08.05.2006
Russia-EU Quandary 2007
№2 2006 April/June

The Partnership and Cooperation Agreement (PCA), a document
underlying the relations between Russia and the European Union,
expires on November 30, 2007. The PCA, signed between the Russian
Federation and the European Communities and their Member States on
June 24, 1994, entered into force on December 1, 1997. Concluded
for an initial period of ten years, the Agreement shall be
automatically renewed year by year provided that neither party
gives the other party written notice of denunciation of the
Agreement at least six months before it expires.

The PCA has been a major factor in the establishment,
development and expansion of a fundamentally new relationship
between Russia and the EU. The present level of cooperation in all
fields has amply demonstrated its effectiveness. Nevertheless, it
is becoming increasingly obvious that compared with the early
1990s, when the PCA was still on the drafting boards, the situation
has changed drastically. Both Russia and the EU have changed, as
has the nature of relations between them. The world itself is also
a much different place.

Partnership and cooperation between the EU and Russia has become
a common, daily practice, while the level of political interaction
between the parties has long transcended the boundaries of the
Agreement. A joint initiative, known as the Road Maps for the
creation of the four Common Spaces, approved at the Russia-EU
Summit in May 2005, raises these relations to a fundamentally new
strategic level of interaction.

An ‘advanced partnership’ requires the formalization of a
full-fledged, legally binding treaty, as opposed to political
accords and joint statements regularly issued at Russia-EU summits.
Russian President Vladimir Putin and European Commission President
José Manuel Durão Barroso first discussed this
possibility in April 2005. The Russian president also stressed the
need to upgrade the legal framework at the Russia-EU Summit in
London (October 2005).

CONSERVATIVES AND PROGRESSIVES

Different political forces both in the EU and in Russia have a
different vision of the way ‘Russia-EU Quandary 2007’ may be
avoided.

European conservatives do not think there is a need to change
anything in the PCA. Their traditional position has been to keep
Russia at arm’s length and not overburden the EU’s agenda with
extra issues. The number of advocates of this approach has
increased considerably with the EU enlargement, most notably after
the admission of the Baltic States and several Central and East
European countries that continue to be affected by a “victim
syndrome” with regard to the Soviet Union and equate the former
Soviet Union with the present Russian Federation.

Russia has experienced a recent surge of pro-Asian sentiments
(with an especially strong orientation toward China), together with
the rise of hard-line nationalists who conceal their inferiority
complex over Russia’s loss of superpower status with ideas to the
effect that the country is “self-sufficient” and should remain an
independent “center of force” in international relations.

Of course, Russia is interested in promoting neighborly
relations, trade and mutually advantageous cooperation with all of
its neighbors. It is not clear, however, how the deepening of
contacts with the EU could prevent it from trading with, for
example, its partners in Asia. Yet this does not only refer to
trade and cooperation, but to the choice of a model for the
country’s political and socio-economic development in the
future.

Russia’s experience shows that the Chinese model (i.e.
authoritarianism mixed with a ‘New Economic Policy’) has failed to
produce the desired result in a different national environment.
Furthermore, an unbalanced, excessive rapprochement with China
could lead to a situation in which Russia loses its Far Eastern and
Siberian regions to Chinese demographic expansion, thus becoming
China’s raw-materials adjunct and waste-disposal grounds for its
dynamic economy.

As for the belief that Russians are “God’s chosen people,” this
can hardly be taken serious when 70 percent of the Russian
population is worse off than 10 percent of the neediest Americans,
while the self-congratulatory theory that says “We are poor, but we
are the most virtuous” holds no water amid the rampant corruption
and organized crime that is eroding Russian society.

At the same time, there are forces both in Moscow and in West
European capitals that are convinced that the search for a solution
to ‘Russia-EU Quandary 2007’ cannot be put off any longer.

There are two main groups in Russia striving to upgrade the
level of these relations. These are, first of all, democratic
factions within the political elite and the expert community who
believe that the European model, adapted according to national
differences and specifics but based on general, fundamental
principles, can best meet the needs of Russia, which is still in
the process of a systemic transformation. The second group is
comprised of elements within Russia’s ruling establishment. They
argue that upping the level of relations with the EU symbolizes
Russia’s importance in the modern world and its status as a “core”
state with a special responsibility for international security and
stability.

As for the EU, in the wake of the failed referendums on the EU
Constitution in France and the Netherlands, many European
politicians realized that Brussels’ old strategy, aimed at
simultaneously expanding and deepening European integration, had
collapsed. Therefore, the elaboration of a new strategy is
impossible without ensuring stability along the perimeter of the EU
borders, especially in the east. Upgrading the level of Russia-EU
relations and rapprochement on the basis of shared interests and
values will eliminate, or at least considerably reduce, the
possibility of a clash of interests in such CIS countries as
Ukraine, Georgia, Moldova and Belarus. In other words, resolution
of ‘Russia-EU Quandary 2007’ will be crucial for the stability and
development of Greater Europe, as well as for effective
multilateral cooperation in countering new threats to international
security.

A PARTNERSHIP OR AN ASSOCIATION?

There are three basic options for the formalization of EU-Russia
relations after 2007.

1. Renewing the PCA (under the provisions of Article 106) until
both sides decide to replace the document.

2. Making amendments and additions to the existing Agreement
(taking into account the current level of ‘advanced partnership’
and the prospects for the further development of relations within
the next 10 to 15 years), including a provision on forming an
association.

3. Creating and ratifying a new agreement (subject to
ratification by Russia, the EU and EU Member States) which will
supersede the PCA.

The third option is unrealistic since it requires the
ratification of a fundamentally new document. This is all but
impossible in a situation where the total burden of mutual claims,
problems and distrust has been escalated by EU expansion into
countries of Central and Eastern Europe.

Furthermore, failure to renew the PCA could cause a temporary
legal vacuum that would affect the interests of both individual
Russian citizens and the Russian Federation as a whole. Such a
scenario could jeopardize PCA-related trade relations (e.g.,
textile and steel agreements), while undermining the established
PCA implementation mechanisms.

This applies in particular to the right of Russian nationals
legally employed on the territory of a EU member state. These
individuals must be accorded treatment free from any discrimination
based on nationality, working conditions, remuneration or
dismissal, as compared to its own nationals (Article 23). [A
European Court of Justice ruling in the case of Russian footballer
Igor Simutenkov set a precedent. On April 12, 2005, the ECJ ruled
that the Spanish football association’s refusal to provide
Simutenkov a license to play professionally in official Spanish
football competition was a form of discrimination. The
discrimination was due to the fact that, under the EU-Russia
partnership agreement, Russian nationals should be entitled to the
same treatment as Community nationals when already employed in that
country. – Ed.] The ECJ instructed the courts of the member states
to apply PCA provisions in instances when their national laws did
not ensure Russian nationals the same working conditions as
compared to their own nationals. Should such rights be eliminated
or made subject to formal approval, Russian and EU nationals,
including businessmen, will risk losing much of the gains already
achieved.
Naturally, similar provisions could be included in a new
replacement agreement to the PCA, but then the ECJ would have to
reaffirm their direct application. Until that time, Russian
nationals would lose their rights.

This leaves only two realistic options: the automatic renewal of
the PCA and its modification. If (as in Scenario 1) the Agreement
remains unchanged while relations are increasingly built on new
parallel rules and regulations, the PCA will eventually become
ineffectual. This will become a burden on bilateral relations,
causing irritation and disagreement, while pushing the sides back
into the past.

Preservation of the PCA in its present form after the 2007
termination date would in effect mean that the partners are not
prepared for a closer rapprochement. However, the adoption of a
non-binding political declaration on “strategic partnership,” as
well as a number of issue-specific agreements that will be signed
anyway, could sugarcoat such a possibility. This “cost-effective”
option, which will not require a new ratification of the Agreement,
is favored by the majority of parties concerned both in Russia and
the EU.

Taking into account the course for strategic ‘advanced
partnership’ and given that the greater part of the PCA is in need
of revision, Scenario 2 appears to be the most expedient and
realistic option. Implementing this option, the Agreement can be
modernized with amendments modifying its substance and even its
name, while still preserving its legal continuity. The goal of a
revamped PCA can and should be the formation of an association
between Russia and the EU.

There are three known types of association agreements: European
Agreements (for Central and East European countries), the
Association and Stabilization Agreement (for the Western Balkans),
and the European-Mediterranean Agreement (for South Mediterranean
states). From a legal perspective, the most advanced form of
association is between the EU and the European Free Trade
Association (EFTA), including Iceland, Liechtenstein, Norway, and
Switzerland. It is remarkable that proponents of “Russia’s
self-sufficiency,” who are greatly concerned about what they see as
its excessive dependence on the EU, hold up the Swiss or Norwegian
model of relations as worthy of emulation. They are apparently
unaware, however, that by so doing, they are promoting the highest
and most binding level of association.

There is an erroneous belief that an association agreement,
unlike the PCA, ultimately presupposes obligatory EU membership,
something that neither Brussels nor Moscow is interested in today.
Indeed, both the preambles and the first several articles of the
European Agreements mention the prospect of EU membership. At the
same time, the first few articles of the Association and
Stabilization Agreements with Macedonia and Croatia, for example,
say nothing about their possible admission to the EU, although in
the preambles they are described as potential candidates. As for
association agreements with Mediterranean countries, the prospect
of their membership is not mentioned at all.

The PCA’s principal difference from association agreements is
that it does not contain provisions about the liberalization of the
movement of goods, persons, services and capital. It does not
contain any provisions about practical steps, although a free trade
zone is mentioned as the partnership’s ultimate goal. Meanwhile,
association is predicated on a free trade zone. The current
Russian-EU document in the majority of cases provides instead for
the Most Favored Nation treatment.

Association agreements, as a rule, have a timeframe for a
gradual (over the course of 10 to 12 years) reduction of customs
and equivalent duties with their eventual elimination. They also
provide for the lifting of import and export quotas, and other
equivalent restrictions, as well as the prohibition of
discriminatory taxation related to the origin of goods. The absence
of such provisions in the PCA creates considerable difficulties for
its ultimate implementation. According to officials of the Russian
Economic Development and Trade Ministry, Russia is ready to open
negotiations on establishing a free trade zone with the EU as soon
as it has been admitted to the WTO. A well-planned procedure for
the creation of such a zone would conform to Russia’s economic and
trade interests.

We do not know what lies in store for us. The opponents of
Russia’s EU membership, who are in the majority both in Russia and
the EU, provide abundant argumentation that can be summed up by the
word “never.” They argue that Russia, with its vast territorial
expanse, will never fit into the EU (although the population factor
is more important than the geographic factor). Furthermore, Russia
will never cede even a fraction of its sovereignty (but even the
Soviet Union managed to do that when it signed wide-ranging
strategic arms limitation and control agreements with the United
States). Lastly, the EU, so the argument goes, will never want to
share borders with China (the EU is prepared to grant Turkey
membership, for example, yet this nation borders on the most
unstable part of the modern world – the Greater Middle East), and
so on and so forth.

The rapid radicalization of the Islamic world amid the
proliferation of weapons of mass destruction and the spread of
terrorism, however, could lead to a new lineup of forces along the
North-South line, to new alliances and coalitions. The danger
carried by Islamic radicalism necessitates a strategic alliance
between all members of the Euro-Atlantic community and their
potential allies outside the region. Therefore, it is not so
important whether Russia becomes a member of the EU or whether a
real, not symbolic, strategic alliance is formed, based on the
protection of shared values and interests. Experience shows that
alliances of partners who are equal in all respects prove to be the
most viable and effective option. Creation of four common European
spaces within a modernized PCA could become a strategic goal.

HOW TO MODIFY THE PCA

A revamped Russia-EU agreement should be signed for an
indefinite period. One of the first articles in this future
document should contain a provision for changing its official name
from the Partnership and Cooperation Agreement to, for example,
Advanced Partnership/Association Agreement.

It is essential to revise the preamble so that it state clearly
and unambiguously that Russia is a developed country with the basic
elements of a market economy and political democracy in place. The
preamble should reflect such factors and processes as the high
level of existing partnership, the creation of four Common Spaces,
and Russia’s admission to the WTO. Furthermore, it should also
mention new global threats, most notably international terrorism
and the proliferation of weapons of mass destruction, as well as
the efforts to fight them.

Title I, General Principles, could be modified into General
Principles and Objectives, incorporating Article 1 in its present
form and complementing it with a number of provisions, taking into
account the experience that has been gained and the new tasks and
objectives of ‘advanced partnership.’

Title II, Political Dialogue, should be transformed into a
section on political dialogue and cooperation, incorporating a new
article that would record the current level of political
interaction. Here, a provision may be added about the “development
of new forms of cooperation in the interest of achieving common
objectives and countering new threats, in particular the problems
of ensuring peace and security, fighting international terrorism
and organized crime, and promoting democracy and human rights.”

Following this are four sections (titles) on matters relating to
the creation of a specific Common Space. Title VII, Economic
Cooperation, should be amended and divided into four chapters, one
for each Common Space. It is essential to formulate detailed
provisions that spell out the “road maps” that were adopted in May
2005. The section on the common economic space should include a
provision on the establishment of a timeframe for the full
liberalization of trade in goods within 10 to 12 years.

The document should clearly spell out the specifics of each of
the four spaces – e.g., as follows.

The common economic space.

Objectives:
– the free movement of goods, services, persons, and capital;
– the development of compatible standards and regulations ensuring
the implementation of the four freedoms and the equality of
competitive conditions;
– the harmonization of relevant legislation and close cooperation
in other spheres of economic and social policy to the extent
necessary for the effective functioning of the common economic
space.

The common space of freedom, security and
justice.

Objectives:
– the freedom of movement, residence and employment, including
professional activity, for Russian nationals, entitled to the same
treatment as Community nationals;
– equal personal security guarantees for Russian and Community
nationals wherever they may reside within the Common Space;
– the harmonization of relevant legislation and judicial procedures
in Russia and the EU, as well as close, permanent cooperation
between judicial authorities, including the fight against
transnational organized crime.

The common space of external security.

Objectives:
– A continuous and regular dialog on all matters of political
relations, foreign policy and security (especially in Europe and
adjacent regions) coordinated within established mechanisms;
– the convergence of positions and joint actions in foreign policy
and security if and when Russia and the EU may deem this expedient
or necessary;
– close cooperation in preventing and combating international
terrorism;
– cooperation in the military field, especially in conducting joint
peacekeeping, rescue or humanitarian operations.

The common space of research and education, including
cultural aspects.

Objectives:
– close and continuous cooperation in fundamental and applied
sciences based on joint long-term programs and financing, as well
as harmonized legislation, in particular guaranteeing intellectual
property rights;
– the establishment of a European Higher Education area on the
basis of the Bologna Process, including the harmonization of
educational systems and broad educational exchanges in which staff
and students can move with ease, while receiving fair recognition
of their qualifications;
– the creation of favorable conditions for the development of
cultural exchanges, the dissemination of art and culture,
inter-cultural dialog and knowledge of the history and cultural
heritage of the peoples of Europe. This would include the promotion
of cultural and linguistic diversity as a basis of vitality of
civil society in Europe without dividing lines.

Specific provisions on the four Common Spaces could be spelled
out in special protocols to the Agreement, in separate agreements
on these spaces, or in some other documents – e.g., annual
priority-action programs approved and supervised by the Permanent
Partnership Council. It is also important to consider such
institutional changes that would facilitate and expedite the
creation of the four Common Spaces. Today, Russia-EU interaction in
the foreign policy sphere is mainly aimed at bilateral problems,
not joint initiatives on current issues of international
security.

A separate protocol or declaration in the form of an annex to
the modified Agreement could be devoted to a whole array of
problems that have emerged around the Kaliningrad Region. Article
55 (Legislative Cooperation) should be amended to include
provisions on the gradual (in two stages) approximation of
legislation whereby Russia will endeavor to ensure that its
legislation will be made compatible with that of the Community
based on a jointly elaborated special indicative program. This
harmonization mechanism should be enshrined in a special agreement
on the implementation of Article 55, the signing of which should be
envisioned under the Partnership and Cooperation Agreement.

Substantial modernization of the PCA will require its formal
ratification. However, since it will be based on jointly approved
initiatives, the chances for its ratification are very good.