Last two months have been marked by active and all-round pressure on Ukraine by Russia, and the "customs war" has become its brightest manifestation. At the same time Moscow does not hesitate to warn about horrors Ukraine may expect if Kyiv sings the Association agreement with Brussels. But at the beginning of October Russian President Vladimir Putin suddenly declared that the Association would bring no political problems for the bilateral relations. "I am sure Ukraine and Russia are true fraternal states, and we will keep cooperating as we do now."

However, the official was not slow to specify that economic relations are another matter and that Russia will take measures to protect the federal market. "If our neighbours opt to significantly liberalise customs rules with the European Union, the Ukrainian market will inevitably be flooded with high quality goods … and Ukrainian goods will be forced out of the Ukrainian market. Then, member states of the Customs Union will have to think about protective measures. Such a possibility exists." At the time he added that both countries should hold talks at the governmental level to estimate the consequences of the creation of the free trade area with the EU. Ukrainian Foreign Ministry says they proposed this solution long time ago, and "it seems we have been finally heard". Moreover, Ukrainian PM Mykola Azarov and his Russian colleague signed in Kaluga the "Road map on investment, financial and industrial cooperation" and agreed to create a grain pool.

So, what are the real intentions of Moscow regarding relations with Ukraine and what consequences should we expect after signing the Association agreement with the EU? ForUm has tried to find out...

Economic threats...

Putin's apologetic tone implies that Moscow has finally accepted the idea of the Association agreement and wants to save the face in front of the inevitable, not abandoning the threats though.  For sure Moscow has already worked out a plan of  sanctions to be introduced right after the announcement of signing of the Association agreement. In fact, minister of trade of the Eurasian economic commission of the Customs Union (EAE CU) Andrey Slepnev confirmed in September that the sanctions would be applied not only to import, but also to export of Russian goods on Ukrainian market.

Moreover, the EAC developed the draft bill "On protective measures against violations of tariff preferences regulations by third countries" long time ago. The measures are planned to be introduced already on November 1. The document says that "considering that a number of CIS countries, key partners of the Customs Union, opt to enter close trading relations with the EU countries, thus creating free trade, there are risks of import of customs free goods, produced in the EU, but pretending to be of CIS manufacturing." It is not difficult to guess what "CIS countries" are meant here. Moreover, the document provides for monitoring of import, field check in the country-exporter ("by its consent"), and, "as a last resource", suspension of admission of certificates of goods origin, which are the basic customs document.

Most probably, the sanctions will be applied after the signing of the Association agreement between Ukraine and the EU, just to "make the point" and "in execution of pledges". In fact, Moscow already had the "dress rehearsal" in August, when closed borders for Ukrainian goods, which was practical noncompliance with the norms of the free trade agreement within CIS. In this respect, expert on economic policy Vitaly Kulik notes that "Russia takes liberty to bend the rules as it sees fit, but demand from others to observe them to the letter. In fact, Russian elite allows itself to treat us, as well as other CIS countries, as "little brothers". Such attitude can be open or hidden, but it is always there."    

... and real benefits of Moscow

On the other hand, the analyst continues, "sticks alone do not fill the purse". Indeed, the Kremlin does not need permanent conflict with Kyiv, thus it needs to give us a "carrot" as well. Therefore,  most probably sanctions will be lifted after some time. First of all, export to Russia is not a favor on its part, but an unbiased demand of local consumers (from food and metal-roll to pump and compressor equipment and railroad cars). Buyers simply cannot suddenly drop purchasing products, "tailored" to specific industries (Russian main pipelines, for example, are assembled with pipes of Khartsyzsk Pipe Plant). Secondly, Moscow itself is interested in export to Ukrainian markets, considering that in 2012 the trade turnover exceeded $9 billion, excluding gas supplies. 

Moreover, according to Oleh Ustenko, executive director of the International Bleyzer Foundation, Russia can use the free trade area "Ukraine-Europe" to access EU markets with its own goods through moving its production on the territory of Ukraine. In fact, Russia has already had similar experience: take, for example, the hardware plant "Dneprometiz", Donestk electrometallurgical works, vehicle assembly plants (VAZ, GAZ, UAZ), Donbass Industrial Union, local branches of Russian banks, etc. Besides, Russia also can move its East-specific modern enterprises on Ukraine's territory, which in turn will support Ukrainian economy, improve the employment rate and become the very cooperation officials speak so much about. 

In turn, Europeans also assure that Moscow will benefit from the free trade area agreement between Kyiv and Brussels. Thus, European Commissioner for Enlargement and European Neighbourhood Policy Stefan Füle said recently that the Association Agreement with Ukraine would not be concluded at the expense of Russia. "Agreement has not been drafted to infringe the interests of Russia. Russia will greatly benefit from the integration of the "Eastern Partnership" states in the European economy. The agreement will contribute to the creation of the common economic space in the long term, as we say - from Lisbon to Vladivostok on the basis of WTO rules."

Economists sum up that some years after Vilnius Summit our country may become some sort of a neo-Baltic country for Russia. "Talking to Baltic countries means to talk to the European Union, where Russia's imperial arrogance and attitude are not taken seriously," Kulik notes.

Political complex of Kremlin...

Ebbing of influence on a "little bother" is considered by Russia not only as an economic loss, but also as a political failure. In fact, head of the CIS executive committee Sergey Lebedev has admitted that the Eurasian integration project is not complete without Ukraine, and Moscow elite shares his opinion. However, Russian officials have no choice but to accept Ukraine's European course, and our sources in Moscow confirm that the majority of politicians and businessmen realize the inevitability of Ukrainian-European rapprochement and now think about the ways to make use of it. They set the task to preserve as much influence in Ukraine as possible, and in exchange for the "delivery" to exact certain concessions from Brussels. The matter concerns the strengthening of its political and economic interests in Europe, including stable supplies of gas and support of Moscow's position regarding Syria. Such agreements are very common for international politics.

In this case, "Ukrainian" policy of Russia may indeed follow the developments of the European integration of Baltic countries, Kulik believes. In first two-three years Russia will apply pressure and sanctions, but then the anger will smooth down, pressure will become occasional, and we will finally be taken as a serious equal partner.  

Moreover, Kyiv is not alone in its "fight" with the Customs Union. Belarus leader Aleksandr Lukashenko has said recently that Belarus has nothing against Ukraine's European integration and is ready to continue cooperation. Minsk has a long-standing conflicts with Russia and some days ago the "father" threatened to withdraw from the Customs Union, "if there is no economic benefit from it". By the way, even Russian specialists admit that since the launch of the Customs Union project, Belarusian trade with other members has been falling down. Thus, in 2012 the decline in trade with Russia made 9.4%, and in the first half a year of 2013 - another 9.2%. Similar tendencies are observed in the foreign trade of Kazakhstan. In general, Moscow preserves discriminating measures against its CU partners, thus no surprise that Minsk and Astana speak about withdrawal more often now.  

... and real future of relations

Considering the above said, the Kremlin has no choice but to take certain steps to accommodate Kyiv, political scientist Kost Bondarenko believes. "Firstly, Russia cannot afford to lose such important economic partner as Ukraine: as of today our mutual trade turnover is higher that Russia's trade turnover with other members put together. Secondly, support on the part of Brussels and Minsk also plays its role. No matter what we think of Putin, he is a serious and wise politician, thus he will not come into unnecessary conflict."

In turn, European experts call upon Ukraine not fear Russian threats. According to Yaroslav Bratkevich, political director of Polish Foreign Ministry, when Visegrad Group countries were in the process of entering NATO, Moscow also made harsh attacks. "Russia warned that if we joined the Alliance, our relations would worsen. But... nothing happened. And when we were in the process of integrating into the EU, the Kremlin worried that its Kalinigrad region would become completely isolated. But now its the most open federal district, through which Russians literally flood northern Poland. In general, V4 and Russia keep improving economic and political relations, and I think the same will happen in your case," the diplomat said.

Thus, after Vilnius Summit, the relations with Moscow will change, and Ukraine will become a sort of a neo-Baltic country, in both economic and political aspects. The difference is that benefits from cooperation with Ukraine are way bigger than from small Baltic republics. Let's hope that Ukraine's European integration will finally make the Kremlin consider us as an equal partner, worthy to launch joint projects and achieve mutual benefits. 

Andriy Boyarunets


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