Thursday, March 04, 2010

Yanukovich Goes To Moscow

Viktor Yanukovich travels to Moscow today on his first official visit to Russia as the president of Ukraine.  The Kremlin has to be pleased with the election of Yanukovych who has already ruled out NATO membership for his country, talked about letting Russian warships stay docked at a Ukrainian Black Sea port, and suggested the Russians could buy into the country's rusting pipeline network.  But the visit may prove relations even under Yanukovych may not be all backslapping and smiles.

First off, Ukraine has been hit below its rusting industrial belt in the global economic slowdown. 

The economy tanked by 15 percent in 2009.  Steel exports, the bread and butter of Ukraine's exports, plummetted a whopping 50 percent. 

Ukraine's finances are a shambles, and Kyiv has gone begging hat in hand to the International Monetary Fund for a $16.4 billion bailout package.

If things couldn't be worse, Yanukovich's presidential rival, the former Prime Minister Yulia Tymoshenko, negotiated a whopper of a deal with Russian Prime Minister Vladimir Putin on gas prices. 

Under the deal, Ukraine now pays Russia more for gas than most European countries do, although Russia pays higher tariffs to Ukraine to ship its gas through Ukrainian territory. 

Gas spats between Kyiv and Moscow in the past left households in Europe without gas in the dead of winter.

Author and political economist, William Engdahl, says the problems date back to the old Soviet Union.

Engdahl blames Yanukovich's predecessor, Viktor Yushchenko, for much of the mess, saying the Orange Revolution leader's desire to join NATO -- at Washington's urging -- sparked anger in Moscow and left it in no mood to sell the Ukrainians subsidized gas.

But now, Russia has their man, Yanukovich, who has stated Ukraine will be a neutral "bridge" between Russia and Europe, and has already rejected Ukraine joining NATO.

However, that may not be enough to satisfy the Kremlin.

On the eve of Yanukovich's visit, the Kremlin issued a statement calling on Ukraine to stick to existing gas deals with Russia. 

The Russians could use the gas prices as a bargaining chip to get its way on a key matter for them: the basing of the Black Sea Fleet.

The Russian naval force is docked at the Ukrainian port of Sevastopol on the Black Sea.

To get a good sense of how much of a hot-button issue the fleet is, check out this Al-Jazeera, People and Power, program.

And here's part two.

Right now the fleet's lease, yes your read that right, is due to expire in 2017, meaning the Russian ships should leave.

Former president Yushchenko wanted the Black Sea Fleet out, but Yanukovich has been cagey, saying he would not oppose the Russian warships remaining in what is a mainly ethnic Russian city. 

The Kremlin could use the gas talks to get a concrete concession from Yanukovich on the Black Sea Fleet.

And then there are Ukraine's energy pipelines.

Yanukovich has said he would revive the idea of a gas consortium that would allow Moscow and the European Union to co-manage Ukrainian pipelines.

Moscow had said it could increase supplies via Ukraine if it was allowed to co-own and manage gas pipelines, but Ukraine adopted a law forbidding their privatisation.

Russia has decided to build North Stream and South Stream -- pipelines that would bypass Ukraine, delivering gas to Europe via the Baltic and Black Seas, and drastically cutting Kiev's transit revenues.

To recap, Yanukovich has balked at NATO membership, is ready to allow Russian warships to remain at a Ukrainian port, and is amenable to allowing Russia, along with the EU, it must be added, to get its hands on its rusting pipelines.

Sounds like a Kremlin simp, no? 

Possibly.  But the two-time felon, Yanukovich, says he understands Ukraine now has large business interests in Europe.

"Ukraine's interests in Europe are huge. This is a huge market," he said. "We are big trade partners. Our trade turnover with Europe is slightly bigger than with Russia given the fall in trade with Russia."

Yanukovich's trip to Moscow, just a week after being inaugurated, is not his first foreign visit. 

His first trip?  To Brussels.
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