Ukraine will sign a cooperation agreement with the European
Union by the end of the year, finance minister
Yuriy Kolobov told Emerging Markets at the EBRD conference in
The move will be a significant development in the cat-and-mouse
game that Kiev has played with Brussels and Moscow over its
future commercial and political allegiance.
Ukraine has long played the EU and Russia against each other
even as its economy weakens, squeezed between two giant,
troubled economic blocs - aware that both sides are keen to
wield greater influence in and over a key bridge between
Europe, Russia and Central Asia.
However it still remains unclear whether politicians in Kiev
and Brussels can or will agree on a deal before the year is
Ukraine has long been seen as the first likely signatory of the
Eastern Partnership, a loose and long-standing plan to draw six
former Soviet satellites - Armenia, Azerbaijan, Belarus,
Georgia, Moldova and Ukraine closer to the EUs
political and economic orbit.
Ukraine stands between possible EU membership on the one hand,
and a future that could see it become part of a single customs
union spanning Russia, Kazakhstan and Belarus.
Politicians in Kiev would like to be part of both clubs,
joining Russias customs union. EU officials have long
made it clear that it can only join one.
Experts remain divided over Ukraines chances of joining
the Eastern Partnership this year. Kolobov and his colleagues
believe it will happen. Alexander Pivovarsky, lead economist
for Eastern Europe and the Caucasus at the EBRD, says while he
would like to see Ukraine sign the deal, the odds
against that happening are currently no better than
Europe has consistently said it would like to sign the deal
which is already written, drafted and is ready to be
signed in November in the Lithuanian capital Vilnius.
But European politicians have made it quietly clear that any
agreement is linked to the release from jail of former premier
Yulia Tymoshenko, who is viewed by Brussels as a political
But the country has other problems with which to contend. Its
economy is slowing sharply, hit by fading economic growth
prospects in Russia, and by the still-troubled eurozone, its
two chief trading partners. The EBRD has downgraded
Ukraines GDP target for 2013 twice in the past seven
months, from 2.5% to 1% this January. This week the EBRD again
revised that figure downward, tipping the economy to contract
by 0.5% this year.
Pivovarsky also warned that Ukraine faced a series of stark
economic challenges, from a widening current account deficit to
the steady decline in output from key sectors including steel,
machine goods and chemicals.
The country is raising capital from global investors to balance
its budget and use as collateral to pay existing debts. Finance
minister Kolobov told Emerging Markets the country would issue
a further $2 billion in sovereign debt, probably in the second
half of the year, adding that there was no hurry.
Ukraine issued $1.25 billion worth of ten-year dollar bonds on
April 9 with a yield of 7.5%, slightly below the 7.625% yield
placed on a $1 billion February debt sale.
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