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October 12, 2005

Ukraine: Is Kyiv On Stable Path Toward Integration With World Economy?

by Andrew F. Tully

Yuriy Yekhanurov (left) with President Yushchenko (file photo)

Ukraine's new prime minister, Yuriy Yekhanurov, describes his government as "technocratic" -- motivated, he says, not by ideology, but by a desire to improve the country's politics and economy. Yekhanurov recently visited Moscow and Brussels in an effort to do just that by securing a place for Ukraine in the World Trade Organization (WTO) and eventually in the European Union and NATO.
Washington, 12 October 2005 (RFE/RL) -- The key to Yuriy Yekhanurov's success in integrating Ukraine into the world economy will be how he deals with Russia. That's according to experts who follow developments in Ukraine closely.

Until its independence in 1991, Ukraine had long been controlled by Moscow, and as recently as last year's presidential election, Russian President Vladimir Putin had worked to help ensure the victory of his favored candidate, Viktor Yanukovich.

That effort failed when Viktor Yushchenko eventually prevailed following the Orange Revolution. Last month, however, Yushchenko fired Yuliya Tymoshenko as prime minister, even though it was Tymoshenko who led the protests that brought Yushchenko to power. Some now question the strength of Yushchenko's presidency.

Once he replaced Tymoshenko, Yekhanurov's first order of business was to travel to Moscow to improve trade relations with Russia, then to Brussels for talks with officials of the European Union and NATO.

After holding talks with his Russian counterpart, Mikhail Fradkov, in Moscow, he told reporters: "There have been no meetings between the prime ministers [of Ukraine and Russia] this year. This is not normal, and now we should work more intensively to catch up on what was left undone, and also look objectively at those problems that we have now."

The Russian media tended to portray Yekhanurov's Moscow visit as a significant step backward for an economically independent Ukraine, according to Georgeta Pourchot, who studies the region for the Center for Strategic and International Studies, a nonpartisan policy-research center in Washington.

Pourchot said some Russians and much of the Russian news media believe none of the country's Eastern European neighbors can enjoy good political and economic relations with Moscow and integrate with the West at the same time. Therefore, she said, they view Yekhanurov as something of a supplicant in Moscow.

"If there is a new government in place [in an Eastern European country] that says, 'Oh, we're interested in European integration or NATO integration,' some circles in Moscow automatically see that as mutually exclusive with a good relationship with Russia," Pourchot said. "These [Russian] newspapers -- right now they're all gloating that Yekhanurov came to Moscow two days after the [Ukrainian] cabinet was confirmed, and [they conclude that] this definitely proves that Ukraine now is moving toward Russia."


Pourchot said that assessment may, in fact, contain some truth. She points to the barter system under which Ukraine gets Russian oil in exchange for Moscow's use of Ukrainian pipelines to ship Russian fuel to the West. Pourchot said that with the price of fuel rising, Russia is threatening to have Ukraine pay the market price for what it gets from Russia, something Ukraine can't afford.

In this way, Pourchot said, Russia can use this threat as leverage to keep Ukraine within it sphere of influence.

James Millar, a professor of economics and international affairs at George Washington University in Washington, agrees that the Russian government believes it has this leverage, but he calls it a miscalculation. He told RFE/RL that this arrangement puts Ukraine on equal footing with Russia on fuel and that Kyiv has plenty of leverage of its own.

"In a sense, both Russia and Ukraine are dependent on each other, at least for the immediate future, and Europe depends upon both of them for oil and gas because Ukraine provides a major source of the pipelines that carry gas and oil to Europe, and Russia needs that revenue [from Europe]. So there is something to negotiate [laughs], and it will be interesting to see how it comes out," Millar said.

Meanwhile, Ukraine has its own internal impediments to integrating with the West. They include the need to enact economic reforms and limit bureaucratic encumbrances on the economy. Yekhanurov said such legislation can be passed by next month, but Pourchot said that expectation is far too optimistic, given Ukraine's current political state.

And Pourchot said membership in NATO and the EU -- and especially in the WTO -- are even further beyond the horizon.

"I doubt [the Ukrainians] are going to do much before the next elections -- next spring, in [2006], the parliamentary elections. Are they likely to integrate faster rather than slower? Is it going to take them a long time? Yes, it will take them a long time. I don't see Ukraine getting even near Brussels [NATO or WTO membership] in very serious terms before 2010, if not later," Pourchot said.

Millar said he can understand Pourchot's pessimism, but he said he is encouraged by Yushchenko's decisiveness in replacing Tymoshenko, and expects quicker progress. However, he isn't making any predictions as to when Ukraine might join the EU or the WTO.

"I'd say that when Yushchenko decided to make a deal with his former opponents, many people felt, 'Well, that's the end of things [the Orange Revolution].' But that hasn't turned out to be the case. That turned out to be a political decision that has really maintained him fairly well. I'm fairly positive [about Yushchenko's leadership]. I think Ukraine's playing its cards pretty well. But Russia is likely to overplay their cards, and I think that will not work to their benefit. It'll work to Ukraine's benefit," Millar told RFE/RL.

Millar said if Yushchenko and Yekhanurov maintain their focus, Ukraine should integrate steadily -- and, one day, thoroughly -- into the world economy.
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