Searching for an Economic Space

KIEV, Ukraine -- Last weekend Ukrainian Prime-Minister Yulia Timoshenko rejected the announcement of her Minster of Economy Sergey Terekhin about Kiev’s departure from the Unified Economic Space (UES). According to the prime minister, Friday’s announcement can be considered only as a “recommendation.”

Prime Minister Yulia Timoshenko (R) showed her Minister of Economics Sergey Terekhin (L) that the choice about Ukraine’s participation in UES should be made by the President

Timoshenko said that the decision about the future of the UES would be made only on the highest level. However, it looks like Kiev already made the decision to leave the UES and it is only a question of time.

The Ministers’ Conspiracy

In the end of last week, German Greg, minister of Economic Development and Trade of Russia, went to Kiev to discuss the trade-economic cooperation between two countries. Observers thought that the Russian minister would discuss with his Ukrainian counterpart routine economic issues of bilateral character. However, the sensational announcement was made in the press conference that Gref held with Ukrainian Economic Minister Sergey Terekhin after the conclusion of the negotiations.

The Russian minister offered to both presidents to take trade-economic relationship out of the competence of the security councils of both countries and to transfer it under the governments’ supervision. “We are switching to a bilateral format of cooperation with Russia. We are creating a special committee, where we are going to discuss all our mutual problems,” Terekhin followed up. He also added that “Ukraine most likely will refuse to participate in the Unified Economic Space.” Gref was not surprised at all. “We’ll have a friendships between our families,” the Russian minister joked.

Later, Terekhin said that Russia was the initiator of Ukraine quitting UES. As he said in an interview to Radio Liberty: “For the first time in the history of the negotiations with the Russian Federation, German Gref said that he and Russia see the UES project as a project for the customs union, with creation of a unified tariffs schedule for imported goods within our borders in addition to above national organ.”

In response, Terekhin reminded that Ukrainian President Viktor Yushenko several times underlined the importance of keeping any economical agreements within norms of the Ukrainian constitution. He also pointed out the economical structures of Russia, Ukraine, Byelorussia and Kazakhstan are not the same. Ukraine, for instance, is an exporter of agricultural products, and “it would be senseless for the importer of energy products to have the same tariffs as Russia.”

“When we laid out the cards on the table, it was a Russian proposal about the new attitude to the UES project and not the Ukrainian one. Moreover, the Russian side suggested to quickly switch to the bilateral scale and to create a commission within a frame of the Yushenko-Putin committee for political economics and social politics, which would be headed by the premiers of both countries. Then it would be necessary to transfer this committee out the control of the security councils of Ukraine and Russia and give it under the supervision of the economic ministries of both countries,” the Ukrainian minister stated.

“The initiator of this proposal was the Russian side and not Ukraine,” Terekhin underlined. He also expressed the opinion that the main goal of the Gref’s visit to Kiev was “the search of this exact point in UES project.” Terekhin thinks that the proposal serves the interests of both countries. “As of today, Ukraine doesn’t see a reason to continue negotiations that have no end. For Russia, these negotiations are pretty costly too, because it finances the UES from its budget. For that matter, both sides would like to have normal mutual negotiations through this committee,” the Ukrainian minister concluded.

However, nobody publicly supported Terekhin’s proposal in Ukraine as of yet. Minister of Industrial Policy Vladimir Shandra said that he considers his colleague’s statement too emotional. “I can say that in Ukraine and in Russia the governments work very pragmatically. It has to be the government’s position and not Terekhin’s,” Shandra said. He also noted that so far the issue of Ukraine leaving the UES project was discussed. According to his opinion, the UES creation is necessary but outside the control of government organs.

Later, the Prime-Minister of Ukraine shared her vision of the problem. “These were only the recommendation theses of the ministers from two countries. And they should be considered only as theses,” Timoshenko said. “The president, the government, if such decision will be made, would examine the recommendations from both ministers.” “I think the decision about the UES concept would be made on the highest level” the prime minister suggested. She also reminded that soon there will be a summit of Russian and Ukrainian presidents.

Democratic Choice of Oil

In reality, Kiev let it be understood that it has a new vision of UES already a week ago. “We are ready to participate in aproject of Unified Economic Space to the full extent as long as it does not contradict our strategic external political goals,” Boris Tarasyuk, head of the Ukraine’s Foreign Ministry, said a week ago in his interview to Kommersant-Ukraine. He also prĂ©cised that “these goals for Ukraine include joining the World Trade Organization this year and in prospective –to join the European Union.”

Kiev’s choice was the expected one. Despite its one-year-old age, UES did not became a full-fledged organization that can survive on its own. Moreover, the relationship between Russia and Ukraine did not improved for this year and that made economic problems even more difficult. Kiev saw imperial ambitions in practically every Moscow move. In the Russian capital high ranking officials were discussing the problems connected with puberty, thus hinting to the young age and inexperience of new Ukrainian authorities.

Less than two weeks ago, during the meeting in Borjomi, President of Georgia Mikhail Saakashvili and Ukrainian leader Viktor Yushenko announced their decision to create a new international structure --“Confederation of Democratic Choice.” This organization, according to Saakashvili and Yushenko’s design, should unite democracies of the Baltic-Black- Caspian Seas region.

Already a week after the Borjomi meeting, the leaders shared their plan with their colleagues – Alexander Kwasniewski, president of Poland, and Valdas Adamkus, president of Lithuania. The Ukrainian and Georgian proposal was met with the big interests by Poland and Lithuania. It is already evident where these leaders would try to sell their idea next. In October Azerbaijan will hold the parliamentary elections. And in December the presidential elections should be held in Kazakhstan. Both of these states are representatives of the Caspian Sea region in the new organization.

However, Baku and Astana have a long way to go to reach the necessary level of democracy. If during the elections these two potential players would repeat Georgian or Ukrainian revolutionary scenarios, then the Confederation of Democratic Choice can became a serious player on the political arena. Its main trump card, beside the democratic regimes, would become Caspian oil, which is so desirable in the West.

The West will Help Them

The chances for the success of this scenario are pretty good. According to Kommersant information, the United States would support such development of the events. The source, which is close to the State Department, told Kommersant that “Ukraine will join the WTO sooner than Russia.” In this case, the source added, Moscow would have to negotiate with Kiev its condition for the joining the organization. “It looks like the Department of State and Administration were able to pacify some influential congressmen, who were upset with Yushenko decision to pull out Ukrainian troops from Iraq,” he said.

The sources in the U.S. Congress think that exactly this move of the Ukrainian president put the brakes on the fulfilling the promises that Yushenko got from the Congress, the Department of State, and White House during his visit in Washington at the beginning of this year. These promises included lifting the Jackson-Vanik Amendment and support for Ukraine to join NATO, WTO and EU.

“It’s evident,” one of the Washington sources told Kommersant, “that difficulties in negotiations between the United States and Russia about later joining the WTO is not the only reason why the White House supports Kiev.” Beside the success of the Deputy Secretary of State for Europe and Eurasia Daniel Freed in Ukrainian direction, the White House administration found additional leverage to pressure Moscow.

The support of Washington to Ukraine in its WTO bid earlier than Russia will not only reinforce Kiev’s position in negotiations with Moscow, but will also let the Kremlin understand the serious irritation of the U.S. with its latest action. Among the points of irritation there are the absence of real energy dialog between Moscow and Washington, the Kremlin’s attempt to persuade Tashkent and Bishkek to remove American bases from its territories and also alarming tendencies in Russian internal politics.

“Even half a year ago,” the same expert told Kommersant, “it was possible to talk about some disagreements about the administration in its political line toward Russia. But now, it looks like Congress, State Department and the White House were able to develop a unified position toward the Kremlin.”

Source: Kommersant