Bloomberg News

EU Leaders Keep Door Open for Ukraine Pact as Rally Planned (1)

December 21, 2013

European Union leaders reiterated that the door is open for Ukraine to accept a trade deal as anti-government forces and authorities remain locked in a stalemate over the former Soviet state’s future place in Europe.

The 28-nation EU is ready to sign the Association Agreement with Ukraine after President Viktor Yanukovych snubbed it for an accord with Russia, sparking a month-long political standoff in the capital, Kiev. Pro-EU demonstrators, after weeks behind barricades on Kiev’s Independence Square, called for a “people’s gathering” at noon tomorrow. Yanukovych attended ceremonies and went on television in past days to persuade voters he’s still in charge and ignoring opposition pressure.

“The offer of the political association and trade ties is still on the table,” EU President Herman Van Rompuy said after the 28-nation bloc ended a summit in Brussels yesterday. “The future of our relations is for the long term. We cannot let that be compromised by short-term calculations.”

Yanukovych, who secured a gas-price agreement and $15 billion bailout from Russia, has rejected calls for early elections, accused his foes of being too “ambitious” and warned the EU and the U.S. against meddling in domestic affairs. The country of 45 million people, a key Russian gas pipeline transit destination to the West, is struggling with its third recession since 2008 and dwindling foreign reserves.

Historical Partner

Yanukovych, who wooed the EU with promises of a trade pact since he came to power in 2010, echoed criticism by Russian President Vladimir Putin, who said Ukraine is a historical strategic partner.

The EU’s diplomatic chief, Catherine Ashton as well as U.S. Senators John McCain, a former presidential candidate, and Chris Murphy were among Western politicians and diplomats to come to Ukraine and lend support.

Russian leaders have countered that by standing behind Yanukovych.

Foreign Minister Sergei Lavrov said yesterday that an EU association agreement for Ukraine was “incompatible” with keeping Russia’s current trade preferences for the ex-Soviet partner.

“It doesn’t mean that we would impose sanctions on Ukraine, we would just return to ordinary terms,” Lavrov said in an interview with state news service RIA Novosti posted on the Foreign Ministry’s website.

Lavrov repeated a Russian proposal rejected in Brussels to hold three-way talks between Russia, Ukraine and the EU to forge a compromise. The EU has said Ukraine can’t join a rival Russian-led customs bloc as well as sign a free-trade agreement with it.

Open Door

Even so, EU leaders including German Chancellor Angela Merkel said there is no date for closing the door to Ukraine, and it is up to the country’s political leadership to decide on which trading bloc to join, the EU’s or Russia’s.

“Europe has to make clear that we want this rapprochement,” said Austrian Chancellor Werner Faymann before yesterday’s summit meetings began. “We can’t desert the people who have placed hopes in us.”

The opposition warned protesters that authorities may send provocateurs to start fights near the Kiev mayor’s office before midday today, according to the website of Arseniy Yatsenyuk, the head of jailed ex-Premier Yulia Tymoshenko's party.

“We again have to remind Viktor Yanukovych that we exist,” Ukrainian opposition leaders said on the website. “We are the people who want changes, who feel that we are citizens and not slaves and we want to live and not to exist.”

Thinking Strategy

Evhen Nishchuk, a presenter at the Independence Square stage set up by opposition to rally supporters, said yesterday that with parliament on a break until Jan. 14, leaders of the movement and protesters will decide how to continue until then.

Prime Minister Mykola Azarov said late yesterday that proceeds from the $3 billion bonds bought by Russia will be spent on paying debts, pensions, salaries, and social benefits through this month and next.

Azarov said after the Russian deal, Ukraine doesn’t need the International Monetary Fund’s aid now. Should the IMF abolish its demand to raise household utility prices and soften other requirements, “the government is ready to discuss” possible loans, he said.

Yanukovych, in a 100-minute televised speech and interview with nine selected journalists Dec. 19, offered to hold a roundtable, which drew skepticism from opposition leaders who said any further direct talks would have to include demands for the government to step down and the prosecution of instigators of violence on Nov. 30.

Roundtable Meeting

A roundtable meeting yesterday with ministry officials, including Deputy Prime Minister Yuriy Boyko and Yanukovych’s chief of staff Serhiy Liovochkin, yielded no results. A Dec. 13 roundtable that included Yanukovych, Premier Mykola Azarov and all leaders of the opposition, also failed to bring a resolution.

The IMF aid the country’s energy industry still weighs heavily on public finances and is “inefficient and opaque.” It forecast 2014 economic growth of 1 percent after a contraction this year. By contrast, Bank of America (BAC:US) Merrill Lynch yesterday released its own estimate, for growth of as fast as 3 percent, according to analyst Vladimir Osakovskiy, citing the Russian bailout money.

Re-Election Chances

European Parliament President Martin Schulz said he doesn’t expect any further moves by Yanukovych toward the EU. Even so, he said the bloc should remain open to Ukraine, if only for the sake of the “opposition on Maidan.”

Yanukovych said on Dec. 19 that he would not run for re-election should he lack pre-campaign support among the population. He also said he would continue to seek office as long as there is a strong public backing.

Yanukovych would currently lose to any of the opposition candidates if a vote was held now, with just 28.6 percent, in a Nov. 28-Dec. 7 survey of 2,013 people by Perspektyva for Tyzhden magazine. It had a 2.2 percentage-point margin of error.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net


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