Is Vlasenko Kiev’s Final Response to Europe’s Demands?

March 13, 2013
Anthony T. Salvia
Director, American Institute in Ukraine

The Verkhovna Rada’s distinctly un-European decision to strip Serhiy Vlasenko of his parliamentary seat came just days after Kiev made what appeared to be a decisive turn towards Europe at the EU-Ukraine summit on February 25th in Brussels.

There, Kiev agreed to undertake a raft of judicial and legal reforms (so as to become more “European”) in exchange for a signed (though not necessarily ratified) Association Agreement with the EU – and to do so no later than the month of May.

But now, Brussels is expressing “deep concern” over Ukraine’s intentions and labeling Mr. Vlasenko’s treatment “not the European way.”

The Vlasenko affair is not the only thing causing Brussels to wonder about Ukraine’s intentions: No sooner had Kiev signed the summit communiqué than President Yanukovich was meeting with his Russian counterpart at Zavidovo, Tverskaya oblast’, for talks about gas prices, pipelines and Ukraine’s relations with the Eurasian Customs Union.

The talks concluded amid unconfirmed reports that Ukraine and Russia are on the verge of signing an agreement establishing a Naftogaz/Gazprom joint venture for the management of Ukraine’s gas pipeline network in exchange for a sharp reduction in the price of imported Russian gas. That remains to be seen. But a second Yanukovich/Putin meeting has been scheduled for April, suggesting something is afoot.

In any case it is clear that Ukraine’s resort to the Russian card, so disconcerting to Brussels, reflects frustration with the inadequate deal Europe is offering.

Journalist Anastasia Bereza, detailing 19 distinct reforms Brussels expects Kiev to carry out by May, calls this “a huge set of changes, and if they all went into effect at the same time, it would mean…breaking up the system that is the basis of [the authorities’] survival.”

If she is right, that would be a steep price to pay – potential destabilization -- for an agreement that offers so little by way of tangible benefits. This is certainly ironic, as one of the arguments against Kiev joining the Eurasian Customs Union is that to do so would prove politically destabilizing.

So the Yanukovich administration can jump through hoops (and, again, if Ms. Bereza is right, risk its own destabilization) to comply with Europe’s demands, and, at the end of the day:

  • Have no guarantee that Brussels will be so impressed by its efforts to comply as to actually sign the agreement;
  • Have no guarantee that all 27 European states will ratify the signed document;
  • Be left with no clear path to ultimate EU membership (Turkey signed an Association Agreement with Brussels in 1964, and, 49 years later, still has no invitation to join),
  • Be saddled with an agreement that will do nothing to promote Ukrainian exports to Europe (and everything to promote European exports to Ukraine).

Not exactly an attractive proposition. To sweeten the deal, Europe has offered Ukraine a 610 million euro line of credit -- contingent on the signing of a new financing deal with the IMF, which continues to make the politically impossible demand that Yanukovich raise gas prices on Ukrainian households and businesses -- even in the face of a shrinking Ukrainian economy, a parliament in turmoil, and presidential elections looming in 2015.

If the West is concerned about “losing” Ukraine, it should look to its own policies.

Brussels’ ham-fisted offer contrasts with what transpired at Zavidovo. Putin told Yanukovich that if Ukraine joined the Eurasian Customs Union it would experience economic growth of 1.6 to 6.5%, depending on the degree of integration. The statement seems to suggest that a relationship with the ECU short of full membership -- an option long favored by Kiev and rejected by Moscow -- may now be on offer.

Whatever you think of the government’s treatment of Timoshenko, Lutsenko and Vlasenko (the Lutsenko case, in my view, is especially egregious), Yanukovich is right to seek the best possible terms for Ukraine in its dealings with Brussels (and Moscow).

Russia is offering Kiev a straightforward deal over which it appears willing to haggle – duty-free access to a growing, Russian-speaking market of nearly 200 million people with a history and culture of buying Ukrainian products, along with a steep reduction in the cost of Russian gas. Not a bad offer when your economy is shrinking as rapidly as Ukraine’s, and a gas pricing deal could correct your balance of payments deficit and prevent further weakening of the national currency.

The convoluted story of Ukraine’s negotiations with Europe and Russia confirms the aptness of this comment by a Danish newspaper: "Russia makes you an offer you can't refuse, while the EU makes you an offer you can't understand."

If you want to get something, you have to give something. Europe does not seem to understand this fundamental political point.