Yanukovych's predicament

As Ukraine enters the final stages of negotiations towards an Association Agreement including a groundbreaking Deep and Comprehensive Free Trade Agreement (DCFTA), the EU must not begin to move goal posts or drag its heels. Rather, as Ukraine comes under increasing pressure from an unhappy Moscow, not to sign on the dotted line, Brussels must urge Kyiv to take the final necessary steps.

The conclusion and implementation of the DCFTA and Association Agreement will give Ukraine a real bond to the EU and represent a significant step forwards in its modernisation and democratisation which will be beneficial to both partners.

Some 15 months since taking over Ukraine's leadership, Viktor Yanukovych finds himself in something a quandary with Russia. As Kyiv progresses on its journey towards deeper integration with the EU, the Russian's are becoming increasingly uneasy, fearing that Ukraine is beginning to edge too far out of Moscow's so-called sphere of influence.

When Yanukovych, who is frequently labeled a Kremlin man, was first elected one of his first priorities was to improve relations with Russia. Under his predecessor, Viktor Yushchenko, relations suffered a serious deterioration, as he raced into EU and Nato membership, while at the same time snubbing Moscow at every opportunity.

Russia responded by making frequent provocative statements regarding Ukrainian sovereignty and territorial integrity and by using its number one foreign policy tool - gas. Prices were hiked, with a particularly explosive situation arising in January 2009 when gas supplies were cut.

Given Ukraine is the main transit route for Russian gas to Europe, this brought the squabble into the EU's backyard. Many homes and businesses in Central and Eastern Europe were gas-less for several days which clearly demonstrated that what happens in Ukraine affects the EU.

While Yanukovych dropped Nato membership efforts and made a number of deals that were positive for Russia, including an agreement signed in 2010 on the stationing of the Russian Black Sea fleet in Sevastopol on the Crimean peninsula until 2042, not everything is plain sailing.

Contrary to what many commentators write, Ukraine has a far from perfect relationship with Moscow and Yanukovych is far from being a Kremlin man.

Unfortunately having warm relations with Russia often amounts to having to defer to Moscow on issues that Moscow defines as central to its interests. The most recent blow came following events on 9 May -Victory day - with Russia pressing Ukraine to respond "adequately" to the actions by Ukrainians in Lviv in the west of the country.

Russia claims that Ukrainian nationalists destroyed Victory Day celebrations when they trampled red (Soviet) flags. However, as on many others historical issues Ukraine's population is divided on this topic and no more so than in the west which considered the planting of the red flag a provocative and insulting action.

While Yanukovych has been much less vocal than Yushchenko on EU membership he nevertheless continues to pursue further EU integration. Unfortunately, the more Ukraine inches towards the EU the more uneasy Moscow becomes and Russia is disgruntled over the current negotiations for the DCFTA.

Russia is piling the pressure on Yanukovych not to sign. Rather Russia wants Kyiv to join a Russian-led Customs Union with Kazakhstan and Belarus: something which is certainly not in the long term interest of Ukraine's economic and social development.

Until now Yanukovych has not bowed to Russian Prime Minister Vladimir Putin's pressure to join, and has tried to appease him by saying Ukraine is open to cooperation in a so-called "3+1", format leaving a possibility for Ukraine to end up with a free-trade deal with such a Customs Union concluded on the World Trade Organisation terms alongside a tree-trade agreement with the EU.

Joining the customs union alone would rule out free trade with the EU and tie future tariffs to whatever might be agreed with the other three, two of which, Russia and Kazakhstan, have structurally different petro-economies.

Moscow has upped the ante offering $8 billion in annual natural-gas subsidies if Ukraine stops the talks. Ukraine's political and economic elites broadly support Yanukovych approach and last week a discussion amongst lawmakers in Ukraine's parliament, resulted in overwhelming support for the DCFTA.

However, with negotiations still on-going Russia will not simply "give up" and one can expect many more visits from Putin. Therefore Yanukovych is going to have to demonstrate masterful diplomacy. He must do what is best for Ukraine - preferably without causing a serious earthquake with Moscow.

Amanda Paul is an analyst at the European Policy Centre, a think-tank in Brussels