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Ukraine: Time for Bold Magnanimity from EU

 

Ukrainians have returned to the streets to protest, just as they did in Kiev (above) on the first day of the 2004 Orange Revolution. Photo by Serhiy, courtesy of Wikimedia Commons.

Ukrainians have returned to the streets to protest, just as they did in Kiev (above) on the first day of the 2004 Orange Revolution. Photo by Serhiy, courtesy of Wikimedia Commons.

The European Union should provide Ukraine with the trade benefits it would have realized had Russian pressure not prompted the government of President Viktor Yanukovych to announce on November 21 that it would not sign a long-anticipated Association Agreement with the EU.

That announcement set off not only pro-EU protests in the streets of Ukrainian cities but also rounds of urgent diplomatic consultations, with Prime Minister Mykola Azarov being quoted by the Ukrainian News Agency on Tuesday, December 3, as saying, “Our delegation will travel to Brussels tomorrow, and we will continue talks, which will allow the signing of the agreement on European integration on terms that are favorable to Ukraine. The president has reached an agreement to this effect, and the delegation is now being created. Simultaneously, another delegation will travel to Moscow tomorrow, since we seek to strengthen our strategic partnership and we want to restore trade and economic relations with the Russian Federation.”

Kiev’s decision to dispatch simultaneous delegations west and east reflects the quandary that Ukraine faces. The Slavic nation of 44 million possesses strong historical, cultural, and ethnic ties with Russia. Of more practical consequence, it is heavily reliant on Russia for its energy supplies, and the Kremlin has not hesitated to exercise the leverage that this dependence provides. In January 2009, Russia shut off its natural gas supply to Ukraine for 13 days as its trump card in a dispute over pricing and payment for the commodity. In April 2010, Russia traded a deep discount on the price of the Siberian natural gas it sells Ukraine for a 25-year extension – until 2042 – of its lease of a naval base at the port of Sevastopol in the Crimea region of Ukraine. The base is home to Russia’s Black Sea Fleet and a critical component of the Kremlin’s naval strategy of securing warm-water ports. At the same time, a majority of Ukraine’s citizens favor EU membership, with many looking at closer integration with Europe as not only economically advantageous but also as a decisive step in sundering the political and economic links with Moscow that linger from their country’s decades as a Soviet Socialist Republic.

The Wall Street Journal and other media sources report that the EU has given an icy reception to Yanukovych’s calls for further negotiations on the Association Agreement, which already has been more than six years in the making and was initialed by both parties in March 2012. The basic message from Brussels at this writing: There’s a perfectly fine, long-negotiated agreement on the table; take it or leave it.

This stance, and Brussels’ reported earlier objections to Ukraine joining both the EU and a Russian-sponsored Customs Union of former Soviet republics, has prompted some critics to charge that the European Union is just as guilty, or even more guilty, than Russia of using high-handed tactics to swing Ukraine in its direction. Writing in The New York Times on Tuesday, University of Rhode Island professor Nicolai N. Petro, currently a Fulbright scholar in Ukraine, criticizes EU negotiators for going “out of their way to turn Union association into a loyalty test” in an us-or-them fashion, and notes that regardless of geopolitical considerations, Russia has legitimate concerns that Ukrainian accession to EU membership could result in cheap European goods entering Russia to the detriment of the country’s manufacturers and overall economy.

These arguments are all the more reason for Brussels to take a page from the Marshall Plan’s playbook and show that Western magnanimity still triumphs over Russian menaces. A Deep and Comprehensive Free Trade Agreement (DCFTA) would be part of the EU-Ukraine Association Agreement. The EU projects that this DCFTA would eliminate 98.1 percent of the duties – as measured in trade value – that currently apply to Ukrainian goods.

The EU should act unilaterally and drop those duties. Without further negotiations, without a signed Association Agreement, without Ukrainian reciprocity, and without waiting to see whether Yanukovych can chart a tortured path between his domestic political opposition and the pressure he is under from Moscow.

The main power Russia holds over Ukraine is economic. While it is beyond the EU’s power to address the energy-supply component of that equation, by acting unilaterally to drop duties on Ukrainian imports, it would set in motion a dilution of that economic dependence by greatly increasing the competitiveness of Ukraine’s goods in western markets. By acting without waiting for Ukraine to reciprocate and eliminate duties on EU goods, it would undercut – at least for now – Russian leaders’ stated concerns about European goods finding their way into Russia in an illicit and detrimental fashion.

Why should the EU let Yanukovych off the hook in this fashion? Ultimately, it’s not about Yanukovych, although on Tuesday he and his Cabinet survived a parliamentary vote of no-confidence by a 40-vote margin, suggesting that EU negotiators will be dealing with him and his staff for the foreseeable future.

Rather, it’s about the people of Ukraine, particularly those hundreds of thousands who took to the streets in 2004 to bring about the Orange Revolution and support democracy, and who have returned to the streets in recent days to chant “Ukraine is Europe!”

A purely economic case is difficult to articulate, but the European Commission’s Directorate-General for Trade reports that last year the EU exported 23.8 billion-euro of goods to Ukraine, while importing just 14.6 billion-euro of merchandise. That 9.2 billion-euro favorable balance of trade indicates that Europe can absorb the influx of Ukrainian goods that would result from a unilateral elimination of trade duties. The dire state of the Ukrainian economy, and its resultant heightened susceptibility to Russian pressure, is another economic argument for bold generosity.

In the end, however, the argument for extending such assistance to Ukraine isn’t and can’t be predominantly economic. The Marshall Plan involved economics but certainly did not have economic gain as its primary goal. Nor did Bonn’s tremendous degree of investment in eastern Germany after the fall of Communism there and the reunion of the country. Nor, ultimately, did the EU’s intervention to rescue the economies of Greece and other southern European countries.

The EU should act unilaterally to show Ukraine that it belongs in the EU regardless of who currently occupies the president’s office in Kiev. The EU should act unilaterally to show itself that it remains a vital entity capable of decisive and effective action.

The signing of the EU-Ukraine Association Agreement was supposed to be the highlight of the EU’s Eastern Partnership Summit Meeting in Vilnius, Lithuania last week. When President Yanukovych arrived at the meeting a week after announcing that he would not sign the accord, he found himself in an awkward conversation with German Chancellor Angela Merkel and Lithuanian President Dalia Grybauskaite. In an awkward exchange, Ms. Merkel reportedly told the Ukrainian leader, “We see you here, but we expected more.” To which Yanukovych reportedly replied, in part, “We have big difficulties with Moscow.”

European Commission President Jose Manuel Barroso bristled at the wielding of this Russian influence, saying after the summit that the EU “will not give in to external pressure, not the least from Russia.”

It’s time for the EU to back those strong words with strong action, and by taking both the substantive and symbolic step of dropping duties on Ukrainian goods to re-assure those protesters on the streets of Kiev, Lviv, and other cities that they are speaking the truth when they chant “Ukraine is Europe!”

 

Author

Tom Garry
Tom Garry

Tom Garry is an analyst and writer who examines how capital flows affect everything from the stability of Euro-zone governments to the basic needs of families in developing nations, and from the bankrolling of terrorist organizations to the redistribution of power in our multi-polar world.

He has a master’s degree in financial economics from the University of London’s School of Oriental and African Studies, where his thesis focused on the exchange-rate policies of Latin American countries, and a master’s in political science from American Military University, where his thesis examined resurgent Russian influence in the Eastern European nations of the former Soviet Union. He received his bachelor’s degree in international relations from American Military University.

When he’s not “following the money,” Tom’s other areas of focus extend from business marketing and consumers’ financial decision-making to religion, governance, and diplomacy.

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