COMMENT: Russia pressure on Ukraine could be working

By bne IntelliNews November 21, 2013

Ariel Cohen of the Heritage Foundation -

The following is testimony that Ariel Cohen, senior research fellow at the Heritage Foundation, gave to the Senate Foreign Relations Subcommittee on European Affairs about the Eastern Partnership.

Since the implementation of the Partnership and Cooperation Agreement (PCA), the EU has continued to reach out to Ukraine, requesting Ukrainian political and legal reforms in exchange for trade expansion and economic integration with the EU, which would bring distinct benefits for Ukraine. However, mounting Russian pressure threatens to derail the EU's decade-long integration efforts

At the end of October and on November 9, President Yanukovych met with Russian President Vladimir Putin. Both sides published minimal information about these meetings, but a number of signs suggest that Russia's vehement opposition to Ukraine's AA and DCFTA membership is the key dynamic in the relationships between Kyiv and Moscow, and European capitals and Russia.

The future of the jailed former prime minister Yulia Tymoshenko and President Yanukovych's resistance to European pressure to pardon and release her seem to be playing a key role in the drama. First, the Ukrainian authorities launched new proceedings against Tymoshenko, which may lead to a jail term of up to 10 years

Second, a senior representative of the ruling Party of Regions announced in Kyiv that Ukraine may forgo the Association Agreement with the EU. The ruling Party of Regions refused to consider the new legislation allowing prisoners to leave abroad for medical treatment. It also pushed through legislation aimed at blocking world heavyweight champion Vitaly Klichko from running for presidency in 2014. Finally, Tymoshenko's attorney has been detained on criminal charges. All this suggests that Russia's pressure may have worked, and there will be no deal with the EU.

Economic factors play a key role

Currently, Russia is Ukraine's largest market for exports ranging from foodstuffs to metal pipes. Millions of Ukrainian migrant workers are employed in Russia, with families dependent on their revenue. In addition, Ukraine is in debt to its northern neighbour for $880m, mostly to the state-owned natural gas supplier Gazprom, which would like to gain control over the Ukrainian gas distribution gas network Naftogaz Ukrainy.

Russia's soft power is dominating Ukraine through pro-Moscow politicians; popular TV channels and other media; and Russian speakers in the east and south of the country, especially in the Crimea. This situation offers Russia significant leverage. The creation of the Russia-dominated Customs Union, and formation of the Eurasian Union, allow Russia to place intense pressure on Ukraine. This is happening not just since the beginnings of the trade war we witnessed this summer, but also with the earlier promises of economic and political gains.

Moscow does not demand reforms, including the rule of law and anti-corruption measures which the EU does. These demands may annoy some Ukrainian elites and high-ranking officials, making domination by Moscow more palatable than European integration in the eyes of a myopic few.

However, Ukraine's hesitancy to enter the Customs Union with Russia is warranted, as in the long term Moscow envisages subjugation, not cooperation. Its ultimate goals are geopolitical, not just economic. Recent events have made this clear. When negotiating over observer status as part of the Eurasian Economic Commission, Ukraine made several requests, including the right to attend all commission meetings, to have the texts translated into Ukrainian, and other reasonable safeguards of Ukrainian interests. All of Ukraine's requests were summarily rejected.

The implacability of the Russian position and the potential loss of economic and eventually state sovereignty defeated Ukrainian elite's desire, if any existed, to join the Customs Union and the Eurasian Union. Yet, Kyiv is understandably apprehensive: if Moscow imposes high import tariffs (up to 10% allowed by [the World Trade Organization]) and non-tariff barriers, economic sanctions, as it were, could come into damaging effect immediately; while EU and potentially WTO response would be painfully - and prohibitively - slow.

Additionally, many EU members are hesitant to reach out to Ukraine until actual, measurable reforms are enacted. This, too, is understandable. The EU places political and legal conditions that are key to the signing of the Association Agreement, including the release of imprisoned former rime minister Tymoshenko

Expert recommendations vary greatly in regards to the EU's response. Some argue that "the sooner the EU signs the agreements with Ukraine, Moldova and Georgia, the stronger the insurance will be against the vagaries of the East European political weather." Ukraine's signature on an Association Agreement is crucial to EaP goals, as Ukraine is expected to demonstrate the benefits of the EU's association agreements to other EaP countries. However, the signature on an agreement would not immediately resolve the long-standing problems in Ukraine. Whether or not Ukraine signs the Association Agreement in Vilnius, "Ukraine is likely to find itself in uncharted waters after November 2013." One possible outcome may be that Kyiv remains sitting between the two chairs: neither signing the DCFTA, nor joining the Customs Union. Such an outcome makes the quickly deteriorating economic situation of Ukraine particularly bitter

Russia has already threatened to respond. Russian presidential adviser Sergei Glazyev publicly stated that numerous articles of the EU-Ukrainian Association Agreement would violate several clauses of the Ukrainian-Russian treaty of friendship and cooperation and "will do serious, irreversible and long-term harm to us." Russia's economic and political pressure through high tariffs and import delays, the possible implementation of a visa regime, and increased energy costs in the middle of a cold winter are the threats Moscow has held out in trying to prevent Kyiv from signing the agreement with the EU. Moscow experts reiterate that if Ukraine signs the EU Association Agreement, Ukraine would become a truly "foreign" country to Russia, estranged economically and politically. As I warned in a recent Heritage Foundation Backgrounder, Russia is threatening to retaliate, making the EU-driven process as painful as possible

It is in the US national interest that Ukraine anchors its future in Europe; develops the rule of law and property rights; and becomes a fully democratic country. Unfortunately, the Administration did not view the future of Ukraine with due seriousness. It eschewed senior-level state visits; economic deal-making; and high-impact public diplomacy. Once again, in Eastern Europe and Eurasia, the US punched below its weight.

Instead of benign neglect, the Administration should have encouraged the Ukrainian leadership to sign the Association Agreement and DCFTA at the Vilnius summit in November. The White House should reaffirm the guarantees of Ukrainian sovereignty and independence pledged by the US in 1994, at the highest level, including protection from economic pressure. After all, while Presidents Putin and Yanukovych met many times, American officials made their trips to Ukraine scarce, and the level of US visitors in the country lower than necessary. Nor was the US willing to coordinate its policies towards Ukraine with the EU in order to link the IMF economic relief package with European integration.

The Obama Administration should have publicly denounced Moscow's illegal economic pressure on Ukraine to force it to join the Customs Union. The US can and should provide technical advice on measures Kyiv can take to oppose such pressure in the WTO and other international frameworks. The U.S. should also promote the release of former Prime Minister Tymoshenko from prison – a step that would further encourage the Europeans to sign the Association Agreement

Provided Ukraine signs the Association Agreement and DCFTA, Congress and the Obama Administration should expand US and international technical assistance to Ukraine, if requested, including steps Kyiv may take in the WTO to defend its trade from discriminatory Russian trade practices. The US should offer advice to: facilitate Ukraine's economic reforms, combat corruption, increase transparency of government decision making, make the civil service smaller and more efficient, privatize government services where possible, improve law enforcement practices, enhance the work of the courts, assist with the training of judges and prosecutors, deepen legal reform, and improve banking practices. The US may lower tariffs on imports from Ukraine to compensate partially for the imposition of Russian tariffs on Ukrainian goods.

Finally, the Administration should boost public and diplomatic support of Ukraine's Association Agreement and DCFTA with European capitals, signaling high-level US attention to this matter, and dispatch senior American officials to Kyiv to articulate support through talks with the Ukrainian leadership and public appearances

Other countries are also under pressure not to join the AA and DCFTA. Moldova, too, has been a target of Russian threats.

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