Ukraine struggles to balance lure of Europe, pull of Russia
Russia is dangling billion-dollar benefits if Ukraine joins a Moscow trade alliance, a move that would scuttle Kiev's chance at an EU free-trade deal.
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Even though Russian Prime Minister Vladimir Putin arrived in Kiev Tuesday with up to $9 billion in annual benefits for Ukraine's troubled economy in return for joining a Moscow-led customs union, which already includes Belarus and Kazakhstan, Yanukovich reportedly rebuffed him.
While Ukraine hopes to further improve economic ties with Russia, its top priority is to finalize a free-trade agreement with the European Union, which would preclude joining the Russian trade alliance.
The decision is a critical moment for Ukraine, as it will have to choose between trying to build better economic relations with Europe or keep an important benefactor satisfied. Ukraine is still recovering from a 15 percent plunge in its GDP following the global economic crash, and it has grown politically polarized by Yanukovich's major past concessions to the Kremlin. Those include renewing a 25-year lease on a Russian naval base in Crimea in return for cheaper Russian energy supplies.
"This is not merely a discussion over economic advantages, but about the very nature of Ukraine," says Oleksiy Kolomiyets, president of the independent Center for European and Transatlantic Studies in Kiev. "The customs union being proposed to us is a camp of authoritarian regimes, and our political system would follow the economic logic if we became part of it. Yanukovich has clearly stated that we will not join."
But he adds that powerful forces in Ukraine, which is deeply divided between its nationalistic, pro-Western west and Russian-speaking and Moscow-oriented east, still favor the union. "There is intense political struggle over this issue, and it's only just beginning," he says. "Ukraine's economy is very fragile and extremely vulnerable to Russian blackmail."
Putin reportedly ended the meeting by warning Yanukovich that joining the EU scheme could lead Russia – Ukraine's biggest trading partner – to retaliate by erecting trade barriers against Ukrainian goods.
"I have to remind you that ... in this case we would have to implement the protective measures," Ukrainian news agencies quoted Putin as saying.