MOSCOW. (RIA Novosti economic commentator Nina Kulikova) - Ukrainian Prime Minister Viktor Yanukovych visited Sochi on August 15-16 to attend the summit of EurAsEC member countries.
The media coverage of the visit eclipsed the summit agenda. Though the positions of Russia and Ukraine on key issues did not radically change, the visit provided an opportunity for resuming negotiations, experts believe.
Russian Prime Minister Mikhail Fradkov and Viktor Yanukovych discussed prospects for bilateral energy cooperation. Every August, Ukraine traditionally concludes contracts on energy supplies for the next year, so the visiting Ukrainian PM was on a mission to negotiate stable prices for Russian gas supplies, said Leonid Vardomsky, head of the Center for CIS and Baltic Studies at the Economics Institute of the Russian Academy of Sciences. "The social situation in Ukraine, where the government has already raised gas prices, depends on that," he said. The gas problem is a priority, and Yanukovych's reputation rests on his earlier promise to settle it with Russia.
Many people want to know if the formula for calculating prices of gas imports will be changed in light of the latest political reshuffle in Ukraine. Though no figures were made public, Yanukovych said prices had been fixed until 2007. "These will be market prices, with a transparent price-setting mechanism, and they will correspond to the level of bilateral economic relations," he said. According to Fradkov, when setting prices for gas supplies to Ukraine, Russia will stick to the agreements reached earlier this year.
Ukraine developed an operating mechanism for energy imports in January 2006, and it is used by Rosukrenergo, a company that buys Russian and Turkmen gas at different prices and sells it to Ukraine at an average price of $95 per 1,000 cubic meters. Russia is not totally in control in these circumstances, and a lot depends on Turkmen gas prices, the cost of Uzbek and Kazakh transit, etc., Vardomsky said.
Turkmen gas, which has been relatively cheap until now, accounts for two thirds of Ukrainian gas imports. However, Ashgabat's recent statements about a potential gas price hike necessitate new contracts. In this light, Fradkov said, "tense" negotiations on gas will soon be continued.
Another priority discussed by the two prime ministers was Ukraine's presence in the single economic space. Until now, Kiev has not officially opposed it, but it has delayed signing a priority package of documents on establishing a customs union. Yanukovych told his colleagues in Sochi that he would "steer in this direction and accelerate it further." Yet the question remains of whether Ukraine will seriously take part in integration in the post-Soviet space.
"The situation is not very favorable for EU-Ukraine cooperation," said Lidia Kosikova, a senior research fellow with the Center for CIS and Baltic Studies at the Economics Institute of the Russian Academy of Sciences. Ukraine has not been invited to join the European Union, nor will it sign an association agreement with it. So far, it has been told to amend its legislation in accordance with European standards, though the country is not receiving much investment and has no access to the EU market. Ukraine's economic losses due to the cool down in its relations with Russia are not being compensated by the West, Kosikova said.
Meanwhile, Kiev's economic losses are obvious. The chill in relations between the political elites in Russia and Ukraine in the past 18 months could not but affect bilateral economic cooperation. A 2005 review showed that Ukraine's share of Russian imports somewhat decreased after two years of growth in 2003-2004, said Dmitry Plekhanov from the Institute for Complex Strategic Studies. "Russian investment in the Ukrainian economy last year went down almost 20% compared to 2004," he said.
Despite all this, Russia remains Ukraine's key economic partner, and speeding up its cooperation within the single economic space and EurAsEC is a possible alternative, said Kosikova. Expanding bilateral dialogue into multilateral discussions may benefit Ukraine, which would receive trade and other preferences within economic unions.
Yet the economic advantages and political ambitions are poles apart in today's Ukraine. Regardless of what policy toward the CIS Yanukovych wishes to pursue, he has to consider those Ukrainians who seek to enter the EU and NATO.
According to Vardomsky, Yanukovych understands that the country is split, and any sharp move, say, a radical step towards the single economic space, may re-escalate tensions between the two parts. So, work on documents on the single economic space is likely to continue, though it is not clear how soon it will yield specific results.
Yanukovych's visit to Sochi helped restore bilateral contacts at the highest level and put in motion cooperative institutions, in particular the joint economic committee of the governments of Ukraine and Russia, which is part of the Yushchenko-Putin intergovernmental commission.
Though political dialogue has been resumed, it's hard to say if it will move forward. Issues such as prospects for Russian investment in Ukraine, access for Russian investors - including strategic ones - to privatization, and accession to the WTO should be settled and coordinated. How well and how soon this will happen is open to debate. Nor is it clear if Ukraine would retain the balance it now has in relations with Russia and Europe. In any case, Russia cannot expect to find a simple way out, either.
The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.
