Archive for January 3rd, 2012

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A good question – Ukrainian direction in 2012

January 3, 2012

Well, I have been posed a very good question by a regular reader, asking which way Ukraine will head in 2012.  East or West?

Before I give the answer I think more likely, it is probably necessary to look are the regional situation in broad, rather than detailed, brush strokes.

Firstly let us look East.  Economically despite what is likely to be a slowing of eastern economies, they will far outstrip western economies over the next decade.  Russia’s WTO accession combined with what are likely to remain fairly high oil and gas prices over the next decade will propel it to become the biggest economy on the European continent knocking Germany into second place by 2020 at the latest.

I am not the only one who thinks this is likely.  A troika of Germany, France and Poland are sending the diplomatic messages that pragmatism will trump EU sensitivities and principles whether there are major internal changes in Russia relating to democracy and human rights or not over the next decade.

It would come as no surprise if China were to start spending far more money internally than externally in the next decade to keep growth going in a very depressed global export arena.  Not to the exclusion of expanding the Yuan as a reserve currency in nations of choice to continue the slow, targeted and deliberate policy it has undertaken in the past 24 months or so.  It would also not look any gift horses in the mouth should they present themselves on the international market you have to suspect.

Ukraine has had an excellent year as far as Chinese relations went in 2011.  The same can be said for Brazil,  South Africa and Turkey for the most part.  Its dealing with Russia slightly problematic over the existing gas contract and a bit of a slap in the face at the end of 2011 when Turkey and Russia came to an agreement on the routes of gas transportation pipelines circumventing Ukraine for the South Stream project.  Relations with India improved but are hardly likely to set the world alight in 2012.

There is also the invitation from Customs Union and Eurasian Union to Ukraine to join.  Neither have been completely dismissed and undoubtedly Ukraine will be watching quite closely as those nation committed work their way through the nuances and unforeseen difficulties of 2012.

If Russian Turkish relations gain momentum this may well have a noticeable affect on where the Ukrainian compass point will err towards.

The Eastern dominated organisations of which Ukraine is a member or holds observer status within are likely to become far more assured actors.  Regional organisations such as the BSEC will become more important to Ukraine.

By no means an exhaustive list of issues in the East/South and East, but let us look West.

Despite the finalising of the text for the DCFTA and AA between the EU and Ukraine, 2012 will bring nothing more than the initialing of these negotiations in February.  They will then be put on respective shelves to gather dust for what may well be quite a long time.

However, this is not the biggest of issues facing the Ukrainian/EU momentum (and neither are issues like Ms Tymoshenko) despite what most commentators are focused upon.

What is completely apparent is the absolute shambles the EU as an entity is from a Ukrainian perspective at present.   The lack of any form of leadership relating to the Eurozone crisis has not gone unnoticed in Kyiv or by the population any more than it has gone unnoticed anywhere else on the planet.

There is still a generally pro-EU stance amongst the populous, however there are now clear indications that there is no desire to rush into another supra-structure  dominated by a Franco/Germanic pollit bureau.  It is only 20 years since Ukraine escaped the clutches of a similar central authority situated a very long way from the average Ukrainian.

Does the inertia, lack of clear authority and leadership, dominating desire for political, policy, monetary and fiscal amalgamation really seem that attractive to a nation that has only just been released from the USSR?

The EU is starting to look rather ugly and authoritarian even to the populous within, let alone to the populous outside.  Fortunately there is more to Europe than the EU or the Eurozone that will pull Ukrainian society towards it.  Somewhere at its core there are intangible ties which pull the peoples of Europe towards a common identity despite politics, wars and history.  A common tolerance earned for each other through a shared suffering during European history maybe all there is, but it is enough to think long and hard before raising the national hand against each other quite so quickly again.

A quick look at Greece and Italy to see technocrats replacing elected politicians almost at the whim of Brussels is not an endearing vision to many.  Ukrainian politicians may well be contemptible for the most part, by they are at least Ukrainian, at least go through the motions of elections,all live and work in Ukraine and do not act as administrators for foreign entities in nations where most Ukrainians have never even been.

A glance at Hungary now, and the rather draconian laws on the media and the political corporate raid on the National Bank of Hungary removing its independence further displays a severe lack of ability by the EU to uphold its own principles within its own Member States.

Ukraine is nowhere near as authoritarian as Hungary has become when it comes to freedom of the press, freedom of speech, or the separation of the pillars of society.  If the EU cannot or does not get to grips with Hungary, an existing Member State, which is democratically backsliding far faster than anything seen in Ukraine (yes it is prosecuting past political leaders for decisions made when in power, changing the Constitution at a whim etc) then it displays a duplicitous and ineffective EU when it comes to lecturing Ukraine.

Add to this the previously mentioned troika of Poland, France and Germany who are willing to engage with Russia on a pragmatic rather than principled basis and the EU position becomes even more hypocritical to the average Ukrainian.

So, back to the question of where do I think Ukraine will head in 2012?  For now, I expect it will continue to walk the fine line between East and West (plus Turkey in the South) and not move decisively in any direction.  It is a situation that one has to suspect Ukraine would prefer to keep for the next few years until 2016 at least, as it assesses how matters East and West progress and the attractiveness of the EU over the Eurasian Union.

Undoubtedly this will lead to an appearance of isolationism in the short term and may well have some temporarily poor consequences for the Ukrainian economy, or at least magnify the poor consequences of a poor global outlook for 2012, however, whilst it may well be a very difficult path to follow, it is likely to be the best option for now.

Given the extreme state of flux within the EU and the possible (albeit unlikely) changes internally in Russia, now is not necessarily the best time to accept any marriage proposals or run away and elope without due care and consideration.  Current appearances may turn out to be quite deceiving!

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