Ukraine-China: 'third alternative'

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The Europe-Ukraine-Russia triangle may turn into a quadruple if China enters the game. Faced with a contracting labor market and limited credit resources, East and Central European countries approach Ukraine’s associated membership in the European Union with caution, fearing that it all may end up in Kiev claiming its fair share of the pie.

EU strategists are racking their brains over how to lure Kiev, while keeping East European member states less concerned about it.  Ukraine’s hopes to negotiate more favorable terms failed. When President Viktor Yanukovych requested 150 billion euros in aid to speed up the economy’s transition to the European technical standards, even “senior” EU members got scared. Europe just can’t afford it.

There is no consensus between Brussels and Berlin about Ukraine. The EU cannot promise the things it knows it cannot do. Attempts to strike a debt refinancing deal with International Monetary Fund have produced virtually no result: minor concessions are all Ukraine has been able to get. One cannot promise a share in a competition-overheated market. There’s no room for Ukrainians on the EU labor market either. Nor can the EU guarantee unrestricted travel due to looming restrictions that may be put in place if Britain’s latest proposals are approved. That leaves the Eastern Partnership ideologists with no tool except political pressure to deal with Ukraine.

The failure of the European diplomacy in Vilnius dealt a sensitive blow to the idea itself of European integration which no longer seems as “naturally attractive” as it was portrayed by EU officials. The lack of natural attractiveness has been compensated for by seemingly endless flows of high-ranking EU dignitaries pouring into Kiev and forcing their advice on the local government as dictatorially as though it were an EU-governed territory. Catherine Ashton urged her EU colleagues to keep up permanent presence in Kiev in an apparent bid to awaken the dormant eurointegration instinct in Ukrainians.

Mykhailo Pohrebynskiy, Director of the Kiev-based Center for Political and Conflict Studies, slammed as unjustified attempts by both EU and Russian politicians to press Ukraine into making its choice.

“It [Ukraine] is unable to choose. Its current configuration dooms it to sit on two chairs - an axiom proven by the latest political events, though its economic aspect remains questionable. Had Europe accepted the proposed creation of a trilateral Russian-EU-Ukrainian commission, a compromise solution could have been found which would have ended the ‘two chairs’ situation. That failed to happen, however. Even a child realizes that whatever the outcome, Ukraine cannot do without Russia,” Pohrebynskiy said.

Meanwhile, the “third force”, or the “third alternative” as you may call it, is quietly making its way into Ukraine. Next year, the country will receive $18 billion in loans and investments from China. A recently-signed package of some two-dozen bilateral accords spans a wide range of trade and economic spheres with Chinese imports to Ukraine expected to hit $10 trillion over five years.

“As China’s strategic partner, Ukraine will have its own guaranteed export quota, which opens up lucrative market opportunities for its industrial and agricultural producers,” Ukraine’s Forum online newspaper reports.

The Chinese are planning to invest $13 billion in the modernization of port facilities and construction of a new deep-water port in Sevastopol, Crimea, and $15 billion in Ukraine’s banking sector. China is Ukraine’s second largest trade partner. Trade will hopefully triple on the agreements signed by Yanukovych during his trip to Beijing.

A plant converting coal into synthetic gas will be built by China in Ukraine, a “breakthrough” project that may become a serious factor at Ukraine’s future talks with Gazprom on prices for Russian gas.

Some analysts wave it all away as too far-fetched, saying that Kiev just flirts with China in order to make Europe and Russia more concession friendly. But where is Ukraine and where is China economically? Besides, China is not a simpleton to be easily fooled around and neglect its own interests. So far, Beijing has been careful to indicate that it’s all pure business, no politics involved.

But one never knows. Ukraine may, after all, discover that sitting on “three chairs” is better than on two.

Cheap Chinese or Chinese-Ukrainian goods flooding Europe is hardly a welcome prospect for European manufacturers.

If Beijing sees Ukraine as a springboard for its push into Europe, then Ukraine’s associated partnership with the EU is just what it needs. Ukrainian ambassador to China Oleh Dyomin remarked that “of course, China is interested in Ukraine being part of the EU space”. He added that the Great Silk Road’s “economic corridor” created by Beijing correlates well with Ukraine’s eurointegration plans.

As for Russia, the existing ties, common border and demand for energy resources guarantee stable economic cooperation with the “Celestial Empire”. But China doesn’t see Russia as an effective mediator with regard to other regions. If China bursts into the geopolitical battle around Ukraine, it could mean new realities for Russia in the CIS.

(The author’s personal view may not coincide with Ọmọ Oódua’s opinion)