The following piece was contributed to EurActiv by FRIDE.
"No matter how well Ukrainian President Victor Yanukovych's communication team portrays the financial benefits of the new gas-and-fleet deal with Russia, it is difficult not to think of it as a sell-out of national interests. The circumstances of the deal signed in Kharkiv last week illustrate how short-term political thinking and narrow business interests prevail in Ukraine.
But the Ukrainian government is not the only one to blame. Kiev certainly needs extra money. With the International Monetary Fund rightly sticking strictly to its reform conditionality, Russia is the only easy option for Ukraine to obtain ready funds. Fading US geopolitical interest towards the region, the lack of an EU vision, the Russian capacity to bankroll loyal post-Soviet countries have all narrowed Ukraine's room for manoeuvre. After another revolt in Kyrgyzstan, allegedly supported by Russian soft power, ask Mr. Lukashenka of Belarus how he feels.
But Ukrainian negotiators could and should be smarter than that. While Russia has been insisting on European prices for its gas, Ukraine has failed to insist in return on European practices in the gas relationship.
The result is that Russia, even with discounted prices, will get more. It has secured the lucrative Ukrainian gas market with ever increasing volumes of obliged consumption and won the lease for its fleet almost for free. Moscow has thus ensured both long-term energy revenues and the political loyalty of its largest Western neighbour.
A high-ranking EU official commented approvingly during a visit to Kiev that, 'there are managers in the new government […] They are doing things instead of talking'. There are managers indeed, but they are following the Russian proverb 'who pays orders the music'. They are certainly not insisting on European norms to regulate such relations.
In relation to the gas deal, it is hard to believe that the new government seriously intends to reform Ukraine's energy governance system, but rather wishes to squeeze the maximum out of the current, corrupt one.
The Kharkiv deal, however, goes beyond this government's preferences. It illustrates well the usual short-term thinking and behind-closed-doors practices of Ukrainian politicians driven by the narrow interests of the political-business communities. There is no intention to represent the "nation"; the clan is what matters.
The swift move to extend the lease of the Russian Black Sea Fleet (despite the Ukrainian constitution clearly forbidding any foreign base on national soil) is the prime example. Certainly, only a few in Kiev believed that Russia would ever give up its base in Sevastopol. But is that a reason for the government to forget to ask its people about a matter that touches upon the interests of the generations of Ukrainians to come? Instead, the unconstitutionally-formed coalition (approved by the West for the sake of stability) has rubberstamped the president's deal.
The Kharkiv deal sent shock-waves throughout the country and Europe. But will it be a wake up call for both? Yanukovych's signature on the Kharkiv Pact is presented as a pragmatic act, actually backed by public opinion polls. No matter how tired they are of politics, Ukrainians need to push more towards reform.
The EU needs to develop a clear vision for Ukraine and the entire Eastern neighbourhood. But so far Brussels seems unable to play geopolitics without a hand from Washington. An abstract political association and distant benefits of free trade are way too long-term for the Ukrainian political elite to grasp now. What they can understand is the chunk of immediate cash Russia can provide today. This is not a call to increase the cash injection from the West. Rather, having played an active role in Ukraine's transition to democracy in 2004, the EU should return to promote democratic consolidation instead of building up the capacity of another (rhetorically) 'pro-European' government.
Undoubtedly, by promoting economic and political stability the Ukrainian government will score some imminent victories. Two potential conflicts between Russia and Ukraine have been eliminated, at least in the short term, and the market is likely to appreciate it. The government will have the extra funding it needs to cover the current energy consumption level (keeping Ukraine among the most energy-inefficient countries in the region); it will not increase energy payments for the population; and will manage to postpone (again) the unpopular political decision in the view of forthcoming local elections.
This kind of Russian support will require further loyalty, though. The lesson from Kyrgyzstan should be clear - building a democratic state is imperative in the end."