Life after Vilnius

27 october 2013

A New Geopolitical Configuration for Ukraine

Dmitry Yefremenko has a PhD in Political Science. He is Deputy Director of the Institute of Scientific Information on Social Sciences at the Russian Academy of Sciences.

Resume: Ukraine will experiment on itself and all the other countries in the post-Soviet space are looking forward to watching how it ends. Whether the ensuing economic or institutional changes over rapprochement with the EU appear tangible and positive will determine Russia’s own conduct and the conduct of countries that still rely on it.

This article presents some of the results of a project conducted as part of a Russian Academy of Sciences program: “Perspectives of Coordinated Social and Economic Development of Russia and Ukraine in the Pan-European Context.”

A political anniversary passed largely unnoticed on 12 September 2013: fifty years ago on that date Turkey and the European Economic Community signed an association agreement. Although it might be a good time to look back on what has been achieved since then and make plans for the future, Turkish politicians have largely ignored the anniversary. And for good reason! While the association agreement resulted in tangible economic benefits for Turkey, in the political sense it doomed that ambitious country to 50 years of humiliating uncertainty in the antechamber of a unifying Europe. Today Ukraine, another large country, is impatiently waiting to be let into that antechamber. But no political analyst in his right mind will state that Ukraine will not have to wait longer than Turkey for full-fledged European Union membership.

And still, the agreement of association between Ukraine and the EU, scheduled to be signed on 28 November 2013 in Vilnius, Lithuania, will be a landmark in the history of post-Soviet countries. The agreement envisages the creation of a Deep and Comprehensive Free Trade Agreement (DCFTA). The event as such will not bring about instant economic or institutional transformation; on the contrary, Ukrainians will either notice that everyday life has improved slightly or has gotten worse. However, in the geopolitical sense, Ukraine will enter a new orbit and by zero sum game logic, to which Russia and the West have in fact returned, this will be seen as a strategic loss for Russia.

WHAT SHOULD RUSSIA DO?

The Vilnius agreement will likely have a greater impact on how the Russian political elite and society view the world rather than on Russia’s immediate interests. However, this is not the end of the world! The emergence of a new, unfavorable geopolitical configuration will force the Russian leadership to choose from a variety of options, depending on strategic targets. In the most abstract terms, this choice will be limited to returning Ukraine to the former geopolitical orbit or fundamentally revise the rules of the game in relations between Russia and the EU.

Will Ukraine turn towards Russia after Vilnius? Statements about the “irreversible European choice” are better left for Ukraine’s domestic political use. After all, the point at hand is the scale of material, political, diplomatic, information, and other resources Russia might be prepared to employ to influence Ukrainian elites and public opinion. For the past few months a great deal has been said about Ukraine’s annual economic benefits from joining the Customs Union, which will range from $6-12 billion. These benefits could be achieved through a drastic reduction in the price of Russian gas, the lifting of export duties on petroleum products, and the creation of a preferential regime for the supply of Ukrainian food products. Moreover, Ukraine will be entitled to compensation with its transition to the Customs Union’s unified customs tariff. Undoubtedly, the brunt of this burden will be placed on the Russian taxpayer during the first phase of Ukraine’s geopolitical membership in the Customs Union. Yet all of this was not enough to persuade Ukraine not to sign the DCFTA or to join the Customs Union. No doubt the stakes will increase after the agreement on association and free trade takes effect between Ukraine and the European Union. With a sluggish Russian economy, relatively high oil prices, and renewed growth in Western economies, geopolitical expectations will serve as an excuse for such a financial burden. Russia has no guarantees that such a strategy will be successful, because relations between Russia and a united Europe could become confrontational within the framework of that scenario.

The alternative looks very hypothetical at this point. It concerns fundamental changes in relations between Russia and the European Union, and Ukraine’s integration into this system of relations as a full-fledged participant. The key to this strategy should be based on recognizing Ukraine as a key factor in Russian-European interaction and devising an inclusive approach to Kiev. Clearly, this condition alone will be very hard for the Russian leaders to accept. However, the political and institutional incompatibility of modern Russia and EU countries is a much harder obstacle to overcome on the road towards a strategy of mutual benefit. Harmonizing the diverse interests of countries with similar political regimes is one thing, but doing the same in relation to countries whose political institutions, norms, and practices are moving in the opposite directions is something very different. Over the past eighteen months this discrepancy has acquired a new quality and has considerably narrowed the maneuvering room in Russian foreign policy towards the West. Even Russia’s recent diplomatic success on the Syrian issue merely emphasizes this. It looks like the European Union and the U.S. will take extra efforts to ensure that Russia’s triumph in Geneva is counterbalanced by a geopolitical knockdown in Vilnius.

Political transformations are not a guarantee that Russia, Ukraine, and the European Union will achieve a strategic partnership. What is of decisive importance for Russia’s future is a real division of power and reconciling the institution of the presidency with the system. Additionally, the Russian government needs to separate the state from property, ensure genuine free and fair elections, promote a new generation of political leaders, and replace the old political and economic elites with new people. These changes, however, will at least create the possibility of conducting a dialogue in a common language and enable all participants to understand that a policy that guarantees joint gains is far more preferable.Apparently, none of these strategies can be implemented in full within months or years after the agreement is signed in Vilnius. Under one scenario, the economy will be the stumbling block; under another, the logic by which the Russian political regime operates will cause problems. Nevertheless, even if Russia does not take any harsh, emotional steps in retaliation for Ukraine’s joining of the DCFTA, a number of quality changes in Russian policy towards Ukraine will manifest themselves before long. Firstly, Russia will have to take protective measures when trade barriers between Ukraine and the European Union are removed. It is important that these measures agree with the principle of reasonable sufficiency and not look like simple revenge. After the Vilnius conference, there will be no reason to preserve the preferred trading and economic relations that Ukraine enjoys, which Russia introduced with a view to that country’s future full-fledged participation in Russia-centered integration projects. At the same time, a wrong decision could follow that would curtail programs for inter-regional cooperation, which would hit primarily the residents of the Crimea and Ukraine’s eastern and southern regions, many of which are still pressing for a special relationship with Russia. It would make more sense to expand such programs.

Russia will make a serious mistake if it closes its labor market to Ukrainian workers. Soaring social tensions over the problems of labor migration are certainly not caused by Ukrainian guest workers looking for jobs in Russia. On the contrary, job qualifications, knowledge of the Russian language, and cultural similarities should, in theory, make Ukrainian migrants welcome guests in Russia. The economic problems Ukraine will face after it signs the association agreement with the EU might fuel an influx of labor migrants to Russia. If that happens, those workers should not be sent back to Ukraine.

The launch of a major student grant program to attract thousands of students from southern and eastern regions in Ukraine to Russian universities could be one of the asymmetric responses to Ukraine’s geopolitical reorientation. The size of the grants should be competitive with those under similar EU programs. This student program might help form a youth cohort of campaigners who want to prioritize developing relations with Russia. Also, it might spell tangible benefits for participating universities in Russia. It is reasonable to offer university graduates involved in this program a wide variety of opportunities, envisaging not only their return to Ukraine, but also various options of further employment in Russia.

Of special note is Ukraine’s hypothetical presence in two free trade zones after the DCFTA becomes effective; that of the CIS and the European Union. Although not unique in the global economy, this situation is unprecedented in post-Soviet space. All the effects of Ukraine serving as a link between the two free trade zones are hardly possible to assess at this point, although Russian officials prefer to focus on the negative aspects. It cannot be ruled out that the worst damage will stem not from the transit flow of European goods across Ukraine to the Russian market, but from preventive measures Russia might take and retaliatory measures by Ukraine and the European Union. In any case, this kind of situation will not last long. Ukraine may try to derive political gains from its special position and to propose some trilateral mechanism to regulate trading relations, which, once operational, might change into a discussion to consider the idea of creating a free trade zone from Lisbon to Vladivostok. Brussels will hardly dismiss this idea offhand, because (1) European exporters will benefit the most from the liberalization of mutual trade, and (2) Russia’s participation in trilateral negotiations would be tantamount to actual recognition of the geopolitical transformation that is about to take place. Russia will likely face a dilemma. If the trilateral dialogue concept implies only a discussion of free trade zone issues, then the Russian leadership will most probably prefer to avoid such talks. If Russia is eager and able to propose a wider agenda, then it is precisely this format that will help steer Russian-EU relations out of profound stagnation.

Events could also develop quite differently. Refusing to hold a trilateral dialogue and escalating protective trading measures will in fact push Ukraine out of the CIS free trade zone. This process will not be smooth and in all likelihood will end the CIS era. Strictly speaking, the whole process was triggered nearly a decade ago with the series of ‘color revolutions’ in a number of post-Soviet countries. The possibility that some CIS countries may conclude association agreements with the EU played the role of a catalyst, for Russia followed in the EU’s footsteps to make those countries face a clear ‘either-or’ choice. Armenia’s difficult decision to give up the idea of rapprochement with the European Union and its declared intention to join the Customs Union is a clear indication that the geopolitical polarization of post-Soviet space is becoming more intensive. If Russia decides to push Ukraine out of the CIS free trade zone after that country signs the association agreement, then, as a result, practically all of the post-Soviet space will be split into two unequal sectors, except for Uzbekistan and Turkmenistan. One of them will be economically tied to the European Union, and the other to the Customs Union of Russia, Belarus, and Kazakhstan.

This polarization of post-Soviet space will result in divisive consequences for the Customs Union, which may see a steady extensive growth trend for two or three years in the future. The risks of the Customs Union’s hasty expansion have been grossly underestimated so far. The Customs Union’s quick start raised the hope initially that it would be the first successful integration project in the post-Soviet era. However, initial positive effects from the emergence of the Common Economic Space and the common customs territory of Russia, Belarus, and Kazakhstan gave way to what is sometimes called ‘the growth crisis’ and of gradually increasing internal tensions between the association’s members. A growth crisis is a natural phenomenon, but in the Customs Union’s case, the specifics of the personality-dependent regimes of the member-states and related excesses, like the ‘Baumgertner affair,’ turned out to be an additional burden. Nevertheless, joint efforts to resolve disagreements and to unify domestic legislation strengthen the Custom Union’s institutional base. Also, coordinating strategic goals could give a fresh impetus to the process of integration. A shift in focus to co-opting several new countries would considerably complicate efforts to achieve the main target of the upcoming months – getting the Eurasian Economic Union up and running by the beginning of 2015. In particular, the efficiency of the Eurasian Economic Commission, whose decisions are consensus-based, may decrease considerably with the admission of new member-states into the Customs Union. Some kind of intermediate participation format might work as a pragmatic alternative to the Custom Union’s rapid expansion; for instance, agreements of association or privileged partnership. However, in the context of growing geopolitical competition, the most likely choice will be in favor of expanding the list of full-fledged Custom Union members, which will hurt its effectiveness.THE EUROPEAN ABDUCTION OF UKRAINE

Among the series of events leading up to the Vilnius summit, 8 November 2011 is a key date. On that day the Nord Stream pipeline started transporting gas to Western Europe to dramatically ease Russia’s dependence on Ukraine as the main transit country for Russian fuel. It might seem that the Putin-Schroeder policy of establishing an exclusive energy partnership between Russia and Germany triumphed in spite of all the obstacles, which would give the two countries an even greater political edge in post-Soviet space and in the European Union respectively. In addition to Ukraine, Belarus, Poland, and other countries transiting Russian gas have also lost previous political and economic advantages. Yet on the very same day German foreign minister Guido Westerwelle and his Polish counterpart Radoslaw Sikorski (the latter had compared the Nord Stream project to the Ribbentrop-Molotov pact shortly before that) said that Germany and Poland had agreed on a joint policy towards Russia. It turned out that the statement was not just a token compensation addressed to Poland. The Westerwelle-Sikorski message heralded a new distribution of the ‘spheres of responsibility’ between Germany and Poland. In fact, Poland hinted that it was prepared to recognize Germany’s leadership in the further reforming of the European Union. For its part Germany agreed with Poland’s critical attitude towards Russian foreign and domestic policies. While remaining focused on EU institutional and economic problems, avoiding excessive involvement in post-Soviet affairs, and reconciling itself with the gradual stagnation of German-Russian relations, Germany gave Poland and its backers in the Baltics and the Visegrad Group of countries a greater say in formulating the EU’s eastern policies.

The European Union’s eastern policies have begun to look increasingly Jagiellonian. Leaving aside the specifics of purely intra-Polish political and ideological rifts from many centuries ago, the term Jagiellonian can be applied to coordinated efforts by the elites of Central European and Eastern European countries based on resistance to a foreign presence, i.e. Russia. Historically, those countries were once either part of the Kingdom of Poland and the Grand Duchy of Lithuania (later the Polish Rzeczpospolita), or at least were adjacent to the vast area between the Baltic Sea and Black Sea. In the modern context, the Jagiellonian policy boils down to an attempt to pull several countries out of the ‘grey geopolitical zone,’ where they have been since the collapse of the Soviet Union. The policy is targeted at cementing those countries’ political and economic attachments to the European Union, as well as preventing their participation in integration projects that may constitute alternatives to the EU.

The latest phase of Jagiellonian policies towards Ukraine began in an adverse environment. Amid the global financial crisis, the European Union and the U.S. paid less attention to the CIS, while the Russian foothold in the post-Soviet space grew much stronger. In Ukraine, the leaders of the Orange Revolution suffered an election defeat and either disappeared into political oblivion or they were imprisoned. The very possibility of a dialogue with the new Ukrainian authorities, which launched the prosecution of former Prime Minister Yulia Timoshenko and her associates looked very doubtful to many in the European Union. Nevertheless, the proponents of Jagiellonian policies continued to build a relationship with President Victor Yanukovich and his team, for which purpose they skillfully used mounting tensions between Russia and Ukraine. At first, Yanukovich regarded the unfreezing of dialogue with the European Union as an opportunity that gave him a better bargaining position in tough negotiations with Gazprom and Vladimir Putin. However, in the long-term Jagiellonian diplomacy persuaded him that seeking an agreement of association with the European Union might be an alternative for him and his inner circle.

With the European integration project in crisis, EU institutions are in dire need of fresh evidence of their own attractiveness and political success. This is one of the major reasons why the EU’s eastern policies have turned Jagiellonian. Dragging Ukraine into the EU realm of economic and political influence may prove successful and receive a great deal of publicity, but at the same time will not require European taxpayers to bear any considerable additional costs. Moreover, the opening of Ukraine’s vast market will surely benefit the export-oriented economies of the EU, especially the German economy. At the same time, the association format means that Ukraine will not receive financial subsidies from Brussels, which are only available to full EU members.

Ever since Russia and the U.S. failed to reset relations following Putin’s return to the Kremlin, Jagiellonian policies towards Ukraine have relied on growing support from the U.S. At the same time, negotiations between the U.S. and the EU to create a trans-Atlantic free trade and investment area may explain to a great extent the U.S.’s interest in Ukraine. If this global project is successful, Ukraine will be a free bonus complementing the unification of the two largest global economies.

What are the chances that the EU’s eastern policy will follow the Jagiellonian course after the Vilnius summit? Much will depend on changes the European integration model will undergo in the course of its internal restructuring and, as a result, the creation of a free trade zone with the U.S. It is most likely that key EU countries will return to the Jagiellonian policy. Indeed, Belarus and Transdniestria have good chances to come into the focus of Jagiellonian policies after Ukraine. In both cases the conflict potential may turn out to be blown out of proportion. In all likelihood the costs of such Jagiellonian policies in post-Soviet space will look unreasonably high to leading EU countries. If this happens, Germany and France will find it far more convenient to return to a dialogue with a geopolitically weakened Russia than to try to drive it into a corner. At the same time, Jagiellonian connotations in the EU’s eastern policies will not likely disappear altogether.

THE MORNING AFTER…

Nothing special will happen the morning after the association agreement is signed between Ukraine and the European Union. A large share of Ukraine’s political establishment will celebrate Europe’s triumph and get ready for a new round of Ukraine’s traditional internal political struggle that pits everyone against each other. The Western press will not miss a chance to declare a geopolitical defeat of Putin’s Russia. The Russian media will report on Ukraine’s loss of real sovereignty and the gloomy prospects for the Ukrainian economy. However, several serious problems will surface before the ratification of the Vilnius agreement. Russia will most likely reduce its direct investment in Ukraine, and Russian financial institutions will curtail their lending programs to the Ukrainian economy. Possible exceptions will include programs that are the most sensitive for major Russian economic players who cooperate closely with Ukrainian industries.

In a situation like this, the risks will soar for a Ukrainian economic default. A possible default could be prevented through a politically motivated easing of terms for Ukrainian access to IMF loans. At the same time, it is very unlikely that the European Union will rush to grant direct subsidies to the Ukrainian economy even after the DCFTA comes into force. The first months and years of the DCFTA’s operation will see Ukrainian goods phased out of the domestic market by lower-priced goods of better quality from EU countries. These tendencies will increase with the transition to EU technical standards, a key DCFTA requirement. The simultaneous introduction of protectionist measures in Customs Union countries will bring many Ukrainian enterprises, and even whole industries, to the brink of collapse. The crisis may peak in 2015 and coincide with the Ukrainian presidential election.

There is a sense that Victor Yanukovich and his citadel in parliament – the Party of Regions – are about to launch a very risky game, if not commit political suicide, by betting on the agreement of association. The current political consensus for closer relations with the EU will disappear the moment the ink is dry on the Vilnius Agreement. Subsequently, the entire responsibility for the economic turmoil will be placed squarely on Yanukovich and his team. The electorate, on which Yanukovich and his Party of Regions currently rely, will be split.

The Yanukovich case is extremely important to understanding the behavior and further evolution of post-Soviet political elites. Earlier, Moldova’s former president, Vladimir Voronin, followed the same path. Pro-Russian slogans propelled him to power, but when he was half a step away from the Moscow-proposed Transdniestrian conflict settlement plan, he made a U-turn under Western pressure. After he was elected president in February 2010, Yanukovich took some resolute steps to mend relations with Moscow. He and then Russian President Dmitry Medvedev concluded the Kharkov accord to extend the presence of Russia’s Black Sea Fleet in Sevastopol for 25 years and introduce a thirty-percent discount on the price of Russian gas. However, both the Kharkov Accords and the Ukrainian parliament’s adoption of a special law on Ukraine’s non-bloc status indicated that the Yanukovich team was eager to get back to the traditional Ukrainian policy of balancing between Russia and the West. At that moment Russia must have misjudged the motives of the new Ukrainian authorities and the opportunities to put pressure on them. At first, the Russian negotiators employed all the tactical and strategic arguments available while negotiating the future of the Ukrainian pipeline system; later they relied on a wider range of issues in Russian-Ukrainian relations. The most influential oligarchic groups, one of which is represented by Yanukovich, interpreted such pressures as a major threat to their long-term business interests. Although in domestic policies the Ukrainian authorities used the tactics of their Russian counterparts quite successfully in fighting their political opponents, in foreign policy Ukraine started drifting towards Brussels again.

Ukraine’s entry into a new geopolitical orbit will certainly propel Yanukovich into a position with which Western political quarters will be prepared to negotiate. Yet that does not mean the West will give him a free hand in building up his potential inside of the country using the very same methods he has resorted to so far. The reverse is more likely: not a single major abuse of administrative resources will remain unnoticed in European capitals. Brussels will demand that Yanukovich hold free elections and nobody will be upset if he loses.

Will Yanukovich lose the votes of those Ukrainians who still view Russia favorably? Most likely, the euphoria over the EU agreement will disappear soon, resulting in a great deal of disillusionment over the Euro-integrationist rhetoric, especially in eastern and southern Ukraine. Moreover, a split could also occur in the Party of Regions, where certain tensions are already intensifying after the presidential team deviated from the eastern integration vector. However, this does not mean that some new political force will appear before the 2015 presidential election and new leaders will gain power capable of uniting those Ukrainians unhappy with the country’s geopolitical reorientation. Victor Medvedchuk and his movement Ukrainian Choice are not convincing contenders for this role. As for the Communists, they will have somewhat better election prospects, but will still be unable to bring about any qualitative restructuring of Ukrainian politics.Apparently, after the Vilnius agreement is signed, Yanukovich will make several conciliatory statements regarding Russia. They will be addressed not so much to Putin or the Russian public, but to his own voters. Russia will not react positively. Yet these statements may prove to have something more than trivial political maneuvering behind them. There have been certain signs of an emerging new political and ideological phenomenon, which could be called ‘East Ukrainian Europeanism.’ In contrast to Ukrainian ethnic nationalism, of which western Ukraine is the stronghold, East Ukrainian Europeanism wants to create a political nation that unites all citizens irrespective of language, religion, or ethnic affiliation on the platform of sovereignty and with the strategic goal of Ukrainian admission to the EU in combination with exclusive relations with Russia. In that formula the European vector means: (1) receiving foreign guarantees of state independence; (2) a determination to enhance the positions of Ukrainian financial and industrial groups in relations with partners in the East; and (3) consent to institutional transformations in accordance with EU recommendations. At the same time, an exclusive relationship with Russia must be a mandatory part of that formula, because only this sort of relationship may give Ukraine extra political arguments in all interactions with Brussels. Ukraine will never get additional arguments if it is used as part of an anti-Russian ‘sanitary cordon’ after the EU agreement.

Under the Jagiellonian scenario, Ukraine will likely act as a policy instrument in the hands of its neighbors in the West. In other words, the super-task of East Ukrainian Europeanism should be the creation of a triple-tier model of strategic partnership, in which Ukraine will act as the main link between Russia and the EU.

Russia still has too few politicians who are prepared to regard the advocates of East Ukrainian Europeanism as reliable partners. As long as Yanukovich is the main speaker for East Ukrainian Europeanism, the level of trust towards these ideas and related initiatives will remain minimal. If calls to join the Customs Union increase in eastern Ukraine, those in Russia will gain strength who want to take a harder line towards the current Ukrainian authorities. They would prefer to see Yanukovich lose, even if he is defeated not by proponents of integration with Russia, but by representatives of nationalist or anti-Russian forces.

*  *  *

Neither a miracle nor a tragedy will take place in Vilnius, but the effects will be serious. Ukraine will experiment on itself and all the other countries in the post-Soviet space are looking forward to watching how it ends. Whether the ensuing economic or institutional changes over rapprochement with the EU appear tangible and positive will determine Russia’s own conduct and the conduct of countries that still rely on it.

Association with the European Union will provide Ukraine with no guarantees of being plugged into this major international project, which still has to prove its viability in the context of the turbulent twenty-first century world. Naturally, the Ukrainian authorities will be quick to declare their intention to acquire full-fledged membership in the EU and, possibly, some confirmation of the seriousness of these intentions may still come to light under Yanukovich. But then Ukraine will approach a threshold where, for the sake of a “bright European future,” it will have to take action to change the very nature and mode of operation of its state machinery and social institutions. It is not certain that the post-Soviet Ukrainian elite will be able and eager to step across that border.

The most important task for the Ukrainian authorities is to preserve the country’s importance and its existence as a political entity. In future, Ukrainian leaders will be confronted with powerful pressures from internal and external forces that would like to see Ukraine abandon its neutral status and join Jagiellonian policies. Along with this, the advocates of Ukraine’s non-bloc status will bolster their unity. In the context of this confrontation, East Ukrainian Europeanism may be the political course that at least will ease the heated internal debates and force external players to take Ukraine’s special opinion into consideration.

The struggle for Ukraine’s geopolitical choice unfolded in strict conformity with zero sum game logic. For the current Russian political regime, this logic is organic. It serves as a natural extension of the golden rule of totalitarian domination: “For my friends, everything; for everyone else, the law.” But the European Union, which in fact inherited the Jagiellonian vision of the Russian Federation as a half-ruined, revenge-driven empire, also follows zero sum game logic and acts in an imperial way. Even though many Europeans, Ukrainians, and Russians are prepared to see the EU as a collective ‘good empire,’ this will not change the very essence of imperial rivalry and related long-term consequences for Europe and Eurasia.

The European Union, Ukraine, and Russia could pool efforts after the Vilnius summit in an attempt to devise a fundamentally new format of trilateral cooperation based on the logic of mutual benefit, but the chances for this are very slim. Probably, EU leaders will try to avoid further escalation of geopolitical rivalry in the post-Soviet space, but that does not mean any of them will be prepared to exert great efforts to harmonize relations with Russia before the future of the European integration project has been clarified. In all probability, everything will come down to closer monitoring of what Russia’s strategic response to the Vilnius summit will be and how this geopolitical weakening will influence internal political processes in Russia.

The Russian leadership is facing a limited number of choices, and the options still available depend on costs and risks. As for Russian society, the EU agreement may serve as a bitter lesson that brings Russians closer to realizing that the political system and economic policy must undergo fundamental reform. After Vilnius, life will go on, including in Russia, but it will be life in anticipation of change.

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