Posts Tagged ‘Eurasia Union’

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Trade reciprocity and circumvention – Ukraine & the neighbourhood

December 25, 2015

Looking away from the usual “last minute legislation” expected from the Verkhovna Rada when it comes to facilitating its domestic and international obligations, most recently the tax and budget laws for 2016, the Verkhovna Rada also passed legislation allowing the Ukrainian government the ability for reciprocity when The Kremlin trade embargo with Ukraine commences on 1st January 2016.

A Kremlin inspired embargo (in all but name) is timed to commence simultaneously with the full implementation of the EU DCFTA with Ukraine.  In short the Government of Ukraine may now apply the same rules of the game to Russian produce as The Kremlin will do to that of Ukraine.  The Ukrainian law passed on 24th December with 291 votes in favour from the 420 deputies registered in the chamber.  (226 votes were required to pass the law).

So be it.  Trade between Ukraine and Russia has plummeted following the illegal annexation of Crimea and the occupation of parts of The Donbas in the east.  With a further $900 million reduction anticipated from The Kremlin applied embargo to Ukrainian products, there is really little further damage of significants any Ukrainian instigated trade warfare with Russia will do to its own economy.

Indeed Ukrainian trade will expand with China, the EU, Turkey, Israel and several MENA nations.  Most economists predict economic growth of about 2% in Ukraine during 2016.  They may be right, depending upon the scale of Kremlin designed and controlled hostilities in eastern Ukraine that will undoubtedly continue throughout 2016 – and beyond.

The issue for Ukraine is not returning to growth in 2016 – the issue is maintaining that growth in 2017, for that will require market reforms that thus far have been glacial in coming.

However, necessity is the mother of invention – or perhaps better stated, the mother of circumvention.

Belarus

Just as it is possible to purchase Belorussian (EU produced repackaged) seafood products in supermarkets in Moscow – Belarus being that entirely landlocked nation renowned for its seafaring abilities (not) – it seems highly likely it will be possible to buy Kazakh produce (that it doesn’t produce – Ukrainian products repackaged) in Moscow supermarkets too.

Indeed it is of note that since The Kremlin’s actions against Ukraine, fellow CIS and EurAsian Union (EEU) nations Belarus and Kazakhstan  have hardly been swift in publicly supporting Moscow.  An inherent problem with allies being coerced or bought off by The Kremlin in order to earn the title of “Kremlin ally”.

Kazakhstan has recently seemed to have taken, if not a more anti-Kremlin stance, then certainly a stance that is so pro-Kazakh – that will be perceived as somewhat anti-Kremlin.  Despite the supposed trade rules of the EEU, Kazakhstan went ahead and signed a political and trade agreement with the EU on 21st December.

Kaz

Perhaps understandable, for Kazakhstan and Ukraine have some commonalities within The Kremlin – President Putin has inferred publicly that both are not truly sovereign/real States over the past few years.  It may thus be felt in Astana that whilst The Kremlin distracted by busily making poor decisions over Ukraine, Syria, Turkey (and eventually it will with Iran too) – notwithstanding even worse domestic decisions –  now is the time to act and prudently insure its essential place in a Sino-European trade route now.

That said, Astana will be more than aware that President Putin looks set to remain in power for at the very least (discounting ill-health) a few more years yet – and the “collective Putin” even longer.  Some delicate decoupling is required, together with a swift coupling with Chinese and European interests to avoid any gaps, and thus weaknesses, that can be exploited if and when the Kremlin’s Eye of Mordor fall upon Kazakhstan.

Kazakhstan is also receiving more than 10 times the Chinese FDI than Russia currently – much “Silk” related.  Indeed due to the Chinese Silk Road/Iron Rail/Silk Belt projects, Kazakhstan and Turkmenistan particularly in Central Asia, are looking east to China and also west to Europe along these trade routes – no doubt Turkey and perhaps Iran eventually will too.  What is becoming painfully obvious is that it looks far less to Moscow, instead is turning a cool (if not cold) shoulder.

It comes then as little surprise that Kazakhstan has apparently reached agreement with Ukraine over continuing trade that appears to simply ignore The Kremlin imposed trade embargo with Ukraine – an embargo that theoretically should effect all EEU members.  Some may opine that such an agreement simply underlines the hollowness of the EEU project – and certainly when not all EEU members are WTO members, then any trade block/major economy to trade block negotiations will not go very far at all.

Furthermore, Kazakhstan and Ukraine have apparently agreed an intensified industrial cooperation too – and having mentioned Turkmenistan, Ukrainian – Turkmen relations appear fairly warm.  A recognition perhaps that Ukraine may ultimately be the final central/northern spur into Europe for the Chinese “Silk” projects, whilst Turkey services the southern European entry – all of which deliberately avoid the territory of Russian Federation entirely.

The relationship between Ukraine and Kazakhstan may well be something worth keeping an eye upon, for it will say as much about the Kazakh intent in the neighbourhood as it will of that of Ukraine.

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Russia is no longer a strategic partner – European Parliament

June 11, 2015

Yesterday the European Parliament passed another resolution relating to Russia.  One of the headline grabbing paragraphs in this latest text stated:

“Russia, because of its actions in Crimea and in Eastern Ukraine, can no longer be treated as, or considered, a ‘strategic partner’.

Russia now openly positions itself and acts as a challenger of the international democratic community and its law-based order, not least by seeking to redraw by force borders within Europe.”

Quite so.  Seemingly ethics and political/democratic values are not quite dead upon the sacrificial alter of economic interests.

Whilst, the full adopted text has yet to appear upon the European Parliament website, it is not going to differ greatly from the text found here of a relevant plenary sitting held in May 2015.  Have a read, for in years to come it may be quite relevant.

As is usually the case, nobody will be surprised to read a similar Duma generated resolution stating that the European Parliament can no longer be treated as, or considered, a “strategic partner” – The old “reciprocity rules” dictate such a response is likely.

The effect of this resolution on The Kremlin and its thinking, however, is likely to be little to none in the immediate.  It holds the same general contempt for the European Parliament as it does for the Russian Duma.  The only EU institution The Kremlin may have adequate respect for is the European Council, and that is because it is made up of the 28 national leaders who decide on any meaningful collective EU foreign policy – and even then, it would greatly prefer to ignore that institution where ever possible and deal bilaterally with the 28 national leaders.

However, looking a little further into the future, any EU recognition and subsequent agreements with the Eurasian Union would require a favourable European Parliament if ratification of legal instruments is required.

Whilst it may be quite some time before the EU gets anywhere near officially recognising the Eurasian Union through meaningful interaction – though should China do so and start signing and ratifying meaningful deals then perhaps that time line may quicken – it would be difficult for the European Parliament, having disowned Russia as a “strategic partner” for all the reasons listed in the above link, to then begin ratifying legal instruments of a strategic nature – unless all the remedies proscribed in the above link have been implemented.  Don’t hold your breath!

Thus, this resolution is quite meaningless to The Kremlin in the immediate term – long term however, it may become somewhat problematic.

If we are to ponder whether China will recognise the Eurasian Union and sign/ratify meaningful legal instruments, the question has to be why not?  Any dramatic expanding of Chinese economic weight throughout the Eurasian Union space – a weight that will dwarf that of the Eurasian Union members – will in turn get free security via the CSTO for its investment in that geographical/geopolitical region should any local unrest put such investment at risk.

Entirely sensible from a Chinese point of view, but Russian dependence upon China is as distasteful to The Kremlin as dependence upon the EU.  A counterweight would be desirable.

Therefore potential “issues” may lay in wait following today’s European Parliament resolution, despite any scoffing at its impotency today.

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Russia’s Duma ratifies Eurasian Economic Union

September 27, 2014

Today saw the Russian Duma ratify Eurasian Economic Union – the wannabe regional challenger to the European Union, at least in part.

Like the EU, it is supposed to be built upon the overarching principles of free movement of goods, services, labour and capital – as far as the economics of block status go.  How that will sit with the “Russia for Russians” nationalist rhetoric remains to be seen when it comes into force.

Belarus and Kazakhstan are expected to ratify their entry into the EEU in the near future, with the entity EEU agreement coming into force from 1st January 2015.

The EEU also differs in some significant ways to the EU, to the point where the EEU agreement is completely incompatible with the EU DCFTA’s recently ratified by Ukraine, Moldova and Georgia.

The EU DCFTAs ratified by Ukraine, Moldova and Georgia fit together far better with the existing Confederation of Independent States FTA, and a few nuanced teaks of that CIS FTA would have allowed for a very reasonable fit.  Whether that will now comes to pass seems unlikely in a world where The Kremlin operates on zero sum.

The original CIS FTA comprised of ratified signatories, Russia, Belarus, Kazakhstan, Ukraine, Moldova and Armenia, with Kyrgyzstan and Tajikistan signatories that remain without national ratification.  The other CIS nations, Azerbaijan, Turkmenistan and Uzbekistan have never signed nor sought membership of the CIS FTA.

Thus on one side there is now Ukraine, Georgia and Moldova with ratified DCFTAs with the EU – and Russia, with Belarus and Kazakhstan soon to follow, with ratified EEU agreements.

Armenia, it has to be said, is currently under extreme Kremlin pressure to join the EEU despite considerable resistance within its society and the political class.  It is clearly the next Kremlin target for assimilation within the EEU, with “No” not being an acceptable answer.

Whether Kyrgyzstan and Tajikistan will eventually join remains to be seen.  Kyrgyzstan has a mere 300 plus issues with the EEU with which it is trying to lodge reservation (exemption) against within EEU treaty.  (Armenia 900 plus).    It may after all ratify the CIS FTA.  That said, The Kremlin will want to see its new entity expand and be seen to be attractive – even if members are actually bullied into joining.

Azerbaijan is currently plainly not interested in any such agreement with either the EU or the EEU.  Thus whilst there may be the usual manifestations of the resource curse for democracy and human rights, that oil and gas as far as the Azerbaijani leadership is concerned, is sufficient not to want binding block trade deals with anybody.  Turkmenistan and Uzbekistan currently do not appear overly enthused with the idea either.

The question therefore arises, what eventually becomes of the CIS FTA?

At the start of the New Year, 3 ratified signatories with EU DCFTAs remain ratified signatories of the CIS FTA.  Another 3 ratified signatories become ratified signatories of the new EEU.  Kyrgyzstan and Tajikistan will still be ratified to no trade agreements whatsoever.

Armenia, as a ratified CIS FTA signatory will probably be forced into applying to join the EEU, but is unlikely to ratify its membership before the EEU comes into being.

The CIS FTA therefore either becomes a poor relative of the EEU agreements for some nations, or it becomes the bridge between both EU DCFTA and EEU agreements at a somewhat lesser level for those ratified to both.  In doing so it maintains the existing legislative regional trade infrastructure for all current ratified signatories in some shape or from,  as it cannot just be scrapped as a legal instrument as long as two or more ratified signatories intend to use it as a legal basis for their trade.  Moldova and Ukraine for example.  Indeed they may have good reason to deliberately keep it alive, even if it became somewhat hollowed out as EEU nations give notice to leave the CIS FTA agreement.

Will the CIS FTA be put to the sword, allowed to stagger on, or be deliberately kept alive by the EU DCFTA ratifying nations as the platform for their trade relations – which would deliberately irk The Kremlin if it wanted to kill it off.

Whatever the case, if there was ever any doubt that the EEU would come in to being, the ratification by the Duma today, has removed whatever doubt that was left.

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Putin’s Ukrainian “solution” – What of the Customs Union now?

December 20, 2013

A few weeks ago I wrote about a very possible cause for Mr. Putin’s Customs Union and soon to be launched Eurasian Union unraveling before it even takes off – “Despite many “experts” and “commentators” stating that without Ukraine it is nothing but a hollow shell, it is perhaps Kazakhstan and not Ukraine that will be the undoing of Mr Putin’s Eurasian political legacy before it even officially gets going. It is no secret that the Kazakhs are very unhappy with the existing Customs Union and will need a great deal of convincing to continue onwards with the new Eurasian Union. Perversely the threat of it unraveling comes not from an unwilling Ukraine, but from within its existing ranks.”

Well, perhaps that threat should now include the other nation in the Customs Union trio – Belarus.

It is no secret that the Belorussian President, Alexandre Lukashenko, has mismanaged his economy for decades to such an extent that it is in a far worse position to that of Ukraine – whom Mr. Putin so graciously bailed out a few days ago to the tune of $15 billion from the Russian National Welfare Fund, together with reducing gas prices by 33% – worth approximately $7 billion per annum until 2019.

However, in several recent visits, President Lukashenko has been told by the Kremlin the cupboard is bare and there is no further money to give to bail him out, despite Belarus being a dear ally and partner – and the Russian cupboard whilst not entirely bare is certainly very close to it, and the Russian economy has stalled.

The result for Mr. Putin will be one of two things.

Firstly, a very upset President Lukashenko sitting along side a very annoyed President Nazarbayev of Kazakhstan who has not seen the benefits of the Custom Union he expected to see.

When President Lukashenko comes again for more assistance, if Mr. Putin refuses to bail out Belarus from the Russian Welfar Fund as well – with everybody now aware that the the Kremlin is prepared to slash prices, lower levies and throw up to $15 billion at a struggling economy – and by extension nation – it wants to control, and that is not even a member of the Customs Union, well surely keeping a member within the fold demands equal financial assistance from a Lukashenko perspective.

In the wake of the Ukrainian “solution”, it is a certainty that the Belorussian regime will be quickly knocking on the Kremlin door with begging bowl in hand and realpolitik in mind.

Alternatively, Mr. Putin can say “No”, but in the current circumstances and with an already very annoyed Kazakh partner, a very upset Belorussian partner may very well spell a crisis for the Customs Union and snuff out any chance of the Eurasian Union ever seeing the light of day when signatories are required in 2015.

With its usual perversity, the regional geopolitics of the region – and the Putin “solution” for Ukraine – may yet be the end of his dream with regard a regional political legacy – as well as relieving  immediate concerns with an exposed EU regarding immediate Ukrainian default.

Pandora’s Box – or rather the Russian Welfare Fund – may just have been opened with no way to close it again whilst sustaining Mr Putin’s vision.  Ukraine may well prove to be its downfall – though we have to suspect that assurances have been made by President Yanukovych that upon reelection, the Eurasian Union will be the favoured direction.

The Kremlin and Mr Yanukovych must therefore hope that the necessary election fraud to keep him in power will be within the parameters of plausible election result manipulation.

In the meantime the EU and those in favour of a definite and binding European integration (not necessarily the same thing as joining the EU) must remember that time – via demographics – are on their side as the USSR become little more than a chapter in Ukrainian history books for those increasing number of voters born to an independent Ukraine.

Keeping the domestic and international pressure on the current leadership via the framing of issues through democratic, transparent good governance is the only durable and intelligent way to win the day – whether agreements are ever signed or not!

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Ukraine – Absent!

December 20, 2012

Much headline space yesterday was given to the cancellation of President Yanukovych’s visit to President Putin and short notice – at such short notice in fact, that the Ukrainian press corps had arrived in Moscow to discover that the visit had been canceled at the last moment.

Media speculation runs rife as to the reason for the late cancellation – was it due to the telephone call initiated by President Barroso of the EU to President Yanukovych, during which he may have persuaded him to leave any formal announcements or signing of deals with Russia or the Customs Union until after the 25th February EU-Ukraine summit?   Or was it, as has been officially stated by both sides, that the documents and deals that were to be signed are not yet ready to be signed?

After all, every president likes to have something to show from an official visit, be they the visitor or the host.

Maybe it was a bit of both?

However, what has not got the media coverage, is that on the same day as the Presidents of Ukraine and Russia were due to meet and didn’t – there were also meetings of the Eurasian Economic Council, the Supreme Council of the Customs Union and Common Economic Space, EurAsEc summit and the CSTO summit – all of which Ukraine can attend in various guises – but attended none!

What to make of that?

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After the elections – Is what happens to Ukraine that important to its neighbours?

October 8, 2012

Naturally there is a lot of interest in the forthcoming elections in Ukraine – particularly so by its immediate neighbours.  To be frank, there always has been since independence was dumped in the lap of Ukraine.

In fact the degree of meddling, both overtly, covertly, cleverly, clumsily, diplomatically and politically, either through direct channels or indirect channels, at a high level or at low, using carrot or stick, is continuous both from East and West respectively.

Both East and West would claim that both would like Ukraine to join their ranks – but neither need it to do so.

Indeed, in August I was sat with a high level diplomat from an EU nation in a hotel in Odessa, who said exactly that – and it is true – but only up to a point – for both East and West alike.

At many levels, Ukraine has little importance to the West or East, whether it plays along with them or not.  It can indeed create more headaches when it does than when it doesn’t.  Cooperation with this or that project, adherence to this or that policy – or not – whilst possibly briefly headline-making if in the public realm, or putting a smile or furrowed brow on the policy makers behind the thrones privately within the corridors of power, rarely addresses the overarching geopolitical and socioeconomic importance of Ukraine to both centres of power East and West.

Without Ukraine, the EU’s Eastern Partnership is meaningless.  That much has been declared openly by many Brussels bureaucrats and diplomats in numerous statements released and/or leaked to the media in recent years.  The failure of that EU policy would be no big deal if Ukraine remained in a grey zone between the EU and the East.  It is though a huge gamble to think that would happen.

Likewise, the Eurasia Union as championed by Moscow, also strives to include Ukraine despite the headaches Ukraine causes Moscow currently.

For those who would pooh-pooh the Eurasian Union concept, I would suggest a rethink.  In fact I have been suggesting such a rethink sporadically on this blog since the autumn of 2011.

I would not be the only one to make that suggestion either.  Both Chatham House and the Carnegie Endowment warn against such complacency.  In fact both consider the Eurasian Union not only likely to become a reality, but also a significant reality that the EU needs to prepare for.

Ergo, whichever Ukraine eventually signs up to – The EU’s DCFTA and AA (and possible membership eventually) or the Russian led Eurasian Union, the ramifications for either side are immense in the grand scheme of things – if not appearing so important in and amongst the minutiae of individual working policies in and of themselves.

Should Ukraine go east, immediately the EU’s EaP would be a nonsense, which as I have already written has been acknowledged by many in Brussels.  Any future EU plans to formally expand eastwards in the next 50 years, also scuppered to any meaningful degree.

Should Ukraine head west, then the Eurasian Union is forced to head east and south-east for meaningful members  whilst allowing a large EU geopolitical, socioeconomic beast to sit along 3000 kilometers of Eurasian Union (Russia and Belarus) borders.

I see no reason to delve into the issues of natural resources, prime agricultural land etc as reasons for the importance of Ukraine to either side, and they are important, but I am more interested in outlining the psychological gains and  losses to the grand plans of both east and west on a global level, that are dependent upon the direction Ukraine eventually takes.

Global perception of Ukraine choosing one over the other has ramifications.

So after the elections, regardless of winners and losers, regardless of them being declared free and fair or not, regardless of the aftermath undoubtedly putting further strain on relations with Ukrainian neighbours east and west one way or another, will either side really disengage with Ukraine?

No.

Despite all the rhetoric past, present, and that to come in the future, very big and very long term plans will be significantly affected by the final resting place of Ukraine within the scheming of others.

Where ever that place finally be, it will not be the end of either supra-structural economic block, but it will have a significant psychological effect on both winners and losers engaged in the tug-o-war over the Ukrainian direction and how those supra-structures will be viewed by those outside looking in just as much as those within the structures themselves.

In this battle, 2015 will be a key year.  Not only is it the year the Eurasian Union formally emerges as a supra-structure aimed at balancing EU geopolitical and socioeconomic weight on the Eurasian continent, but it is also the year that President Yanukovych is also up for reelection.

Also by 2015, the German elections will have occurred (2013) and European Parliament elections (2014), meaning any treaty changes to Lisbon, and therefore the shaping of an EU that Ukraine may – or may not – ultimately join, will have been framed no sooner than the end of 2014  at the earliest.

One has to suspect that should Yanukovych be reelected, before the end of his second and final term in 2020, a strategic choice between the EU’s DCFTA, AA (and eventual membership) and the Eurasian Union and immediate membership will have been made, signed and sealed.

From an EU perspective, the sooner something moves the better, as public opinion per recent polls is decidedly reversing and heading eastwards once again with regards to the preferred polarity of any future economic integration – no doubt a sentiment in some part fueled by the continuing farce of the Euro and Eurozone issue.

From a Eurasion Union perspective, the longer the EU fails to deal with the Eurozone issues allowing Ukrainian society to ponder the lack of leadership and consequences of its inactions in Greece, Italy, France et al, all who have seen serious and sporadic on-going civil disobedience, not to mention the current EU political ill-wind blowing towards all things Ukrainian, the better.

All in all – there is still a lot of  meddling, both overtly, covertly, cleverly, clumsily, diplomatically and politically, either through direct channels or indirect channels, at a high level or at low, using carrot or stick, to be done with respect to Ukraine and the grand plans of the EU and Eurasian Union.

What?  Oh!  No – option 3, Ukraine dealing with both equally is not an option in either grand plan – whether Ukraine likes it or not.

An interesting 5 – 7 years ahead, as that will determine the final outcome – an outcome I would not like to predict, despite the rhetoric in the public realm.

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