Union with Russia?

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The Customs Union of the Eurasian Economic Community was founded in 2010. The Union today includes Russia, Belarus and Kazakhstan, and would gladly welcome the Ukraine. Is a new Union with Russia the best option for the Ukraine? Or has it no real economic benefit for the country?

Union with Russia has no plausible economic justification

Author

Alexandra Azarkhina

05/25/2013 - 17:02

No economic reasons can justify Ukraine’s participation in the Customs Union. Business arguments hide only political interests.

In the Soviet era the economics of the Soviet Union (USSR) republics were all interconnected. The process of production started in one part of the Soviet Union and finished in another. All the routes, industrial objects, were created in order to make the Union more integrated. After the break-up of the USSR, one of the main challanges for each new state was to exist autonomously without the support from the rest of the former Soviet Republics and in accordance with the rules of the market economy. Russia exploited these fears and proposed to all republics to remain linked to the superpower within the framework of an economic agreement. The first attempt of such a re-union was the Commonwealth of Independent States (CIS), but it was not successful.

Now Russia proposes a Customs Union (CU) of Belarus, Kazakhstan and itself as an effective alternative against world-monopolies and as a great possibility to create a free economic zone within the Heartland. For a number of reasons this alternative is not as brilliant for Ukraine as Russia wants to make it look.

The choice of business vs. the choice of authorities

The membership in the CU can stimulate commercial activity between countries, increase the volume of trade and make more effective the usage of the territorial proximity. What does that mean for the Ukraine? It is true that Russia is one of Ukraine's principal partners in foreign trade but, regarding the trade with the rest of the CU and CIS members, the volume is very low – only 11%.

As a comparison, trade with the European Union (EU) is six times more important, while with the ASEAN-China it is five times more significant. Commercial unions should not be the choice of the politicians, but of the businesses. And statistics show that the businesses do not vote nor for the CIS nor for the CU.

Friendship of rivals?

The Union would be interesting if the economics could complement each other, and if it was profitable for everyone. The specificity of the countries belonging to the CU is that they all export mainly primary and semi-finished products. In such economic conditions all participants of the Union can be considered as rivals on the market of raw materials.

Customs Union, not just an economic question?

Russia made pressure on Ukraine concerning its participation in the CU many times. The Ukrainian government and the mass-media present this problem not only as a question of the free border, but more like a “civilization choice”. However, the dilemma of participating in the EU or in the CU is more likely to be an issue of international politics than a civilizational question. Moscow invites Kiev to the CU, while the EU is considering to take Ukraine as its partner. That looks like an old diplomatic game: if you are invited, the host has real interests in your participation, and if you ask permission for being a guest, you are the one who really needs it.

This article deliberately presents only one of the many existing points of views of this contorversial subject. Its content is not necessarily representative of its author's personal opinion. Please have a look at Duel Amical's philosophy.

This article convinced me.

Customs Union is a reasonable alternative to the EU

Author

Antin Shaposhnikov

05/25/2013 - 17:02

Not only political but also economic reasons make it a reasonable alternative for the Ukraine to join the Customs Union instead of integrating the European Union.

Today the Customs Union (CU) includes three countries, and some other states such as Kyrgyzstan and Tajikistan would also want to join. It is not a secret however, that the Ukraine, one of the biggest countries of Eastern Europe, would be the most welcomed guest in the CU. It is not surprising that an important task of the Kremlin’s foreign policy is to bring forward Ukraine’s integration. This issue combines economic and political motivations: the will to control Ukraine’s market is doubled by the dream of an “obedient Ukraine”. Russia seems to be rather consistent in its policy as well; during the past three years Moscow has been insisting by all means on Ukraine’s membership in the CU. The arsenal of methods has been wide: blackmailing, polite invitations, promises of big profits, political pressure and finally the painful gas issue. All these steps illustrate that Russia knows what it wants and is ready for big efforts to achieve its goal. And what about the Ukraine?

Political dances instead of serious work

Nowadays there is no consensus amongst the Ukrainian people and elite on this case. Even if the only party in the Parliament to applaud post-Soviet integration is the Communist Party, this idea is also supported by other people. The chaotic competition of regional parties and the party in power, which tries to sit on two chairs at the same time, make the question even more complicated. Other important politicians officially propose a multi-vector foreign policy and a step by step European integration. However, very often, their work turns into mutual accusations of sabotage of the Western course.

In addition Ukrainians fear borders being closed and more severely restricted visa regime with Russia and Belarus in case of an advanced integration within the EU. In fact, they have there a lot of relatives, as well as cultural and business relations. Also, it is to be noted that all EU Member States in Eastern Europe are also NATO members. And any initiative which aims at an eventual NATO integration is very unpopular in Ukraine. That is why the upcoming Associate agreement between Ukraine and the EU is likely to be the final stage of the country’s Western policy. Dreams about free visa regime or colossal investments from the West will in that case remain only dreams.

Regional and economical factors of Ukrainian Eastern policy

The popularity of Ukraine’s integration of CU traditionally has geopolitical reasons. This idea is rather popular in the Southern and Eastern regions. It includes not only traditional pro-Russian political supporterns amongst the locals but also those representing the interests of local industries, which regularly cooperate with Russia. The Integration of the CU, as well as a future harmonized market and currency system with Russia would give a huge economic push to the country’s development. However, we can also find supporters of post-Soviet integration in Western and Central regions, even if these ones put the emphasis rather on potential economic benefits than on political reasons (such as the re-foundation of a new Soviet Union).

Finally, this issue probably needs a more thorough analysis on the impact of the CU integration balancimg advantages and disadvantages in a long-time perspective. But Ukraine has no time to lose. Nowadays, for Yanukovych, it is too hard to sit on two chairs. Very soon its administration will have to finish the neutrality policy and decide about entering one of the two alliances.