By Jonas Vaicikonis – Secretary of State Clinton’s visit to Kiev in early July underscored continuing US interest in Ukraine. Some Western observers have expressed alarm over the new course that Ukrainian politics have seemingly taken after recent presidential elections brought a new administration to power.
The February election of President Viktor Yanukovich brought a series of changes in Ukraine’s domestic and foreign policy–most notably, a deepening of Ukraine’s relations with Russia. Many see this as a u-turn in Ukraine’s path toward membership in the European Union and NATO that former President Viktor Yushchenko had pursued. However, EU and NATO expansion into Ukraine had already been put on hold for the foreseeable future by the current political and economic climate in Europe.
Rather than signaling a new shift toward Russia, Yanukovich’s administration is simply taking the path of least resistance in terms of economic development by deepening an existing political and trade relationship. Yanukovich states that he supports eventual Ukrainian membership in the EU, but says that his administration is focused on pragmatic moves that can quickly help the Ukrainian economy escape the global financial crisis. A fast way to pursue this is to slow the pace of the anti-corruption reforms that are a prerequisite to EU membership (which is off the table anyway) and instead to expand trade and cooperation with Russia.
Yanukovich’s quiet decision to disband the commission working towards NATO accession was received as a gesture of goodwill in Russia and came at no real political cost, given diminished interest among NATO nations in further expansion. Then came the sudden announcement at the end of April of an agreement with Moscow to extend Russia’s lease on the port and naval base at Sevastopol until 2042. This permits the Russian Black Sea Fleet to remain a presence in the Black Sea and the Mediterranean. This is a departure from the policy of the previous administration, which had firmly stated that it would not renew the lease when it expired in 2017.
Russia and Ukraine have been major trading partners since the fall of the Soviet Union and the Russian Black Sea Fleet has been stationed in Sevastopol for more than 200 years. The fleet is actually a key contributor to the local economy and the lease extension includes provisions for the fleet to purchase a larger share of its supplies from Ukrainian firms. In exchange for the lease extension, Ukraine will receive a 30 percent rebate on natural gas purchases from Russia until 2019, helping to reduce a serious financial burden.
Not long after the agreement was signed, Russian Prime Minister Vladimir Putin proposed closer economic integration between the two states in a number of industries. These proposals seemed to fit the narrative of an aggressive Russian energy policy in a former Soviet state, especially his proposal to merge Ukraine’s state natural gas company with Russia’s far larger Gazprom. While this proposal was covered in the western media, Putin’s offers of closer economic cooperation in the aviation and nuclear energy sectors were not as widely discussed, even though they were welcomed by the Ukrainian government. Yanukovich’s administration seemed caught off guard by Putin’s gas company merger proposal and politely dismissed it, but it recognizes the need for Russian capital to revive its aviation industry and its stalled project to build the Khmelnitsky nuclear power plant.
The Ukrainian opposition, led by former Prime Minister Yulia Tymoshenko, denounces this series of moves by Yanukovich. They see a closer relationship with Russia as a danger to Ukraine’s long-term prospects for closer European economic and security integration, even though they acknowledge that it brings badly needed short-term economic gains.
Ukraine welcomes foreign investment and trade anywhere it can get it, just like any nation battered by the global financial crisis. Some observers see Moscow’s Ukrainian initiatives as Russian economic imperialism fueled by petroleum wealth. An alternative interpretation could be that Ukraine has not completed the economic reforms necessary to attract West European and American business. So, Russian firms with ties to the Russian government are some of the few willing to invest in a country ranked 142nd out of 183 in the 2010 Doing Business report, a compilation which evaluates the health and transparency of the business environment in most of the world’s states.
European and American investors have been aware of widespread corruption and inefficiency in Ukraine, especially in the energy sector, for some time. In fact, Ukraine’s receipt of funds from both the IMF and the European Commission is dependent on its agreement to carry out reforms in the energy, banking, and industrial sectors. Implementation of the reforms is viewed as a precondition for a free-trade agreement and a visa-free regime with the European Union that Yanukovich is negotiating and hopes to achieve by the end of the year to advance his stated goal of further European integration.
While this pursuit of a deeper relationship with the EU is a start, closer ties with the West (possibly leading to EU membership) mean pursuing painful political and economic reforms to root out corruption. Still, Ukrainian efforts to foster closer relationships with Western Europe and with Russia are not necessarily mutually exclusive.
Photo Credit: The Kharkiv Summit April 2010, www.kremlin.ru.
Jonas Vaicikonis is an intern in the Stimson Center’s Unblocking the Road to Zero program