Ukraine’s president, Viktor Yanukovich, on Saturday reaffirmed his commitment to signing a trade agreement with the European Union later this year, despite threats of retaliatory measures from Russia, its biggest commercial partner.
In an Independence Day speech on Saturday, Yanukovich called for “deepening” relations with Russia but insisted that “association with the European Union must become an important stimulus for forming a modern European state.”
Ukraine is due to finalize a political association and trade agreement with the bloc in November.
Such an agreement would preclude it from also joining a customs union with Belarus, Kazakhstan and Russia which is seen as the precursor to an “Eurasian Union,” modeled on Europe’s but including the countries of the former Soviet Union. Without Ukraine, the most populous of former Russian satellite states, such a union would be more Asian than European.
The association treaty would also compel Ukraine to further liberalize its economy and put it structurally on par with other European Union states, enabling more foreign investment in the country to the likely detriment of Russian companies.
In a move apparently designed to dissuade Ukraine from signing, Russia last week enacted discriminatory border checks on all Ukrainian cargos, delaying exports and thus driving up costs. It ended the extra customs checks a few days later when Russian president Vladimir Putin nevertheless warned that a free-trade deal between Europe and Ukraine might “squeeze out” Russian goods and would compel the Eurasian customs union states to take “protective measures.”
Ukraine’s economy relies heavily on coal, fuel, grain and steel exports. More than 60 percent of its exports go to other former Soviet republics while the country imports some 60 percent of its natural gas and more than 90 percent of its oil.
By keeping supply just below demand and both resources overpriced, Russia hopes to force Ukraine to trade more of its industrial assets for energy and accelerate a process of economic reintegration that stalled under the previous, pro-Western government.
While Yanukovich was elected in 2010 with the Kremlin’s blessing when he was seen as more pro-Russian than his opponent, former prime minister Yulia Tymoshenko, his administration has continued a policy of waning Ukraine off its dependence on Russian imports by developing Black Sea and shale gas reserves in cooperation with Western companies like ExxonMobil and Shell instead of Russia’s Lukoil.
It is not certain, however, that an association agreement will be signed in November. Many European countries are disappointed that democratic reforms have apparently stalled since Yanukovich was elected and are appalled by the jailing of Tymoshenko who was convicted to a seven year prison sentence in late 2011 for abuse of office.