At the Adam Smith Institute website, Eamonn Butler explains why there won’t be an easy economic fix for the EU/Ukraine trading relationship:
The trouble with EU membership is that it is such a big deal. A country that wants to be part of the club, and enjoy its free trade benefits also has to accept a mountain of regulation and to sign up for the common currency. It is all or nothing.
That puts countries like Ukraine in a fix, just as it put the UK in a bit of a fix in the early 1970s. The UK did not want to raise tariff barriers and lose its trading relationships with its historic trading partners such as Canada, Australia and New Zealand, from which it imported a great many agricultural products — butter, lamb, fruit, bacon and much else. But thanks to the Common Agricultural Policy, it did not have much choice. Today, the UK is inside the EU’s tariff wall, which makes trade with the rest of the world more expensive, and naturally focuses UK trade on Europe.
As a logical matter, that does not have to be. If the EU allowed Ukraine the same sort of status enjoyed by (neutral) Switzerland, the country would be free to trade with the EU as part of its customs-union club – but would remain free to preserve trading links to other countries as well. It would also be free to retain its currency and its legal and regulatory structure. A free trade pact with the EU that would help grow the Ukrainian economy, without threatening Russia or the Russian-speaking Ukrainians that the country would be wholly swallowed up into a Western political alliance.
A genuine free-trade deal, rather than full membership. That would probably be ideal for Ukraine (and for other nearby countries not already in the EU), but it won’t be on offer, because too many existing members of the EU would also prefer to have that kind of trading relationship without all the legislative/regulatory overhead that full membership requires. In many ways, the EU cannot afford to offer Ukraine such a deal, for fear of undermining the basis of the current integrated model.
Update: Daniel Hannan on the possibility of partition in Ukraine.
These two views — Ukrainians as a historic people, Ukrainians as a strain of Russians — frame the present quarrel. Most Russian nationalists allow, albeit reluctantly, that Ukrainian national consciousness exists. Alexander Solzhenitsyn grumpily accepted that western Ukrainians, after the horrors of the Soviet era, had been permanently alienated from Mother Russia; but he insisted that the frontiers were arbitrarily drawn under Lenin. If Ukrainians claimed independence on grounds of having a separate national identity, he argued, they must extend their own logic to the Russian-speakers east of the Dnieper.
Plainly a pro-Russian regime can’t govern the whole country: the recent uprising has put that fact beyond doubt. If the Slavophiles can’t rule the West, might the Westernisers win the East? The way of life they propose ought to be more attractive. But we should not underestimate the importance, in such a region, of blood and speech. Nor should we underestimate how much more Ukraine matters to Moscow than it does to Brussels. Vladimir Putin has mobilised troops on the border. Does anyone imagine any EU government, with the possible exception of Poland’s, contemplating a military response?
If neither the Slavophiles nor the Westernisers can carry the entire territory, some kind of separation starts to look inevitable. Such a separation might come about as paramilitary groups establish local supremacy. Or it might happen as a result of Russian intervention, as in Armenia, Moldova and, later, South Ossetia. It is easy enough to imagine Russian security forces crossing the border at the request of local proxies and establishing a de facto Russophone state. The Trans-Dniester Republic still exists, unrecognised but very much in force, on Ukraine’s western border; why not a Trans-Dnieper Republic to its east?