Ashton returns to Ukraine

EU foreign policy chief pushes for political breakthrough, and prepares plans for emergency financial support.

The European Union’s foreign policy chief, Catherine Ashton, will return to Ukraine today (4 February) in a bid to broker a breakthrough in the months-long stand-off between President Viktor Yanukovych and the opposition.

Ashton held meetings with both sides in Kiev last Tuesday and Wednesday (28-29 January), amid warnings from a former Ukrainian president, Leonid Kravchuk, that the country was “on the brink of civil war”. Parliament’s repeal of laws to curb demonstrations last week has helped calm the situation, but the opposition has rejected a conditional amnesty offered by Yanukovych to the protestors and wants the president’s powers reduced.

Ashton will also spend most of Wednesday (5 February) in Kiev.

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Meanwhile, Ukraine’s already precarious financial prospects has worsened because of a warning from Russia last week it may not be willing to follow through with an earlier agreement to bail out Ukraine because of the resignation last Tuesday (28 January) of the prime minister, Mykola Azarov. Russia’s Prime Minister Dmitri Medvedev said it would be reasonable to honour the agreement “only when we know what economic policies the new government will implement, who will be working there, and what rules they will follow”.

Ashton stepped into the financial breach this weekend, saying that the EU and the United States are currently working on a package of financial support, which “won’t be small”, to provide a “period of stability” leading up to presidential elections that have long been scheduled for February 2015.

Before the unrest began, Ukraine had been in the process of negotiating a package of stand-by funding with the International Monetary Fund (IMF). However, the support from the IMF, through which the EU was preparing to channel loans to Ukraine, was conditioned on structural reforms.

Ashton made clear in her interview that she viewed an IMF package – a “much bigger challenge”, in her words – as support for a later stage.

Russian and Ukrainian officials have yet to comment on Ashton’s comments, but in the past Russian officials have accused the EU of trying to ‘blackmail’ Ukraine into a closer relationship with the EU. Russia’s President Vladimir Putin last week also criticised the EU’s diplomacy in Ukraine, saying: “The more intermediaries there are, the more problems there are.”

José Manuel Barroso, the president of the European Commission, yesterday (3 February) put Ashton’s comments in a broader framework of EU efforts to ease the crisis in Ukraine.

“The first priority now is the end of violence and a political solution to the crisis,” he said in Brussels. Barroso noted that Commission had already prepared a €610 million package of support for Ukraine in anticipation of Ukraine signing an agreement with the IMF, and said that the EU was not using money to persuade Ukraine to agree to a political deal – an association agreement – that Yanukovych rejected on 21 November.

“We don’t agree with the idea that we should pay something for a country to join this agreement,” he said.

Yanukovych’s decision not to sign the association agreement, together with a trade deal, prompted the street demonstrations in Kiev. Police violence in late November brought as many as 500,000 Ukrainians onto the streets; government measures in mid-January that were intended to limit the demonstrations prompted an upsurge in violence and resulted in the first deaths of demonstrators.

Rather than agree to the terms set by the IMF, Yanukovych turned in December to Russia, striking a deal whose value was estimated at $15 billion (€11.1bn) in direct support – through the purchase of Ukrainian government bonds – and around $4bn (€3bn) in lower gas bills.

Before Christmas, officials within the EU’s institutions were working on a document that indicated that, had Ukraine signed the IMF deal, the EU’s financial support for Ukraine could potentially have amounted to around €19bn between 2014 and 2020. Most of that sum would have been in the form of loans, but it included between €150m and €200m in grants per year. The loans would have been channelled through the IMF and would have been conditioned on reforms.

MITRANAND