EU, Ukraine leaders discussing financial aid related to Association pact

Western loans, particularly from the IMF, will convince the Ukrainian government to fulfill the remaining requirements of the Ukraine-EU Association Agreement, Ukrainian Ambassador to the EU Kostiantyn Yeliseyev told the Ukraine-EU Parliamentary Cooperation Committee on November 14, as reported by the Kommersant-Ukraina newspaper. He also accused the EU of not wanting to sign the agreement and by artificially inflating problems surrounding the imprisonment of former Ukrainian Prime Minister Yulia Tymoshenko, the newspaper wrote. The committee members issued a statement to the European Commission “to support renewing cooperation between Ukraine and the IMF, to increase financial and technical aid programs and to freeze budgetary and micro-financial support.”

Meanwhile, European Commission President Jose Manuel Barroso plans a phone call today with Ukrainian President Viktor Yanukovych while EU Enlargement Commissioner Stefan Fule plans a phone call with Ukrainian Prime Minister Mykola Azarov, reported Kommersant, stating the discussions will concern offers of financial aid.

Yanukovych indicated on November 14 that he will not pardon Tymoshenko, a solution to the conflict that was proposed by the EU. “My position remains as it was: all of Ukraine’s citizens are equal before the law, the rule of law and the supremacy of rights above all, and that applies to everyone,” he said. “I believe there will never be any exclusive approaches here for any citizen.

Zenon Zawada: After allowing a legislative solution to slip through its fingers, a pardon is the only mentioned means for the Yanukovych administration to resolve the Tymoshenko conflict. The president’s November 14 statement on Tymoshenko could have been his latest bluff, but we think that’s unlikely and that he’s serious in this regard.

Perhaps in a desperate clinging to hope, the notion is floating in Kyiv that Yanukovych could pardon Tymoshenko at the last minute. In this scenario, he could take credit for resolving the conflict himself and ensuring Ukraine’s European future. We see that as highly unlikely because (1) she is likely to get a European court ruling overturning her conviction, rehabilitating her politically, (2) she poses too much of a threat to his re-election campaign, even from abroad, (3) she could pursue criminal charges against those who imprisoned her upon her return to high political office and (4) she has yet to admit to any wrongdoing in the pardon request offered by her lawyer.

The Ukrainian government surely needs all the loans it can get since its fiscal condition is of great concern to the investment community. However, the tragedy is that even the hundreds of billions of dollars in aid suggested by Yanukovych yesterday (which the EU won’t come close to offering) won’t convince him to release Tymoshenko, in our view. If there is another available means of releasing Tymoshenko beyond a pardon, it has yet to be made public by any of the key players involved. Therefore, the best hope for the Ukraine-EU Association Agreement is that the EU leadership will overlook Tymoshenko’s imprisonment to sign the agreement with the Ukrainian government.