Ukraine Leaves Door Open to EU but Says the Domestic Economy is Top Priority

Nov 22, 2013, 08:59 ET from Ukraine Monitor

KYIV, Ukraine, November 22, 2013 /PRNewswire/ --

Ukraine's decision to suspend plans to sign an Association Agreement with the European Union is based solely on economic reasons, according to Ukrainian Prime Minister Mykola Azarov.

"The decision to suspend the signing of the Association Agreement with the EU was difficult, but it is the only possible option given the economic situation in which Ukraine has found itself," he said in parliament on Friday.

"This decision was prompted solely by economic reasons, we are not changing the strategic course of Ukraine, which is laid down by the law on the principles of domestic and foreign policy," he added.

Meanwhile, an adviser to Lithuanian President Dalia Grybauskaitė claimed on Friday that in a telephone conversation earlier this week Ukraine's President Viktor Yanukovuch had cited economic pressure from Russia as the main reason why Kyiv cannot sign the EU agreement.

During the telephone conversation, the Lithuanian President was allegedly told about Russian threats to restrict the imports of goods from Eastern Ukraine, which, according to Kyiv's calculations, could lead to billions of euros in losses and could affect entire industries and the employment of hundreds of thousands of people.

Advisers to President Yanukovych have noted that Ukraine has been facing enormous economic pressures and trade threats that could potentially plunge Ukraine into economic ruin if it were to sign the agreement without any guarantees of either EU assistance or more favourable terms from the International Monetary Fund.

Azarov on Friday also pointed to "extremely harsh conditions" of the IMF for refinancing billions of dollars of standby loans issued in 2008 and 2010 as "the last straw".  Among these conditions, the IMF would have required Kyiv to increase domestic gas prices for consumers by 40%, which would impose an impossible hardship on the 46 million citizens of Ukraine who are already struggling in a depressed economy.

On Friday, the former President of the European Commission, Romano Prodi, also weighed in, repeating his earlier statement that "Ukraine must be seen as a bridge between the European Union and Russia, in both geopolitical and economic terms."  Prodi said he remained cautiously optimistic that the EU and Ukraine could still forge an agreement in the future that takes into account the country's unique geographical and economic reality.

Catherine Ashton, the EU's foreign policy chief, was also careful on Friday to keep the door open for the future.  "We believe that the future of Ukraine lies in a strong relationship with the EU," she said in a statement.

Ukrainian officials also noted that while the country's European ambitions remain valid, the economic well-being of the country comes first.  One official added that Ukraine had requested help from the EU specifically to get through the tough process of economic integration, essentially a package that would make the Association Agreement economically viable. "But we have not received it," the official said.

SOURCE Ukraine Monitor