Must Ukraine Remain a No Man’s Land?
KIEV-- After reaching an agreement on Russia’s accession to the World Trade Organization on Thursday, European Union leaders are set to meet Ukrainian President Viktor Yanukovich in Kiev today. Although the EU-Ukraine summit should endorse an ambitious new political association and free trade agreement that has been five years in the making, the agreement’s fate is still uncertain on the eve of the meeting. The association agreement would mark a significant shift in Ukraine’s political and economic orientation towards the West. It commits the country to upholding democratic freedoms and the rule of law as well as EU standards in areas such as fair competition and transparent public purchasing.
Corruption and red tape meant that Ukraine attracted just 30 foreign investment projects last year, which created only 1,000 jobs. Investment flows improved in 2011, as negotiations with the EU neared completion and related reforms started to take effect. So why is this win-win agreement still in doubt? A number of EU member states object to concluding the negotiations while Yulia Tymoshenko, Ukraine’s former prime minister and defeated presidential candidate, is languishing in jail on charges related to the ten-year gas supply deal she concluded with Russian Prime Minister Vladimir Putin in January 2009. She now faces additional charges of tax evasion and theft of government property. However, Tymoshenko has told European diplomats that she would not want her imprisonment to stand in the way of a deal from which both sides will benefit. At the same time, Yanukovych is demanding that a clause be inserted into the new agreement that would give Ukraine the prospect of joining the European Union. This is a pretext for delay.
Yanukovych knows full well that the EU, grappling with the euro crisis and still coming to terms with Bulgaria and Romania, cannot presently give Ukraine a membership perspective. At last week’s European Council in Brussels, member states were not even ready to give an unqualified go ahead to Serbia or Montenegro, whose political and economic reforms are far more advanced. Furthermore, in October, Putin invited Ukraine to join his proposed Eurasian Customs Union, with the incentive of a further discount on Russian gas prices;Putin’s proposed union would be incompatible with the EU agreement. It looks as though the president and his backers prefer to temporize, keeping both Russia and the EU in play, with as few concessions as possible to either. Ukrainian oligarchs are afraid that their freedom of action would be limited by both the Russian and EU agreements.
While the Russian proposal would open up Ukraine to competition from far more powerful Russian oligarchs, backed by the Kremlin, the EU agreement would put an end to opaque tendering procedures and the manipulation of tax and customs rules, which today discourage foreign competitors. Ukrainian participation in the putative Eurasian Union is necessary for the body’s credibility, and this gives Kiev some leverage with Moscow. Although Yanukovich wants to keep Tymoshenko in jail until after the parliamentary elections scheduled for October 2012 — meaning that the EU agreement is unlikely to be signed before then — he also hopes to gain some electoral advantage by wrapping himself in the European flag. If the agreement is not concluded, he can claim this was because the EU refused his membership demands. In Kiev today, EU leaders should call the Ukrainian president’s bluff. It is not in the EU’s interest for Ukraine to remain a kind of no man’s land, in which the rule of law is up for grabs. The Ukrainian people, too, need “more Europe,” if they are to shake off the political cynicism that has taken hold since the collapse of the Orange Revolution.
A better business climate is required to generate jobs in what remains one of Europe’s poorest countries. The conclusion of the negotiations today would start a process that still requires initialing, signature, ratification, implementation, and enforcement. At each stage, the EU can nudge Ukraine toward further reforms as a condition for moving ahead. For now the association agreement should be endorsed without unrealistic preconditions and the EU should continue pressing for Tymoshenko’s release from prison, pending the conclusion of the various legal procedures underway.
The views expressed in GMF publications and commentary are the views of the author alone.