Ukraine has warned that Russia will step in to fill a vacuum left by the European Union unless the bloc reciprocates the overtures being made by its president-elect Volodymyr Zelensky.
Artem Shevalev, EBRD’s alternate board director for Ukraine, said Russia had been pouring money into Ukraine and “exerting every kind of leverage to bring Ukraine into the fold”.
Zelensky sent a delegation to Brussels earlier this week, headed by Oleksandr Danylyuk, who was a finance minister under the previous administration.
Shevalev said Europe’s lukewarm response to Ukraine’s vote to enshrine its relationship with the EU in its constitution had been disappointing. “It plays into Russia’s narrative that Ukraine is not wanted in Europe,” he said.
“It’s not just about the money — although Ukraine has received far less European financing than, say, Poland — but it’s the symbolic side of things. I don’t see why the EU didn’t say that, subject to reaching various milestones of governance and development, Ukraine could be an EU member in the future. That would have helped a great deal.
“I’m aware that talk around adding new EU members is unpopular just now, but if it were a question of Ukraine potentially joining in 2030, I don’t see how that could have been a problem.”
Zelensky appears to have planted his flag firmly in favour of European integration. With the president-elect’s reputation as a political unknown, an early mission to make contact with the EU and discuss reforms, particularly one headed by well-known figures of stability like Danylyuk, is an early sign of Zelensky’s warm intentions to Europe.
Vilius Šapoka, minister of finance for Lithuania, said: “I do believe that Ukraine has already chosen its European path and will continue.”
Vasile Tofan, a partner at Horizon Capital, a private equity firm with operations in Ukraine, agreed.
“Ukrainian integration into the EU is irreversible on many levels, economically and socially,” he said. “It’s not about who is the president. I think any president will have to accept that reality.”
Honeymoon period
However, the EU would do well not to take Ukraine’s friendship for granted. Zelensky is in what one emerging markets portfolio manager in New York called “his honeymoon period” with Europe. “But Russia is there, and Ukraine will be forced to get along with them.”
Said another investor: “Zelensky has made it clear he is no Russia fan by any means. But he is a pragmatist in terms of negotiating with Russia.”
If Zelensky were to jeopardise Ukraine’s relationship with the IMF and other international stakeholders — perhaps by allowing oligarch and Zelensky supporter Ihor Kolomoisky to force the reversal of Privatbank’s nationalisation — it could open a window for Russia to bring Ukraine into the fold. Shevalev said that such a development would be “disastrous” for Ukraine’s relationship with the international community.
“Could Ukraine service its external debt without IMF support? Possibly, but it would be very expensive,” said Shevalev. “That would open a huge window for Russia to gain influence over Ukraine by bailing the country out.”
Russia has a track record of attempting to manipulate Ukraine through debt. In 2013, the country lent Ukraine $3bn. Russia is suing Ukraine for non-payment, but Ukraine alleges that Russia used threatening behaviour to coerce it into accepting the money, calling Russia’s lawsuit a “tool of oppression”. The case is awaiting trial in an English court.
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