UKRAINE HOLDS HER OWN IN TOUGH TALKS WITH PUTIN

On April 17-18, Vladimir Putin paid his first visit to Ukraine as president of Russia. The presence of Defense Minister Igor Sergeev, Fuel and Energy Minister Viktor Kalyuzhny, Gazprom chairman Rem Vyakhirev, and other heads of Russian government departments in Putin’s delegation had seemed to presage a serious effort to tackle the chronic problems in Russian-Ukrainian relations at the beginning of the Putin presidency. In the event, the visit and the discussions held with Ukrainian President Leonid Kuchma in Kyiv and Sevastopol made scarcely a dent in those problems. With the Ukrainian side stubbornly defending its interests, Putin appeared content to postpone a detailed consideration of the bilateral differences and to settle instead for such atmospheric effects as the occasion could generate.

–Natural Gas. Setting the stage for Putin’s visit, the Fuel and Energy Ministry and Vyakhirev had issued a series of angry statements over Ukraine’s failure to pay her gas bills and the siphoning off of Russian gas in transit via Ukraine to third countries. Kyiv for its part insists, as it did again during Putin’s visit, that the sum of Ukraine’s arrears needs to be correctly ascertained as a first step toward negotiating a repayment mechanism; and that the value of the gas siphoned off from the transit pipelines can be added to Ukraine’s overall debt. Moscow puts that debt at US$2.1 billion; Kyiv, at US$1.4 million–a sum technically referred to as the “ascertained debt.” From those positions the sides have not budged since last year. Moreover, according to Vyakhirev on the eve of the visit to Kyiv, the Ukrainian side “stole” 7 billion cubic meters of Russian gas in 1999 and 2 billion thus far in 2000.

in Kyiv, Ukraine’s new prime minister, Viktor Yushchenko, proposed to the Russian side that the two countries jointly devise a repayment mechanism which would include not only debt restructuring, but also cutting the price paid by Ukraine for Russian gas, raising the transit fees for Russian use of Ukrainian transit pipelines, deducting the raised fees from Ukraine’s gas bill to Russia, deducting as well other Russian debts to Ukraine mainly on industrial orders, and eliminating barter settlements in favor of monetary ones on a commercial basis. Kuchma for his part promised to end the siphoning-off, a practice which he publicly chastised as “uncivilized”. The Russians on this occasion had to settle for that low-cost verbal amend. Putin and Kuchma instructed the respective cabinets of ministers to set up a joint working group and submit proposals by next month. If experience is any guide, the presidents’ instruction is a recipe for procrastination.

Putin cast the situation in the best possible light by describing the Ukrainian proposals as “worth considering.” Vyakhirev did not repeat his all-too-recent warnings that Gazprom would stop using Ukrainian transit pipelines and invest in other routes for Russian gas exports to third countries. Those warnings, however, lack credibility because Gazprom is badly short of investment funds. It may ultimately even seek Ukrainian contributions to overhauling the extant transit pipelines, whose service life–according to Vyakhirev himself–will soon approach its end.

–Trade. Ukrainian-Russian bilateral trade turnover dropped by 17 percent in 1999 compared to 1998, with Ukraine posting a sizable deficit. Although tending to recover in the first quarter of 2000, bilateral trade is hamstrung by Russia’s unilateral decisions to exempt some 300 types of goods from the provisions of free trade agreements, to levy value-added taxes in accordance to the country-of-origin criterion, and to impose surcharges on exports of oil and oil products. During the discussions in Kyiv, Yuschenko and other Ukrainian officials renewed the traditional proposals for Russia to rescind those practices. Putin and the Russian delegation merely took note of the proposals.

–Black Sea Fleet. On the second day of the visit, Kuchma and Putin staged an amply televised amity demonstration in Sevastopol aboard the Russian Black Sea Fleet’s flagship Moskva and the Ukrainian Navy’s flagship, the Hetman Sahaydachny, moored side-by-side for the occasion. Putin almost went out of his way to acknowledge Ukraine’s title to Sevastopol and the Crimea and to describe the Russian-Ukrainian naval coexistence as symbolic of the two countries’ will to cooperate.

No public mention was made of the contentious military and economic issues which Russia had recently and acrimoniously aired. In one interview, the commander of Russia’s Black Sea Fleet, Admiral Vladimir Komoyedov, described the purported Russian-Ukrainian “strategic partnership as a mere slogan, devoid of any real content.” The contentious issues include: Russian Fleet arrears to Ukraine and to Sevastopol for electricity and other utility services, which are frequently being cut off because of the debts; Ukrainian heavy taxation of supplies from Russia destined for the Russian fleet in the Crimea; severe restrictions on Russian naval aviation’s use of Ukrainian airspace; the Ukrainian demand to inspect nuclear-capable airplanes of the Russian fleet to determine that they have been disabled from carrying nuclear bombs; stringent Ukrainian conditions and limitations on the replacement of outdated Russian weapons systems with new ones by the Russian fleet; and Ukraine’s active participation in NATO-sponsored naval exercises, to Russia’s displeasure.

–Arms Exports. Putin made a strong pitch in Kyiv for Ukrainian arms manufacturers to join forces with their Russian counterparts on the international arms markets, instead of competing. The Russian president pointed to the Soviet-era military-industrial complex as a valuable asset that Russia and Ukraine can use to mutual benefit as arms exporters. In fact, several joint projects are underway in this sector, notably the An-70 transport aircraft. Increasingly, however, Ukrainian products tend to challenge Russian ones on international arms markets. In the latest example, even as Putin was addressing the subject in Kyiv, the Ukrainians were aggressively promoting their T-84 battle tank and other products of the Kharkiv-based Malyshev plant against equivalent Russian products.

In their initial comments on the summit, Kyiv observers and politicians have suggested that the Ukrainian-Russians relations are passing from an era of intense personalization–by former President Boris Yeltsin with Kuchma–to one of low-key pragmatism, one in which the conviviality of “no-necktie” summits will yield to protracted bargaining over interests that are often difficult to reconcile.

“The Fortnight in Review” is prepared by senior analysts Jonas Bernstein (Russia), Stephen Foye (Security and Foreign Policy), and Vladimir Socor (Non-Russian republics). Editor, Stephen Foye. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at pubs@jamestown.org, by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4526 43rd Street NW, Washington, DC 20016. Unauthorized reproduction or redistribution of “The Fortnight in Review” is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation