Russian Unlikely to Pressure Ukraine into Customs Union

Tighter border checks of Ukrainian exports will not convince Russia’s former satellite state to fall in line.

Russian president Dmitri Medvedev speaks with his Ukrainian counterpart, Viktor Yanukovich, during an economic forum in Donetsk, October 18, 2011
Russian president Dmitri Medvedev speaks with his Ukrainian counterpart, Viktor Yanukovich, during an economic forum in Donetsk, October 18, 2011 (Presidential Press and Information Office)

Tighter border checks of Ukrainian exports to Russia are clearly meant to convince the former Soviet satellite state to enter Moscow’s Eurasian customs union. It might not work.

On Wednesday, Russian border guards started new discriminatory border checks on all Ukrainian cargos, delaying exports and thus driving up costs. Ukrainian products are still allowed to enter Russia as well as Belarus and Kazakhstan — both members of a customs union that is seen as a precursor to an “Eurasian Union” — but controls are made complicated and lengthy. They might cost Ukraine between $2 and $2.5 billion this year.

Russia denies anything is out of the ordinary although nationalist party lawmaker Leonid Slutsky said in a radio interview this week that the problems were caused by “bureaucratic hurdles Ukraine faces by not being a member of the customs union.”

Ukrainian lawmakers have been less forgiving. “The ban on the imports of Ukrainian goods into Russia is nothing else but pressure by Russia in order to force Ukraine to join the customs union,” said former foreign affairs minister Arseniy Yatseniuk, now the liberal opposition leader.

It’s hardly the first time Russia has used trade to pressure Ukraine into a more eastward policy. Especially disputes over natural gas prices and siphoning have plagued relations since the collapse of the Soviet Union in the early 1990s. The countries waged two “gas wars” in the winters of 2006 and 2009 when Russia suspended delivery — which also put Europe’s gas supply at risk. Nearly 70 percent of Russian gas exports to the European Union is transited through Ukraine, a reason for the body to try to draw it into a trade association agreement, due to be signed in November, which would preclude it from joining Moscow’s customs union.

Ukraine imports some 60 percent of its natural gas and more than 90 percent of its oil. By keeping supply below demand and both resources overpriced, Russia tries to force it to trade more of its industrial assets for energy and accelerate a process of economic reintegration that stalled under the previous, pro-Western government.

Incumbent president Viktor Yanukovich is seen as more sympathetic to Moscow yet his administration his continued the policy of waning Ukraine off its dependence on Russian imports by developing Black Sea and shale gas reserves in cooperation with Western companies like ExxonMobil and Shell instead of Russia’s Lukoil.

From the Kremlin’s perspective, preventing Ukraine from drifting into the Western orbit is both an economic and a strategic imperative. An association agreement with the European Union could be a first step toward membership. It also compels Ukraine to liberalize its economy and put it structurally on par with other European states, enabling further investment in the country to the likely detriment of Russian companies. Once the process is complete, under the bloc’s current accession rules, Ukraine could apply for membership and the countries already in the European Union would have little legal basis to deny it.

That would be a blow to President Vladimir Putin’s hope of pulling many of the former Soviet Union states into an Eurasian Union — which is also meant to entertain the anti-Western notions of nationalists like Slutsky.

Ukraine is the most populous of former Russian satellite states, a major trading partner and shares Russia’s culture and Orthodox faith. Even many liberal Russians like to think of it as an extension of Russia proper and regret the separation of the two after the collapse of communism in Eastern Europe.

By keeping Ukraine in its sphere of influence, Russia maintains a foothold in Europe, indeed, a “European” identity, whereas the alternative, an Eurasian Union that includes only Central Asian republics besides Russia, would relegate it to a less pivotal role in world affairs.

Trying to force Ukraine into a state that many Ukrainians would consider subservient to Moscow, however, is unlikely to work, writes Dmitri Trenin, director of the Moscow Center of the Carnegie Endowment for International Peace. Russia’s intimidation will only rekindle Ukrainian nationalism, he predicts, and a semblance of national unity in Kiev. “By shifting gears abruptly from professions of eternal brotherhood with the Ukrainian people to what amounts to a trade war, Mr Putin effectively works at cross purposes with himself. Ukraine will not join Europe — at least, not for a long time, but it will certainly not rejoin Russia.”