Ukraine's decision to halt the process for signing landmark political and economic agreements with the European Union has caught Europe and the media by surprise, but the move fits within Stratfor's ongoing analysis of the issue. A week before Ukraine's Nov. 21 decision to freeze negotiations with Brussels, we noted, "Kiev has so far attempted to balance both sides [the European Union and Russia] without committing too firmly to either." In the fourth quarter forecast, we wrote, "Ukraine, the most critical state in this competition [between Brussels and Moscow], will likely end up balancing any favorable actions toward the European Union with energy concessions to Russia."
As these previous analyses indicated, Ukraine's basic geopolitical fundamentals require it to strike a balance. Located on the borderlands between Russia and Europe, Ukraine must factor each side into its decision-making. Russia and the European Union are Ukraine's largest trading partners, and maintaining an economic relationship with both is crucial. There are two key factors complicating Kiev's balancing act. The first is Ukraine's financial situation, with the country's economy currently in recession. Second is the domestic political situation in Ukraine — there have already been protests in the capital amid outcry from jailed opposition leader Yulia Timoshenko and other pro-EU officials.
Ultimately, Ukraine will continue reaching out to the Europeans on economic and energy matters, and it will continue to try to keep Russia at arm's length in order to preserve its sovereignty and independence. The latest events do not mark a significant shift in Ukraine's policy, but rather their continuation. Thus, Kiev will continue trying to maintain this balance, as long as it is in an economic and political position to do so.
