Ukraine shocked many in the West last month when it announced it would “renew dialogue” with Russia a week before it was due to sign an association agreement with the European Union that could have been a first step toward membership. Ongoing protests in the capital Kiev and other major cities as well as opinion polls suggest Ukraine’s turn to its former Soviet master is a temporary one, however. The country still wants to become part of Europe. It just can’t afford to make that choice yet.
The association agreement would have given Ukraine preferential access to Europe’s vast internal market, the biggest economic zone in the world. It would also have forced Ukraine to liberalize its economy which threatened Russia’s commercial interests in the country of 45 million.
The largest among Russia’s former satellite states, Ukraine still relies heavily on coal, fuel, grain and steel exports to other countries that were once part of the Soviet Union. It exports more than $12 billion worth of goods to Russia alone every year, making it Ukraine’s second-largest trading partner after the EU. It also imports virtually all of its natural gas and oil from Russia. The government has initiated policies that should make it less energy-dependent, such as developing domestic shale gas reserves as well as oil and gas fields in the Black Sea, but it will take many more years before these efforts bear fruit. In the meantime, it could ill-afford to ignore Russian president Vladimir Putin’s threat that he would take “protective measures” against Ukraine if it choose to sign the European trade deal.
Russia put significant pressure on Ukraine in recent months to dissuade it from ratifying the association agreement. It blocked Ukrainian goods at its border in August in what was widely seen as a warning sign. It later stopped Ukrainian exports of chocolate and railway carriages. As a consequence, Ukraine’s economy contract 1.5 percent in the third quarter of this year. Its foreign reserves fell 30 percent while its national debt increased to the equivalent of 77 percent of economic output.
If Ukraine had ratified the association agreement anyway and Russia followed up on its threats, the country would likely have required international financial support to continue to pay its bills. Yet the European Union, which already has several of its own member states on life-support, wasn’t forthcoming while the International Monetary Fund was only willing to provide a loan if strict conditions were met. Among them was a demand to reduce fuel subsidies which, according to the Ukrainians, could have caused gas prices to rise up to 40 percent. That could very well have doomed the government’s chances of reelection in just over a year’s time.
“What will be our compensation for the huge losses from losing the customs union market?” Ukraine’s prime minister, Mykola Azarov, asked lawmakers in November. “Unfortunately,” he said, “we did not receive a realistic answer to this question.”
Severing ties with Russia’s customs union — which will soon include Armenia besides Belarus and Kazakhstan — could have been an economic catastrophe for Ukraine. But that is not to say Ukraine won’t eventually decide to deepen ties with Europe.
Especially in the western part of the country, which used to be part of the Austro-Hungarian Empire and where the electorate tends to vote for pro-Western opposition parties, support for European Union membership is high. But even in the east, the incumbent government’s power base and home to some eight million ethnic Russians, half the population favors stronger ties with the West over Russia.
A poll conducted by the Kiev International Institute of Sociology in September revealed that support for European Union membership isn’t concentrated so much in the west of Ukraine as it is among the younger generation. Only Ukrainians over the age of fifty by and large prefer closer relations with Moscow.
The conservative government in Kiev is already besieged by protesters who demand that it signs the association agreement after all. Given the polls and Ukraine’s demographics, it is difficult to imagine how a future government will be able to resist such demands.
Ukrainian entry into Putin’s customs union, let alone the Eurasian empire he hopes to revive, is therefore unlikely. At the same time, Russia is unlikely to give up trying to lure the Ukrainians back into the fold. If Russia manages to keep Ukraine — one of its most important trading partners and a country that shares its culture and Orthodox faith — in its sphere of influence, it maintains a foothold in Europe, indeed, a European identity. Without Ukraine, Putin’s “Eurasian Union” would be a predominantly Asian project, counting mainly Caucasus and Central Asian republics among its member states, and unable to compete with Europe’s.
For now, Russia’s heavy-handed tactics appear to have accomplished what European “soft power” could not. In the long term, however, it is exactly this autocratic behavior toward a former vassal state that undermines Russia’s aims, argues Dmitri Trenin, the director of the Moscow Center of the Carnegie Endowment for International Peace. “It feeds local nationalisms by periodically strengthening their anti-Russian element,” he points out. “By shifting gears abruptly from professions of eternal brotherhood with the Ukrainian people to what amounts to a trade war, Mr. Putin effectively works at cross-purposes with himself.” Ukraine might not join Europe yet, but it certainly isn’t going to rejoin Russia.