Ukraine suspends trade talks as Putin wins ′tug of war′ with EU

by  Martin Banks 

A government statement said the decision had been taken to protect Ukraine's "national security".

Hours earlier MPs rejected a bill that would have allowed jailed opposition leader Yulia Tymoshenko to leave the country - which the EU had demanded as a condition for the deal to proceed.

Ukraine had come under intense pressure from Russia not to sign the historic EU deal at a summit next week.

The Ukrainian government said on Friday that it was instead looking into setting up a joint commission to promote ties between Ukraine, Russia and the EU.

EU officials have not given up hope completely that they will be able to sign an Association Agreement with Ukraine in Vilnius on 29 November, but the prospects for this are growing dimmer by the minute.

Just hours after President Viktor Yanukovych's governing Party of Regions rejected legislation that would have allowed the jailed former prime minister Yulia Tymoshenko to travel abroad for medical treatment, the country's government announced it was halting preparations for the Vilnius signing ceremony.

Ukraine's government now seems to hope it can balance Russian and European interests. Officials are proposing a three-way commission to regulate trade among Moscow, Brussels and Kiev. Whether this is really what Ukraine's government wants, and whether this is indeed possible, remains to be seen.

Russian officials said they welcomed any Ukrainian moves to foster closer relations.

Reaction to the latest moves was swift with respected commentator James Wilson, Director of the EU Ukraine Business Council, saying, “The harsh reality is that Ukraine is facing severe economic difficulties, and is running out of options to prevent economic disaster.

“Moscow wants Ukraine to join its own customs union with Kazakhstan and Belarus, which it sees as a prototype rival to the EU. It begs the question: Is there any prospect of the EU giving financial support to the Ukrainian economy to overcome its current difficulties? Could a package or an offer be tabled in time to save the Vilnius Eastern Partnership Summit scheduled for next week?"

The Brussels-based Wilson added, "We shall find out the answers to these questions in the coming days. Ukraine is of course not Greece - if Ukraine goes bust Europe will not suffer the risk of collapse of confidence in the Euro, but what price does Europe put on the geopolitical issue of Ukraine being sucked into Russia's orbit?”

“Also if we are trying to find a way to measure the pain against pleasure principle what steps will Europe now take to emphasize how cold it is outside the European family?” he went on to say.

Mr Wilson, who is an expert on the region, added, “Where does this leave us now with the EU’s demands to release Tymoshenko? It would appear superficially that the current Ukrainian government does not seriously intend to release her at any time in the nearest future.”