How Far, How Fast, How Close?

KIEV, Ukraine -- Anxiety is high ahead of Russian President Dmitry Medvedev’s May 17-18 visit to Kyiv. Coming on the heels of a blockbuster deal that allows the Russian Black Sea Fleet to remain in Crimea until at least 2042, many are asking: What’s next?

The administration says only five relatively minor deals will be inked. Critics are skeptical, citing the president’s penchant for backroom deals and signs that Yanukovych wants to crush political dissent to his administration

There’s yet another top-level meeting between Russian and Ukrainian leaders coming up – the third in less than a month. The bilateral talks are leaving everyone outside of the inner circles in Kyiv and Moscow wondering where it’s all going to end and, more importantly, at what cost to Ukraine’s fragile sovereignty.

Russian President Dmitry Medvedev is to meet his Ukrainian counterpart, Viktor Yanukovych, in Kyiv on May 17-18, following weeks of controversial proposals made by both sides toward unification of strategic sectors of their countries’ economies.

Gas, nuclear power and other key industries are all on the table for reunification as in Soviet days. Ukrainian officials pledge to abide by national interests. But, in the eyes of most experts, their cards and intentions don’t look so good.

What’s even worse is the breakneck speed and cloak of secrecy with which the high-powered negotiations are being held. Moscow has made no secret that it wants to reel in former republics that didn’t make it under the European Union umbrella. But unlike during Soviet times, it is using slick PR and energy exports rather than communist ideology and tanks.

“I don’t even think they care about the economic side of things. The priority is on reviving the great Russian empire,” said Oleh Rybachuk, a civic activist who served in 2005-2006 as chief of staff to former Ukrainian President Viktor Yushchenko.

It was Yushchenko who declared a sharp Western shift in his country’s foreign policy to great concern in Moscow. Now the Russian tag team of President Dmitry Medvedev and Prime Minister Vladimir Putin are trying to make sure Kyiv stays put in the east for good.

“They feel that they have the momentum and they want to capitalize on their gains without losing any time,” Rybachuk said.

Within two months of replacing Yushchenko as president, Yanukovych met Medvedev in the eastern Ukrainian city of Kharkiv to declare that he would prolong the Russian navy’s stay on Ukrainian territory for 25 years in exchange for a lower price on natural gas imports.

Then, alongside his Ukrainian counterpart Mykola Azarov, Putin announced in the southern Russian city of Sochi that the two countries would move forward with even bigger plans, such as the merging of their nuclear energy sector and state energy companies.

When the fleet-for-gas deal was rubber-stamped in parliament, the opposition vented their anger, engaging in fistfights with their political opponents and pelting the parliamentary rostrum with eggs.

Even as the drive toward reintegration continues apace, with more strategic decisions expected to be taken on May 17, the authorities in Kyiv have stubbornly refused to let the public in on their plans. “I doubt anyone outside the inner government circle knows what’s really going on,” Rybachuk said.

First Deputy Prime Minister Andriy Klyuyev was supposed to address concerns in parliament on May 12. But for oppositionist lawmakers, he raised more questions then he answered.

“I am shocked by the cynicism of those who actively hid traitorous and treacherous documents that they signed from the public, the parliament and even the president while they were in power."

Meanwhile, Azarov has accused the opposition of holding his government to higher standards of transparency than they exhibited while in power.

“I am shocked by the cynicism of those who actively hid traitorous and treacherous documents that they signed from the public, the parliament and even the president while they were in power. And today, they are demanding an account of agreements that haven’t even been signed yet, and which in accordance with diplomatic practice, are part of the negotiations process,” he told a government meeting on May 12.

However, signals coming out of Moscow give reason to believe that the Ukrainian public and opposition should be more demanding of answers from their leaders than ever before.

An article in Russian Newsweek on May 12 talks up a supposedly confidential plan put together by the Russian Foreign Ministry that foresees warmer relations with the West for economic gain, coupled with an aggressive investment policy in former Soviet republics to keep them within Moscow’s sphere of influence.

With regard to Ukraine, this means tying its nuclear and other industries closer to Russia’s, while gaining control over the nation’s vast natural gas pipeline, which transports 80 percent of Russian gas exports to Europe.

Russian opposition leader Boris Nemtsov sees nothing good in the Kremlin’s latest overtures to Ukraine. “It seems to me that the key problem in relations between our countries is that there is no democracy in Russia, no freedom of speech, no elections and no political competition.

And what’s dangerous about this? It’s dangerous when investments are political … that is to say, when the state, as represented by Putin, the KGB, the railroads or Gazprom, buy some asset in order to dictate their will to the Ukrainian people,” he told Ukrayinska Pravda.

Naftogaz + Gazprom

One of the more controversial points of integration on the agenda is Putin’s proposal to merge Ukraine’s financially battered state oil and gas company Naftogaz into Russian energy giant Gazprom.

Putin aired the proposal during his meeting with Azarov in Sochi on April 30. Former Prime Minister Yulia Tymoshenko and other oppositionists immediately raised the concern that any unification would be only in Gazprom’s favor. “According to expert calculations, Ukraine will end up with around 6 percent in the new joint venture,” she said on May 1.

Yanukovych tried to calm rising criticism by questioning whether such a deal will be struck. “As far as I am concerned, it is just one of several possible forms of cooperation with Russia on the gas issue,” he said. Ukrainian Foreign Minister Konstantin Gryshchenko called such a merger unlikely.

However, several sources said such a merger is being studied seriously and could involve the breakup of Naftogaz into separate companies controlled by the Kremlin and various Ukrainian businessmen.


Another prospective merger aired by the Kremlin involves unification of the two countries’ nuclear sectors. “We are offering to establish a major holding, which would unite our generation, nuclear engineering and nuclear fuel cycles,” Putin announced on April 26.

Details on such a merger remain unclear. But some suspect that Moscow, at the very least, wants to thwart an attempt made by the United States to free Ukraine of dependence on Russian nuclear fuel.

Westinghouse had won a trial contract to supply nuclear fuel assemblies to one of Ukraine’s nuclear plants, thus threatening to break into the market of Ukraine’s traditional supplier, Russia’s TVEL.

Under Tymoshenko, Westinghouse went further toward threatening Russia’s monopoly on Ukraine’s nuclear industry, which produces nearly half of the country’s electricity. The company was given the right to take part in a competitiveness evaluation, along with TVEL, for construction of what would be Ukraine’s first center for producing nuclear fuel.

Ukraine has its own uranium (to make the fuel) and zirconium (to make the fuel assemblies), but it lacks the technology to build the plant. According to the Westinghouse country representative for Ukraine, Svitlana Merkulova, the evaluation has not happened. “The former energy minister said a decision would be taken in April, but we were never sent criteria for the evaluation or invitations to take part,” she said.

Now, it appears that Russia will get the contract to build the fuel plant without having to undergo competition. Azarov told a recent government meeting that a loan agreement with Russia to be signed on May 17 is part of the deal. “We will receive Russian loans for the construction of two nuclear reactors, and together we will build a plant in Ukraine to produce nuclear fuel,” he said.

Oleksandr Hudyma, a nuclear specialist and member of Tymoshenko’s parliamentary faction, said if Moscow builds the new facility without facing competition, Russia will end up with control.

“Westinghouse just wanted to sell us the technology, but Russia wants a 50 percent stake in the plant, which really means they will control it. And they are even talking about exporting the fuel made there to third countries in Eastern Europe,” Hudyma said.

A wave of black PR has appeared in Ukrainian media against Westinghouse. According to Merkulova, recent media reports “suggest that the Westinghouse fuel design for use in Ukrainian nuclear power plants may not be safe for operation.” She added that “this suggestion is both incorrect and inappropriate.”

In the meantime, officials at Ukraine’s state nuclear energy company, Energoatom, are in the dark about their fate. “We don’t know any more about it than the media,” Energoatom spokesperson Natalya Kozlova said.

Control of Ukraine’s nuclear industry is a lucrative prize. “The country’s nuclear plants subsidize the country’s entire economy,” Kozlova said.

Source: Kyiv Post