Ukraine’s Dilemma: East or West?

When translated literally the name Ukraine means ‘on the edge’ or ‘borderland’ which is appropriate given the country’s location between east and west. And in the past few months Ukraine has been in the middle of an intense power struggle between Russia to the east and the EU to the west. The country has been in a vulnerable position since the breakup of the Soviet Union and is one of the poorest countries in Europe with a huge debt to pay off in the coming years. Its population is also divided; regions located near to the Russian border are pro-Russia, while in Kiev, the Ukrainian capital, people tend to be pro-EU. Ukrainian president Viktor Yanukovych is at a crossroads because he cannot please both sides of the population. This will definitely affect his changes of being reelected.

The Ukrainian regions near the Russian border, such as the city of Luhansk, are very dependent on Russian imports. People fear that the prices of day-to-day products will increase and that life will be harder by being part of the EU. And some companies depend entirely on the Russian market, such as the Luhansk Locomotive Factory. The general director of LLF, Pavel Cesnek, stated that “my factory is practically 100% dependent on the Russian market because all of our production goes to Russian Railways. It is the only customer we have”. Cesnek is not alone in his concern about Ukraine moving towards the EU; the mayor of Luhansk, Sergei Kravchenko, also sees both sides of the story. He is not anti-EU but says that in his city alone, an average of 22,000 people would lose their jobs if Russia stopped importing their goods. (Rosenberg for the BBC, 2013)

Between the 2-15th of October, DW-Trend conducted a poll in Ukraine concerning the country’s relation to the EU. The results showed that 58% of the people questioned supported EU membership while 31% were against it. (DW-Trend) It is clear that the majority of the people support improving relations with Europe, and only 15% of those questioned support joining Russia’s custom union. (The Economist, 2013)

In December 2013, Ukraine’s sovereign debt[1] reached a debt payment peak of $15.3 billion to be paid in the next two years. Investors have expressed concern towards the country’s ability of settling this debt. Reforms to boost the economy in Ukraine are necessary and is also one of the pre-requisites for an EU agreement. Some EU members have also questioned the point in arguing over the country considering its lack of reform. The foreign ministers of Poland and Sweden both stated that “in the absence of any evidence of economic reform, we will not be drawn into a meaningless bidding war over Ukraine’s future.”  Initially this set of reforms might cause an increase in the price of energy along with a reduction in government spending and currency devaluation, but many believe that in the long run Ukraine will reap benefits from joining the EU as many other former USSR countries have done. (Matlack for Bloomberg, 2013)

Russian president Vladimir Putin and Ukraine’s president Yanukovych held talks in the Kremlin on the 17th of December of 2013 to discuss Ukraine’s situation. After this meeting, Russia declared that it would buy $15bn-worth of Ukrainian government bonds and to reduce the price of Russian from over $400 to $268.5 per 1,000 cubic metres. This assistance is very welcome in Ukraine since many industries located in the East depend heavily on gas imports from Russia to continue production. An average of 75% of the country’s engineering exports are destined for Russia.  Putin recently stated that this support is not bound by any conditions.  (BBC, 2013)

However, Russia has been ‘bullying’ Ukraine to join the Customs union led by Moscow by reducing 25% of the trade between both countries and also by reducing the supply of gas. President Yanukovych calculated that the economic loss could add up to $15 billion. On the 21st of November 2013, dubbed as “Black Thursday”, Ukraine decided not to sign an agreement with the EU leading to widespread protests all over the country. In response, Carl Bildt, the foreign minister of Sweden mentioned that the Ukrainian government “suddenly bows deeply to the Kremlin. Politics of brutal pressure evidently works”. (The Economist)

According to President Putin the only one that is putting pressure on Ukraine is the EU. The easiest option for Ukraine to solve its current condition in the short run would be to align to Russia, but in the long run being closer to Europe would help the country conduct political and economic reform which would help boost its economy. (Matlack for Bloomberg, 2013)

It is up to Ukraine to decide whether it will be part of the east or west. Up until now no consensus has been reached, and the country is torn between both sides. As some may say, beggars can’t be choosers, but in the case of Ukraine this is certainly not the case. In fact President Yanukovych is facing possibly the most vital decision for any country in recent years; a decision that will fundamentally affect how Ukraine is governed and how it will define itself culturally, socially and economically.

*Cover image ‘Protests in Kiev 27 November‘ by Ryan Anderson


[1] Bonds issued by a national government in a foreign currency, in order to finance the issuing country’s growth. (investopedia)

2 responses to “Ukraine’s Dilemma: East or West?

  1. Catherine,
    I’m having a hard time understanding why the nation of Ukraine can’t just deal with both Russia, the nations of the European Union, or any nation they want. How is it that the Ukraine is somehow seemingly forced to choose between EU and Russia, when I can buy BOTH a Chevrolet and a BMW? Let me put it this way. The people and nation of Ukraine simply should choose to take the actions which will benefit the most of its citizens, whoever they are doing business with.
    Thanks,
    Jerry

    • Hi Jerry,

      Ukraine has a unique geographical position that allows it to cooperate both with the EU and Russia. Ukrainian president Yanukovych has expressed intentions to sign a free trade agreement with the EU and to possibly consider joining Russia’s Eurasian union. Up until now both Russia and the EU are making it hard for Ukraine, because if they decide to side with Europe, Russia will react by closing its market and vice-versa. Ukraine has become a country of dispute in terms of interest and power.

      There is no reason why Ukraine should decide for one side or the other. If there would be a trade agreement with the EAEU and the EU that would open doors between members of Russia’s led union and the EU. Unfortunately up until now none of both sides has considered exploring this option.

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