UKRAINE: a potentially "huge market" for European businesses

by Martin Banks

Speaking exclusively to European Business Review, First Deputy Prime Minister Serhiy Arbuzov predicted a 2 to 3 per cent growth in Ukraine's GDP if the agreement is signed at a summit later this year.

Mr Arbuzov, who until recently was Governor of the National Bank of Ukraine, also said the EU stood to gain from any such deal as it would open up a potentially "huge market" for European businesses.

"It is a win-win situation," he declared, "but this is a once in a lifetime opportunity and one that we must grasp with both hands."

He also played down recently-voiced Russian doubts about the possible economic gains Ukraine stands to reap from signing the trade deal at the Eastern Partnership summit in Vilnius in November.

Ukraine has come increasingly under the spotlight in recent times with observers from the European Parliament, including Pat Cox, the institution's former president, making regular fact-finding trips to Kiev, the latest being at the end of July.

Some fear that the Yulia Tymoshenko case might create obstacles for reaching agreement between the two sides.

Mr Arbuzov is responsible for economic affairs and EU integration in the current Ukraine government and has no direct influence over the case concerning the country's jailed former Prime Minister.

He points out that the EU is already Ukraine's largest trading partner and that Germany ranks second in direct investments into Ukraine.

He also firmly believes that Ukraine can be of "use and interest" to Europe, saying, "Ukraine is a country of unrivalled potential and opportunities. It shares European values. "It has a highly experienced workforce, a market of 46m consumers and infrastructure projects which European companies could contribute to with personnel, technology and investment."

He also points out that Ukraine has "been very useful to Europe" on security issues, proving stability at its borders with Europe "for a long time."

"Ukraine is a very peaceful country. We do not have any claims over our neighbours," he said.

In this respect he says the country compares favourably with, say, Turkey which is at odds with Greece over Cyprus, and Russia and its ongoing dispute over Georgia.

Unofficially tipped as the country's next Prime Minister when the next cabinet reshuffle takes place, Mr Arbuzov is seen as a rising star of Ukraine politics. What is certain is that he will play a vital role in determining Ukraine's position vis-a-vis the association agreement with the EU.

After a highly successful career in the financial sector, he was appointed to his current post in December 2012.

In the same year,the Ukrainian magazine Korrespondent placed him among the 30 most influential people in the country.

He believes that despite the euroszone crisis deeper integration with the EU currently has the support of most Ukrainians, saying, "The number of those favourable to the EU has actually been growing."

Amid a background of continuing pressure from Moscow, he goes on to warn, "Movement towards Europe might, in fact, be our main means of preventing the country from splitting into 'Eastern' and ' Western' Ukraine."

One of the main challenges between now and the November 28-9 summit in the Lithuanian capital, he says, is to convince German chancellor Angela Merkel that the association agreement with Ukraine will be in the interests of both the EU and Germany.

At present, he says there is a perception that Merkel, possibly influenced by her connections to Russian President Vladimir Putin and the country's oil giant Gazprom, is dragging her feet when it comes to giving wholehearted support.

Germany is believed to be insisting that Tymoshenko must be released before the agreement is signed.

But Mr Arbuzov says, "There is a view that this is a politically motivated case, the reprisal against a political opponent.There is an opposite view that she should bear responsibility for her actions as laid down by the law.

"Nobody in Europe feels the depth of the disaster which we in Ukraine have been experiencing since she signed the notorious gas contracts with Russia in 2009. We have been since paying much higher gas bills than, say, Germany, twice as high in fact, and the Ukraine economy has suffered billions of losses annually. All this at a time of economic recession."

"Were Ukraine's public interests neglected? It is evident they were. Has the guilty person been punished? Yes she has."

The 37-year-old denies he is unduly concerned by the continuing publicity surrounding Tymoshenko but admits he finds it "tiresome."

He much prefers to focus on the EU's possible "rapprochement" with Kiev, saying, "We can be a very profitable partner for the EU and this is what we should be discussing rather than being preoccupied with one particular issue."

With memories still relatively fresh of Ukraine's independence from the old Soviet Union in 1991, he goes on, "We have to remember that Ukraine is still a country in transition and this means the risks are quite high."

He concedes that concerns remain about certain issues such as the rule of law and judicial independence but adds, "Things are changing quite dramatically and we want to become what I would call a more predictable partner for the EU. For us, EU integration is, in the first instance, about participation in the European project.

"We are moving to toward Europe not for money but for the standards and values which allowed Europe to become what it is at present."

In a bid to dispel other "myths" about this large East European country, he moved to reassure the West that it remains committed to guaranteeing energy supplies to EU member states this coming winter.

He said, "We are ready to join in a dialogue about gas supply routes and also with companies attracted to the Ukraine market. I want to assure you that,like Europe, Ukraine is developing energy diversification projects, this despite the fact that we might create certain ´inconveniences´ for Gazprom.

"We are also committed to following all the rule of the Energy Community and rely on Brussels in supporting our interests as the largest transit country of Russia gas."

Many believe that signing the agreement will significantly weaken Moscow's pull on Kiev and put Ukraine firmly on a path towards EU intregration.

The Donetsk-born Mr Arbuzov, who headed several leading Ukraine banks before entering into politics, says is quietly confident the trade agreement will be signed in the autumn but cautions that failure to do so could represent a real setback in EU/Ukraine relations.

"We need to do the deal in Vilnius. Failure could be very damaging for businesses both in Ukraine and elsewhere in Europe."

"But," he added, "I want to stress that Ukraine has never been so close to
associated membership than at present.