Beyond the Northern Dimension: Ukraine as a potential partner

EVA Junior Fellow Yegor Paanukoski argues that there is a legitimate reason to look towards the European Union’s Eastern border: Finland has a lot to gain from closer cooperation with Ukraine.

Revolutionary events in Ukraine at the end of last year provoked different reactions in EU countries. Poland, Germany and even Lithuania were particularly active in trying to resolve the crisis. However, during the “Orange revolution”, the Finnish position was cautious. Is it because Ukraine is too far away from Finland? Or is it because Helsinki did not want to spoil the relationship with Moscow over the issue of Ukraine? Due to EU’s Eastern enlargement, Ukraine has become a new neighbour of the EU, including Finland. Perhaps, a wait and see policy is not the worst – and perhaps even the best one in the arsenal of Finnish foreign policy. Yet Ukraine is no longer a so-called grey zone leaning towards Russia. I believe that Ukraine offers numerous opportunities for Finland.

From grey to bold orange

Firstly, the Northern Dimension in its current form should not prevent Finland from assuming a more active role in cooperation with Ukraine. Already in 1998 in Kyiv, President of Finland Martti Ahtisaari stated that “the Finnish Government’s initiative on the European Union’s Northern Dimension will strengthen ties between Ukraine and the Union”. It did not happen as Mr. Ahtisaari envisaged: Ukraine remained in the grey zone until 2004.

Now, after the “orange revolution”, the situation is different. Ukraine is determined to move towards the EU, while the Northern Dimension has lost much of its sparkle. Ukrainian ambitions to join the EU are reflected in President Viktor Yushchenko’s speeches in Brussels, Strasbourg and the German Parliament; in Yulia Timoshenko’s new governmental programme “Towards the People”, where the EU is mentioned twenty times (and Russia only twice); as well as in the very concrete EU-Ukraine action plan for 2005-2007. The new political leadership of Ukraine is clearly choosing the European dimension of development.

All this creates a good momentum for Finland to include Ukraine into various cooperative and developmental programmes, thus resurrecting the idea of economically linking the Baltic Sea and the Black Sea. And why not make it one of the new strategies for Finnish developmental and cooperation policy? If Finland feels the task is too big, it can work towards a common Nordic policy on Ukraine. Participation in the distribution of EU’s funds for Central and East European States is important, but can only be a supplementary goal.

Finno-Ukrainian trade: increasing, but not at its full potential

A more stable foundation for closer cooperation between Finland and Ukraine is trade. According to Finpro, the trade balance between Finland and Ukraine has constantly increased since 1999, augmenting from 60 million euros to 200 million euros in 2004. Currently, paper products comprise 28% of all exports to Ukraine. In the coming years, the demand for Finnish paper products and relevant technologies will increase for two main reasons: the growing affluence of Ukrainian population and Kyiv’s desire to balance its dependence on Russian paper industry. In addition, Finland could substantially increase its exports to Ukraine in the sectors of e.g. woodwork and carpentry technologies, water purification technologies, wood industry products (cottages, furniture), fish industry technologies, and knowledge on municipal services, in particular water disposal.

As Finpro’s country profile shows, 45% of Finnish imports from Ukraine comprise iron and steal. However, Ukraine has new products to offer, namely fruits and famous Crimean wines, which have a quality and price level that will surprise Finnish customers. Also, if Ukraine succeeds in completing the oil pipeline from Brody to the Polish port of Gdansk, it will become an alternate energy transit country for the Baltic Sea region. The Crimea Peninsula, Carpathian mountains, and Kyiv, the cradle of “Orange revolution”, are very prospective tourist destinations. It is relevant that the new Ukrainian leadership is determined to ease the visa regime for EU citizens and eventually abandon it.

Curbing corruption is the number one objective

Obviously, granting the status of market economy and Ukraine’s eventual membership in the World Trade Organization (WTO) would decrease some of the risks typical for post-Soviet economies. The new Ukrainian leaders need to be encouraged to create more opportunities for small and medium size firms. Because SMEs previously had to function in a system based on bribes, corruption must now be fought and bureaucracy made more efficient. All in all, curbing corruption is one of the prerequisites for Ukraine’s integration into the EU zone. In this case, countries of the EU with positive anti-corruption records, such as Finland, could offer their assistance and expertise which would also pay off in the form of increased trade profits between Ukraine on the one hand, and Finland and the EU on the other.

PS. The Government of Ukraine has recently announced plans to abolish the system of customs fees collected on country borders. The Government of Ukraine is also determined to simplify the paperwork related to imports of products to Ukraine.