Strategic Posture Review: Ukraine

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Despite having enormous natural and human resource endowments, Ukraine has experienced severe difficulties during the past two decades transitioning from a Soviet republic subordinate to Moscow to an independent country with a democratic political system, effective liberal market economy and foreign and defense policies that meet the country’s unique national security requirements. Many of Kiev’s particular foreign policy concerns result from Ukraine’s status as both a bridge and a front-line state situated between the former Soviet empire and Western and Central Europe.

Ukraine has increasingly tried to turn that status to its advantage. For now, though, it has yet to strike a comfortable balance. Most Western governments have clearly circumscribed their military, economic and other commitments to Ukraine, which remains outside NATO and the European Union. In contrast, many Russians are intensely concerned with the fate of Ukraine — partly because some Russians still question whether Ukraine can or should be a separate country independent of Russia itself. Although unlikely at present, Ukraine remains acutely vulnerable to the emergence of a nationalist government in Russia that might seek to reclaim some or all of its territory.

Under President Viktor Yanukovych, in office since February 2010, Ukraine has declared its commitment to pursuing a “multivector” foreign policy intended to maintain good diplomatic relations with all countries. More simply, Yanukovych often describes Ukraine as a bridge between the former Soviet states and Western countries. In fact, this has been Ukraine’s general strategic posture since it became an independent country in 1991, whereby it has remained closely tied to Moscow while cautiously cultivating other relationships. Though actively seeking closer economic integration with the West, Ukraine’s current government has ruled out membership in NATO as a policy goal. The previous government had harbored such aspirations, but encountered major problems with Russia and its own divided population when it sought to move in that direction, which many NATO governments were reluctant to encourage in any case. As for Ukrainian aspirations for EU membership, they are hobbled by the country’s weak and unreformed economy as well as its limited adherence to liberal democratic principles.

Today Ukraine is the largest contiguous country on the European continent that does not extend into Asia, with its most important geopolitical feature being that it lies between East and West, along the new, if less distinct, boundary separating the old Soviet bloc and Europe. Fortunately, Ukraine’s front-line status has thus far been overshadowed by its role as a bridge country. In this role, it has helped to buffer tensions arising between Russia on one hand and NATO and the EU on the other as the two regional organizations expanded into the former Soviet republics, including some of Ukraine’s neighbors.

Several of Ukraine’s international borders remain officially unresolved, though in practice these disagreements are unlikely to lead to the kinds of armed conflicts seen in other former Soviet republics such as in the South Caucasus. A boundary treaty drawn up in 1997 between Ukraine and Belarus has not been ratified due to unresolved financial claims. Land boundaries have been drawn with Russia, though the maritime boundary through the Sea of Azov and Kerch Strait remains unsettled. The two sides negotiated a framework agreement for those in December 2003 and discussions continue at the expert level. Ukraine also objects to a causeway Russia is constructing toward Ukrainian-administered Tuzia Island in the Kerch Strait. Ukraine has not resolved Romania’s claims to Ukrainian-administered Zmiyinyy Island or the two countries’ contested Black Sea maritime boundary, despite ongoing bilateral talks based on a 1997 friendship treaty that projected resolution by 1999.

Recent History

Upon declaring its independence from the Soviet Union on Aug. 24, 1991, Ukraine began a transition to a market economy but suffered significant economic slowdowns. Growth has picked up during the past decade, but the country has yet to complete many major reforms. Under former President Leonid Kuchma, Ukraine adopted its first constitution as an independent country and pursued a foreign policy balanced between East and West. But Kuchma became tainted by his association with corruption, illicit arms transfers and repression of civil liberties. Furthermore, he consolidated excessive power in the executive branch and may have encouraged electoral fraud to secure the election of his preferred successor when he could not run for a third term in 2004.

During the 2004 elections, the Russian government also worked with Kuchma to support the election of Yanukovych, then prime minister, as Kuchma’s successor. Although the authorities initially declared Yanukovych the winner against Viktor Yushchenko, widespread evidence of vote-rigging led to three weeks of mass demonstrations by orange-clad protesters, most prominently those residing in the impromptu tent city rapidly established in Kiev’s central Independence Square. To break the deadlock, Ukraine’s Supreme Court annulled the vote and ordered another round of balloting. Yushchenko emerged as the winner in what the international media took to calling the “Orange Revolution.” Western governments intervened throughout this process. Though they professed to support a free and fair electoral process rather than any particular outcome, Russian leaders suspected the West of seeking to overthrow pro-Moscow regimes in Ukraine and other former Soviet republics through a process of “color revolutions.”

Yushchenko’s honeymoon period proved short-lived. His popularity across Ukraine soon fell precipitously because of the country’s faltering economy, accusations of corruption against his administration, visible in-fighting among the leaders of the Orange Revolution, seemingly gratuitous confrontations with Moscow, generally poor performance and a seeming lack of energy and initiative in pursuing his reform agenda. After Yushchenko and Yanukovych made a deal to divide power between them, the charismatic Yulia Tymoshenko became the leader of the parliamentary opposition.

But Yanukovych and Yushchenko soon engaged in a protracted struggle for control over Ukraine’s political institutions. Amendments to the Ukrainian constitution adopted in December 2004 as part of the compromise ending the disputed presidential election, and which went into effect in 2006, left uncertain the respective powers of the president, the legislature and the cabinet heads. All three fought for control over government policy and the all-important Foreign, Defense and Interior Ministries, whose leading officials waged vicious bureaucratic battles against each other, at times using opportunistic alliances with members of other executive branch bodies and the parliament.

Foreign policy issues did not play a major role in the 2007 parliamentary elections, which largely focused on questions of the popularity, integrity and effectiveness of the country’s leading politicians. Tymoshenko, Yanukovych and Yushchenko all stressed their desire to enjoy good relations with both Russia and the West. They all called for Ukraine to enter the World Trade Organization and, less realistically for the time being, the European Union. Yanukovych’s last-minute calls for national referenda on whether Ukraine should abandon its military neutrality — by joining NATO, for example — or make Russian the second official state language failed to affect the outcome appreciably. For her part, Tymoshenko made fighting corruption a core element of her platform. Russian leaders, recognizing that Moscow’s heavy-handed intervention in the 2004 ballot probably backfired by alienating Ukrainian nationalists and by embarrassing Russia when its preferred candidate lost, took care to limit visible involvement in the 2007 ballot.

In the subsequent 2009 presidential election, which pitted Yanukovych against Tymoshenko, divisions in the reform camp handed Yanukovych a narrow victory. These national elections, while a testimony to the persistence of deep political and other divisions among Ukrainians, also underscore their commitment to democracy and civil rights, despite the growing authoritarianism in many other former Soviet republics. This strong commitment, further manifested by the large voter turnouts, in turn helps explain the unanticipated ability of Ukrainians to sustain the first independent Ukrainian state in centuries, following the disintegration of the multinational Soviet Union in 1991.

Under Yanukovych, the influence of the parliament, the prime minister and the other branches of government has been reduced. The presidential administration makes key policy decisions, while the judiciary, the central bank and parliament have lost independence. Since his election, Yanukovych has initiated a broad campaign against corruption. Critics, including Western governments, worry that the government is using these corruption charges as a means to target past and potentially future political rivals. Yanukovych’s supporters can cite evidence of at least some corruption for most anyone they chose to prosecute. More importantly, they note that international polls show rising levels of confidence and trust in Ukraine.

Yanukovych’s first trip as president was to Brussels. This was perceived as a strategic move to overcome fears that he was Moscow’s man by conveying a commitment to furthering relations with the EU and the West. To demonstrate further this commitment to balancing relations with Russia and the EU, Yanukovych signed into law the Foundations of Domestic and Foreign Policy legislation, which declares that Ukraine is a neutral state that seeks only close cooperation with, and not membership in, NATO. In addition to still seeking EU membership, which will not soon occur, the government’s stated priorities are pursuing a strategic partnership with Russia and the Commonwealth of Independent States, maintaining the country’s neutral status and abandoning the quest for NATO membership.

Political Structure and Demographics

Although one should never underestimate the influence of Ukraine’s political, commercial and regional elite networks, Ukraine’s constitution formally defines the country as a presidential-parliamentary system of government. The popularly elected president heads the executive branch, assisted by a prime minister and cabinet of ministers. The legislative branch consists of a 450-member unicameral parliament. The judiciary, perhaps the weakest branch, has a Supreme Court, a Court of Appeals, local courts and a Constitutional Court. The most recent major constitutional changes occurred in October 2010, but these essentially repealed earlier amendments and restored the 1996 constitution. Most notably, these changes enhanced the powers of the president, again giving him the right to appoint and dismiss the prime minister as well as other national, provincial and local government officials.

Ukraine’s population is approximately 45.8 million people, of whom 78 percent are ethnic Ukrainians, 17 percent are ethnic Russians and roughly 0.6 percent are ethnic Belarusians. The population is primarily urban, with the industrial regions of the east and southeast the most heavily populated. These divisions, which make national politics complex, also affect the country’s national security policies, with urban easteners generally looking to Russia and western Ukrainians eager to emphasize ties with the rest of Europe. Ukraine’s east-west divisions are longstanding. For centuries, western Ukraine had belonged to Austria-Hungary and Poland, before the Soviet government forcefully incorporated it in the 1940s. Its primarily Ukrainian-speaking population is generally more nationalist and pro-European and less inclined to look to Moscow for political guidance than the large Russian-speaking communities of the industrial regions of eastern Ukraine.

Energy and Foreign Policy

Energy politics has been an important driver of Ukraine’s foreign policy, most obviously by encouraging Ukraine to sustain good relations with both EU members and Russia, which controls most of the pipelines that transport oil and gas from Central Asia to Europe. Energy politics also manifests itself in shady ties and conflicts between national and transnational groups that exploit the lack of transparency in Russia and Ukraine for financial gain. Europe’s dependence on gas delivered via Ukraine provides some balance against this trend, since the EU, along with the United States and many international financial institutions, continue to push Kiev to make its energy sector more transparent and less corrupt.

Ukraine and Russia have a mutually dependent energy relationship that constrains their reciprocal leverage. Russian companies under the Kremlin’s control possess the oil and gas pipelines that Ukraine needs for its own use, but Russia needs to move its energy through Ukrainian territory to reach Western markets. In the past, when Ukraine and the Russian state-owned gas company Gazprom have disagreed over what price Ukraine should pay for its gas imports or how much Ukraine owes Gazprom for earlier purchases, Russia has curtailed its deliveries to Ukraine. In response, Ukraine has drawn down its large stocks of gas reserves, while also allegedly siphoning off some of Gazprom’s European gas deliveries transiting Ukrainian territory. Some Russian energy managers would like to exert greater control over Ukraine’s pipeline infrastructure, as doing so would allow Russia to use gas more effectively as a political lever against regional states.

The EU has been investing in Ukraine’s energy infrastructure to prevent this as well as to gain greater transparency in such a strategically important sector for its member states. Another European objective is to improve the efficiency of Ukraine’s domestic energy use, which is ranked among the lowest in the world. If Ukraine’s domestic gas prices were raised to world market levels, Ukrainian industries would become even less competitive in global markets than they currently are. Along with the United States, the EU has been encouraging greater energy conservation, the upgrading of inefficient energy infrastructures and greater pursuit of alternative energy options. Over the longer term, both the EU and Russia are seeking to reduce their dependence on the pipelines traversing Ukrainian territory by building new routes.

Economy and Trade Relations

Ukraine’s economy continues to grow modestly, with the International Monetary Fund (IMF) and World Bank forecasting growth of 3.5-4 percent in 2011 with an inflation rate of approximately 12 percent. There should be significant growth in the metallurgy sector as construction projects increase for the UEFA 2012 soccer tournament, which will be hosted by Ukraine and Poland, and as the recovery in foreign export markets gains momentum.

The biggest challenge Ukraine faces is to reduce its vulnerability to external shocks, especially interruptions in Russian energy deliveries. Ukrainian authorities also need to make a greater effort toward improving the business climate and raising foreign investor confidence. Accelerating the rate of growth further requires that the government must make greater progress toward fiscal stability, economic diversification and attracting more foreign direct investment.

Ukraine made a significant step in this direction on May 16, 2008, when the country became a member of the World Trade Organization (WTO). Membership in the WTO implied that Ukraine would become more open and transparent and would work toward improving the investment climate, although both efforts remain incomplete at best. In 2010, Ukraine had to borrow money from the IMF to cover a significant budget deficit. To receive the loan, the government had to commit to an ambitious series of economic reforms designed to avert future deficits. These include restructuring the national pension system and reducing state subsidies for domestic gasoline consumption.

Reining in corruption is an essential component of transforming the economy and improving the business climate, and is pivotal for improving not only relations with the West but also Ukraine’s global image. Currently, the investment climate is improving as Ukraine further integrates with the EU. In addition, Chinese and other Eastern investors are increasingly looking toward investing in Ukraine’s abundant rich soil for agricultural purposes.

Since March 2007, the EU and Ukraine have been negotiating a free trade agreement (FTA), part of a broader Association Agreement that is to replace the present Partnership and Cooperation Agreement established in 1998. But Ukraine will need to make greater progress in implementing economic and political reforms before the FTA, let alone EU membership, will ever be considered seriously. Russia has exploited this situation to lobby Ukraine to join the Moscow-led customs union comprising Russia, Belarus and Kazakhstan. Russian Prime Minister Vladimir Putin told his Ukrainian counterpart Nikolai Azarov that joining the customs union will result in some $6.5 billion to $9 billion in direct benefits to Ukraine through expanded industrial opportunities. Russia has considerable economic leverage over Ukraine due to the deep interdependencies between the two national economies, with most of Ukraine’s high-tech exports going to Russia.

Like Moscow, the EU insists that closer integration will contribute to economic growth for Ukraine given that the EU is Ukraine’s primary commercial partner and accounts for one third of Ukraine’s external trade. Brussels also maintains that Ukraine will benefit from the political association with the union. Joining Russia’s customs union would negatively impact EU talks unless Russia joins the WTO. Conversely, Russia has indicated that a free trade agreement between Ukraine and the EU would require Russia to take protective measures such as raising trade barriers.

Security and Defense Policy

The main security threat to Ukraine since independence has been that Russia will seek to reincorporate all or some parts of its territory. In the early years following the end of the Soviet Union, some Ukrainians and many Russians considered the separation between Russia and Ukraine unnatural. Proposals regularly arose for reunification or at least the transfer of some Ukrainian territory, such as those regions dominated by ethnic Russians, to the Russian Federation. Conversely, many Western countries consider keeping Ukraine independent from Russia a geopolitical imperative, as without Ukraine, Russia’s economic and military potential are an order of magnitude less than that of the former Soviet Union.

Ukraine is not currently a full member of any of Eurasia’s strongest military blocs. It remains outside of NATO, the Moscow-dominated Collective Security Treaty Organization and the European Union. Ukraine has joined several weak security institutions, such as the Commonwealth of Independent States (CIS); the GUUAM grouping comprised of Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova; and the Community for Democratic Choice, formed in Prague in December 2005 by the presidents of Ukraine, Georgia, Lithuania, Latvia, Estonia, Romania, Moldova, Slovenia and Macedonia to focus on the promotion of democratic values, regional stability and economic prosperity. Ukraine has consistently supported peaceful, negotiated settlements to disputes and has substantially contributed to U.N. peacekeeping operations since 1992.

Ukraine deepened cooperation with NATO in 1997 after signing a Charter on a Distinctive Partnership between Ukraine and NATO in July 1997. A supplementary Declaration to Complement the Charter was signed in August 2009. In early 2008, Tymoshenko, Yushchenko and Parliament Chairman Arseny Yatsenyuk submitted a joint letter to NATO’s then-Secretary-General Jaap de Hoop Scheffer declaring Ukraine’s readiness to accept a Membership Action Plan (MAP) for NATO, a step generally considered a requirement for membership. Then-President George W. Bush and other American leaders subsequently lobbied vigorously for Ukraine’s MAP application. Bush even visited Ukraine a few days before arriving at NATO’s April 2008 summit in Bucharest that was to decide on the matter. Nevertheless, Germany, France and other West European governments worried that antagonizing Moscow over the issue would add to existing tensions resulting from Russia-NATO disputes over Kosovo and missile defense. They also pointed to the lack of popular support within Ukraine for NATO membership.

The Russian national security establishment had made clear that it strongly opposes Ukraine becoming yet another NATO member on Russia’s borders. After meeting with Yushchenko at the Kremlin in February 2008, Putin observed that if Ukraine were to join NATO and host U.S. missile defense sites, “in response to such a potential deployment on Ukrainian territory, Russia — and theoretically we can’t rule this out — could aim its missile systems at Ukraine.” Russian Duma members raised the possibility of abrogating, renegotiating or simply not extending after its 2009 expiration date the 1997 Russia-Ukraine friendship and cooperation treaty, which stipulates the inviolability of the two countries’ territory and borders. Some press reports, later denied by the Russian government, related that Putin himself said in a closed speech at the Bucharest summit that Russia might take back the Crimea if Ukraine ever joined NATO.

To address Russian and domestic concerns, Ukrainian leaders subsequently reaffirmed that their national constitution prohibits foreign bases on Ukrainian territory, with the temporary exception of the Russian naval base at Sevastopol. Polls indicate that only a minority of Ukrainians wished to join NATO, with opposition to membership greatest among the Russian-speaking majorities in eastern and southern Ukraine, especially in the Crimea. In the summer of 2006, local protests against the docking of a U.S. Navy ship in the Crimean port of Feodosiya disrupted that year’s U.S.-Ukrainian Sea Breeze exercise, an annual event since 1997. The Crimean parliament subsequently voted to declare the peninsula a “NATO-free territory.” The Yushchenko government pledged that, before actually joining NATO as a full member, it would hold a nationwide consultative referendum on the issue.

The NATO governments ultimately decided to postpone offering Ukraine and Georgia a MAP at the 2008 Bucharest summit. Nevertheless, the summit declaration affirmed that the two countries “will become NATO members” eventually, leaving everyone confused as to NATO’s intentions. Unofficially, most NATO leaders have made it clear that they do not envisage Ukraine joining the alliance anytime soon, given the country’s limited progress in security sector reform as well as the widespread opposition within Ukraine — and Russia — to it joining NATO. Especially following the August 2008 Russia-Georgia War, which would have entangled NATO much more deeply if Georgia had received a MAP, let alone membership, NATO leaders are content to develop relations further on the basis of the July 1997 NATO-Ukraine Charter on a Distinctive Partnership, which along with the November 2002 NATO-Ukraine Action Plan established several subjects for broad, if not deep, consultation and cooperation. The two sides also use the NATO-Ukraine Commission (NUC), also established in 1997, to institutionalize the relationship without formal membership. Recent activities have included NATO helping to eliminate Ukraine’s large stock of surplus conventional weapons and providing language, civics and other courses to Ukrainian officers. NATO’s new Strategic Concept, adopted at the alliance’s November 2010 heads-of-state summit in Lisbon, reaffirms the alliance’s commitment to partnership with Ukraine.

Although NATO membership has for now been ruled out, Ukraine is the only alliance partner participating in all the primary peacekeeping missions currently undertaken by NATO. Ukraine was also the first partner country to cooperate with NATO regarding cyberdefense. Ukraine further assists NATO to target money laundering and the trafficking of drugs, arms and humans, and collaborates with the Euro-Atlantic Disaster Response Coordination Center, through which Ukraine and other NATO members and partners receive assistance during natural disasters. In February 2011, Ukraine expressed interest in cooperating with NATO to build the European missile defense system, consistent with its previous insistence on setting up a joint European missile defense system. Such cooperation may depend on NATO and Russia resolving their often sharp differences over the alliance’s missile defense plans. In addition to participating in NATO peacekeeping missions, Ukraine also supports U.N. peacekeeping efforts, with its most significant contribution to date being a 275-man helicopter squadron sent to support the U.N. Mission in Liberia.

Military reform has been another major area of Ukraine-NATO collaboration. Following the dissolution of the Soviet Union in 1991, Ukraine inherited the second-largest military in Europe after Russia. On paper, it included nuclear weapons and other modern armaments, though the ability of Ukraine’s new armed forces to actually use them effectively was unclear. Since independence, Ukraine has implemented many military reforms, including reducing the size of its army, eliminating weapons systems and armaments such as combat aircraft and tanks, and relinquishing all the nuclear weapons and nuclear delivery vehicles Ukraine inherited from the Soviet Union.

When Ukraine gained independence in 1991, its armed force consisted of 780,000 personnel, 6,500 tanks, 7,000 armored vehicles, 1,500 combat aircraft and more than 350 warships. It also possessed 1,272 strategic nuclear warheads and 2,500 tactical nuclear weapons. By the end of 1996, the country had eliminated more than 400,000 personnel, 600 combat aircraft, 2,400 tanks and 2,000 armored vehicles.

According to the latest issue of the IISS Military Balance, Ukraine currently has roughly 130,000 active duty personnel, of whom 70,000 serve in the army, 14,000 in the navy and 45,000 as members of the air force. About half of all active-duty personnel serve under voluntary contracts, while the other half are conscripts. The country can also rely on 85,000 paramilitary personnel and 1 million reserve personnel. Current reform plans aim to disband the territorial commands and instead have army units serve in a Joint Rapid Reaction Force, a Main Defense Force and a Strategic Reserve. The air force has slightly more than 200 combat planes, including 80 MiG-29s, 36 Su-27s, 36 Su-25s and 36 Su-24s.

The Ukrainian military still needs more reform, with one major problem being that Ukraine’s armed forces are underfinanced. In 2009, Ukraine spent approximately $1 billion on its military. The state budget allocated 1.29 percent of GDP towards defense in 2009, but Ukraine actually spent only 0.79 percent of GDP. These financial shortfalls lead to limited training, outdated equipment and widespread protests among armed forces personnel about military living conditions. The effect of all these problems is that, despite the large force that Ukraine can field on paper, most of the country’s armed forces can only conduct territorial defense missions.

Since independence, Ukraine has demonstrated a continued commitment to nuclear nonproliferation. In 1992, Ukraine signed the Strategic Arms Reduction Treaty, and two years later it ratified the Nuclear Non-Proliferation Treaty as a non-nuclear-weapons state. At the 2010 Global Nuclear Security Summit in Washington, Yanukovych promised to send the country’s stockpile of highly enriched uranium (HEU), estimated at 198 pounds, to Russia for secure storage, with the United States to contribute $50 million to support this project. Furthermore, Ukraine plans to convert its research reactors from using HEU, which can also be used to make nuclear bombs, to less dangerous low-enriched uranium. These decisions demonstrate Yanukovych’s willingness to cooperate with the United States on key security issues that are not opposed by Moscow.

Relations with Russia

The linguistic, cultural, ethnic and historical ties between Russia and Ukraine have played a major role in Ukrainian foreign policy. For most of its post-1991 history, Ukraine has pursued a policy of maintaining tight ties with Russia while at the same time pursuing closer relations with the West, particularly the European Union. Yushchenko’s brief foray into trying to move Ukraine considerably closer to the West while antagonizing Moscow proved a failure that is unlikely to be soon repeated.

Current President Yanukovych has reverted to the past posture and sought to deepen ties with the West without taking measures that could alarm Russia. One of Yanukovych’s first and most controversial moves in office was to grant Russia a 25-year extension on its lease of a naval base for the Black Sea Fleet in the city of Sevastopol on the Crimean Peninsula. Issues relating to Sevastopol have long troubled Russian-Ukrainian relations. Ukrainian nationalists, viewing the Russian military presence on the peninsula as an encroachment on sovereign Ukrainian territory, complain about Russian interference in local affairs. For their part, Crimean nationalists, believing that Ukrainian leaders pay insufficient heed to the distinct needs of their population, such as adequate Russian-language schools and socio-economic opportunities, have lobbied Moscow to allow the primarily ethnic Russian territory to rejoin Russia.

In 1997, Russia and Ukraine agreed to divide the Soviet-era Black Sea Fleet. Even so, Kiev repeatedly tried to increase the rent Russia pays to continue using the former Soviet military facilities in and around Sevastopol, which house approximately 14,000 Russian navy personnel. Moscow annually wrote off almost $100 million of Ukraine’s debt to Russia, largely incurred for energy supplies, in compensation for the base. Nevertheless, under Yushchenko, Ukrainian authorities refused Moscow’s request to increase the number of Russian diesel submarines based in the Crimea from two to at least a dozen. The two countries also disputed ownership of several offshore lighthouses.

In April 2010, Ukrainian legislators ratified the Kharkiv Accords, the controversial Russian-Ukrainian agreement that allowed the Russian navy to remain at its Sevastopol base for another 25 years after the current lease expires in 2017. In return, Ukraine will receive a 30 percent discount on natural gas over the next decade. The Ukrainian Parliament was split over this agreement, with opponents claiming that the government was “selling out the country’s sovereignty.” The projected savings from 30 percent discount on natural gas has been estimated at $40 billion over the 10-year term of the agreement, but critics complained that the deal is not especially generous and attacked Yanukovych for allegedly “trading sovereignty for gas.” The debate is shrouded in uncertainty and confusion since Ukraine’s highly subsidized national energy system, decaying transit infrastructure, widespread corruption and pervasive opaqueness make it hard to determine with certainty who will benefit most from the arrangement. Still, relations between Russia and Ukraine have subsequently improved, and Kiev is no longer a major point of contention between Moscow and Europe.

Relations with Europe and the United States

Despite moving closer to Moscow since 2010, Ukraine continues to enjoy good relations with the EU. Formal ties between Ukraine and the union date back to 1998, when they signed a 10-year Partnership and Cooperation Agreement (PCA). The PCA aims to promote benign economic and political reforms in Ukraine through political dialogue. The subsequent Orange Revolution of 2004 and the EU enlargement of that year, which expanded the EU’s eastern borders to alongside Ukraine, were major impetuses for deepening relations, both politically and economically. Following Ukraine’s accession to the WTO in May 2008, Kiev began free trade agreement negotiations with the EU. The EU-Ukraine Association Agenda, which will increase Ukraine’s political association and economic integration with the EU, was adopted in 2009. The agenda has focused its objectives on judiciary reform, rule of law and human rights, transparency and democratic accountability, the fight against corruption, and increasing citizen participation in public decision-making. It also helps prepare for the entry into force of the EU-Ukraine Association Agreement, which is considered the successor to the PCA and which will further deepen relations.

The EU has also included Ukraine in its new Eastern Partnership Initiative, launched in May 2009 to promote reforms in Ukraine, Belarus, Moldova, Georgia, Azerbaijan and Armenia, in order to bring them closer to the EU without any expectation that they will join the union anytime soon. The EU has encouraged Ukraine to maintain good relations with Russia, in part because approximately 80 percent of the gas that Europe receives from Russia transits Ukrainian territory. Poor Russian-Ukrainian relations could again disrupt these gas deliveries to Europe, as happened in 2006 and 2009.

Although the United States does not have the same stake in Russian-Ukrainian relations as the EU, it has generally pursued the same goals. The U.S. government has sought to encourage Ukraine’s transition to a secure, democratic society with a prosperous market-based economy, transparent government, strong rule of law, protection of freedom of speech and media, comprehensive judicial reform and reduced corruption. U.S. officials recognize that Ukrainian-Russian relations will inevitably remain close, but they do not want them to be so tight as to compromise Ukraine’s autonomy or independence.

The Orange Revolution led to closer cooperation between Ukraine and the United States. In March 2006, the United States granted Ukraine permanent normal-trade-relations status by terminating the application to Ukraine of the Jackson-Vanik amendment to the Trade Act of 1974. This controversial law, which still nominally applies to Russia, aimed to pressure the Soviet republics to reduce restrictions on emigration, especially for religious minorities, by denying most-favored nation status to countries with nonmarket economies that restricted emigration. On April 1, 2008, the United States and Ukraine signed a new Trade and Investment Cooperation Agreement, which established a forum for discussion of bilateral trade and investment relations in order to advance commercial ties.

The United States has provided more than $4 billion in assistance since Ukraine acquired independence to promote political and economic reforms as well as to provide development and humanitarian aid. The assistance has been provided primarily through the Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act, enacted in October 1992. Current U.S. reform priorities are helping Ukraine acquire a new criminal procedure code, improved electoral procedures and anti-corruption laws that meet international standards. In July 2010, Washington and Kiev established a Political Dialogue and Rule of Law Working Group. This body provides a platform through which nongovernmental organizations can exchange views on democratic, legal and political reforms. It also seeks to further the development of Ukraine’s civil society sector.

Although clearly more comfortable working with Russia, Yanukovych does stress his commitment to benign neutrality within Europe and has sought to meet some important U.S. and NATO security goals such as those relating to nuclear nonproliferation and international peacekeeping.

Concluding Observations

Ukraine has yet to fully transition from a subordinate republic of the Soviet Union to an independent state able to exert influence commensurate with its size and resources both in Europe and beyond. Another lagging transition concerns the country’s domestic political system. Ukraine has yet to become a truly liberal democratic state in which multiple parties compete and win elections under free and fair conditions. Western governments and international human rights organizations also complain about a marked deterioration in Ukraine’s human rights conditions in the past year. Ukraine’s transformation into a liberal democratic state is unlikely to occur until current President Yanukovych — who has centralized political power in his hands and regularly ignores the political opposition — and his administration leave office.

The members of the Organization for Security and Co-operation in Europe (OSCE) have elected Ukraine to assume the organization’s rotating chairmanship in 2013. As with Kazakhstan, which held the chairmanship in 2010, the decision recognized Ukraine’s potential to bridge the gap within the OSCE between the former Soviet republics and other OSCE members. Yanukovych interpreted the decision as affirming the international community’s recognition of Ukraine’s achievements toward promoting European peace and security through its policy of neutrality as well as its building a democratic society in line with OSCE norms. In fact, many Western officials have indicated they hope the responsibilities of the chairmanship will help sustain Ukraine’s independence and bridging role in Europe as well as induce the government to improve its human rights policies.

Nevertheless, both Western European and Russian leaders are actively seeking to reduce their countries’ reliance on Ukraine as an energy transit country by building alternative oil and gas pipelines that circumvent Ukrainian territory. Once those enter into operation, Ukraine’s importance in international affairs could decline unless Ukrainian leaders establish other important roles for their country.

Richard Weitz is a senior fellow at the Hudson Institute and a World Politics Review senior editor.

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