The European Union and Ukraine signed a political association agreement today, after Russia took steps toward annexing Ukraine’s Crimean Peninsula, bringing us full circle to the very issue that led to the burgeoning of the Maidan protest movement and the overthrow of Ukrainian president Viktor Yanukovych in February.
The deal, signed on the sidelines of an EU summit in Brussels, brings Ukraine and the EU closer to political and economic cooperation, while the free trade portion of the deal will have to wait until Ukraine holds new presidential elections in May.
This is the same deal that Yanukovych and company rejected in November 2013, and which lent the impetus to the Maidan protest movement, the president’s downfall, and then Russia’s intervention in the Crimea.
Even with this deal, however, Ukraine remains hostage to Russia in numerous ways, and there is still much to be anxious about. There are questions as to whether Ukraine can simultaneously deal with Russian President Vladimir Putin and the European Union without putting more stress on the economy and the political structure. While the EU deal was an obvious knee-jerk reaction to Russia’s move on the Crimea, it may have been too soon for Ukraine.
According to Robert Bensh, a long-time energy expert in Ukraine, “Russia still controls many of the levers for the Ukraine’s success. It is Ukraine’s largest trading partner, and Ukraine is heavily in debt to Russia and relies on Russia for most of its energy imports.”
“Russia has been selling Ukraine natural gas at well below world prices, and has substantial ability to promote riots, political intrigues and general instability. In short, unless Ukraine can normalize relations with Russia, the prospects for growth will be low,” Bensh told Oilprice.com today from Kiev.
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In contrast with Russia’s influence, the West’s ability to affect Ukraine’s success is highly limited, though greater integration of Ukraine into Europe could strengthen institutional frameworks to handle growth. Still, as Bensh noted, a trade pact with the EU does not resolve Ukraine’s entrenched corruption, and success is still dependent on Russian cooperation.
“The European Union needs to engage with Russia as much as possible, but events in Crimea make this hard,” he said.
Later this week, we’ll be talking to experts about what Ukraine can do to encourage growth and harness the goals of the Maidan revolution.
Be sure not to miss our exclusive interview earlier this week with Mr. Bensh on Russia, Ukraine and what it all means for energy.
By James Stafford of Oilprice.com