Ukraine’s U-turn On EU Agreements Hearkens Back To Cold War Climate

President Yanukovych finds himself in an uncomfortable position, having to reconcile irreconcilable forces.
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    Police guard a statue of Vladimir Lenin in Kiev, Ukraine, December 1, 2013.  Protesters toppled the statue a week later. (Photo/Ivan Bandura via Flickr)

    Police guard a statue of Vladimir Lenin in Kiev, Ukraine, December 1, 2013. Protesters toppled the statue a week later. (Photo/Ivan Bandura via Flickr)

    BRUSSELS — The Ukrainian president announced on Nov. 21 that he would not sign a political Association Agreement and an economic Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union, leaving the Europeans empty-handed just days before what was hoped to be a historical summit in Vilnius, Lithuania, and facing the near complete failure of their Eastern Partnership policy.

    President Viktor Yanukovych’s sudden about-face brought tens of thousands of Ukrainians, mainly students and the middle class, onto the streets of Kiev and other Ukrainian cities in the biggest anti-government protests since the 2004 Orange Revolution. Since then, thousands of demonstrators have been occupying government buildings and barricading the main square, paralyzing the city center and prompting clashes with riot police.

    They are protesting Yanukovych’s decision to reject the deal with the EU, but their anger stretches wider and encompasses the country’s dysfunctional governing class.

    Yanukovych, a native Russian speaker, has never had much legitimacy in the Ukrainian speaking part of the county. He is still backed though by a constituency in the industrial East that has close cultural and linguistic kinship with Russia.

    What made the Ukrainian government suddenly change its mind only a few days before the Vilnius summit and after six years of arduous negotiations with the EU over the agreements?

    Many around the world are wondering what went wrong. Over the last week, journalists and analysts in Europe have been promulgating explanations and analysis.

    The official version given by Ukraine is that Russian pressure to renounce the deal had become too strong. Moscow was threatening Kiev with new trade tariffs on Ukrainian goods; and the Russian state energy giant Gazprom suddenly complained that Ukraine had a huge outstanding debt and demanded swift payment.

    From Moscow’s perspective, Ukraine signing the agreements with the EU would violate the treaty on strategic partnership and friendship with Russia. Instead, Russia wants to draw Ukraine into a Moscow-led customs union and prevent it drawing closer to the EU — a move that would signal a historic shift toward the West and away from Moscow. The Kremlin has now promised cheap gas and big loans to Yanukovych.

     

     

    A geopolitical contest?

    Was this about Kiev trying to play Russia against Europe in an attempt to extract money and benefits from both sides? Was it about Ukraine choosing between East and West? Are we back to a geopolitical contest not seen since the end of the Cold War, with Russia not wanting to lose influence in Ukraine, and Brussels trying to gain some?

    There is a limit though to what the EU is apparently willing to do to get Ukraine into its sphere of influence. In 2005, a few months after the Orange Revolution, a senior Ukrainian envoy came to Brussels hoping to get one thing: a public statement that one day Ukraine could join the EU. The promise never came. And in the end, the Orange Revolution leaders turned on each other in corruption scandals and political vendettas that resulted in Yanukovitch being voted into power.

    In 2008, the EU conceived its Eastern Partnership project as a non-military form of engaging with the six former Soviet Republics: Ukraine, Moldova, Belarus, Georgia, Azerbaijan and Armenia. The success or failure of this venture depends to a large extent on whether Ukraine – by far the largest and most important of the six – signs an association and free-trade agreement with the EU. These agreements do not offer the prospect of accession to the EU, but the Union is keen to use access to its markets as well as prospects of visa-free travel to stimulate political reform and bolster trade exchanges.

    The association agreement with Ukraine includes commitments in so-called WTO+ policy areas – technical barriers to trade, customs administration, intellectual property rights and trade in services – that far outweigh those negotiated in the framework of the WTO. Importantly, some policy areas, such as competition and energy, are covered by a sophisticated dispute settlement mechanism that emboldens their legal enforceability.

    The agreements would also entail privatizing important sectors of the economy, such as energy or rail. Other provisions prescribe the transposition of EU legislation into Ukraine’s legislation according to a strict schedule set out in the annexes.

    No doubt the required reforms and adjustments would come at a price for the Ukrainian economy in the short run. The recipe is the same as the one the EU applied to former Eastern European countries but with one major difference: for Ukraine and the other countries of the Eastern Partnership, no explicit membership is enshrined in the agreement, depriving these countries from a major incentive to apply the painful reforms.

    The EU also wants to impose change on Ukraine’s poor democratic, legal and human rights record, as well as the liberation of Yulia Tymoshenko – one of the leaders of the 2004 Orange Revolution who was sentenced to seven years in jail for exceeding her authority as prime minister – so she could get medical treatment in Germany.

    Additionally, the EU promised Ukraine IMF assistance. But again, IMF loans come with strings attached. In this case, the IMF would probably insist that the Ukrainian government increase the price of gas for private citizens, which would lead to increases in heating and hot water rates, and end farming subsidies.

     

     

    A clear mismatch in expectations

    As a result, when Ukraine officials looked at the EU agreement, they saw difficult times ahead. Yanukovych probably thought this did not matter, so long as he could get the financial assistance he desperately needed to ease Ukraine’s massive economic and financial crisis.

    But in the end, Brussels did not offer to compensate Yanukovych for the lost exports to Russia; nor for the cost of approximating industrial and legal standards with EU norms.

    In other words, there was a clear mismatch in expectations between the two sides. And the final blow to the agreements with the EU probably came when the International Monetary Fund presented very stiff terms for loans to avoid an economic collapse in Ukraine. These were demands that Kiev felt impossible to meet.

    No doubt the EU believed Ukraine was too advanced in the process to backtrack; and Ukraine thought the EU was so keen on signing that it would be willing to accommodate Kiev on a number of issues. Both were wrong. And if the EU felt duped by the Ukrainian leader’s last minute U-turn, chances are that he too felt duped.

    This said, few young Ukrainians know what the agreements with the EU actually entails. For cosmopolitan Ukrainians, the EU is an enclave of liberal democracy and open markets and looks like a more attractive model than Russia. They have the illusion of EU-aligned future prosperity.

    Paradoxically, the Ukrainians are sending a clear signal that the values that the EU is believed to defend can still be inspiring, uniting and a worth a sacrifice. Such a public longing for Europe can hardly be seen in Europe itself these days. Even the people in the former Eastern European countries, who used to share that same enthusiasm before joining the EU, lost their illusions long ago.

    The EU’s offer for an Association Agreement and a Deep and Comprehensive Free Trade Agreement remains on the table. And the public anger and mass protests against Russia’s role in persuading Yanukovych not to sign with the EU has made it all but impossible for the Ukrainian president to take the alternative route offered by the Kremlin, i.e., joining a customs union with Russia, Belarus and Kazakhstan.  In other words, Yanukovych finds himself in a very uncomfortable position, having to reconcile irreconcilable forces.

    On Dec. 3, Yanukovych headed to China to sign economic and trade agreements. He was probably trying to show both the EU and Russia that they are not the only possible partners for Ukraine –  and also hoping to find a third way out of the impasse.


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