Ukraine may still join the Russian led Customs Union

Remember this from only a few days ago?

I pointed out that waving a diplomatic stick that the EU does not yet hold by way of DCFTA or AA agreements to beat Ukraine with over issues like the trial of Ms Tymoshenko seemed somewhat previous given they have not yet even been concluded and that there are others holding handfuls of carrots who do not care what happens to Ms Tymoshenko.

I pointed out that lengthy delays over ratification should the Tymoshenko result not be to the EU liking also provided a very real chance that the EU will be left at the alter by a Ukrainian bride after years of courtship.

Of course the EU should use the ratification process as a possible stick to maneuver the Ukrainian leadership over Ms Tymoshenko if they think she is worthy of using such a grand lever for. They will not be able to consistently wave the same stick around over any issue they dislike as Peter found out when crying wolf, especially when others are circling and seeking courtship with Ukraine with just as much economic bilateral trade at stake.

Well, just two days after the EU publicly started to threaten to beat Ukraine with a stick they don’t yet hold, President Yanukovych gave an address to the Ukrainian parliament that included this:

“If Ukraine finds it of use it will join the Customs Union. We have made calculations, some of which indicate that membership of the Customs Union will bring us advantages, while others show that it is of no use. We must watch the Customs Union operating in a couple of years’ time and see how relations will be structured within it, when its members join the World Trade Organization. If this membership is advantageous, provided there is political will, we will give our consent.

We will turn to the Ukrainian parliament, as we will need to amend the Constitution, which today does not allow us to form supranational bodies. And we will turn to the people, if the need arises to call a referendum. So, concerning the prospects, we, as any normal state, continue assessing them.

When an invitation arrives, it is always welcome and we are grateful for it. But when we are being invited as now, we are surprised.

The Customs Union has been formed and it is working, and we must understand how trade and economic relations should be built with Russia, Kazakhstan and Belarus. Perhaps it is normal not to be willing to create fresh problems for the industry and economy.”

Now I may not be the sharpest tool in the foreign policy tool box, however that statement reads to me as though whilst the EU DCFTA is the preferred option and will continue until negotiations are concluded and agreements initialed, any thoughts of the EU slowing the ratification process for more than a few years will indeed mean Ukraine walking away from the alter. After all Ukraine would be no worse off than it is today if it did.

When half your trade goes East and half goes West and both want you in an exclusive club, one or the other is going to be disappointed. Russia is normally far more obvious when it comes to showing its disappointment than a far more sensitive EU.

Meanwhile I understand FTA negotiations between Turkey (who already seem to be turning their backs on the EU after so many years of being a bridesmaid and not the bride) and Ukraine are picking up pace and reciprocal Visa systems have been agreed beginning 10th September when the major Visa system changes come into effect. (More on that on the day).

One has to anticipate an increase of Ottoman economic activity in Ukraine within the next few years that being the case.

It seems Ukraine can also can wield diplomatic sticks it does not yet hold and it is not simply an EU preserve.

Fortunately it is a fair bet that whatever the outcome of the Tymsoehnko (and others) trial, far too much effort has already been put into the DCFTA to allow that to fail. After all, the USSR kept supplying gas throughout the Cold War to the West.

The AA, which is based on more “moral” foundations than the necessities of trade, however, may be a different matter.

Anyway, it seems we have had an exchange of shots across the bows from both sides within a matter of days, none of which seriously threaten the conclusion of the DCFTA or AA negotiations, only what happens afterwards.

2012 is going to be a tremendously interesting foreign and domestic policy year both here and within the EU and its Member States.