Tymoshenko Urges EU to Abandon Ukraine Deal Conditions at Summit

Ukrainian former Prime Minister Yulia Tymoshenko made a last-ditch appeal to European Union leaders to drop conditions for a trade agreement after the government in Kiev last week halted preparations for the deal.

Tymoshenko, whose jailing has been a sticking point in negotiations, urged EU leaders gathering today for a two-day summit in the Lithuanian capital of Vilnius to drop her release as a pre-requisite for the agreement, according to a letter posted on her party’s website yesterday. Ukrainian President Viktor Yanukovych said the country needs to resolve issues plaguing its relationship with Russia before it can sign.

“This document is kind of a time machine that will take us from the past and move us into the European reality,” Tymoshenko said in the letter. “If Yanukovych makes a positive decision, I’m earnestly asking you to sign the agreement with no hesitation or conditions, including about my freedom.”

Ukraine’s government on Nov. 21 suspended preparations for the EU agreement, freezing a process that would have cemented the place of the nation of 45 million in the trading bloc’s orbit. That sparked the biggest street protests since the Orange Revolution nine years ago, in which an opposition group including Tymoshenko overturned a presidential election initially won by Yanukovych.

EU leaders have insisted that the door remains open for Ukraine, an essential energy transit route between Russia and the West. Russia wants to lure the country to its own customs union that includes Kazakhstan and Belarus.

CDS, Bonds

Five-year credit-default swaps, contracts insuring Ukrainian debt against non-payment, declined to 926 basis points on Nov. 25, the lowest on a closing basis since Oct. 24. They rose 20 basis points yesterday to 987, the third-highest in the world after Argentina and Venezuela, according to data compiled by Bloomberg. The yield on government bonds due 2023 rose 12 basis points, or 0.13 percentage point, to 9.85 percent.

Yanukovych, speaking in a televised interview, yesterday said that he still aims to complete an EU trade deal before his presidential term ends in 2015.

“Today, we can’t answer the question of when,” said Yanukovych, who pledged to travel to the EU summit, where the agreements were scheduled to be signed. “December will show whether it’s possible to sign the agreement in spring next year.”

‘Decide Freely’

The EU and Russia each buy about a quarter of exports from Ukraine, the second-most populous ex-Soviet country. The nation shouldn’t have to chose between the two as countries “must be able to decide freely” about their international relations, German Chancellor Angela Merkel told reporters in Berlin yesterday. She will meet Yanukovych at the EU summit, she said.

“We have to get over this either-or mentality,” Merkel said. “The Cold War is over.”

More than 100,000 people marched through Kiev on Nov. 24. to protest against the government, which says it wants to improve ties with Russia, which had threatened trade sanctions if it signed the EU accord. The protests continued yesterday.

Forty-five percent of Ukrainians think that the country should sign the EU agreement, according to a survey by GfK Ukraine on Oct. 2 to 15, while 14 percent would prefer the Russia-led Customs Union and 15 percent said the country should stay away from both. The poll of 1,000 Ukrainians has a margin of error of 3.1 percentage points.

Tymoshenko’s fate is “not today’s question,” Yanukovych said. She “should pay her fines and then she can ask for a pardon,” he said, adding that her case shouldn’t prevent an EU deal. The jailed former premier in a Nov. 22 letter to Yanukovych also offered to urge European leaders to sign the agreement with Ukraine without the country meeting all the criteria, including her release.

Not Tymoshenko

The EU was wrong to assume the main problem was Tymoshenko’s jailing, Polish President Bronislaw Komorowski was cited as saying by the newspaper Gazeta Wyborcza yesterday. He urged the trading bloc to offer Ukrainians a chance for visa-free travel to boost their aspirations for European integration.

“The problem is the policy of pressure and blackmail being employed against Ukraine by its eastern neighbor,” Komorowski said, according to Gazeta Wyborcza.

Russia hasn’t offered to review its natural gas supply contract with Ukraine, President Vladimir Putin said Nov. 26 in Trieste, Italy. The two countries haven’t agreed on new loans according to Ukrainian Prime Minister Mykola Azarov.

Ukraine owes about $20 billion to Russian banks and more than $30 billion in total to Russia including “loans and quasi-loans,” Putin told reporters in Italy. Russia wants to work with Ukraine on the outstanding debt regardless of its decision on the EU trade pact, he said.

‘Normal Conditions’

Halting preparations for the deal was in the nation’s economic interest and the country may yet sign it when the terms are right, Yanukovych said. That may be “soon or not very soon,” he said.

“When we meet on normal conditions that meet our interests, then we’ll have a conversation about signing,” Yanukovych said. “I want this time to come as soon as possible.”

Countries in the Russia-led customs union would “immediately stop free trade with Ukraine” if the country signed the EU deal, costing the country 400,000 jobs, Azarov said yesterday.

The EU is ready to discuss a deal this week, according to Lithuanian Foreign Minister Linas Linkevicius, whose nation holds the EU’s rotating presidency. Signing a deal later “may be difficult” as pressure from Russia “won’t disappear,” he told reporters in Vilnius yesterday.

The next “logical time” to sign an agreement would be during an EU-Ukraine summit in the spring, he said.

“Should the situation change and Ukraine say ‘yes, we want it,’ we’ll meet and talk on what can be done,” Linkevicius said. “Ukraine isn’t making a U-turn. It’s taking a pause to sort out how to respond to the artificial and deliberate obstacles by Russia.”

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