Ukraine Warned of Road to Nowhere as Trade Snub Rankles EU

Photographer: Genya Savilov/AFP via Getty Images

Ukrainian President Victor Yanukovych had said the EU’s offer didn’t provide sufficient protection from possible trade sanctions from Russia, which disrupted exports from its neighbor in August in protest at the proposed agreement. Close

Ukrainian President Victor Yanukovych had said the EU’s offer didn’t provide sufficient... Read More

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Photographer: Genya Savilov/AFP via Getty Images

Ukrainian President Victor Yanukovych had said the EU’s offer didn’t provide sufficient protection from possible trade sanctions from Russia, which disrupted exports from its neighbor in August in protest at the proposed agreement.

Ukraine failed to sign a landmark trade pact with the European Union, in a bid to improve ties with Russia, frustrating officials from the 28-nation bloc who couldn’t say when the deal may go ahead.

Ukraine’s government halted preparations last week to sign the association agreement and free-trade accord, and no breakthroughs were made at a two-day summit in the Lithuanian capital of Vilnius. Two other former Soviet republics, Georgia and Moldova, initialed similar treaties today, with a view to signing them next year.

Ukraine’s “leadership chose a way going nowhere,” said President Dalia Grybauskaite of Lithuania, which holds the EU’s rotating presidency. “I see a defeat on Ukraine’s part to seek a better life. The current decision by the leadership is to halt progress.”

Grybauskaite said “no negotiations” on the deal took place at the summit, “because the Ukrainian leadership came with a very clear decision not to sign.”

The political and trade deal would have locked Ukraine, a nation of 45 million and a key energy-transit nation, in the EU’s orbit and had caused friction with neighboring Russia. Yanukovych’s about-face on the EU agreement sparked the biggest street protests since the 2004 Orange Revolution, in which an opposition group including jailed ex-Prime Minister Yulia Tymoshenko overturned a presidential election initially won by current leader Viktor Yanukovych.

Photographer: Georges Gobet/AFP via Getty Images etty Images)

Ukraine’s “leadership chose a way going nowhere,” said Dalia Grybauskaite, president of Lithuania, which holds the EU’s rotating presidency. Close

Ukraine’s “leadership chose a way going nowhere,” said Dalia Grybauskaite, president of... Read More

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Photographer: Georges Gobet/AFP via Getty Images etty Images)

Ukraine’s “leadership chose a way going nowhere,” said Dalia Grybauskaite, president of Lithuania, which holds the EU’s rotating presidency.

Change of Tactics

Ukrainians had demanded that the government signs the EU accord, with more than 100,000 gathering Nov. 24 in Kiev. Thousands protested in near-zero weather in the city center today, singing the country’s national anthem every hour, while authorities stepped up police presence in the area.

“The police force is ready to perform its main function -- to ensure civil order and the safety of citizens,” Interior Minister Vitaliy Zakharchenko said in a statement. “We shouldn’t allow any reasons for aggressive activity or unlawful behavior, especially by young people and students.”

Yanukovych today said his “plans haven’t changed” on forging closer ties with the EU.

“The tactics have changed slightly,” he told reporters after the summit. “After we find solutions for our financial and economic difficulties and unblock the signing of a strategic-partnership agreement with Russia, and do everything it takes build normal relations with the EU-Russia-Ukraine format.”

EU leaders reiterated that the door remains open to Ukraine, though they were unable to predict when the accord may be signed.

Russian Tensions

“We hope that sooner or later Ukraine will be ready to sign this agreement,” EU President Herman Van Rompuy said. “Looking at the longer term, there is no doubt that this will really benefit the Ukrainian economy and the Ukrainian people.”

Chancellor Angela Merkel told reporters Germany would step up its role in negotiations to help ease tensions with Russia.

“There are ties to both sides,” she said. “The task for us as members of the EU consists of speaking with Russia even more intensively in the future, so that we can get out of this either/or -- either the EU or Russia.”

Russian President Vladimir Putin has said he doesn’t oppose the EU deal and has suggested three-way negotiations. European Commission President Jose Barroso reiterated that the idea of such talks is unacceptable. A Ukrainian delegation will visit Moscow in December to meet with officials from Russia, which supplies 60 percent of its natural gas, Prime Minister Mykola Azarov said this week.

Third Recession

Yanukovych has said the EU’s offer doesn’t provide sufficient protection from possible trade sanctions from Russia, which disrupted exports from its neighbor in August in protest at the proposed agreement. Ukraine’s economy is mired in its third recession since 2008 and talks over a bailout from the International Monetary Fund have so far failed.

The EU and Russia each buy about a quarter of exports from Ukraine, the second-most populous ex-Soviet republic.

An EU mission to resolve the fate of Tymoshenko, whose 2011 conviction for abuse of office is deemed selective justice by the bloc, should be extended, Martin Schultz, president of the European Parliament, told reporters.

As well as Georgia and Moldova, Armenia had planned to initial an association agreement in Vilnius, before changing its mind earlier this year in favor of a Russian-led customs union. To proceed with full signature of the treaties, Georgia and Moldova may need to resist objections from Russia, according to Lithuanian Foreign Minister Linas Linkevicius.

‘Firm Stance’

“Pressure from Russia will remain and it’s up to Moldova’s and Georgia’s persistence and firm stance to succeed,” he said today in televised comments. “We must learn a lesson from this situation, that EU countries must be united. We must think about changes in our strategy to relations with Russia.”

Georgia will probably face diplomatic and economic pressure after Russia hosts the 2014 Winter Olympics in the Black Sea resort of Sochi, according to Svante Cornell, research director at the Central Asia-Caucasus Institute and Silk Road Studies Program in Stockholm. It will struggle to balance Russian ties with integration with the West, he said.

“It’s impossible to combine these two,” Cornell said by e-mail. “We see that Russia goes very far in terms of threats, blackmail and pressure in order to prevent countries signing even free-trade agreements.”

To contact the reporters on this story: Patrick Donahue in Vilnius at pdonahue1@bloomberg.net; Daryna Krasnolutska in Vilnius at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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