"Will the Fat Lady Sing in Vilnius?"

BRUSSELS, November 22, 2013 /PRNewswire/ --

Ukrainian Prime Minister Mykola Azarov delivered a diplomatic exocet missile at 14.58 today in Kyiv when he announced in a Ukrainian notice posted on the government portal that the Ukrainian Government had decided to withdraw from the negotiations with the EU to conclude an Association Agreement and Deep and Comprehensive Free Trade Agreement.

Two minutes after this bombshell - and bizarrely this time in English - he posted a second announcement on the portal instructing his government to work on boosting trade within the CIS.

On Channel 5 TV in Ukraine last night, the MP responsible for Presidential liaison Yuriy Mirosnichenko made reference to the need for Europe to act in true partnership and provide temporary financial assistance to tide Ukraine over the next year or two. It would seem that the heart of the negotiations to secure the deal from the Ukrainian perspective is economic.

However Europe faces the problem that its negotiators have concentrated on procedural issues, such as legislative reform, the need to find a solution for the question of selective justice, and the incarceration of former Prime Minister Yulia Tymoshenko. But the harsh reality is that Ukraine is facing severe economic difficulties, and is running out of options to prevent economic disaster, and Europe appears to have miscalculated the determination of the Ukrainian President to run for and win a second term in the 2015 presidential elections.

The IMF has been demanding strings attached to any new loan, and their requirements on exchange rate flexibility and higher gas tariffs have simply not been electorally acceptable to the government, which is already preparing for the 2015 elections.  

Moscow wants Ukraine to join its own customs union with Kazakhstan and Belarus, which it sees as a prototype rival to the European Union. Has Ukraine sold out to the availability of soft loans on favorable economic terms from Moscow that would help the current government to stave off an economic default next Spring?

At the time of writing, EU heads are still considering how to react to the Ukrainian Government's announcement. Will President Barroso consult the European heads of Government in an emergency meeting? Is there any prospect of the EU giving financial support to the Ukrainian economy to overcome its current difficulties? Could a package or an offer be tabled in time to save the Vilnius Eastern Partnership Summit scheduled for next week?

"We shall find out the answers to these questions in the coming days," said James Wilson, Director of the EU Ukraine Business Council. "Ukraine is of course not Greece - if Ukraine goes bust Europe will not suffer the risk of collapse of confidence in the Euro, but what price does Europe put on the geopolitical issue of Ukraine being sucked into Russia's orbit?"

"Also if we are trying to find a way to measure the pain against pleasure principle what steps will Europe now take to emphasize how cold it is outside the European family?" he went on to say.

Where does this leave us now with the EU's demands to release former Prime Minister Yulia Tymoshenko? The Rada was unable to come to any conclusion today (21st November) on a draft law tabled before the Parliament that would permit her release from detention to undergo medical treatment. It would appear superficially that following Azarov's announcement today, the current Ukrainian Government does not seriously intend to release her at any time in the nearest future.

Last week, European Parliament Presidents Cox and Kwasniewski delivered their report on the Yulia Tymoshenko case to the European Parliament's Council of Presidents at an in-camera session. The European Parliament's observation mission to Ukraine prophetically admitted that "time was running out" in the country´s efforts to sign the long-awaited trade deal with the EU.

The two-man team partly blamed a "chronic lack of mutual trust and confidence" between the Ukraine government and opposition parties for the impasse in the Rada concerning the relevant draft legislation.

The frank admission by former Polish President Alexander Kwasniewski and ex-European Parliament President Pat Cox came after it was announced that their mission in Ukraine would be prolonged until the Eastern Partnership summit in Vilnius on 28-9 November.

Tymoshenko, a long-time bitter rival of President Viktor Yanukovych, has been serving a seven-year jail term since being convicted of abuse of power in 2011 over a controversial gas deal with Russia.

European Parliament President Martin Schulz said at a press conference last week following the presentation of the mission's report that the decision to prolong the mandate had been adopted unanimously by all political group leaders. The Council's Foreign Affairs Committee, which met on Monday 18th November, agreed to respect the recommendations of the European Parliament's emissaries, Cox and Kwasniewski.

The whole question of an Agreement between Ukraine and the EU risks now being postponed until well after the next Presidential elections in Ukraine in 2015, unless the European Commission can pull a rabbit out of the hat with a last gambit that can rescue Ukraine from its economic worries.

The fat lady may still sing in Vilnius, but with an estimated price tag of 5-6 billion euros in economic aid needed to bring her on stage, it will be an expensive performance.

http://www.euubc.com

SOURCE EU Ukraine Business Council




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