Business & Economy

Germany brings Ukraine relations to EU summit table

19 December, 2013

Germany's new Foreign Minister Frank-Walter Steinmeier yesterday (17 December) criticised both Russia and the EU in their tug of war regarding Ukraine. In the meantime, Ukrainian President Viktor Yanukovich obtained massive Russian economic assistance, while the opposition accused him of pawning entire sectors of the country’s economy to Moscow.

Steimeier, a Social Democrat (SPD), has returned to the post of foreign minister he held during Merkel’s first ‘grand coalition’ in 2005-2009.

In his inaugural speech, Steinmeier said it was “utterly scandalous” how Russia used Ukraine's economic plight for its own ends, and in order to prevent the signing of the association agreement (AA) with the EU. “Of course, the violent behaviour of the Ukrainian security forces towards peaceful demonstrators was also scandalous," he added.

He repeated questions raised by Polish President Bronislaw Komorowski about whether the EU had underestimated how divided Ukraine was and how determined Moscow was.

"I say quite openly I have no answers to that. But I'm certain we need to be able to answer that before we can respond to calls for help in stabilising the situation there," he said, as quoted by Reuters.

According to diplomats, Chancellor Angela Merkel will bring the Ukraine issue up at the EU summit table later this week. EU leaders are meeting in Brussels on 19-20 December for a summit officially dedicated to defence and economic issues. However, a discussion on international issues is also foreseen. Since the Vilnius summit of the Eastern partnership held on 28-29 November, which saw Yanukovich turning his back on the EU, leaders have been pressed to re-think their handling of international affairs against an ever-more assertive Russia.

As a Social Democrat, Steinmeier is likely to question his predecessor’s policy on Ukraine. Germany’s Ukraine policy under his Free Democrat predecessor, Guido Westerwelle, was largely dominated by pressure on Kyiv to free former Prime Minister Yulia Tymoshenko from jail. Nowadays her name is no longer mentioned.

Steinmeier will travel to Poland on Thursday for talks on Ukraine, while Chancellor Merkel flies today (18 December) to Paris to meet French President François Hollande. Poland, Lithuania and Estonia have repeatedly called for a more flexible EU policy vis-à-vis Ukraine, which would not be taken hostage by the Tymoshenko issue. These countries also take the view that Ukraine should be offered a clear perspective for EU accession. The AA stops short of discussing the perspective of bloc membership in the EU-Ukraine relationship.

It is unlikely however that Germany would be prepared to go so far. Reportedly, Steinmeier omitted from his speech a comment that appeared in a text version circulated earlier, saying the EU's offer to Ukraine fell far short of what was needed by the country.

In the meantime, Yanukovich met with Putin in Moscow and obtained a $15 billion (€10.9 billion) bailout, plus a drastic reduction of the price of Russian gas. Russian Finance Minister Anton Siluanov said Moscow would buy $3 billion worth of Ukrainian Eurobonds as early as the end of this week, marking the first installment in debt purchases that will total $15 billion. Russia's Gazprom has also reportedly slashed the price Ukraine will pay for supplies to $268.5 per 1,000 cubic metres from about $400.

Yanukovich strategies worked?

It can hardly be denied that Yanukovich’s strategy has had an effect. Just as the EU remained inflexible on Tymoshenko' release, so too Moscow refused to change the terms of a gas contract negotiated by her in 2009. Following Yanukovich's vacillation towards both sides, both the EU and Russia changed their positions.

Tens of thousands of protesters gathered in Kyiv following the news of the deals in Moscow.

"He has given up Ukraine's national interests, given up independence," Vitaly Klitschko, the leader of the opposition party UDAR and heavyweight boxing champion, told the crowd.

Oleh Tyahnybok, leader of the opposition Svoboda party, said Yanukovych had "pawned whole sectors" of the country's economy to Russia.

The Ukrainian daily Economic Pravda published the draft documents the Ukrainian delegation took to Moscow for signature. It remains unclear if all have been signed in the form in which there are published, but the daily says that it is unlikely that many changes have been made.

Among the documents are:

An action plan to resolve the trade restrictions in bilateral trade in 2013-2014;
An Agreement on the implementation of measures of resumption of normal production of aircraft An-124 with D-18T and their modifications;
A Protocol between the governments of Russia and Ukraine for the supply of goods for industrial cooperation in 2014; and
An Intergovernmental agreement on joint actions on the construction of transport crossing through the Kerch Strait, which connects the Black Sea and the Sea of Azov.

Personal gain?

Yanukovich may have also made personal gains in the process.

The Moscow visit was expected to coincide with a change of intermediary in Russia's gas supplies to Ukraine. The current tandem made up of Naftogaz and Ostchem, a company owned by the oligarch Dmitry Firtash, could be joined by a third player called VETEK, a company woned by Sergei Kurchenko, who is considered close to Yanukovych's son Alexander, the Economic Pravda writes.