The Re-Finlandisation Of Ukraine – Yanukovich Trashes Economic Restructuring And Democracy

KIEV, Ukraine -- Less than three months after the Presidential elections in Ukraine, Viktor Yanukovich, the elected President, has already surprised the great majority of analysts with his policies.

Viktor Yanukovych

Most pundits, inferring things from the leader of the Party of Regions’ speeches and political programme and the current Ukrainian political circumstances, were dubious of his capability to steer Ukraine’s politics and economy towards Russia. There would be no new course in Ukrainian foreign policy after Yanukovich’s victory, they predicted.

The author of this article was viciously ridiculed in a comment posted by a reader when he wrote in this column that a Yanukovich Presidency would entirely change the internal and external political dynamic in Ukraine.

The last two weeks’ events seem to vindicate my prognosis. Ukraine is relinquishing a balanced foreign policy for what it thinks will be an economic relief.

Since April 21 history is on the roll again in Kiev, with its streets filled with thousands of “orange” and “blue” demonstrators. On that date, Ukrainian President Viktor Yanukovich and Russian President Dmitry Medvedev signed an agreement on extending the Russian Black Sea Fleet's lease of Sevastopol beyond the 2017 expiry date in return for lower prices for gas imported from Russia.

The deal was concluded in two documents. The first document specifies the interstate agreement to extend the stationing of the Russian Black Sea Fleet until 2042, with the possibility of a further extension by 5 years. The second document amends the gas contract signed on January 19, 2009 by then Ukrainian Prime Minister Yulia Tymoshenko and Russian PM Vladimir V. Putin.

This amendment states that Ukraine will receive $40 billion worth of gas “for free” over the next 10 years, a discount of 30 percent. It means that in 2011 fuel bills for oil and natural gas imports from Russia will be cut by an estimated $4 billion.

On April 27, this agreement was ratified by the Rada, the Ukrainian Parliament, by a vote of 236 Deputies (out of 450) amid turmoil and despite efforts of the former President Viktor Yushchenko and former Prime Minister Yulia Tymoshenko to convince a majority of Deputies to vote against the agreement.

The deal has many consequences for Ukraine, Russia and the West. First, it reinforces, if not perpetuates, Russia’s influence and presence in Ukraine. Ukraine’s sovereignty and security policy becomes de facto limited and constrained.

With this agreement, Yanukovich has clearly ruled out the chances of Ukraine becoming a member of NATO. In the years to come, Russia will endeavour to include Ukraine in its area of security for good by pressuring Kiev to formally become a member of the Collective Security Treaty Organization (CSTO), considered by The Kremlin as a counterweight to NATO.

Second, in the midterm, the Russian economic, military and political presence in the Crimea will be strengthened. This will give Russia an enviable position from which to pressurise Ukraine should the Ukrainian leadership not agree to perform some important strategic and political tasks imposed by Russia.

The effect is already being felt, since Yanukovich is reviewing the policies of his predecessor on almost all important fronts. On April 27 in Strasbourg, he said that the “famine” in Ukraine between 1932 and 1933 was not a genocide, as claimed by Yushchenko, but a “common tragedy of the participating States of the USSR.”

Third, if the Ukrainian Government believes that the reduction of the price of gas (the price is now comparable with the average European prices) will solve the many problems of the Ukrainian economy, they are totally wrong. Only thorough structural reforms can save the Ukrainian economy from further decline.

This is not to deny, however, that a reduction of the price of gas and all other Governmental actions will bring the state deficit down and improve public finances in the current and following years.

In Sevastopol, for instance, the extension the Russian Black Sea Fleet’s presence will continue to provide 15,000 jobs for Ukrainian citizens and President Medvedev has pledged to make major investments in improving the naval port’s aging infrastructures.

The economic situation in Ukraine is really bad. Its Gross Domestic Product (GDP) fell in 2009 by 15%. Metallurgical production - the main source of state revenue - shrank by 30%. However, the tumult that accompanied the Ukrainian Parliament’s extension of the lease agreement will frighten foreign investors.

Ukraine is likely to sink into political conflict and internecine war. In such a situation it will be difficult to save the country from its economic woes. Russia’s state finances will be in a slightly better shape in 2010, but if one takes into account the reduced gas price as a result of the agreement, Russia will run a wider budget deficit than Ukraine in 2010.

Fourth, the immediate winners of the agreement to lower gas prices are Ukrainian industrialists doing business in the eastern part of the country, by coincidence the stronghold of the Party of Regions. The chemical industry in particular and, partly, the metallurgical industry will be the main beneficiaries of the Yanukovich-Medvedev deal.

However, bringing gas prices back to the level of 2009 will not give the chemical and metallurgical industries a determining advantage over their competitors since the rebirth of these industries depends more on a long term programme of modernisation than the advantages of short term financial factors.

Fifth, while opposition Deputies in the Rada were throwing eggs at Volodymyr Lytvyn, Chairman of the Verkhovna Rada, Russian Prime Minister Putin was in Kiev to meet his Ukrainian counterpart, Mykola Azarov, to discuss further energy and industrial cooperation.

For example, Putin proposed creating a nuclear power holding company with Ukraine (“energy cooperation”) as way to rebuild ties between the two states. Such an agreement on energy cooperation will significantly limit Ukraine’s sovereignty on energy policy and seriously jeopardise plans on energy cooperation with the European Union (EU). Russia is trying to monopolise the Ukrainian gas and nuclear energy sectors and it seems that the new Ukrainian President agrees with such a policy.

Sixth, the agreement marks a return of Russia’s clout in its “privileged sphere of influence,” although most ex-Soviet republics will remain disobedient to Moscow’s diktat on many counts.

With the EU’s – and the Obama Administration's – softness in its relations with Russian nationalists, one can expect a gain of confidence in The Kremlin and greater assertiveness against Georgia, Belarus and, to a lesser extent, Turkmenistan, countries which have in the last few years pursued a foreign policy largely independent of Russia.

Source: The Georgian Times


Pushkin said…
It is amusing to read these delusional analysis of the political trends in Ukraine. For beginners, what you see happening is call "realpolitik" as oppose to just "politics". The first is based in practical or pragmatic matters; the latter presumes a moral and ideological premise. This is no game, this is the real "stuff." The problem is that the western Ukrainian politicos have not waken up from their fading faked "orange" government style: a lot of talk and fighting, a lot of money making through out flat corrupted back room deals, and the noisy ideological support from the western press and the western leaders. The "orange" leaders failed to understand that the "orange" social cry in 2004-5 was the result of a well crafted political maneuvering by the consultants paid by financiers and at a time when the Soviet regime was still at the bottom of their own demise but with clear signs of restructuring the political and economic conditions, following what Kissinger called a "different democratic system".

While the western oriented press and the pro-western Ukrainian leaders keep using the traditional rhetorical garbage by calling "Ukrainian interests" everything previously conceived by Tymoshenko, Yushencko and associates during their time in power, usually ignoring and minimizing the population in east Ukraine, language and culture, now the same western press and western political actors keep making the same mistakes, they repeat the same rhetorical claims in the press. Wake up!! Ukraine never was and never will be a homogeneous country, in culture, language and history. So what the orange leaders call "Ukrainian interests" is nothing more than their own personal or group interests. The misery of Ukraine is the product of the orange leadership actions aided by bad economic times. The continuous insults to the east of Ukraine during Yushencko's tenure are bouncing back in full force. Someone in Washington rose the delusional perspective of the "orange" president who was blunt, insulting, and quite frankly inconsiderate towards the eastern Ukrainian population. To read his claims and Tymoshenko's claims that anything the new administration does is against the "Ukrainian" interests is just laughable. They are up for new surprises. They do not have the pampering and support of the "orange" consultants, who by the way have their own little fight with the Obama administration for trashing the American economy while making a bundle during the last financial crisis.

There is more showtime to come.... the standards of living of all Ukrainians is in the making. Let's hear and read the prognosis of the "orange" leaders...
wesley rodgers said…


World geopolitics changing!!

One of the basic facts is quite clear that despite what is happpening now or did or did not
happen in the past, the people of
Ukraine have diversified desires!!

Pushkin made some great points in his article and at the end of the day Ukraine people and the country are literally caught between both worlds and that will never change.

There is no question that culturally and ancestral for sure there is a direct connection with Russia that is indegenious like a persons human genes.
But over the years and a half century or so Ukraine people have really and truly been thru so many changes and usually they get
the worst end of the deal.
However,although Russia says it is willing to work and be friends
with Russia again and Putin has said he is a brother we must remember there are certain terms attached to his words.

I was in KIEV in 2006 when Russia cut off gas supply and my apartment had no heat and it was
explained to me that there was some misunderstanding
with Russian Federeation.

There was no misunderstanding other than economiocs and in January Russia cut off the oil supply and people were freezing and Russia and Putin were holding up Ukraine for more money and also there were political undertones.

Fact is that when dealing with Russians they have a certain mindset which is very disciplined and tough to beat.

And then the past couple of years Russian Federation was still threatening Ukraine with
armed ICBM missles unless Ukraine dropped its desire to join NATO.

Well thata threat scared Germany and France more than strong hearted Ukranians
who have great spirit and best prepared to deal with Russia.
But western Europeans took Russias's threat seriously because
they KNOW in their minds Putin
and associates mean busines
and also intimidation usually works.

So,they took action and voted UKRAINE out to become a member
which is wrong, as Ukraine has always been there for my native country the U.S. and also for Russia, but the U.S. has been a bit more kind with Ukranians and in the U.S. Ukraine people are thought of in most circles
as very cultured, educated
advanced and strong hearted decent people.

But Ukraine lives right in that very special spot along the Black Sea which borders eastern Europe and the western portion of
Europe--tough spot to be

Being friend and doing some business with Russia is great
for Ukraine as long as
the current administration does not close respectable relations with other European countries
and the U.S., and Canada
When so many people in Ukraine voted for Orange Revolution it
was not necessariloy a vote
for the best but a vote for
major systematic change and a
more open society and dersire
for more opportunity in their
own lives--very basic.
And that Ukraine people are
still striving for and they
did have major changes for the
positive since the breakaway from Soviet Union but their
mandate was not met.
In the ever changing
geopolitical world even Putin knows that.
Russia still attends most NATO
meetings but has never joined
but Ukraine has been denied.
It is time Ukraine be given
the fair treatment by
all countries.