Under Yanukovych’s predecessor, Viktor Yushchenko, Ukraine-Russian relations hit rock bottom as Yushchenko rushed full speed into pursuing EU and NATO membership, while at the same time spurning the Kremlin at every possible opportunity. In return Russia took revenge, making frequent provocative statements regarding Ukrainian sovereignty and hiking up gas prices with a particularly explosive situation arising in January 2009 when gas supplies were cut off. Given Ukraine is the main transit route for Russian gas to Europe, this brought the squabble into the EU’s backyard. As a consequence many homes and businesses in Central and Eastern Europe were gas-less for several days. What happens in Ukraine, whether that be gas cut-offs, political instability or economic crisis, impacts the EU. Therefore, it is in the EU’s interest to deeply engage with Ukraine’s leadership to facilitate the modernization and development of the country.
While Yanukovych has taken a much slower, step-by-step approach towards Euro-Atlantic integration -- dropping NATO membership -- closer ties with the EU are still alive and kicking and is one of the few issues most Ukrainian political parties agree on. However, the closer Ukraine gets to the EU the more Russia tries to pull Ukraine back. Handling this situation is tricky. Russia (with its special historical ties with Ukraine) sees the country as being a fundamental cog in its sphere of influence. To a certain degree this amounts to Moscow expecting Ukraine to defer to Moscow on issues that Russia defines as central to its interests. Therefore, more often than not Russia takes the attitude of a master in its relations with Ukraine. This has also been exacerbated in the past by the West frequently defining its relationship with Ukraine through the prism of Russia.
While Yanukovych has made a number of deals that have been positive for Russia, including an agreement signed in 2010 on the stationing of the Russian Black Sea Fleet in Sevastopol on the Crimean Peninsula until 2042, not everything is smooth sailing. Contrary to what many commentators write, Ukraine has a far from perfect relationship with Moscow and Yanukovych is far from being a Kremlin man. The most recent blow came following events on May 9, “Victory Day,” with Russia pressing Ukraine to respond adequately to the actions by Ukrainians in Lviv in the west of the country. Russia claims that Ukrainian nationalists destroyed Victory Day celebrations when they trampled red flags. However, as on many other historical issues Ukraine’s population is divided on this topic and no more so than in the west, which considered the planting of the red flag a provocative and insulting action. Russia is also unhappy with agreements being negotiated with the EU. Ukraine is on track to conclude an association agreement at the end of 2011 which includes a Deep and Comprehensive Free Trade Agreement (DCFTA) and an action plan for a visa regime. Russia is piling on the pressure not to sign. Russia wants Kyiv to join a Russian-led customs union with Kazakhstan and Belarus -- something which is not in the long term benefit of Ukraine. Until now Yanukovych rejected Putin’s pressure to join, rather saying that Ukraine is open to a free-trade deal with such a customs union alongside a free-trade agreement with the EU. Joining the customs union would rule out free trade with the EU and tie future tariffs to whatever might be agreed with the other three -- two of which, Russia and Kazakhstan, have structurally different petro-economies.
Moscow has upped the ante offering $8 billion in annual natural-gas subsidies if Ukraine stops the talks. Ukraine’s political and economic elites broadly support Yanukovych’s approach, and earlier this week a discussion amongst lawmakers in the Ukrainian Parliament resulted in overwhelming support for the DCFTA. However, with negotiations still ongoing Russia will not simply “give up,” and one can expect many more visits from Vladimir Putin in the coming months. Therefore Yanukovych is going to have to demonstrate masterful diplomacy. He must do what is best for Ukraine -- preferably without causing a serious earthquake in Moscow. Not any easy task.
The conclusion and implementation of the DCFTA and the association agreement will give Ukraine a real bond to the EU and represent a significant boost to its European integration prospects. The EU should encourage Ukraine and certainly not start to move the goal posts on requirements, as they are often prone to do. By having an “honest approach” the EU will have more scope to press Kyiv on other issues such as democracy. Yanukovych is not Putin, he cares a great deal about his image in the West, and that should give the West leverage. Even if engaging with Ukraine can sometimes be frustrating it is a matter of credibility for the EU because if the EU fails with Ukraine, then it will represent a failure of its entire neighborhood policy, which will only serve to benefit one party -- Russia.
