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You're reading: Ukraine’s grand bargaining

Ukraine is battling with economic recession and needs immediate remedies, which EU appears not in the position or willing to offer. This mostly involves financial assistance, which IMF is refusing to grant. Meanwhile the EU has not been keen on nudging the Fund to take a milder position on Kiev. On balance, Ukraine’s economic interests and indeed those of its many top businesses lie with closer economic relations with EU. Despite recent tensions, Ukraine and Russia are already close commercial partners. But in the long-term Ukraine needs economic convergence with EU, however pressed with economic woes right now Kiev is least interested in long-term gains.  

In the next few days perhaps the details of the Russian offer would emerge, and chances are they are more relevant to Ukraine’s current financial needs than those offered by the EU. In addition, the ambitions of the current president Viktor Yanukovych to get re-elected in early 2015 clash with EU demands of releasing the former Prime Minister and a potential rival in 2015 elections. Another clash-point with EU is the political damage that the president would incur if he were to compile with IMF-EU financial assistance precondition to significantly increase domestic gas prices. Hence politically, Russia could be in a better position to meet the Ukrainian president’s political needs as well.

The latest decision by the Ukrainian government before the summit, effectively puts EU in a difficult position – as it either has to come up with a more flexible position and potentially with an immediate financial support, most likely with IMF. Alternatively, Brussels will have to suffer yet another humiliation, the second one in the last three months, following Armenia’s sudden turnaround on its EU Association deal in favor of the Russian Customs bloc.

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