Ukraine Looks West and Southeast, Not East

Continuing a foreign policy that seems to be explicitly aimed in every direction but Moscow’s, Ukraine has just concluded a Presidential-level delegation to the United Arab Emirates in order to expand bilateral relations, open new trade and cooperation opportunities, and — indirectly — remind Moscow that there are other sources of oil and natural gas than Russia.

Ukrainian Minister of Justice Oleksandr Lavrynovych and his counterpart in the UAE, Hadef Al Dhaheri, signed three treaties on reciprocity on criminal matters, reciprocity on civil and commercial matters, and criminal extradition; simultaneously, the two governments signed a series of other agreements, on air transport and higher education among other things.

While all good and valuable, there were two larger events in play on this trip, which continued in Qatar.

First, Ukrainian President Viktor Yanukovych took the opportunity to announce a new series of land reforms and efforts at deregulation. While pitched at UAE investors — harmed but not nearly so damaged by the financial crises of the last five years as in other countries — the larger message was a good one for Ukraine, which faces severe headwinds economically in the coming months and years. Russia is more determined than ever to bring Ukraine into its fold, which will necessarily mean another tense winter struggle with Russian state-owned gas giant Gazprom; and the economic slowdown across the globe will dampen export markets on which Ukraine’s industrial capacity relies.

Deregulation — including, critically, land use and ownership reform — and efforts to rationalize and lower the tax code are some of the handful of weapons a post-Soviet state has at its disposal. Coupled with a highly-educated workforce and an under-appreciated work ethic, Ukraine will have new tools to lure foreign investment and, critically, the seeds of growth, even as the world tips into recession.

Focused eternally on the nominal plight of former Prime Minister Yulia Tymoshenko (though curiously not her alliance with fascists), the diplomatic and media worlds have largely overlooked the series of reforms Yanukovych has pressed through Parliament since taking office, at a rather marked cost to his own political standing. Yanukovych is the first to agree that more needs to be done, and quickly; but if the reform program continues, there is some hope for Ukraine’s economy even in the face of the dismal economic picture and demographic hurdles Ukraine faces.

At least as importantly as the actual agreements is the second value of Yanukovych’s public appearance in the UAE: a very obvious shot across the Russian bow. While importing oil and natural gas over seas is more expensive than yanking the petrochemicals through existing pipes, Ukraine’s first order of business is and must be breaking Russia’s stranglehold over Ukraine’s, and by extension Europe’s, energy security. Recent meetings with Azerbaijan, the UAE, and other producers are designed to both open new markets and to remind Russia that there are, so to speak, other fish in the sea.

A mere agreement or two with the UAE or even all of the Gulf states will not change Russian intransigence, but the efforts are not so much designed to scare off Russia as to unwind the disastrous deal Tymoshenko illegally signed, binding Ukraine to exorbitantly high natural gas prices and crippling the country’s economy.

And if the Russians won’t give even then? At some point, it really will become cheaper in every sense to import petrochemicals from the Gulf. This trip was a good first start.

Image Copyright Lange