Ukraine does not intend to relinquish the hryvnia in favor of a common currency for the Common Economic Space. First Vice Premier Mykola Azarov said on August 26 that the Ukrainian government will not agree to the institution of a common currency within the CES. The Saturday before last, Russia’s Premier Mikhail Kasyanov announced unexpectedly that Moscow is interested in the introduction of a common currency as the final stage of integration. This came as a major surprise to Mr. Azarov, who stated that this issue had not been raised during any of the seven rounds of intergovernmental talks. At the same time, he opined that the Russian government is looking for reasons to delay the creation of the CES. In his view, Moscow has recently shown interest in economic integration with Ukraine as well as the two remaining prospective CES members, that is, Kazakhstan and Belarus.
Though still on paper, the CES is already eyed by other countries. Last Tuesday, Mykola Azarov met with foreign ambassadors to Ukraine, and representatives of Moldova and Uzbekistan expressed their interest in joining the CES negotiations. Mr. Azarov ruled out any scenario whereby CIS members will be automatically admitted to the new organization, even if they are ready to meet all of its requirements. “In each separate case we will assess the consequences of each new member’s accession, and Ukraine will defend its interests and weigh all the advantages and disadvantages,” he said. However, Mr. Azarov admitted that at the present stage he cannot say when the presidents of the four prospective CES members will sign even the framework agreements on the union. This could happen at the upcoming CIS summit in Yalta, though it is possible that a separate summit will be held to this end.
Meanwhile, foreign ambassadors were more interested to know what the CES is really all about, since until recently very few Westerners took it seriously. Mr. Azarov explained to the Western diplomats that at the present stage the CES rests on declarative agreements that envision a great deal of work. The creation of the CES is planned as a phased process. At the insistence of the Ukrainian side its first phase will be the creation of a free trade zone. Thus far an agreement has been reached to eliminate all exemptions from the free trade regime. It will be recalled that Ukraine has ratified an agreement on free trade with Russia. However, since Moscow exempted 150 groups of goods from this regime, free trade between the two countries has been on paper only.
Vice Premier Azarov also assured the Western ambassadors that Ukraine’s economic integration in the Eastern direction should not be viewed as a rejection of its strategic course toward the EU and WTO. He reiterated that Ukraine plans to join the WTO in 2004 and said that this will happen long before the CES becomes a full-fledged organization. According to him, all relevant WTO norms will be taken into consideration in creating the CES. Mr. He even stressed that Ukraine’s further integration with the EU depends exclusively on whether the European Union wants it or not.
The fact that the EU does want it became known on August 26 during the summit of the heads of parliaments of Baltic and North European states held in the Lithuanian town of Palanga. The summit resulted in a separate declaration on Ukraine. Unfortunately, thus far things have gone no farther than declarations.
As for Ukraine’s integration in the Asiatic direction, it is obvious that this can be sponsored by Russia alone. If it agrees to lift the special duty on oil and gas and open its markets unconditionally to Ukrainian foodstuffs and metals within the CES framework, this idea will have a chance to see the light of day. Mr. Azarov stated that Russia has guaranteed that it will cancel limitations on fuel exports to Ukraine, Belarus, and Kazakhstan along with exemptions from the free trade regime. However, the unexpected statement by Mikhail Kasyanov about the need for a common currency is proof that the process of the CES creation could face many hurdles. It appears that in exchange for its economic concessions Moscow wants to take some of its CIS partners’ sovereignty. Even today it is obvious that without political concessions by Ukraine our producers will not be allowed free access to Russian markets, which is stipulated in draft agreements approved by the governments of the four prospective CES members. This seems to be the only plausible explanation for the recent statement by Premier Kasyanov on the need for a common currency.
