EU extends Ukraine deadlines for Association Agreement

The EU has extended to November 19 the deadline by which the Ukrainian government must meet the remaining key legislative requirements for signing the Association Agreement, EU diplomat Aleksander Kwasniewski told reporters on November 13. The EU also decided to extend the mandate of its diplomatic mission – led by for Polish President Kwasniewski and former European Parliament Chair Pat Cox – up until the Eastern Partnership summit itself, which is scheduled for November 28-29 in Vilnius.

The evening of November 13, Cox and Kwasniewski were scheduled to give their final report to the European Parliament on the progress the Ukrainian government made in meeting requirements, including the most critical EU demand of arranging for the release of imprisoned former Prime Minister Yulia Tymoshenko. The EU leadership agreed to postpone their report as well.

Ukraine’s parliament convened for only briefly on November 13 after the chair of the working group to draft a bill arranging for Tymoshenko’s release reported that no progress was made. Parliamentary Chair Volodymyr Rybak closed the session without reviewing the second reading of two other critical bills required by the EU, involving reforms to the state prosecution and election laws. German Foreign Minister Guido Westerwelle tweeted on November 13 that he regrets the Ukrainian parliament failed to pass legislation that day to arrange for Tymoshenko’s release.

November 19 is the next session of the Ukrainian parliament at which the EU expects necessary legislation to be approved. The EU Foreign Affairs Council was scheduled to decide on whether to sign the Ukraine Association Agreement on November 18. “We understand that everything’s very complicated politically, but we hope that enough good will is found for a consensus so that everyone who wants to sign the Association will sign it,” Kwasniewski said. “November 19 is the last moment for doing what needs to be done. And we as a mission expect that everything will turn out as we discussed today with our partners.”

Meanwhile, the Presidential Administration of Ukraine declined on November 13 a journalist’s request for detailed information about Ukrainian President Viktor Yanukovych’s November 9 meeting with Russian President Vladimir Putin. The Presidential Administration declined to state in what city they met, who traveled in the Ukrainian delegation and what was discussed, other than stating their talks were part of a working visit related to the Eastern Partnership summit. On November 11, Arseniy Yatsenyuk, the chair of the parliamentary faction of Tymoshenko’s Fatherland party, said such secret meetings were grounds for impeachment and indicated a state betrayal.

Zenon Zawada: Once we make a prognosis of what to expect with the Association Agreement, a monkey wrench gets thrown in by the players involved, whether in the form of an extended deadline or altered demands. This time however, we believe the latest extended deadline shouldn’t change any expectations, with the EU Foreign Affairs Council likely to decide on November 18 to defer its decision on Ukraine to the Vilnius summit. In essence, Yanukovych has one more day to decide on whether to pardon Tymoshenko, which we believe is highly unlikely to happen. Parliament has one more day to approve the second readings of two critical bills that involve reforming the state prosecution and election rules. Meanwhile, there’s not enough time for any legislation to be fulfilled that would enable Tymoshenko to be released in time for the Vilnius summit.

The only explanation for extending the deadline we can see is to get the two bills approved as a means of giving the EU leadership more arguments in favor of signing the Association Agreement. However, everything hinges on Yanukovych’s willingness to pardon of Tymoshenko, according to the position of a big EU player such as Germany, which won’t accept her remaining in prison or returning to prison. So we still recommend investors to plan for the EU to reject the Ukraine Association Agreement, with a very small chance that it will overlook Tymoshenko’s imprisonment and go forward with signing it anyway. We plan a detailed analysis of the effect of these political events on the Ukrainian markets for release next week.

As for Russia, we believe that Yaukovych must have accepted some form of an offer from Putin – during their two confidential meetings in three weeks – to decide to put the brakes on the Association Agreement. The offer had to involve loans and gas price discounts. However in the long-term perspective, we believe Yanukovych won’t agree to join the Customs Union and he plans to continue this game of playing Brussels off Moscow for as long as he’s allowed to so.