The European Union’s leaders on Tuesday (28 January) offered Russia the prospect of free trade from the Atlantic to the Pacific, in an effort to defuse tensions over the EU’s attempt to expand its trading relations with Russia’s neighbours. The offer puts commerce at the heart of the EU’s efforts to adjust its strategy for relations with Russia.
The offer was made by the presidents of the European Council and European Commission – Herman Van Rompuy and José Manuel Barroso – at the summit in Brussels with Russia’s President Vladimir Putin. Barroso characterised the meeting as “an opportunity for a genuine joint reflection on the nature and direction of the EU-Russia strategic partnership”, and EU officials billed it as a way to “clear the air” after Russia and the EU last year accused each other of blackmailing Ukraine. Russia’s imposition of trade restrictions on Ukraine last summer persuaded Ukraine not to sign trade and political agreements that had been initialled with the EU.
Speaking after the summit, Barroso depicted the EU’s efforts to strike trade deals with members of the EU’s Eastern Partnership – all of them in Russia’s neighbourhood – as a “key to achieve [the] strategic objective” of creating a “common economic space from Lisbon to Vladivostok”. The EU’s trading relationship with Russia is currently governed by an agreement negotiated in the late Soviet period and in force since 1994. That agreement was due to expire in 2007, but has been rolled over each year. The three presidents said that their next summit, on 3 June in Sochi, would see an effort to revive long-stalled talks on a successor agreement, currently termed simply ‘the New Agreement’.
Advertisement AdvertisementThe EU’s offer of a “common economic space” echoes an objective voiced by Putin in 2011, but stands in sharp contrast with the long list of trade disputes between the EU and Russia, as well as the lack of progress on the New Agreement. An EU official said “we have been extremely disappointed with what has happened since Russia joined the World Trade Organisation [WTO]” in 2012, because of “a veritable surge of… protectionist trade measures”. The official said there had been 78 such moves. Both sides have referred each other to the WTO for adjudication in separate disputes.
The differences over trade have emerged still more sharply in exchanges about Ukraine. The political crisis there dominated the three-hour summit – which took place immediately after Ukraine’s Prime Minister Mykola Azarov announced his resignation. Over recent months and days, top EU officials have been scathing about Russia’s arguments that the EU’s putative free-trade deal with Ukraine could harm Ukraine and Russia, describing the arguments and figures presented in private and public as “utter nonsense” and “myths and misinformation”. Putin, though, returned to the theme during the summit, suggesting that the free-trade deal with Ukraine could result in European cars and other products entering Russia under the preferential trade terms that Ukraine currently enjoys with Russia. Putin said that “we would most likely fail to maintain the current tariffs” for Ukrainian products if Ukraine signed a trade deal with the EU.
Putin coupled that warning to Ukraine’s political and business elite with a message of assurance to Ukrainian citizens. He said that a loan struck in December with Azarov’s government would be honoured, whoever succeeds Azarov. Last Wednesday (22 January), the Ukrainian government approved a programme of co-operation with former Soviet states that have joined the Eurasian Customs Union (ECU) that Russia is currently forming.
Ukraine’s President Viktor Yanukovych has not, however, said that he intends to take his country into the Customs Union. Membership of the ECU would deprive Ukraine of the ability to set tariffs by itself. As a result, it would not be able to strike a bilateral free-trade agreement with the EU.
The EU denies that it has objections to the ECU. “We are not a priori negative or hostile to the idea,” an EU official said before the summit, adding: “I can assure you that Presidents Barroso and Van Rompuy have said this.” He said, however, that the EU remains unclear about its nature.
WTO members are obliged to inform the WTO of their plans for common customs. “None of this is happening with the Eurasian Customs Union,” he said. “We are struggling to understand its legal basis.”
