Ukraine turns again to the EU for more money

Yesterday’s development, with half the Ukrainian government under deputy Prime Minister Serhiy Arbuzovin in Brussels to discuss and possibly sign the Association Agreement with the EU, in exchange of more financial aid of the order of at least €18 billion, is a clear sign that the country is really in dire straits. Last week President Viktor Yanukovych tuned down this agreement with the EU, saying that his country will sign instead a similar accord with Moscow. To this effect, Yanukovych met last week with the Russian leader Vladimir Putin to negotiate a deal with the Eurasian Union created by Moscow and comprising already some ex USSR republics. The continued protests by thousands of people in the capital Kiev for a second week asking the government to sign the agreement with the EU and not with Russia, and the extreme reaction of all the three opposition parties asking the same, must have created an internal spilt in the Ukrainian government. Tens of thousands of protestors are heading now for the capital from the periphery, to participate in the demonstrations during this weekend. The resumption of the strength of the protests must have played a critical role. It was a real surprise that the deputy Prime Minister led yesterday a Ukrainian government delegation to Brussels, to reportedly ask for additional aid of €18bn in order to sign the Association Agreement with the EU. Back to Brussels It’s like the Kiev government is auctioning the entire country and now raise the bids higher than what the leader of Kremlin offered, some days ago while meeting Yanukovych in Sochi. If the reports are true that the Ukrainians ask for such an astronomical amount as additional financial aid, the Brussels dignitaries must have taken the case very seriously. The responsible EU Commissioner Štefan Füle who received the Ukrainians in Brussels, after reassuring them that the Association Agreement is always on the table, stated that the International Monetary Fund is ready to discuss an aid package for Ukraine. Last Wednesday IMF Managing Director Christine Lagarde while in Brussels clearly stated that the IMF was “ready to resume negotiations with Ukraine at any time, if Ukraine wants to help its economy going in the right direction”. This is probably not the kind of help that the Kiev leaders had in mind. Invariably, IMF’s soft loans go together with policy programmes. Impossible to have the one without the other. Understandably, the IMF’s programmes to accompany the loans will demand for austere fiscal policies and structural reforms, starting for the functioning of state sector which is in a deplorable state. All Ukrainian governments have been running the place like feudal lords, accountable to none. The state security forces and the administration, even the judiciary serve the political interests and (why not) personal business projects of the governing group of people. The Political parties are created and exist for the sake of their leaders. Ideological differences play no important role. For example Yanukovych is considered to be politically inclined towards Moscow. Still, during the last two years he had been in close relations with the European Union. The two sides had actually worked closely and drafted a package of agreements covering all sectors of the Ukrainian economy. It’s an Association Agreement (AA) and a Deep and a Comprehensive Free Trade Agreement (DCFTA). This is what Yanukovych turned down the last minute, despite the fact that his country had already been favoured by EU’s financial aid. The European Sting has been following the whole issue very closely. Sting writer Suzan A. Kane on 22 November wrote, “Only last October the European Investment Bank (EIB) supported the extension of the existing metro line of Dnipropetrovsk, a city of more than one million people in south Ukraine. The EIB accorded a loan of €152 million over 25 years, with favourable terms. The contract was signed on 25 October in Luxembourg by the Ukrainian Finance Minister Yurij Kolobov and EIB Vice President László Baranyay. The EU is, or rather was, even preparing visa liberalisation for Ukrainian nationals. In any case, Brussels has offered a lot of goodies to the Ukrainian President Eastern Partnership and of course had promised a lot more after the signing of the Association Agreement”. Yanukovych changes sides Despite all that, Yanukovych went last week to Russia and stated that he was ready to sign an agreement with the ‘Eurasian Union’. It includes Belarus, Kazakhstan and Armenia and the Kremlin aspires to make of it a strong new economic entity of global dimensions. Now Yanukovych does another full U-turn and sends his deputy Prime Minister to Brussels to ask for €18bn in order to sign the AA- DCFTA package with the EU. Štefan Füle met with Ukrainian deputy Prime Minister Serhiy Arbuzov in Brussels yesterday and discussed ways towards the signature and implementation of the EU-Ukraine Association Agreement. The Commissioner went as far as to say that the EU is ready to top up what the IMF has to offer. Füle clarified that “We stand ready to help and support Ukraine in its modernisation on the basis of the Association Agreement, including through topping up IMF loans with macro-financial assistance; by stepping up the European Union’s financial assistance programmes to help Ukraine implement the Agreement, when signed, and helping to bring on board other international partners”. Auction to buy a country In reality, what the EU does now is participating in an auction to buy Ukraine’s affiliation to the West. The Commissioner, apart from promising to top up IMF’s soft loans, also reassured the Ukrainian delegation that the EU is ready to offer more programmes including financial help. On the other side of the fence Putin didn’t stay idle yesterday. He said that the needs of Ukraine will be fully covered in the Eurasian Union, especially when it comes to cheap energy. It’s really a sad spectacle to watch the European Union and Russia to use their internal leverage in the country to pull Ukraine to their sphere of influence, not minding the trauma they cause to this deeply divided nation.