UKRAINIAN PRIME MINISTER SIGNS COOPERATION AGREEMENTS IN TBILISI... Meeting on 7 December, Valeriy Pustovoytenko and Georgian Minister of State Vazha Lortkipanidze signed a 10-year agreement on economic cooperation as well as accords on trade, banking, culture, and transportation, Interfax and Caucasus Press reported. The two leaders discussed coordinating efforts to prevent a further devaluation of their countries' currencies. Pustovoytenko also held talks with President Eduard Shevardnadze, parliamentary speaker Zurab Zhvania, and Foreign Minister Irakli Menagharishvili. The Ukrainian leader told Menagharishvili that Ukraine is willing to host talks between Georgian and Abkhaz representatives on confidence-building measures in order to expedite a settlement of the Abkhaz conflict. LF

...VISITS TO POTI, BATUMI. The next day, Pustovoytenko inspected the oil terminal under construction at Georgia's Black Sea port of Supsa and again affirmed Ukraine's interest in exporting via its territory Caspian oil shipped by tanker from Supsa to Odessa, Interfax reported. Pustovoytenko also visited Batumi, where he discussed the prospects for bilateral cooperation with Adjar Supreme Council chairman Aslan Abashidze. A rail ferry service between Batumi, Poti, and Ilichevsk is to begin operating on 19 December after several postponements. LF

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LAZARENKO SEEKS RELEASE ON BAIL. Former Ukrainian Premier Pavlo Lazarenko on 8 December asked to be released on a bail of $3 million, AP reported. He is currently being held in a Geneva jail. Lazarenko's attorney, Paul Gully-Hart, said Lazarenko will prove his bank deposits in Switzerland are legitimate and that the money was not embezzled from Ukrainian state coffers. The Ukrainian government said the same day that it will not comment on the situation until all details of the case are known. Deputy Foreign Minister Oleksandr Maidannik said the affair is complicated by Lazarenko's refusal to meet with officials from the Ukrainian Embassy in Switzerland and the fact that he was carrying a Panamanian passport when he was detained. PB

UKRAINIAN PRESIDENT SIGNS WORLD BANK DEAL. Leonid Kuchma signed a draft law on a $200 million World Bank loan to upgrade Kyiv's heating system, AP reported on 9 December. The deal must be ratified by the parliament and is still subject to the IMF's approving the government's reform program. The money would be used to modernize the city's power plants. Kuchma also issued a decree setting up a special economic zone in Transcarpathia, the western part of the country that was hit badly by floods last month. The decree grants tax breaks and provides incentives for investment in the region. PB

UKRAINE STRADDLES THE NEW DIVIDE

Despite internal weaknesses and a range of external challenges, Ukraine has registered a number of impressive foreign-policy achievements since gaining independence in 1991. In order to do so, it has had to juggle demands, as a result of an unstable and unpredictable Russian Federation to the east, unsteady neighbors to the north and south (Belarus, Romania, and Moldova), and the expanding NATO and EU blocs to the West. Whether Ukraine will be able to maintain this level of performance in its foreign policy over the longer term remains to be seen. While the external demands posed by its neighbors are substantial, Ukraine is equally threatened--in terms of its democratic development and stability--by its inability to settle its own domestic affairs.

In an effort to normalize regional relations, Ukraine has concluded several important agreements with neighboring countries. Those pacts include a Joint Statement on Mutual Reconciliation with Poland, a Treaty on Good Neighborly Relations and Cooperation with Romania, and, following a nearly four-year delay, a Treaty on Friendship, Cooperation, and Partnership with Russia. At the same time, Ukraine has slowly cultivated closer relations with the West.

The NATO-Ukraine Charter, signed at the Madrid Summit in July 1997, established a new framework for NATO-Ukraine relations. Recognizing Ukraine's unique position in the region, the charter establishes a "distinctive partnership" between NATO and Ukraine. The expansion of the alliance has been a difficult question for Ukraine, as Russia has made clear its opposition to further NATO expansion. While Russia continues to view NATO as a threat, Kyiv's position has shifted over the last several years. In July 1998, Ukrainian Foreign Minister Borys Tarasyuk said that Ukraine sees NATO enlargement as a "process of expanding the area of stability and democracy."

It is not yet clear whether the majority of Ukrainians believe the potential benefits of greater cooperation with NATO--or possible future admission to the alliance--outweigh the costs. Russia's own instability and deviation from the path of democratization may provide Ukrainian leaders with further arguments for exploring still deeper relations with Western security alliances.

Ukraine is thus faced with the challenge of developing relations with the West without overly antagonizing Russia. Such antagonism would entail several risks, not least since Ukraine is still heavily reliant on Russian trade and energy resources.

Early last year, Ukrainian President Leonid Kuchma blamed Moscow for the poor state of Russian-Ukrainian relations, claiming that Russia's "biased, prejudiced attitude toward Ukraine has intensified." He added that Russia views Ukraine as a constituent part of the federation or at least as existing within the Russian sphere of influence.

With Ukraine moving more perceptibly toward closer relations with the West, it is not unreasonable to expect Russia's insecurities to intensify. Much of Russia's political elite has not accepted Ukraine's post-Soviet status as an independent, sovereign state. The loss of Ukraine, of all the former republics, has arguably been the most difficult for Russians to swallow.

The issue of ethnic Russians in Ukraine is of potential concern. Post-Soviet Russia is a nation-state that has 25 million ethnic Russians outside its borders, 11 million of whom live in Ukraine. The treatment of ethnic Russians in the former republics has been a controversial issue for Russian nationalists. Ukraine's leadership has wisely refrained from pushing too hard on issues that could prompt a reaction from ethnic Russians in Ukraine or be used as a pretext by Russian nationalists looking to stir the ethnic pot. In Crimea, where ethnic Russians are in the majority, the threat of unrest is greatest.

In general, Ukrainian-Russian discussions of such thorny issues as the payment of outstanding debts, the negotiation of energy agreements, and questions of European security, have been quite tough and often heated but have never slid out of control. However, Russia's internal situation is fluid and volatile, as is Ukraine's. And neighboring Belarus, which has distinguished itself by demonstrating belligerence in international relations, might complicate Ukraine's relationship with Russia, not to mention the entire regional security order.

Unlike Belarus, whose main foreign-policy objective has been to pursue a rather flimsy union arrangement with Russia, Ukraine has seized opportunities to settle territorial claims and to otherwise ameliorate differences with its neighbors. Its pre-1991 role as the western-most tenant of the former Soviet Union has been transformed into that of eastern-most flank of the still evolving new Europe. As a result, Ukraine is faced with a wide range of responsibilities. Considering the relative immaturity and fragility of the Ukrainian state, Kyiv has so far handled this challenge with considerable dexterity.