Calling the EU’s Bluff: Ukraine’s game of risk

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The “response”, however was hardly what the European Union could have expected. Instead fulfilling the conditions for the Association Agreement, the Ukrainian government has switched to deepening relations with the Customs Union, guided by Moscow.

An unreliable EU partner

On May 15th 2013 the European Commission made an important step towards Ukraine by taking the decision to make all technical preparations for the possible signing of the Association Agreement, despite the fact that Kyiv has failed to demonstrate enough progress in implementing its commitments. In fact, it was another chance for Kyiv, a few months more before the Eastern Partnership Summit in Vilnius, to address issues related to election laws, judiciary reforms and selective justice.

After two weeks, Kyiv “responded” with President Viktor Yanukovych signing the “Statement on Ukraine’s participation in the Eurasian integration process” in Astana (Kazakhstan), with Prime Minister Mykola Azarov signing the “Memorandum on deepening cooperation between Ukraine and the Eurasian Economic Commission” in Minsk.

These signed documents have no legal force and do not establish rights and obligations regulated by international law. Therefore, one can assume that officially Kyiv decided to simply reassure Moscow that the rapprochement with the EU would not come at the expense of relations with Russia. However, in this case, the signing of both the Statement and the Memorandum would hardly have been considered a conspiracy, but happened without any notification to the European partners. Hence, this created a situation where Viktor Yanukovych had to call President of the European Commission Jose Manuel Barroso to assure him that the new model of cooperation between Ukraine and the Eurasian Economic Union does not contradict Ukraine’s strategic course towards European integration.

Unilateral concessions

The very name of the “Statement on Ukraine’s participation in the Eurasian integration process” enabled the Russian media to announce a drift in Ukraine’s foreign policy vector and an end to its European integration. Thus, Russian President Vladimir Putin has managed to gain a significant portion of PR to strengthen his image of being a “land gatherer” of the former Soviet Union.

The signed documents neither give Ukraine the expected right of advisory vote, nor the right to attend meetings of the Customs Union (CU) bodies, but only the “opportunity” to be invited, only to public meetings, only with the consent of all members, and strictly without the right to participate in decision making. Instead, in the Memorandum, Ukraine declared its “intent to adhere to the principles fixed in the documents that form the legal basis of the Customs Union and Common Economic Space and to refrain from actions and statements against the interests of the Customs Union and Common Economic Space”. At the same time, the Eurasian Economic Commission didn’t declare any reciprocal intentions concerning Ukrainian interests. In comparison, in the 16th EU-Ukraine Summit Joint Statement both sides agreed on “the need to refrain from any measures going against the Deep and Comprehensive Free Trade Area”.

The Customs Union: Economics or politics?

It is logical to assume that economic cooperation should be the main reason for the existence of the CU, but the first years of its operation do not show tangible results in this area. Internal trade within the CU remains at only about 12 per cent of the total foreign trade of its members (compared with the EU level of trade integration at about 60 per cent). Thus, the people of Belarus and Kazakhstan have experienced a significant increase in consumer prices for a wide range of products as a result of the implementation of high external customs tariffs agreed with Moscow. As a result, Russian businesses complain of massive smuggling throughout the territory of Belarus and Kazakhstan. It should be noted that cooperation within the CU basically cannot be a priority for the Russian economy, as its imports and exports with CU countries makes up only about 6-7 per cent of its foreign trade, while turnover with the EU makes up about 50 per cent.

Therefore, it is more logical to look for reasons for the CU’s existence in the political sphere. It is no secret that Putin has made the restoration of the Soviet Union as his priority, the collapse of which he has called “a geopolitical catastrophe”. The Eurasian Economic Community as a possible format for the Soviet Union’s reincarnation is planned to be created by 2015, while the CU is an important step towards that aim. This is why Russia is interested in preventing the signing of the EU-Ukraine Association Agreement, believing that after its failure to sign, Ukraine will have only one way left – to the CU, and later the Eurasian Economic Union.

Lack of political will

The Ukrainian authorities need the Association Agreement with the EU as a tool to resist pressure from Moscow (including negotiations on gas prices), as well as a factor that will contribute to the dialogue with the IMF and increase investment, and a foreign policy success which can be presented to voters.

Standing between Kyiv and the signing of Association Agreement with the EU remain the specific commitments, the fulfilment of which depends entirely on the political will of the current Ukrainian authorities. The ruling party has a parliamentary majority to vote for electoral and judicial reforms, and it also knows how to solve problems with selective justice. Therefore, only political decisions at the highest level are necessary, although these decisions are in some way challenging and even uncomfortable for the current Ukrainian authorities.

In this context, the signing of the Memorandum with the CU could be seen as a ponderable demotivating factor for taking uncomfortable political decisions, as integration with Moscow requires neither reforms nor the release of political prisoners. Thus, the Memorandum seems to be a kind of insurance for the government that if it fails to sign the Association Agreement with the EU, the door to the CU will still be open.

Meanwhile, official Kyiv will probably please itself with illusions that rapprochement with the CU will make the EU turn a blind eye towards failure of these obligations, which the Ukrainian authorities mostly want to ignore. But the EU knows as much as Yanukovych does, that he is not eager to share power with the CU supranational bodies, controlled by Moscow; and Ukrainian oligarchs are not very enthusiastic about the idea of sharing their assets with their Russian counterparts.

Nevertheless, Moscow obviously expects that the Kremlin-oriented part of Yanukovych’s team will try to persuade the Ukrainian president that the EU, scared of the prospect of Ukraine’s rapprochement with the CU, will sign the Association Agreement even without Kyiv fulfilling its obligations. And when, at the Vilnius summit, Ukraine understands the failure of its bluff, it will face the Russian offer – unattractive, but the only one left open to it.

Minimising the risks

The position of the Ukrainian authorities, indeed, is not an easy one: the EU has put forward a number of requirements, the fulfilment of which would weaken Yanukovych’s domestic monopoly of power and his relations with Moscow would become more complicated. Meanwhile, Kyiv realises that even the complete fulfilment of its obligations does not guarantee the signing of the Association Agreement, because Russia will also actively work on this issue with the European capitals, using its arsenal of compelling arguments such as gas prices.

Thus, the Ukrainian authorities’ desire to minimise risks of possible failure of signing the Association Agreement is understandable. In this respect it is very important to ensure that this “risk minimising” activity does not substitute the main task, which is to fulfil the obligations and sign the Agreement. Such lobbyists of Ukraine’s European integration as Poland and Lithuania also feel it is hard to convince their often more influential partners in the EU to enhance cooperation with the country, which is slipping into authoritarianism. But despite all the hardships, they are neither giving up nor preparing ways to retreat.

Ukraine has never been so close to signing the Association Agreement with the EU as it is now. And with respect to the necessary cooperation with Moscow, Kyiv should keep in mind that Russia’s main trading partner is precisely the European Union, the Association with which Ukraine is going to sign.

Maksym Khylko is a research fellow at the Taras Shevchenko National University of Kyiv. He holds PhD in Philosophy and an MA in International Relations. Between 2001-2010 he worked as a political and media analyst and consultant.