International Policy Digest

World News /06 Nov 2013
11.06.13

Russia: When Bullying Backfires

The European Union is approaching a major milestone in its relations with Ukraine. Next month, the most valuable state in eastern Europe that remains a non-member will have the opportunity to expand its relations with the West by signing an Association Agreement with the EU.

Once signed, the agreement will provide a new framework for EU-Ukrainian relations which will deepen trade relations and require Kyiv to partly adopt EU legislation. Although it is too early to speak of EU membership for Ukraine, the agreement would be a landmark achievement. Not since the 1990s when the decision was made to include the ex-communist countries of central Europe has such a critical moment presented itself for EU expansionists. But will the signing of the Association Agreement actually take place?

Although Eurocrats might not want to admit it, Ukraine’s current closeness with the West is not the result of the country’s sudden belief in the importance of democracy, fair play and the rule of law. Rather, Ukraine’s willingness to sign the agreement is likely a reaction to Russia’s bullying, in particular, the heavy-handed geopolitical tactics undertaken by its president, Vladimir Putin, to dissuade Kyiv from breaking away from its northern neighbor. Indeed, Mr. Putin has done more to further Ukraine’s European integration than any Ukrainian figure recently.

One of the Russian president’s main projects during his second term has been the expansion of a Russia-led Eurasia Customs Union to act as a counterweight to the EU’s Deep and Comprehensive Free Trade Agreement (DCFTA), which is part of the Association Agreement.

The Customs Union, along with other organizations such as the Joint Economic Space, the Eurasia Union, and the Collective Security Treaty Organization, are the Kremlin’s attempts to place Ukraine more firmly in Russia’s orbit as a key member of a Moscow-dominated sphere of influence.

That Ukraine has resisted Moscow’s overtures for deeper integration, while other former Soviet Republics, such as Armenia, have acquiesced and decided to join the Customs Union, which includes Belarus and Kazakhstan, has incensed Mr. Putin and caused him to ratchet up economic pressure on Russia’s former vassal.

In mid-August, for instance, additional checks on all Ukrainian goods entering Russian territory were introduced, subjecting them to a more rigorous and costly verification process when crossing the border. Following this, Ukraine’s leading chocolate maker, Roshen, which is owned by Petro Poroshenko, a pro-EU business leader and one of Ukraine’s richest men, saw its products added to the Customs Union’s list of hazardous items on the grounds that its products posed a health risk. Additionally, the import of Ukrainian pipes made by another Ukrainian oligarch, Victor Pinchuk, was interrupted.

These trade disruptions are emblematic of Russia exerting its “soft power,” i.e. taking action designed to remind Ukraine’s political and economic elites of the importance of staying in Russia’s good-graces and, ultimately, to inhibit Ukraine from signing the Association Agreement. But it also smacks of desperation, and, in fact, has backfired: the previously quarreling Ukrainian elite has united, and the opposition in parliament has agreed to back the president, Victor Yanukovych, in passing all laws necessary prior to the Eastern Partnership summit in Vilnius, Lithuania where the Association Agreement is to be signed in late November.

Although promising, Ukraine’s indications that it will sign the Association Agreement should not be construed as the country’s sudden conversion to European values and a rules-based system of justice. Not only does the Association Agreement pose risks for powerful business interests, but large obstacles remain which, if left unresolved before the Summit, could torpedo the signing.

For starters, Ukraine’s economy is teetering on the brink of bankruptcy, and the signing of an Association Agreement, which could allow for the International Monetary Fund to disburse money, may appear more palatable than having to join the Customs Union in order to gain financial assistance from the Kremlin. Ukrainian elites likely see this as a choice between the lesser of two evils. Moreover, the Ukrainian oligarchs, having amassed huge fortunes in the wild-west atmosphere which existed after the chaotic and unruly privatization of the 1990s, have grown accustomed to playing by their own rules.

By inching closer to the West, they will have to submit not only to the more stringent rules of law and property rights present in EU legislation (the acquis communautaire), but the DCFTA will also free up trade, injecting competition from western European businesses whose organization, business acumen, and products may reduce the fat margins to which the oligarchs have grown accustomed. The potential loss of the Russian market, whether through a short-term trade spat or a long-term reduction bilateral commerce, would hit the oligarchs hard, forcing them to undertake costly modernizations to their supply chains in order to redirect the bulk of their business to Europe.

The most glaring problem, however, is the continued incarceration of the opposition leader, Yulia Tymoshenko, whose release the EU has set as a precondition before the Association Agreement can be signed. To date, the former prime minister remains in jail, where she has languished since June 2011, and at last month’s Yalta European Strategy Conference, Mr. Yanukovych, when pressed by an ally of Ms. Tymoshenko to pardon her, demurred. Mr. Yanukovych’s wager is that even with Ms. Tymoshenko in prison, the Association Agreement is too far-reaching and would be too great a blow to the EU’s Eastern Partnership for it not to be signed in Vilnius.

Mr. Yanukovych’s gamble will most likely not pay off. The appeal of an Association Agreement is that it sets clear rules that all aspiring members to the EU must follow. While some European leaders argue that insisting on Ms. Tymoshenko’s release runs the risk of missing a rare opportunity to bring Ukraine closer to the West, relaxing the EU’s conditions for one country would weaken them for all. Further, the Association Agreement, if signed, still needs to be ratified by Ukraine’s parliament to enter into force. This will most likely not take place until after the next presidential election 2015.

All this means that no one should be reaching for the champagne quite yet. But even if the Association Agreement is not signed, important progress has been made; the foundation has been laid for more constructive discussions on Ukraine’s EU integration. The borderland may still be a corrupt state dominated by a clutch of billionaires, but it is slowly making the reforms demanded by Brussels. And the probability that Mr. Putin’s intimidation will continue makes it all the more likely that Ukraine’s path runs west.