015 presidential elections.
And
what about the Russian reaction?
Well
I don’t think Russian President Vladimir Putin will take all this lightly – the
signing of the DCFTA by Ukraine will be a huge blow to Putin’s aspirations to
head a Eurasian Union, which will look pretty hollow without Ukraine – Armenia
is not much of a substitute herein. I still think that the mini-trade war which
we saw last month is a prelude to much more difficult trading relations between
Russia and Ukraine over the next few months. The Yanukovych administration hopes
that by signing the DCFTA its new best friends in Brussels, et al will ride to
its rescue through the dark and likely difficult winter months. I am not
entirely sure that will be the case, given past experience, and given that many
EU-28 member states, particularly in Western Europe, still have valued
business/energy sector relations with Moscow.
Timothy Ash is head of emerging markets research at Standard
Bank in London, United Kingdom.
