Ukraine’s Risky Bet

MOSCOW — Ukraine is leaving Russia for Europe. That’s what many observers see as the likely consequence of the Association Agreement that Ukraine and the European Union are expected to sign at a summit meeting in Vilnius at the end of this month. But those who expect Ukraine to embark on a fast transformation should not be complacent. Bitter disputes persist within the Ukraine-E.U.-Russia triangle, complicated conflicts that are about selfish interests, not universal values.

Vladimir Putin may say that opening borders to European goods and services under the Association Agreement’s free-trade pact is Ukraine’s sovereign choice. But Russia’s president is a master at dissembling: He is widely believed to have promised his Ukrainian counterpart, Viktor Yanukovich, to inflict a lot of pain if the Association Agreement is signed.

The Russian energy monopoly Gazprom charges Kiev exorbitant amounts for natural gas, the highest in Europe, and Ukraine is behind in its payments. Prime Minister Dmitri Medvedev says there will be no “all-encompassing forgiveness of debt, no ‘gas communism’ in the future.” Sergei Glazyev, Mr. Putin’s point man on Ukraine, is even more blunt. “Signing this treaty will lead to political and social unrest. The living standard will decline dramatically.”

Among other conditions, Brussels wants Ukraine to establish Western-style institutions, including a prosecutor’s office with limited authority, a citizen-friendly police service and an independent judiciary — all designed to end the system of payoffs and patronage that benefits the president’s family and friends. Mr. Yanukovich will likely offer his assurances that this will be so, while continuing to do his best to bend these institutions to his will.

Brussels asserts that under the Association Agreement, Ukraine will save €500 million a year in customs duties, and it is promising an aid package of €186 million to help Kiev begin to implement institutional reforms and another €610 million after they are in place.

But this comparatively small amount of European money won’t save the day. Ukraine’s economy is stagnating and the country stands to lose billions in trade if the Kremlin gets tough. Russia can close its borders to more Ukrainian goods. It also can introduce stringent visa requirements, demand advance payment for natural gas exports, or cut off supplies as it has done twice before.

Full article: Ukraine’s Risky Bet (NY Times)

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