Russian pressure is building on Kyiv

Quite unsurprisingly, with the EU, IMF and “the West” in general suffering from a bout of Ukraine fatigue not seen since the Yushenko/Tymoshenko years,  and with Ukraine tied to a ruinous gas deal signed during those years, Russia with a Presidential election next month, is piling on the pressure and rhetoric at Kyiv.

Back in July 2011 I wrote about trade disputes between Russia and Ukraine building up and amongst the many disputes currently on-going is a cheese war.  Russia has currently banned all Ukrainian cheese and to be honest it is getting the same headline press in Ukraine as the current gas negotiations for which Russia is attempting to drive a very hard political bargain.

Tymoshenko may well have signed Ukraine up to economic suicide when authorising the gas contract between Russia and Ukraine in 2009, but to get out of it, Yanukovych must now commit political suicide.  The price for Ukraine to have gas prices the same as Russian users does not depend upon it surrendering the Ukrainian gas transport system to Gazprom any longer.

The price is now signing up and being a full member of the Customs Union.  To do that would put the long negotiated and soon to be initialed DCFTA with the EU in an exceptionally precarious position if not a completely unworkable position.  Tied to the DCFTA is of course the political Association Agreement which regular readers will know I thought was not a particularly bright idea from the EU side, envisioning the exact scenario we now see unfolding over the geopolitical battle for Ukraine.

Thus far Ukraine has refused to buckle to such pressure, however this week saw the upping of the Russian anti considerably.

I predicted back in January 2010, that the Ukrainian GTS would become an empty and useless system (other than for domestic supply).  Not that it was difficult to predict, anybody who takes an alternative view to Ms Tymoshenko over policy will usually turn out to be right.

Two days ago, to turn up pressure on Ukraine further, Russia announced that the construction of the South Stream gas line will begin in December 2012 and that with it, plus the new working Nordstream plus the recently Gazprom acquired and fully owned Belorussian GTS, will mean that no EU gas will then be transited via Ukraine.

The pressure on Kyiv will now be enormous, as that is likely to be the Russian position going forward for some time.  It would be easy to say, just release Tymoshenko and the EU and IMF will come riding over the horizon to the rescue, however, the latest opinion polls not controlled by the government showed only 30% of Ukrainians believed her jailing was political.  The vast majority according to that poll therefore think justice has indeed been done.  The fact her jailing managed only 2000 protesters would seem to back that poll.

Whilst the international audience may well be happy with her release, the domestic audience, and they are the people who vote, may not be as happy, to say nothing of a large number of MPs.

The important question for the EU, Russia and Ukraine is now whether Kyiv will stay strong or if it will crumble.  It is said in every crisis there is opportunity and this maybe an opportunity for Ukraine to show both Russia and the EU it will not be bullied by either, however the pressure is tangible!

Thus far though, since that Russian announcement, Ukraine seems to be standing strong – thankfully – just the kind of crisis to force Ukraine look to opportunities to move on and become less reliant on Russian gas.