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Russian-Ukrainian Relations

Mon. May 24th, 2004
Washington, D.C.

On May 24, 2004, the Carnegie Endowment for International Peace hosted a meeting on Ukraine’s relations with Russia in the European and Euro-Atlantic context. The speaker, Oleksandr Sushko, is considered to be one of Ukraine’s top foreign policy experts. Dr. Dmitry Trenin, Deputy Director of the Carnegie Moscow Center and Co-Chair of the Moscow Center’s Foreign and Security Policy Program, served as the discussant. Anatol Lieven, a Senior Associate at the Carnegie Endowment, chaired the session.

Mr. Sushko began by observing that the content of the relationship between Ukraine and Russia is determined not just by the domestic agenda in either country, but also by the agenda of European and Euro-Atlantic institutions. He would thus attempt to present an analysis of the real motivations and intentions that underlie the relationship between the two neighbors.

The framework of the relationship between Kiev and Moscow is determined by three factors: the transformation of the neighborhood, Russia’s multi-instrumental approach to its neighborhood, and Ukrainian domestic politics. With the recent expansion of the European Union and NATO to include many former East-bloc—and even former Soviet—states, a new situation has arisen in Eastern Europe. This change has introduced a new agenda into the relations between countries that have become outsiders to this process. It is no secret that, over the past several years, Ukraine has expressed the desire to join both the EU and NATO. These aspirations, however, have not met with much success. This factor is important for Russian-Ukrainian relations.

Russia has been trying to create a common space for the “confused and refused” countries that have no immediate prospects of joining either the EU or NATO. In this regard, Russian policy has been determined by a post-imperial syndrome. The process of EU and NATO enlargement is complete for a certain time to come, and a new border has arisen between insiders and outsiders to the process. This border is quite stable in the medium run. The stability of the border provides an impetus to Russia to secure a strong regional leadership role. Russia does not see any prospects of a renewed global role for itself, but does see opportunities for serious regional influence.

The second factor affecting Russo-Ukrainian relations is demonstrated by President Vladimir Putin’s recent pragmatic approach to NATO enlargement. It is hard to define this factor, but it comes down to Russia’s use of a variety of instruments in its relations with former Soviet republics. There is a range of structures, including Russian business and media, through which Russia maintains a presence in the region, and by which it seeks to influence it and become a regional leader.

The third factor, as mentioned above, is the Ukrainian domestic political agenda. Unlike Russia, Ukraine has real political competition, and the result of the next presidential election is unpredictable. This situation encourages politicians to seek foreign support, and some find this support in Russia. A special relationship has thus developed between Ukrainian and Russian elites. Moscow’s help does not come without conditions attached, however.

Russia has several factors going for it that make it attractive to Ukrainian elites as a regional leader. Moscow has no sentiments on democracy and the rule of law, which are a big component of Kiev-Brussels and Kiev-Washington relations. This makes Ukrainian leaders more comfortable dealing with Russians.

In the economic sphere, Russia enjoys better relations with the WTO, EU, and other Western economic institutions than Ukraine does. Russia obtained Western recognition of market-economy status last year, while Ukraine, which has a similar economic structure, still has not. Russia has accomplished more results in its WTO accession process than Ukraine has. Thus, Ukrainians are becoming in interested in Moscow’s suggestions to take a common stance on economic issues in order to obtain greater international economic leverage.

Russia can also offer Ukraine trade preferences in oil and gas. Ukraine is clearly dependent on Russia for its energy imports. This makes the Ukrainian economy vulnerable to pressure from Moscow. The Ukrainian government wants more favorable conditions for oil and gas imports, and this makes Russia an attractive partner. Cheap oil and gas can be of dubious benefit, because they would put Ukraine in the situation of Belarus vis-à-vis Russia, and would make it very difficult to have political disagreements with Russia. However, the elites seem to have no awareness of this potential problem.

Some Ukrainian politicians also receive Russian political support. This sometimes takes the form of public support from Mr. Putin, but is sometimes less public but still efficient. Putin enjoys a confidence level of 44 percent in Ukraine, which is higher than the rating of any Ukrainian politician. Therefore, if he appears on television and tells viewers he likes a particular Ukrainian politician, the latter can expect a popularity boost.

Russian friendship comes as part of a package, and so does the friendship of the EU. What Ukraine has to decide is which of the two packages is more attractive. Since there is no clear answer, Ukrainian elites have been trying to develop a way to benefit from both packages at the same time. There are some limitations to this approach. Clearly, no country can join two customs unions at once. However, semi-integrational deals are possible. For instance, Ukraine could arrange free-trade agreements with both Russia and the EU. The Ukrainian elite is uncertain about the value of the Western club, but, at the same time, wants to be part of it. However, it does not want to pay the price of belong to the West. It is thus trying to find a comfortable medium-run formula that would give it good relations with both Russia and the EU, Mr. Sushko concluded.

Commenting on Mr. Sushko’s presentation, Dr. Trenin noted that, to understand where Russia is coming from, one should take President Putin at his word. Russia wants to be a regional great power. It wants “to be, rather than to belong.” Unlike some other countries, which may be “confused and refused,” Russia knows where it is going. It wants integration with the West, not into it. Moscow has taken a big step towards WTO accession, which, in itself, would be a major milestone on the way to Russia’s global integration. For Mr. Putin, nothing is more important in the coming two years than hosting a G-8 summit in Moscow in 2006.

It is true that Russia has lately been concentrating more on former Soviet republics. However, it has been doing so not out of nostalgia, but rather out of economic and security considerations. Moscow believes it has a comparative advantage in the region. Russians have internalized Ukraine’s independence, and they now see Ukraine as a separate state, although they still have difficulty thinking of it as a foreign country. Ukraine is increasingly seen as an opportunity for Russian business. Indeed, Russian companies, with interests ranging from natural gas to cell phone networks, have entered the Ukrainian market. The Single Economic Space (SES) does not have much of a chance to succeed. It may have a future, but not as a top-down process. Rather, it can only be built with the support of economic actors.

Ukraine is seen by some as a potential friction point between Russia on the one hand, and the EU and United States on the other. Russians and others talk about East-West competition in Ukraine. In Dr. Trenin’s view, however, such competition will not be the dominant theme of the coming decades. Unlike Washington observers, Russians do not see the coming Ukrainian presidential election as historic, and certainly not as one of the defining moments of Ukrainian history. Most Russian observers see Ukraine continuing on its present course, conducting further reforms, and trying to reach out to both Russia and the West. Indeed, this is a “normal policy” for Ukraine to follow.

Russia does support Vyktor Yanukovych for the Ukrainian presidency. Moscow does not have any illusions about him, however. It does not regard him as particularly pro-Russian. If Vyktor Yushchenko wins instead, we can be sure that Mr. Putin will extend his hand of friendship to him, just as he did earlier to the new Georgian president, Mikheil Saakashvili. Russians do not see a reformed, democratic Ukraine as a threat. Indeed, a reformed Ukraine would be a valuable opportunity for Russian business. Russian companies themselves are emerging from a dark age dominated by mafia-style groups. They would now be better served by a pro-reform Ukrainian government.

Many observers have cast the Commonwealth of Independent States (CIS) as a new stage for the 19th-century Great Game. This is not a very good reflection of today’s world. If it is true that Russia’s primary interests in Ukraine are economic, then Russian competition with the West over Ukraine—such as it is—is a healthy phenomenon. Fortunately, Russia does not have any security concerns in Ukraine. However, in the parts of the CIS where Russian policy does have a security focus, Russian interests coincide with those of the West more than they clash with them.

In the question and answer session, Mr. Sushko noted that, while 44 percent of Ukrainians trust Mr. Putin, about 20 percent distrust him. Putin’s great popularity in Ukraine is not easy to explain. Part of the reason is that his personality matches popular expectations of what a leader should be like. Ukrainians want a leader who is strong, but not too strong. While Putin has been a strong leader, he has been rather weak in dealing with problems such as Chechnya and the sinking of the Kursk submarine. However, his strength in other areas contrasts favorably with the weakness of the Ukrainian president, Leonid Kuchma. Thus, the root of Mr. Putin’s popularity in Ukraine is that he is more attractive as a leader than Mr. Kuchma is. Boris Yeltsin was not regarded any better than Kuchma. It must also be noted that Putin’s popularity in Ukraine is not anywhere as high as it is in Russia.

The Iraq campaign is very unpopular in Ukraine, as is Ukraine’s participation in it, which undermines the public trust. As much as 80 percent of the population supports the withdrawal of Ukrainian troops from Iraq. This is not a unique sentiment, but is shared across Europe. President George W. Bush is quite unpopular in Ukraine.

Responding to a question on the fact that the signing of the SES agreement was followed a week later by a spat between Russia and Ukraine over Tuzla Isle in the Sea of Azov, Dr. Trenin remarked that the whole incident was baffling. Russian officials have been quite opaque about it, which has fueled speculation. According to one theory, the Tuzla dispute, which broke out in October 2003, had to do with the State Duma elections in Russia, which were to be held the following December. A section of the Kremlin was trying to whip up nationalist fervor in Russia to aid the prospects of the Rodina bloc, which had been created by the Kremlin earlier. As a result, Rodina tapped a reservoir of nationalism and did even better than the Kremlin expected it to.

According to another theory, the incident was staged by Russia to support the Ukrainian regime, by showing it as capable of standing up to Russia. Dr. Trenin emphasized that both the above theories were based purely on speculation.

It was a good sign that the incident disappeared from the public discourse after the Kremlin “switched it off.” However, the spat did demonstrate the existence of a latent Russian nationalism that may cause major problems if aided. However, left alone, this nationalism is not likely to create great disturbances.

Taking a different view, Mr. Sushko observed that the SES and the Tuzla dispute were both part of the same package, and were an example of Russia’s use of multiple instruments to pressure its neighbors. The incident was also a test of the West, and of Ukraine. Further, by creating the dispute, Russia was pushing the process of re-delineating its sea borders with Ukraine. The current Kerch Strait border, which dates back to 1973, is the result of a treaty between the Russian and Ukrainian Soviet republics. This treaty put the shipping channel in the Ukrainian sector of the strait. Russia, on the other hands, wants joint responsibility over the shipping channel, and has officially withdrawn recognition of the 1973 border.

Dr. Trenin replied that Russia’s main political objective in the dispute was to render the Sea of Azov inaccessible to third-country ships without Russian approval. Some in Russia feared the potential for NATO ships to approach the Russian coast by entering the Sea of Azov through the Kerch Strait. Now that this issue has been resolved to Russia’s satisfaction, the shipping channel as such is likely to fade from people’s memories.

Regarding Ukraine’s EU membership prospects, Mr. Sushko observed that there is currently an unfavorable situation in Brussels for Ukraine. There is no willingness to offer Ukraine membership at this time. However, if the new neighborhood policy toward Ukraine is seen to work well over the next three to five years, Ukraine’s membership prospects may improve, which has been the case with the Balkan countries. Despite recent statements to the contrary, the EU has made no ultimate decisions regarding Ukraine’s membership chances. However, as things currently stand, Brussels wants to keep Ukraine out, while Moscow wants to keep it in. There is no doubt that this situation makes Russia more attractive in the eyes of Ukrainian elites. However, the story is not complete, because the EU is waiting for Ukraine to change for the better.

Dr. Trenin noted that Russian strategy has influenced Ukrainian domestic politics, but not massively. For example, the Russian government was recently criticized for paying an extra $700 to $800 million to Ukraine as part of a free trade agreement. A Ukraine in NATO would be a big problem for Russia, which Moscow would try to forestall. However, Russia has shown a capacity to adapt to unfavorable changes over the last 13 years, and could do so again. NATO is less of a bogeyman now than it used to be. Russians no longer consider a military conflict in Europe possible. The United States is viewed differently by Moscow, however. Russia sees the U.S. as a power that is still potentially capable of attacking Russia or putting Moscow under military pressure, the way it forced Belgrade to withdraw from Kosovo.

There is no prospect of Russia itself joining NATO in the near term. The current Russian administration and—if Putin does not make significant mistakes—the following ones are not likely to put Russia in the position of a demandeur, begging to be admitted into the alliance. This is a psychological barrier that Russian elites are unlikely to cross. Unlike all former Warsaw Pact countries and some former Soviet republics, Russia has no “yearning to belong.” While these countries see NATO as a symbol of the West, Russians still regard it as a military alliance. There is, however, a feeling in Russia that NATO would not come to Russia’s aid militarily if needed. There is only one NATO member that might do so, “but that is a different story.”

Asked about the political tussle over the Odesa-Brody pipeline, Mr. Sushko noted that Ukraine took a clear position regarding the issue in January 2004. The cabinet has decided to direct the oil flow in the pipeline from the Black Sea to Brody, rather than the other way round, which Russia had urged. Although President Kuchma is critical of the cabinet’s decision, it has full legal force. While there may be a political dimension to the dispute, the rhetoric surrounding it has been economic. The proponents of a reversal of the pipeline have argued that there is not much Caspian oil to transport to Poland, and that there are no contracts so far to transport the oil in that direction.

Dr. Trenin observed that to think that Ukraine will go whichever way the oil flows in one pipeline is simplistic. Russia has invested a great deal in Ukraine and, according to a Kiev business consultant, most people interested in investing in Ukraine are Russians. The priority given by Moscow to economics demonstrates the growing maturity of Russian foreign policy.

Mr. Sushko retorted that, while there may be a great deal of Russian investment in Ukraine, most of it comes from questionable sources. According to official statistics, the United States is the largest foreign investor in Ukraine, while Russia is the sixth-largest, accounting for only 7 percent of foreign investment in Ukraine. While Cyprus [where a great deal of Russian money resides] is the third-largest investor, some of the money flow from Cyprus is not Russian in origin, but rather represents the repatriation of Ukrainian capital. Nevertheless, Russia does invest in Ukraine through third countries, such as Cyprus and the British Virgin Islands. While Russian investment as such is welcome, it would be desirable to bring it out into the open, in order to combat money laundering, Mr. Sushko concluded.

Summary prepared by Rashed Chowdhury, Junior Fellow with the Russian and Eurasian program at the Carnegie Endowment.

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.