At the end of October Russian Premier Dmitriy Medvedev stated that Russia might switch to a system of advance payments for gas by Ukraine because of the large overdue amount of money owed to Gazprom. At the same time he admitted that such approach would complicate the situation, and that in general certain debt for supplied gas did not put at risk gas transit to Europe.

In turn, Ukrainian vice-PM Yuri Boiko responded that in case Russia opted for formal approach to the gas relations, Ukraine might respond in kind. "In our partner relations with Russian colleagues we have always supported them during peak periods of supplies to Europe, and thanks to our support Gazprom has been able to fulfill its contract obligations. But if the Kremlin applies formal approach, we reserve the right to do the same - we will use the contract for purchase only, and the full responsibility for transit to Europe will rest with Russians," the official said.

Experts opine that such statements are a continuation of the pressure Russia imposes on Ukraine on the eve of the signing of the Association agreement with the EU. The same concerns long lines at the common border, claims to Roshen company, as well as the recent decision of the Eurasian economic commission of the Customs Union, which has granted itself the unilateral right to revise rates of duties in the framework of the CIS free trade area agreement. In this respect, governmental envoy on European integration Valery Pyatnitski says that similar decisions violate the WTO norms. "Speaking about losses from mass import, the WTO norms provide for certain protection measures, but to apply sanctions for only a possibility of losses is incorrect and contradicts with these norms." In turn, governmental envoy on cooperation with Russia, CIS and  Eurasian economic community Valery Muntiyan believes that the Customs Union has absolutely no grounds to revise duties. "They should have read the agreement more attentively. It says that the revision of rates requires serious grounds. Moreover, CU members are not even ready to name Ukrainians goods they want to protect their market from." 

Fighting for Vilnius

All these claims reflect Moscow's utmost discontent with Kyiv's clear intention to sign the Association, economic analyst Vitaly Kulik believes. At the same time, EU officials confirm that the agreement is most like to be signed at the Vilnius summit. Thus, in his remarks following the European Council, President Herman Van Rompuy noted that the EU counted on "taking important, even historic steps with Kyiv." In turn, Spanish Ambassador to Ukraine Gerardo Bugallo Ottone said that despite the outcome of the Vilnius Eastern Partnership summit, Ukraine would sign the Association Agreement with the European Union in any case.

Experts says that such cheerful mood of Brussels is owed to Kyiv's significant progress in fulfilling EU requirements for signing the Association agreement. Thus, US ambassador to Ukraine Geoffrey R. Pyatt notes that our country has advanced in fulfilling basic requirements and believes all conditions will be met before the Vilnius summit. Indeed, the draft bill on strengthening of court independence has already been passed in its first reading, the work on amendments to the election legislation is almost complete, and speaker Volodymyr Rybak promises to adopt the law on Prosecutor's Office within the next plenary week. In this respect, President's aide on constitutional and legal modernization Maryna Stavniychuk assures that there is still time to approve all necessary legal changes. "President does not consider it even an option to postpone the singing of the Agreement and intends to do everything in his power to meet the requirements in time. There is no plan "B"."

However, there is one pending problem which is still out of the picture of progress - Tymoshenko's case. President of Poland Bronislaw Komorowski says it is the last significant barrier on the path to the Association agreement and to the western world in general, and calls upon the opposition not to obstruct the adoption of a compromise decision. According to the high official, he does not doubt the decision of the Ukrainian court, but calls upon the Ukrainian authorities and opposition to find a way to provide Yulia Tymoshenko with a possibility of treatment abroad. "We also appeal to the opposition, which bears responsibility for adoption of this decision as well."

As a reminder, there are two draft bills on a possibility of treatment abroad for the convicts, submitted by non-factional deputies Serhiy Mishchenko and Angelica Lanubska, and a draft bill on humanization of legislation on preliminary confinement by Volodymyr Kupchak. But political scientist Yevhen Leshan states that the opposition blocks the consideration of these projects thus  sabotaging the signing of the Association agreement at the Vilnius summit. "The parliament is working its way through, but the opposition resists. The impression is that the opposition factions have been paid by Moscow to prevent the signing of the Agreement," the expert says.

"The opposition blocking can be viewed as a way to shift the responsibility for failure of the European aspirations of Ukraine and its people to political opponents and government elected by the people. The leaders of the parliamentary opposition have turned the state with 45 million people into a hostage to their own political interests and put in jeopardy the possibility of signing the Association Agreement. The law permitting Tymoshenko to undergo treatment aboard could have been adopted back in spring of 2012, but Tymoshenko herself and her political force refused then," speaker Rybak adds.

In this respect Vitaly Kulik notes that amid the conflict with Russia and persistent fulfillment of AA requirements, President Viktor Yanukovych demonstrates the skills of a true and committed leader, who stands for national interests. "It is been popular to speculate that the ruling party, which won presidential elections of 2010, allegedly drags the country to Moscow and away from European integration. But the real practice has proved this is all garbage. The ruling party stands for political and economic independence of the country and is ready to stand its ground against any challenges and threats," the analyst comments.

Europe defends Ukraine

Apparent willingness of Kyiv to fulfill its part of the obligations spurs Brussels into active defense of the Eastern European partner from Russian attacks. Thus, in October European Commissioner for Enlargement and European Neighbourhood Policy Stefan Füle once again slammed the Kremlin's policy of pressure on Ukraine. "EU partners must take their own decisions and establish relations with neighbors as they see fit. Any pressure is unacceptable. Moreover, it should not influence the decision making in any way. The concept of solidarity is not a mere name for us. We do not want anybody to fall a victim to this pressure. Besides, FTA with the EU and FTA within CIS do not contradict each other." 

In turn, US ambassador to Ukraine Geoffrey R. Pyatt points out that the third parties have no right to press on Ukraine regarding its choice of foreign policy and any attempts are unacceptable. The official assures that after signing the Association agreement both Washington and Brussels will make every effort for its implementation to go fast and smoothly.

And Brussels is getting angry, Kulik believes. Its appeal to the WTO about lawfulness of Moscow actions regarding the introduction of a disposal fee for imported cars is a good proof of it. The European Commission states that this fee is discriminating and causes European car exporters annual losses at 10 billion euro. The matter concerns not only Ukraine, but the general aggressive policy of "federals" on protection of internal markets regardless of the WTO norms. Apart from cars, Russia has recently applied measures against Polish foodstuff and Lithuanian dairy products. In fact, Lithuania has already stated its readiness to appeal to the WTO after Russian Rospotrebnadzor has suspended import of Lithuanian dairy products to the Russian market. Lithuania is convinced that this ban is groundless and discriminating, and that the whole situation looks like an economic war because of "someone's dislike for rapprochement of post soviet countries with Europe." The foreign minister of Lithuania has even threatened to block communication with the Kaliningrad region if the Kremlin does not stop pressing on the neighbors.

Executive director of the International Bleyzer Foundation Oleh Ustenko believes that Russia is not interested in serious conflicts with the EU, which is the principle market outlet for the Federation (22% of the total export). If the EU temporary closes its markets for Russia, it will not have any difficulties, but Moscow will suffer huge losses, incomparable to the benefits from expelling Ukrainian exporters from its markets. And if the US joins the protest at least partially, Russia's losses may reach 40-50% of its export supplies, including the "blood" of the federal export - hydrocarbons.    
Kulik sums up: influence of Russia in Europe is not small, Gazprom alone owns pipelines, storages and local suppliers in Germany, Finland, Baltic countries and all over Central-Eastern Europe. However, the European Union is anyway stronger on its own territory, and together with the US is able to make local pro-Russian lobby to bow to all-European interests.  

The Kremlin has no choice but to get over it

Recent CIS summit in Minsk has proved that differences between CIS countries and Russia appear more pronounced. Moreover, controversies within the Customs Union itself become more serious as well. Fierce supporter of Eurasian integration, President of Kazakhstan Nursultan Nazarbayev has complained about shortfall in observance of mutual agreements, while Belarusian President Aleksander Lukashenko has threatened to leave the Customs Unions and publicly declared that there is nothing wrong with the association between Kyiv and Brussels. (See the article "Ukraine and CIS: friendship bypassing Moscow").

At the same time Ukrainian authorities actively promote bilateral projects with CU and CIS countries bypassing the Kremlin. Thus, there are plans to establish joint ventures with Kazakhstan on production of train cars and cargo aircrafts; with Minsk- on production of train cars, agricultural machinery, cars. Ustenko opines that considering the above mentioned factors, Russia will not be able to force Belarus and Kazakhstan to join the blockade and large-scale trade wars against Ukraine. Moreover, Russia's pressure on the neighbours may strike back and destabilise the Customs Union itself, as well as the launch of other projects like Eurasian economic union. And finally, the CU and CIS leading countries can replace Russia as a market outlet for Ukrainian goods if Russia persists in its harsh policy. 

In turn, the Association agreement will enable our producers to improve the quality of goods and services in accordance with the world standards and to become more competitive both on CIS and world markets. In particular, director of the analytic group Da Vinci Anatoli Baronin forecasts that the export from Ukraine to Asia and Africa will grow, considering that European standards work in the developing countries as well, and the integration will throw open the gates of commerce for our production. Political scientist Yevhen Leshan points out that Kyiv does not focus only on Europe, but aims for all possible markets, including China - for eight months of 2013 our export to China has grown by 46.4% and exceeded $1.8 billion.

Ukraine has been working hard to adapt to the European standards. In particular, Ukraine has harmonized more than 40 regulations, and in total it needs to adapt more than 300 regulations, directives and other legal acts of the European Union, which will cost us 165 billion euro. "It cannot be done within a year or two, but in the long view it will retarget the economy and will make it more effective," Ustenko says. In turn, head of the Cabinet's Business Council Andriy Zablovski believes that the majority of Ukrainian producers will have no problems with adapting European standards. "Ask any industrial association, and most of them will tell you that the adaptation proceeds at full speed."

To speed up the process, the Ministry of Economy, Development and Trade has worked out the Program of implementation of the Association agreement, providing for both political and economic tasks: observance of international norms and standards of justice and human rights; harmonization of the national legislation; improvement of the investment climate; provision of mutual access to markets of goods and services; improvement of standards of labor safety and consumer right protection, etc. In total, the document includes about 50 areas of focus. According to the minister Ihor Prasolov, new Association-based relations will establish a proper base for successful realization of strategic goals of both domestic and foreign policies.

Summing up, we want to note that Ukraine's rapprochement with Europe may benefit Moscow as well. Thus, Russia can use the free trade area "Ukraine-Europe" to access EU markets with its own goods through moving its production on the territory of Ukraine. In fact, Russia has already had similar experience: take, for example, the hardware plant "Dneprometiz", Donestk electrometallurgical works, vehicle assembly plants (VAZ, GAZ, UAZ), Donbass Industrial Union, local branches of Russian banks, etc. Meanwhile, unfriendly policy of the Kremlin in 2012 resulted in reduction of good supplies to Ukraine by 5.9%  in 2012, and for the eight months of 2013 - by 25.4%.

And though political scientists say that Vladimir Putin considers Kyiv's European choice as his personal defeat, it seems he has no choice but to get over it. It is way more profitable to be friends with Ukrainians than to conflict, and both political and business groups of Russia understand it, and in turn might press on the "war party" to finally establish economically beneficial and conflict free dialogue with Ukraine.

Andriy Boyarunets


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