Both also understand that Putin holds the stronger hand in this particular card game: Russia’s market is more important to Ukraine’s exports than the other way around; Ukraine owes Russia $1.3 billion for past energy purchases; and Russia remains, far and away, Ukraine’s main source for gas imports.
Last year a quarter of Ukraine’s exports, totaling $18 billion, went to Russia. They can’t easily be redirected, even though Ukraine’s trade with the EU, which now takes over one-quarter of its exports and provides more than one-third of its imports, has soared during the past decade. As for gas, it’s essential to Ukraine’s economy and, with winter approaching, its political stability. Russia supplies close to two-thirds of Ukraine’s needs, more than 2.3 trillion cubic feet (tcf), with domestic production providing the rest. True, shale gas deposits have been found in Ukraine, and Shell and Chevron have already signed up to develop two fields. Ukraine’s total shale gas stocks may approach 197 tcf, of which 42 tcf are recoverable, and that’s on top of 39 tcf in regular gas deposits. And yes, Ukraine reduced its gas imports from Russia in 2012 and, with the EU’s help, recently signed a deal to buy gas from
So Yanukovych was under a lot of pressure from Moscow. But Putin is too wily a strategist to rely on pain alone to extract concessions; he knows that financial inducements help. Arseniy Yatsenyuk, one of the leaders of Tymoshenko’s Fatherland (Batkivshchyna) Party, has alleged that the enticements included $20 billion for Yanukovych himself, plus a pledge to help ensure his victory in the 2015 presidential elections. Who knows? But it’s a good bet that Putin promised Yanukovych reliable gas supplies at reduced prices and aid for Ukraine’s economy, which is mired in all manner of problems. These include declining foreign exchange reserves; foreign debt that’s skyrocketed from just under to $13 billion in 2000 to almost $124 billion in 2013, with $15.3 billion in repayments due in the next two years alone; and a budget deficit that will approach 6 percent of GDP this year.
Yanukovych has yet to sign on to the customs union (which will oblige him to hike tariffs on non-member states and more tightly bind Ukraine to Russia), let alone the Eurasian Union. And Prime Minister Mykola Azarov announced the decision on the AA, which has been presented as a “suspension” rather than a termination, prompting speculation that Yanukovych could switch course at the eleventh hour. Well, that’s certainly possible: if Yanukovych has proved one thing about himself, it’s that predicting his position is a fool’s errand. But for now the scuttling of the AA has increased his isolation at home and abroad. His standing among Ukrainians in the central and western part of the country, where support for the EU and opposition to the Party of Regions and to Yanukovych himself is strongest, has been further diminished. The EU feels dissed and had. Secretary of State John Kerry canceled his scheduled trip to Kiev for the OSCE foreign ministers conclave. The opposition, buoyed by the protests, has called on the government to quit. If Yanukovych, fearing a second Orange Revolution, resorts to repression against protesters, the EU won’t be able to revive the AA talks, assuming that’s even possible. No one will be happier than Vladimir Putin.
In short, the Russian leader, having seethed while watching him defiantly cozying up to the EU, won’t be in a charitable mood. For every bit of assistance Yanukovych gets from Putin, he will have to yield a bit more of his country’s autonomy. Putin is now like the Athenian generals in Thucydides’ epic, and Yanukovych like their hapless interlocutors.
Rajan Menon is the Anne and Bernard Spitzer Professor of Political Science at the City College of New York/City University of New York, nonresident senior fellow at the Atlantic Council and the author, most recently, of The End of Alliances (Oxford University Press, 2007).
Image: Flickr/Jedimentat44. CC BY 2.0.