Professional Documents
Culture Documents
June 8, 2011
from the very beginning of his term in office, Yanukovych proved to be far
more protective of the national (read corporate) interests of Ukraine and thus
positioned himself as a Europhile.
Yanukovych traveled extensively to EU capitals in a bid to convince European
leaders to disengage from Russias South Stream pipeline project, which
would bypass Ukraine, transporting Russian gas to Europe via the Black
Sea. In addition, he began to engage seriously with the question of European
integration, privileging negotiations on Ukraines Association Agreement with
the EU, while snubbing the possibility of joining Belarus and Kazakhstan in
Moscows Customs Union.
It is becoming increasingly clear that the current Ukrainian president, like all
of his predecessors, will not toe Moscows line and will therefore never satisfy
Russia. Even when confronted with the interests of oligarchs, who want cheaper
gas from Russia, and by his own need for funds to overcome the current
economic crisis and reform the public sector, Yanukovych will not budge.
Ukrainian businesses do not want to be taken over by their Russian competitors
and Yanukovych himself wants to remain the independent leader of a sovereign
nation, not the governor of a Russian province.
Many in
Whether Kyiv and Moscow will be able to overcome this deadlock and build a
stable and healthy relationship, therefore, remains open to question. The current
level of expectations on both sides, the lack of strategy, and the mutual distrust
all suggest that relations between Ukraine and Russia will be fraught in the
coming years.
Moscow and
constructive,
and pragmatic
In the five years that followed Ukraines so-called Orange Revolution, Russia
felt abandoned and grew to resent Kyiv for the geopolitical, economic, historical,
and cultural divides that emerged between the two countries. Moscow had
expected that, under the leadership of Yanukovych, Ukraine would find its way
back to the fold, reconciling and building stronger ties with Russia.
The Kremlin, however, did not seem to have a clear strategy for dealing with
Ukraine once Yanukovych took office. Moscow opted for tactical moves, starting
with settling the long-running and symbolically important issue of its Black Sea
Fleet. In addition, Moscow pursued some patchy sectoral cooperation projects,
continued to pressure Kyiv on an ad-hoc basis on cultural issuessuch as
Russian language rights, common history, and religionand pursued its grand
integration project of Ukraine joining the Customs Union.
Ukraine and
Russia hoped
for the cold
war between
Kyiv to be
replaced by
a friendly,
relationship.
Yanukovych, however, did not have a clear plan for how to rebuild relations
with Moscow either. Despite much talk about the need to improve relations
with Russia, there was no understanding in Ukraine of Moscows needs and
expectations. Consequently, many of Ukraines policies toward Russia were
reactions to Moscows proposals or perceived Russian expectations and led to
unpredictable results.
The Kharkiv Agreement
The first step toward rebuilding relations with Russia was made by Ukraine in
April 2010, with the formal signing of the Kharkiv agreement by presidents
Medvedev and Yanukovych and its subsequent synchronized ratification by the
parliaments of both countries. This agreement provided for the extension of
Russias lease on facilities in the port of Sevastopol, home to its Black Sea Fleet,
until 2042 and in return gave Ukraine a 30 percent discount on Russian gas.
Yanukovych claimed that this move was a response to his electoral promises of
improving relations with Russia and addressing Ukraines energy supply problems.
A year into
Yanukovychs
The agreement has been widely seen as a diplomatic victory for Russia. Moscow
saw that Ukraines incoming president was in dire need of money and sold the
deal to him on the basis that it would give him the necessary financial breathing
room to focus on domestic reforms. Concretely, the agreement allowed Russia
to extend its presence in Ukraine, and, Gazproms current financial troubles
notwithstanding, the discount for gas was not a big loss and was a price Russia
was ready to pay for the twenty-five-year lease extension.
presidency,
The agreement sought to rebuild relations by taking pressure off issues that
were uncomfortable for Russia. Moscow was able to send a clear signal to the
West that Russia still saw Ukraine as a natural part of its sphere of interest,
a message the Kremlin felt it particularly needed to convey after the 2004
Ukrainian presidential elections. The agreement also fed the illusion in Moscow
that, despite opposition protests at home and astonished reactions in the West,
Yanukovych would be ready to go further and accommodate Russias needs.
surely sliding
Kyiv saw the agreement as a one-off that could improve relations with Russia
and dissuade Moscow from pressuring Ukraine for deeper integration.
Yanukovych seemed to think that by responding to Russias symbolic need
to maintain a presence in Crimea, he could gain economically through a gas
discount, killing two birds with one stone.
Ukrainian negotiators believed that, should they grant a twenty-five-year lease
extension to the Black Sea Fleet, Russia would be compelled to reciprocate by
providing cheaper gas for a longer period. However, Yanukovych chose to deal
with Medvedev, cutting Putin out of the talks. As a result, Russia opted to make
more modest concessions, offering a small and rather illusionary discount.
relations
between the
two countries
are slowly but
into deadlock.
The price Ukraine pays for Russian gas is one of the highest in Europe. The
benefits of the Kharkiv agreement, however, were primarily intended for the
Ukrainian metallurgy and chemical industries, which favored cheaper gas and
competitiveness today to modernization and profit tomorrow. Paradoxically,
because Ukrainians largely consume domestically produced gas, the public at
large did not benefit from Russias 30 percent gas discount.
The agreement is a clear loss for Ukraine and the administration in Kyiv
privately admits as much. Kharkiv allowed for a modest normalization of
relations with Russia, as well as the reopening of talks on border demarcation
and the delimitation of the Kerch channel. Some in Russia would even like to
attribute a slight increase of trade flow between the two countries to the accord,
although this phenomenon may be more accurately attributed to the recovery
from the economic crisis. Ultimately, however, Kharkiv stripped Ukraine of
its bargaining power for the revision of the gas price formula and, moreover,
opened the door to further Russian claims.
A few dissenting voices in Kyiv have advocated renouncing the Kharkiv
agreement. While these voices have so far only come from the opposition,
many believe that government opposition to the accord may materialize at a
later stage. However, any opposition to Kharkiv could have negative economic
consequences for Ukraine, particularly if Russia were to call in Ukraines
gas arrears, which currently amount to approximately $3 billion. Moreover,
Ukraines image, which has already been tarnished by the poor implementation
of international commitments, would suffer even further.
Other Areas: Mergers and Acquisitions Rather Than Equal Partnership
It is becoming
increasingly
clear that
the current
Ukrainian
president,
like all of his
predecessors,
will not toe
Moscows
line and will
therefore never
satisfy Russia.
The Customs Union, which would unify the economic and industrial space that
was torn asunder by the collapse of the Soviet Union, is a project that is dear to
Russia and especially to Putin.
The union began in January 2010 with the introduction of a common tariff
scheme with Russia, Belarus, and Kazakhstan. This was followed in July 2010
by the entry into force of the Customs Code, which applies to all three member
states. These countries subsequently created a commission for the union, whose
voting power is divided 57 percent, 21.5 percent, and 21.5 percent among Russia,
Belarus, and Kazakhstan, respectively.
The Kremlin
The Customs Union covers trade in goods, leaving aside trade in services
and the free movement of capital and persons. It is envisioned that import
duties received under the union will be consolidated in one account, with
Russia receiving 87.97 percent of the proceeds, while Kazakhstan and Belarus
would receive 7.33 percent and 4.70 percent, respectively. Russia also expects
Kyrgyzstan, Tajikistan, and Uzbekistan to join the union at some stage. Customs
Union members are planning on creating a Single Economic Space (SES) by
January 2012 to stretch cooperation between the parties beyond trade.
dealing with
Russia sees Ukraine as a valuable addition to the Customs Union, whose ultimate
membership can be ensured incrementally. Ukraine itself, however, sees little
value in this kind of cooperation.
In 2011, Moscow reiterated its invitation for Ukraine to join the Customs Union,
initially during Putins visit to Kyiv in April and subsequently through statements
made by Medvedev and other high-level Russian officials. Ukrainian participation
in the union, Russia maintains, will bring the country a variety economic benefits.
These range from a reduction of energy prices to the increase of exports
to other members (worth an estimated $4 billion to $9 billion annually), the
cancellation of export duties for oil, and the lowering of gas prices, which would
collectively save the country another $5 billion to $6 billion annually.
Suggestions of eventual Ukrainian membership in the Customs Union are taking
place in parallel to the negotiations the country is currently concluding with the
Despite much
talk about the
need to improve
relations
with Russia,
there was no
understanding
in Ukraine
Political Aspects
The Customs Union is a Russian-led project and the possibility of other states
having impact within it is minimal. It is not clear, however, how votes within
the union would be redistributed should Ukraine decide to join. Russian claims
that Moscow would control less than half the votes within the commission are
difficult to believe, as are the Kremlins assertions that all member states would
have veto power over common decisions.
The only real defense mechanism Yanukovych has at the moment to ward off
Russian pressure on membership is the Ukrainian Constitution, which does not
allow the government to defer its authority to supranational bodies. However,
with last years decision to revert from the newly drafted 2004 constitution to
the previous version, Ukraines Constitutional Court proved that the integrity of
the countrys governing document is subject to the needs of Yanukovych and his
entourage of oligarchs. With the specter of Russian interference in their country
and business looming, it is unlikely that Ukraine will opt for membership in the
Customs Union, the potential of cheaper gas notwithstanding. The example of
Belarus and its increasing dependence on Russia despite President Aleksandr
Lukashenkas attempt to defend the countrys sovereignty has provided them
with a cautionary tale in that regard.
of Moscows
needs and
expectations.
Economic Aspects
Kharkiv
stripped
Ukraine of its
bargaining
power for the
revision of
the gas price
formula and,
moreover,
International Commitments
opened the
door to further
Russian claims.
these countries, but this time as a unified bloc. Ultimately, though, it was the
Ukrainian parliament that effectively put to rest any chance of Ukraine becoming
a full-fledged member of the Customs Union by adopting a resolution on May
19 in support of the conclusion of DCFTA talks with the EU as a priority.
His first year in office was an informative one for Yanukovychit soon became
apparent that Ukraine would be increasingly subjected to Russian pressure,
particularly if Kyiv wants to ensure a supply of cheaper gas. Even this possibility
seems increasingly fleeting, though, as Moscow plans on raising domestic gas
prices to international levels within two years. In addition, it is becoming ever
more apparent in Kyiv that any integration projects will be carried out on
Russias terms, with Ukraine gaining in the short term, but losing out heavily in
the long run.
At this stage, what Europe has to offer seems far more attractive. It would entail
short-term losses due to the implementation of reforms and the introduction
of EU norms, but would also ensure significant gains in the long run thanks to
better market access. Yanukovych understands that the choice is not a simple
one of gas prices, it is about security and independence in real terms. It is a
choice between reform and integration with the EU or social discontent and the
complete sellout of Ukraines interests to the Kremlin, which would undoubtedly
replace Yanukovych with a more compliant interlocutor.
In sum, while there has been a reawakening of sorts between Moscow and Kyiv
over the past five years, relations between the two remain essentially unbalanced.
Russia consistently expects more of its neighbor to the west and is consistently
disappointed. Ukraine has two main concernscheaper gas and less attention
from Russianeither of which have been forthcoming. Moreover, the goals
are contradictory, as Russia will only be interested in providing cheaper gas if it
achieves greater economic integration with Ukraine.
The overall atmosphere has improved since Yuschenkos time in office,
with some critical issues, especially border talks, moving forward. However,
unfulfilled Russian goals, such as Ukrainian membership in the Customs Union
and Ukraines overall closer alignment with Moscow, continue to dominate
the bilateral agenda.
By responding
to Russias
efforts to reinstitute an
economic and
industrial space
covering most
of the former
Soviet Union,
Ukraine risks
isolating itself
from nonRussian goods,
investment, and
technology.
Ukraine, it would seem, is only interested in ensuring a cheap supply of gas from
Russia, while keeping enough distance from Moscow to ensure the survival of
the current administration and the oligarchs who support it. Russia, on the other
hand, has clearly stated its interests by now. Kyiv, however, has not proved adept
at understanding and interpreting these interests.
Putin, for whom tying Ukraine into the Russian chain of production is a
key goal, is not the only face of todays Russia. His integration proposals for
Ukraine are partly built on emotional grounds and first and foremost appear
to reflect a Soviet-era understanding of economics, where the utilization of
resources from the entire former Soviet space is key to restoring Russias
prominence and strength.
Ukraine faces
a choice
This thinking draws little support from Russias policy- and opinion-making
communities, within which the modernization of Russia is increasingly seen as
a necessity and bolstering old, burdensome structures as a hindrance to Russias
future. Kyiv has yet to fully understand that Putin is not the only one who
defines Moscows foreign policy agenda. Indeed, a number of other important
actors, from Medvedev to key business figures, see Ukraine as a burden rather
than an asset.
between
discontent
the Kremlin.
The primary interest for Russian industry is in Ukraines energy sector, in terms
of both gas extraction and electricity provision. Russian interests, however,
clash with those of Ukrainian oligarchs who see this sector as their privileged
sphere of influence. Moreover, Russian businesses are preoccupied with domestic
developments and therefore have less time for Ukraine. Russias future accession
reform and
integration
with the EU
or social
and the
complete
sellout of
Ukraines
interests to
to the WTO, as well as the creation of the Customs Union, remain hotly debated
topics and uncertainty of their consequences still reigns in many industries.
Three issues remain critical for both the Russian leadership and people: history,
language, and culture. They are a matter of national identity and self-esteem
rather than an attempt to undermine Ukrainian sovereignty. They build on
Moscows historical perception about itself as the Third Rome, the center
of Slavonic orthodox civilization. Without Ukraines consent to belong to this
world, Russias own historical legitimacy is at stake.
Moscow is not currently taking aggressive steps toward Ukraine regarding these
issues. However, it does send constant subtle reminders. The Kremlin ultimately
expects Yanukovych and his team to address these concerns by showing
deference to what many Russians see as Russias civilization role.
The main problem for Ukraine, however, is the way in which these issues have
been used domestically by politicians as ammunition in their electoral battles.
The threat to Ukraines language and culture has also, therefore, come from
within. Indeed, the current administration seems as if it is seeking revenge
by attempting to reverse a number of the previous administrations decisions
that aimed to sever cultural ties and build a separate Ukrainian identity,
distinguishing the eastern and western Slavonic worlds. It has sanctioned the
rewriting of history books, attempts to introduce Russian as a second official
language, and the cancellation of dubbing movies into Ukrainian.
10
Ukraine, it
would seem, is
only interested
in ensuring a
cheap supply
of gas from
Russia, while
keeping enough
distance from
Moscow to
ensure the
survival of
the current
administration.
introduction of higher gas prices for Ukraine, or trade wars, prompted by the
finalization of EU-Ukraine talks on the DCFTA, are likely to follow.
While
The nature of Ukraines agenda for Russia remains an open question. Cheaper
gas, which may not actually be a good thing in and of itself for Ukraine, cannot
be the key to relations with Russia. It may, however, be difficult for Kyiv to
define any other priorities given that the overall direction of the country seems
questionable. Defining Ukraines development and foreign policy orientation
or making a civilizational choice between Russia and the West would help.
However, such a decision could be complicated by forthcoming parliamentary
elections and the likelihood of growing populism. Kyiv must find a vision in
order to rebuild its relations with Russia and end the tensions.
is ready to
Notes
his back on
1 Comparative surveys of the Levada Center (Russia) and Kyiv International Institute of
Sociology (Ukraine), www.levada.ru/press/2011032809.html.
2 Ibid.
Yanukovych
make symbolic
concessions to
Russia, he is
neither willing
nor able to turn
the corporate
interests of the
oligarchs who
support him.
11
12