The election of Viktor Yanukovich, considered a pro-Russian politician by most of the Western media, as a president of Ukraine, raised a number of questions, the most dramatic of them is whether the EU had lost Ukraine altogether. The concerns only increased when after less than two months in office Yanukovich agreed to extend the lease of the Russian naval base in Sevastopol until 2042 in exchange for a discount in the price of gas worth $4bn each year for the next ten years.
It may be too early to conclude that Yanukovich and his party aim to bring Ukraine into Russia’s orbit or that this policy will eventually lead to the full subordination of the former to the latter. More likely, one observes the return of the balancing act, which is a reaction against the previous attempt to become quickly integrated into the EU and NATO. That policy, from the point of view of Mr. Yanukovich’s electorate, did not bear fruit. This is why the new leadership tries to reach out to both Moscow and Brussels, to which the new Ukrainian president paid his first trip abroad.
It would be premature to conclude that recent deals will reverse the trajectory of Ukraine’s development over the last two decades, which can only be characterised as a strategic drift away from Russia. This centrifugal drive is easy to understand if one is able to grasp that for Ukraine there is no abstract “independence”, just independence from Russia, supported by four fifths of the population in the referendum of 1991. No influential force in Ukraine has ever tried to challenge the value of political independence or campaign for re-unification in the form of re-entry into Russia.
Today’s Russia and Ukraine are very different and their national interests differ accordingly. Contrary to the Russian super-presidential system, Ukraine’s constitution from the outset introduced a mixed presidential-parliamentary design. This ensured the freedom of the opposition and the diversity of media. The very divergence of regional interests helped to establish political pluralism. Kiev refused to consider participating in the Russia-centered security system. Instead, it entertained alternative regional formats. It chose to view NATO enlargement as a positive process, to negotiate and use the mechanisms of distinctive partnership with the alliance, and even to send troops to Iraq. Ukraine was reluctant to take part in the Russia-led project of economic reintegration, with the exception of a free-trade zone, which, however, as a comprehensive regime was not acceptable for Russia. Over time, Ukraine learned to use its near-monopoly on the transit of the Russian gas to Europe (about 80 per cent of these exports cross Ukraine’s territory) as leverage to counter-balance its energy dependence on the neighbour. Finally, the authorities established education in the Ukrainian language and used this along with the politics of memory as instruments to emphasise country’s distinctiveness from Russia and diminish the soft power of the latter. During his second term in office from 1999 until 2004 president Leonid Kuchma had good grounds to name his book of reflections “Ukraine is not Russia”.
The Orange revolution converted the process that started as a drift away from Russia, into a centripetal movement towards Europe, which was slow, controversial and problematic, but which has gone rather far. In 2007 negotiations started between Ukraine and the EU aimed at concluding an Association Agreement.
Internally, the country has become an electoral democracy, where the voters, and not recognition by external players, decide the outcome of the struggle. Elections conducted according to international standards have become an accepted mechanism for settling political disputes. Moreover, the powers of the presidential office were further weakened in favour of the parliament. This fact directly affects the conduct of the foreign policy, because today’s choices will be subjected to the public approval and can be revised during the next elections.
Meanwhile, Russia lost the role of a king-maker in Ukraine. In 2004 Viktor Yushchenko won the presidential elections Russian open interference notwithstanding, and in 2009 Moscow prudently decided not to even name a favourite. As a result, Viktor Yanukovich does not “owe” anything to Moscow for its support, and in principle this should make him feel more self-confident in negotiations with Kremlin.
After the two gas crises of 2006 and 2009 the privileged economic relationship between the two states was destroyed, although the situation remained as opaque as before. The price of Russian gas grew from $50 in 2004 to more than $300 dollars for one thousand cubic meters in the first quarter of 2010. This was lowered to $230 in the “gas for Sevastopol” trade-off. However, Moscow’s policy to construct the bypass gas pipelines, Nord Stream and especially South Stream, signaled that Russia wanted to weaken Ukraine’s transit monopoly.
Viktor Yanukovich’s arrival is unlikely to reverse these trends completely. On the economy, the new administration has already ruled out the possibility of joining the Customs Union of Russia, Belarus and Kazakhstan. Indeed, this would be legally impossible for Ukraine, which unlike those other countries is a WTO member. As a result of the economic crisis, Ukraine’s GDP fell by 15 per cent in 2009 so it is self-evident that Ukraine needs both Russia and the West for its economic survival. The West is able to provide Ukraine with much more economic assistance than Russia, which itself has again started borrowing money from abroad to bridge its budget deficit. At the same moment when Kiev secured the discount in the gas price from Russia, Ukraine was desperately negotiating a $12bn assistance package from the IMF.
In energy relations, Yanukovich first proposed to Moscow to return to the idea of a gas transportation consortium. But, the plan did not work. Moscow may be willing to pay for tangible geopolitical results, like those it gained in the Sevastopol deal, but as the economic pressure against formally allied Belarus indicates, it will no longer make concessions in return for verbal expressions of loyalty. Russian leadership will therefore seek economic benefits as well. It cannot afford to lose revenue – it is not accidental that the new price of gas is set at the 2009 level which Ukrainian producers found very difficult to pay – and if production costs of Ukraine's industries decrease it would undermine the competitive advantages which Russian industries enjoy. If the global oil prices continue to rise, so will gas prices. In this situation the new Ukrainian leadership will be requested to pay for the gas with Ukrainian property and assets. And the oligarchic groupings which stand behind Yanukovich will hardly consent to the new demands.
Yanukovich’s administration is willing to grant the Russian language regional language status, again – in full compliance with European norms, but it shows no inclination to make it a state language, and thus falls far short of Russia’s expectations.
For the EU, however, the best way to react to this controversial state of affairs would be to act now rather than waiting for the results of the new phase in the Russian-Ukrainian relations to reveal themselves. The EU should pursue a pro-active policy based on a vision that Ukraine can still be made into a success story of the post-Soviet transition.
Europe’s interest in Ukraine’s continuing transformation into a mature democracy and a functioning liberal and transparent economy is self-evident. If Ukraine fails to reach these goals, which is a realistic scenario given numerous social and economic ills, the EU will have to concentrate on dealing with soft security challenges, on managing the wealth gap on its borders rather than on using the opportunities of this vast country. If Ukraine is not properly anchored in the energy security of Europe, some EU member states will hardly feel secure either.
In order to achieve success, the following recommendations seem appropriate. So that the EU doesn’t “lose Ukraine”, engagement should not decrease, but it should be firmly conditioned. As British analyst James Sherr argues, Ukraine’s challenging economic situation means that the case for conditionality is stronger than it has ever been. The working document, known as “Matrix for Cooperation”, was reportedly handed over by the European Commission to Ukraine at the end of April 2010 and it clearly indicates what the EU expects in terms of reforms. This document is a step in the right direction.
Even if the name of the game is “integration without membership”, the results of Ukraine’s incremental inclusion into Europe’s economic and legal system can be made visible fairly soon, in the form of the visa-free travel and other initiatives. If the EU is more involved with Ukraine, there will be more constraints on any potential plans to launch a conflict in or with Ukraine.
The EU should use sticks with the same transparency as it uses carrots. If the new Ukrainian administration preserves the opaque mechanism of gas trade that benefits just a few people at the expense of country’s industry and its fiscal interests, the EU should withdraw its support of international projects that help Ukraine. The European taxpayer cannot be expected to directly or indirectly contribute to a policy that will perpetuate economic inefficiency and corruption. Once again, the EU is interested in reforms and positive changes, and not in the continuity of notorious gas trade schemes, whether they involve Russia or not.
The framework of the Eastern Partnership initiative, launched in 2009, should be taken seriously because it adds a regional dimension to the policy. Most importantly, the EU has to demonstrate that this policy is conducted “in parallel”, with the policy of strategic partnership with Russia, rather then “in consultation” with Moscow. This after all is what the founding documents stipulate. In other words, if progress can be reached in relations with EaP partner countries, no other powers should intervene and obstruct that progress. They should however be welcome to join specific projects if they wish to co-operate.
Of course the EU should try to engage with Russia as well. The problem, however, is that Russia does not always share EU goals, underlying norms and principles. Ukraine can remain partially integrated in Europe. In the future it can choose to integrate more comprehensively. At the same time Russia has apparently abandoned its once-proclaimed “Europeanization”, while the country’s leadership finds it difficult to accept that today’s notion of Europe implies adherence to a set of values rather than geographic coordinates. If at some point in the future Moscow decides to embark on a course of integrating itself into Europe and diminishing mutual normative divergence, this will be the best way to overcome the dividing line on the Russian-Ukrainian border. Until then, helping Ukraine to stay on course towards mature democracy entails facing and overcoming Moscow’s opposition. Paraphrasing the words of one leading Ukrainian journalist, the EU should not be seen to trade the future of Ukraine for today’s contracts with Kremlin.
Arkady Moshes is Director of the Research Programme on Russia in the Regional and Global
Context, Finnish Institute of International Affairs
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