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Monday, 25 November 2013

Ukraine was stuck between ‘rock’ Russia and ‘hard place’ Europe. The country choose to stick with the rock, thus alienating the hard place and many of their own people. This might be a blessing in disguise for all parties.

The Ukraine is a former Soviet republic with about 45 million inhabitants in 2012, neighbouring with Belarus and Russia.

Since the Soviet Union collapsed and the Ukraine turned into a market economy, the country has been suffering from those symptoms that are so typical for many of the post-Soviet Union states:
  • a chaotic political situation;
  • ubiquitous corruption, merging into what you could call “numerous signs of scoundrel capitalism”;
  • high unemployment and general poverty among the less lucky parts of the population;
  • above all, economic and industrial backwardness.

Although the economy enjoyed some years with remarkable GDP growth during the last twenty-odd years, the 2008 economic crisis hit the country like a hammer.

Wikipedia: Ukraine was caught up in the worldwide economic crisis in 2008 and the economy plunged. GDP fell 20% from spring 2008 to spring 2009, then leveled off as analysts compared the magnitude of the downturn to the worst years of economic depression during the early 1990s.

Next to the usual problems that a developing country has after more than 70 years of dictatorship, there has been one other constant issue during the last twenty years: the difficult and often sub-zero relations with ‘giant brother’ Russia, leading to verbal aggression and sometimes even abuse of the latter.

You must know that the Ukraine has a pivotal position, when it comes to the transport of Russian gas to the southern countries in Europe. The reason for this position is the vast gas transport network of Russian gas behemoth Gazprom ( the so-called Urengoy – Pomary – Uzhgorod gas pipeline), that is partially positioned on Ukrainian soil. If you look at the following picture, you immediately see what I’m talking about:

The role of the Ukraine in the gas transport
from Russia to South-Europe
Picture courtesy of: Google Maps
Click to enlarge
The Ukraine wants to pay the lowest price possible for the Russian gas, as a courtesy from Russia to the Ukraine for hosting Gazprom’s pipelines. Russia, on the other hand, wants an undisturbed and unrigged delivery of their gas to their customers in South-West Europe. All the gas that comes into the Ukraine should get out of the Ukraine as well, except for the gas that Ukraine itself buys from Russia.

This… probably did not always happen in the past. As a consequence, there have been numerous reciprocal accusations between Russia and Ukraine:

  • Russia stated on a number of occasions that Ukraine had stolen gas from the pipelines, owned by Gazprom;
  • Ukraine accused Russia of manipulating the gas prices, when the Ukraine didn’t want to sing to the tune of Russia.
  • Besides that, Russia has been accused of heavily interfering with the Ukrainian politics in the recent past

One other very important fact to keep in mind, is that approximately 17% of the people in the Ukrain are ethnic Russians. You could safely state that the western part of the Ukraine – with probably the majority of the population – dislikes the Russians (“the big bully”), while the eastern part of the country, where the ethnic Russians live, feels very much attached to Russia. All these conditions caused an explosive political situation between Russia and the Ukraine in recent years.

And there is more: during the last few years, the European Union had been luring the Ukraine to become a member of the European Union. The bait was an association agreement, that would offer a free-trade zone between the EU and the Ukraine and could eventually emerge into a full membership of the EU for Ukraine.

The Ukraine – at least the western, pro-European part of the country – was very enthusiastic about this EU membership plan, that would probably bring vast European subsidies, improved trade opportunities, economic growth and eventually prosperity to this very poor country, with its strategic position in Europe. Therefore this EU plan almost succeeded.

That was much to the disliking of Russian president Vladimir Putin. The thought that Ukraine could become a future member of the EU, outraged Putin, who accused the EU of hunting in his backyard. Putin ‘invented’ a customs union (a free-trade zone in EU-style) with Kazakhstan, Belarus and Russia and made the Ukraine ‘an offer that they couldn’t refuse’.

And this indeed happened: last week, the Ukraine ultimately abolished the plan for the association agreement with the EU and ‘voluntarily’ chose for a pact with Russia and its customs union.

The flabbergasted EU officials added in a cutting tone of voice to the Ukraine, that this decision would cause that the door to Europe would be closed for years and years to come.

The Economist wrote upon this unfolding story:

ONE can always count on Ukrainian governments to renege and surprise.  And so it did this time. On November 21st, one week before the European Union summit in Vilnius during which Ukraine was supposed to sign an association agreement, its government suspended talks with the EU.

The suspense and excitement were replaced by deep disappointment. As one Ukrainian paper put it the government managed to snatch defeat from the jaws of victory (again). This was the closest Ukraine had ever come to crossing the border between Russia and the West.

The official version of Ukraine’s turn around is that it could not withstand Russia’s pressure. The government cited the “benefit of Ukraine’s national security” as the reason for “resuming active dialogue with Russia and other countries of the customs union of Belarus and Kazakhstan….aimed at restoring the lost production output and trade and economic relations.” Carl Bildt, the Swedish foreign minister and the co-author of the whole project, tweeted upon learning the news: “Ukraine government suddenly bows deeply to the Kremlin. Politics of brutal pressure evidently works”.

Disappointed as they were with Viktor Yanukovych, the president of Ukraine, the EU accepted his version of events. After all, Russia’s restrictions have already reduced Ukrainian trade by 25% and more was in store. Mr Yanukovych estimated the potential economic loss from Russian sanctions to be in the order of $15 billion. This is at a time when the Ukrainian economy is already shrinking, and its budget hole is growing with no access to international capital markets. Ukraine is broke and beggars can’t be choosers. Unless, of course, the beggar is Ukraine.

This story by the Economist is an absolute must-read: I urge all my readers to read the whole, quite surprising article about the background of Ukranian president Yanukovich’ decision to sign a treaty with Russia, instead of the EU.

For me personally, it is not surprising that Ukraine signed a treaty with Russia and rejected the association agreement with the EU. That the reason for this decision WAS surprising does not change one bit about this.

My only question is: what has the EU been thinking, when they offered the association agreement to Ukraine?! Especially, when you take the following into consideration:

  • The EU suffers from a steadily waning popularity in many western countries, where populism and anti-European/anti-EU feelings go hand in hand.
    • Many of these feelings have been caused by the EU’s decision to let poor and economically backward East-European countries like Slovenia, Croatia, Romania and Bulgaria into the EU.
  • With the Ukraine, an extremely large, very poor and divided country, with a high level of corruption and political disorder, would enter the EU. 
    • In its current unstable form, the country would probably hardly benefit from the EU and its political situation would cause many EU officials a migraine headache;
    • This country could eventually become a financial black hole for European structure subsidies, which would probably vanish without a trace;
    • And the EU would have very little to gain from the Ukrainian membership, except for a new market to dump EU exports;
  • And last but not least: this association agreement could spark a new cold war within Europe, as Russia would consider it unacceptable behaviour from the EU to openly hunt for new members among their former fellow Soviet-states, like Ukraine and Georgia.

According to BNR News Radio’s savvy Foreign Relations analyst Bernard Hammelburg, this association agreement for the Ukraine has been an extremely stupid idea of the EU and the plan would have been ‘dead on arrival’. I happen to agree with him.

Bernard Hammelburg of BNR News Radio
Picture copyright of : Ernst Labruyère
Click to enlarge
Please do understand me right: I am neither a particular friend of Vladimir Putin and his policy, nor fundamentally against the Ukraine as a member of the EU!

To the contrary: I have much hopes and expectations for a united Europe, as it is the best warrant for peace in this formerly heavily battered continent, with its numerous small and big wars in the past.

People, however, just have to understand that the time is not right for a Ukrainian membership of the EU yet!

Before the Ukraine could become a member of the EU, the relations between Russia and the EU must have become so much better, that the mistrust and envy between these parties have finally faded away.

This will take years and years and (probably) a new generation of Russian and European leaders, who grew up without the socialist/communist inheritance and post-Cold War feelings that blur the relations between us, until this day.

So let us not grief about losing the Ukraine as a future EU member, but instead be happy that a grave political mistake has been prevented. This might be a tough and enraging message for the EU-oriented Ukrainians, but that is the way it is, in my humble opinion.

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