Is Ukraine its own master?

On 26th November, Ukranian President Viktor Yanukovych confirmed in an interview with Ukraine’s major TV channels that his country would not be signing an Association Agreement with the EU at its Eastern Partnership Summit in Vilnius this week. He didn’t in fact give a direct yes or no to the question of whether or not he would sign, but his reply made it clear that Kyiv had decided to put the process on hold. ‘We will be doing everything to strengthen Ukraine’s economy,’ explained the president, ‘to increase living standards year on year and make our country more competitive. When we have reached a level we are comfortable with, and when it is in our interests to do so and we will be able to set realistic conditions, then we will renew talks about signing an agreement.’ 

Yanukovych has come up with a figure of 20 billion euros as an annual EU subsidy to his country, ‘and a total of around 160 billion by 2017’.

News of the Ukrainian government’s U-turn broke last Thursday after the speakers of the ruling Party of Regions and members of the government started talking about the need for some financial compensation due to Ukraine by the EU in return for its signature. In other words, Ukraine had started to haggle. A major obstacle to closer ties between Ukraine and the EU has been the question of the release from prison of Ukraine’s former PM Yulia Tymoshenko. Former Polish President Alexander Kwasniewski and ex-European Parliament President Pat Cox have since June 2012 been on a mission from the European Parliament to find a solution to the problem. But now the Ukrainian government is trying to sideline this issue, with Party of Regions MP Volodymyr Oliynyk declaring that ‘the main issue for Ukraine isn’t Tymoshenko, but compensation for opening its markets to EU imports and for possible retaliatory measures by Russia.‘ Some unbelievable figures have been bandied around as necessary for Ukraine to protect itself from an avalanche of EU goods and to modernise its own production, and now  Yanukovych  has come up with a figure of 20 billion euros as an annual subsidy to his country, ‘and a total of around 160 billion by 2017.’

 
Thousands of protesters gathered in Kyiv to demonstrate against their government's decision not to sign a major trade and association deal with the EU. The protest was the largest since the 2004 Orange Revolution. Photo CC Ivan Bandura

Last minute demands

European politicians have all been pointing out that until recently the question of compensation, subsidies and financial conditions in general had never been even mentioned by Ukraine. Štefan Füle, the European Commissioner responsible for Enlargement  and European Neighbourhood Policy, told a journalist from the Kommersant-Ukraina newspaper, ‘These issues come under my responsibility and they couldn’t have been raised without my knowledge. As far as I am concerned, Ukraine made only two demands of the EU. The first concerned a specialised steel producer where EU anti-dumping measures are already in force, and the second involved a producer of food products that was encountering problems with Russia over health and safety issues.’ 

And in an interview with the same paper Simon Smith, Britain’s ambassador to Ukraine, made a similar point. ‘These figures of $105 billion or $160 billion, supposedly needed by Ukraine to help it come up to European standards, only appeared a week or two ago. But our talks about the agreement concluded two years ago and the text we arrived at hasn’t been altered since. So we’re asking ourselves what has changed for Ukraine. Where did these figures come from, that Kyiv should suddenly be saying, “Heavens, it’s so expensive, the agreement will be so painful for us!” Nothing’s changed on the EU side. Let me just stress that we are not even talking about losses Ukraine might incur by implementing the Association Agreement. We believe it will bring new opportunities and be of immense importance to Ukraine, and it’s not even worth talking about it in terms implementation costs.’

Protest rallies in Kyiv have been attracting crowds of up to 150,000 people, and similar actions have been taking place in all Ukraine’s large cities.

The Ukrainian government’s decision triggered an immediate reaction from its citizens. On 21st November journalists and community activists started gathering on Kyiv’s Revolution Square, the centre of the Orange Revolution of nine years ago, to protest against the official U-turn, and later a number of opposition political parties held their own rallies. Eventually all these separate actions merged into one massive gathering, or rather initially two – the activists occupied Revolution Square and the party supporter European Square – but on 26th November they came together as one ‘maidan’, the Ukrainian word for square which since the Orange Revolution has become shorthand for a mass political demonstration. Rallies on different days on different squares have been attracting crowds of between 500 and up to 150,000 people, and similar ‘maidans’ have been taking place in all the large cities of   Ukraine.

Why did it go wrong?

One of the people privy to decisions taken by the presidential administration admitted to me that they had made several mistakes during their talks with the EU. The first of these was failing to put forward a clear list of demands at the time that the EU produced its own. The EU’s conditions, known as the ‘Füle list’, appeared in February 2013 and contained 19 articles setting out the steps Ukraine needed to take before the EU would sign an Association Agreement with it. Issues included the harmonisation of Ukrainian legislation with European standards, and in particular a lessening of the role of the Prosecutor-General’s office and the adoption of an Electoral Code. But the main condition was an end to selective justice – in other words, the release of members of ex-Premier Yulia Tymoshenko’s political team and Ms Tymoshenko herself, who have been in prison since 2011. ‘We should have had our own list of conditions ready, including a demand for compensation to protect our producers’, admitted my source.

‘By the time EU goods start flooding our markets Ukrainians need to know that our stuff is better – that Ukrainian sausage, for example, is tastier than German sausage.’

It is quite possible that a list will now be drawn up in the near future. ‘Also’, he went on, ‘we need to organise a mass campaign in support of our own producers. An agreement is going to be signed sooner or later, and ‘by the time EU goods start flooding our markets Ukrainians need to know that our stuff is better – that Ukrainian sausage, for example, is tastier than German sausage.’   

Moscow claims that a free trade agreement between Ukraine and the EU would hurt the Russian economy and as such it has urged Kyiv to delay signing any deal. Photo Premier.gov.ru

Russia the real winner

The real winner in the standoff between Ukraine and the EU is of course Russia. The Kremlin has succeeded in not only beating off the threat of cheap European goods reaching Russia via Ukraine but in yet again keeping Kyiv in its own orbit - the last time that happened was in 2008, when an initiative to begin a process which would end with Ukraine being admitted to NATO was effectively thwarted by Moscow. The question of course remains of how much it has cost Russia. Many experts believe that we’re talking about a reduction in the price of Ukraine’s gas from the present $500 to $260 per 1000 cubic metres. Others claim that Yanukovych has secured Vladimir Putin’s support for the presidential election of 2015, when he hopes to win a further term in office. Russia, however, has failed to achieve its main goal, which was to attract Ukraine into its own Eurasian Customs Union. Kyiv has announced that it is ready to forge closer ties with the Customs Union but without becoming a member.