international analysis and commentary

Yanukovic’s non-aligned Ukraine

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The first moves by new President Victor Yanukovic seem to open a new phase in Ukraine’s foreign policy – a phase marked by a “non-aligned” stance aimed to improve relations with all its neighbors and thus revive the national economy.

First, Yanukovic went to Brussels to reassure the EU that his good relations with Russia, which definitely prefers him in respect to the pro-Western government led so far by Julia Tymoshenko, does not mean a Ukrainian disengagement with the Union. Yanukovic made his first foreign visit as head of state to Brussels in order to symbolically demonstrate his commitment on European integration which he declared a “key priority” for Kiev. High level talks produced a target date in early 2011 to complete negotiations on a free trade agreement between Ukraine and the EU, and focused on the reform of the Ukrainian gas sector. The latter is vital for the Union as a quarter of all gas imported into the EU transits through Ukraine and disputes between Kiev and Moscow have interrupted the energy flow to Europeans twice since 2005. Other important issues addressed included a visa-free agreement between the two parties.

Shortly after the trip to Brussels, Yanukovic went to Moscow to meet President Dmitry Medvedev in order to open a “new page” in bilateral relations. This meeting also produced an important result: Kiev’s commitment to renew the lease of the Sevastopol port for the Russian Black Sea Fleet after its scheduled end in 2017. Moscow attaches great importance to the navy’s strategic position in the Crimean shores, which was questioned under the Tymoshenko government and now will probably be enshrined in a new treaty. As a result, Medvedev has been keen to reassure Yanukovic that full bilateral cooperation would be implemented at all levels. 

The two foreign policy moves are coherent with a domestic one related to the Yanukovic presidency. The new president has immediately appointed Iryna Akimova as his first deputy and Serhiy Lovochin as head of his administration: the former is a (cautiously) pro-Western entrepreneur from the metallurgical lobby, while the latter represents the pro-Russian gas lobby.

All these steps follow the claims made in his inaugural speech that Ukraine is “a non-aligned state”, and a “bridge between the East and the West, integral part of both Europe and the former USSR”. In line with this position, Yanukovic, who campaigned against NATO membership, has stated that Kiev will continue its partnership with the Alliance without perspectives of changing its non-member status. He also re-stated his commitment on the “sovereignty and independence of Ukraine and the rights and freedoms of its citizens”.

Yanukovic’s guidelines for Ukraine’s foreign policy are partially rooted in the country’s political situation, as well as in its economic problems. In fact, Yanukovic defeated Tymoshenko in the recent presidential election by only 3.5% of the votes, and his competitor won in all the western regions. That means the country is still politically divided along the Dnepr river between large pro-Western and a pro-Russian camps. This in turn reflects a deeper cultural divide, epitomized by the fact that the World War II partisan Stepan Bandera, recently recognized by Tymoshenko as the “Hero of Ukraine”, is celebrated as a founding father in the northwest of Ukraine, while he is considered a Nazi puppet in the southeast. Such divide made it extremely difficult for Tymoshenko to pursue a strong pro-Western policy and would do the same with Yanukovic’s strong pro-Russian one, thus encouraging the new presidency to make balanced choices and avoid further splitting the country.

However, there is more than cultural legacy in the current political contest: the old Clinton principle “it’s the economy, stupid” matters in Ukraine as well. The pro-Western governments of the last five years were unstable and made little progress in improving the country’s economy and the state’s finances. Corruption has plagued the political system, involving also Tymoshenko. Nowadays, the situation is very bleak with widespread poverty, a 15% fall in real terms of the 2009 GDP in respect to 2008 and a 10% rate of inflation. In addition, the political instability has until now delayed the approval of the 2010 state budget, causing the partial suspension of a 16.4 billion dollar IMF loan. Such a terrible situation explains why Yanukovic wants better relations with all his neighbors, and countries like the US, which can bring capitals to Ukraine and re-activate the IMF loans. In fact, his inaugural speech mainly focused on the economy, and avoided divisive political issues such as the introduction of Russian as an official state language. As the economy is now by and large the top national priority and the elections have been judged free and fair by the international monitors confirming the Ukrainian democratic transition, there is now less political attention given to the West/Russia divide and more to the search for solutions to the economic crisis.
 
In that context, the gas sector has huge economic and political relevance. On one hand, from a purely economic point of view, the state-owned national gas monopolist Naftohaz has suffered heavy losses in recent years, which have been covered by the already fragile state budget, and needs huge investments in the gas pipelines to improve its efficiency and productivity. At the same time, Ukrainian consumers and industries desire low gas prices considering the current recession. Therefore, Russian and European investments are extremely welcome, including joint ventures or even direct participation in Naftohaz by foreign shareholders.

On the other hand, from a political point of view, the gas sector is intrinsically linked to the country’s independence and sovereignty. Russian control on the Ukrainian gas transport system would imply a form of direct control on the country’s economy, and even its politics.

As a result, Yanukovic seems to take into account European pressure for a reform of the gas sector in line with EU regulations as a necessary pre-condition for attracting Western investments in this crucial area of the economy. At the same time, Russia also has some capability to invest in the gas sector, and most importantly to reduce gas prices and to grant new loans in order to cover the state’s soaring deficit, making it a crucial partner for Kiev. Hence, it is likely that in the future Ukraine’s foreign policy will focus on improving those bilateral relations that are deemed necessary to revitalize the national economy, while avoiding ideological choices that may conflict with this goal. At the same time, Yanukovic’s Ukraine will be closer to Russia than it has been in recent years, and there are concerns that the Ukrainian political system could return to Russian-style, non-democratic practices which it endured until the 2004 “Orange Revolution”.

As a new sort of “non-aligned” country, Ukraine could gain economically and politically from both its European and Russian counterparts, as several countries did during the Cold War from Washington and Moscow. However, there is a risk that the country could be further destabilized by its strategic position across two spheres of influence.

Yanukovic’s performance in such a delicate geopolitical environment will also depend on the domestic strength of his presidency. Parliament’s approval of Mykola Azarov as Prime Minister, along with a majority of 235 deputies out of 450, means that Yanukovic will count on a friendly government but on a slim parliamentary majority. Managing Ukraine’s foreign policy, whatever it may be, will prove to be a tough act.