Archive for December 22nd, 2015


So ends The Kremlin tragicomedy diplomacy to prevent the DCFTA

December 22, 2015

The 21st December saw the final opportunity for The Kremlin to further obstruct, delay and undermine the ratified DCFTA between Ukraine and the EU pass without managing to achieve a single goal.

The ratified EU-Ukrainian DCFTA will come into effect from 1st January 2016 with no concessions or further delays – and rightly so.  The Kremlin having managed to delay it by 12 months already, it has failed to delay it once more – let alone scupper it.

Thus with effect from 1st January 2016, what amounts to a trade embargo upon Ukrainian goods by The Kremlin simultaneously comes into force with the market opening DCFTA with the EU as far as Ukraine is concerned.

As stated in previous entries, the net effect will be to push Ukraine more swiftly toward European integration and develop other markets.  A Ukrainian-Turkey FTA seems an assured outcome with both soon to be subject to self-harming Kremlin sanctions – “The question therefore, is how long will any such Kremlin instigated embargo upon Ukrainian goods last? The answer will be in years – but how many?

A glance at the 1990’s would suggest that as a petulant and truculent Kremlin embargoed almost all trade with the eastern European and Baltic States as they swiftly stepped out from under The Kremlin shadow, they rapidly redirected their trade flows. Naturally a free trade agreement with the EU, let alone the deep and comprehensive one that comes into force, means that Ukraine will have little option but to make the most of that opportunity (and other opportunities outside of Europe). Those certain Ukrainian businessmen that pre-war in The Donbas who would have tried to slow such a process due to their trade interests with Russia, having seen them dramatically effected by Kremlin sponsored events in the east, will also be forced to look to other markets during the (likely) forthcoming embargo years.

During the early 2000’s, similar Kremlin embargoes on Moldova and Georgia forced trade reorientation with Europe (and others) too.

The end result being that when The Kremlin relaxed and/or removed its imposed embargoes, pre-embargo trade levels never returned – with any of the nations involved.”

The failure of the last minute talks was of course anticipated by everybody.

Nobody expected any progress or breakthroughs.  The EU and Ukraine had made it perfectly clear that under no circumstances would the DCFTA implementation be further delayed.  The Kremlin had already authorised what will amount to a trade embargo with Ukraine with effect from 1st January 2016.  Ukraine had unilaterally in January 2015 adopted EU standards as its benchmark, and on 16th December issued a Decree abandoning the Russian/Soviet GOST standard system, coming fully into force in 2018.

Against such a backdrop there would either be a sensible negotiation regarding country of origin certification and other technical issues to facilitate trade – or there would be a Kremlin diplomatic tragicomedy put forward that simply could not be taken seriously (and in fact would be laughable).

It so came to pass that, unsurprisingly, the later diplomatic tragicomedy was presented to the EU and Ukraine by The Kremlin, and the meeting was described as “surreal” by Ukrainian FM Klimkin.

So what were The Kremlin demands of the EU and Ukraine presented?

The Kremlin wanted Ukraine to maintain acceptance of Russian GOST industrial standards for another 10 years – even within the sectors where Russia and Ukraine have absolutely no trade.

As this would lead to unfair competition in the Ukrainian market between goods produced according to EU standards and goods produced according to Russian standards, it was simply a non-starter considering all the aforementioned ratified legal instruments and Decrees already in existence.

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The Kremlin insisted that Ukraine, as a matter of principle, recognise Russia’s SPS rules for Russian food exports, which had Ukraine done so would prevent Ukraine applying the DCFTA in this regard.  As a matter of complete farce, The Kremlin further demanded that Ukraine implement the Russian bans and restrictions on certain animal products and plants vis-à-vis the EU. In short, this would mean that Ukraine would have to apply the Russian food embargo against the EU.

Regarding customs, The Kremlin requested that the EU provide extensive data on prices and customs valuation information to Russia for each and every single transaction on goods exported to Ukraine. An absolute no-go for the EU as it would be in complete contradiction with the EU privacy legislation and the protection of confidential business information. Furthermore, this would not provide The Kremlin assurances about the origin of the goods imported by Russia, one of the consistent points of opposition raised by The Kremlin and used as the premise for what will be a Ukrainian goods embargo.

The Kremlin also presented demands in other areas that are entirely unconnected and completely estranged of the DCFTA.

By way of a few examples, The Kremlin claimed that Ukraine would have to adopt the EU’s energy legislation because of the DCFTA – which is absurd.  The text of the DCFTA only reiterates Ukrainian commitments already undertaken within the Energy Community Treaty framework.  An entirely separate legal instrument to which Ukraine has adhered since 2011.

Bizarrely, even though Ukraine has adhered to its ECT commitments since 2011, The Kremlin now insists, some 4 years later, that Ukraine in doing so (and thus in separating itself from the Russian system), threatens the entire functioning of the energy system (which has been unaffected since 2011 when the “separation” actually occurred).

Technically speaking it is absolute and utter flapdoodle, balderdash and codswallop, and various degrees of complete oratory arse!  It is technically unfounded (and has no connection with the DCFTA, which does not prescribe any rules or recommendations in this respect).  Technically and practically, the electricity connection, and thus trade, is possible regardless of which grid synchronisation is chosen.

By way of example, the Baltic States are synchronised with the Russian electricity grid while the UK or the Nordic States are not synchronised with the grid of Continental Europe. Nevertheless all of these countries are still connected with the EU electricity market.

In another degree of diplomatic lunacy, The Kremlin wanted to include investment issues in the trilateral negotiations/talks/gobbledygook.  There are no investment provisions within the DCFTA, and therefore Kremlin requests for higher investment protection for Russian companies in Ukraine are well outside the scope of these any DCFTA discussions.  Russian investors and their investments are subject to the bilateral investment treaty between Russia and Ukraine.  It has absolutely nothing to do with the EU nor any EU Member State.

The upshot of the tragicomedy presented by The Kremlin at the last chance (because the festive season prevents any further meetings prior to the DCFTA entering into force on 1st January) to find some form of agreement and/or consensus, is that during 2016, the already radically reduced Ukrainian trade with Russia will probably decrease by another $900 million – which is not a figure that will undermine Ukraine even in its current economic circumstances.

The EU may be an incoherent foreign policy actor, an abject defence failure, a bureaucratic behemoth – but it is a truly significant global trade player.  (Arguably the only other claim it has as a significant global player is in “aid”.)

The question therefore to be asked, if knowing that presenting such complete nonsense could never be accepted either by the EU nor Ukraine, why do so?

The answer is clearly that The Kremlin had nothing to offer either side, had no intention of making any concessions despite the self-harm failing to do so will cause, was sat at the negotiating table in bad-faith once again, and had already accepted there was no longer any way to undo or further prevent the EU-Ukraine DCFTA fully entering into force.  So why not?

Thus with tragicomedy diplomacy over the DCFTA having produced the results that such diplomacy delivers – tragicomedy outcomes – why not turn the final negotiation/discussion session into a farce?  For The Kremlin the only outcome ever acceptable to to prevent the agreement entering into force – and it has failed.

Domestically however, The Kremlin can inform its audience that up until the very last moment it tried to avoid the loss of Ukrainian produce in the Russian consumer marketplace and avoid implementing (another) embargo on a neighbouring State (albeit one full of fascists and not US arse-licking Turks this time).

(Ukraine can presumably look forward to Visa-free travel with the EU at some point within 2016 – and thus upon the same date that enters into force and in true Kremlin reciprocity style, we will probably witness the reintroduction of Visas for Ukrainians entering Russia.)

Nevertheless, regardless of the merits or otherwise of the EU-Ukraine DCFTA, and no matter what gibberish presented by The Kremlin, it is somewhat reassuring to witness no concessions offered to the Kremlin at the last moment.

There can be no room for a third party veto on any bilaterally ratified legal instruments.

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