Understanding Ukraine’s Choice

"Ukraine had to weigh its domestic economic priorities against its relationship with Russia and Europe’s ability to alleviate its debt in the short term."

Yanukovych had a choice, and he made the one that was natural for him, taking into account the offers he received from Moscow and Brussels. The surprising decision to step away from the trade-association agreement after five years of negotiating was immediately blamed on Russia’s political and economic pressure, which many argued forced Yanukovych’s hand. The thousands of protestors that soon flooded Maidan ignited a debate about Ukraine’s democratic values and drew criticism from the West. However, this debate grossly overlooks Ukraine’s bleak economic situation. Ukraine had to weigh its domestic economic priorities against its relationship with Russia and Europe’s ability to alleviate its debt in the short term.

Yanukovych foremost had to consider the state of Ukraine’s economy. As Job C. Henning wrote in TNI this month, Ukraine is facing a grave economic problem with low prospects for future growth. High debt, inefficient public spending, a vital reliance on Russia as a trading partner and a vigorous black market (worth at least $4.3 billion) all cripple the Ukranian economy. In turning to Russia, Yanukovich appealed to his constituency in Eastern Ukraine, which is more reliant on Russian trade.

Russia is further crucial for Ukraine because it is more than just a trading partner; it provides loans and subsidies. Currently, Ukraine owes Gazprom over $2 billion for three months worth of natural gas. Russia was ultimately more able to accommodate Ukraine’s immediate economic needs with fewer short-term consequences. Ukraine on the verge of default, could not afford to take the deal offered to them by the EU, which would have been beneficial only in the long run. By buying $15 billion in bonds, Russia stepped in once again as the country’s financial savior and illustrated its to the Ukrainian economy.

Russia’s recent trade deals with China, have also made Ukraine anxious that Russia could be slowly diverting its energy supply away from Ukrainian markets to the East. Over the course of their relationship, Ukraine has received many trading privileges from Russia to induce it into a closer economic relationship and eventually, perhaps, the Customs Union. Ukraine could not reasonably change the Ukranian-Russian relationship without an appealing counteroffer from Brussels. Brussels instead offered Yanukovych an ultimatum in regards to Yulia Tymoshenko, leaving Yanukovych little choice.

Europe not only failed to provide an attractive agreement, but it also failed to present itself as a reliable trading partner. The fault lines in Europe began realigning long ago, and Ukraine’s decision to not sign a trade agreement with the EU is among the lingering consequences of an economic crisis that made the EU less appealing to many trading prospects. After failing to even guarantee economic prosperity for its own member states, such as Greece, Spain and Italy, Europe is no longer perceived as the beacon of economic affluence and stability it once was.

In rejecting the trade agreement, Yanukovych was essentially asking for a better deal and not automatically turning his back on Europe for good. The Ukrainian prime minister Mykola Azarov stated on December 12th: “Ukraine continues preparation to [sign] the Association Agreement and [the] introduction of [a] free trade area with the EU.” The issue is not Ukraine’s relationship with the EU but that the trade association agreement did not meet Ukraine’s immediate economic needs and left their domestic economic priorities unaddressed. For example, one specific point of contention in the trade agreement was the EU’s demand to lower agrarian subsidies in Ukraine, where the agricultural sector employs almost 16 percent of the population. Clearly this was not in line with the country’s interests.

The missed opportunity here was that the EU had a chance to agree to a tri-lateral consultation with Russia in order to ease their anxiety about the trade agreement. Europe could have addressed Russia’s concerns about the impact the agreement would have had on the Russian economy. Instead, by disregarding Yanukovych’s request to bring Russia in on the conversation, Europe placed Ukraine in an undesirable position, leading to their current predicament.

In response to the unrest in Ukraine, several Western commentators have expressed regret that Europe lost an opportunity to spread democracy to a former Soviet state. The idea that Ukraine is in a battle of tug of war between East and West, with Democracy (and according to some, inadvertently Kantian world peace) hanging in the balance is misleading. The protestors in Ukraine are not so much battling for a side as for the future and wellbeing of their own country. Most importantly, the Ukranian people are trying to establish a new path that is not necessarily in line with either the European notion of democracy or the perceived clutches of Vladimir Putin. The decision to not sign the trade agreement with the EU, given their economic situation, makes sense.

The assembly of many protestors in Ukraine is one of the most positive signs that the country is in fact developing its democratic values. Yet it could also be argued that some of those who voted to oppose the EU trade agreement may have felt implicit pressure to do so by Yanukovych’s government, and in this sense they are a poor reflection of the people’s will. Ukraine is still developing democratically, and it is unrealistic to expect it to act like the United States.

Pages