As long as Viktor Yanukovych’s team is in power, the only goal of European policy towards Ukraine will be to prevent any rapprochement with Russia. In particular, Europe does not want Ukraine to cede control of its gas transportation system to Russia or to join the Customs Union of Russia, Belarus and Kazakhstan.

       Ukraine has never faced such intense pressure from geopolitical rivals seeking to become the country’s patron. The European Union, with the support of the United States, resorted to ultimatums late last year. It threatened to block the initialing, signing and ratification of the agreement on political association and free trade zone because of problems with Ukrainian democracy, notably, criminal proceedings against opposition leader Yulia Tymoshenko.

       This was followed by two major events in March 2012. The aforementioned agreement was semi-initialed in Brussels. Full initialing would mean approval of each page. Once that is done the document cannot be amended. In reality, only 10% of the agreement, notably its declarative, political part (adherence to values and Ukraine’s European identity) has been initialed, whereas its economic part – the terms of a free trade zone – has been initialed only symbolically. In the latter case, only the first and the last pages of the document have been initialed, which leaves it open to amendment and requires full initialing no sooner than in eight or nine months. In the meantime, it was stated late last year that the talks were over and the agreement was ready for full initialing.

       Apparently, the EU has taken a pause until the end of parliamentary elections in Ukraine scheduled for October. The European Commission will make a decision on the future of the agreement depending on how “honest and transparent” they will be (this is how European politicians formulate their demands to the Ukrainian government, but I think everything will depend on the election results).

       On the whole, EU maneuvers with respect to Ukraine look like elements of a well-considered strategy. As long as Viktor Yanukovych’s team is in power, the main, and in fact the only, goal of European policy towards Ukraine will be to prevent any rapprochement with Russia. In particular, Europe does not want Ukraine to cede control of its gas transportation system to Russia or to join the Customs Union of Russia, Belarus and Kazakhstan.

       Experts see the obvious economic advantages of Ukraine’s integration into the Customs Union, at least, in the medium term. It is also clear that the ruling party has a stake in fulfilling its obligations to voters who want better relations with Russia. Otherwise, the government will lose its support and any chances of winning the forthcoming parliamentary elections and having Yanukovych re-elected for a second term in 2015. The EU must have made very serious arguments to compel Kiev to chant the mantra of “the priority of European choice” and ignore any proposals of Moscow without even promising to integrate Ukraine into Europe even in the indefinite future.

       These arguments must be convincing enough to allow European and U.S. politicians to exert direct pressure on the country. Thus, at a round table discussion of trans-Atlantic security in Kiev in late March, head of the NATO Liaison Office in Ukraine, Marcin Koziel, urged Ukraine to formulate its position on defense in Europe. Secretary of the U.S. Embassy in Kiev Yuriy Fedkiv was even more straightforward when he said that the alliance would welcome any proposals, including those from Ukraine, on the issue of missile defense deployment. Such overt pressure on Ukraine would have hardly been possible if Ukrainian leaders had not invited it by taking part in the discussion (whether official or not) of the possibility of deploying elements of U.S. missile defense on Ukrainian territory. We do not know for sure whether such a discussion has taken place but most probably it has.

       It is easy to imagine Moscow’s reaction to its “strategic partner” taking such a position. This is why it is not surprising that Moscow is also exerting symmetrical pressure on Kiev. Tymoshenko made a big mistake by ordering her subordinates to sign the objectionable agreement with Gazprom in January 2009. But as a “strategic partner,” Russia could meet the requests of Ukrainian leaders to revise this agreement halfway, without setting difficult preconditions. However, Prime Minister Vladimir Putin is adamant. He insists that the agreement comports with the laws of Ukraine and Russia as well as international legal standards and must be fulfilled. If Ukraine wants to pay less for gas, it should either cede control of its gas transportation network to Gazprom (by establishing a consortium) and/or join the Customs Union of Russia, Kazakhstan and Belarus.

       To sum up, the current state of Ukrainian-Russian relations has nothing to do with strategic partnership. Ukraine could sooner be described as having a strategic partnership with the United States, all the more so as the relevant agreement that contains an obligation of the sides to facilitate Ukraine’s full-scale integration into NATO was signed in Washington by the foreign minister of Yushchenko’s government and has not been denounced yet despite Ukraine’s “bloc-free status.” So, a proposal to Ukraine to consider hosting elements of American missile defense is entirely in keeping with its strategic partnership with the United States.

       Now I’d like to say a few words about the Ukrainian economy. In elaborating their positions at talks with Ukraine, neither the West nor Russia has adequate information, including that from international economic agencies.

       Economically, Ukraine is not in such a bad shape. Risk insurance is much more stable than it was in 2008 or 2009. The risk of default on its sovereign debt is much smaller although international expert agencies keep listing Ukraine in the category of countries that are days away from default.

       It is also important that, unlike Greece (to which Ukraine is often compared), Ukraine’s foreign debt is moderate by the European yardstick.

       Obviously, the IMF’s refusal to loan funds to Ukraine is creating more difficulties for its economy, but it can borrow from Russia and China, albeit at higher interest rates.

       Major changes are taking place in the Ukrainian economy. Ukraine took in 57 million tonnes of grain, which is a spectacular result for its economy in general and its agricultural sector in particular, considering that it has not yet completed reforms there. It is also important that, unlike the previous government, this one is taking proper care of the budget. This government deserves credit for creating a surplus during the first two months of this year. It has also managed to reduce its balance of payment deficit virtually to zero – this is vital for maintaining the exchange rate of the national currency and preventing price hikes.

       Ukraine is one of the few countries that registered real GDP growth in the first two months of this year. It is small – a mere 2%, but still significant. Ukraine would be able to resolve many of its economic issues if it improved relations with Russia above all. I think Ukraine could achieve this by shifting its lopsided orientation toward the EU. It should not shift entirely toward Eurasec, either. Ukraine should strive to find the right balance between Europe and Russia. Clearly, it is very difficult to build such a policy, especially when the country’s senior geopolitical partners and rivals – Europe and Russia – are going through a cold spell. However, this is the only way Ukraine can achieve a stable position.

       Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.