Ukraine president preparing to commit to Customs Union, news reports said

Ukrainian President Viktor Yanukovych traveled to Sochi on December 6 to meet with Russian President Vladimir Putin to discuss trade and economic cooperation and preparing for the Strategic Partnership Agreement, the Ukrainian presidential press-service said on Dec. 6. The Customs Union was not discussed and no documents were signed, the Russian presidential press-service reported the next day.

They discussed preparations for the Dec. 17 meeting of the Russian-Ukrainian Interstate Commission in Moscow, where cooperation in industry and high-tech spheres will be discussed, particularly aviation and shipbuilding, rocket construction and aerospace. They also discussed the current state of bilateral cooperation in the financial-credit sphere. They drew closer in the energy sphere, “but a final decision hasn’t been made,” a Russian presidential spokesman said. Their meeting last six hours, news reports said.

Yanukovych signed on Dec. 6 a strategic agreement with Russia that includes a requirement of joining the Customs Union, tweeted Edward Lucas, the international editor of The Economist. The deal allegedly includes USD 5 bln up front (reaching as high as USD 15 bln) and a natural gas price of $200 per tcm, in exchange for Ukrainian membership in the Customs Union, Lucas tweeted. The deal’s confirmation will lead to a possible crackdown and state of emergency in Ukraine. “Technical details being hammered out in Moscow. Western govts flummoxed. (Haven’t confirmed this but sources good),” Lucas tweeted on Dec. 6.

Yanukovych is preparing to sign an agreement on strategic partnership with Russia to join the Customs Union on Dec. 17 , according to Arseniy Yatsenyuk, the head of the opposition Fatherland parliamentary faction. The agreement has been prepared, initialized but not signed or ratified, he said.

Zenon Zawada: A secret deal between Russian and Ukrainian presidents, as cited above, should not be ruled out, in our view. As discussed in prior reports, we see short-term benefits for Yanuokvych partnering with Russia but he loses in the long term. Yet he is very likely to be be entirely focused on solving his short-term problems.

What’s particularly surprising is that Ukraine’s other oligarchs – whose assets would be threatened under Customs Union membership – haven’t spoken out against Yanukovych’s plans, which undermine their long term interests and wealth. We certainly expect a state of emergency to be declared should such a document be signed, following by extensive political repressions and plans for rigged elections. Ukraine’s attractiveness to Western foreign investment will lose whatever tiny standing it has now. However, we don’t believe Ukraine can be governed on a Russian-style authoritarian model and expect extended political strife, including violent conflicts, for many months under this scenario.