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Ukraine: The Single Economic Zone Or The EU?

Ukraine has announced that it intends to create a Single Economic Zone with Russia, Kazakhstan, and Belarus. The plan seems to contradict Ukraine's repeated declarations that it wants closer ties with the European Union. Ukraine's previous attempts to create economic zones with former Soviet neighbors have come to nothing. Will things be any different this time?

Prague, 29 August 2003 (RFE/RL) -- Ukraine's Finance Minister and Deputy Prime Minister Mykola Azarov, together with his counterparts from Russia, Belarus, and Kazakhstan, last week approved a draft agreement on the formation of a single economic zone encompassing their countries.

The agreement is to be signed by the four countries' presidents at a Commonwealth of Independent States (CIS) summit to be held in the Crimea next month. The zone is intended to increase trade by simplifying bureaucratic regulations and scrapping tariffs. Russian Prime Minister Mikhail Kasyanov indicated it could lead to deeper integration, a single currency, and common economic borders.

The plan has taken many in Ukraine by surprise, with some observers saying the move appears to contradict Ukraine's declared aim of strengthening ties with the European Union. But the EU itself does not appear to be concerned by the plan.

Steffen Kovmand is the acting head of the European Commission's Kyiv office. On 26 August, he was among the Western diplomats to attend a meeting called by Azarov.

Kovmand said that the EU has not been shown details of the proposed agreement. But he said Azarov's briefing gave the EU no reason for worry over its relationship with Ukraine.

"[Azarov] certainly managed to reassure everyone in the room that this was in no way contradictory to Ukraine's EU ambitions. And he pointed out that it was something that he felt could make good economic sense to Ukraine. And he also pointed out that in various articles and provisions of this agreement -- that, I repeat, we haven't actually seen yet -- the speed and depth of integration was very much something that would be decided step-by-step, and by each signatory to the agreement," Kovmand said.

EU Enlargement Commissioner Guenter Verheugen is due to visit Kyiv on 11-12 September, and Kovmand says the economic zone agreement has not affected his plans. Kovmand says that Verheugen will ask Azarov and other members of the government for more details about the plan. For his part, Finance Minister Azarov tells RFE/RL the proposals did not exclude the desire for a closer relationship with the EU.

"I do not see any obstacles [to the EU] in the agreements that have been signed. Again, I emphasize, I would not sign any agreement that would produce such obstacles," Azarov says.

The single economic zone also appears to have surprised some officials at the Ukrainian Foreign Ministry. Foreign Minister Anatoliy Zlenko says that Ukraine's priority remains closer ties with the EU.

"We already have a strategic course for our country, and that is toward European integration. And currently we are mobilizing -- by this I mean the president of Ukraine is mobilizing -- all our efforts for the realization of this political course for our country," Zlenko says.

Zlenko said Ukraine could only enter the new economic zone if such an arrangement was compatible with EU regulations and standards and did not impede Ukraine's timetable for closer relations with the EU. He added that the zone could improve Ukraine's chances as an EU candidate if it improved the country's economy.

Former Ukrainian Foreign Minister Boris Tarasiuk now heads the Ukrainian parliament's committee on European integration. He says Ukraine should seek better relations with Russia and other former Soviet republics. But he added that trying to integrate Ukraine with both the EU and Eurasia simply did not seem practical.

"If integration with the European Union is the natural path for Ukraine, then integration with the East, which is represented by the Single Economic Zone, is the Kremlin's main objective and nothing else," Tarasiuk says.

Kyiv has a history of often appearing to change its foreign policy priorities, at times seemingly moving toward the West and at others toward Russia and Eurasia. President Leonid Kuchma has characterized such apparent vacillation as a "multi-vector [directional] policy." Tarasiuk described it in the following way.

"In connection with the behavior of the Ukrainian government and the use of popular slogans -- such as 'European integration,' 'European course,' 'Euro-Atlantic course' -- and what actually happens, I want to say that we are witnessing the diagnosis of what doctors call a split personality," Tarasiuk said.

He said the government is deliberately keeping its intentions unclear in order to play the EU and Russia against each other.

Tarasiuk thinks the government will be able to secure the two-thirds parliamentary majority needed to ratify an agreement on the economic zone. But he believes that in reality, Moscow and Kyiv -- the two most powerful players in the potential zone agreement -- are far from reaching a final agreement:

"Ukrainian and Russian participants in the talks have absolutely different concepts of what constitutes a Single Economic Zone. Ukrainian participants take it to mean a free trade zone, while the Russian participants mean a common currency, a common customs union and so forth. These are completely different levels and I think problems will arise out of this," Tarasiuk says.

Tarasiuk adds that other such schemes have been created in the past to augment economic ties between CIS republics: "There have been ideas for economic union and free trade zones between Ukraine and Russia, and free trade zones between CIS countries, but nothing has ever come of it. I want to say that of the thousands of projects initiated during the 12 years of the CIS's existence, none, luckily, have materialized."

Tarasiuk says he believes the current idea may suffer the same fate.