In a major article published in Critique in 2015 Marko Bojcun analyzed the origins of the crisis that erupted in Ukraine in 2013-2014, and which has shaped that country’s political, economic and social situation since then. The essay is republished in his book Towards a Political Economy of Ukraine: Selected Essays 1990-2015. This article by a leading Ukrainian Marxist historian addresses many of the issues that are currently being debated in the international Left in relation to the current war unleashed on Ukraine by Vladimir Putin’s Russia. Published here in two parts because of its length. [R.F.]
Origins of the Ukrainian Crisis
This article explores the origins of the Ukrainian crisis in several historical developments that came together in 2014. The first development, and the condition necessary for activating all the others, is the situation that has unfolded inside Ukraine itself since 1991 with the establishment of a new nation state simultaneously with the return of capitalism. The second is the isolation of Ukraine from the regional economic and security blocs of the Euro-Atlantic core states to the west and of Russia to the east. The third is the revival of Russian imperialism, and the fourth is the ensuing rivalry between Russian and European imperialisms to incorporate Ukraine, into their respective transnational strategies. The fifth development is the overarching confrontation between a declining American power and a reviving Russian power in Europe. Russia is observed as the proactive power that militarised and internationalised the Ukrainian crisis in 2014 by seizing Crimea and arming the separatist insurgency in the east. It brought the question of European security to the centre ground, making a confrontation inevitable between Russia and the USA. However, it also has the potential to open up cracks in the Euro-Atlantic core between the USA on the one hand and the most powerful European states on the other.
My findings are at odds with the claim made by academic and political figures right across the political spectrum in the West that the USA bears primary responsibility for the Ukrainian crisis by having encroached too far into Russia’s traditional sphere of influence.[1] Rather, I see the US-Russia rivalry as only one contributing factor. The Euro-Atlantic core states had the initiative after the collapse of the Soviet bloc. They integrated Central European and Baltic littoral states into the EU and NATO on their own terms from the end of the Cold War right up to the international financial crisis and the Russo-Georgian war in 2008. Thereafter, however, the Russian state retook the initiative in Eastern Europe and the Caucasus, the eastward drive of NATO and the EU stalled, and the role of the USA in the region’s affairs became increasingly a reactive one. This was the broader context of the Ukrainian crisis, which matured and then erupted in the period from 2008 to 2014.
The fragility of the Ukrainian state
The Maidan[2] arose in 2013, as it did in 2004, because the new Ukrainian ruling class failed to share state power democratically or to invest in the development of its own society. Lacking democratic legitimacy or an adequate social consensus made the state weak and less capable of dealing with the challenges and opportunities it faced from neighbouring powers.
This past quarter-century we have seen the simultaneous construction of a new nation state and its still incomplete transition to a capitalist economy. State building and the privatisation of the nationalised assets have been not only simultaneous, but also symbiotic processes. The state was built as the instrument for the wholesale transfer of these assets into the hands of a very narrow class that we call the oligarchs. This social class then turned the state to enabling new rounds of wealth accumulation from the living labour deployed in the growing private sector.
The old Stalinist bureaucracy was not driven out of the collapsing nationalised economy. Rather, it made its own way to the individual and corporate ownership of the economy’s commanding heights. So too did it ensure its own resurrection in the political sphere where it became the absolutely dominant subject of the multi-party system.
The state rested on a fragile social consensus of a population holding onto an ever-fading promise that prosperity would come from leaving the Soviet Union and joining the West. The Ukrainian masses rose up in frustration and anger over this broken promise in 1994, 2001 and 2004, but their increasingly massive protests failed each time to fundamentally change things. On the contrary,[3] the Ukrainian people are as poor today as they were in the last year of the USSR, and they are riven by far more inequalities than they were then. Their influence over public policy and public institutions remains weak, even if they have managed repeatedly to recover their basic rights to free expression, assembly and self-organisation.
Thus the present crisis is in the first instance attributable to the failure of a newly independent state to meet the mass expectations on which it was founded in 1991. The Maidan in the winter of 2013-2014 was the latest revolt against this manifest failure, a mass movement that briefly undermined the new ruling class, drove its most powerful faction out of the country, but ultimately failed to dislodge it from the political and economic institutions. However, the Maidan was sufficiently threatening to compel the Russian state — gendarme of the transnational ruling class in its region — to intervene and seize Crimea, to arm a revanchist insurgency in the Donbas, and so to prevent the revolutionary process from spreading into the east and south.
The international isolation of the Ukrainian state
The second historical development that contributed to the outbreak of the current crisis was the failure of the Ukrainian state — for reasons not entirely of its own making — to integrate successfully into either the Euro-Atlantic alliance or the Russia-led alliance. Its resulting isolation from the integration projects on either side made Ukraine particularly vulnerable to shifts in the relations between the big powers in the region.
After succeeding Leonid Kravchuk as president in 1994, Leonid Kuchma pursued a strategy to build a national ruling class that could hold its own place in the international political economy. His strategy required keeping Western and Russian capital out of the first big privatisations of nationalised property, accumulating wealth at home and upgrading technologically so as to prepare the country for membership in the EU and its single market. Kuchma’s strategy failed because the state leadership could not compel its own capitalists to keep their wealth in the country to upgrade and diversify the domestic economy. Rather, Ukraine became a low wage, energy and materials intensive exporter of primary goods and semi-finished products in agriculture, energy, chemicals and minerals, the profits from which the oligarchs sent abroad.[4] The mounting social inequalities in the midst of a rapid rate of economic recovery on the back of an export boom and an increasingly repressive regime were the triggers for the 2004 Orange Revolution.
From Kuchma’s second term in office and Putin’s first in Russia, Russian capitalists succeeded in placing substantial investments in the Ukrainian economy. Kuchma’s successor in 2004, Viktor Yushchenko, tried to offset the Russian advance by inviting in European investment capital. By 2008 the Ukrainian economy was well penetrated by both Western and Russian investors, neither of whom contributed much to diversifying or upgrading it. Rather, each side was trying to incorporate Ukraine’s natural resources, cheap labour and markets onto a low technological echelon of its own regional chains of production and consumption.
Yet the 2008 financial crisis prevented either side from making a bid for a dominant position. The Ukrainian oligarchs still held onto their hope of remaining an independent capitalist class in the global political economy. They resisted incorporation into the succession of Russia-led integration projects: the Commonwealth of Independent States and the Customs Union. The European Union, on the other hand, did not want them in as members, and it made that abundantly clear in 2005-2007 by rejecting the requests for a membership path from Yushchenko, the most pro-Western of all Ukraine’s leaders. Moreover, the EU’s biggest states — Germany, France and Italy — remained steadfastly opposed to offering Ukraine membership in NATO.
So Ukraine ended up in the grey zone between US-led Europe and Russia, and the likely recipient of friction between them that grew as Russia revived and US influence in Europe waned.
The revival of Russian imperialism
The third historical development contributing to the current crisis has been the revival of Russian imperialist ambitions. Throughout the 1990s the Western powers set the agenda, incorporating Central European and Baltic states into the EU and NATO, and all the time holding Russia, Ukraine and Belarus at arm’s length outside their integration project.
From around 2000 Putin began to restore Russia’s position as a power in Eurasia. He focussed first on rebuilding Russia’s economic ties in the ex-Soviet space by reclaiming state control over Russian energy and mineral resources and promoting several national corporate champions in these sectors. Later, the restored economic links with Russia’s near abroad would lay a path to securing transnational competitive status for Russia’s biggest energy and mineral producers.[5]
In terms of strategy, although not of scale, the Russian model of imperialism is similar to that of the USA in the twentieth century: the provision of military security to countries in exchange for their alignment with Russian foreign policy, and their access to Russian markets in exchange for the removal of barriers against Russian capital penetrating their national economies. It is different from the USA experience insofar as Russian expansion has relied on its competitive advantages in global markets of fuel, energy and mineral resources whereas American capitalism expanded globally with a far more diversified production base and with already saturated domestic demand.
The Russian economy is weakly driven by domestic demand, and it does not satisfy it. It is not diversified nor is its bourgeoisie willing to invest significantly in its diversification. Property ownership in Russia is too insecure, access to domestic resources and markets is in the gift of state authorities, and better security and investment opportunities exist for Russian capital investment abroad. Therefore, while the Russian national economy is not diversified, Russian capital has become diversified both sectorally and geographically along transnational chains of production, trade and investment.
A Deutsche Bank report in 2008 concluded that Russia had become by 2006 the largest outward investor of its capital of all the BRIC countries (Brazil, Russia, India and China). Russian overseas direct investment (ODI) was double that of its nearest rivals India and China at $160 bn, up from $20 bn in 2000. Russia was already the second largest source of ODI in emerging markets after Hong Kong. Russian private capital was invested first in the near abroad and then expanded outwards, seeking new markets, financing and new technologies principally in the fields of fuel, energy and metals.
A survey of 25 top Russian firms shows they sent 52 percent of the ODI into Western Europe, followed by 22 percent to the near-abroad countries and 11 percent to Eastern Europe. Several Russian companies made new large purchases abroad in 2008: Evraz in Canada, the USA and Ukraine, Severstal in the USA, Lukoil in Italy and Gazprom in Belarus. The biggest transnational corporations of Russian origin at the time also included Sistema, Sovkomflot, Norilsk Nickel and Basic Element. By 2010 ODI by Russian firms exceeded $200 bn, and was going mainly to the CIS and EU countries.[6]
For the past 15 years Russia has targeted Ukraine for reabsorption into its traditional sphere of influence. There was an ongoing desire to preserve joint production in engineering, defence, aerospace and other high-technology sectors that survived the Soviet break-up. However, Russian capitalism was looking to new horizons as well, and Ukraine lay along its principal path of expansion into Central and Western Europe. It holds the downstream transit facilities and processing industries that Russian energy, minerals and chemical producers need. Russian producers made their first such cross-border acquisitions in 2000.[7] However, the gas and oil transit pipelines through Ukraine that link Russian suppliers to European consumers, the most valuable transit facility of them all, have remained steadfastly in state hands.
The Yanukovych presidency
The period of Viktor Yanukovych’s presidency saw further popular alienation from the political order, the economy falter under the blows of the 2008 financial crisis, and the state face a zero-sum choice of accepting either Russia’s or the West’s terms of integration into their respective regional integration projects. The mixture of these three factors finally exploded in Kyiv in the winter of 2013-2014.
Yanukovych narrowly defeated Yulia Tymoshenko for the presidency in 2009 on a platform of political stability and the restoration of economic ties with Russia.[8] His predecessor Yushchenko had fallen out bitterly with Tymoshenko as Prime Minister over policy towards Russia. Tymoshenko took the full force of the 2008 financial crisis. She negotiated for emergency funding with the IMF in 2009. Ukraine-Russia relations were dominated by disputes about the cost of Russian gas and its transit to Europe. The state corporation Naftogaz Ukrainy became more and more indebted to Gazprom, and the Russian government used the debt to pressure Ukraine on a variety of issues.
Yushchenko had tried to balance growing Russian economic penetration by opening up the country to Western investment. That influx ended spectacularly with the financial meltdown in 2008 that battered people’s livelihoods and convinced enough voters, even in the nationalist west of the country, to give Yanukovych a chance to turn things around. The arrival of Armani-dressed oligarchs in limos with tinted windows and bodyguards inside to Yanukovych’s inauguration in Kyiv in January 2010 gave everyone a taste of things to come.
Yanukovych perfected the scheme of taking bribes from all of the businesses his ministries permitted to trade. These appropriations made him a tycoon in his own right (he was nominally represented in the private sector by his son Andrii). Yanukovych created his inner circle, called the “Family”, from the seven most powerful capitalists. He restored Dmytro Firtash, the gas trader, to financial health by giving him 12 billion cubic metres of Russian gas in settlement of a dispute that Firtash’s firm Rosukrenergo had had with Naftogaz Ukrainy during Yushchenko and Tymoshenko’s terms, when they tried to close him down. Rosukrenergo once again became the intermediary between Gazprom and Naftogaz Ukrainy in a scheme that allowed Russian and Ukrainian presidents and oligarchs to milk the interstate gas transit. Gazprom opened an $11 bn credit line for Firtash, which he used to build a monopoly stake in fertiliser processing in Ukraine, a port facility, a bank and the national television channel Inter.[9]
Renat Akhmetov, the country’s richest man, was also blessed when Yanukovych granted his firm DTEK a monopoly on electricity exports. Yanukovych ordered the state energy regulator to increase the tariffs local and regional authorities paid for DTEK’s electricity from coal-burning stations, to levels comparable to those paid to state-operated nuclear power stations. Both Akhmetov and Firtash won tenders to privatise regional electricity distributors. Both placed their representatives into the state energy regulating commission to ensure that they continued to get high returns for their gas and electricity.[10]
In November 2012 President Yanukovych signed a Double Tax Treaty with the government of Cyprus to replace the Soviet-era treaty. Thus he preserved the channel used by the biggest corporations to expatriate their profits, either permanently or to recycle them back to Ukraine as foreign investments and loans that were subject to much lower levels of capital gains tax. Flight of capital to tax havens was taking place through various other channels used by Ukrainian and foreign firms alike. They consistently deprived the state budget of between $10 bn and $20 bn every year.[11]
As soon as he took office Yanukovych moved to strengthen presidential authority over the legislature, judiciary, the public procurator and the Kyiv city government. He appointed his own Cabinet of Ministers under Mykola Azarov, denying the legislature its constitutional prerogative. The rules were changed to make it easier for the Party of Regions to build voting majorities in the Verkhovna Rada. And in August 2012 the law by which the Rada was elected entirely on the basis of proportional representation of parties was replaced. Now half the seats would be chosen on the basis of proportional representation of those parties that gained more than 5 percent of all votes, and the other half by single mandate constituency elections. The new law gave the President’s Party of Regions a way to finance its own candidates disguised as independents to run in the single-mandate constituencies. It also provided the means to subvert the democratic oversight of local electoral committees and to deliver fraudulent vote counts to the Central Election Commission.
The October 2012 elections to Verkhovna Rada were the dirtiest in the history of independent Ukraine. They provided Yanukovych with a majority of deputies in the Rada, elected by proportional representation from the list of the Party of Regions and as nominally independent candidates standing in single-member constituencies.[12]
In addition to settling scores with potent rivals, the imprisonment of Yulia Tymoshenko and Yurii Lutsenko (former Minister of Interior) and their barring from public office for seven years served to intimidate the entire parliamentary and extra-parliamentary opposition. State security organs went after opposition candidates, independent analysts, university rectors and investigative journalists. A determined attempt was made -- in the end unsuccessful -- to muzzle the media by making slander of public officials a criminal offence. This broader offensive had the hallmarks of the drive to “sovereign democracy” made by Putin years before in neighbouring Russia.
The economy
Economic growth in the period 2000-2008 was driven by the influx of foreign direct investment into domestic retail markets and the commodities that dominated Ukraine’s exports: raw and semi-processed minerals, chemicals and food products. When their hugely inflated prices finally collapsed in 2008, GDP dropped more than 15 percent in the following year, the second deepest fall in Eastern Europe after Latvia. The private sector was left holding debts equivalent in value to a year’s GDP.[13] Commodity prices recovered at the end of 2009, but in the longer term international demand did not. Ukraine’s recorded annual GDP grew again, in 2011 by just over 5 percent, but then fell back and registered no growth at all in 2012 and 2013. In 2014 it began to contract as a result of the Russian seizure of Crimea and the war in the east of the country.
Trade
Ukraine’s foreign trade was characterised by the following patterns:
- Trade with the EU single market and with Russia each accounted for one quarter of the value of its foreign trade.
- Ukraine incurred annual trade deficits in its trade with Russia as a result of its reliance on Russia’s and Turkmenistan’s oil and gas (transited through Russia).
- Ukraine incurred annual trade deficits with the EU as a result of the disparity between the capital content of goods it imported from the EU (machinery, consumer durables) and those it exported to the EU (primary and semi-processed goods).
- Ukraine covered its trade deficits with Russia and the EU by generating surpluses from trade with the East Asian, Middle Eastern and African countries.
External trade remained in balance or went into surplus as long as demand for the country’s principal exports remained strong -- that is, between 2000 and 2008. There-after, the trade deficit grew year on year, reaching $15 bn in 2012.[14]
In 2013 Russia began a trade war with Ukraine in response to the first easing of trade barriers between the EU and Ukraine ahead of the anticipated free trade area agreement between them. Russia claimed that EU exporters would use Ukraine to dump their products into the Russian market. It banned imports of Ukrainian dairy products, fruit, vegetables, meat, sunflower oil and alcohol.
Investment
Annual foreign direct investment leapt forward after the Orange revolution from $1.7 bn in 2004 to a peak of $9.2 bn in 2007. Ukraine was second only to China in these years in terms of per capita investment flowing into the country. For the first time much of this inflow came through the banking system, with many foreign banks setting up Ukrainian subsidiaries to provide both corporate lending and retail services. Most foreign direct investment went into export credits for agricultural and mining concerns, consumer lending, real estate and the domestic trade in imported luxury goods.[15]
The proportion of foreign capital held in Ukraine’s banks grew from 13 percent to over 50 percent between 2004 and 2008. Between them the banks of six EU member states held 30 percent of the banking capital. Financial institutions based in Russia held another 10 percent. The European share was held overwhelmingly by large commercial banks, headed up by Raiffeisen of Austria, Unicredit and Intesa San Paolo of Italy, and BNP Paribas of France. The Russian share was distinguished by the predominance of state banks among their holders — VTB, Vneshekonombank, Sberbank, BM Bank and Prominvestbank, and by four other banks tied to the Kremlin.[16]
The international financial crisis in 2008 forced the rival centres of foreign capital to alter their positions in the Ukrainian market. Facing serious problems at home, the banks that had bought up the domestic networks of several Ukrainian banks were forced to sell. Ukrainian oligarchs, who had sold their banks at lucrative multiples of their book value, now bought them back at a good discount. Russian banks, on the other hand, were better protected from the financial crisis by ample credit from their own government’s sovereign funds, so they strengthened their position in the Ukrainian banking system. On balance, however, the biggest initial winners were the Ukrainian private banks, which increased their share of assets in the banking system from 40 to 51 percent between 2008 and 2012. The Ukrainian state banks Oshchadbank and Ukrexsimbank also increased their share from 11 to 15 percent over the same period.[17]
The overall share of banking capital owned by foreigners fell to 34 percent in 2014. The share of Russian capital rose to 12 percent, making it the largest bloc from any one country and double that of its closest rival, Cyprus, at 6 percent. Not to be over-looked is the fact that a considerable share of Cyprus-exported capital came originally from Russia. After 15 years of cross-border investment, Russian capital was deeply penetrated not only into Ukraine’s banking services, but critically also in the processing and manufacturing sectors: petrochemicals, agrochemicals, food production, paper, construction materials, steel, non-ferrous metals, machinery and weapons manufacturing. It also had developed strong positions in mass media, telecommunications, insurance, business information and information technology.[18]
Debt
Ukraine’s state debt (including state guaranteed debt of the private sector) grew only marginally between 2000 and 2007 to $18 bn, or 12 percent of its GDP. Thereafter it grew rapidly, peaking at $73 bn in 2013. The country’s gross external debt, which included that of the private sector, was double that amount at $142.5 bn, equivalent to 78.3 percent of GDP in 2013.[19]
Tymoshenko’s government negotiated a loan of $16.4 bn from the IMF, $10.6 bn of which were released by September 2009. Yanukovych’s government led by Prime Minister Mykola Azarov that succeeded Tymoshenko’s in 2010 was responsible for adding another $40 bn to the state debt over four years, including: $20 bn in treasury bills and Eurobonds; $6.85 bn in IMF Special Drawing Rights in August 2010 and April 2013; $6.6 bn borrowed from the Chinese government in 2012; and $3 bn of the $15 bn originally offered by the Russian government in November 2013 to help persuade Yanukovych not to sign the Association and Free Trade Area Agreements with the EU. The Ukrainian government was additionally in arrears to Gazprom for several billions dollars’ worth of gas.[20]
Debt repayment became an increasingly heavy burden on the state budget, at the end of 2014 accounting for 40 percent of total expenditures.[21] For both the West and Russia Ukraine’s indebtedness provided a handy lever to influence its government. The IMF was the arbiter of its creditworthiness and gatekeeper to international capital markets. It tried to impose its conditions on the government to decrease state ownership of public utilities, and to withdraw subsidies on the cost of supplying them to households, communal services and businesses.
The Russian government used Ukraine’s indebtedness and its dependence on Russian export markets to leverage the Kharkiv Accords in April 2010. The Accords extended the lease of Sevastopol and other Crimean ports to the Russian Navy until 2042 in exchange for cheaper gas. In June of that year the Verkhovna Rada excluded the goal of NATO membership from the country’s national security strategy, thus restoring its non-aligned status. Yanukovych also agreed to start talks with Russia about merging the state utility Naftogaz Ukrainy with Gazprom and deepening co-operation between the countries’ defence, aerospace and aeronautical industries.
Labour migration
The movement of labour also reveals the pattern of Ukraine’s incorporation into the international political economy. Since the collapse of the Soviet Union, Ukraine has exported its labour in two directions: workers living in the east of the country have gone largely into Russia, while those in the centre and west have gone into the EU countries. They number in the millions, and their outmigration has had a profound, if contradictory impact on the Ukrainian economy. It has lost skilled and well-educated people to countries where they are now employed as cheap, illegal or legally precarious labour. Communities depopulated by the outmigration have seen their social and family structures severely degraded. Migrant workers have been sending remittances from their earnings home that are estimated to exceed the combined foreign direct investment coming into Ukraine.[22] Without their remittances, the condition of the working class would be considerably worse than it is today. The overall impact of labour outmigration, however, has been negative as far as the reproductive capacity of Ukrainian society is concerned.
The zero-sum choice
Labour migration, trade, the repatriation of profits from foreign direct investment, debt repayments and capital flight are all tributaries for the extraction of wealth from the Ukrainian economy. The European Union and the Eurasian Economic Union are both regional integration projects designed to comprehensively regulate and channel such tributaries into their respective metropolitan cores. In 2013 the Ukrainian state found itself forced to choose between the EU on the one hand and Customs Union on the other. The Customs Union, formed in 2010 and made up of Russia, Belarus and Kazakhstan, was the precursor to the Eurasian Economic Union. The latter was launched in January 2015, together with Armenia as its fourth member. This was a zero-sum choice because there was no way for Ukraine to belong to both regional integration projects. The fact that its economy was closely tied to both the Russian and EU markets, asymmetrically but nevertheless in equally strong measure—through debt to the West, energy supplies from the East, and trade with both — was simply ignored by Russian and EU leaders.
The European Union and Ukraine had a Partnership and Cooperation Agreement since 1994. They had been negotiating since 2007 an Association Agreement and a common deep free-trade area based on the laws, state competition policy and production standards that are already enforced within the EU single market. These requirements, which the Verkhovna Rada was urgently adopting throughout 2013, would add considerable costs to the state and private sector in order to make Ukrainian goods acceptable in the EU market. Except for a transition period when EU food products and Ukrainian automobiles were protected from competition, the abolition of almost all tariff and non-tariff barriers to trade would in the long run expose several Ukrainian industries to sustained and ruinous competition from the EU side.[23]
Moreover, the EU’s offer was “integration without the institutions”: Ukraine was not offered membership in the EU nor even the prospect of membership, so it would remain excluded from the decision-making process that shapes the EU single market in which its own businesses and workers were going to compete. It was not an attractive proposition.
The Customs Union and its successor Eurasian Economic Union offered Ukraine something different. This integration project was far less developed than the European Union’s. Russia accounted for 90 percent of the combined GDP of the Customs Union’s members, which meant that Russia would dominate the Union whatever its formal governing structure. The Russian establishment saw in this project one of the important means to reclaim great power status. The news agency Sputnik hailed the launch of the Eurasian Economic Union in January 2015 as “the birth of a new giant”. Putin called it “a powerful supranational association capable of becoming one of the poles in the modern world and serving as an efficient bridge between Europe and the dynamic Asia-Pacific region”.[24]
Yet such a bridge was hardly possible to build without Ukraine. Russian diplomacy focussed on this challenge, trying to coax it into the Union by promising generous energy subsidies if it joined and trade sanctions if it did not. Yet even under Yanukovych and in the worsened economic situation, the government continued to resist. There was a fundamental lack of trust between Kyiv and Moscow, at the heart of which was the refusal of the Russian state to acknowledge Ukraine’s independence.
This refusal is rooted in a long history of Russian imperial domination of Ukraine. It is justified ideologically by the claim that the Ukrainian nation does not exist, that its people are simply the little brothers (nialorosy) of the Russian nation. After gaining independence in 1991 Ukrainian leaders regularly faced jibes from their Russian counterparts about when they would finally come to their senses and stop playing their game of nation building. Putin expressed perfectly the paradox that Ukrainian statehood poses to Russia’s leaders when he told George W. Bush in April 2008 at the NATO summit in Bucharest that Ukraine really was not a state, but if it tried to join NATO it would cease to exist as a state. It was also at this meeting that “Putin threatened to encourage the secession of the Black Sea peninsula of Crimea and eastern Ukraine”.[25] It was therefore hardly surprising Kyiv baulked at pooling its sovereignty with Russia’s in the Customs Union or the Eurasian Economic Union.
Despite the Kharkiv Accords lowering the price for Russian gas by $100 per thousand cubic metres, Ukraine continued to pay more than Germany and Italy, which are considerably further from Russian gas fields than Ukraine. Neighbouring Belarus enjoyed a lower price, but only after its president Alexander Lukashenko sold the country’s gas transit pipelines to Gazprom. The Ukrainians were not ready to do that; instead, they began to diversify their sources of supply, reducing imports from Russia from 57 mcm in 2007 to 33 mcm in 2012 and 26 mcm in 2013.[26]
The Ukrainian government’s inability to service its foreign debt brought matters to a head at the beginning of winter in 2013. Putin and Yanukovych held talks in Moscow on 22 November 2013 after which Yanukovych announced he would not sign the Association Agreement and the linked European Free Trade Agreement at the upcoming Summit of the EU Eastern Partnership in Vilnius. When the news reached Kyiv, several hundred people gathered on the Maidan to protest and demand Yanukovych sign the agreements.
In Vilnius on 29 November he said at his press conference: “We have big difficulties with Moscow. I have been alone for three and a half years in very unequal conditions with Russia”.[27] He proposed as a way out of the situation that Moscow be involved in three-way negotiations with the EU and Ukraine. However, EU officials rejected his proposal.
Addressing the Eastern Partnership’s plenary session Yanukovych insisted he was not rejecting the Agreements, but wanted further negotiations in order “to minimise the negative consequences of the initial period that will be felt by the most vulnerable groups of Ukrainians”:
“Unfortunately Ukraine has been left facing serious financial and economic problems recently ... [we need] macro-financial assistance ... the restoration of co-operation with the IMF and WB … a revision of trade restrictions on individual items ... participation of the EU and international financial institutions in the modernisation of the Ukrainian gas transit system ... as the key element ... to ensuring Ukraine’s energy independence ... the elimination of contradictions and the settlement of problems in trade and economic co-operation with Russia and other members of the Customs Union related to the establishment of the free trade area between Ukraine and the EU”.[28]
Yanukovych was being pressed to choose between Russia and the West, but he wanted co-operation with both sides to deal with the country’s mounting problems.
[Continued in Part II, https://lifeonleft.blogspot.com/2023/04/origins-of-ukrainian-crisis-part-ii.html]
[1] They have included John Mearsheimer, “Why the Ukraine Crisis is the West’s Fault”, Foreign Affairs, September-October 2014; Stephen Cohen, “Why is Washington Risking War with Russia”, The Nation, 18-25 August 2014; Jeremy Corbyn, British Labour Party MP, “NATO Belligerence Endangers Us All”, Morning Star, 17 April 2014; Marine le Pen, leader of France’s National Front, “France’s le Pen in Moscow blames EU for new ‘Cold War’”, Reuters, 12 April 2014.
[2] Maidan Nezalezhnosti, Independence Square in central Kyiv, lent its name to the mass revolts in 2004 and 2014 against corruption, social injustice and oligarchic rule.
[3] In 1994 the threat of a general strike forced the Verkhovna Rada and President Leonid Kravchuk to finally call the first democratic elections to both institutions in the independent state. In 2001 the encampment on Independence Square - Maidan - in Kyiv that called itself “Ukraine without Kuchma” demanded the second president’s resignation before being violently suppressed. The 2004 Orange Revolution overturned the falsified presidential election and brought Viktor Yushchenko to the presidency.
[4] The government retained state ownership of land, the arms, aeronautical and aerospace industries, communications and energy transportation pipelines.
[5] Putin’s strategy also required subordinating the oligarchs politically, destroying the insurgent Chechen state at the cost of tens of thousands of lives, substantially recentralising the loose federal system he inherited from Boris Yeltsin, and undertaking neoliberal reforms of the welfare system.
[6] Alexey V. Kuznetsov, “Industrial and Geographical Diversification of Russian Foreign Direct Investments” (April 5,2010). Electronic Publications of Pan-European Institute; https://ssrn.com/abstract=2338170. Accessed 1 October 2015.
[7] Marko Bojcun, “Trade, investment and debt: Ukraine’s integration into world markets” in Neil Robinson, ed, Reforging the Weakest Link: Global Political Economy and Post-Soviet Change in Russia, Ukraine and Belarus (Aldershot: Ashgate, 2004), 46-60.
[8] Marko Bojcun, “The International Economic Crisis and the 2010 Presidential Elections in Ukraine”, Journal of Communist Studies and Transition Politics, 27:3-4 (September-December 2011), 496-519.
[9] “Otochennia Patina dopomohla Firtashu zarobyty rrtiliardy doliariv”; http://tsn.ua/politika/kogo-zdav-na-sudi-firtash-odkrovennya-yaki-mozhat-vildika ti-politichn1y-zem1etrus-v-ukrayini-425106.html. Accessed 1 August 2015.
[10] Yatsenruk prosyt´ kredytoriv dopomohty Ukraini; http://www.epravda.com.ua/news/2015/05/15/542594/ Accessed 5 May 2015.
[11] T.A. Tyshchuk arid 0.V.Ivanov, “Shliakhy protydii pryldiovanomu vidplyvu kapitalu z Ukrainy” National Institute of Strategic Studies, 2012; http://old2.niss.gov.ua/content/articles/fi1es/Kapital_Tuschuk-72ec2.pdf. Accessed 1 December 2012.
[12] Serhii Rakhmanin, “Use vzhe vkradeno do nas”. Zerkalo tyzhnia, 237,19 October 2012.
[13] “Ukraine - the spectre of default”, Economist Intelligence Unit.- Business Eastern Europe, 23 February 2009.
[14] Bohdan Danylyshyn, “Porady novomu uriadu”; http://www.epravda.com.ua/columns/2012/12/ 6/349303/. Accessed 6 December 2012.
[15] Bojcun, “The International Economic Crisis”.
[16] Ibid.
[17] Tyzlzden´,18 February 2013.
[18] Kuznetsov, “Industrial and geographical diversification”.
[19] Oleksandr Kravchuk, “Istoriia Forrnuvannia Borhovoi Zalezhrtosti Ukrainy”; http://commons.com.ua/formuvannya-zalezhnosti/. Accessed 2 May 2015.
[20] “Ukrains’ka vlada ne hotova zarady kredytu ity na reformy”; http://dtua/ ECONOMICS/ ukrayinska-vlada-ne-go tova-zaradi-kreditu-mvf-yti-na-reformi.html. (accessed 13 February 2013); “The hidden debts of Russia and Ukraine”; http://www.businessinsider.com/ the-hidden-debts-of-russia-and-ukraine-2014-3. Accessed 4 March 2014. @Rosiia ne dopomahatyme Ukraini”; http://www. pravda.com.ua/news/20 14/01/29/7011938/. Accessed 1 February 2014. Financial Times, 23 September 2013, 26 November 2013, 28 November 2013, 18 March 2015, 8 April 2015.
[21] David Marples, “Poroshenko’s choices”; https://www.opendemocracy.net/en/odr/poroshenkos-choices/. Accessed 11 November 2014.
[22] World Bank, Migration and Remittances Fact Book 2011.
[23] “Five facts you need to know about the Ukraine-EU trade deal”; http://rtcom/business/168856-ukraine-europe-trade/; Accessed 27 lime 2014.
[24] Nadezhda Arbatova, “Three Faces of Russia’s Neo-Eurasianism”; https://www.iiss.org/publications/ survival/ 2019/survival-global-politics-and-strategy-december-2019january-2020/616-02-arbat0va. Accessed January 2 2020.
[25] “Putin hints at splitting up Ukraine”; http://www.themoscowtimes.cont/ne ws/article/putin-hints-at-splitting-up-ukraine/361701.html. Accessed 5 March 2015. See also Putin’s address to the Russian Federal Assembly on 4 December 2014 when he justified the seizure of Crimea on the grounds that “Crimea, the ancient Korsun or Chersonesus, and Sevastopol have invaluable sacral importance for Russia, like the Temple Mount in Jerusalem for the followers of Islam and Judaism” http:/ /en.kremlin.ru/ events/president/news/47173.
[26] Arkady Moshes, “Will Ukraine Join (and Save) the Eurasian Customs Union?”; http://www.ponarseurasia.org/memo/will-ukraineloin-and-save-eurasian-customs-union. Accessed 20 June 2013.
[27] The Guardian, 29 November 2013.
[28] Kyiv Post, 29 November 2013.
