Could Turn Towards China Disrupt Ukraine’s Western Direction?  

Kyiv experiencing breakthrough in relations with Beijing amidst deteriorating connections with international financial institutions.

Could Turn Towards China Disrupt Ukraine’s Western Direction?  

Kyiv experiencing breakthrough in relations with Beijing amidst deteriorating connections with international financial institutions.

Thursday, 22 July, 2021

Analysts have warned that Ukraine’s increasing closeness to China may risk obstructing its path towards European integration.

When David Arakhamia, a member of Ukraine’s ruling Servant of the People Party, announced in early July that his party intended to follow the experience of the Chinese Communist Party, there was widespread condemnation from the media, the opposition and even from within his own political faction.  

Denouncing his statement to China’s state news agency Xinhua, critics pointed out that not only was Communist - along with Nazi - ideology prohibited in Ukraine, but also that the ruling party had come to power declaring themselves to be libertarians.

The spat was just the latest in a series of incidents highlighting China-Ukraine relations in recent weeks.

On June 22, Kyiv withdrew from the list of signatories in an international statement to the UN human rights council calling for an investigation into human rights violations in the Xinjiang region.

Some media reports theorised that this was the result of pressure from Beijing over supplies of the Chinese Sino-Vac vaccine, the most widely used in Ukraine, which started its vaccination roll-out relatively late. Distribution only began in late February, with rates very low in the first few months.

There was further criticism of the Ukrainian government when leading politicians attended the presentation of a book by Chinese leader Xi Jinping, itself published in Ukraine at Arakhamia’s initiative.

Perhaps most controversial was the revelation of a June 30 intergovernmental memorandum between Ukraine and China on Chinese investments in “rail transport, airports, ports, communications and municipal engineering construction”.

Kyiv only confirmed the signing of the memorandum on July 6 after the media reported it had been agreed, further intensifying the scandal.

The Kyiv government has already perturbed Washington over the ownership of helicopter manufacturing company Motor Sich. Although US pressure spurred Ukraine to refuse a deal that would see control handed over to China, it has been frozen rather than cancelled entirely.

Vasily Yurchishin, director of economic programmes at the Ukrainian Razumov Centre, said that Kyiv was experiencing a breakthrough in relations with Beijing amidst deteriorating connections with Western financial institutions such as the International Monetary Fund (IMF). China is already Ukraine’s largest trading partner and a huge market for its exports. 

Kyiv received its most recent payment from the monetary fund last June, with the ruling party promising that they would fulfil the requirements to receive the next disbursement in July 2021.  However, statements made by Ukrainian officials indicate that no funds are expected this year.

“Paused relations with the IMF will freeze the financial assistance from both the World Bank and the EU,” Yurchishin continued. “This will create a significant budgetary hole, which they expect to close with the help of China.”

He added that Russia had always acted as an alternative to Western funding in the past, an approach now impossible considering the conflict between the two countries. Chinese investments would also be more attractive because they do not require the implementation of anti-corruption measures from the Ukrainian authorities.

Sergey Gerasimchuk, an expert at the Ukrainian Prism analytical centre, said that engaging in large-scale investment projects with China was not without risk. He noted that a number of countries had changed their views towards such cooperation in recent years.

“We see that Eastern European countries are gradually leaving the 17 + 1 format, which is the platform for implementation of Chinese investment projects within the Belt and Road initiative,’ he continued. “Lithuania has already left it, Romania is close to leaving – these are our key strategic partners in the region.”

One telling example was Montenegro’s difficulties repaying a Chinese loan for the construction of a high-speed highway. This proved to be an economically ineffective project, and the country had to turn to the EU for help returning the money.

Gerasimchuk said that part of the problem lay in the country’s capacity to implement a particular project.

“You can’t say that all Chinese investment projects end in a fiasco,” he said. “We should rather say that everything depends on the quality of state institutions in the creditor countries. In those countries, where the Chinese money was spent primarily on improving the ratings of the government, the money brought no economic effect and was wasted, but the loan has to be repaid.”

Given that the quality of Ukrainian state institutions is poor, this means that such risks are extremely high for Kyiv.

The issue is further complicated because relations with China are not just backed by the ruling party. The Xi Jinping book presentation was attended by the leadership of three out of five of Ukraine’s parliamentary factions. Along with Servant of the People, it included the pro-Russian Opposition Platform for Life and the formally pro-European Batkivshchyna party, which was represented by its leader Yulia Tymoshenko.

Lyubov Tsibulskaya, the head of the Centre for Strategic Communications and Information Security, said that while the Ukrainian media was not necessarily supportive towards closer relations with Beijing, “China has already created a powerful network of friendly politicians, offering them loans and economic contacts on preferential terms”.

Mikhail Gonchar, president of the Centre for Global Studies Strategy XXI, said that the book launch marked a significant foreign policy victory.

“That is why it demonstrates what usually remains invisible - almost all influential Ukrainian parties have members promoting Chinese interests. That is why this presentation caused such a sharp reaction both in Ukraine and abroad,” he explained.

Gonchar said that China’s strategy was to establish an economic relationship with Ukraine before cementing increased political influence, which will in turn affect Kyiv’s ability to continue integration with the EU.

“If we transfer the usual matrix of China’s relations with third countries to Ukraine, we will see that after increased economic influence, Beijing will expand its political influence,” he said. “Most likely, in a political sense, this influence will be limited to demands to take a neutral position on issues that are painful for China, as has already happened in relation to the Uyghur genocide.

Another step away from the West, will convince the West that we do not have clear foreign policy priorities and do not share common values with the West,” Gonchar continued. “All of this can give powerful arguments to those who say that Ukraine has no place in the EU and NATO.

This publication was prepared under the "Amplify, Verify, Engage (AVE) Project" implemented with the financial support of the Ministry of Foreign Affairs, Norway.

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