Doctor of Economy, Prof., Director of the National Institute of Strategic Studies, Adviser to the President of Ukraine

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The newest turn in the geopolitical strategy of Ukraine is characterized by the greater economic and political cooperation with the future new EU members, primarily countries of the Central Europe forming the so-called Baltic-Black Sea axis; it is considered a principle strategic vector of the nation. It would be a great simplification, if we tried to characterize the reasons for emergence of such a situation by exclusively consideration of the moment: the sudden and abrupt strengthening of the Central European (CE) countries' position that occurred during the Iraqi crisis or the decision of Ukraine to send a military brigade to the Polish sector of Iraq with a mission of post-war stabilization.

I do not deny the importance of what had happened, but actually issues in question are reasons more fundamental and concern the role the countries of the CE, especially Poland, are to play after finally joining the EU in realizing our highest priority-the European integration strategy of this country. One may predict circumstances, under which the future of our relations with the EU would greatly and, possibly, decisively depend on the extent of relations with the CU countries that are presumably to become the primary object of the EU policy. Ukraine will also become one of the targets of this policy, and, properly speaking, depending on our position in the above interaction, the correspondent measured assessment of situation is to be made. Essentially, there is such implication in the European Commission's declaration "The Expanded Europe Neighborhood: New Dimension of Our Relations with Eastern and Southern Neighbors" of March 2003 that largely adds up to the logic mentioned.

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The EU-plus Philosophy

First, about the so-called ambiguities of the EU expansion and possible negative effect of it for this country; this is reminded of from time to time, today too, by high- ranking officials. The experts of the National Institute of Strategic Studies do not share their opinion. On the contrary, we proceed from the assumption that the EU expansion opens new prospects for Ukraine and quite ponderable opportunities to enhance the policy of this country for European integration. As a result of the expansion, Ukraine will achieve the status of an immediate neighbor of the EU members, which would objectively increase the EU influence on this state, especially in the political sphere.

The matter in hand is the effect the EU would have in enhancement of democracy, human rights and freedoms, strengthening of media positions, and establishing basic principles of civil society.

It would be well to take into account also the geopolitical aspects of the EU expansion, and scrutinize the process against the backdrop of the Greater Europe realization and objective transformation from unipolar and multipolar worlds. The issue in question is the steps in the direction of buttressing geopolitical self- sufficiency of the EU, rebirth of Europe as avowed leader of the world civilization. The international community is interested to have exactly such vector of the civilization development, which logic of civilization transformation also meets the national interests of the USA. Only shortsighted leaders fail to understand this, while the events in Iraq merely aggravated the problem.

At the same time, the EU expansion within the parameters defined is not able to solve finally the issue of European self-sufficiency as well as to substantially strengthen the economic potential of the EU, which is not up to that of the Unites States at present. With appropriate expansion, the build-up of production equivalent to that of the present parameters of the GDP of the United States could be achieved. Experts agree, however, that during the immediate future the USA is capable to grow at even higher rate. This is also at the expense of the priorities of the scientific and technological progress, technical re-equipment in the military sphere, creation of a new ABM system, as well as access to major sources of raw materials on the planet. In such a context, the streamlined economy of Ukraine, as well as of other countries neighboring the EU, may be regarded as ponderable economic potential. Its phased integration into the economic system of the EU may function as critical mass having means to provide for changes in the geopolitical situation of Europe.

If the EU expansion is regarded from such a point, it becomes clear that there are sound preconditions for the Ukraine's intention to achieve full-membership in the organization. Reciprocal interests stipulate this process. The EU is equally interested to have Ukraine civilized and democratic, as Ukraine needs the EU, and such mutual interest is to grow with time. Time is required for the countries of Western Europe to comprehend this dependency. The main thing for us left in such a situation is to persistently prove to the

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world community this country's consistency in the course chosen, and in asserting democratic principles, supremacy of law and socially oriented market economy.

Concurrently, political self-restraint should be shown as well as understanding of the complexity of the EU expansion and realization of the fact that the process cannot be artificially speeded up. It took almost fifteen years for the countries of Central Europe that had appreciable advantages comparative to Ukraine at the start of the integration to affect complex system reforms, often unpopular, to approach the European standards. In addition to political will of the candidate countries' these reforms required also immense efforts of the entire society. The Ukrainian society have not raised itself to such a level of transformation; hence, time as well as hard and painstaking efforts are needed, and, primarily, political consolidation of the society.

Within the context outlined, the position of the European Commission concerning relations between the expanded EU and neighboring countries, including Ukraine, should not be regarded as a delimitation, raising of a new Berlin Wall or founding of the so-called "gray area". Actually, what is meant is the opposite, that is, formation of the idea of the Great Europe, an attempt to define economic and political grounds for a wider (compared with the EU) European integration zone. The issue in question is the creation in perspective of a common European economic space in accord with the principle of concentric circles of different degrees of integration, in which the neighboring countries would be seen as real functional subjects of formation and not as opposite poles.

With the said in mind, one may assert that the Great Europe is not a philosophy of separation. It is the "EU plus" ideology, that is, the EU plus the area of lesser integration, with Russia finding itself besides this and other countries. Such development is very favorable for Ukraine geopolitically, and against the backdrop of the above should be regarded the document adopted by the European Commission in March 2003. It deals not with the tooling of 'separating" the expanded EU from the neighboring countries; on the contrary, it attends to the mechanisms of active cooperation with the countries that are not members of the EU. As stated in the declaration of the European Commission, the aim of such a cooperation is to gain ''access to all to benefits of the EU without participating in its institutions", including "the common market, free trade, open investment treatment, approximation of laws, interrelation of the infrastructures, and the use of euro as reserve and basic currency in bilateral relations". "If the EU neighboring countries, " the correspondent document emphasized, "achieve real progress demonstrating common values and effective realization of political, economic and institutional reforms, including bringing their legislation in conformity with the EU norms, it will provide them with a chance of a closer economic integration with the EU". For that purpose, these countries may be proposed "the perspective of getting a share of the internal EU market, as well as prospects of further integration and liberalization to promote free movement of people, goods, services

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and capital (four freedoms)".

It is highly important that the European Commission document not only proclaims general principles of neighborly relations, but also provides for the mechanisms to realize them. What is referred to is the development by each of the EU neighboring country of the Plan of Actions that would include the goals, guiding lines, and schedules of performance. The Document reads that the annual examination of the achievements concerning the Plan of Actions would be a concrete manifestation of the enhanced political interest of the EU in realizing cooperation with the partner countries, and would allow the governments of the correspondent countries to get loans for carrying out political and economic reforms. Such a position of the EU outlines the European integration prospects for this country more clearly. It provides the structures of power and, primarily, the government of Ukraine with the ground to take a diverse approach to defining general logic of this country's actions in the context of the EU expansion than was expressed previously in official commentaries. Accents should be made not only on preventing correspondent risks, although the problem needs attending, but, primarily, on defining and making the most of the new possibilities that open before our country with the EU expansion.

The opportunity to define and realize the arranged mechanism of cooperation between the EU and Ukraine for the immediate and more distant future provided by the European Commission decision should be made good use of by the Ukrainian side. The experience gained by the countries of the first wave of European integration must be constructively absorbed with negative factors also taken into account in addition to the ones of positive nature and do the utmost to prevent mistakes made by the nations of Central Europe. We would rather not integrate into Europe in the role of a "younger brother", which classes we had already a chance to take, and must avoid. In this connection, putting off the realization by Ukraine of its ultimate goal of becoming a full-member of the EU for future that is more distant than planned is not to be seen as exclusively a failure. It is at the same time also a strategic perspective to carry out the system transformation that are to be implemented within correspondent period. What is meant is the following:

* First, the realization within a proper time period of the outpacing development strategy well-grounded in the President of Ukraine's Address, which is to secure the annual rate of growth no lower than 6 to 7 percent (that is, more that twice as that in general in the EU countries), thus substantially narrowing the gap of the GDP value per capita between Ukraine and the EU member-countries;

* Second, proficiency in control of the innovation model of restructuring and growth, which realization is to assure substantial strengthening of competitive ability of the Ukrainian economy and Ukraine to become firmly established as a high-tech power: the existing intellectual, scientific and technical potential gives grounds to reckon on this;

* Third, in the social sphere, the primary tasks should become task-oriented setting of reliable preconditions to catch up with the backlog in the level and quality of life with the countries of

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the EU, for the middle class-the basis of political stability and democratization of society-to gain a strong foothold, substantial cutting of population income differences and removing poverty;

* Fourth, completion during 2003 to 2004 of the necessary procedures that would contribute to positive decision concerning recognizing this country as the one with market economy and attaining WTO membership. Coping with the appropriate tasks would create preconditions for the establishing free trade area and Ukraine to become the EU associate member as stipulated by the Partnership and Cooperation Agreement (PCA) of 1998;

* Fifth, active accomplishment by Ukraine of the tasks of the so-called sectional integration. The matter in hand is the intensification of integration between this country and the EU in power engineering, as well as cooperation in developing transportation and communication networks, information and high-tech spheres; and

* Sixth, problems of adapting legislation of Ukraine, national judicial system, including legal standards and norms, judicial and administrative practice and law, to comply with the judicial and legislative establishment of the EU being the Government and Verkhovna Rada order of the day. Formation of the jural complex of the country is a lengthy social process organically linked with the changes in all the spheres of the country's life that cannot be artificially hastened. However, the most favored conditions should be made for it since the issue at question is one of the determinant prerequisites of the successful strategy of the Ukrainian European integration.

The United States-Poland-Ukraine Axis

Emphasis on special mission that the countries of Central Europe can play in realization of the European integration strategy of Ukraine made in the preliminary matter of this publication is predetermined by important objective fundamentals concerning several aspects. To begin with, the experts of our Institute pinpoint the problem of preserving with the EU joining of the specific identity of these countries that played quite a significant role in formation of the All-European values. Although being different in their special cultural inheritance, traditions, and mentality, they are very close to the correspondent worth of the Ukrainian people.

The notion "Central Europe" was leveled out because of the World War II. Professor T Kyiak points out: "Central Europe was compressed to the strip of the Berlin Wall. It is for this territory and its assimilation that the opposition was stirred up between the Soviet Union and Western Europe." The latest transformations in Europe radically changed the situation, however the problem of revival of specific identity of the Central European countries and their regional self-assertion failed to become less acute. From the angle of history, these problems are very much similar to the issues of European self-identification of the Ukrainian people, which at all stages of development had the most close ties primarily with the CE countries.

Alongside with the mentioned objective inducement for extending integration between countries of Central Europe and Ukraine there exists the

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adequacy for economic transformations. What is referred to is the need to get to grips with the model of innovative development and introduction on the basis the post- industrial production systems, restructuring of the agroindustrial complex, converting and adapting the economy to the needs of society, thus getting over the profound income differences of the population and providing for outpacing rates of growth.

Also to be taken into account was the fact that lagging of Ukraine behind the CE countries as to the per capita value of GDP calculated through the purchase power was not critical. In 2001 the figure for Ukraine was about 4,500 euro, while for 10 EU candidate-countries it made 10.7 thousand euro, including 7,750 for Latvia, 8,960 for Lithuania, 9,240 for Estonia, and 9,410 for Poland, with the second wave countries correspondingly 5,710 for Bulgaria, 5,560 for Romania, and 5,230 for Turkey. With the shady sector of economy taken into account, the figure for Ukraine is to be much higher. Also should be born in mind the higher rates of growth demonstrated by Ukraine during the recent three years from 2000 to 2003. If in the countries of the "ten" the annual rates of growth rarely exceeded 2.5 percent, amounting to 1.6 percent for Poland, 2.7 percent for Czech Republic, and 3.5 percent for Hungary, the correspondent figure for Ukraine came to 7.1 percent, making 7.3 percent during the first half of 2003. In addition, currency in Ukraine is more stable and lower the level of external debt; also positive balance of payments, and much lesser the budget deficit.

On top, takes effect the following fact: the potential of the countries of Central Europe to expand trade to the West is insignificant, being exhausted largely. Hence, the countries mentioned would try to exploit the potential capacity of the Ukrainian market, which is quite extensive. One can also predict stirring up of investments - transfer of a number of productions oriented for export from the territories of Czech Republic, Slovakia, Hungary and Poland to Ukrainian terrain, with an aim of using the country's competitive advantages, let alone evading tight regulatory pressure applied in the EU, (which is equally important). Hungary may serve an example, which tends to regard Ukraine as a foot in the door to penetrate markets of other post- Soviet states. In this context, it is of utmost importance to increase borderline cooperation between our countries.

These circumstances are responsible for the natural interest of the Central European countries in realization by Ukraine its strategy for European integration and their official (public) support of it. This sets up objective prerequisites for subregional integration to intensify at the Central European level with Ukrainian participation. Options are not excluded of making correspondent relations official and shape them institutionally in accord to the world practice.

While translating these processes into life, special importance gains the refining of the all-round strategic partnership of Ukraine with Poland. This country, having achieved radically new geopolitical status lately, is turning into one of the most significant partners of the United States, taking the role of a peculiar transatlantic integrator in Central and Eastern Europe. Today, Poland found

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itself in a provocative position: the war in Iraq elevated the country to the crest of the world politics wave, however its political and economic capabilities remain too inadequate to this level. This fact motivates objective interest not only of Ukrainian, but of the Polish side too, in extending all-round cooperation between our countries. The USA-Poland-Ukraine pack must be employed for the Ukraine's approaching Europe the most efficiently. There is a real possibility for this team to become even close-knit, turning into a stable interdependency of geostrategic importance, which fact is to be taken into account by the Ukrainian diplomatists.

In this context, mutual cooperation of the Ukrainian and Polish sides in realizing the oil transporting corridor Odesa-Brody and further extended to Gdansk, seen by the political analysts as highly promising project of European economy of the immediate decade, acquired principal importance. After Poland gained access to the Iraqi oilfields, geostrategic significance of this oil pipeline grew substantially. The case in point is not exclusively prospects of transporting Caspian oil, but also of the one originating in the Middle East region with a special role here of the broadening of economic cooperation of Ukraine with Turkey. Substantial rapprochement of interests of both countries that occurred recently as well as common aspiration for European integration are setting ponderable preconditions for the Turkish side to join the project too. In general, multidirectional integration of Ukraine into the All-European oil transportation system could become a decisive factor of bilateral interest in speeding up European integration of Ukraine.

Under the new situation, the ambitious position of Ukraine towards appreciable enhancing of the GUUAM position and intensification of interaction with countries of Central Asia and Caucasus achieves special significance, especially regarding the extension of international transport and communication lines, and development of hydrocarbon deposits of the Caspian Basin. The extension of the appropriate cooperation corresponds fully to the interests of the EU, with Ukraine in solving these or other issues capable of becoming an important link between the East and West.

The Steps Towards NATO

It is within the context of implementing practically European integration that one should consider essential activity of the Ukrainian foreign policy set in motion on the euro-Atlantic course, the clear-cut directing it at streamlining the country's military potential to comply with European standards, as well as at full-scale euro-Atlantic integration. The case in question is one of the driving elements of this country's state policy that concerns in addition to the prospects of our external security also the philosophy of our future existence. Joining the WTO on the one hand, and our activity as to the NATO full membership on the other hand are two the most worked over items related to asserting the European strategy of this nation.

Reinforcing the leadership of the Ministry of Defense is a confirmation to such a conclusion. What is being done by

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Ukraine concerning the issues mentioned serves as proof of the new quality of integration; its transfer from the purely political substantiation to practical decisions.

The political decision concerning prospects of obtaining by Ukraine full NATO membership became a turning point in relations of this country with the Alliance. This momentous decision reflects deep comprehension of the fact that not only Ukraine's NATO membership alone, but also the process of respective integration itself would be contributive to solving a number of important strategic objectives of this country, namely:

* To guarantee protection of the national security and sovereignty of Ukraine;

* To realize more fully the available scientific and technical potential of this country and to draw it into high-tech military industrial complex development;

* To provide for the present-day organization of the Ukrainian state borders;

* To secure positive reconstruction of the Ukrainian society, strengthening of democracy, and asserting supremacy of law and human rights protection; and

* To enhance international image of the country, its active involvement in the geopolitical process of providing all-European and collective security and strengthening stability in the East European and Black Sea regions.

With all these factors in mind, the euro-Atlantic integration is considered by the political leadership of the country a key sequence of the strategy to realize the goal of the highest order-the tasks of the European integration, rather than an intermediate stage of it. In this context, the experience gained by the countries of Central Europe is also taken into account since it is known well that the road of these nations to the EU went through prior obtaining NATO membership.

Relations with Russia and the CIS Countries

Ukraine is interested in developing multilateral economic cooperation with the CIS countries. Here, the positive role is to be played by implementation of accords reached during the quadripartite meeting of presidents of Belarus, Kazakhstan, Russia, and Ukraine held February 22 to 23 in Moscow. Deepening of regional cooperation corresponds fully to the principles of the EU, which are based on comprehending the fact that only through cooperation and partnership with its neighbors each country taken separately is capable to realize its potential with national interests guaranteed.

European orientation of this new interstate formation is not contrary to Ukrainian interests. Increasing integration between respective states contributes to the area of stable development and high rate of economic growth being established the eastern part of the European continent. If during the previous decade reaching the annual rates of growth of 3 to 3.5 percent by the countries of the West was seen as "economic miracle", the first decade of the new millennium may witness a real "economic miracle" of correspondent

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GDP growth rate of 6 to 7 percent within the new integrated association.

Active position of the Ukrainian President is in full conformity with the integration course on issues that concern our relations with the Russian Federation and bringing them out to the level of genuine strategic partnership. The European community is objectively interested in such a development, including also mutual coordination of the policies of European integration of our countries. The reference is to one of the important factors of expanding in the European region of the stability area, which establishment is one of the deciding priorities of the EU.

Especially promising in this respect is our constructive cooperation with Kazakhstan, being independently interested in the European vector of the new regional formation and intending to approach Europe through the 'foursome'. Ukraine may play the role of a link here.

Concurrently, the strategy of regional policy of Ukraine and logic of our economic relations with the CIS countries should be seen as a subordinate relative the course for Ukraine's European integration. It is one of the basic clauses of the 'European Choice" document that is not subject to be called into question. Russia is a great country that plays an increasing role in European politics with Europe being concerned in expanding links with Russia. Likewise Ukraine, Russia is eager to integrate into the common European economic space, but there are differences of principal character. Russia does not raise the question of its membership in the EU. Instead, it claims for the status of independent integration center on the Eurasian expanses. The strategy titled "Europe of Two Empires" means active interaction between EU's Europe and another European integrating formation - Eurasian or post-Soviet Europe with Russia at the head.

In this situation, Ukraine should be very consistent in defining mechanisms of its taking part in integration of the post-Soviet space. Optimal is our cooperation in creating free trade area, however, actual complexities of the task should be kept in mind as well as nil result of the attempts to solve it previously. The complexities mentioned are connected with external circumstances: during the years of independence natural distancing of the national interests, economic ones included, occurred among the respective states, which adjustment by restoring former economic ties is virtually impossible. In this situation the free trade area declared by the leaders of four countries may realized exclusively on the basis of the WTO principles generally accepted in the world practice that guarantee equal competitive chances for participant-countries and their international legal protection.

The free trade are thus created on WTO principles would contribute to the settlement of another basic task of European integration course not only of Ukraine, but other regional integration participant-countries too: the joining of the common European economic space. This issue is becoming increasingly urgent. The European Commission by its decision on partnership relations confirmed that such a perspective is a reality.

With the existing differences concerning this problem considered, the clause as to the simultaneous obtaining

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WTO membership by the respective countries is not constructive for this country. Ukraine has advanced considerably on this issue. The bilateral protocol on reciprocal access to markets of goods and services signed between Ukraine and the EU in Brussels recently is an important step in the proper direction. Hence, we have no right to artificially restrain the process.

At the background of strategic priorities of Ukraine, other fundamental contradictions must be also taken into consideration. For Ukraine that had made important steps to adapt its legislation in force to the one of the EU, harmonization of legislation with the respective CIS countries is impossible. It would be backing off from Europe, the road for Ukraine taken to integrate into the Eurasian domain.

Realization of the idea to create joint customs union and the impending use of Russian ruble as a common unit for settlements within the new regional formation would also prop up the retreat. One must be aware of the fact that the extent of indicated integration so ardently upheld by the Russian side exceeds the limits of purely economic cooperation. Its realization stipulates the necessity of political (as well as military) integration of the four countries. In this case, what is actually intended is the molding of functionally independent integrating association-the extended reproduction of the EurAsEU, which structural joining Ukraine always treated with well-founded caution. Participation in the respective structures would in fact mean conversion of the strategic paradigm of this nation that cannot but provoke strong objections. To prevent such a development the following principle should be adhered to: setting up of a free trade area based on the WTO standards is the limit our relations within the four countries could go, exceeding which we have no right to.

The economic reasons of the appropriate objection should be seen clearly without exaggeration of the potentials of the northeastern vector of this country's economic interests. During the Soviet period, the Ukrainian economy never existed as an integral self-sufficient system. Only 17.9 percent of the output of its own were put to use on the Ukrainian market. Similar situation existed in regards of the other CIS countries. It should be also kept in mind that each of the respective countries craved to break loose from the grips of the former empire, to get over the crisis and set market mechanism in motion singly. In the upshot, different economic structures had formed along with foreign economic interests and priorities of one's own. In 1996, 47.6 percent of Ukrainian export went to the CIS countries, and 35.9 percent of it was absorbed by Russia. In 2002, it amounts correspondingly to 23.4 and 17.1 percent. Instead, this country's export to the EU member - and candidate-states for the same period rose from 23.9 to 40.8 percent, and exceeds presently the good sold to Russia with the trend continuing along the first half of the current year. The value of direct investments here from the EU countries came to 1.5 billion U. S. dollars, or 34.4 percent of the total amount of foreign investments in Ukraine, however the stake from Russia to Ukraine fail to exceed 6 percent in it. The narrowing of this direction of the foreign economic relation is an objective process, being simultaneously a good sign of positive change that the Ukrainian economy endures while

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increasing its competitiveness.

It is well known that Ukraine must always be on the go on economic courses in all directions, including the eastern one too, and apply for this all the possible instruments. In such a frame of reference, this country's WTO membership, and setting up of a free trade area with more favorable climate for economic ties with the CIS countries must be seen as a sign not of weakness, but of strong Ukrainian position. This country does everything it can to make good use of the existing opportunities. Here lies the immediate interest of its producers and of the entire real economy.

The formation of the Integrated Economic Space in accord with the declaration of the leaders of the four countries cannot deny Ukraine's participation in other subregional (over-the-border) foundations, in particular, the GUUAM and the Black Sea Union. In the newly created situation, special significance gains the initiative position of Ukraine concerning the stepping up of interaction with countries of Central Asia and Caucasus, especially in building up of international transport and communication lines, and development of hydrocarbon deposits of the Caspian basin.

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The expansion of the EU within already defined frames, that is joining the EU first by ten, then by two and later on by one country more, leaves Ukraine with two alternative options. On the one hand, it is the setting up of the final demarcation border between the EU and neighboring countries (the post-Soviet Europe, to put it differently). This situation will force Ukraine to press for integration along the eastward course. The other alternative is the active and consistent policy towards European integration, which stresses the realization of the "European Choice" Strategy laid out in the President of Ukraine's Address and tasks of internal transformations and establishing democratic principles in the state. Each concrete step in the proper direction would be contributive to better international prestige of this country, and, therefore, its European appeal.

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