Democracy Lab

The Grassroots Are Growing

Despite Ukraine's countless problems, its civil society is proving remarkably vibrant. The third in our series of Lab Reports on Ukraine.

Ukraine is a country defined by peculiar tensions between democratic and authoritarian impulses. Ever since the leaders of the Ukrainian Cossack state signed away their independence to the Russian tsars in 1654, there has been a question mark over the identity of Ukraine and the Ukrainians. The pull of the centralizing force of the Russian tsars to the east against the lingering gravitational pull toward Europe developed into a legacy of pluralism and lack of regard for authority that persists, in some ways, even today. These simmering tensions have erupted again as Ukraine's government tries to dictate a "special" path to European integration, with help from Russia, while student-led protests demand that Ukraine should sign the Association Agreement this week as invited by the European Union.

Just ten years ago, the streets of Ukraine's capital were filled with a million peaceful protesters bedecked in the color orange, demanding justice and the reversal of a falsified vote that would have brought the authoritarian regime's hand-picked successor to power as president. Ukraine was the only one of the post-Soviet republics that had a viable and vibrant political opposition that conducted real debates in the parliament (not to mention that the leaders of that opposition consistently surpassed the president in polling). Ukraine's "Orange Revolution" also revealed another force that makes Ukraine somewhat unique in the post-Soviet region: a lively, diverse, and large civil society sector.

This "revolution," where a political opposition joined with civil society to bring people into the streets and bring down a government, along with similar events in Serbia, Georgia, and Kyrgyzstan, sent a clear message to autocrats around the world -- namely, that the nongovernmental organizations of civil society could pose a real threat to their power. Ukraine's civil society showed that the notion of a special path for the "Slavic Brotherhood of nations" -- a project advanced with particular fervor by Vladimir Putin, who essentially claims that democracy is unsuitable for Russia, Belarus, and Ukraine -- is really just a myth.

The biggest paradox came in 2010, when Ukraine's civil society secured a presidential election that was deemed free and fair. And yet Viktor Yanukovych, the winner, was the very same candidate whose fraudulent campaign had resulted in the protests that became the Orange Revolution. His victory was soon marred by a rapid turn toward authoritarianism, enabling massive corruption in favor of his family and associates, and the jailing of his opponent Yulia Tymoshenko in an act of what is now referred to euphemistically as "selective justice."

Ukraine's collection of nongovernmental organizations -- what we have come to refer to as "civil society" -- is relatively exceptional in the post-Soviet space. The only other countries in the region where similar civic-led uprisings have taken place to protest authoritarian rule are Georgia, Moldova, and Kyrgyzstan. Georgia and Moldova, meanwhile, are now in line to initial agreements with the EU. Arguably, Ukraine's civil society has had a more difficult task in edging the country toward democracy because of its size and special relationship with Russia. And yet civil society in Ukraine possesses particular qualities that provide hope for the future as the country lurches between east and west, between authoritarianism and democracy.

Ukraine's civil society possesses qualities that add to its vigor and promise. Observers and specialists over the years have noted that it consists primarily of young people. This was very noticeable in the 1990s, especially when compared with Russia. This tradition has continued, and now a second and third generation of youth activists are coming forward -- those who have declared a national student's strike in support of European integration -- while the first wave of post-independence activists, now in their 40s, are still working in the civic sector, having turned their youthful activism into a real profession. With many examples of youth activism -- from the student hunger strike and mass youth protests of 1990 to the Orange Revolution -- there is much to inspire younger Ukrainians, who continue to be dismayed by their governments.

What does Ukraine's civil society consist of and what role does it play? There are many different types of groups and sectors within Ukraine's civil society that have been evident and active since before the Orange Revolution. Especially important are the independent media, especially online. Unlike the official, already established print and broadcast media, which has always been under government control either directly or through pro-government oligarchs, these small Internet publications were a perfect vehicle for Ukraine's emerging civil society. Often established by a mixture of anti-government activists and journalists who were being censored, these publications have tended to focus on information and political analysis that is not to be found in official media.

Ukraine's premier Internet publication, Ukrainska Pravda, was a pioneer in this field when it was launched in 2000. The initiative of Georgiy Gongadze and other journalists whose work was being censored by official media, Ukrainska Pravda was and continues to be a platform providing news and analysis of the current political situation and of the corrupt dealings and lifestyles of Ukraine's oligarchs and politicians. Georgiy Gongadze's grisly murder at the hands of the government in the lead-up to the Orange Revolution is now well known. Ukrainska Pravda has continued to set a high standard and has provided inspiration and guidance for dozens of similar publications that are now found not only in Kiev, the capital city, but also throughout the regions of the country.

The intellectual leadership of Ukraine's civil society is provided by a large community of analysts and critics. The dividing line between investigative journalists and critical analysts who publish in Internet publications is often indiscernible to outsiders. But the result of their work is a broad and easily accessible body of ongoing information that comments on and critiques government officials' activities.

While these analytical centers cannot compare with the well-funded partisan think tanks of Europe or the United States, they have emerged as an important source of critical thinking and information used by civil society. Many of them were founded in the early years of Ukraine's independence often by groups of like-minded critical intellectuals, or in some cases by student activists and they have grown to be an important element of Ukraine's civil society by providing information and venues for discussion and debate of issues that does not take place anywhere else. They have monitored government policies and followed trends in politics, and have often come up with policies and recommendations that have been taken up by advocacy groups. They have provided experts to challenge government officials and political party leaders and have often been the voice of the moral high ground in Ukraine's polarized political landscape. On occasion, analytical centers provide the launch pad for activists, or bring activist groups together to discuss strategies or form coalitions, as happened before the Orange Revolution.

Ukraine's analytical centers have the distinction of being more numerous than in other surrounding countries and also of being critical of the government. This is different from Russia, for example, where most analytical centers and think tanks have not emerged from the activism of a civic movement and are often close to the government.

Ukraine's civil society has produced some innovative forms of organization around the need to monitor elections. One example is the Committee of Voters of Ukraine, which is one of the largest and most influential nongovernmental organizations in the country. Established in 1994 to help train and deploy domestic observers, this group counted over 20,000 members at its peak. It has monitored every election since then. Although its membership has fluctuated and it has now been joined by several other similar organizations, it has drawn its strength and dynamism primarily from the active and civically oriented youth in the country who want to be involved in the political process but who prefer not to join any political party. When the government prohibited domestic observers, these young activists registered as members of the press, using creative methods to circumvent government strictures to enable them to fulfill their mission. The efforts of this group and others, through the years, has prevented some electoral fraud and provided a challenge to all governments trying to falsify election results.

Another noteworthy civic initiative -- independent exit polling -- was pioneered by the Democratic Initiatives Foundation (now named for its late founder and President, Ilko Kucheriv). The group set up its first exit poll for the parliamentary elections of 1998, and has done so for every election since. There is credible evidence that the results of these independent exit polls, which have generally proven highly accurate and are announced at a press conference at eight in the evening as the polls close on election day, have prevented further fraud by the government. The most notable example took place in the second round of the presidential election in November 2004, when this exit poll was used together with other evidence to demonstrate that the government had stacked the election in favor of its chosen candidate.

Ukraine's civic groups have also developed skills in monitoring the media in order convey to citizens how news and information, particularly at the time of elections, is being used by the government to manipulate the electorate. Other election-related civic efforts have included get-out-the-vote campaigns and wide-ranging voter education programs. Ukraine's civic groups have often formed coalitions to work together for free and fair elections, increasing their impact far beyond what they might have had as individual organizations.

Ukraine has been very successful in producing broad-based civic movements and activist groups that have challenged the authoritarian governments. Under President Kuchma there were movements going by names such as "For Truth" (Za Pravdu), "Ukraine without Kuchma," and "I Know" (Znayu), as well as the youth movement Pora that spearheaded the campaign of civil disobedience that led to the mass outpouring of people into the streets for the Orange Revolution. When the government of President Yushchenko came to power in 2005, many civic leaders were drawn into the new government -- a phenomenon characteristic of many countries where civic groups are responsible for uprisings that lead to a change in government. In Ukraine, this period did not last long, but it did have the effect of depriving civil society of its sense of purpose for a time, when everyone hoped that Yushchenko would solve the country's problems. When it turned out that the "Orange" government was not living up to the hopes and expectations of the people, civic movements took up their mission again. Once President Yanukovych came to power, they swung into action, launching activities to hold government accountable and to mobilize citizens to stand up for their rights.

The latest manifestation of the renewed rise of civic activism may be seen in the civic movement Chesno ("Honestly"), which emerged in late 2011 to monitor members of Ukraine's parliament. One of its first achievements was to put a stop to "piano" voting by the members (a system in which one parliamentarian on the floor of the chamber holds the electronic cards of many of his fellow deputies so that he can vote for them in their absence, a practice most often employed by the deputies in the pro-government party of power).

Statistics show over 85,000 public associations and charitable organizations registered in Ukraine as of last year. Many of them are cultural, sporting, educational, as well as human rights and other types of organization that exists in most other countries of the world. But the segment of civil society represented by politically oriented nongovernmental organizations in Ukraine has had an effect in maintaining pluralism and preventing the wholesale slide into authoritarianism experienced by some of Ukraine's neighbors. And civil society in Ukraine is evolving: one of the new types of institutions that has emerged in the past few years is the oligarch-funded foundation. Each of the major Ukrainian business oligarchs now has a foundation. To be sure, these are not true "grassroots" organizations. Still, some are doing potentially useful work in areas such as social welfare, economic development, and culture, and to some extent they do reflect a plurality of funding sources, even though much of this is in the end self-serving for the oligarch donor.

In another of the odd paradoxes that can only occur in Ukraine, Yanukovych's authoritarian government has been responsible for some legislation on nongovernmental groups that will benefit civil society in the long run. Passed in March 2012, the new legislation makes the registration and operation of civic groups and public associations much easier and allows them to conduct some self-financing activities. While this legislation is not in itself a guarantee that the government will not renew the searches and harassment of civic groups that occurred early in Yanukovych's administration, this should be seen as a big success for the civic groups that worked long and hard on drafting and discussing these laws and lobbying to get them adopted. This development shows even more starkly the differences between Ukraine and Russia, where a full-scale crackdown on the nongovernmental sector is currently in progress, replete with legislation obliging civil society recipients of international donor funds to register as "foreign agents" -- basically expecting them to declare themselves as "traitors and spies" as accused by President Putin.

If democracy ever comes to Ukraine, it will be the result of the continuing activism of civil society in acting as watchdogs, holding government accountable, providing policy recommendations, and mobilizing and educating citizens to act in their own best interests. Ukraine has no tradition or experience of government leading pro-reform efforts. And the general lack of understanding of the concept of public service among Ukraine's public officials suggests that for the foreseeable future all impulses toward a democratic future will continue to come from below. In the end, Ukraine's conundrum remains: Ukrainians' continuing uneasiness and lack of confidence in state structures is one of the sources of pluralism and the nascent democratic culture that has prevented the country from falling into full-fledged authoritarianism. Yet as long as government continues to work against it, rather than with it, civil society alone cannot fulfill Ukraine's hopes for a democratic and prosperous future.


Democracy Lab

The Basket Case

One of Europe's biggest countries is on the verge of economic collapse. The second in our series of Lab Reports on Ukraine.

Recently, a big investment bank invited me to give a talk about the Ukrainian economy. I was happily surprised to find 300 interested fund managers in the hall, showing that Ukraine is a current focus of hedge-fund managers. The present Ukrainian intrigue is thick, involving the International Monetary Fund (IMF), the European Union (EU), and, of course, Russia. The United States, by contrast, is strangely absent from this drama.

For years, the Ukrainian government has pursued a disastrous economic policy, rendering a serious financial crisis possible or even likely. The outlook for Ukraine's economy looks even worse now that Ukraine's leaders have put the brakes on a planned agreement to deepen cooperation with the European Union. The last-minute decision by Ukraine's president, Viktor Yanukovych (pictured above with Russian President Vladimir Putin), to cancel the signing of an Association Agreement with Brussels is being widely attributed -- not least by Yanukovych and EU officials themselves -- to pressure from Russia, which has been threatening Ukraine with draconian sanctions if the country does sign the EU agreement. This drama deserves wide attention.

Like most former Soviet states, Ukraine is subject to predatory rule. Its masters have two predominant objectives: to maintain power and enrich themselves. In February 2010, Viktor Yanukovych won free and reasonably fair presidential elections with a narrow margin over then-Prime Minister Yulia Tymoshenko. He represented the Russian-speaking electorate in eastern and southern Ukraine, while Tymoshenko found most of her support in the Ukrainian-speaking west and center of the country. This balance between West and East has kept Ukraine more open and pluralist than Russia.

Most of all Yanukovych represents the interests of a limited number of big businessmen in Donetsk, his eastern home region and its metallurgical industry. President Yanukovych started off with full control of parliament, government, and the courts. His first government represented nine big business groups, but he quickly reduced their number to three. Instead, friends of his son Oleksandr have come to dominate the government since December 2012. These young businessmen from Donetsk hold all key economic posts in the government, including first deputy prime minister for economic affairs, finance minister, and chairman of the central bank.

With full control over courts and law enforcement, Yanukovych utilizes them at will, not least for jailing opposition leaders. In August 2011, the law enforcement authorities arrested Yulia Tymoshenko, his main opponent in the 2010 presidential election. She was subsequently sentenced to seven years in prison for abuse of power in a blatantly flawed court proceeding.

Yanukovych started his presidency by adopting an ambitious structural reform program in June 2010. It was in line with an independent presidential reform program commission that I co-chaired. One month later, the president concluded a stand-by agreement with the IMF of $15 billion for two and a half years. Within a month, his government complied with the sensible prior actions required by the IMF, and Ukraine received the first two tranches of this loan of a total of $3 billion.

Yet by November 2010 reform had already ground to a halt. The turning point was the adoption of Ukraine's first tax code, which taxed more than a million small businessmen out of existence. After protesting vehemently for a month, many of those affected closed shop. The tax code was all the more beneficial to large businessmen, because it facilitated transfer pricing, enabling them to transfer their profits to trade companies in Cyprus without paying any tax. As a consequence, the tax code also devastated the Ukrainian stock exchange, which has fallen starkly during Yanukovych's years in power and almost disappeared because of ever worse corporate governance.

Yanukovych's economic policies have stayed off track. In February 2011, an IMF mission agreed three key conditions for the government, but the government has not fulfilled them as yet. Sensibly, the IMF continues to insist upon them.

The most important IMF condition is to hike domestic gas prices. The Ukrainian state oil and gas company Naftogaz imports natural gas from Russia for over $400 per 1,000 cubic meters, but the government insists on purchasing natural gas produced in Ukraine for only $53 per 1,000 cubic meters, keeping domestic gas production artificially low while subsidizing purchases of Russian gas. Naftogaz sells gas to consumers and utilities at similarly low prices, but the purchased and sold quantities do not add up. Somebody is buying gas at the low regulated price and selling it at the higher market-oriented price, making fortunes on this arbitrage. We do not know who benefits, but Yanukovych has adamantly opposed raising these prices. These price disparities cost Naftogaz losses of 2 percent of GDP each year, which are ultimately financed by the state budget, that is, the taxpayers.

The second IMF condition is to reduce the budget deficit. Instead, Yanukovych has let it expand due to a variety of populist social expenditures. Competitive public procurement has basically ended. Large public contracts are distributed among cronies, and the kickbacks or overpricing reported by the independent media that still exist is often 50 percent of the contract. Yet no legal measures are undertaken against the senior officials who indulge in this large-scale embezzlement. This year, the budget deficit is likely to reach at least 6 percent of GDP, and the public debt is set to exceed 40 percent of GDP, which might be more than Ukraine can bear. The Ukrainian government could ignore IMF demands because it could borrow on the international Eurobond market at ten-year yields of 7.5-9.5 percent, but now these yields have risen to 12-13 percent, depriving the Ukrainian government of access to the international capital market.

The third IMF condition is that Ukraine introduces a more flexible exchange rate, which is a code word for depreciation. The exchange rate of the Ukrainian hryvnia is pegged at too high a level. As a consequence, last year Ukraine's current account deficit was 8.2 percent of GDP, and it is likely to be about the same this year. In September 2011, Ukraine's international reserves peaked at $38 billion. Since then, they have steadily shrunk to the present level of $20.6 billion, corresponding to only 2.6 months of imports, and they are set to contract further. The general market expectation is a depreciation of the hryvnia, which is reflected in the low and falling ratings of outstanding Ukrainian loans.

Rather than following its commitments to the IMF, the Ukrainian government has imposed strict currency regulations, to make it exceedingly difficult to take money out of the country. It has also pursued very high interest rates. Last year, posters with the picture of Gerard Depardieu promised 19.5 percent interest on one-year time deposits in a Ukrainian savings bank. The high interest rates have kept inflation at zero, but they have also killed investment and thus liquidated economic growth. Output has fallen for the last five quarters. The expected contraction for 2013 is now 1 percent, but it might become 1.5 percent.

It is difficult to imagine a worse economic policy. A visit by the IMF Mission in October yielded a concluding press release that shocked those accustomed to the Fund's usual diplomatic bromides. The statement said that the Fund continues to insist on a more flexible exchange rate, "ambitious fiscal consolidation," and reform of the markedly inefficient energy sector. The only positive note in the statement involved some minor improvements in the business environment, such as simplified procedures for construction registration of real estate ownership rights. "Much remains to be done, however," the communiqué pointedly noted.

Yet all relevant top officials from the prime minister down met with the IMF mission, showing that the Ukrainian government is anxious to keep the Fund fully informed and the doors to the IMF open, so that they call for support on short notice. When needed, the IMF can provide Ukraine with emergency financing within a month, but then the government has to fulfill all the IMF top conditions in advance.

Instead of taking IMF demands at face value, the present Ukrainian government treats the IMF as a public relations issue. The young Ukrainian economics ministers go to Washington as often as they can get an appointment with top IMF officials. They hire ever more expensive lobbyists and seem surprised that they do not receive IMF funding in return.

Why would any government pursue such a harmful and mindless economic policy? The simple answer is that it benefits the ruling "family" and its closest friends. Previously unknown individuals, who are presumed to be connected with people at the top, have taken over a large number of private companies at low prices. The worse the economic situation is, the cheaper Ukrainian companies become for these selected buyers. A few businessmen close to the president have enjoyed the benefit of being invited as the single bidder permitted at "auctions" to buy state corporations at minimal prices.  

For six years, Ukraine has pursued negotiations with the European Union about a very substantial Association Agreement, which also includes a deep and comprehensive free trade agreement. It was supposed to be signed at the EU Eastern partnership summit in Vilnius on Nov. 28-29. But on Nov. 21, the Ukrainian government announced that it has decided to stop the preparations for signing the agreement.

Considering the national interest, Yanukovych had every reason to sign the Association Agreement. A solid majority of Ukrainians is pro-European, and the president's advisors acknowledge that it will be hard for him to be re-elected in March 2015 without signing the agreement. Moreover, all the leading businessmen are eyeing the vast European market for their future expansion, although Russia and the EU each take about one quarter of Ukraine's exports at present. They also want to defend their properties from the president's predators.

The free trade agreement would have abolished all customs tariffs between the EU and Ukraine as well as promoting regulatory convergence in competition policy, state aid, and energy policy. It would have a great positive impact on the Ukrainian economy. The economists Veronika Movchan and Ricardo Giucci have estimated that it would add 12 percent to Ukraine's GDP in the long term, and Oleksandr Shepotylo has assessed that it would expand Ukraine's exports by 46 percent in the long term.

The Association Agreement also offers a far-reaching reform plan for the Ukrainian state. The EU has committed itself to considerable technical assistance. Sixty state agencies in various EU countries have committed themselves to reform their Ukrainian counterparts. This could amount to a cleansing of Ukraine's pervasive corruption and the state-building that Ukraine itself so far has failed to accomplish. The EU state agencies have already a successful record from the previous enlargements of the Union.

But for the moment these incentives seem to have been overridden by Yanukovych's fear of Russia's President Vladimir Putin, whose government openly threatened Ukraine with a variety of economic and political sanctions if Kiev were to follow up on its promise to seek closer relations with Brussels.

For a long time the Kremlin did not pay much attention to Ukraine's dealings with Europe, presumably thinking that the EU could not possibly accept Yanukovych's shenanigans. In the middle of the summer, however, Moscow woke up. It started a trade war with Ukraine, blocking exports to the Russian market of steel pipes, chocolate, and various agricultural goods -- all of which, it happened, were products controlled by pro-European Ukrainian businessmen. In August, Russia blocked most Ukrainian exports for 10 days by complicating customs procedures at the border. Ukraine's large exports of railway cars have also been impeded. Russia eased up temporarily but threatened to impose new trade barriers (designed to drive Ukraine into default) and to cut gas deliveries, as it did in 2006 and 2009.

Both Russia and Ukraine are members of the World Trade Organization (Ukraine since 2008 and Russia since August 2012), but neither country complies with its WTO commitments. Ukraine has launched complaints against Russia in the WTO, but WTO procedures are too slow to be useful, and Ukraine is in desperate straits. The EU proposed a more effective remedy: immediate additional market access as compensation for Russian trade sanctions.

Ukraine has traditionally tried to straddle the divide between the West and Russia. The Russian trade war of August suggested that this tactic had been exhausted. Yanukovych reacted swiftly but contradictorily, first turning to Europe and then to Russia.

EU representatives have long demanded that Yanukovych carry out 11 major legal and political reforms, but the president just stonewalled them. At the end of August, Yanukovych changed tune. He accepted all the EU conditions lock, stock, and barrel, and jump-started a legislative process to have them all adopted before Vilnius. They include constitutional amendments on the judicial system and the constitutional court, laws on all arms of law enforcement, a new electoral law, and renewed elections where parliamentarians had wrongly been deprived of their seats. A score of laws went through the parliament, the last being the new electoral law.

Yet two bills that did not pass were precisely the ones that mattered the most: on Nov. 21 the Ukrainian parliament, the Rada, voted down a proposed law that would have allowed Tymoshenko to seek medical treatment in the West, thus flouting the EU's key demand. Nor did the parliament adopt a vital judicial law aimed at transforming the prosecutor's office. Without it all the planned reforms of law enforcement become toothless. Shortly thereafter the Ukrainian cabinet confirmed that it would stop its preparations for signing the European Association Agreement and instead negotiate deals on trade, gas, and transportation with Russia.

This turn of events had been preceded by two trips by Yanukovych to see Putin in Russia. On Nov. 20, Ukraine's Prime Minister Mykola Azarov met Russia's Prime Minister Dmitry Medvedev in St. Petersburg, and they seem to have settled the deal. The official communiqué stated that they discussed mutual cooperation on "access to pipeline transportation, free trade in services, and the gradual restriction of export taxes." The general understanding is that Russia is about to offer a substantial package of financing of some $10 billion a year in the form of lower gas prices and credits from Russian state banks. Putin's advisor Sergey Glazyev mentioned such an arrangement at a conference in Yalta in September. (Azarov has dismissed these assumptions as nonsense.) All this leaves the impression that Yanukovych tried to bargain with the EU, which refused, while Putin was ready to put money on the table.

Putin has all along made clear that his aim is to compel Ukraine to join his Customs Union with Belarus and Kazakhstan. Yanukovych, for his part, has firmly opposed accession, which would reduce both his power and economic growth in his country. No formal agreement between Russia and Ukraine has been made public. It is doubtful whether Putin will accept $10 billion a year of financing for Ukraine just for it not signing the EU Association Agreement. Russia pays approximately as much a year to bankroll Belarus and keep it in the Customs Union. There has been no public talk about Russia stopping South Stream, the gas pipeline that is supposed to eliminate Russian gas transit through Ukraine.

It is also possible that Yanukovych did not want the Association Agreement, but he wanted to look as if he was trying. Now he can keep Tymoshenko in prison and deprive other opposition leaders of the right to stand in the presidential elections scheduled for March 2015, and without any new law on prosecution, he maintains control over law enforcement and courts. The large-scale transfer of financial assets and companies to his "family" can continue. But given the circumstances surrounding Ukraine's sudden rejection of the agreement, Yanukovych is not in a position to credibly blame Tymoshenko for the problems. Instead, he has cited pressure from Russia, while Azarov has blamed the IMF for its impermissible demands.

Yanukovych is walking on egg shells. Ukraine's economic situation is precarious. The risk for a run by ordinary Ukrainians both on banks and the Ukrainian currency is evident, though Ukraine has been on the brink for so long that no panic is apparent. The rating agencies mercilessly downgrade Ukraine ever lower, and corporate defaults are all too common. Ukraine is in desperate need of an IMF agreement, but Yanukovych has recently firmly rejected any (necessary) increase in domestic gas prices, and it should depreciate the hryvnia in any case.

On Sunday, Nov. 24, more than 100,000 Ukrainians took to the streets in Kiev, and protests erupted throughout Ukraine. Demonstrators draped themselves in the European flag and blue-and-yellow ribbons. Opposition leaders took the stage at the European Square in Kiev, eerily reminiscent of the Orange Revolution. A serious political challenge has ben added to the economic risks.

The European Union, and the United States, has regretted Ukraine's decision to stop its preparations for signing the Association Agreement, but the EU has emphasized that its door remains open. Yanukovych is welcome to sign at the planned EU-Ukraine summit in the spring. The game is not over. Russian financing remains uncertain and hardly sufficient. This does not look good for anybody.