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West or east? Ukraine weighs its options

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Its very name means "borderland.'" Ukraine long has been on the edge between east and west. Now this country of 46 million people is poised to tilt westward by signing an association agreement with the European Union next month, one that also promises freer trade.


However, President Vladimir Putin of Russia is putting pressure on Ukraine to instead join Belarus and Kazakhstan in a Eurasian customs union that has become his pet project.

The Russian sales pitch is simple: Russia remains the single biggest market for Ukrainian exports. Ukraine would get cheaper gas -- Belarus, which also has sold its gas distributor to Russia's Gazprom, pays less than half as much. Russia would ease the country's huge debt burden, much of it owed to Gazprom. Putin also was the main backer of President Viktor Yanukovych in November 2004, when his rigged election was overturned in the Orange Revolution.

Most alluring of all, the Russians, unlike the EU, would not make pesky demands for human rights, the rule of law, an end to corruption and a proper democracy.

Ukraine would gain far more by going west, however. Trade is shifting to what is, in overall terms, a much bigger and richer market than the Eurasian union could ever be. The EU has a well-tried formula for helping to reform and liberalize economies from the former Soviet bloc. Even Ukrainian oligarchs close to Yanukovych recognize more competition from the EU will help them modernize their companies. An association agreement could even be a precursor to eventual EU membership.

What is pushing the Ukrainians toward the EU now, though, is not any of the above. It is Russian bullying.

Putin says Ukraine is a sovereign country able to make its own choice, but it is doubtful he believes this. Not only did Russia rule most of Ukraine for two centuries, but Kievan Rus is seen as the cradle of the modern Russian state. Many Russians still live in Ukraine: Crimea is 80 per cent Russian.

To deter Ukraine from turning west, the Russians briefly imposed trade restrictions recently, even banning chocolate imports from Ukraine. A Kremlin adviser has called the signing of an association agreement "suicide," warned of a Ukrainian default and even threatened to split apart the country's Russian-speaking and Ukrainian-speaking halves.

When Armenia was pushed around by Russia, it caved and decided to join the Eurasian union. The response in Georgia and Moldova has been to move closer to the EU, however. Similarly polls in Ukraine show support for the association agreement has risen to more than 50 per cent. Yanukovych has no desire to play second fiddle in a club dominated by Putin.

Russia's stance has also injected geopolitics into the debate. Some Europeans argue that, to head off any risk of losing Ukraine to Putin, the EU should relax its conditions for the association agreement, especially its demand that Yanukovych's political opponent, former prime minister Yulia Tymoshenko, be released from jail, where she has languished since her politically motivated trial in June 2011.

That would be a mistake. The EU's pressure has been working. Ukraine may still be a corrupt oligarchy, but it has been making reforms demanded by Brussels. It is widely expected Tymoshenko soon will be sent to Germany for medical treatment, and may be released thereafter.

More generally, the value and appeal of an association agreement lies precisely in the conditions it sets for liberalization and reform. To soften these for one special case would weaken them for all.

The EU would keep leverage even after an association agreement is signed. Brussels hopes to implement its free-trade elements immediately, but it needs ratification by national parliaments to come fully into force. That process will probably last until beyond the next Ukrainian presidential election, set for early 2015.

If Russia sticks to its threats, Ukraine also will need financial assistance from the Europeans to see it through the winter. It should get it. The EU also could ease its visa regime and help more students go west.

To both sides, Ukraine is the most valuable prize left in Eastern Europe. Indeed, this moment could be as critical for the region as the decision in the 1990s to admit the ex-communist countries of central Europe to the EU.

Fortunately, thanks to Putin's inept bullying, the prize should now fall into Europe's lap.

Republished from the Winnipeg Free Press print edition October 12, 2013 D7

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