Editor's Note: The following Kyiv Post article was originally published on Nov. 29, 2013, at 12:56 a.m.
Ukraine’s big moment turns into major bust
VILNIUS, Lithuania – First Deputy Prime Minister Serhiy Arbuzov certainly got noticed when he was the only one who attended a high-powered business forum flanked by two burly bodyguards in a room full of top government officials, businesspeople and journalists from the European Union and the six Eastern Partnership countries, including Ukraine.
In a different location at the summit, Lithuanian President Dalia Grybauskaite, the host of this year’s biggest political event in Europe, arrived at a civil society conference that had no metal detectors or other heavy security features.
These episodes, taking place on the first day of the EU summit with six ex-Soviet republics on Nov. 28, illustrate the difference in attitudes between Ukrainian and European officials – providing more keys to why the two sides did not sign a major bilateral treaty despite years of preparation and negotiations.
By bringing his own bodyguards, Arbuzov displayed poor judgment by applying the same domestic rules of the game abroad. In its negotiations with the EU, Ukraine did the same. It haggled.
Rather than giving praise and offering congratulations, European leaders expressed emotions ranging from extreme sadness to great anger and annoyance in conversations about Ukraine at this two-day event that ends today.
Rather than signing an association agreement, President Viktor Yanukovych is expected to only sign a memorandum to declare his intent to sign a far-reaching political and free trade agreement with the EU.
“It’s ironic. Here we are in Lithuania, and Baltic countries have done so much work to join the EU.
Ukraine is the other way round… making bigger and bigger shopping claims,” says Andrew Wilson, senior policy fellow at the European Council on Foreign Relations.
The “shopping claims” are what Kyiv estimates its industry would lose as a result of Russia’s trade sanctions should it sign a free trade deal with the EU. Part of a bigger political pact, Ukraine’s government also says $27 billion annually are needed to make adjustments to meet advanced EU standards.
President Viktor Yanukovych in a recent speech said the total cost would be $217 billion, roughly equal to the nation’s annual economic output. Kyiv officials insisted on compensation, which Arbuzov in his Vilnius speech veiled as “solutions that would help solve the social and economic situation.”
But those figures make the Europeans laugh.
EU Enlargement Commissioner Stefan Fuele said the so-called adjustment costs cited by Ukraine are “neither proportional nor credible.” He said Ukraine effectively is claiming that EU association would cost the nation 10 percent of gross domestic product over the next 10 years. “This deeply contradicts the experience of the (EU) accession countries,” Fuele added.
A fluent Russian speaker, Fuele said that other Central and Eastern European countries, after signing an association agreement, saw a 57 percent growth in gross domestic product per capita between 1990-1996, and a 61 percent growth of direct foreign investment.
Fuele said that he was also “disappointed that the funding needed for Ukrainian enterprises to modernize is spoken of as costs, and not investment.” He said they represent more jobs, more growth, more wealth.
“The only cost I can see is the cost of inaction,” he added.
Georgia and Moldova, two eastern partnership countries that initialed an association agreement with the EU on Nov. 28, seemed to share his view.
Valeriu Lazar, Vice Prime Minister and Economy Minister of Moldova, said that his government understood that modernizing the country “can only be achieved by accepting European rules of the game.”
Georgian Deputy Prime Minister and Economy Minister Giorgi Kvilikashvili, said that even the declaration of intention to sign an agreement with Europe caused a surge of interest from investors.
But, as in Ukraine’s case, the move provoked pressure from Russia.
Russia intensified its trade and other economic-related sanctions toward Ukraine this year to dissuade it from pursuing closer ties with Europe. It banned and stalled the import of a number of Ukrainian goods that caused major losses to the economy.
Lithuanian Prime Minister Algirdas Butkevicius said that “it takes strength to resist pressure.” He speaks from experience. Like other former Soviet republics, Lithuania faced Russian economic retaliation and blockades every time it took a step away from its former ruler. This year, Russia banned dairy products from Lithuania – a move which was interpreted as a warning against playing too active a role during the country’s presidency of the European Council.
But Georgia’s Kvilikashvili said it was possible to fight trade blockages. In 2006, Russia banned agricultural products and wine from Georgia. Then, a brief military war with Russia followed in 2008.
After that, Georgian companies had to adapt quickly to the new reality – and have succeeded.
“Georgian companies have already diversified, we are no longer dependent on a single Russian market,” he says. “Of course it will be painful if Russia decided to close its market, but we have diversified and will survive.”
Genadiy Chizhikov, head of Ukraine’s Trade and Industry Chamber, said that Ukrainian companies overlook many new markets in the post-Soviet space. “Ukrainians simply don’t make an effort to promote their produce there,” he says.
Ukraine’s government acts in a similar style. Swedish Foreign Minister Carl Bildt said that Ukraine’s authorities “tried to get the most money for the least amount of work.”
As a result, “they are not going West. I don’t think they are going East. I feel they are going down,” he said about Ukraine. In Brussels, the Ukrainian side made one last push to get at least some sort of a memorandum of intention signed with the EU. By the time Kyiv Post went to press, it was not clear whether they would succeed.
But Batkivschyna party head Arseniy Yatseniuk told reporters that the EU would not sign any joint statements of intention to sign an association deal with Ukraine.
“I know about the discussion over signing a joint declaration of intention, but our European partners don’t support the idea of signing a joint statement,” Yatseniuk said in Vilnius.
It seems Kyiv failed to get a Russian deal, as well. Prime Minister Mykola Azarov said earlier this week that there were firm financial, energy and other agreements with Russia. Russian President Vladimir Putin said that issues, like revising expensive gas contracts that are crippling Ukraine’s economy, have not even been raised yet.
Konstantin von Eggert, a Russian journalist, says that now, when Ukraine is particularly vulnerable both economically and politically, Russia is highly unlikely to offer any deal to Ukraine.
“Yanukovych completely destroyed his reputation with Putin by going soft under pressure – Putin doesn’t like people who go soft under pressure,” he says.
Kyiv Post deputy chief editor Katya Gorchinskaya can be reached at [email protected].
