It looks as if Ukraine’s Prime Minister Viktor Yanukovych has begun to work hard at improving relations with Russia. On the eve of his planned visit to the US the prime minister suddenly decided to visit Moscow. This was his third meeting with President Vladimir Putin since he came to power in August 2006. What is interesting, though, is that the trip to Moscow was announced after the scandal about the signing of directives concerning Yanukovych’s visit to the US. The head of the government refused to issue directives for the president’s signature until the threat that the visit would be delayed became a reality.
No one knows what directives the prime minister took with him to Moscow. But judging from his statements, he appears to be ready to go far in order to seek a rapprochement with our large northern neighbor. It looks as if the Ukrainian prime minister is gradually mastering the conceptual apparatus that is close to the Kremlin’s ear. Yanukovych assured Putin that Ukraine will participate in the Single Economic Space (SES), which was created through the efforts of Russia, Kazakhstan, Belarus, and Ukraine.
“The unification of tariffs is the first step to the Single Economic Space,” Yanukovych said during his meeting with Putin, adding that he finds it necessary to settle this question. These words surprised the Russian president to such an extent that he asked: “Do I understand correctly — Ukraine is thinking about the SES?” He received the frank response: “Of course.”
Prime Minister Yanukovych also offered to transport via Ukraine Russian goods that are still being transported to Europe via the Baltic states. “We are ready to direct through Ukraine the channels that were going through the Baltic states. We are building well-paved roads — we are proposing to build a Kyiv-Moscow highway,” he said, adding that Ukraine is “very concerned” about the questions of goods transit and tariff unification.
According to the summary of the meeting, Putin stated that Moscow and Kyiv are moving toward final agreements on energy questions. Putin told Yanukovych that before he visits Kyiv, a number of documents will be ready, which are now in the final stages and being prepared for signing.
Later, Yanukovych told journalists that during his visit to Moscow, he managed to achieve success in the question of Russia- Ukraine energy collaboration. “We have received a powerful signal for increasing the volumes of oil pumping to Ukraine for the current and next years,” the prime minister said. According to him, this will make it possible to enlarge the volumes of oil processing at Ukrainian oil-processing plants.
Yanukovych also said that there are a number of unresolved questions in Ukrainian-Russian relations, which should be settled, with an agreement prepared for signing. The prime minister named the question of readmission, simplification of citizenship registration, and trade restrictions. “It has become clear to us that we need to take a decision on a wide spectrum of product groups,” the prime minister said. At issue are meat and dairy production and caramel. Among “new questions” Yanukovych named the supply of broad-diameter pipes.
COMMENTARY
Andrii ZAGORSKY, professor at the Moscow State Institute of Foreign Relations:
“The subject of the Single Economic Space has been raised by Moscow, and in October 2006 Fradkov invited Ukraine again to join this process. Yanukovych’s interest in the SES during his meeting with Putin should be regarded as a gesture that the Ukrainian prime minister is trying to make toward Moscow. The SES prospect is rather weak, which is why one cannot speak of Ukraine’s surrender. In any event, the Single Economic Space does not exist yet; neither do the free trade zones and especially the tariff union. Moreover, this whole process is limited to a packet of agreements that are being prepared by both Russia and Kazakhstan. I don’t know whether he sees weak spots or illusions that are appearing here, but, naturally, he is trying to speak to Moscow in its own language in order to decrease expenditures at least where this is possible. Next year’s gas prices will definitely be lower in Ukraine than in Georgia or the Southern Caucasus countries. But this is not so much a question of Ukraine’s “surrender” of someone or something as a game in this space with the aid of those concepts that are preferred by Moscow.
“The subject of the unification of tariffs was broached several months ago. Ukraine’s interest in acquiring investments to develop a transport infrastructure is understandable. This is both a good and useful thing. As for tariff unification, Russia will not agree to unify tariffs without a complete program for realizing the Single Economic Space. Unification of tariffs means the expansion of the domestic Russian tariff on railway transport to partner states, which is lower than Russia’s export tariffs; this makes transport cheaper. This is what is meant by tariff unification. Without broad participation in the SES — and this is hardly possible even under Yanukovych — one cannot speak about the application of Russian tariffs.
“Tariffs in Russia also have a weak tendency to grow. After Russia joins the WTO, there will be a rather speedy process of bringing domestic and export tariffs closer, and this will remove the advantages that emerge from the expansion of such tariffs. Therefore, the major advantage that may be gained thanks to the development of a transport structure is not so much tariff issues — one should not count on this — as the question of trans-European and trans-Asian systems of communication that will help to save time and reduce expenditures on goods transported between Asia and Europe via Russia. This is very important for Ukraine because Ukraine’s many export clients are in northeastern Asia and Asian countries.”
Mykhailo HONCHAR, vice-president of Strategy 1 Foundation
“The SES project is more dead than alive, and Ukraine’s attempts to reanimate it look rather illogical. It is difficult to find the logic of general national interests. If one were to apply the logic of clan-corporate interests, then the goal of reanimating an idea linked to the Russian president is to obtain certain dividends of a political or perhaps economic nature. However, the last appears doubtful. On the other hand, regardless of the SES idea or any other ones, Russia has always tried to foist the concept of tariff unification in its political course vis-a-vis the post-Soviet countries. The Russian approach has always been obvious and based on the desire to obtain a minimization of existing tariffs on transport from the post-Soviet countries, particularly Ukraine, through which passes a significant volume of the transit goods channel. When the Ukrainian side talks about the acceptability of such ideas, the question arises: where do Ukraine’s interests lie in such a unification, which in fact serves a cover for the intention to minimize or reduce our tariff revenues, and correspondingly, our state revenue.
“As for the redirection of goods from the Baltic direction, the situation looks attractive at first glance. Russia has some concerns about transit via the Baltic countries. Moscow senses that conditions are increasingly being created to set up an informal transit alliance from the Black Sea to the Baltic Sea, an alliance of Ukraine, Belarus, and the Baltic countries in order to create a unified tariff policy. These countries occupy all the transit space between the Baltic region and the Black Sea, through which passes a significant channel of external economic trade between the Russian Federation and the EU.
Russia’s intention to withdraw part of its cargo from the Baltic direction and transfer to the Ukrainian one resembles a carrot-and-stick policy — a stick for the Baltic countries and a carrot for Ukraine. Situationally, one can truly win by letting part of this cargo through one’s own territory and gain additional earnings.
“But there are no guarantees that Ukraine will not become a victim of similar actions at the next stage of the game. It is risky for Ukraine to play this game. I don’t think it meets Ukraine’s interests. If one speaks about some serious goods channel, it should not be regarded in a narrow bilateral format but in a trilateral one, with the participation of the European Commission and the European Union, in order to develop a systematic tariff policy on the west-east level. In all other cases this is simply a certain situational thing that, as always, will lead to results contrary to expected ones, because there are only promises from the Russian side. But they will demand completely realistic actions from Ukraine and a concrete tariff reduction without any guarantees of increasing cargo channels.”







