This marks a sharp turnaround in the pro-European Union speeches which had been heard just prior to this when the language had been towards the free trade deal as offering Ukraine a new European perspective and the prospect of “transformation”. Indeed, only last week I sat literally feet away from Yanukovych and listened to him speak about the importance of European integration and its part in the modernization of the Ukrainian economy. It was truly refreshing – albeit later commentary from the much less “reconstructed” Prime Minister Mykola Azarov brought things more firmly down to the ground.
This all begs the question as to what was discussed during the Putin-Yanukovych meeting? What concessions and/or threats were made by Moscow to encourage this apparent change of tack? Or has there really been a change of tack, and is the Yanukovych regime simply continuing the now well versed Ukrainian strategy of playing the West off against Russia to extract the greatest rent, or of “milking both cows” to use a farming phrase for an agricultural based economy.
I, for one, remain firmly in the latter camp, I.e. that this is all a game of bluff and counter bluff by the Yanukovych regime, in bolstering its hand in the run up to the Vilnius summit. After all let’s not forget that from a regime perspective the Vilnius summit offers potentially huge prizes for Ukraine, I.e. securing a genuine and real European and EU perspective, or cash/bailouts from Moscow. And for the first time in at least a decade, if not longer, Ukraine is centre stage at this EU summit, and it is an opportunity for the Yanukovych regime to “milk” all this to the full, as this chance is unlikely to come around for a very long time. If a deal is not done at Vilnius, the EU focus will move elsewhere, and a huge chance/opportunity will have been lost. Indeed, that is just the way the EU operates – imagine, a huge amount of energy has been expended by the EU in trying to get this deal with Ukraine done, with 27 visits by the Cox/Kwasniewski mission to Kiev. If Vilnius fails, why would the EU waste any more energy/resources on Ukraine?
I am though still optimistic that Yanukovych will do the right thing, and cut a deal at Vilnius which ends up with signatures on the document. My logic herein is that this is a game-changing deal for Ukraine – and does Yanukovych really want to go down in history as the Ukrainian president who turned his back/spurned the chance of European integration, in favour of relegating Ukraine’s status finally and decisively to that of a second division Russian proxy – akin to that of Belarus? Belarus is also probably a good comparable for Yanukovych as spurning the deal on offer at Vilnius with the EU risks not only an opportunity for a step towards European integration, and growth/reform/development of the Ukrainian economy and business, but potentially the risk of being ostracised by the West if he fails to sign on the dotted line. Only last year Merkel compared Yanukovych to Lukashenko in Belarus, which caused great offence in Kiev, and at the time was seen as a step too far by many Western diplomats and governments, as the perception is that Yanukovych is not there yet – and he can be “turned”. However, spurning the chance for an association agreement and free trade agreement with the EU for what are seemingly petty politics and personal rivalries with Tymoshenko risks the isolation of the Yanukovych regime, and its supporting oligarchs from the West. It is not inconceivable to think that this could all end up in a Belarus-style sanctions regime, especially if the next step in Ukraine is a move to administered solutions to secure Yanukovych’s victory in the 2015 presidential election. I think for Ukraine’s business elite, which much favours sojourns in Western capitals, to Moscow, I think this would be a distinctly unpalatable prospect.
The other key reason why I do think that Yanukovych will bite the bullet (perhaps literally) at Vilnius is that returning from the summit with a signature on an association agreement and free trade agreement would be a turning point perhaps in his own presidency, which according to opinion polls (just 15-20 percent support) is currently in a rut. He can rebrand himself as a pragmatic leader who did the right thing for Ukraine, and set Ukraine firmly on the European course. It will give him a chance in the 2015 elections, a chance that at the moment he simply does not seem to have – he looks set to decisively lose a free and fair election. The West, meanwhile, will likely give him a second chance, and see him as a man that they can do business with. He will hope that Western financing and support will follow, giving the chance of managing through a Russian counter-reaction and an already hugely challenging macro framework.
The administration thus appears to have a reasonable hand of cards as it heads to Vilnius but it would be well advised also not to overplay this hand, as this is an opportunity for Ukraine and Yanukovych not to miss.
Tim Ash is head of emerging market research at Standard Bank in London.
