Ukraine-EU deal sees the light but there’s no defeat for Russia

Visit of José Manuel Barroso, President of the EC, and Štefan Füle, Member of the EC, to Ukraine (from right to left, Petro Poroshenko, President of Ukraine and José Manuel Barroso, President of EC), (EC Audiovisual Services, 12/09/2014)

While the ceasefire between Ukraine’s military forces and the separatists appears to be holding since the September 5th truce, something “historic” – as leaders called it – might have happened yesterday. Ukraine ratified a landmark trade-and-political deal with the European Union, officially moving towards the West. The moment was crucial not only for the importance of the step taken by Ukraine, but also for the role that this deal played during the whole Ukraine-Russia crisis.

When Ukraine’s then President Viktor Yanukovych refused to sign the agreement on the creation of the EU-Ukraine free trade zone last November, in favour of closer relations with the Kremlin, something changed forever. That was indeed what triggered the protests and riots that eventually led the country into this crisis.

The EU-Ukraine Association Agreement, which includes free-trade provisions and aims to boost Ukrainian exports to the bloc, carries also shadows, along with lights. Last Friday 12 September, days before the EU deal passed with 355 votes in the 450-seat legislature, Russia, Ukraine and the European Union agreed to postpone the creation of the EU-Ukraine free trade zone. Because the trade measures, although ratified, are now set to come into force in December 2015, or even early 2016, instead of November this year as previously planned.
The postponement of the deal is the result of an intense behind-the-scenes activity, as of a delicate diplomatic work, although the delay appeared as a victory for Russia at a first glance.

Russia has been pushing to delay and amend the deal since last year. The Kremlin opposes the free trade provisions, saying it would allow cheap EU goods to flood its market via Ukraine. So until 2016 Ukraine will maintain its existing restrictions on imports from the EU, while having obtained full access to the EU market for its exports. In return, Russia has promised a preferential trade regime for Ukraine.

The delay provides “breathing space to discuss whatever problem may arise”, EU Trade Commissioner Karel De Gucht – which was present last week at the meeting where the postponement was decided – told a news conference.

Ukraine’s President Poroshenko is facing growing criticism in Ukraine for apparently caving in to pressure from Moscow and consequently accepting a delay in signing the deal. On top of that, although most Ukrainians want to move closer to Europe, many of them have reportedly claimed that the price paid during the conflict was too high. “No country has paid such a high price for its European choice”, Mr. Poroshenko said before the vote on the EU deal, and this might be quite a point in both directions – pro or contra a more “European” Ukraine.

So the crisis between Ukraine and Russia has moved into another phase now, from direct conflict into an economic battle. Both Moscow and Kiev seem to be heading towards what could be a cold winter of economic and diplomatic conflict. Signs are already visible, and one of the biggest moves on this delicate and strategic battlefield has already been made.

The reasons behind the postponement of the deal and Russia’s deep concern about an EU-Ukraine deal are not exclusively economic. Russia is not worried of having its market allegedly “flooded” with cheap EU goods, or not so much at least. That is just the official explanation that Russia has given to the European Union. Kremlin can’t simply tolerate the idea of losing Ukraine. This is true both in economic terms, with Russia having a favourable access to Ukraine’s agro-food and energy sectors that just can’t be lost, and in a cultural way. Having some kind of influence on Kyiv is natural for Moscow. This might not mean that Putin wants to re-create a “Sovietic equilibrium” but maybe that Russia doesn’t want to let go another piece of its “empire”. Probably the most precious one.

Along with the trade agreement, yesterday a law that gives “special status” to the eastern regions and provides three years of limited autonomy to territories held by the separatists, saw the light. “There is no military solution for this crisis,” Mr. Poroshenko said earlier this month at the Yalta European Strategy conference and this extremely delicate phase may be the confirmation of that. However, Andrey Purgin, the first deputy Prime Minister of the self-declared Donetsk People’s Republic, told CNN that, although the law represents a point of start for further discussion, rebel leadership feels no obligation after the EU-Ukraine agreement, because it does not consider itself part of Ukraine.

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