The EU has billed the Vilnius summit as historic but the Ukrainian president’s decision to walk away from the deal leaves it looking like anything but. What happened?

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On the surface, it looks very much as if Viktor Yanukovych has been playing Europe along while he negotiated more favourable trade terms with Russia. This may, of course, turn out not to be the case but in the meantime Yanukovych’s reputation for dishonesty has been done no favours – not in the EU, not in Russia and certainly not in Ukraine itself, where around fifty per cent of the population feel he has betrayed them.

We know he made two trips to Russia earlier this month during which, according to the Ukrainian Prime Minister, Mykola Azarov, Moscow threatened to take economic retaliation against Ukraine if Yanukovych signed on to the political association agreement and free trade pact with the EU.

Azarov says this was the decisive factor in Kiev’s decision, although Yanukovych himself has stressed what he calls the EU’s “humiliating” aid offer. He wanted far more to compensate for the anticipated loss of Russian trade and the exposure of Ukraine’s uncompetitive businesses to European competition.

The EU may indeed have miscalculated. Perhaps it should have offered more generous terms to a country which is in any case in the grips of a severe economic crisis (albeit one in large part of its own making). In retrospect, too, the decision to link the association agreement to the release of former Ukrainian Prime Minister Yuliya Tymoshenko was a miscalculation. This was not the moment to force Yanukovych into a decision which would have left him humiliated.

So is Yanukovych the winner here?

It’s a little too early to say because we don’t know yet what his deal with Russia is. And Yanukovych is still negotiating with the EU. That’s why he has gone to Vilnius – despite his last minute volte-face on signing the deal. He insists that he still wants to take Ukraine into Europe. It’s not clear though what he wants in return – or whether Brussels is ready now to give it to him.

Yanukovych may also have to pay a political price in Ukraine itself. He seems to have been caught by surprise by the strength of the popular reaction to his decision. Kiev hasn’t seen demonstrations of this size since the 2004 Orange Revolution first swept him from power. For Yanukovych, the spectacle of so many people on the streets will have brought back unhappy memories.

And Moscow will be a much tougher partner to deal with now that Yanukovych has played his strongest card.

If not Yanukovych, is Putin the real benefactor of the EU’s embarrassment?

Perhaps, at least in the short term. It looks like he has won a major tug of war with the EU – and one that has had disturbing echoes of the Cold War. But it’s not that clear yet what the Kremlin has got out of this, apart from the pleasure of poking the EU in the eye.

Putin will have had to offer plenty of carrots to accompany his sticks, so there will be a price to pay that today’s Russia can ill afford. It will certainly not want to take responsibility for nursing Ukraine’s failing economy but there’s no doubt that Yanukovych will want precisely that. How else will he be able to sell this to his own people?

And nor is it at all clear that Putin has persuaded Yanukovych to take Ukraine into his Customs Union – Russia’s alternative to the EU political association agreement. On the contrary, Yanukovych has wasted no time in making clear that he still has his sights set on Europe. So Russia could end up footing the bill for Kiev without getting any substantial political rewards in return.

And Putin has succeeded at last in riling the German Chancellor, Angela Merkel, who has warned Russia to abandon its Cold War methods. Moscow’s relations with the EU are on a slippery slope.

Where does this leave the EU?

Feeling very angry and looking rather stupid. Six years of negotiations with Ukraine look for the moment at least to have come to nothing. Things may yet change of course but the EU has not handled these negotiations well. But perhaps this will be a wake-up call for Brussels in its dealings with Moscow. Certainly the signs are there that this has been one humiliation too far and that the EU is ready now to start pushing back.

We may see this in the deals on offer to Moldova and Georgia, the two states that will sign on to the association and free trade agreements, despite heavy-handed pressure from Russia to back away from them. The pressure won’t end with the deals signed in Vilnius, however, and the EU must now start to demonstrate to Georgia and Moldova that they have its full and unwavering support. If they can manage that, Ukraine may yet be tempted back to the fold. If not, well, President Viktor Yanukovych can always sign up to Vladimir Putin’s Customs Union.

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