RUSSIA - UKRAINE - EU

COMMENTARY

by Gordon Hahn

As the November 28/29, 2013 European Union’s Eastern Partnership Summit in Lithuania draws closer, expectations that Ukraine will sign an association agreement with the EU are increasing, tensions have escalated between Moscow and Ukraine, and also between Kiev and Brussels. These growing conflicts should not be seen in terms of Aesopian fables about Russia’s pursuit of the USSR’s restoration or Ukraine’s alleged European roots and destiny.

Despite claims made in the West and by the Ukrainian opposition, Viktor Yanukovich has not proven to be Moscow’s puppet. He signed Ukraine’s 2010 law ‘On the Basic Directions of Domestic and Foreign Policy’ which stipulates Ukraine’s integration “into the European political, economic and legal area for the purpose of becoming a member of the European Union.” Nor is he willing to alienate Moscow and half of his country’s populace by severing Ukraine’s deeply rooted ties to Russia. This dispute is much more about Ukraine’s balanced strategic development and power-maximizing among the contending parties.

The conflict between Russia and the EU over Ukraine’s future is based on perceived self-interest and power-maximizing; something in which all states and unions of states engage. One way states maximize their power (sometimes with unintended costly trade-offs, to be sure) is to join in various economic, political and/or military associations, alliances, unions, etc. Some states are powerful initiators and dominant players in such unions; others are latecomers joining out of weakness.

The formation of international organizations, regimes and unions is further driven by globalization’s imperative for integration among states (coupled with some disintegration within states), including now hundreds of international organizations, as one modality for power maximizing. Within the globe’s network of networks, unions of states - like individual states - seek to maximize their influence and power, by increasing the number of their members.

Thus, Ukraine seeks to increase its economic (and even political) potential by joining such unions. By joining the EU Kiev seeks markets for its products, technological development for its industries, and a role in one of the major economic, political and, one suspects, military blocs. NATO is a likely destiny after Kiev chooses the EU.

Since Russia’s strategic and political cultures value its historical great power status, Moscow is especially keen to maximize power by creating unions around its cultural, economic, political, and military potential. Specifically, it seeks to maintain its status as the main power in Central Eurasia by constructing a series of economic unions and military alliances: the Eurasian Customs Union (with Kazakhstan, Belarus, and now Armenia), the United Economic Space (Customs Union plus several Central Asian states), the Eurasian Economic Union project, the Collective Security Treaty Organization, and the Shanghai Cooperation Organization (with China’s membership containing Moscow’s ambitions, in this case).

The membership of Ukraine, the second most powerful of the former Soviet republics, would significantly enhance the clout of these Eurasian projects, thereby increasing Russia’s own economic and political power. Conversely, Ukraine’s rejection of these Eurasian unions weakens the attractiveness of these projects to other prospective members, confining them largely to Russia and the weakest post-Soviet economies. This less than robust configuration barely enhances Russia’s power in the region and in the end may prove more of a burden than a boost. Moscow’s recent inter-ethnic difficulties from legal and illegal immigration flowing from allied Central Asian states and Azerbaijan demonstrates this. One solution to combat high rates of illegal, low-skilled immigration from these countries’ would be to introduce a visa regime for them. However, Moscow’s desire to maintain a connection to these states and its own status as an attraction for their populations, dictate against instituting such a regime.

Europe also seeks to bolster its power by bringing in Eastern Europe’s largest country. Beyond increasing the common market’s economic power, Ukraine’s inclusion will promote Europe’s energy security, assuming that Ukraine’s bargaining power vis-à-vis Moscow is indeed bolstered sufficiently to preclude a gas cut off to Europe.

But a happy ending for all is not guaranteed. For Kiev, a European choice will not be all roses. There is no guarantee that Ukraine’s present leadership is capable of overcoming powerful domestic clans, corruption, and other obstacles to the domestic legal, economic and political reforms that accession to the EU requires. Ukraine’s failure to accede would drive it into Russia’s arms and foster the kind of resentment of Europe that Turkey experienced after Europe spurned its entry into the EU.

Although Kiev’s EU choice is one in favor of more rapid democratic and free market development, it is also be one in favor of Europe’s socialist comprehensive cradle-to-grave government paternalism, massive welfare state and, perhaps, financial insolvency. Indeed, Russian finances are in better shape than Europe’s.

Kiev asserts it has not closed the door on its relations with Russia or even joining Russian-led organizations such as the Customs Union, the United Economic Space, and the Eurasian Union, but in fact it takes several steps away from those options by signing an EU association agreement. Similarly, EU Enlargement and Neighborhood Commissioner Štefan Füle said at the 10th Yalta Annual Meeting on 20 September that the EU and Ukraine are “working on overcoming the issue of legal incompatibility between the Association Agreement and Customs Union.” The fact remains that EU membership, if not the association agreement, will exclude Ukraine’s membership in any of these Eurasian organizations.

Yet Ukraine's economy is heavily dependent on exports of nuclear equipment, grain, chemicals, steel, coal, fuel and petroleum products to Eurasian Customs Union’s member-states. Nearly two-thirds of Kiev’s exports are sent to former Soviet republics, most to Russia (25%), Belarus and Kazakhstan. Kiev will lose some portion of this trade as its legal regime anchors into Europe and as Russian Customs Union and other Eurasian economic unification projects are further institutionalized. This dynamic will be reinforced by new economic pressures created by an EU-Ukrainian association agreement, undermining Ukrainian trade with Russia and the rest of the Customs Union.

Russia, moreover, can up the costs for Kiev. One Russian official warns that if, after being squeezed out by an influx of European goods on the Ukrainian market, Kiev’s goods begin to flood the markets of Russia and other Eurasian Customs Union members, Moscow will invoke statute 6 of the CIS Free Trade Agreement to allow blocking such dumping exportation. The Russian Customs Service banned imports of some Ukrainian goods, including those of Ukrainian chocolate goods popular across the former USSR, costing Kiev billions of dollars in trade. So Kiev’s cost-benefit calculus as regards the economic trade-offs becomes whether additional trade with the EU can compensate for the trade and other relationships lost with Customs Union member-states; this is not a sure bet given EU financial crises and stagnating economic performance.

There also are ethno-national complications for Ukraine in joining the EU. Hungarian nationalists are threatening to scuttle the EU ratification vote should Ukraine sign the association agreement. They demand that Kiev create a Transcarpathian enclave in Ukraine to unite a series of districts bordering Hungary where ethnic Hungarians predominate. The Crimean Tatars and ethnic Russians of eastern Ukraine could appeal to Brussels for similar further autonomy within Ukraine.

The EU also takes on significant risks by adopting an already fiscally-strapped and sluggish Ukrainian economy with limited economic and cultural ties to Europe as compared to its ties in the Slavic and post-Soviet east. Ukraine’s debt is high and likely to get higher as Russian gas subsidies are terminated, and its products are not likely to be competitive on the European market any time soon. In June, Fitch dropped Kiev’s credit rating to ‘negative’, and in September Moody’s reduced its rating, noting a very high risk of default, after Ukrainian reserves fell to $21.6 billion against an external debt service bill of $10.8 billion by the end of the year. The EU’s Eastern Partnership program has already dished out 600 million euros in the last three years to six eastern European countries. How long will German and other EU taxpayers bear such a burden given repeating Greek defaults and the threat of additional ones across the continent?

Although the EU is eager to note the ‘asymmetric’ relationship between Russia and Ukraine and the former’s pressure on the latter to join its favored structures, the EU is loath to acknowledge its’ own preponderance of power in its relationship with Ukraine, which will only grow as Kiev becomes dependent on western economic assistance as it has on Russian implicit subsidization in the form of below market prices for gas and oil since the Soviet collapse. Europe’s enticements also risk a dangerous split inside Ukraine between its Russophilic east and more Europhilic and Polonophilic west. Such a split could lead to explosive consequences, especially if NATO pursues Ukraine.

Most Europeans will never acknowledge it, but EU membership is also a stepping stone to NATO membership. An attempt at that will lead to unforeseeable levels of tension and potential conflict between Russia and the West. Already, just in the run-up to Ukraine’s signing the association agreement, tensions have run high between Russia, on the one hand, and Ukraine and the EU, on the other. Political commentators in Ukraine have been harping on the worst aspects of Russian reality, and Prime Minister Mykola Azarov threatened to begin drastically cutting and in the future terminating Ukrainian gas imports from Russia. In turn, some Russian government and media have supplied a mix of not very veiled threats and dour analyses of the consequences of Kiev’s accession to the EU. Presidential advisor Sergei Glaziev offered a series of threats designed to force Kiev to think twice and thrice about turning West, including the possibility of instituting visa requirements for Ukrainians’ entry to Russia. Putin later rejected such a visa policy, but this and similar actions remain in his back pocket and very well might be employed. It is not likely that Putin rejects Ukraine’s independence, as some claim, but his often heavy-handed tactics give that impression and offer Kiev little incentive to re-think its Western vector.

But Ukraine’s choice is not inevitably one between civilizations. Western civilization is itself melting down by increasingly rejecting its own founding ideas and culture, and there is still some hope that Russia and its Eurasian partners will transition to them. Moreover, Russian president Vladimir Putin is right in saying that Russia and Ukraine “have common historical roots and common fates, a common religion, a common faith, and very similar culture, languages, traditions, and mentality.” However, the best features that Russia and Ukraine have in common will not necessarily be destroyed because of Ukraine’s growing economic ties to Europe, and leaders in Moscow and Kiev can fashion cultural and other programs to ensure that they are not. Indeed. President Yanukovich has followed this path by signing a law making Russian an official state language along with Ukrainian, in half of the country’s regions and by extending Kiev’s treaty allowing Russia’s Black Sea Fleet to continue basing in Sevastopol until 2042.

Over time, however, the number of Ukrainians who can recite verses of Pushkin by heart and Russians’ ties to Ukraine will decline somewhat. Tensions between Europe and Russia could place the two Slavic nations on opposite sides of the barricades. Such outcomes would be a tragedy for these deeply intertwined peoples. One hopes that somehow Russians and Ukrainians can revalue their common Slavic and Orthodox roots while simultaneously making mutual journeys toward the West.