The European Union told Ukraine on Thursday its rejection of a free-trade deal in favor of closer ties with Russia would risk its economic future, as EU leaders prepared for what is likely to be a fraught meeting with President Viktor Yanukovich.
Yanukovich was due to fly into the Lithuanian capital Vilnius in time for a dinner in honor of the Eastern Partnership, the EU's four-year-old program of outreach to former Soviet states Including Ukraine.
He had been expected to sign a far-reaching free-trade and political association deal with the EU at the Vilnius summit, the result of years of negotiation.
But last week, following intense pressure from Moscow and growing concerns about Ukraine's dire economic situation, Yanukovich announced he was not ready to sign the EU deal yet and would instead focus on reviving economic dialog with Russia.
Speaking a few hours before Yanukovich was due to arrive on Thursday, EU enlargement commissioner Stefan Fuele warned Ukraine that its decision to walk away from the agreement could imperil its future.
Disputing Ukraine's figures for the cost of upgrading its economic base to European standards, Fuele said: “The Ukrainian economy needs huge investments but these are not costs. They represent future income, more growth, more jobs and more wealth.”
“The only costs that I can see are the costs of inaction allowing more stagnation of the economy and risking the economic future and health of the country,” he told a business forum in Vilnius, adding that the EU offer remained on the table.
Yanukovich himself set the scene for a frosty encounter by dismissing the EU's trade offer as “humiliating”. The 600 million euros ($800 million), or so, of support on offer was “candy in a pretty wrapper”, he said.
But his presence at the EU gathering - without signing the agreement - indicates he does not want to burn his bridges with the EU and leave his country's economic future solely to Russia. His government says the suspension of the deal with the EU marks only a “pause” in moves to integrate Ukraine into the European mainstream.
He has accepted short-term support from Moscow, which supplies Ukraine half of its gas needs, without committing to Russia's Customs Union with Kazakhstan and Belarus, and all the while keeping the EU within reach.
Defending Kiev's decision, First Deputy Prime Minister Serhiy Arbuzov told the Vilnius forum: “The country cannot be ready for such serious decision (to sign) if the social-economic situation is not balanced.”
“No about-face has taken place. We are confidently moving towards an aim which we have set. Ukrainians need Europe and the European path is the only one for us,” he said.
Eye on the prize
The EU will still go ahead with initialing political association agreements with two other ex-Soviet republics, Georgia and Moldova, putting them on track to sign formally in around a year. A visa agreement with Azerbaijan will also be signed.
Belarus and Armenia will also attend the summit, though there seems little prospect of their moving closer to the EU. Belarus is a member of the Russia-led Customs union, which Armenia has also opted to join.
But the biggest prize in the Eastern Partnership was always Ukraine, a vast country of 46 million people that borders four EU member states, and it will be something of an elephant in the room during the dinner on Thursday night.
EU leaders, including German Chancellor Angela Merkel, French President Francois Hollande and British Prime Minister David Cameron, will hold a pre-dinner meeting in Vilnius to work out how to handle the situation with Yanukovich, officials said.
The ghost at the banquet is likely to be Yulia Tymoshenko.
EU leaders will have an opportunity to press the case of the jailed former prime minister, a bitter Yanukovich rival who was convicted of abuse of power in 2011, after a trial the EU says was political.
Tymoshenko declared a hunger strike on Monday and has given her support to the tens of thousands of Ukrainians who have demonstrated in Kiev against the rejection of the EU deal.
On the eve of the summit, Yanukovich told the EU on Wednesday to stop meddling in her case and appeared likely to retort that her guilt had been proven in a Ukrainian court.
EU leaders may also try to understand from Yanukovich how he intends to balance his acceptance of help from Russia with his stated aim of moving closer to the EU. Russia and Ukraine have suggested three-way talks with the EU, but that is not acceptable to Brussels.
“These are bilateral programs between the EU and the Eastern Partnership countries. It's not about negotiating three-ways with Russia,” said an official from Lithuania, which holds the EU presidency and has planned the Vilnius summit.
It is not clear what Russian President Vladimir Putin did to get Yanukovich to shift position, but diplomats in Brussels, Kiev and Moscow have suggested Russia will give Ukraine a more favorable gas-supply deal and better terms on repaying 1.3 billion euros of debt.
It will also reopen trade flows that have been interrupted since Yanukovich started making his overtures to Brussels.