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Ukraine and the EU: A change in tone

Ukraine, and Kyiv in particular, is a place with no middle gear. In summer months life trudges along at a snail’s pace, sometimes stopping altogether as masses flock to the countryside or Mediterranean resorts.

November 3, 2013 - Jakub Parusinski - Articles and Commentary



Then, come September, the country kicks into a frenzy of activity, as reforms have to be launched, budgets set and business plans completed before the winter freeze starts in mid-December.

But even by local standards, this autumn is shaping up to be a game-changer. A Russian trade ban on Ukrainian chocolates, among other goods, appears to have scared the country’s leadership into action on the signing of the unprecedented Association Agreement and Deep and Comprehensive Free Trade Area deals with the European Union.

Earlier the fate of the deals, to be clinched at the Eastern Partnership Summit in Vilnius on November 28th-29th, was very much uncertain. Europe hesitated because of the continued imprisonment of former prime minister Yulia Tymoshenko; Kyiv preferred to balance the regional powers against each other. Some EU diplomats in Kyiv are worried that even if the 28 member states agreed, Ukraine would under some pretext sabotage the deal – ruining years of work and potentially undermining the very concept of the Eastern Partnership.

Until, that is, the Kremlin shook its heavy fist. The ban on Ukrainian chocolates was first justified for health concerns, then grouped under an umbrella of customs restrictions against Ukrainian goods – supposedly a test of the protective measures Russia would have to implement if Ukraine joined the European free trade area rather than the Eurasian one.

But instead of scaring the nation into submission, it drove home the message that while large, Russia is not a reliable partner. After many companies halted exports, on principle or due to constraints, a consensus appeared among the business elite that exposure to European markets and competition was a necessary for the nation’s survival. The party was even recently joined by Vyacheslav Bohuslayev, the president of Motor Sich, a helicopter engine producer dependent on the Russian market.

Meanwhile, President Viktor Yanukovych also shifted to a more pro-European political tone, even opening the issue of releasing Tymoshenko for medical treatment in Germany (now widely expected to take place in coming weeks). As former president Viktor Yushchenko told Radio Free Europe last month, this is one of the rare instances in which everyone’s interests coincide.

Ukraine’s European partners have long learned about the need to capitalise on such moments. Ukraine can stand still for years when leading business-political groups get stuck in gridlock; when their interests align, the country can move with breathtaking speed. After months of growing international isolation, the Yanukovych administration has been beset by an almost daily onslaught of Western dignitaries – foreign ministers from Poland, Sweden and Germany, EU commissioners, heads of state.

But for all the sweet words that may be uttered, a braided prisoner released for treatment, there should be no illusions as to the trajectory that Ukraine is taking. Since Viktor Yanukovych’s election in 2010, the country has become more centralised and authoritarian, and civic and economic freedoms have suffered. Although part of this effort was justified in the name of reform, the main goals were power and money. And now the corrupt system appears to be spiralling out of control.

Corporate raiding, hostile takeovers and shakedowns of businesses, have become more frequent. While the victims of such corporate attacks where typically industrial operations in the regions, more and more the targets are large firms backed by Western capital. In a shocking recent case the office of Ukrsotsbank, owned by Italy’s Unicredit, saw its Kyiv office raided and materials seized. Days later its director announced the holding would be selling its Ukrainian assets.

The state of the media industry is also worrying. The recent hacking of leading independent journalists’ computers has shown a worrying level of sophistication. When one of the journalists filed a complaint with the police this was used as an excuse to confiscate her equipment and question her colleagues, even though the IP address of the hackers led to Germany. The creation of a black PR website that imitates the leading opposition website Ukrainska Pravda and smears opposition politicians suggests the propaganda is likely to intensify ahead of the 2015 presidential elections.

Nor has the political culture changed. Consideration of the three law projects that would enable the release of Tymoshenko to Germany has been delayed to the next parliamentary session in early November. Meanwhile Vitali Klitschko, the heavyweight boxing champion turned opposition leader declared his presidential ambitions on October 24th after a tax law was passed that could bar those with long term residency abroad (Klitschko has been a long time German resident) from running. While some believe the purpose of this law is horse-trading – its repeal in exchange for support of the government’s bill on releasing Tymoshenko – it shines a harsh light on how things are done in Kyiv.

All this should not bar the EU from signing the association and free trade agreements with Ukraine. Freer trade will modernise Ukraine’s economy and transform its society, and these steps toward Europe should increase enthusiasm for further reform, and Russian bullying should not be tolerated. But to deliver a real impetus for change the EU has to go further. The example of Turkey, an EU associate for five decades, holds lessons for both sides. It is time to shift gears further up, not down.

Jakub Parusinski is the CEO of the Kyiv Post.

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