Armenia’s choice and the Eastern Partnership

A few weeks ago, Armenia stunned EU foreign policy watchers when it gave up on its association and free trade deal with the EU just a few weeks after negotiations had been finalised. The move followed Russian demands on Armenia to join the Russia-led Customs Union, thereby preventing the state from entering into a free trade with the EU. But even if Armenia’s U-turn was the direct consequence of Russian pressure, it nevertheless touched a raw nerve in the EU. It is therefore relevant  to ask what Yerevan’s U-turn means for EU foreign policy in general, and for the Eastern Partnership (EaP) in particular.

The shape of things to come?

That a country of 3 million people and a nominal GDP of $10 billion would turn its back on the world’s biggest market (over half a billion people and a $16 trillion GDP) would have previously been virtually unthinkable. The EU, which has spent the last two decades managing a queue of almost two dozen countries vying to enter the club, is simply not used to being rejected by countries such as Armenia.

Armenia’s sudden change of direction seems to suggest that one of the most prized things the EU can offer (access to its market) can be countered by other powers – and offers. It was not Armenia’s decision per se that shook the EU foreign policy community, but a fear of the possible shape of things to come – and a feeling that a multipolar world is emerging not only at the expense of US power, but also of EU influence. Read the rest of this entry »

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A solidarity package for the eastern partners

The year ahead will be a crucial one for the success of the Eastern Partnership (EaP). While Ukraine and the EU work towards the eventual signature of an Association Agreement at the Eastern Partnership summit in Vilnius in November, Moldova and Georgia will only initial the Agreement, and are not due to sign it until autumn 2014.

Since the Deep and Comprehensive Free Trade Agreement (DCFTA) will only become a legal reality for them towards the end of 2014, between now and then they will be vulnerable to external pressures – diplomatic, commercial or energy-related – aimed at disrupting the signing of the agreement.

The recent U-turn by Armenia (which chose to join a Russia-led Customs Union rather than sign up to the DCFTA), as well as rising trade pressures on Ukraine and a new wine embargo on Moldova, probably mark just the beginning of a longer escalation of trade-related hostilities. The aim of these pressures is to either divert some of the  Eastern partners from their EU association agenda, or drastically increase the costs of  pursuing this option and weaken the political forces behind pro-EU moves. As a consequence, they will start paying the economic and geopolitical price for association with the EU well before they start reaping the benefits of it.  Read the rest of this entry »

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Keeping the Eastern Partnership on track

Sir Humphrey Appleby, the suave civil servant in the British sitcom ‘Yes Minister’ known for his wise but cynical pessimism, once remarked that diplomacy is about surviving until the next century – while politics is about surviving until Friday afternoon.

Such differences in time horizons apply also to the pace of European foreign policy when dealing with post-Soviet realities, as the EU and most of its Eastern partners enter the finishing line on Association and Deep and Comprehensive FreeTrade Area agreements. For in the case of EU-Armenia relations, things have not survived intact until Friday afternoon. After having been engaged for years in the preparation and negotiation of an Association and Free-Trade agreement with the EU, Armenia has aborted the process just before its conclusion and announced its intention to join the Russian-led Customs Union. Read the rest of this entry »

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Russia-Syria: The Odd Couple

As the world awaits a possible military strike – led by the US – on Syria, the leaders of the G20 are gathering for their annual summit in St Petersburg. This time round, the issue of war is likely to overshadow discussions on the economy, finance and trade, with the meetings and media platforms of the summit being used to exchange arguments over Syria between advocates of military action and the dwindling group of friends of Bashar al-Assad.

Some Western leaders will no doubt try to persuade President Putin to alter his hitherto obstructive stance on Syria. In public, they are likely to make appeals on humanitarian grounds, arguing that the use of chemical weapons against a civilian population cannot go unpunished. In private, they will appeal directly to Russia’s rational self-interest and urge Moscow to come down on the right side of history in the eyes of the Arab world. In all likelihood, Russia will respond with lectures on the sanctity of international law, state sovereignty and non-interference in the domestic affairs of others. As a result of these two seemingly unbridgeable positions, it may well become another dialogue of the deaf.

The use of chemical weapons in Syria may have emboldened some countries in the West to take a more pro-active stance on Syria, but it does not seem to have had any real impact on the Russian standpoint. Despite frequent claims to the contrary, Russian support for Assad is not primarily motivated by the interests of arms dealers, the desire to hold on to its military base in Tartus or a cynical attempt to simply antagonise the West. Although driven by all of these concerns to varying degrees, Russian support for Syria is mainly rooted in the historical relationship of the two countries and in respective domestic political developments of the last few decades. Consequently, appeals to either humanitarian sympathies or naked interests are highly unlikely to change the Russian position. Read the rest of this entry »

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The Russian-Ukrainian Trade Spat

In mid-August, Russia blocked virtually all imports from Ukraine. Although the cross-border flows between the two countries have since resumed following a week of heightened tension, the issue is far from over. On the contrary, the trade spat was probably just the first warning shot in what could escalate into a full blown trade war, the ultimate aim of which would be to prevent Ukraine from signing an Association Agreement with the EU at the Eastern Partnership summit in Vilnius in late November, thereby preventing further economic integration with the European Union and steering it in a Eurasian direction instead.

It is in Ukraine’s political interest to sign the Association Agreement, containing a free trade component, with the EU, while maintaining the existing free trade agreements it has with other post-soviet states, including Russia. Although a country can have multiple free trade agreements and such an arrangement would be a win-win situation for Ukraine, Russia is adopting a more zero-sum stance towards the matter. This is primarily due to the fact that, once Ukraine signs the Association Agreement with the EU, it will no longer the able to join the Russia-led Customs Union – or the proposed  Eurasian Economic Union – due to the differing standards and tariffs in place. An EU-Ukraine free trade deal will mean greater access for Ukraine to the EU market through lower customs and non-tariff barriers, higher export quotas for certain sensitive goods, and the adoption of EU standards in a wide range of domains.

Until recently, Russia was relatively at ease, feeling secure in its belief that the EU would not sign the already finalised and initialled Association Agreement with Ukraine as long as former Prime Minister Yulia Tymoshenko remained in jail, and that President Yanukovich was unlikely to release his main political rival a year and a half before the next presidential elections, due in early 2015. However, in the last few months there has been some progress made, with the European Commission putting forward a proposal for a Council decision on the signing of the Agreement, and the EU and its member states working more actively to seal the deal with Ukraine in Vilnius. Read the rest of this entry »

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Ukraine’s gas loop

For many years, most countries in central and eastern Europe – from Bulgaria to Latvia, from Ukraine to Hungary – have complained of their dependence on Russian gas. All have tried to reduce this dependence through a combination of the development of new infrastructure (interconnectors, compressor stations for reverse gas flow), frantic searches for alternative gas suppliers (Nabucco, Norway), anti-trust procedures against Gazprom (as launched by the European Commission), and regulatory changes affecting the sale of gas in Europe (the ‘third package’).

An interesting sideshow of this struggle is now occurring in Ukraine. While most analysts assumed that a decreased dependence on Russia would come from access to non-Russian resources – in the form of shale gas, liquefied natural gas (LNG) or Norwegian gas – Ukraine and the German energy giant RWE seem to have found a way to limit Gazprom’s sway over Kiev, while continuing to consume Russian gas. Read the rest of this entry »

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Why Saakashvili Lost?

Mikhail Saakashvili, Georgia’s president conceded the defeat of his party at the parliamentary elections. His rival Bidzina Ivanishvili, a money-splashing oligarch who made his billions in Russia and and set up the Georgian Dream party – a motley crew of oppositionists ranging from very respectable centrist politicians or former diplomats to some loony nationalists and populists – got over 50% of the votes on party lists. Saakashvili might still get a majority in the Parliament because whereas he seems to have lost the contest for the Parliament’s half seats that are elected on party lists under proportional voting system, the other half is elected as single-seat constituencies where Saakashvili’s part might have the lead.

Anyway, the election results are a big surprise. Just a couple of months ago very senior Georgian politicians were expecting something like a 50% to 30% victory for Saakahsvili, and were saying that the main danger from Ivanishvili was not for this round of elections, but for the next electoral cycle where he could build on his 30% to make the leap towards a proper majority.

Of liberalism and social democracy

The reasons for the elections results are manifold. The most important is basically too right wing a government. In his near-decade in power Saakashvili achieved huge successes in state building. The list of achievements is very long and has been so often quoted by Georgia apologists and friendly lobbyists that many people are tired of it. However, what Saakashvili achieved is no mean feat. He drastically reduced low-level corruption when it comes to the interaction between the citizen and the state – from traffic police to construction-permit issuers. He attracted significant investments, and most importantly (re)built the skeleton of a more or less functioning state, starting with the police and tax-inspectorate, then moving on to courts, universities, and municipal services (Here is a good book from the World Bank chronicling Georgia’s reforms). All was supplemented with a huge deregulation drive – that ranged from cutting red-tape and giving as free a hand to investors to drastic liberalisation of visa procedures for as many countries as possible. Georgia was open to anyone who would come to spend money or invest – from Iranian or Turks going to casinos in Batumi, to Russian, Kazakh or Gulf investors. Read the rest of this entry »

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Time for Azerbaijan to open up

Foreigners normally tiptoe around Azerbaijan. They all want something from the country, be it in the field of energy or security. The EU wants Azerbaijani oil, gas and cooperation over building gas pipelines to Central Asia. The US and Israel value cooperation over Iran. Turkey has a strategic partnership with the country. Russia wants Azerbaijan not too align too closely with the US and to prolong the lease for the Russian radar station in Gabala. In its turn Azerbaijan is rarely a foreign policy demandeur. It has lots of oil money and a consolidated authoritarian regime which does not want to take lessons over foreign policy or lack of democracy at home.

Appearances can be deceptive

Money and a careful foreign policy between various great power interests made Azerbaijan the ultimate balancer and a fairly arrogant regional player. But the Azerbaijani system is more fragile than the country’s foreign partners think. The foundations of that system are increasingly shaky for several reasons.

One key factor is decreasing oil production. Oil production peaked in 2010; it will go down by half by 2017 and two-thirds by 2019. The hope is that new gas reserves will make up for the difference in incomes. This might compensate the fall in revenues, but only partly and insufficiently. Read the rest of this entry »

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Updating Russia’s repressive software

The massive street protests, which started in December 2011, have proved a very considerable stress-test for Russia’s autocratic political system, built and steered by Putin for over a decade. Russia-watchers in Europe and the US debated how the Kremlin would respond. A few months ago the usual cohort of useful wishful thinkers argued that Putin, swayed by the rising middle classes, would accelerate Russia’s modernisation. In a sense they were right. Putin is modernising, but his efforts are directed at the repressive apparatus of laws and, possibly, institutions, rather than at the economy or the political system.

Tightening the screws

During 2005 and 2006 Russia adopted swaths of legislation designed to prevent events like the 2004 Orange revolution in Ukraine or the 2003 Rose revolution in Georgia. Electoral laws were toughened in ways that strengthened the pro-Kremlin ‘United Russia’ and weakened potential alternatives; thuggish pro-Kremlin youth groups such as Nashi (‘Ours’) were established; new restrictions were introduced, seriously complicating NGO activities and election monitoring; and vaguely defined legislative provisions against ‘extremism’ that could then be used against opposition activists were adopted.

Under Medvedev’s presidency the bulldozer of state repression was used with less enthusiasm. Sometimes it actually receded. Earlier this year it even seemed that the authorities might actually embark on liberalising the political system in response to the street protests. Instead, the protests seemed to have sparked a new round of attempts to tighten the screws and refurbish the repressive apparatus.

It started with the legislative software. Read the rest of this entry »

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Putinism under Siege: on the nationalist-democratic alliance

Journal of Democracy has just published a special issue on ‘Putinism under Siege‘ with contributions from Lilia Shevtsova, Ivan Krastev & Stephen Holmes, Denis Volkov, Sharon Wolchik and I. My piece is on The Strange Alliance of Democrats and Nationalists .

The article looks at three broad themes:

1) How Russian nationalism is evolving from an expansionist, Eurasian, and imperial version into something that is primarily anti-immigrant, defensive and sometimes non-expansionist.

2) How nationalists started to adopt some pro-democracy rhetoric in the belief that a more democratic system based on majority-rule would make state policies closer to their policy prescriptions.

3) How some Russian democrats sometimes entered into ad hoc alliances with nationalist groups on an anti-Putinist platform, but also how a much deeper fusion of democratic and nationalist views starts to be espoused by various political players. This phenomenon is still in its early stages, but could be a sign of things to come. Read the rest of this entry »

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