Serhiy Fomin, Candidate of Economy, senior researcher at the Institute of World Economy and International Relations of the NAS of Ukraine.

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At present, one of the most important problems of the EU is the increase in the EU member states. At the session of the European Council in Lycene (December, 2001) for the first time it was officially declared that 10 candidate countries (Poland, Hungary, the Czech Republic, Slovak Republic, Slovenia, Estonia, Latvia, Lithuania, Cyprus and Malta) late in 2002 should complete the negotiations as regards the accession to the EU in order that in 2004 they will take part in the election to the European Parliament by rights of the full-fledged members. The European Council having expressed itself for the EU expansion in the format of 10 countries at the same time notified Bulgaria and Romania that it is expecting intensification of their efforts on the road to the accession to the EU. Moreover, the Commission will prepare the program of more active involvement of these two Balkan countries in the EU expansion process. At the same time it was stated that all the candidate countries should continue the institutional and administrative reforms aimed at adaptation of national legislations to the EU legislation.

On the whole, candidate countries welcomed the resolutions of the Lycene summit. Only the representatives of Bulgaria and Rumania stated that delaying in time of their countries' joining the EU was not justified and, in their opinion, the real accession is already possible for Bulgaria in 2004 and for Rumania in 2005-2006. The Commission did not comment these statements though previously it was indicated: the EU membership of these countries is possible not earlier than in 2006 - 2008. Cyprus is undoubted leader in the negotiations as to the accession to the EU, which has

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completed the discussions of 27 articles out of 31 articles aqui communautaire. Among them are such complicated questions as agriculture, regional and budgetary policy, free movement of goods, services, capitals, people, fishing, membership in economic and currency unions, power engineering, transport policy, social policy and employment, environment protection, cooperation in the field of culture, education, statistics, etc.

The EU expansion to the East takes place under conditions when even within the limits of already existing political, economic and currency unions the common transport market has not been yet created and considerable contradictions have not been removed in all branches of economic activity of member states, which prevent from creation of the common economic space and reduce general potentialities of the EU enlargement. So, in spite of some increase in employment and reduction of unemployment, the required labor market mobility has not been achieved. In some countries this market is totally narrow, in other - the unemployment is not uniformly distributed by regions, in the third - there is a significant structural unemployment. Besides, in 2001 the taxation and pensionable system reform slowed down in all countries. The functioning of the common internal market of goods and services is being delayed by the fact that some countries, as previously, apply the measures of state control over the extent of market openness in separate sectors of the economy. In this case, 30% of the violations of the EU legislation on the common market fall to France and Italy.

The state economic assistance to the enterprises in the EU was reduced on the average from 1.4% of GDP in 1995-1997 to 1.2% in 1997-1999. But in such countries as Belgium, Germany, France, Finland, Spain, Luxembourg and Portugal it is still rather high. A great attention is paid to the development of the financial market. In May 1999 the Action Plan was adopted in the sphere of financial services up to 2005, which includes measures aimed at unification of the markets of member states. As regards functioning of euro then there are achievements and shortcomings in this field. The national stabilization programs and convergence programs of Belgium, Netherlands, Luxembourg, Austria, Finland, Greece, Spain, Ireland, Denmark, Sweden and Great Britain were adopted without serious amendments since in 2002- 2005 all of these countries have the intention to reduce the state budget to zero or positive balance. The situation in Germany and Portugal is worse to a considerable extent, the state budget deficit in these countries approached to 3% (of GNP volume) indicator. The Commission also criticized France and Italy for the fact that in the mid- term prospects they will not manage to balance between revenue and expenditure flows of the state though the expected deficit in both countries will be noticeably below 3% of GDP. Great Britain, Denmark and Sweden still remain outside the European currency union (that is, they do not introduce euro).

In addition, on account of the distinct economic structure and levels of development member countries differently respond to the external economic impacts (i. e. impacts outside the EU). In such cases, as a rule, the national governments previously realized their own independent monetary-financial policy, price policy, etc. After introduction of euro they have no such instruments. The common currency may function in full value only in the common state but not in the union of the sovereign states which is the EU. It is explained by the fact that any currency system functioning depends not only on the activity of the bank making emission but also on a lot of other factors of economic, political and social character.

The distinctions existing between the EU member countries (taking into consideration the future new members as well) in the field of productivity and labor pay, level of economic and technical development, social security, unemployment level, etc. under conditions of the common currency, in some experts'

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opinion, will only aggravate contradictions, will lead to the increase in uncontrolled migration, finally, may give the opposite result than was expected on the eve of euro introduction. In order to do the task set - to achieve "a full employment" up to 2010, the EU should create 20 m of new jobs, 11 m of which are intended for women and 5 m for aged staff. In this case it should be taken into account that in 2004 the unemployment problem will be aggravated after the EU enlargement. In Bulgaria, Poland and Slovak Republic its level makes up 18%. All the candidate countries require the reformation of their social systems and real assistance on the part of the European Social Fund (ESF), Regions' Support Fund and PHARE program.

Though some of the candidate countries demonstrate the high rates of growth, on the whole their overage GDP per capita in 2000 made up 35.2% of the respective indicator in the EU. Therefore for the candidate countries it is recommended to implement economic policy aimed at the achievement of the convergence with the present composition of the EU and "viable market economy", which is ready to withstand "a competitive pressure" on the internal market of the EU. The decision on the EU enlargement was rather political, adopted regardless of the concrete economic realities, since from economic standpoint the majority of the candidate countries do not meet the standards of the accession to the EU established by the Union members themselves.

Such an approach was demonstrated, for example, with respect to the Baltic States, they are promised to be already admitted to the EU in 2004. Political and strategic directness of the Baltic States' incorporation into the EU (and it is also quite evidently - into NATO) is self-evident (meaning opposition to Russia). Estonia and Latvia while conducting the policy of discrimination as to the Russian speaking population, depriving of its civic rights, in addition, these countries do not observe one of the Copenhagen criteria of the accession to the EU - to respect the principles of democracy, human and national minorities' civic rights. But this by no means influences the EU decision to admit these countries to this organization, it testifies to the double moral standards.

Undoubtedly, the meeting of the Heads of States of the EU countries held in Lycene, is of a historic importance. The adoption of the Lycene declaration on the future of the EU has become its main result. Recognizing a great of European integration, the European Council, however, considers that at the present time the EU is at the cross- roads. In order to move along, the EU should give an adequate answer the two challenges. The first of them is globalization of the contemporary world in which the integrated Europe should play an important role. The second one is the distance of the Union from the common people. The European Council raised a question of the possibility of reorganization of the four main treaties which are difficult for the public to comprehend.

Is not it expedient to adopt the Constitution of the European citizens in the long-term outlook? This and other issues were submitted for the discussion at a special Convention consisted of the two members of the European Commission, by one representative from each member states, 30 representatives of national parliaments and 16 members of the European Parliament.

The Convention will also hear the opinions of "social partners" and regions of the EU. NGOs, businessmen, scientists and other representatives of the civil society will have the opportunity to express opinions within the framework of a special forum. Thus, unlike the past, a regular revision of the main treaties will be prepared not only by the officials but also by the representatives of broad strata of the public. Though formally the Convention's recommendations will not have the binding effect namely they will determine the range of the decisions which should be taken by the EU. The Convention's operation is guided by

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the presidium consisted of 12 members. Exceptionally great role is played by the chairman of the Convention and his two deputies. The European Council appointed to these positions the former President of France Valery Giscard d'Estaing, the former Prime Minister of Italy Juliano Amato and the former Prime Minister of Belgium Jan- Luke Deen. On February 28, 2002 in Brussels the Convention inauguration session was held.

At the session in Lycene the progress was achieved in some other fields. The important step forward was made in the development of common foreign and security policy.

It should be noted that the European Parliament gradually acquires greater importance in the EU institutional system. If previously the deputies were united by belonging to the right or left spectrum then now the members of the European Parliament start to be divided into supporters and opponents of speeding of the federalist model of integration. In the course of the intermediate rounds of the vote, the deputies of separate countries and parties adopted a position which violated the group discipline of the relevant factions. The supporters of close integration, acting under the slogan "more Europe", propose to strengthen the role of the EU in such spheres as regulation of transport and communications systems, liberalization of power market, integration of financial markets, employment policy.

Economic consequences of accession to the EU for the countries of Central Europe

The practice indicated that the agreements on association (including the creation of a free trade area) concluded between the EU and Central European states, led to an increase in the EU exports to the countries of Central Europe. However, the exports to the Western Europe were curbed. Under the pressure of Western states the countries of Central Europe abolished subsidies for their industries and agriculture, liberalized foreign trade regime. On their markets a dominant position is occupied by the commodities (especially it concerns agricultural and food products) from the EU countries. Due to the glut of EU commodities on domestic markets in the Central Europe, their national production idled, in a number of branches of industry and agriculture the volume of output diminished, and the unemployment increased.

As is well known, Austria, Germany, France, other countries of the EU through the state banks support their inefficient enterprises with too many excess jobs, subsidize own agriculture. The accession of Central European countries to the EU will lead to stricter regulation of their production under the competition rules of the EU and to use more severe technical standards and consumer's protection norms.

On January 30, 2002 the European Commission submitted a financial program of the EU enlargement. This plan, which envisages to provide assistance in the sector of agriculture and regional policy, was worked out as a result of arduous debates of the Commission with some countries of the EU and many of the candidate countries. According to this program the EU allocates to the candidate countries about 28bn euros in the period of time from 2004 to 2006 (but not from 2002, as it was planned previously). On the whole it is €6.5bn less than it was promised at the Berlin Summit in 1999. Among other articles the Commission paid special attention to nuclear security guarantees. Under this article from 2004 to 2006 the Slovak Republic will obtain €60m, Lithuania - 181m.

In accordance with this plan, it is very essentially, the EU introduces ten-year transition period (up to 2013) for the new member countries until they will be able to obtain direct and full-fledged assistance from the funds of a Common agricultural policy. In 2004 direct payments to the candidate countries aimed at agrarian sector reforms will amount to 25% of the norm, established for the present member states (approximately €3.3bn), in 2005 - 30%, in 2006 - 35%. A balanced growth of

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these payments will be started from 2007 and from 2013 the new member countries will already obtain 100%. In the course of the negotiations Poland and EU reached a consensus on the problem of agricultural land sale to foreign citizens. As is well known, the Polish legislation prohibits such sale. So, the agreement was approved under which the citizens of other countries of the EU will have the right to purchase Polish land suitable for cultivation, only in 12 years after Poland's admission to the EU.

Poland, the Czech Republic and Hungary gave a negative assessment of the proposed program. In their opinion, a delay in the payments will give rise to acute problems during liberalization of trade in agricultural commodities. The candidate countries insist on hundred per cent financing of this branch from the EU funds already in 2007 and on the same principles with long standing member countries. but Germany, Netherlands, Austria, Great Britain and Sweden consider that the candidate countries will simply not be able to put into operation the enormous, in their opinion, appropriations which the Commission allocates for agriculture and regional policy of the EU.

Since the new members will be deprived of privileges in the branch of agriculture which have "the old" member countries of the EU, then the fundamental principle of the common market, under which every participant should observe one and the same rules will be violated in the EU. It is easy to foresee that as compared with "the old" members, a small volume of compensatory payments in order to support the agriculture of the countries of Central and Eastern Europe will place the local villagers at a disadvantage in comparison with the farmers of Western European countries. Abolition of the tariff and non-tariff barriers to import from the Western member countries of the EU will lead to bankruptcy of many national agricultural producers in the countries of Central and Eastern Europe. Since they will not be able to withstand competition on the part of the western farmers (as before, a generous financial support on the part of the EU will be rendered to them).

On the whole, the free movement of goods and capitals within the framework of the EU will sharply aggravate the competition on the national markets of the new members from the number of the countries of Central and Eastern Europe which may result in the closure of a great number of enterprises, aggravation of unemployment and migration of skilled workers and specialists to more developed countries. The new members should "pull up" their social indicators to the level of other partners, that may be done at the expense of unpopular measures of strict economy. Naturally, the new members reckon on the support on the part of the EU, in particular, on appropriations from its structural funds. For example, in 1993 for the poorest member countries of the EU, among them are Greece, Portugal and Ireland, a special "solidarity fund" was established. Certainly, these countries justly fear that the new members of the EU will compete with them as regards the allocation of means from this fund and structural funds. At the same time, leading countries of the EU and, in particular, Germany, which are the main donor countries, would like to some extent to cut their dues.

For same candidate countries the future membership in the EU will lead to the reduction in their relations with the CIS countries. Thus, for instance, for Poland from the geographic and historic points of view economic ties with Ukraine, Russia and Belarus are more important than ties, say, with such members of the EU as Spain or Portugal. But Poland's accession to the EU will inevitably cut its trade with Eastern neighbors and will result in losses which will be difficult to compensate at the expense of the trade development with other members of the EU. In its turn, the EU enlargement may have the negative consequences for Ukraine, Russia and Belarus, in particular, to complicate the access of their goods to neighboring countries - Poland, Slovak Republic, Hungary and Romania.

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Euroscepticism in the candidate countries

The nearer admission time the more and more unambiguous is the attitude to it on the part of the public and some political parties in the candidate countries. The times have gone when a general euphoria as to the prospects of the EU membership dominated in these countries. At present, the carriers of public opinion in Central European states may be conditionally divided into "Europhils" which see, first of all, the positive aspects in the accession to the EU, and "Eurosceptics" for which the negative sides of the EU membership predominate over the positive ones. In addition to it, "Eurosceptics" do not belong to some marginalia. In Poland their circle includes a great part of Roman Catholic clergy and political parties of Christian-national trend. In Czech Republic - the Republican and the Communist parties as well as Democratic civil party, headed by the former Prime-Minister, and at present the Chairman of the Parliament Vatslav Klaus. What is the danger of the accession to the EU, in the opinion of "Eurosceptics"? Their following arguments may be noted:

a) The admission to the EU will lead to the deprivation of national sovereignty, spiritual and cultural identity of the country.

In Poland a majority of the clergy headed by Cardinal Glemp shares such views. Only in recent years the Polish church attitude to the EU was changed to some extent: at present, the church does not openly oppose and even with certain reservations supports Poland's admission to the EU. The main merit in this aspect belongs to the Pope who in the course of his visit to Poland in 1999 proclaimed that "the papal throne supports Poland's integration into the EU". At the same time he pointed out a compulsory condition of such integration. In his opinion, "the unity of Europe is impossible without a spiritual unity". The spiritual unity may be provided only on the basis of the Christian values. The Pope states "the crisis of the Christian self- consciousness" in Europe and calls for the "new evangelization" of European countries. One of the most radical opponents of Poland's membership in the EU is a leader of Roman Catholic broadcasting station "Radio Marija" (the audience is over 6 million) the clergyman T. Rydzyk, who openly declares that "today's unification of Europe takes place not in the spirit of Christianity but in the spirit of liberalism and freemasonry".

b) Central European states' accession to the EU will result in extremely negative consequences for their economies, economic dependence.

During the the establishment of free trade areas in the EU, the countries of Central Europe under pressure of the EU, as it was already said, abolished state subsidies for their industries and agriculture, liberalized a foreign trade regime. Owing to this fact, a lot of their enterprises do not withstand competition of imports from the EU countries and are being closed down. These countries' admission to the EU will lead to further aggravation of competition and unemployment growth. According to forecasting of the Polish economist P. Albinsky, then in Poland about 3 million peoples engaged or associated with agriculture will their jobs or means of subsistence, as well as more than 100.000 miners and 40.000 metallurgists. But the new members of the EU will have the lower status than "the old" members. Besides, the EU considers premature to spread on the new members the right of free movement of manpower. Austria and Germany adopt a high profile on this issue, having intentions to impose a moratorium on labor immigration for a term of 7 years. Naturally, it is "the cold shower-bath" for millions of Poles, Hungarians, Slovaks, Czechs who planned to look for the better paid jobs namely in neighboring Germany and Australia after admission of their countries to the EU. So, the professor P. Yaroshynsky, the leader of the Party "Rodzina Polska" ascertained with bitterness: "the EU membership means that not Poland admits to

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the Eurounion, but the Eurounion admits to Poland, that will lead to sale or liquidation of our plants and factories, the influx of cheap subsidized goods from the countries of the West, and, respectively, to elimination of our industry. Such will be the results of the Eurounion's admission to Poland". One of the leaders of Polish Christian-National Union M. Pylka considers that socio-economic model, introduced in the EU, is inefficient, fatal to Poland.

c) "The EU expansion to the East" is being initiated mainly by Germany and is today's variant of an old German anti-Slavic policy "Drang nah Osten".

The main investors in the countries of Central Europe are German companies supported by the government of Germany. The Baltic countries' admission to the EU is also being accelerated by Germany. The Czech "Eurosceptics" see Germany's role in the EU in a similar way. In particular, P. Shwets notes that Germany has the greatest influence in the EU and may use it at its discretion. M. Bednar asserts that the expansion to the East means granting the Central European countries the status of the second-class membership. According to public opinion polls: if in 1995 more than 80% of the Czech population approved the country's accession to the EU then in June 2001 it was less than 50%. (Osteuropa, ! 10, 2001, SS. A318-325).

d) The EU will not bear a load after expansion up to 27 members which fundamentally differ from each other in economic, social and even in cultural and civilized plan, and will be transformed into extremely inefficient, unguided organization.

In this connect one may refer to Margaret Thatcher's book "Ability to guide the state". Thatcher regards the EU as the organization that does not subject to any reforms. In her opinion, the Great Britain should accede to the North American Free Trade Area which includes the USA, Canada and Mexico, in practice it would mean the Great Britain's withdrawal from the EU. Thatcher pessimistically considers the prospects of the Eurounion. She regards that "this structure will break down owing to an absence of the common interests".

It seems that the arguments of "Eurosceptics" may be useful to get sober a part of the Ukrainian political elite endowing the EU with all the possible and impossible merits proclaimed "the entry into Europe" nearly an objective of the very existence of the Ukrainian state, in essence, its national idea.

Prospects of Ukraine's inclusion in the European integration

As is well known, the accession to the EU as a full-fledged member Ukraine regards as its strategic goal. In the near future Ukraine will attempt to conclude an agreement on free trade with the EU and to obtain from the union a status of the associate member. But the consideration of the issue as to negotiations aimed at the establishment of free trade area between the EU and Ukraine has not been put on the agenda yet and has been postponed to the future time. At the Copenhagen summit held in June 2002 Ukraine was not included in the list of countries which are regarded as the candidates for the accession to the EU.

There is an opinion that Ukraine's chances on the accession to the EU will be considerably increased if Ukraine becomes the member of the WTO. In essence, the WTO principles coincide with legal criteria required for the membership in the EU. Therefore, Ukraine's accession to the WTO, as some researchers consider, will mean the liberalization of the trade regime between Ukraine and the EU and will make it possible to start organizational work on the conclusion of the agreement on free prospects - the agreement on the associate membership of Ukraine in the EU.

But the issue of the EU membership of Ukraine may hardly be solved by means of simple joining the WTO. A lot of other factors, and not only factors of economic, but also demographic and civilizational character

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prevent Ukraine's accession to the EU. Thus, for example, the further chances of Ukraine's admission to the EU were stipulated by the fact that Ukraine as distinct from the majority of the countries of Central Europe with its numerous population cannot be so rapidly integrated into the EU as small Central European countries. The status of the associate membership, for which Ukraine is striving i. e. the conclusion of the treaty with the EU on association, similar to that which already have the countries of Central Europe, and the establishment of free trade area in the likeness of those which at present exist between Central European countries and the EU, does not give the guarantees for the admission to the EU, on the rights of a new member state. As is well known, Turkey has the status of the EU associate membership from 1964, it was given the status of the candidate for the EU members, concluded a customs union with it, but the question of the beginning of negotiations with the EU on its full- fledged membership has not been solved yet, this fact may be explained by some fear which feel the European countries as regards the EU possibility to integrate Turkey with its great demographic potential and Islamic culture. The same is about Ukraine.

Though Ukraine declares its affiliation to the European civilization, identifies itself as the European state, however, for the majority of the western Europeans it (despite all official declarations) remains a part of Eurasia which joining the EU may lead to the negative consequences. Moreover, Ukraine lags behind the leading countries of the West and new industrial countries including Turkey, concerning the development of branches of science and engineering, industry, on the main social indicators, etc. It is quite obvious that economically and technologically backward country cannot so far rely on the EU membership. In the near future, under conditions of the achievement of high social indicators, it seems that the maximum which Ukraine may rely on it is not the EU membership but some form of associate relations with the EU within the framework of the Euroland.

It should be added that its aspiration to join the EU Ukraine, as the majority of the countries, relates to the image of the EU which presently exists: i. e. as sufficiently efficient organization which was able to increase the level of economic development of all the member countries. But what will happen with the EU after joining the present 12 relatively underdeveloped candidates countries? Does not lead this "the EU expansion to the East", which is now being realized mainly on political consideration, to the real economic decline, organizational collapse and anarchy within the framework of this organization, especially in connection with the possible Turkey's accession to the EU with its great labor resources, migration of which to the European countries in this case is inevitable.

Interrelations between Ukraine and Russia as well as with other CIS countries in the light of the EU expansion

The orientation towards Ukraine's accession to the EU prevents to develop integrational relations within the framework of the CIS, in particular, with Russia. It is quite evident that it is impossible at the same time to be in economic union with Russia or in Eurasian Economic Community (EurAsEC), on the one hand, and in the EU, on the other. Therefore, being afraid that integration within the framework of the CIS may constitute an obstacle on the road to the EU, Ukraine renounces any from of integration with Russia and other countries of the CIS which is higher than the establishment of free trade area.

The EU - is a political and monetary-economic union, which naturally contains the customs union. Not in the last turn, Ukraine refuses to enter EurAsEU not because the Ukrainian politicians do not like such form of cooperation as customs union but because they want to see Ukraine in quite another customs, military-political and monetary-economic union, namely - in the EU. Just that

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is why, in order not to stand in the way of hypothetical prospects of the accession in the indefinite future to the EU, Ukraine does not want to be bound by any integration agreements with its eastern neighboring countries. At least, such an impression is being formed. There are very few of us who can remember that formally Ukraine is not even the member of the CIS, since it did not sign the CIS Charter and the Minsk Convention on Iterparliamentary Assembly of participating states, though it takes part in the activity of these organizations.

In contrast to Ukraine which made its "European choice", the EU did not drop a hint to understand that it also made its appropriate "Ukrainian choice". For example, the head of the department of cooperation with Ukraine, of Friedrich Ebert Fund Schneider-Deters notes that "between the EU and Ukraine there is not a single coincidence of views as to development of their relations in the long-term prospects. A full-fledged membership in the EU is an officially declared goal of the present Ukrainian government, whereas the EU considers Ukraine as one of "the partners", but not "a potentional member" (Osteurope, ! 6, 2001, S. 719). The same view takes Reinhard Betzuge, a permanent representative of Germany to the Organization for Security and Cooperation in Europe, who: "For the EU the associate or even full- fledged membership of Ukraine in the EU does not put on the agenda".

Moreover, at present 19 countries are applying for the EU which already have the treaties on association with the EU (including here not only Central European but also Turkey and the Balkans countries), then it is logically to assume that Ukraine which has no similar agreements, took the place in the end of the turn, that may last not for one decade. And what may give the associate membership even if Ukraine would obtain it in 2007? The agreement on the association contains the provision on the establishment of free trade area with the EU. But at present do the Ukrainian enterprises withstand a competition with the goods of the EU countries which without any restrictions will flood the domestic Ukrainian market?

Certain Ukrainian politicians aspire to join the EurAsEC. This community was created on the basis of the already existing Customs Union which is currently is being developed namely in the direction of the creation of the common market. Naturally, by virtue of its "European choice" Ukraine can not enter it, being limited by the observer status. Ukraine's goal is without making any commitments which are proceeding from the membership in the EurAsEC (and which would prevent Ukraine's advancement to the membership in the EU) to achieve its regime of free trade with Russia and other members of the Community i. e. duty-free and without any restrictions to sell is goods on the Russian and Eurasian markets, in this case obtaining power resources from Russia without export duties and VAT, at prices being used in settlements between the members of the Community or (it is better) at internal Russian prices, at which Belarus as member of the Belarus-Russia Union obtains gas and oil.

So, the impression is being formed that the area of a free trade with Russia and other members of the EurAsEC is required for Ukraine as some provisional assistance to overcome the current economic difficulties, as "the leverage" for the preparation to the membership in the EU. It is natural that not only a full-fledged but even associate membership in the EU, in essence, is inconsistent with participation in the area of free trade with Russia and other countries of the EurAsEC and CIS. As is well known, the associate membership means the availability of the area of free trade with the EU. But will it be possible for Ukraine a full-fledged, without commodity exemptions, simultaneous stay in two areas of free trade - with the EU and with Russia?

Whereas the leading Ukrainian politicians constantly reiterate to their colleagues in the CIS that the tasks of the CIS or the EurAsEC should be exceptionally economic cooperation without any political and military aspects,

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that the economy and policy should not be interrelated, as regards the EU they agree to such interrelation. Ukraine's decision to solicit for a full-fledged membership in NATO, undoubtedly, is related to the hope that such membership may speed up its accession to the EU. In this way, in international economic relations underdeveloped countries in the exchange of those economic benefits and assistance which they obtain from the richer and developed countries, pay at least by their political and military- strategic loyalty. In other words, the economic integration is impossible without close political and military cooperation, without coordination of foreign policy as regards the third countries.

The recent granting of the status of the market economy country for Russia on the part of the USA (it will mitigate the access of Russian goods to the markets of the USA), the EU promise to grant the same status for Russia in the short term; all this has become possible only due to political rapprochement between Russia and the West, which is vitally interested in Russian energy carriers. According to the data of the Russian economists, the establishment of the free trade area without any commodity withdrawals with Ukraine and other members of the CIS may lead to Russia's losses up to $2bn annually. Yu. Godin, leading researcher of the Center of foreign economic research of the Russian Academy of Sciences, writes: "Russia cannot infinitely act to the detriment of its own interests even sincerely wishing to render aid other countries of the Commonwealth.

Naturally, the Russian leaders pose a question: is it worth while to bear such expenses if the CIS partners (with the exception of Belarus and other member countries of the Collective Security Treaty) are not eager to become Russia's allies, but quite often conduct the policy which runs counter to its vital national interests? As they say, all's well that ends well. We would be happy if Ukraine were really admitted to the EU in ten-fifteen years (however, no one knows what kind it will be then). But if it does not happen? Having got rid of the Russian markets and having not got the equivalent markets in the West, once again (unlikely that Ukraine will be admitted to the EU), owing to its Euroatlantic orientation Ukraine will lose more than it will acquire. Then does not it remind of grievously known situation in which someone wants to kill two birds with one stone, the end is known!

The fact that we now observe in trade relations between Ukraine and Russia, is none other than opposition. Especially acute for our state is the problem of the Russian collection of VAT and export duties on energy carriers. As is well known, from July 1, 2001 Russia started to collect indirect taxes in trade with the CIS countries on principle of the country of destination i. e. the value-added tax and excises are now being paid to the budget of importing country. However, the given order does not spread on such goods as oil, gas condensate and natural gas. Besides, in exporting given goods to the CIS countries which are not the members of the Eurasian Economic Community, Russia imposes export duties on these energy carriers which results in their higher prices. Ukraine insists on abolition both VAT and export duties on energy carriers which it imports from Russia. Russia refuses flatly to include Russian energy carriers which have a demand on the world markets, in the regime of duty-free and tax-free trade with the CIS countries - non-members of the EurAsEC. Moreover, Russia steady reduces energy carriers supply to these countries since they systematically do not pay for them and accumulated heavy debts. According to the assessments of Russian economists, the amount of the annual "energy" debts of Ukraine to Russia in the period of 1994-2000 did not drop lower than $2-2.5bn, and in separate years (1997-1998) exceeded $3-3.5bn.

Lately, having convinced that the EU attaches greater importance to cooperation with rich in energy resources Russia than with Ukraine (at present, our neighbor provides 41% of natural gas consumption in Europe and 18%

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of oil and these quantities may be doubled), some Ukrainian politicians set forth an idea of "entry into Europe together with Russia". However, in contrast to Ukraine, Russia does not strive for a full-fledged or associate membership in the EU. Its goal is the deepening of cooperation with the EU countries, in the future the creation of free trade area with them. In our opinion, so far more optimal would be coordinated, progressive movement of our two states to the establishment in the future (when economies of Ukraine and Russia will achieve the required competitiveness) of a common economic space with the countries of the EU, as an example of the Common European Economic Space that exists from January 1, 1994 between the EU and EFTA countries.

Here we remind that the European Economic Space spreads the principle of the four freedoms of the EU on the member countries of EFTA - free movement of goods, services, capitals and population. Out of the four members of EFTA - Iceland, Norway, Liechtenstein and Switzerland - only the latter did not join the Agreement on the Common European Economic Space since the national referendum in the country declined it. Within the framework of the Common European Economic Space the cooperation is also being realized in such branches as adjustment of economic, monetary and industrial policy, implementation of scientific and technical research, environment protection, fishing, transport. That is, in essence, EFTA countries obtained the numerous privileges from the EU, without being directly the members of the EU.

And finally, it is worth to recollect the ancient proverb: "A bird in the hand is worth two in the bush." The question is clear: so, which choice will be made by Ukraine?

Translated by Anatoliy Murashko

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