Publication: Eurasia Daily Monitor Volume: 2 Issue: 54

Ukrainian President Viktor Yushchenko

As Russian President Vladimir Putin prepares to meet with his Ukrainian counterpart Viktor Yushchenko on March 19, Kyiv defies Moscow’s leadership role in the post-Soviet space.

On March 14, Yushchenko held an unprecedented meeting with a group of about 20 top Russian business executives, including the heads of Lukoil, Basic Element, AFK Sistema, Vneshekonombank, Vneshtorgbank, AvtoVAZ, and Itera. Most analysts agree that, in terms of the number of participants and their rank, only the Kremlin has previously convened such gatherings. To be sure, the timing of the meeting was linked with Putin’s upcoming visit to Ukraine. But it was not the Kremlin’s idea to bring Russian “oligarchs” to Kyiv. That initiative came from the Yushchenko administration and was successfully realized in a surprisingly short period of time. It appears that the Ukrainian president’s office sent invitations on March 10-11 and, just three days later, the leading Russian tycoons assembled in Ukraine’s capital (Vedomosti, Kommersant, March 15).

There are several reasons behind Yushchenko’s invitations. First, the Ukrainian leadership is anxious to dispel any possible fears caused by the ongoing talk of revising certain privatization deals dating from the days of the thoroughly corrupt Kuchma administration. Second, Yushchenko understands full well that his government’s political success depends mainly on its economic performance. The latter, however, hinges on how much foreign investment Kyiv is able to attract in the immediate future. Yushchenko promised the Russian businessmen to create an especially friendly investment climate for them. Having emphasized the positive role that Russian businesses have already played in Ukraine, Yushchenko specifically stressed, “We welcome the capital inflow regardless of geography; what matters is that the capital is honest.”

Third, the meeting obviously has a political dimension. As the Kremlin makes clear that it does not regard its interest in Ukrainian elections over and is likely dreaming of political revanche in Ukraine’s 2006 parliamentary polls, the Yushchenko government deems it important to send a warning signal to Russian businesses that might be tempted to get involved in Ukrainian politics. In plain words, Kyiv unambiguously explained to the Russian “oligarchs” that providing financial support for some segments of the Ukrainian elite in the east and south of the country who entertain “federalist” or “separatist” sentiments might prove risky business. According to one Russian participant in the meeting, Yushchenko began his opening remarks with a statement that Ukraine would not be divided into parts but would remain unified, adding, “This page in Ukrainian history had already been turned.” Having issued a stern and clear-cut warning, Yushchenko went on to highlight all the advantages of investing in good relations with the “orange” government rather than attempting to undermine it (Kommersant, March 15).

More broadly, Yushchenko made clear to the leading Russian industrialists that he intends to discuss the guarantees on Russian investments directly and not through his Russian counterpart in the Kremlin. In other words, all issues pertaining to the development of Russian business in Ukraine need to be resolved in Kyiv, not Moscow.

Later, in an interview with the Moscow-based business daily Kommersant, Yushchenko openly acknowledged that he was trying to win Russian businessmen over to his side: “I told them bluntly: I would do everything so that you feel more comfortable in Ukraine than in Russia.” The Ukrainian president also admitted that he did not discuss the issue of his direct relationship with key Russian businessmen with Putin, adding, “It is unlikely we would manage to agree on this” (Kommersant, March 18).

Some commentators point out that by reinforcing his position with Russian big business, Yushchenko gained additional maneuvering room and would be able to hold negotiations with Putin in a more self-assured way. At a minimum, it will likely be more difficult for the Kremlin to resort to its traditional argument in discussions with Kyiv — namely, that the Ukrainian economy fully depends on Russian one. It would also undermine the familiar corollary of Moscow having political leverage over Kyiv.

In preparation for his meeting with Putin, Yushchenko has already asserted Ukrainian interests in the issue seemingly dearest to Putin’s heart — the formation of the Single Economic Space (SES). Speaking with a correspondent from Vremya novostei, Yushchenko stressed that all agreements dealing with the SES should correspond with his country’s national interests. In particular, these agreements “should not block the road toward [Ukraine’s] full-blown membership of the European Union.” “I won’t sign a single document that contradicts this principle,” Yushchenko declared (Vremya novostei, March 17).

Many Ukrainian and Russian analysts contend that Kyiv’s new Europe-oriented foreign policy doctrine turns the Moscow-centered Commonwealth of Independent States into an empty and senseless institution. The CIS, predicts noted Ukrainian expert Dmytro Vydrin, will inevitably be replaced by bilateral economic and political relations between countries that earlier were part of the Soviet Union (Parlamentskaya gazeta, March 5).