The European Union and Ukraine: Strategy for the Future



The relationship between the European Union and Ukraine is one of increased importance as we enter the new millennium. In a matter of years, the European Union and Ukraine will share a common border. This fact opens up new opportunities but also presents new challenges for our relationship. To realise the positive potential of EU-Ukraine relations, significant efforts must be made on both sides.

The legal basis of the relationship between the EU and Ukraine is the Partnership and Cooperation Agreement (PCA) signed in Corfu, Greece in 1994, at the same European Summit where Finland joined the EU. Reflecting the growing comprehension of Ukraine´s importance and role, in November 1994 the EU approved a Common Position on Ukraine. In June 1996, the European Council decided to consider Ukraine an economy in transition that provided for better access of Ukrainian goods to the EU market. In December 1996 an EU Action Plan on Ukraine was approved pledging to support Ukraine´s independence, territorial integrity and sovereignty, its democratic transformation, economic stabilisation, and integration into the world economy. The Partnership and Cooperation Agreement, which only came into force in 1998 provides the framework and the mechanisms for the development of a close relationship. It sets a free trade agreement between the EU and Ukraine as a goal.

Over the years, the EU share in overall trade volume of Ukraine has grown from 8,7% in 1994 to 19% in 1998, with Germany taking the lead in EU trade with Ukraine. At present, the EU is the second largest trading partner of Ukraine and the largest one outside the CIS.

The first EU-Ukraine Cooperation Council met in Brussels in June 1998 and adopted the Joint PCA work programme consisting of seventeen priorities for cooperation. Since then, yet another meeting of the Cooperation Council as well as two meetings of the EU-Ukraine Cooperation Committee have been held. Considerable progress has been made in such fields as customs, environment, science and technology as well as training and education whereas in the domain of market access progress has been rather limited.

The growing political dialogue through the PCA framework, regular consultations between the EU troika and the Ukrainian government, and EU-Ukraine summits contribute to better understanding of each other, and as far as the EU is concerned, to increased comprehension of Ukraine´s importance and its role as a regional power. It is no coincidence that Ukraine has become one of only two countries in the CIS for which the EU has decided to elaborate a Common Strategy.

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Before going further, let me say a few words about the European Union. The European Union is neither an international organisation nor a confederation of states. It is a Union of European states that have in the course of post-war European history joined forces. By doing so they have voluntarily given up a substantial part of their sovereignty. What started in 1951 as a Coal and Steel Union - to make war between Germany and France impossible - has grown into an enormously complicated and powerful Union that has created a unified market of 350 million people and removed all internal borders. By the introduction in 1999 of the euro, the Union took the unprecedented step of abolishing national currencies. Today, the Finnish and German marks are but variations of the euro and the monetary policy of "Euroland" is in essence made in Frankfurt.

The Union is an organisation which is constantly on the move. The Union Treaty of Amsterdam of 1998 is but the latest codification of change of the Union. It paves the way for the EU to embark upon its next enlargement. The Treaty obligates the Union to define common strategies in areas of notable interest to the Member States of the Union. The strategies are adopted by the European Heads of States and Government by consensus whereas implementation of the strategies can be decided upon by a qualified majority of the Member States. This makes the Common strategies an efficient new tool for the European Union´s Common Foreign and Security Policy.

The external message of the strategies is clear: they confirm the resolve of the EU to enhance and develop its relationship with new partners. Internally the Common Strategies represent by far the most ambitious step to coordinate and provide consistency within the policies and programmes of the EU.

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The Finnish presidency is working to make the Common Strategy on Ukraine ready for adoption at the European Summit in Helsinki in December.

Conceptually the Ukraine strategy is based on an analysis which defines the promotion of the rule of law and the consolidation of democracy as the basis for future relations between the Union and Ukraine. The political message is evident. A democratic Ukraine is a strategic partner of growing significance for the Union. The fact that Ukraine has since independence been a source of regional stability, despite its domestic difficulties and diversities, is a laudable achievement.

The strategic partnership linking the European Union and Ukraine is illustrated by the fact that the Union remains the largest financial donor to Ukraine. Through macro-financial assistance, the Tacis programme, as well as through bilateral programmes, valuable support is provided to help Ukraine in her transition and reform process. In order to encourage the process of economic reform in Ukraine, following the third EU-Ukraine summit, held here in Kyiv on 23 July this year, the European Union has granted Ukraine an additional balance-of-payment loan amounting 150 million euros. The first tranch of this, amounting 58 million euros, has already been made available to Ukraine.

As Ukraine´s key partner in the field of technical cooperation, the EU also continues to provide significant assistance under the Tacis programme. The EU has stepped up its assistance to strengthen Ukraine´s financial system, helping the National Bank of Ukraine to strengthen its supervisory capacity and reinforcing sound commercial practice among Ukraine´s commercial banks. A new phase of the Tacis-financed joint European-Ukrainian Policy and Legal Advise Centre (UEPLAC) project has been launched this autumn. The European-Ukrainian Policy and Legal Advise Centre has a valuable role to play in helping to facilitate the process of PCA implementation including the approximation of Ukrainian legislation to EC standards.

At the EU-Ukraine summit held here in Kyiv last July, the EU and Ukraine reconfirmed their commitment to implementing the G-7 Memorandum of Understanding on the closure of Chernobyl, which is of crucial importance in guaranteeing the development of a modern, safe, efficient and environmentally sound energy sector in Ukraine. In support of Ukraine´s decision to close the Chernobyl plant by the year 2000, the EU has reconfirmed its readiness to consider substantial loan financing for the completion of the Rivne 4 and Khmelnitsky 2 reactors. The Community and its Member States are also providing a total of 210 million USD to the Chernobyl Shelter Fund, which makes the EU the largest provider of financial assistance for this operation. In this context, the EU also attaches great importance to the reform of the Ukrainian energy sector and stands ready to continue technical assistance in this area.

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Rapid and dynamic European integration is based on a deep commitment to the benefits of positive interdependence. The cooperation offer of the Union is an offer of interdependence. It demonstrates the firm conviction that a relationship that makes wars impossible can also create synergy and communality.

Transportation, ports and access routes are the best examples of interdependence. To take an example, the second largest German port is Antwerp in Belgium. Telecommunications, electricity and energy-pipelines are other examples of infrastructure networks that are well known to all and to the development of which the EU pays particular attention. The Inogate-programme is an important achievement in this respect.

The Council of Ministers has followed the development of Inogate since its beginning in November 1995. We have watched it grow from a vehicle for the provision of technical assistance into one of the most potent instruments we have for the promotion of regional cooperation. It links the states of the Caspian Basin, the Caucasus, the Black Sea region and now, Central and South-Eastern Europe. Along with its sister programme on transport, Traceca, it has become one of the most visible initiatives ever launched within the Tacis-programme.

The reason why Inogate has developed in this way is simple. It responds to particular needs of the countries in the region. Whether they are producers, transit countries or consumers, all stand to benefit from the unlocking of the huge energy resources of the Caspian Basin.

Moreover, Inogate provides a forum in which solutions to technical, but highly significant problems related to the management, financing and institutional arrangements for the transit of oil and gas can be worked out by experts, in a cooperative and non-controversial atmosphere. So far, the European Community has allocated something like 50 million euros to this programme. The EU welcomes the signing of the Inogate Umbrella Agreement at the Inogate Summit held in Kyiv in July and attaches great hopes for what the programme can achieve now and in the future.

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The integration into the European Union of countries bordering Ukraine represents a major challenge not only to the EU, but also to Ukraine. The enlargement of the Union enhances economic dynamism and political stability at the borders of Ukraine, thus offering unique possibilities for economic cooperation with the neighbouring Ukrainian regions. But simultaneously European integration threatens to create a normative divide unless Ukraine adopts norms and standards of one of its most important market and trading partners - the European Union.

At this moment the acceding countries are in midst of adopting European norms and legislation. This is no small or simple task. Just to illustrate what this means let me reflect that when Austria, Finland and Sweden joined the Union we signed a document of 80 000 pages. When the turn of Poland, Hungary and the Baltic States comes the number of pages will have reached 100 000.

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Ukraine enjoys today excellent relations with all its neighbours and has taken important steps in nation-building and in consolidation of democracy. Likewise, Ukraine´s achievements in tackling the question of minorities, defusing the language question and settling the situation on Crimea must be recognised. Let me take this opportunity to congratulate Ukraine for these achievements.

Moreover, the EU welcomes Ukraine´s active work as a mediator for the achievement of the overdue settlement of the Transnistrian conflict. In this context, I would like to mention that the EU is sending a senior officials troika to Moldova in October. The EU also welcomes the close involvement of Ukraine in stabilisation of the Balkan crisis and encourages the strengthening of Ukraine´s role in South-Eastern Europe. We count on Ukraine´s continued contribution to international efforts for peace and stability in our region.

Ukraine has come a long way, but there is still room for further progress. Special attention should be paid to the strengthening of civil society and to the role of NGOs in Ukraine. It is also of crucial importance that pace of economic and structural reforms be accelerated. In order to foster the strengthening of two-way trade and investment, further progress should also be made in abolishing barriers to trade and investment as provided for in the PCA.

Recognising Ukraine´s pro-European choice, the EU is committed to working with Ukraine at national, regional and local levels, in order to support a successful political and economic transformation in Ukraine. Successful transformation of Ukraine will positively influence not only the regional environment, but also the progress of Belarus and Moldova, while securing and enhancing the gains achieved by Hungary, Poland, Romania and Slovakia.

The EU Common Strategy on Ukraine, currently under preparation, will enunciate the Union´s commitment to strengthen this relationship and define areas for practical cooperation in fields such as the consolidation of democracy, the rule of law and public insitutions, foreign and security policy, economic and social integration, energy and nuclear safety, justice and home affairs. The offer of a reinforced relationship, based on shared democratic values and the PCA as the legal and institutional basis of the relationship between the EU and Ukraine, is aimed at helping Ukraine to assert its European identity and open a perspective of further European integration.

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Finally, I would like to take the opportunity to raise an issue of crucial importance to Ukraine but also to the whole of Europe. In the course of this month, presidential elections are being organised in Ukraine for the third time since its independence. As President Ahtisaari pointed out in his speech at the Yalta summit in early September, the forthcoming presidential elections are an important milestone on the new Ukraine´s road towards an integrating Europe. Free and fair elections and the fact that all candidates have easy access to the media are factors which strengthen Ukraine´s prestige and the country´s standing in the European community of values.

The European Union sees elections as a cornerstone of functioning democracy. It is thus natural that the EU follows closely the proceedings of elections in all of the countries in transition. Having said this, we do not want to partake in the political processes in one way or another. Our aim is to emphasize the importance of letting the democratic processes work and develop so as to form a solid basis for the future of an independent Ukraine. Ukraine´s standing as a European state and its relations to international financial insitutions will to a great extent depend on its ability to meet European norms, including the holding of free, fair and democratic elections.

I commend the East West Institute for organizing this important conference on "European Union and Ukraine: Consolidating Constituencies for Integration" here in Kyiv. I wish you fruitful discussions.