RUSSIA - UKRAINE RELATIONS: STRENGTHENING ECONOMIC

C O N F I D E N T I A L MOSCOW 001960

SIPDIS

E.O. 12958: DECL: 07/09/2018
TAGS: PREL PGOV UP RS
SUBJECT: RUSSIA - UKRAINE RELATIONS: STRENGTHENING ECONOMIC
TIES FOR NOW

Classified By: Acting Political M/C Bob Patterson. Reasons 1.4 (B/D).


1. (C) Summary. In recent conversations, both the MFA and
the Ukrainian Embassy characterized the Russia - Ukraine
bilateral relationship as at an all time low. Ukraine's NATO
aspirations dominate and negatively affect all aspects of the
relationship. Other disputes, including the sluggish,
contentious negotiation over Russia's Black Sea Fleet (BSF)
in Sevastopol, Ukraine's "reinterpretation" of its shared
history with Russia, Russian-language education in Ukraine,
and Yushchenko's efforts to establish an independent
Ukrainian church, continue to shadow the relationship. The
Ukrainian Embassy pegged the Bucharest NATO summit as the
point at which an accumulation of minor irritants became
considerably less tolerable to the Russians. PM Tymoshenko's
recent Moscow visit affirmed that the two countries have much
to gain through economic cooperation, but those economic ties
are overshadowed and threatened by the political discord.
End summary.

NATO: Breaking Point
--------------


2. (C) MFA CIS Second Department Director Viktor Sorokin
told us July 2 that the Russia - Ukraine bilateral
relationship was "complicated," with no improvement likely in
the near future. Russia and Ukraine had "no common
language," said Sorokin. One contribution the West might
make, he thought, would be to leave Ukraine alone rather than
"pulling" it in a direction for which Ukraine was not
prepared and which was not helpful to its neighbors. Sorokin
believed that continued confusion among the Ukrainian
leadership made cooperation difficult. He predicted more
political chaos in Ukraine before and after the referendum on
NATO, should one be staged. Per Sorokin, the GOR was trying
to counter the political deadlock with economic cooperation
from which both countries would benefit. He warned, however,
that NATO membership would change the economic calculus. (On
June 28, immediately after the meeting with visiting PM
Tymoshenko, Putin issued a statement warning of the
consequences of NATO membership for bilateral economic
cooperation.)


3. (C) Besides NATO, political disharmony abounds: the BSF
and Sevastopol, Ukraine's effort to re-write (from the
Russian point of view) the countries' shared history,
Russian-language education in Ukraine, and the Orthodox
church remain bones of contention. In a June 23 interview
with Ogonyok magazine, DFM Karasin expressed anger at
Yushchenko's decree ending the presence of the BSF in Crimea
after 2017. The decree, Karasin said, had undercut much of
what had been achieved up to that point in the BSF
negotiations. Moscow Mayor Luzhkov's May 12 visit to Ukraine
-- especially his comments asserting Russia's right to the
naval base -- and the GOU's subsequent decision to bar
Luzhkov from entering Ukraine; as well as DPM Ivanov's
equally contentious June 14 visit to Sevastopol, exemplified
the GOR's "if-NATO-then-this" rhetoric. According to
Sorokin, one of Yushchenko's biggest mistakes was to focus on
his "crusade" to redefine Ukraine's history and make
"questionable personalities," such as Roman Schukevich and
Ivan Mazepa, into national heroes, instead of strategizing
about the economy.

Economic Cooperation for Now
--------------


4. (C) Sorokin warned that the ending of close economic ties
between the two countries in energy, transport, space,
aviation and military industries would have a profoundly
disruptive effect on both economies. Indeed, Putin had said
that Russia would terminate the "lucrative" deals that
Ukraine's arms and space industries were enjoying if Ukraine
joined NATO. Ukraine would then have to invest heavily in
retrofitting its industries to meet the Western alliance's
standards. According to Sorokin, Tymoshenko, more than
Yushchenko, understood the importance of economic cooperation
with Russia, and the Russian and Ukrainian prime ministers
during Tymoshenko's visit had focused not on the gas price,
which inevitably would rise, but on ways to cope with the
high price of energy. The GOR, said Sorokin, hoped that
intensified economic ties would change the Ukrainians'
political views. If that failed, and Ukraine joined NATO,
there would be economic consequences.

Ukrainian Embassy View
--------------


5. (C) The Ukrainian Embassy maintained that the Russia -
Ukraine relationship had taken a nose-dive with the Bucharest
NATO summit. Political Counselor Myroslava Scherbatyuk
thought that all subsequent Russian moves had been linked to
NATO, such as a the revival of discussions about the status
of Crimea and the Duma's re-examination of the Treaty.
Scherbatyuk thought the Duma's June 4 resolution, which
recommended that the GOR abrogate the Russia - Ukraine Treaty
if Ukraine joined NATO was "ominous." Ominous as well, she
said, was the decision to establish a separate budget for an
information campaign in Crimea. Russia's NATO "hysteria"
meant that every additional minor irritant got blown out of
proportion, Scherbatyuk said. The GOR's repeatedly expressed
displeasure with the state of Russian language education was
designed to force Ukraine to make Russian an official
language. According to Scherbatyuk, Yushchenko's plan to
establish an independent Ukrainian church was a painful topic
for the Russians, who saw it as aimed at the authority of the
Russian Orthodox Church.


6. (C) Yushchenko and Medvedev met briefly on June 6 during
the CIS informal summit in St. Petersburg. Medvedev
reiterated GOR positions on political issues such as NATO,
Russian language education in Ukraine and an independent
Ukrainian church, while emphasizing the importance of Russian
investment in Ukraine. PM Putin is scheduled to visit Kyiv
in September and President Medvedev before the end of the
year. Both the MFA and the Ukrainian Embassy expressed
concern that with the Ukrainian electoral season approaching,
the confused political situation in Ukraine would complicate
the already strained relationship. Sorokin said that
different political factions in Ukraine continued to seek
domestic political advantage by leveraging Russia - Ukraine
relations, rather than promoting mutual interests through
concrete projects.
BEYRLE