Impact of rapprochement between EU and EEU on middle countries Moldova, Ukraine, and Georgia

Op-Ed
	The probability of an unfavorable scenario for maintaining the AA/DCFTA depends on the share of the pro-Russian parties, their opposition level to the European values, insignificant or negative impact on the implementation of the DCFTA and nostalgia for the Russian market...
Dionis Cenuşa

The intention to create a common economic sphere from Lisbon up to Vladivostok remains topical.  The given idea is wanted rather in Moscow than in Brussels. Evidently, a free trade agreement with the European Union (EU) would increase the legitimacy and attractiveness of the Eurasian Economic Union (EEU). This is essential for Russia’s geopolitical interests in the region. To a lesser extent, the same objective is followed by the EU.

There is enormous disproportionality related to the principles that guide the European economy and, respectively, the Eurasian one (which belongs to the Eurasian Economic Union). So, the EU lays emphasis on the liberalization of the market and elimination of monopoles (including in the energy sector) with the aim of stimulating the economy (owing to competition) and of increasing the consumers’ access to goods and services. This economic model is powerfully related to the functioning of democratic institutions and the rule of law.

In the case of the common market of the EEU, we speak about the maintaining of monopoles in the economy, with the state playing a major role in the process of taking economic decisions. As a result, in the case of Russia, we see the politicization of the decisions related to trade and the bilateral economic relations with the EU, Ukraine, Moldova, Georgia, Turkey, including the countries of the EEU – Belarus, Kazakhstan. The political factor is an indivisible element in the functioning of the economy, if we judge at least by Russia’s behavior. This economic model comes into conflict with the rule of law principles. For this reason, the EEU agreement does not refer at all to the democratic principles, including the rule of law, unlike the European treaties.

Even if the economic models of the two integrationist blocs, as the goals, differ substantially, the restrained position stated earlier by the EU diminishes. Fulfilling the Minsk agreements on Ukraine by the Russian side is the key condition for starting negotiations between the EU and EEU invoked by Brussels. The same condition is stated by the main European capitals (Berlin and Paris). Russia refuses yet to tie the constitution of the common economic area between the EU and EEU to the Ukrainian file.

Under the pressure of political populism, the member states change gradually their attitude to the EEU. The elections in France, Germany and the Netherlands scheduled for 2017 could favor a rapprochement between the EU and EEU. The dialogue will be rather punctual and will refer to narrow cooperation areas similar to those covered by the accord negotiated by the EU with Vietnam. To benefit from more intense commercial relations with the EU, like those envisioned by the agreement between the EU and Canada (CETA), the democratic principles (democracy, human rights), which are widely non-observed by the EEU countries, will have to be incorporated.

However, if the rapprochement between the EU and EEU is ensured, the probability that the pressure will be intensified, both at internal and external levels and on the non-EEU states of the Eastern Partnership (countries that signed AA/DCFTA), so as to make them join the Eurasian integrationist bloc will be greater.

Is economic integration between the EU and EEU possible?

The interest of the European business community in the access to the Eurasian market (countries of the Eurasian Economic Union, in particular Russia, Kazakhstan, and Belarus) is maintained, while the commercial sanctions imposed by Russia intensify this interest. That’s why the eventual restoration of the economic relations is considered in many European and Eurasian capitals as mutually advantageous.

The restoration of the bilateral relations between the EU and Russia and a possible rapprochement between the EU and EEU must not be mixed up with the launch of a swift and comprehensive process of creating a common economic area. The simpler the eventual commercial agreement negotiated by the EU and EEU is, the bigger will be its chances of being fully implemented.

Nevertheless, to speak about a common economic area between the EU and EEU, a simple free trade agreement is not enough. To ensure the free movement of goods, persons, capital and services (an advanced form of economic integration), a very complex legal basis is needed, which would also contain political principles (democracy, human rights). But this is inadmissible for Russia.

Moreover, before starting such discussions with the EU, Russia and the other Eurasian countries must show that they are able to create a common economic area and to ensure the full liberalization of trade at the level of the EEU. For the purpose, Russia should stop politicizing the economic relations with the EEU member states (Belarus) and imposing barriers on third countries that affect the commercial interests of the EEU, such as the blocking of Ukraine’s exports to Kazakhstan.

The low economic performance of the EEU shows the economic integration is problematic. Thus, in the course of 2015 internal trade saw a decrease of over 20% in mutual exports within the EEU. Russia continues yet to benefit the most from the liberalization of trade in the EEU. (See table below)

Table Russia’s trade with the other countries of Eurasian Economic Union, USD

Source: UN Comtrade, Armenia joined the Eurasian Union in January 2015, while Kyrgyzstan in August 2015.

Situation of middle countries

While the Eurasian integrationist process becomes stronger, Moldova, Georgia and Ukraine deepen the economic integration and political association with the EU. But the stagnation of European economy and internal deficiencies (economic, banking, etc.) hinder the three countries that signed AA/DCFTA from swifter enjoying tangible benefits from the liberalization of trade with the EU. For the purpose, the CIS market is an additional source of economic resources for the three countries that are in the process of Europeanization, but Russia hampers the good functioning of the free trade area. There are voices in the EEU saying that the economic role of the CIS will be reduced to a maximum and the elements of economic cooperation in the post-Soviet area will be later fully transferred to the EEU.

The opinion that Moldova, Ukraine and Georgia will suffer if they join none of the integrationist blocs prevails in the EEU countries. It is considered that if the countries that signed AA/DCFTA transpose the EU legislation, the EU should offer these a more clear membership perspective.

The supporters of the EEU ignore the fact that the three countries decided in a sovereign way to associate politically with the EU and to initiate the European integration. The fact that the three countries weren’t forced by the EU (by commercial, diplomatic, political or even military ways), as they were by Russia in order to make them abandon the agreements with the EU (by the model of Armenia), is also overlooked.

At the same time, the EEU projects its non-democratic approaches on the relations between the EU and the countries that signed AA/DCFTA based on a complex, targeted democratization process. The European perspective depends on the success of democratization, not on the mechanic transposition of the European legislation. Furthermore, besides the democratization of institutions, the EU insists on the importance of modernizing the economy, combating monopoles and promoting consumers’ interests, offering them instead technical and financial assistance. A country that is not ready to meet the European standards concerning economy and democracy functioning cannot join the EU. The example of Hungary or Poland shows that democracies need more time to immunize against authoritarian instincts inherited from the previous Soviet and Socialist regimes.

One of the scenarios that would satisfy Russia is to distance the three countries from the EU for not offering a European perspective and for the failure to penetrate the very competitive European market. This could favor the pro-Russian political elites that, for example, in Moldova, enjoy conservable popular support (IPN, May 2016). The consolidation of the pro-Russian forces could lead to the review of the AA/DCFTA. Thus, the joining of the EEU would serve as a geopolitical alternative that does not necessitate ‘painful’ institutional or legislative changes and that do not imply political commitments related to the observance of the human rights (ex. non-discrimination of sexual minorities).

Instead of conclusion...

The existence of cooperation between the integrationist blocs deserves attention and even efforts. But the profoundness and substance of a commercial agreement between the EU and EEU/Russia must proportionally cover the observance of the democratic principles. If the EEU is not interested in the observance of human rights or democracy that is addressed, for example, in the recent EU – Canada agreement (DCFTA), the EEU is eligible for a simpler commercial agreement equal to that negotiated by the EU and Vietnam. The connection with the Ukrainian file should be maintained.

However, the rapprochement between the EU and EEU could have an effect on the middle countries, such as the diminution of the interest of the political and economic elites of Moldova, Georgia and Ukraine in the AA/DCFTA.

The probability of an unfavorable scenario for maintaining the AA/DCFTA depends on the share of the pro-Russian parties, their opposition level to the European values, insignificant or negative impact on the implementation of the DCFTA and nostalgia for the Russian market.

IPN publishes in the Op-Ed rubric opinion pieces submitted by authors not affiliated with our editorial board. The opinions expressed in these articles do not necessarily coincide with the opinions of our editorial board.