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18 October 2024

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UKRAINE: YANUKOVYCH TURNS TO WEST, CALLING ON MOSCOW FOR HELP ALONG THE WAY

ALEXANDER BONDAR, Business mir #16 - 2010-05 MAIL PRINT 
Ukraine’s European neighbours need not fear that the country’s new president, Viktor Yanukovych, might make some unexpected political or economic U-turn.
This will not happen because Yanukovych is actually a much more predictable, pragmatic and down-to-earth politician than his predecessor, Viktor Yushchenko. Yushchenko proved to be an Eastern leader who was much loved by the West and who ended proving to be of the West’s most bitter disappointments.
Pragmatism is Yanukovych’s second nature (he was nicknamed “ the attendant” back home in Donbass). Moreover, the country has emerged from its postrevolutionary “Orange Period” so devastated that Yanukovych can’t help but use more pragmatic policies to develop Ukrainian statehood and bail out the nation’s weakened economy.
One must first put aside the political rhetoric and clichés which are so widespread in Ukraine, Russia and the European Union alike, and look at the current situation without any preconceived notions. In doing so, it becomes perfectly clear that Yanukovych has always been and will continue to be primarily a pro-Ukrainian president rather than a pro-Russian or pro-European political leader.
After all, should President Viktor Yanukovych act in any other way? A successful national politician is someone who makes his country stronger, wealthier and more influential – this is true of any nation on any continent. His predecessor failed to do so because his political perspective was too narrow; Yushchenko preferred pursuing a single point of view, even if it went against a large portion of the Ukrainian population’s interests.
Some now say Yushchenko was too much of a romantic, while others use a stronger term and call him a fool – but it no longer matters as he is ancient history now. He has been succeeded by Yanukovych, who is anything but romantic or lyrical. He is rather a pragmatist who would never make a move without the guarantee of some tangible effect.
On the other hand, he is apt to do whatever is most realistic and not give a damn about how many people do or don't like it.
Yanukovych is not opposed to Ukraine’s pro-European ambitions. In fact, he will ardently support this policy as long as the EU remains an advantageous political and economic partner and a comfortable place for people to live in. This is a transparent and pragmatic approach, given the annual level of trade between Ukraine and the EU. Trade with the EU topped $43bn in 2008 (the year preceding the financial crisis), and Ukraine cherishes hopes of Western loans. These loans are crucial to the recovery of the country’s ruined economy.
Yanukovych is absolutely incapable of unilateral moves such as introducing visa-free entry for EU citizens like Yushchenko did. His position is very specific – Ukraine should certainly work towards a rapprochement with the European Union, but only do so gradually, as it grows stronger and more economically stable.
The time will certainly come, though not in the immediate future, when Europe will open its doors to Ukraine of its own volition. That will happen when a strong, democratic and wealthy Ukraine becomes a more appealing economic and political partner for Europe through its alternating competition or cooperation with Moscow.
The next important issue is whether or not Western businesses will face problems trading in Ukraine. Ukraine has no reason to hinder Western investments in the first place, certainly not with the huge debts the nation has accumulated and the looming menace of default hovering. Secondly, problems like corruption, bribery, red tape, and political bias — which all definitely hamper international relations – have not taken root since Yanukovych’s election. These problems had been present before, during the earlier team’s administration.
Yanukovych is equally unlikely to begin a rush rapprochement with Russia, which would undoubtably affect his Western policy. He is supported by Ukranian business tycoons who are even more interested in Western markets than they were five years ago, as they have since grown used to working with them. They are wary of competing with Russian businesses that are rich and strong adversaries as well. They prefer dealing with Westerners, who are restrained by laws and traditions. Therefore, it would be wrong to assert that Yanukovych’s victory automatically gives Russian players the green light in Ukraine.
At the very least, Russia will be obliged to reciprocate every small concession Ukraine makes.
Generally, Ukraine’s new policy is almost certain to replicate its old preYushchenko policy – led by President Leonid Kuchma in the 1990s and the first few years of the new century. Incidentally, Yanukovych was Kuchma’s Prime Minister late in his presidency. This old policy will be “packaged” in a new way and incorporate current conditions. Every minor political or economic change in Ukraine’s Western policy will be immediately balanced by a similar move in regard to Russia.
In the current conditions, Yanukovych may attempt an even more daring tactic — Ukranian involvement in trilateral projects. He might try to implement his longstanding idea of setting up a consortium including Ukraine, Russia, and Western Europe to upgrade the country’s oil and gas pipelines. This would grant Prime Minister Vladimir Putin his dearest wish — broader access to Ukrainian pipelines for unimpeded gas export to Europe.
Ukraine also has purely economic reasons to cooperate with Moscow. In fact, the Ukrainian economy is driven by three industries – its Russian gas reliant steel industry, and its engineering and farming sectors, which benefit from the nearby Russian consumer market. The two economies are interrelated as follows: trade with Ukraine represented 5.4% of Russia’s overall trade turnover in 2008, while Russia accounted for 23.3% of Ukraine’s trade turnover. The two countries’ mutual trade totalled $40bn, which is lower than Ukraine’s trade figures with the European Union.
But one important factor distinguishes Ukraine’s trade with Russia from its European trade – Ukraine is nothing more than a supplier of unprocessed or semi-finished goods to the West. On the other hand, Russia supplies Ukraine with oil, gas, coal, metals, chemicals, and semi-finished products — the majority of which go on to be exported to Europe. In return, Ukraine exports metals and metal by-products, machinery, equipment, foodstuffs and chemicals to the Russian market. It would be just as unwise for Ukraine to lose its trade with Russia as it would be reckless to reduce its cooperation with the West.
The latest Russian-Ukrainian agreements resulted in the expected gas-for-fleet trade-off. Ukraine secured a 30% discount on Russian natural gas in exchange for a 25-year extension of the Russian naval base's lease after the current lease expires in 2017.
Although the agreements were reached earlier than expected, they not so much point to a change in Ukraine’s political priorities as prove that Yanukovych is a more pragmatic politician than his predecessors.
Ukraine is unlikely to recover from its economic collapse without Russia’s assistance, but Russian businesses' aspirations in Ukraine include broader access to its gas transportation system. Russia now badly needs Ukraine's pipelines to ensure reliable delivery of natural gas to Europe.
As for Ukraine’s agreement to extend the deployment contract for Russia’s Black Sea Fleet in the port of Sevastopol, even those who know little about the strategic border realities in Eurasia can more or less correctly gauge its importance.
But that’s not all. Ukraine is deeply immersed in economic chaos and the cold-hearted, sober-minded West is unlikely to be guided by emotion in its relations with Ukraine. However, Russia is different as this year, Moscow had every right to impose a multi-billion dollar fine on Ukraine for violating its Russian gas contract, even though the violation was due to the catastrophic state of Ukraine’s economy. Russia finally decided not to profit from its neighbour's financial troubles, even though the Russians are cash-poor as well.
Yanukovych is well aware of Russia's weakness where Ukraine is concerned, and will certainly try to use it to get more preferential conditions in exchange for vague promises the President may or may not choose to fulfil. Talks and negotiations on a common customs and economic area as well as extending the Russian fleet's deployment in the Crimea will go on for years and years to come. This will give Ukraine certain advantages along the way, such as Russia’s direct assistance in obtaining preferential conditions on rolled steel and chemical import quotas, etc.
The situation will continue until Ukraine comes out of its current economic collapse. Is Europe willing to adopt a similar attitude, and provide some tangible help rather than just making empty declarations? The answer is a definite ‘no’ as Europe prefers to wait for relative stability to return and hope that its own economic interests in Ukraine aren’t compromised. But that won’t happen in the near future and Europe is unlikely to extend a helping hand to Ukraine any time soon.
Ukraine will not make any final decision on its general policy or decide on the best moves to make until the economy stabilises. For now, it will probably begin to gradually drift toward the West, but will call on Moscow for help the way.
ALEXANDER BONDAR, Business mir #16 - 2010-05  MAIL PRINT 
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Ежедневные новости и аналитика из Швейцарии и Европы, политика, экономика, интервью

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