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Ukraine’s Pivot to Europe?

November 15 2013, 15:07

LVIV, Galicia, Ukraine – While Ukrainian President Victor Yanukovich is caught between Russian threats and European Union enticements, Andriy Sadovy, the mayor of this resurgent city in western Ukraine, has made up his mind: he is all for the Association Agreement Ukraine is due to sign with the EU at a summit in Vilnius, Lithuania, on November 28.

Lviv may not yet be a Ukrainian silicon valley but 10,000 IT jobs have been created here on Sadovy’s watch, with salaries around €1,000 a month. A law professor in Odessa is lucky to bring home €400. The Euro2012 soccer championship boosted tourism arrivals by 25 percent. This year, the number of tourists, many from Poland and Germany, has continued to rise.

Mayor Sadovy sees business services, tourism, sports, education, and culture as the best way to bring Lviv closer to the EU. He is counting on the EuroBasket 2015 basketball tournament to attract 10,000 fans to the city and is bidding to host the 2022 Winter Olympics, with events in the nearby Carpathian Mountains. Lviv’s small, private, and remarkably liberal UkrainianCatholicUniversity emphasizes outreach to the EU and North America.

However, Ukraine requires major investment to upgrade infrastructure and raise living standards. Western Ukraine is struggling to break out of the post-Soviet malaise, which clings to national life. Bureaucracy and corruption still stifle private initiative throughout the country. It can take three years to set up a company. Investors require a stable and predictable business climate, with an impartial and efficient legal system. Public finances are dire and an IMF program is overdue.

Given Ukraine’s tormented history, the EU’s economic and financial crisis seems pretty small beer. People here see the proposed EU agreement as a blueprint for modernization and development. Recent opinion polls show majorities in favor of closer EU links not just in western Ukraine but also in the eastern Donbass region. Russia’s image as a benign, protective neighbor has been undermined by threats of reprisals if Ukraine signs the EU agreement.

EU leaders want former Prime Minister Yulia Timoshenko to be released from prison before the Vilnius summit as proof of the government’s willingness to tackle the country’s politicized justice system. If she is sent abroad for medical treatment but still regarded as a prisoner, the European Parliament, which must give its consent to the Association Agreement in March, will not be convinced.

Yet, even if the president summons up the courage to pardon his rival, many people in Kiev and Lviv are skeptical about the EU’s capacity to change the country’s entrenched, dysfunctional, oligarchic structure. Timoshenko’s release, they say, would not be proof of the president’s conversion to EU-style reform, but rather a response to Russian bullying. Yanukovich needs the EU agreement if he is to stand a chance of winning reelection in 2015, but he may not be ready to run the political risk of releasing his main rival.

Russian reprisals against Ukrainian exports are likely if the agreement is signed in Vilnius. Kremlin spokesmen have hinted at support for separatism in eastern Ukraine. Gas supplies may be blocked. The EU should respond firmly, as it did when increasing quotas for Moldovan wine exports blocked by Moscow. EU companies can sell more gas to Ukraine by reversing pipeline flows.

Faced with a firm response, Russia would probably step back from the brink. Russian President Vladimir Putin does not need a new cold war over Ukraine. His zero sum approach is largely bluster. He knows that Russian firms in Ukraine will benefit from free trade with the EU and that Russia itself will still be able to trade freely with Ukraine. If Mr. Putin steps back from the brink, the EU should offer to negotiate a new partnership with Russia.

The EU will need to offer tangible and concrete benefits to Ukrainian citizens to reinforce their recent, tenuous pivot toward Europe. Higher EU industrial and environmental standards, and increased competition, will mean job losses before free trade creates new employment opportunities.

People in western Ukraine living close to the border can visit relatives or go shopping in neighboring parts of Poland or Slovakia without visas. But, in general, visas are still required to visit the EU. Eighty percent of Ukrainians have never travelled abroad. EU leaders should face down vociferous nationalist groups to make it easier for Ukrainians to visit the EU. The EU’s Erasmus Mundus scholarship program and national schemes like the British Chevening scholarships should be extended, despite tight budgets. It is money well spent.

Lviv’s EU inclinations, its determined leadership, its UNESCO world heritage art and architecture, its universities, cosmopolitan traditions, and general openness bode well for the future. Yet, the Lviv oblast (administrative region) represents only 5 percent of Ukraine’s declining population. It shares many of the country’s political, economic, and social challenges. Association with the EU may not be sufficient to reverse decades of neglect, but it may jolt the rest of the country into becoming more like Lviv. Does anyone have a better idea?

GMF Blog

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