President Barack Obama’s current
strategy of engagement with former adversaries is right on
track. Russia stands out as a major short-term success story
of this strategy. The signing of the Strategic Arms
Reduction Treaty (START) Agreement, achieving Russia’s
approval to use its territory as an alternative supply route
for the International Security Assistance Force’s (ISAF)
operations in Afghanistan, and Russia’s increased activity
to pressure Iran on nuclear issues are remarkable. In the
long run, Obama’s main challenge will be to turn these
concessions into sustained cooperation. Among all these
questions of potential contention between the United States
and Russia, this research paper will specifically center on
Ukraine. Its key objective is to assess whether Ukraine’s
current institutional neutrality and its so far unreformed
energy sector will negatively affect Ukrainian democracy and
make Kiev increasingly lean toward Moscow’s political orbit.
Keywords: Ukraine, U.S.
foreign policy, EU, security, energy sector
President Barack Obama’s current
strategy of engagement with former adversaries is right on
track. Increased talks with Burma, the Cuban leadership’s
readiness to talk to the United States and normalize
bilateral trade, rapprochement with Russia, and attempts to
engage Iran and North Korea are examples of this strategy.
Russia stands out as a major short-term success story of
this strategy. The signing of the Strategic Arms Reduction
Treaty (START) Agreement, achieving Russia’s approval to use
its territory as an alternative supply route for ISAF
operations in Afghanistan, and Russia’s increased activity
to pressure Iran on nuclear issues are remarkable. In the
long run, Obama’s main challenge will be to turn these
concessions into sustained cooperation. While it is a right
strategy to seek steady cooperation with Russia there are
difficult tasks ahead of U.S.–Russian relations. Such issues
as Georgia’s breakaway territories of South Ossetia and
Abkhazia, Ukraine’s security, and a U.S. missile defense
shield in Europe still loom large on the horizon.
Among these questions of potential
contention between the United States and Russia, this
research paper will specifically focus on Ukraine. Its key
objective is to assess whether Ukraine’s current institutional neutrality and so far
unreformed Ukrainian energy sector will negatively affect
Ukrainian democracy and make Kiev increasingly lean toward
Moscow’s political orbit.
The importance of this question is
twofold. Firstly, Obama’s Russia policy runs a risk of being
overshadowed by the U.S.–Russian political divide with
regard to Ukraine’s geo-strategic place in the broader
European political context. Given Ukraine’s past political
competitive track record which has polarized the country in
the past, Obama’s strategy could provide the right momentum
to engage Ukraine concerning its security guarantees.
Secondly, a lack of the U.S. and EU investment into
Ukraine’s economy and its energy sector may result in
increased rapprochement with Russia which can threaten
This question involves understanding
Obama’s engagement strategy toward Russia, the latest
political implications of Ukraine’s stated neutrality with
regard to joining regional security organizations (e.g. the
Collective Security Treaty Organization or NATO),
reform problems in Ukraine’s energy sector and its impact on
democracy in Ukraine.
Arms control, Afghanistan, and missile
defense have been the main pillars of Obama’s “reset”
engagement policy with regard to Russia. However, Russia is
a major power with the capability to project its influence
abroad where U.S. interests lie, including the EU and its
neighborhood. This is especially evident in EU energy
security issues and the division in the EU over energy
supply routes, between Germany and Poland over Nabucco
pipeline, for instance, the former for the project, the
latter against it.
Another example of the divide within European members of
NATO is the recent debate on removing tactical nuclear
weapons from Eastern Europe.
Newer members of NATO, such as Poland, insist on keeping
these weapons as a deterrent against Russia. Although these
disagreements occur, Russia has limited means in its arsenal
to orchestrate the outcome of these tensions within NATO or
the EU. But Ukraine is a different case. It is situated
between NATO and the Collective Security Treaty Organisation
(CSTO) members, but not being a member itself has led to
strategic confusion as regards its foreign policy
orientation – both on political and societal levels. If not
engaged now, there is a risk that its sense of insecurity
will bring another cycle of destabilization in Ukraine.
Thus, when engaging Russia, the U.S. administration will
also have to ease Ukraine’s strategic insecurity. There are
two important issues for the United States to take into
account when engaging Ukraine: Ukrainian security guarantees
and democracy in Ukraine.
There are two key issues that the
United States will have to face when considering the
strategic context around Ukraine: 1) Ukrainian security
guarantees and 2) energy security. A lack of U.S. attention
paid to these two issues can endanger democracy in Ukraine
and cement Ukraine’s pro-Russian orientation. This means
that the current tilt toward authoritarian rule by the
Yanukovich government will not be greatly challenged without
active American and European engagement with Ukraine. Active
European and American involvement in Kiev's economic and
political spheres will allow them to monitor Ukraine's
democratic development. If the United States does not
address Ukraine’s security guarantee, it will result in
Ukraine’s drifting toward Russia’s orbit, especially in the
vital energy sphere, which in turn threatens to weaken
democracy development in Ukraine.
On June 6, 2010, the Ukrainian
Parliament adopted a resolution entitled “Real Guarantees to
Ukraine's Nuclear-free Status”. A key proposal of this
resolution was to develop the 1994 Budapest Memorandum on
Security Assurances to Ukraine.
On April 24, 2010, the Council for Foreign and Security
Policy, a Ukraine-based nongovernmental organization,
organized a conference titled “International Security Forum:
From Ukrainian Security to European Security: 21st Century
Challenges” in Lviv, Ukraine. The forum comprised well-known
intellectuals, parliament members of Ukraine, and
philanthropists. The main topic discussed during the
conference was Ukraine’s non-alignment policy. The majority
of experts agreed that as Ukraine would not become a NATO
member any time soon, it needed to formulate a new national
Participants pledged that a new concept would be prepared
and submitted to President Yanukovich. After he was elected
president in 2010, Ukraine announced its neutrality with to
regard to regional security institutions, such as NATO and
CSTO. Yanukovich is seemingly trying to strike a delicate
balance between Russia and the U.S. During the April 2010
nuclear energy summit in Washington, Ukraine announced that
it would relinquish its nuclear stockpile, namely its highly
enriched uranium. His first official visit was to Brussels
as opposed to expectations that he would first travel to
Moscow. However, Ukraine also signed a new agreement with
Russia to extend a lease until 2042 for the Russian Black
Sea Fleet that is stationed in Sevastopol.
This agreement was later ratified by the Ukrainian
parliament with serious violation of procedural rules:
members of parliament, who were in fact absent during the
ratification, were counted as having voted in favor of the
According to the former Minister of
Foreign Affairs Boris Tarasyuk, Ukraine is still
experiencing a political polarization and its external
orientation continues to strongly depend on who is in power.
Volodimyr Ohryzko, another former minister for foreign
affairs, stated that non-alignment will be a big financial
burden for Ukraine. According to Ohryzko, Ukraine will not
be able to sustain the financial costs of being non-aligned
and provide for its own security independently.
The point about sustainability of financial burdens for
Kiev’s non-alignment policy is valid, given Ukraine’s
current economic challenges.
Discussions around Ukraine’s strategic
policy orientation have usually been about debates on
whether it will come into Russia’s political orbit or pursue
pro–NATO policies, but the issue is not that black and
white. NATO’s enlargement issue is a classic example of how
politics and its challenges come into play in an alliance.
There are two main challenges within alliance politics:
entrapment and abandonment.
In NATO’s case, with regard to its Eastern enlargement,
entrapment is more likely. This brings with it the issue of
NATO’s new post–Cold War identity. The former Warsaw Pact
members who are now NATO members tend to see it as a
security guarantee against their former patron, i.e. Russia.
On the contrary, older Western European members of the
Alliance do not share this concern. Russia was very
successful at bilateralizing its relations with such
countries as France and Germany. Ukraine’s internal
divisions over NATO and current U.S. policy toward Russia
can provoke a sense of insecurity in those Eastern Europe
countries that are for Ukrainian membership. Division over
such key issues on European affairs is an important fault
line between the alliance members that could bring
unnecessary entrapment into one another’s external problems.
Ukraine’s security policy orientation
changes dramatically after each administration. As recent
experience showed, it went through the period of
multi-vector foreign policy under Leonid Kuchma,
uncompromising anti-Russian and pro-NATO policies of
Yushchenko, and, presently, the non-alignment strategy of
Yanukovich. During all these administrations in power, most
new NATO members were actively lobbying for Ukrainian
membership into the alliance, and the schisms within NATO
over this issue increased as the number of its members grew.
Every new member or a group of members try to pursue their
own security policies. Put another way, they are promoting
their own vision of European security, which usually
includes having Ukraine in NATO. Therefore, leaving Ukraine
without security guarantees that would be acceptable to both
NATO members and Russia generates a risk of entrapping NATO
members into political confrontation with Russia.
Given the extent of the traditional
polarization in Ukraine over foreign policy issues the
chances for such a confrontation have increased. Taking into
account Ukraine’s ultra-competitive political environment,
Ukraine might face another crisis that could leave the
country in a crisis. In this case, countries like Poland
would most likely support pro-NATO opposition and this will
entrap the United States in another cycle of tensions with
Russia. Current president of Poland Bronislaw Komorowski has
been vocal over his support for Ukraine’s NATO membership.
In his 2008 visit to Kiev, Komorowski criticized anti-NATO
protests in Ukraine and stated that NATO members that oppose
Ukraine’s membership could exploit such protests.
However, his stance highlights yet another division over
Ukraine’s membership within NATO. This is important because
despite the fact that Yanukovich curtailed Ukrainian
government's NATO ambitions, but there are still certain
opposition and intelligentsia members that advocate pro-NATO
Poland is one of the key countries
whose relations with Russia and Ukraine are very important.
There is an interesting relationship here: Ukraine is
important for Washington to preserve the U.S. engagement
policy’s achievements with Russia, and Poland is important
for Russia to preserve the achievements of the Russian
rapprochement policies with Ukraine and to strengthen its
relations with Europe. Zbigniew Brzezinski once mentioned
that the United States is concerned with Ukraine’s
independence because it is very concerned with Russia.
According to Brzezinski, bolstering Ukraine’s independence
would tame Russia’s imperial temptations.
Using the same rhetoric, it is possible to say that Russia
is concerned with Poland because it is concerned with Europe
and Ukraine. Poland has long been a strong advocate of
Ukraine’s admission to NATO and the EU. Russia seems to be
quicker to realize the importance of Poland than the United
States is to grasp the importance of Ukraine. Russia has
already started to apply pragmatism to its relations with
Poland. In September 2009, Putin visited Gdansk to
commemorate the start of World War II. He also recently
participated in a ceremony at Katyn to commemorate 20000
Poles that were killed by the Soviet NKVD.
Russo–Polish rapprochement can have
both negative and positive implications for the overall U.S.
strategy in Europe and particularly with regard to Russia.
Negative consequences, such as further political and social
polarization, could arise if the Ukrainian security question
is not addressed in order to formulate a commonly acceptable
term and if Ukraine continues to become increasingly
interdependent with Russia without equally strong ties to
the U.S. and EU. In this case, easing tensions and
strengthening bilateral relations with Poland, in the same
way as with Germany and France, can cement Ukraine’s links
to Russia. Such a scenario threatens to reduce the
legitimacy of democratic forces in Ukraine.
However, the current changing
strategic context in Europe will likely bring additional
dimensions and flavors to the debate on Ukraine’s fate.
Along with its challenges, Obama’s engagement policy and
rapprochement with Russia, Russo–Polish rapprochement as
well as Yanukovich’s stated neutrality can provide a fertile
ground for transatlantic and pan-European cooperation if
Ukraine’s security status is addressed. In this case,
improved Russo–Polish relations will be an added value to
Obama’s strategy of engaging Russia. In sum, among key
elements to sustain and promote U.S. interests are Ukraine’s
appropriate security guarantees acceptable to all
stakeholders and Western investments into Ukraine’s energy
Energy Sector and its
On April 22, 2010, the Russian and
Ukrainian presidents signed the so-called Kharkiv pact. The
pact includes the agreement on extending the lease on the
Russia–operated naval base in Sevastopol and a reciprocal
agreement to reduce the price of Russian gas for Ukraine.
Ukraine agreed to extend the lease for the Russian Black Sea
Fleet until 2042 and, in turn, Russia discounted by 30
percent the price of gas sold to Ukraine.
Insufficient Western investment into
the economically vital energy sector and predominance of
Russia–related energy deals could polarize the country once
more. According to the president of Kiev International
Energy Club, Olexander Todiychuk, there is still not a
guarantee in this agreement that Ukraine’s gas
transportation system will be fully loaded with gas.
However, on April 27, 2010, Putin announced that there might
be a possibility that Russia would determine concrete
volumes of gas to be transported to the EU through Ukraine,
though he did add that there is no discussion on this issue
The recent gas agreement with Russia is still expensive,
both in terms of the price and the concession such as
extending the Russian Black Sea Fleet lease, which Ukraine
has made. For instance, EU members did not have to make such
concessions to get nearly the same price. According to the
new deal, the price for Russian gas would be $230 per cubic
meter. This, however, nears European prices if the
transportation cost differential between the EU’s and
Ukraine’s distances is taken into account.
Ukraine is in desperate need of energy
sector reform and exploration of domestic deposits of gas,
including shale gas. Deputy Prime Minister of Ukraine Sergiy
Tigipko stated that Ukraine would need additional investment
for the exploration of Ukrainian gas deposits in order to
lessen its energy dependency.
This is crucial, especially considering the fact that
Ukraine has one of the most energy
inefficient economies among the industrial
In order to alleviate some of these problems, the United
States and the EU need to invest into the modernization of
gas transportation system in Ukraine. In other words,
Ukraine’s energy sector has to become more competitive,
efficient, and transparent for investments.
Currently Ukraine’s energy system, gas
distribution, and gas export is chiefly regulated by a
state-owned company, Naftohaz Ukrainy. This company
comprises departments for dealing with both gas and oil. It
is also responsible for the production, transportation, and
distribution of energy resources.
In a way, the transportation of the Russian gas through
Ukraine to the EU is managed by Naftohaz Ukrainy. According
to a March 23, 2009, Brussels declaration on the
modernization of the Ukrainian gas transportation, the
system must be divided into several sections.
There have been numerous requests by the EU to break the
company into several autonomous departments, each
responsible for its area of specialization. The EU’s vision
was that restructured and compartmentalized Naftohaz would
be easier to monitor, would become more efficient, and would
make its transactions more transparent.
Naftohaz Ukrainy was the main entity
during the Kharkiv gas agreement between Ukraine and Russia.
According to U.S. energy expert Edward Chow, the deal did
not favor Ukraine, due to the fact that the 30 percent
discount on Russian gas is linked to Russia’s exempting
export duty deliveries. This, according to Chow, leaves
Ukraine to rely upon Russia’s benevolence, considering that
in the past Moscow reneged on its obligation and removed the
oil export duty exemption for Belarus.
Another aspect of this agreement vulnerable to criticism is
the discount itself. In 2010, Ukraine intends to buy 36
billion cubic meters (bcm) of gas, of which only 30 bcm will
be sold at the discounted price.
Restructuring Naftohaz Ukrainy and
dividing it into more autonomous production, distribution,
and transportation departments would make it easier to
monitor and scrutinize its activities. That will also make
it easier to monitor such agreements as the Kharkiv deal
between Russia and Ukraine. According to Alexander Chaliy,
former deputy head of the president’s secretariat,
restructuring Naftohaz Ukrainy is the first thing on the way
toward attracting EU investments..
According to the Brussels declaration, Ukraine has several
commitments, such as transparency and openness for investors
into Ukraine’s gas transportation system. Ukraine is also
responsible for disclosing technical and financial
information to all stakeholders.
This is a good framework for starting reforms and investment
into this strategically important sector in Ukraine.
Such a division of powers in Naftohaz
Ukrainy is paramount for two reasons. First, it will
demonstrate the government’s willingness to conduct reforms
and make foreign investment more likely because of increased
transparency, and second, it will increase efficiency. At
the same time, reforming Ukraine’s energy sector and
bringing in American and European investment would serve
other purposes. The United States should encourage the
Ukrainian government to start conducting such reforms The
U.S. investment could balance Russia in Ukraine’s energy
market and would make it less likely that Ukraine would
trade in gas in the presence of such dubious discounts. Such
a balance would help ease tensions between the opposition
and the government and contribute to more energy efficiency
as well as stimulate the Ukrainian economy.
All of the above, however, does not
imply that Ukraine should temper its relations with Russia.
The EU and Russia are becoming increasingly interdependent
economically. Therefore, for Ukraine to be better integrated
in the EU, it needs to maintain stable and cooperative
relations with Russia. This would bolster their image of a
reliable energy and trading partner. The importance of
Russia is very well understood in Ukraine. Russia is a large
trading partner and the biggest energy provider to the EU.
Warmer relations between Russia on the one hand and Ukraine
on the other would ease some tension in the region. All
these, with the right conditions, such as security
guarantees and equally balanced energy relations, could
bolster the sovereignty of Ukrainian foreign policy. It will
give Kiev an opportunity to benefit from trade with the
largest player in the region, Russia, as well as pursue
independent energy projects aimed at providing energy
security for the EU. Such stabilization would also create a
strong interdependency between Russia and Ukraine that would
allow for more maneuverability of Kiev in the region.
Energy supply diversification is as
important a component for Ukraine’s political situation as
it is for its energy security. Ukraine’s participation in
new energy projects such as the Odessa–Brody–Plotsk–Gdansk
oil pipeline (OBPG) and its favorable location between the
EU and Russia would help it achieve sustainable levels of
economic development. Economic development, regional
cooperation, and deeper regional interdependency will have a
positive effect on political stability in Ukraine. So far
there have been five business plans on the OBPG pipeline
initiated by Azerbaijan, Georgia, Lithuania, Poland, and
Ukraine. All five business plans concluded that the pipeline
project is feasible both economically and technically.
From the U.S. standpoint, investment,
diversification of investment into the Ukrainian energy
sector, and support for energy supply diversification is
also crucial for several reasons. First of all, investment
and reform of the energy sector will help the government to
sustain its unity and avoid a potential paralyzing crisis in
Ukraine. Second, diversification of investment, meaning from
the US, EU as well as Russia, is important to prevent the
domination by either side. It is also important to provide
for the unity in the country, which means that neither the
opposition can legitimize its claims that Yanukovich is
giving away Ukraine’s assets to Russia nor will it cement
the government’s image as a sole provider of goods and
favorable deals, such as potential Russian investments that
could potentially contribute to the economy.
Ukraine’s energy sector reform and
energy security have grown from simply being a domestic
issue for Ukraine to becoming a regional matter of strategic
significance. U.S. investment is necessary for preventing
another crisis in strategically located Ukraine, and
supporting Ukraine’s democratic traditions.
Ukraine’s increasing dependence on
Russian energy and its effects on Ukrainian democracy is an
important issue to consider. Despite all its shortcomings,
the Orange Revolution and the democratically elected Orange
government left an enduring legacy of political openness.
The 2010 presidential elections, its uncertainty and
ultra-competitive nature confirmed this once more.
Yanukovich was elected after the second round with a slight
margin in what international organizations called a free
election. However, there is a great risk that this legacy
will not be sustained if Ukraine’s security aspirations are
not addressed in time. Former prime minister and
Yanukovich’s rival in 2010 presidential elections, Yulia
Tymoshenko, stated that Ukrainian democracy is being tested
under the current government.
It is important to note that
U.S.–Russian engagement and Obama’s moderate tone about
Russian democracy has far-reaching implications for
Ukraine's democratic development. Thus, in current
U.S.–Russian and Russian–Ukrainian rapprochement there is a
great chance that Ukrainian democracy will be threatened.
This is because Russian and Ukrainian democratic credentials
differ starkly. Easing its criticism toward the democracy
problems in Russia and engaging Moscow could only help
foster a better dialogue between the U.S. and Russian
governments without significantly affecting Russia’s almost
non-existent democratic forces. However, the legacy of the
Orange Revolution allows one to label Ukraine as a more or
less functioning democracy... To preserve its democratic
credentials, Ukraine needs to balance its current
interdependence with Russia with equally strong ties with
the EU and the U.S. Otherwise, Ukraine’s democracy and
relative openness of its political system could be in
jeopardy. In short, this situation favors U.S.–Russian
dialogue and gives it an opportunity to develop. However, it
does not much favor Ukraine because democratic culture and
political openness is more developed there; and if the
United States treats Ukraine in the same way it views
Russia, then the democratic legacy of the Orange Revolution
will be threatened at best. For the United States, this is
an important issue to bear in mind given the complexities of
democracy-building in the former Soviet space.
Among many anti-democratic moves by
the current Ukrainian government, two issues stand out as
more salient: first, the recent decision by Ukraine’s
Constitutional Court on parliamentary coalition formation
and approving a new coalition in the parliament, and second,
Ukrainian Parliament’s decision to abolish local elections.
Ukraine’s Constitutional Court’s decision favored a new
pro-Yanukovich coalition comprised of parliamentarians (MPs)
that joined it from the opposition as well as allowed any
individual MPs to join the coalition. According to Yuri
Klyuchkovski, an MP from the opposition party Our
Ukraine–People’s Self Defense, the court’s decision
contradicts the constitution. According to Klyuchkovski, any
political party in the parliament must have a right to
abolish a mandate of any parliamentarian that had been
elected in its ranks but this decision precludes parties
from exercising this right.
Leader of the United Center party Viktor Baloha stated that
the decision of the constitutional court favored the current
government and it would likely make the opposition become
better coordinated to challenge this government.
This trend is likely to continue and become more resilient
if there is no credible opposition challenging the current
ruling administration. The declared neutrality status of
Ukraine with regard to regional military blocks, increased
sense for the need of security guarantees and increased
interdependence with Russia, including in energy field, will
bring disillusionment to the pro-Euro-Atlantic camp in
Ukraine. Solidifying ties with Russia without equal ties to
the West will further reduce the legitimacy and appeal of
Western-leaning politicians in Ukraine.
Engaging Russia without tackling
Ukraine’s security guarantees and solidifying its energy and
economic ties to the U.S. and EU could make Ukraine a new
ground-zero of the U.S.–Russian political confrontation in
Europe. This can tarnish the momentum gained in the current
U.S.–Russian “reset” policy. If not tackled, these issues
might arguably bring a new wave of domestic destabilization
and strong disapproval of the government, and even weaken
democracy’s development in Ukraine.
Ukraine is a democracy with fairly
open and competitive political system. In such an open
political system with the recent history of fierce political
competition, such sensitive issues as Ukraine’s foreign
policy orientation will constantly be the matter of
contention. Energy security and Ukraine’s place in European
security architecture are currently key problems in Kiev’s
agenda. The United States will need to target these issues
in order to prevent cataclysmic polarization in
strategically located Ukraine and to preserve its currently
unraveling democratic legacies.