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External Influences on Ukraine’s European Integration

Steven Pifer


Editor’s note: In an article submitted in April for the recently released edition of the

Ukrainian National Security and Defense

journal—“External Influences on Ukraine’s European Integration”— Steven Pifer describes how the European Union, Russia and United States view Ukrainian President Victor Yanukovych’s professed desire to integrate Ukraine into Europe. He concludes that, unless Yanukovych responds to EU concerns on democratic regression, his policy likely will leave Ukraine in a gray zone between Europe and Russia. The Ukrainian version of the article can be accessed online on pages 71-74 of the journal. 

Introduction

Since taking his office at Bankova in March 2010, President Viktor Yanukovych has regularly insisted that his foreign policy attaches priority and importance to integrating Ukraine into Europe.  He says that he wants Ukraine to draw closer to, and ultimately join, the European Union.

Ukraine’s success with the European Union depends critically on choices and concrete actions taken by Kyiv, but it is also affected by the approaches and attitudes of external actors, first and foremost, the European Union and its member states.  The views of Russia and, to a lesser extent, the United States also have an impact.

Kyiv must take these external actors and influences into account as it pursues its policy goals.  Growing concern in the West about democratic regression in Ukraine combined with a hardening attitude in Moscow appear to impose narrowing constraints on the Ukrainian government’s freedom of maneuver in pursuing its European policy course.  Absent a genuine effort to address the concerns articulated by the European Union, it is not clear how Mr. Yanukovych will succeed in his declared European aspiration or how he will keep Ukraine out of a gray zone between Europe and Russia, something that Ukrainian foreign policy previously sought to avoid.

The European Union’s Conditionality

Not surprisingly, the European Union is the most important external actor when it comes to Ukraine’s ability to advance the European vector of its foreign policy.  That is because Kyiv has made the European Union the primary mechanism for its integration into Europe, particularly after Mr. Yanukovych eschewed steps to draw closer to NATO.

The European Union has for some 20 years supported closer relations with Ukraine and the country’s integration into Europe, though it unfortunately has declined to give Kyiv a clear membership perspective.  EU reluctance to state that Ukraine could aspire to follow Poland, Hungary and others into EU membership ranks is a result of several factors.  The first has been concern about the long reform path that Kyiv must travel in order to shape a political and economic system compatible with those of Europe.

Second, some EU member states believe the enlargement process that was launched in the 1990s and which culminated in the addition of 12 new members in 2004 and 2007 has proceeded too far, too fast.  They do not want the European Union to create new membership perspectives, as it still needs time to fully integrate its most recent entrants.

Third, Ukraine is a large, populous country.  Some EU member states worry that, if it joined, Ukraine would require significant EU development funds, absorbing funding that otherwise would go to other member states.

In explaining their hesitancy, EU officials sometimes cite the experience of Turkey, which has long had a membership perspective but remains years from realizing that goal.  They say they do not want to create unrealistic expectations in Kyiv that might take years, if not decades, to realize.

Today, the primary vehicle for the EU-Ukraine relationship is the association agreement completed in 2011 and initialed in March 2012 after four long years of negotiation.  It contains a deep and comprehensive free trade agreement, which would harmonize Ukraine’s trading regime with that of the European Union and open up large sectors of the European economy to Ukrainian exports (and vice-versa).  The Yanukovych presidency deserves credit for making some tough decisions and bringing the negotiation to a conclusion.

The European Union, however, has placed signature of the association agreement on hold, due to concerns about internal developments within Ukraine, specifically the regression in democracy that has taken place over the past two years.  These concerns have focused most publicly on—but by no means are limited to—the trials, convictions and imprisonment of former prime minister Yulia Tymoshenko and former interior minister Yuriy Lutsenko.  The European Union regards these cases as blatant examples of selective prosecution.

When Mr. Yanukovych traveled to Brussels this past February for a summit meeting with European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy, the EU leaders made clear the importance they attach to partnership with Ukraine and the association agreement.  EU officials have said that the association agreement could be signed in November in Vilnius during the EU’s Eastern Partnership summit.

EU leaders have also made clear, however, that signature depends on Ukraine taking action on three areas of particular concern:  electoral shortcomings, selective justice and progress on the general reform agenda.  Following their discussions with Mr. Yanukovych, both Mr. Van Rompuy and Mr. Barroso cited the importance of progress on these questions.  EU officials have said that progress should be made by May in order for there to be a realistic chance of signing the association agreement in November.  The February 25 summit’s joint statement cited an expectation of “concrete progress by early May 2013.”

EU Enlargement Commissioner Stefan Fuele reiterated this in his March 13 speech to the European Parliament.  While stressing EU interest in deepening relations with Ukraine, Mr. Fuele made clear that domestic developments within Ukraine were a key factor.  He said:

“if we want to sign the association agreement, and I am convinced we do, as it is in our shared interest, the way forward for the [Ukrainian] authorities is not through bringing more and more disturbing news.  The time has come for sending some good news in dealing with selective justice.  Unless the cases of Yulia Tymoshenko and Yuriy Lutsenko are properly addressed and there is sufficient confidence that there will be no more selective justice, we could hardly talk about conditions that are conducive for signing the association agreement.”

Mr. Fuele’s statement could not have been clearer.  He also cited concern about the case of Serhiy Vlasenko, Tymoshenko’s lawyer who was stripped of his mandate in the Rada after the EU-Ukraine summit took place.

EU member states reportedly differ over how high a bar to set for signature of the association agreement, that is, on how much progress Ukraine must make in order to meet the EU’s conditions.  Some countries, such as Poland and Lithuania, appear to favor signature even with modest progress, in part out of concern that Kyiv otherwise could drift back into Moscow’s orbit.  Others, such as the Netherlands and Germany, believe that Ukraine must make significant progress.  Sweden, which traditionally has argued for a more forward-leaning engagement of Ukraine, apparently now belongs to the latter camp.   Parliamentarians in some EU member states have threatened to block ratification of the association agreement if Ms. Tymoshenko remains in prison.

Should the November 2013 EU Eastern Partnership summit transpire without signature of the association agreement, neither Brussels nor Kyiv appears to have a Plan B.  On March 20, EU Ambassador to Ukraine Jan Tombinski said that, should the association agreement not be signed in November, the EU calendar in 2014 and Ukrainian presidential election in 2015 would likely mean that Ukraine and the association agreement would be put on the EU’s backburner until the summer of 2015.

Little Give from Moscow

While Kyiv faces conditionality from the European Union, it has met an uncompromising position from Moscow, where President Vladimir Putin is intent on strengthening Russian influence in the post-Soviet space.  For the Russians, Ukraine clearly is the principal prize in reestablishing a commanding position in the region.

Moscow’s stance undoubtedly disappoints Mr. Yanukovych, who made restoring a better relationship with Russia his first foreign policy focus in 2010.  In addition to dropping positions that irritated Russia—such as pursuing a NATO membership action plan and seeking to have the Holodomor recognized as genocide against the Ukrainian people—the Ukrainian president agreed in April 2010 to extend the presence of the Russian Black Sea Fleet in Crimea for 25 years.  In return, the Russians agreed to give Ukraine a discount on the price of natural gas of $100 per thousand cubic meters.

The value of the price discount subsequently declined as the cost of gas rose.  Kyiv has made securing a cheaper price for gas the number one priority on its agenda with Moscow.  The problem is that, while Ukrainian officials blame the price formula on Ms. Tymoshenko’s 2009 gas contract and would like to undo the contract, Mr. Yanukovych in effect validated that formula with his April 2010 agreement.  So far, the Russians have shown no give on the price or the contract’s other terms.  They argue that the contract is perfectly legitimate.

The saga took a new turn earlier in 2013.  Over the past two years, while complaining about the price, Naftohaz has purchased less and less gas from Gazprom, falling below the 41 billion cubic meters per year that the contract requires.  The contract terms specify “take or pay,” i.e., Naftohaz has an obligation to pay for 41 billion cubic meters, even if it takes less.  Gazprom reportedly has presented Naftohaz a bill for seven billion dollars for gas that it argues Naftohaz is obligated to pay for even if it did not take it.

Ukrainian officials have stated that they will not pay.  This could end up in an international arbitration court, whose ruling would be binding on both parties.  The fact that Naftohaz has thus far not tried to challenge the overall contract in an arbitration court suggests that Kyiv is not confident that it could prevail in such a process.

For the past two decades, Ukraine’s dependence on gas from Russia was offset by Russia’s dependence on Ukrainian pipelines to move Russian gas to Europe.  Moscow is now working in a very determined manner to reduce its dependence on Ukraine for gas transit.  Gazprom has usually transited about 100 billion cubic meters of gas each year, an estimated 80 to 85 percent of its gas exports to European countries such as Germany and Austria, via the Ukrainian pipeline network.  That gave Kyiv substantial leverage with Russia, but that is now changing.

The first Nord Stream pipeline, which moves gas from Russia to Germany under the Baltic Sea, is in operation, with a second pipeline under construction.  Those two pipelines will have a capacity of 55 billion cubic meters per year.  And Moscow appears increasingly serious about building by 2016 pipelines under the Black Sea to circumvent Ukraine.  They could allow Gazprom virtually to write Ukraine out of its future gas transit plans.  That would remove significant leverage that Kyiv has had over Gazprom.

Ukraine has tried to interest Russia and the European Union in a consortium to manage its gas transit network.  Interest from EU quarters appears to have ebbed, in part because of uncertain financial aspects of the arrangement.  The Russians indicate interest but have suggested that Kyiv must first withdraw from the European Energy Community, something that the Ukrainian government says that it will not do.

Moscow’s uncompromising line shows up on other questions as well.  The Russians have expressed interest in bringing Ukraine into the Customs Union that currently comprises Russia, Belarus and Kazakhstan.  Mr. Yanukovych has said that he would like Ukraine to have a relationship with the Customs Union.  But membership in the Customs Union is incompatible with a deep and comprehensive free trade agreement with the European Union.  As Mr. Barroso recently said, “One country cannot at the same time be a member of a customs union and be in a deep common free-trade area with the European Union.  This is not possible.” 

Mr. Yanukovych’s government appears to understand this, as demonstrated by its proposals for forms of cooperation with the Customs Union short of membership.  Foreign Minister Leonid Kozhara in late February reiterated earlier Ukrainian suggestions for cooperation in a “three-plus-one” format which might, among other things, establish a free trade area among the four countries.

Russian officials, however, consistently dismiss the idea that a relationship short of membership is possible.  Prime Minister Dmitry Medvedev in March stated that Ukraine faced an “everything or nothing” choice.  Kyiv could not have a special relationship with the Customs Union; as an observer, it would remain an outsider and have no special privileges.  Moreover, Russian officials suggest that, beginning in 2015, Russia will allow foreign labor to enter the country freely only from states that belong to the Customs Union.  While the declining labor force in Russia may force reconsideration of this, it does raise questions about the future ability of Ukrainians to work in Russia.

Mr. Putin hosted Mr. Yanukovych for a meeting on March 4, after a scheduled December meeting was cancelled at the last minute, apparently due to the absence of agreements to record.  While the two reportedly discussed the full range of issues over the course of seven hours, it is not clear that the meeting produced significant movement toward compromise.  By all appearances, the Russians calculate that, for the time being, their hard-line stance towards Kyiv makes sense for their foreign policy goals.

Declining Interest in the United States

As for Washington, interest in Ukraine and its European aspirations appears to have faded as Mr. Yanukovych has regressed on democracy.  The Obama administration accepted the Ukrainian president’s reversal of his predecessor’s desire for a NATO membership action plan and ultimate membership in the Alliance.  U.S. officials recognized that closer integration with NATO lacked broad support among both the elite and the wider public in Ukraine.

It also turned out that Kyiv’s decision not to proceed with a NATO membership action plan fit with the Obama administration’s desire to “reset” relations with Russia.  Mr. Yanukovych’s turn away from NATO removed Ukraine’s relationship with the Alliance as a major potential problem between Washington and Moscow.  The U.S. government was able to reiterate its support for a strong NATO-Ukraine relationship, knowing that Kyiv would not push that relationship in a direction that would cause a major problem with Russia.

Washington thus threw its support behind the EU-Ukraine relationship as the primary vehicle for integrating Ukraine into Europe.  That corresponded to Mr. Yanukovych’s expressed preference and ran a smaller risk of alienating Moscow than deepening NATO-Ukraine ties.

In general terms, Ukraine has fallen significantly in importance on Washington’s agenda.  Part of the reason is the fact that the Obama administration does not see a geopolitical struggle with Russia for Ukraine.  And part of the reason is relative:  Ukraine received more attention from Washington in 2005-2008 than otherwise would have been the case due to the Orange Revolution and the election of Victor Yushchenko as president.  Even when Mr. Yushchenko’s shortcomings became apparent, the story of democracy in Ukraine appealed to the George W. Bush administration, which sought to make the advance of democracy an underlying foreign policy theme in its second term.  Ukraine thus received considerably more attention, including visits by the president and vice president, than a medium-sized European state could normally expect.

Kyiv has lost that attractiveness with the reversal of democratic progress that has taken place under Mr. Yanukovych.  The Obama administration initially expressed readiness to work with him, as the victor in a free and fair ballot in 2010.  The U.S. government took special interest in securing the removal of highly-enriched uranium from Ukraine.  But as that was achieved, and as opposition leaders such as Ms. Tymoshenko and Mr. Lutsenko were bundled off to prison, the bilateral agenda has commanded less interest at senior levels in Washington.

Some Ukrainian officials apparently hope that energy cooperation, particularly the development of Ukraine’s energy resources, including unconventional gas resources, can attract high-level U.S. interest. The U.S. government can provide assistance in this area and certainly desires that Chevron’s investment will succeed, but that question likely will not become a priority for the White House.  It certainly will not suffice to overcome concerns regarding selective prosecution and other democratic shortcomings in Ukraine.

Indeed, when Under Secretary of State Wendy Sherman traveled to Kyiv on March 19-20, she reiterated the importance of Ukraine taking steps such as ending selective prosecution and improving the judicial system in order to improve the broader U.S.-Ukraine relationship.  While noting that the U.S. government at this point does not favor sanctions on Ukraine, Ms. Sherman cautioned that Congress is discussing such measures.

Looking to the future, it is difficult to see how Ukraine, if it continues its current course, will be able to command greater interest in senior Washington circles.  Ms. Sherman’s visit could the most senior executive branch visitor that Kyiv sees for some time.

Where Does This Leave Kyiv?

Given Ukraine’s current situation and the preferences of the Ukrainian elite and public, the logical European integration course for Kyiv is to use the association agreement to deepen its links with the European Union while maintaining constructive relations with Russia and cooperative interaction—but not the pursuit of membership—with NATO.  That appears to be the foreign policy course advocated by the Yanukovych government.

But the combination of increasing conditionality from the European Union, a continued hard line from Russia and declining interest from the United States narrows Kyiv’s freedom of maneuver.  Much of this problem for the Ukrainian government is self-inflicted:  no factor has had greater negative influence on EU and U.S. policy toward Ukraine over the past two years than Mr. Yanukovych’s regression on democracy, including selective prosecution of opposition leaders.  This badly hinders Ukraine’s ability to carve out for itself an appropriate place in Europe.

Mr. Yanukovych has on occasion suggested that he understands the problem and will act to meet EU (and U.S.) concerns.  In February during a meeting with the Polish and Slovak presidents, he expressed understanding for the EU position regarding Ms. Tymoshenko and Mr. Lutsenko and said a compromise could be found.  Subsequently, however, Mr. Vlasenko lost his mandate in the Rada—in what many saw as punishment for his service as Ms. Tymoshenko’s defense lawyer—and the Prosecutor General continued proceedings seeking to link Ms. Tymoshenko to the 1996 murder of Yevhen Shcherban.  Those actions do nothing to alleviate Western concerns about selective prosecution, and they undercut the president’s words regarding finding a compromise.

For much of the period since the early 1990s, Ukrainian foreign policy has sought to ensure that the country had strong links with the West as well as a stable relationship with Russia.  Senior Ukrainian officials have in the past set a maximum goal of fully integrating into European institutions and have said that, at a minimum, they wish to build a web of links to prevent Ukraine from being left in a gray zone of insecurity between Europe and Russia.  Unfortunately, on its current course, it is difficult to see how Ukraine avoids getting stuck in such a gray zone.

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