In Background, Ukraine

By Alexander Mercouris, Russia Insider, May 22, 2015

Russian President Vladimir Putin’s website is providing fascinating details of a high level government meeting that took place in the Kremlin on 20th May 2015.

EU symbol, photo by Francois Lenoir, ReutersThe meeting covered a broad range of economic issues, but I shall focus here on one particular issue, which is what the report tells us about the state of the tripartite negotiations Russia is having with the EU and Ukraine over Ukraine’s Association Agreement with the EU, and what the negotiations also tell us about the strength or otherwise of the EU’s commitment to Ukraine.

It appears from the report that the EU’s commitment to Ukraine is weakening, and that the EU might be preparing to wrap up its Ukrainian adventure.

This, of course, is what the results of Putin’s talks with Merkel in February and with Kerry this month also suggest. However the report on Putin’s website offers the first written confirmation of this from an official — albeit Russian — source.

I discussed the Association Agreement in some detail in an article I wrote earlier this month for Russia Insider  (see How the EU Association Agreement Makes Existing Ukraine-Russia Trade Links Impossible, Russia Insider, 4th May 2015). I explained in that article that contrary to what most people think, the Association Agreement is not simply a free trade agreement between Ukraine and the EU (even though it calls itself that) but that it is in reality a device to make Ukraine part of the European Economic Area and the European Single Market subject to the regulation of the EU bureaucracy in Brussels and the jurisdiction of the European Court of Justice in Luxembourg.

I also explained in that article that these arrangements were completely incompatible with maintenance of Ukraine’s existing economic and trade relations with Russia.

Though I did not go into details of the geopolitical intentions behind the Association Agreement, its terms make them fairly obvious – to detach Ukraine from Russia, and to integrate Ukraine with the West.

At the time I wrote that article, it appeared that the tripartite negotiations between Russia, Ukraine and the EU were deadlocked and were going nowhere. The Ukrainians and the Europeans were categorically refusing any amendments to the text of the Association Agreement, while — for good reasons that I explained in the article — the Russians were insisting on nothing less. It now seems, if a report made to Putin at the government meeting on 20th May 2015 by Economics Minister Ulyukaev is to be believed, that a breakthrough has taken place, and that the Europeans have finally agreed to consider amendments to the text of Association Agreement, as the Russians have always demanded.

Ulyukaev’s words reporting the breakthrough to Putin were as follows:

Overall, more than half of the 15-month breather that we agreed on has passed now, and sadly, this time was not used very productively. But there was an expert meeting at the end of April, and the day before yesterday, I had a meeting with the EU Trade Commissioner and the Ukrainian Foreign Minister. …

Overall, our approach met with our European and Ukrainian colleagues’ understanding. We agreed that the experts will start working in groups to prepare by the end of July the documents, the status of which will be clarified later.

The documents could take the form of protocols to the Ukraine-EU agreement, or they could form a separate agreement that would make a single package with the [EU-Ukraine] agreement and would enter into force simultaneously with it.

Once this work is completed at the end of July, we will have to make an important decision, namely, whether this set of documents suits us, or whether we need to take other decisions.

I should explain that protocols are documents that are attached to a treaty or a legal document that become part of its text. They carry equal weight to the document to which they are attached.

Good examples are the Minsk Protocol of 5th September 2014, which was, technically speaking, a document that was attached to the peace plan Ukraine’s President Poroshenko had previously announced in June 2014, which it amended substantially, and the Secret Protocol of the Soviet German Non-Aggression Pact of 1939, which spelled out important details of the Non-Aggression that did not appear in its published text, and which I recently discussed in detail in another article.

The alternative Ulyukaev talks about is equally radical – a separate treaty or agreement “that would make a single package with the [EU-Ukraine] agreement and would enter force simultaneously with it”.

In other words the Association Agreement would become one in a set of agreements, each of equal weight, with each agreement interpreted by reference to the terms of the other.

Regardless of which option is adopted, Ulyukaev makes it clear that the intention is to give binding legal effect to changes to the text of the Association Agreement.  On this Ulyukaev is unequivocal:

[E]ither we actually have been heard now and will obtain legally binding documents that satisfy us, or we will be obliged to act in accordance with Government Resolution No. 959 [the resolution of the Russian government that allows for cancellation of Russia’s free trade agreement with Ukraine – AM].

As to the actual changes to the Association Agreement Russia proposes, Ulyukaev spelled them out:

The first concerns tariff regulation of goods of a sensitive nature for our economy. We propose setting transition periods before tariffs for these goods are liberalised in accordance with the Ukraine-EU agreement.

The second is customs administration and organising the relevant electronic documentation and information support, and identifying the goods’ country of origin, so as to make proper use of the preferential regime and exclude from it goods that come from third countries.

There is also the matter of technical regulation. Here, we think it right to maintain the possibility for Ukrainian companies to choose between European standards and the standards in force under CIS agreements. Health and phytosanitary control is another matter here, too.

Yet another issue is Ukraine’s inclusion in the electronic certification system in operation in the Eurasian Economic Union, so that we can be certain of the relevant information’s authenticity. We want to keep in place the certification system currently in operation, so that businesses will not have to spend extra time and money on getting all their certification redone.

In the energy sector, we want to preserve the parallel operation of Russia’s and Ukraine’s unified energy systems, so as not to have to bring on line reserve generating and grid capability.

These proposals, if adopted, would effectively nullify the Association Agreement as it exists now. Instead of a wholesale and binding adoption by Ukraine of the acquis, the body of EU law administered by the European Court of Justice, Ukrainian enterprises would be free to pick and choose whether to adopt EU standards (i.e., the acquis) or stick with Russian ones.

Given that Russia is the biggest market for Ukrainian industrial goods, it is likely that the majority of Ukrainian industrial enterprises would choose to stick with Russian ones.

Instead of the free movement of goods across the EU-Ukraine border envisaged by the Association Agreement — and which is a fundamental principle of the European Single Market — certain types of Ukrainian goods that Russia considers “strategically important” to itself would continue to be protected in the Ukrainian market from EU competition while continuing to have free access to the Russian market, as they do now.

The existing electronic monitoring system would be preserved to enable Russia to track the movement of goods within Ukraine itself, so as to insulate itself from unwanted imports of goods from the EU.

Ukraine’s energy system would remain unified with Russia’s. Though Ulyukaev does not spell it out, it appears likely this means some degree of Russian control of Ukraine’s pipeline network, and of the  electricity generating and supply industry.

These proposals must be considered in conjunction with the equally far-reaching political proposals for the extensive autonomy within Ukraine of the two People’s Republics, which were recently published, and which I have recently discussed (see Ukraine: Confederal Solution Looms, Russia Insider, 14th May 2015).

Taken together, these two sets of proposals bring into clearer focus the sort of solution for the Ukrainian conflict that the Russians now envisage. This is for a loosely confederal Ukraine, in which the eastern regions largely govern themselves while exercising a degree of control over Ukraine’s foreign and economic policies; which is barred forever from joining either NATO or the EU; and which remains tightly integrated economically with Russia but with a certain scope for people and businesses in Ukraine’s western regions to reorient themselves more closely to the EU.

This is a totally different outcome than the one envisaged by the Maidan movement, which seeks a unitary, monocultural Ukraine inside NATO and the EU and distanced permanently from Russia.

Since adoption of these Russian proposals would mark the final failure of the Maidan revolution, the Ukrainian government is certain to oppose them bitterly.

The proposals might not, however, be so objectionable to some of the Maidan movement’s supporters in western Ukraine. Recent reports (see Western Ukraine Ready for Secession?, Russia Insider, 28th April 2015) suggest growing secessionist sentiment there. If so, then it is not difficult to see how these proposals, if pitched properly, could appeal to the people of Ukraine’s western regions, by offering them peace together with a certain connection to the EU, which is what they want.

However, the single most important fact to emerge from Ulyukaev’s comments is that the Western powers are suddenly becoming receptive to these Russian proposals. Here again is what he said:

Mr President, you could say that a sense of cautious optimism has emerged. The ice is starting to melt, in the sense at least that they have started listening to us and are actually hearing what we say.

Overall, more than half of the 15-month breather that we agreed on has passed now, and sadly, this time was not used very productively. But there was an expert meeting at the end of April, and the day before yesterday, I had a meeting with the EU Trade Commissioner and the Ukrainian Foreign Minister.

(Ulyukaev then sets out the Russian proposals)

Overall, our approach met with our European and Ukrainian colleagues’ understanding. We agreed that the experts will start working in groups to prepare by the end of July the documents, the status of which will be clarified later.

What Ulyukaev is saying is that after wasting eight months rejecting the Russian proposals out of hand, the Europeans have suddenly indicated in the last few weeks that they might be prepared to accept them after all.

If this is really so, and if what Ulyukaev says is true, then it is the best evidence to date that the Western powers have indeed finally given up on their Ukrainian adventure, and have accepted that the grandiose geopolitical objectives they set themselves when they drafted the Association Agreement and backed the Maidan coup are unachievable, and that the time has now come to draw a line under the whole affair.

Note by New Cold editors: There is a part of this story reported above by Alexander Mercouris which is not analyzed in his article but is being widely reflected upon in Russia and in eastern Ukraine. That is, what are the consequences for the pro-autonomy, anti-oligarch struggle in eastern Ukraine should a rapprochement be reached between Russia and the European Union? Will Moscow accept the austerity agenda of Europe for Ukraine, rather than resist it? This would worsen an already-bad economic situation in eastern Ukraine, not to speak of the rest of the country. And it would seriously dim the economic prospects of an autonomous eastern Ukraine (Novorossiya). This website will endeavour to follow this side of the story.


EDITOR’S NOTE: We remind our readers that publication of articles on our site does not mean that we agree with what is written. Our policy is to publish anything which we consider of interest, so as to assist our readers in forming their opinions. Sometimes we even publish articles with which we totally disagree, since we believe it is important for our readers to be informed on as wide a spectrum of views as possible.

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