Friday, 14 May 2010

Yanukovych plays the Moscow card

Ukraine's new leader, Viktor Yanukovych, is betting on a strongly pro-Russian and anti-Orange stance ahead of President Dmitry Medvedev's state visit to Kiev on Monday, as he seeks to gain Moscow's help with the country's struggling economy.

With the European Union's attention focused on Greek and Portuguese financial woes, it may be just the time to play the Moscow card, analysts say.

Medvedev is set to sign a bunch of deals, variously on border demarcation, joint use of Russia's Glonass satellite system, cooperation between Russia's VTB and Ukraine's Ukreximbank and on cultural and scientific corporation, RIA Novosti reported.

In the most controversial area, energy, talks but no deals are expected.

Yanukovych has made dramatic overtures towards Moscow since his election in February. Most controversial has been the deal to extend the lease for Russia's Black Sea naval base by 25 years in return for gas savings of up to $40 billion over the next decade.

And in what looks like a well-timed move, two criminal investigations were opened against former Prime Minister Yulia Tymoshenko this week, putting Yanukovych's main opponent on the defensive ahead of Medvedev's visit next week.

Another contentious issue for Ukraine's nationalist opposition could be talks between Russian and Ukrainian security services on the resumption of patrols by Russia's Federal Security Service officers around Russia's Black Sea naval base at Sevastopol in the Crimea. A deal on the patrols could be signed on May 19, during Medvedev's visit to Kiev.

Ukraine's prosecutors have revived a 2001 bribery investigation against Tymoshenko that was halted after the Orange Revolution in 2005 and opened a new investigation into claims she skimmed hundreds of millions of dollars from sales of Kyoto emission quotas to Japan.

The investigations were launched as Tymoshenko was stepping up her campaign against Yanukovych's new government. She has called the investigations a personal attack by Yanukovych against her.

The decision on whether she will be taken into custody or not will be made on May 17, the day Medvedev is due to arrive in Kiev.

According to Sergei Markov, a senior United Russia State Duma deputy, it is unlikely that Tymoshenko will go to jail. "However, the investigation can be used as pressure on Tymoshenko's European partners," he said.

The moves against Tymoshenko are either intended as a signal to Moscow or an attempt by the Yanukovych regime to consolidate power, but either way they underpin Ukraine's new enthusiasm for Moscow, analysts said.

"Unexpectedly, Ukraine has moved closer to Moscow in the last couple of days, politically and economically," Alexander Rahr, a Russia and Eastern Europe expert at the German Council on Foreign Relations, told The Moscow News. "It looks like Ukraine is steadily moving towards becoming a member of the single economic space," an ambitious reunification program Russia pledged to complete by 2012 with Belarus and Kazakhstan.

Though Ukraine is increasingly looking eastwards, the country has no intention of giving up on closer ties with Europe, analysts said.

"Neither Ukraine nor its partners can count on a quick resolution of its economic problems" unless it gets help from Russia, said Dmitry Danilov, head of European Security Studies at the Russian Academy of Sciences' Institute of Europe.

Yanukovych had initially proposed a three-way consortium between Naftogaz, Gazprom and European investors to rebuild Ukraine's dilapidated gas transport system. But those plans appear to be scuppered after Prime Minister Vladimir Putin instead proposed a straight two-way merger between Gazprom and Naftogaz, which would see the Russian energy giant practically swallowing up the undercapitalised Ukrainian company.

Yanukovych's government has not yet reacted to the offer, and officials no such deals are expected during Medvedev's visit. But analysts said it was a proposal that Yanukovych would certainly be considering.

"Right now Yanukovych is interested in stability, particularly energy stability," Danilov said. "Ukraine got a very nice offer - it was a step forward. Though Yanukovych will be criticised for selling out to Russia, he is effectively taking advantage of the situation and getting gas concessions."

Ukraine understands that the European Union is currently too preoccupied with Greece and Portugal, and with its own economic problems, said Rahr, of the German Council on Foreign Relations. "It can expect less from the European Union than it can from Russia."

The EU, faced with its own budget problems, has "irresponsibly lost Ukraine" from its field of vision, Rahr said. "I have heard nothing concrete about any steps in the partnership with Ukraine."

Europe is not giving up on Ukraine, but there is an acknowledgement that there is little it can currently offer. Meanwhile, Russia has mutual interests with Ukraine, Rahr said.
Those interests appear to be more economic than political, said Markov, of United Russia. "The integrated assets of Russia and Ukraine will be more capitalised, and they will bring more profit for both sides," he said.

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