Russia-Ukraine relations have a different character from the other Post-Soviet Republics due to the common past and historical heritage depending on the centuries. It has taken a long time for Russia to accept Ukraine as an independent foreign policy actor. Therefore Ukraine gained its independence after the USSR dissolved in 1991, but in 1997 it signed the Friendship and Cooperation Agreement forming the legal framework of bilateral relations. The structure of bilateral relations, important not only for Russian and Ukrainian foreign policies but also for domestic policies, has been fluctuating ever since.
Russian President Vladimir Putin made an official visit to Ukraine in July 2013 to commemorate the 1025th anniversary of the first baptism and the evangelization of the region. Putin’s visit was an opportunity to reassess the future of Ukraine and the course of bilateral relations, since bilateral relations were occasionally overshadowed by the other global issues.
Ukraine’s EU orientation: From great hopes to disappointment
Ukraine tried to balance its relations with Russia by turning toward the EU. The notion of integrating into Western institutions like NATO and the EU had a decisive effect in Ukraine’s foreign policy. When the 2004 presidential elections were compromised by claims of fraud they were held again and ended up delivering a victory to a Western-oriented foreign policy. This shift, known as the Orange Revolution, is interpreted as the most important factor shaping the future of Ukraine. Although Ukraine focused on its relations with the EU in this period, the EU’s preferences were also changing. At first the EU had preferred to shape its relations with countries to its east under the framework of the European Neighborhood Policy, but in 2009 a special policy towards its eastern neighbors called the “Eastern Partnership” was adopted. This “Eastern Partnership” policy is an attempt to avoid granting associate member status (which itself did not imply accession negotiations) by offering the Association Agreement and the Deep and Comprehensive Free Trade Area (DCFTA) with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.
The Eastern Partnership Summit is scheduled for November 2013 in Vilnius, Lithuania and will be a turning point for the future of EU-Ukraine relations. The EU has stipulated that Ukraine's economic and political reforms must be put into practice before it ratifies the agreements. Time for negotiations has not been scheduled into the Summit, but whether the Association Agreement will be signed is expected to be clarified at the summit.
If Ukraine signs the agreements with the EU in November it will not join the Russia-led Eurasian Customs Union (ECU). According to James Sherr from Chatham House, an EU-Ukraine free trade agreement would be the “end of the game” for Russia. Thus, while the Kremlin waits to hear Ukraine’s foreign policy choice it is simultaneously playing on Ukrainian society’s divided opinions regarding relations with Russia. For example, Putin answered a question about Ukraine signing the Association Agreement with the EU in April 2013 by referencing “the vulnerability of the Ukrainian economy” and “the close ties with the Russian economy.” According to Putin, the “Russian economy can cope with the possibility of an interruption in economic relations with Ukraine. However Kremlin warns if the Ukraine signs a FTA with EU, there is a possibility of the elimination of some industrial activities, which means a loss of 9-10 billion dollars annually for Ukraine.”
On the other hand, if Kiev becomes a member of the ECU, there is a possibility that $7 billion of its gas debt to Russia will be cancelled. It is expected that Moscow will directly or indirectly invoice new bills by the Vilnius Summit in November. The Ukrainian ruling class has been growing discontent due to the drop in financial support from the EU and the gradually increasing energy bills from Russia, particularly after the Orange Revolution. In addition, it has led to increasing criticism regarding a foreign policy direction that breaks relations with Russia.
The President of Ukraine, Viktor Yanukovych, has not signaled any hesitation about signing an agreement with the EU, but he has also called Russia a Ukrainian “strategic partner.” Yanukovych seems to be searching for a balance, a desire which stems from the lessons of the past. The reason for Russia’s keen interest in the process is the privileged position Ukraine holds in Russian foreign policy.
Ukraine’s place in the Eurasian Union Project
After the dissolution of the USSR, the post-Soviet republics were gathered under the umbrella of the Commonwealth of Independent States (CIS) to pursue economic and political relations with each other. However, newly independent Ukraine’s attitude to the CIS prevented the union from being sufficiently effective. In this regard, Ukraine played a determining role in the integration of the CIS. The same dynamic is also valid for Putin’s ECU, which was introduced before the 2012 presidential election. This project aims to raise Russia’s global influence by creating an economic and political union, analogous to the EU, among states within the former Soviet geography. The ECU’s economic integration started in 2012 with an agreement signed between Russia, Belarus, and Kazakhstan and is expected to be completed with the accession of the other countries. As a potential leading country in this Russian-initiated project, Ukraine’s membership decision will play a decisive role. The conventional wisdom in the Russian foreign policy of the 1990s claimed, “without Ukraine any Russian influence will be limited to Asia”; now, similarly, it is said that without Ukraine the Eurasian Union Project will be also limited to Asia. Moscow is thus still trying to make the ECU attractive for Kiev.
As a result, while Putin tries to draw attention to the 18% decrease in bilateral trade between Russia and Ukraine in the first quarter of 2013, he is also emphasizing the 2-3% increase in trade between Russia, Kazakhstan, and Belarus due to the ECU. Moreover, there are hints that if Ukraine may receive discounted gas if it joins the joins the Union.
Since its independence Ukraine’s energy debts to Russia and economic development problems have been decisive factors in the equation. On the other side, it is also known that non-EU members are not as enthusiastic about the reform process compared to members. Ultimately the EU will decide the fate of the agreements by determining whether the necessary reforms were completed. The coming months will be a critical turning point for Ukraine’s foreign policy orientation and economic integration, and when it comes to Russia-Ukraine bilateral relations it may prove to be a hot autumn.
This article was firstly published in Analist Monthly Journal, September 2013.