Eastern Europe: Which way to turn? - FT.

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November 11, 2013 6:40 pm

By Neil Buckley and Roman Olearchyk

Former Soviet states that choose to join the EU trade bloc run the risk of Russian retaliation

Corbis

Join our club: Russia would be deeply pained if Ukraine chose to tie its economic fortunes to the EU rather than Moscow

ladimir Pirogov, 73, who for 50 years was a trainer at the city stadium in Yalta in the well-funded heyday of Soviet sport, perches these days on a stool just off the Crimean resorts elegant promenade, selling his paintings to tourists. In what is now Ukraine, his generation still looks east to Russia, he says. Were not needed in Europe, not our factories, not our economic potential. Were mostly Russian speakers here, says Mr Pirogov. We want to live with Russia. Yalta is famed as the city where Stalin, Churchill and Roosevelt in 1945 carved up postwar Europe, laying the foundations for what would become the Iron Curtain. Today, with western Europe and Russia again vying for influence over Ukraine and other states at the continents heart, many in Yalta do not share Mr Pirogovs nostalgia for the Soviet era.
East or w est

Nikolai Slotenko, 31 and jobless, says only closer integration with the EU offers a better future for young people. We want Europe to open its borders allowing us to travel freely there, he says. We want to be where there are honourable salaries, decent roads, living standards, dont you understand? For the citizens of Yalta and millions of others in former Soviet republics, decisions in coming weeks could shape their future for years ahead. They could determine whether the EUs model of market-based democracy will play a bigger role in their lives or whether the more authoritarian model of Russia and much of the rest of the former Soviet Union does instead.

This new battle for hearts and minds between the EU and Russia has echoes of cold war rivalries. The EU is offering six former Soviet states far-reaching trade and association agreements under its Eastern Partnership programme. It was hoping to sign or initial such deals with four Ukraine, Moldova, Armenia and Georgia at a special summit in Vilnius, Lithuania on November 28. It has more recent echoes, too, of the western push in 2008 to put Ukraine and Georgia on the path to Nato membership which ended in the five-day Russian-Georgian war. Russia views the EU initiative as another means of trying to lever these republics out of its orbit, not militarily but economically. No one expects things to end in war this time but there could be a sharp escalation of trade disputes as Russia has done everything it can to dissuade these countries from a partnership with the EU. President Vladimir Putin wants them instead to join a customs union Russia has created with former Soviet Belarus and Kazakhstan. This is due to deepen by 2015 into a Eurasian Economic Union a quasi-EU of ex-Soviet states. Because their trade rules are incompatible, joining both groups simultaneously is impossible. Moscows strong-arm tactics have included trade, energy and security pressures. With Ukraine, in recent months it has restricted imports of everything from steel to chocolates ostensibly for health or safety reasons. In August, it temporarily slapped punitive

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Eastern Europe: Which way to turn? - FT.com

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customs controls on other goods in a demonstration of the measures it could take if Kiev signed an EU deal. This would heap pressure on a country already in recession that has been in intermittent talks with the International Monetary Fund. Russia has also banned Moldovas most important exports, wine and brandy, and has threatened to cut off gas supplies to Europes poorest country (We hope you dont freeze this winter, a visiting Russian deputy premier remarked darkly.) In Georgia, Russian troops have erected barbed wire barricades along the borders of the breakaway region of South Ossetia, which Russia has occupied since the 2008 war, in what Tbilisi sees as creeping annexation. Armenia, meanwhile, saw Russia raise gas prices and sign a $4bn weapons contract with its enemy, Azerbaijan. Russia has even banned Lithuanian dairy goods in apparent pique that the Baltic republic one of only three former Soviet states to have joined the EU is hosting the summit at which the deals will be signed. Armenia has already caved in. Three months after completing talks on an EU deal, it announced in September it would join Russias customs union instead. Alexander Rondeli, a former Georgian ambassador and foreign policy analyst in Tbilisi, jokes that while Russians may not be good at soft power the art of attraction they know how to do soft blackmail. . . . The EU is exerting pressure too but in a different way. It is demanding tough reforms of political and judicial systems by aspiring partnership countries. It is pressing Ukraine, in particular, to release Yulia Tymoshenko, the former premier and co-leader of the 2004 Orange Revolution. Brussels says her jailing, after Viktor Yanukovich, her arch-foe, became president in 2010, is an example of selective justice that Ukraine must stop. The different approaches highlight a crucial contrast. The EU sees its Eastern Partnership as the best way of exporting its democratic values beyond its eastern border. Russia is pressing the same countries to join its single market, and submit to its rules, but is happy for the authoritarian elites and systems in countries such as Ukraine to stay in place. For the Kremlin, the successful implementation of an EU-type, rules-based, values-driven model of the economy and politics [in ex-Soviet republics] would directly threaten the supposedly distinctive...model of governance that is currently upheld by Moscow, says James Sherr of Chatham House, a think-tank. We really now have two different normative jurisdictions in Europe. Thats the new dividing line of Europe, and the question is where the border is. For both projects, this months Vilnius summit is a potential make-or-break moment. And for both, the centre of attention is the same: Ukraine, a state with a population of 46m that is Europes biggest country by area, apart from the European portion of Russia itself. For Russia, the loss to the EU of this Slavic country that it sees as the ancient cradle of its civilisation would leave its Eurasian union forever incomplete. We have common traditions, a common mentality, a common history and a common culture, Mr Putin said of Ukraine in September. We have very similar languages. In that respect...we are one people. The Eastern Partnership offers agreements similar to those the EU signed with ex-communist countries in central Europe in the 1990s 10 of which became EU members the following decade. The political co-operation and free trade deals are the biggest and most complex Brussels has offered to non-members. They require countries to adopt about 95 per cent of the EUs trade and economic legislation into their national law. They can also lead to visa-free travel. By opening up ex-Soviet republics to EU trade and investment on EU-style rules, they could be a powerful force for modernisation and development. But they also open these countries to the chill winds of competition from EU producers and, with EU members wary of backing anything that smacks of future expansion, offer no explicit perspective of eventual membership. Russias Eurasian union plan is the most determined of several attempts to rebuild economic links sundered by the 1991 Soviet collapse. Its officials insist it is a trade bloc, not some neo-imperial project. They were irked by remarks by Hillary Clinton, who in her final days as US secretary of state last year warned of a move to re-Sovietise the region. Its sad to hear that these ghosts of the cold war are alive, says Andrei Slepnev, trade minister of the new grouping. First, our customs union is built exclusively as an economic union. Second, there are a dozen customs unions in the world. And no one accuses the Mercosur countries, or Asean, that they are building an empire. Mr Putin, too, told foreign journalists Russia had no desire or aspiration to revive the Soviet empire. He denies Russia has been bullying neighbours into staying away from the EU plan. But Mr Putin says Moscow has legitimate economic concerns. If Ukraine or Moldova open their borders to EU goods, he suggests, their own products would be squeezed out of their domestic markets and flood Russias. So Russia must defend its market but is not interfering or questioning [anyones] sovereign right to decide in favour of the EU. Yet people who know Mr Putin say building the Eurasian union incorporating Ukraine has become a pet personal project. The

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Eastern Europe: Which way to turn? - FT.com

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Russian initiative also targets countries in former Soviet central Asia beyond the scope of the EUs plans where it aims to counter growing Chinese influence. Some foreign policy experts warn that the EU and Russia are wrong to be in effect forcing ex-Soviet republics to choose between them. For most, since much of their trade is still with Russia and the former Soviet Union, co-operating with both makes more sense. The EU/US and Russia have, often unintentionally, forced these states to make zero-sum choices, says Samuel Charap of the International Institute for Strategic Studies in Washington. In some cases, these choices have deepened social and political divisions. It now seems too late to adjust the EU or Russian plans to be compatible. So the run-up to Vilnius and its aftermath promises to be tense. After Armenias U-turn, Moldova and Georgia are still due to formally agree the text of their deals, the final stage before signing, potentially next year. Ukraine is meant to sign. But it faces, and poses, the biggest quandaries. . . . For Kievs leaders, integrating with the EU could provide the best long-term path to growth and modernity. Yet the institutional reforms required (which Chatham Houses Mr Sherr calls a polite euphemism for severing the link between politics, business and crime) could weaken their grip on power and wealth. Joining Russias customs union, meanwhile, would deliver a cut in prices of the Russian gas on which Ukraine relies, but for which it pays among Europes highest prices. But many senior Ukrainians fear it would dilute the sovereignty the country has enjoyed since 1991, turning it back into a Russian province. President Yanukovich must also decide whether to free and pardon Ms Tymoshenko, as the EU demands, but then potentially face her still one of Ukraines most popular opposition figure in presidential elections in 2015. Ukraines parliament will vote in coming days on legislation that would allow her to be released to Germany for treatment for a chronic back problem, in a compromise proposed by EU diplomats. But it is far from clear Mr Yanukovich will allow it. Mr Sherr says the EU faces a Hobsons choice. It must decide whether to sign a deal with a corrupt country that has gone backwards democratically in recent years, or to let Russias soft blackmail prevail. Kiev has accelerated efforts to complete EU reforms in recent months. But some European leaders fear its leadership will go cold on continuing reforms after a deal is signed. Above all, says Mr Sherr, the EU and IMF must be ready to help Ukraine weather the economic consequences of Russian retaliation. If we sign the agreement, I think Russia is going to try to bring the ceiling down, economically, on Ukraine, he adds. ------------------------------------------War games: EU moves compound Moscows Nato angst In Estonia last week, 6,000 Nato troops scrambled to defend the Baltic republic against an invasion, writes Neil Buckley. The invader was the fictional state of Bothnia and the troop movements were military exercises, codenamed Steadfast Jazz. But Natos biggest exercise in seven years, in one of only three ex-Soviet republics to have joined the EU and Nato, spoke volumes about lingering mutual suspicion. The Nato manoeuvres came weeks after Russian forces simulated repelling an attack on Belarus, a former Soviet state still in Moscows orbit. Nato and Russia insisted their exercises were not aimed at the other. But for Moscow, expansion of Nato to its borders, including parts of its former Russian or Soviet empires seen as a buffer zone, remains one of the sorest points in relations with the west. Russian officials allege that the US reneged on promises after the Soviet collapse that Nato would not expand. One of Russias most senior defence officials told foreign reporters privately in September that Moscow was convinced Nato was a threat. Analysts say western officials may not have realised how provocative Nato expansion would appear to Moscow. The EU may have sent similar unintended signals with its Eastern Partnership programme. Samuel Charap of the IISS notes that countries encountering a defensive build-up, or an expanding military alliance that they are not part of, even one not ostensibly aimed at them, face a security dilemma. This instils a sense that they have become less secure. If Nato expansion provoked a classic version of such a dilemma for Moscow (though Nato theoretically remains open to Russian membership), the EUs integration plans have created an integration dilemma, because Russia was left out. We shouldnt be surprised that Moscow, determining there were significant costs for Russia resulting from these plans, responded by pushing its own mutually exclusive integration proposals, he says.
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