On the ninth anniversary of the Orange Revolution that overturned the election of Viktor Yanukovich as Ukraine’s president, Kiev and Yanukovich are again facing massive protests.  More than 50,000 Ukrainians braved cold, rain, and tear gas to stage protests in favor of integration with the European Union.  Opposition politicians are calling for the president’s impeachment for betraying the national interest.  Ukraine had been expected to sign an association agreement, strengthening trade ties and taking an important step towards eventual EU membership, November 28th at a summit in Vilnius, but pulled out at the last second.

This was a major victory for Russia, which had been applying massive political and economic pressure on Ukraine.  Russia called in a  multi-million dollar gas debt, held up Ukrainian shipments at the border for weeks with a new restrictive customs regime, laid an importation ban on a popular Ukrainian brand of chocolates, for allegedly containing carcinogens, and talked of cutting off supplies of heating gas during the approaching winter.  These measures decreased Ukraine’s exports by 25%, and cost the country an estimated 15 billion dollars.  Ukraine, with an economy in recession and large foreign debt, was in a poor position to resist.

Image courtesy of World Economic Forum,  © 2009, some rights reserved.
Image courtesy of World Economic Forum, © 2009, some rights reserved.

The source of both the protests and Russia’s hostility is the Nov. 28-29th Eastern Partnership summit being held in Lithuania’s capital, Vilnius.  The Eastern Partnership is an EU program seeking to improve trade and diplomatic relations with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine, all former Soviet republics on Russia’s borders.  Russia views this as an attempt to undercut its traditional influence in these states.  Armenia, Moldova, and Ukraine were all approaching an association agreement with the European Union, while Russia attempted to strong-arm them to join its customs union and eventually its proposed Eurasian Union.

In November 2011 Russia, Belarus, and Kazakhstan built on a preexisting customs union by founding the Eurasian Economic Space, with plans for further integration into a Eurasian Union by 2015.  The Union is a Russian attempt to re-exert power in the post-Soviet states by offering lower prices on natural gas and deeper economic integration.  Both Tajikistan and Kyrgyzstan have expressed interest in joining the Eurasian Economic Space.  Most recently, Armenia’s president, Serzh Sargsyan, who had been courting the EU, agreed to join the Eurasian Union after meeting with Putin in Moscow.  Ukraine, with its agricultural resources, heavy industry and population of 45 million, would be the most important addition yet.

But Putin and Yanukovich’s poor relationship has been a major obstacle to Ukraine’s joining. Yanukovich, while more pro-Russian than his predecessor, still cautiously guards his country’s sovereignty to secure his own power.  Putin views Yanukovich as traitorous for considering the EU treaty despite Russia’s backing during his contested election in 2004.  The two share an intense personal hatred of one another.  However, the Ukraine’s path to the European Union is faced with even greater obstacles.

Previously, Ukraine’s bid for a free trade package and association agreement with the EU had been held up by the imprisonment of Yulia Tymoshenko, a former prime minister and the chief political rival of Yanukovich, on charges of corruption.  Many European nations said they would only sign the agreement on the condition of her release, arguing that her imprisonment is politically motivated.  Following Russia’s trade hostility, Ukraine’s parliament, the Verkhovna Rada, introduced legislation to release Tymoshenko and other opposition figures.  But the emergency session of parliament, controlled by Yanukovich’s Party of Regions, expired without its passage.  Many of the protestors supporting the treaty are chanting for her release.  If Yanukovich is able to weather the protests, his chances of reelection in 2015 will have greatly increased – his biggest opponent will be behind bars and Putin is far less concerned with clean elections than the EU.  Russia is also more tolerant of the corrupt patronage networks that hold his regime together.  But his nation will still be struggling.

Ukraine’s Time of Troubles

Ukraine faces deep financial pressure.  A sharp drop in the price of steel, the country’s main export, during the financial crisis of 2008 left Ukraine indebted and reliant on the International Monetary Fund for bailouts.  IMF aid was suspended after Ukraine refused to lower gas subsidies and the Ukrainian economy dipped into recession in late 2012.  Currently, Ukraine lacks the foreign currency reserves to pay for its imports and to refinance its growing debt.  Russia and the EU offer competing packages.  The Russians presented Yanukovich with dramatically lower gas prices, debt forgiveness, and a resumption of trade in the country’s east, Yanukovich’s political base.  On the other hand, the EU has prepared a low-interest  loan for the Ukrainians, and has discussed rerouting gas up the Slovakia-Ukraine pipeline if Russia cut off gas completely.  The former is more appealing for Mr. Yanukovich, but Ukrainian populace, enraged by Russian economic sanctions and diplomatic heavy-handedness, supports the EU offer.

Cultural and market factors will also impact Ukraine’s final decision.  A fourth of the population speaks Russian, and, particularly in the east of the country, many citizens are ethnically Russian.  But the country’s domination by Russia during its Imperial and Soviet periods has left a lasting antipathy and a fiercely independent spirit.  Russia is Ukraine’s largest current trade partner, but Ukraine’s oligarchs salivate at the prospect of reaching Europe’s far-larger potential market and funding from Western capital.  Their sheltered corporations could suffer in the short-term when faced with competition from Europe, but would ultimately be able to better compete on the world stage.  As the protesters say, the choice lies between the links of the past and the relationship of the future.

In the short run, what matters most is how many protestors take to the streets of Kiev.  Will Yanukovich make an embarrassing climb-down under popular pressure, signing the treaty after all?  Will he free Ms. Timoshenko?  Or will he be able to wait it out?  Ukraine’s, Russia’s, and Europe’s futures depend on what happens in these next few days.

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