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.