Ukrain Signs Agreement With EU

 The leaders of the European Union’s 28 member states today signed a landmark political agreement with Ukraine, a long-planned move that has – since the revolution in Ukraine and Russia’s annexation of Ukraine’s Crimean peninsula – become a symbol of EU support for Ukraine.

The association agreement concluded today is intended to frame relations between the EU and Ukraine, setting out in what ways – and how – the two sides intend to deepen co-operation.

The EU has signed various types of association agreements with dozens of countries in the past. One type – known as a ‘stabilisation and association agreement’ – is intended as a first step towards eventual membership of the EU. The association agreement with Ukraine belongs in a separate category, along with deals signed with Chile and Egypt.

However, in a move that reflects the impact of Ukraine’s political and military crises, the EU and Ukraine did not today sign the trade provisions in the association agreement, leaving that element to be signed in the months following early presidential elections in Ukraine called for 25 May. Germany’s chancellor, Angela Merkel, said yesterday (20 March) said that the decision to delay the signing of the trade provisions came at the suggestion of Ukraine.

Ukraine’s now former president, Viktor Yanukovych, cited the trade provisions – collectively packaged and named a ‘deep and comprehensive free-trade agreement’ (DCFTA) – as a reason for not concluding the association agreement with the EU. His decision followed intense economic pressure by Russia, intended, in the words of Sergei Glazyev, an adviser to Russian President Vladimir Putin, to dissuade Ukraine from the “suicidal” step of signing an association agreement. Glazyev is now subject to US sanctions and may today also be barred from the EU.

Russia has resumed its economic pressure on Ukraine, impeding cross-border trade and seizing a Russian factory belonging to Petro Poroshenko, a Ukrainian businessman who became a leading figure in the three months of protests that eventually led to Yanukovych’s flight from Kiev on 21 February.

To alleviate the economic pressure on Ukraine, the EU has unilaterally brought forward some elements of the DCFTA that would benefit Ukraine, removing tariffs on some agricultural, industrial and other goods. It puts the value of the measures at €487 million per year.

The EU is also in the process of approving a package of financial support for Ukraine that the European Commission argues would ultimately benefit Ukraine to the tune of more than €11 billion by 2020. A small part of that sum had already been budgeted for Ukraine before its multiple crises erupted. Some of the support – potentially worth €1.6bn– is contingent on Ukraine agreeing to reforms demanded by the International Monetary Fund. The form of that support – loan guarantees – means that the actual cost to the EU is about ten times smaller than the headline figure given by the EU as the value of its support. The majority of the financial-support package – over €8bn – should come through loans from the European Investment Bank and the European Bank for Reconstruction and Development, both of which are controlled by the EU’s member states. The loans would have to be repaid, albeit at lower rates than Ukraine could expect to get on the financial markets.

The signing ceremony with Ukraine’s prime minister, Arseniy Yatsenyuk, came at the start of the second day of a summit of EU leaders. The first day had been dominated by debate about the crisis in Ukraine and in the EU’s relations with Russia, culminating in the imposition of sanctions on 12 allies of Putin.