Neo-Titoism spreads as Brussels? influence wanes

Success stories in what it calls the neighbourhood have been hard to come by for European Union. Over the last few years Georgia, then Ukraine, and most recently Moldova have all been the big EU hope – but in each case those hopes were dashed by prompt a worsening of the situation on the ground. Unfortunately for the EU, this year’s annual summit with Ukraine (on the 22^nd November) is likely to showcase this failure of Brussels in dealing with the region.

This year the summit comes at an auspicious time, as the EU reviews its European Neighbourhood Policy (launched in 2004) and the Eastern Partnership (launched in 2009), ahead of a second grand summit in Budapest under the Hungarian Presidency in May 2011. But France has dragged its feet on visa dialogue. EU negotiators are increasingly frustrated with the total lack of progress towards a Deep Free Trade Agreement, which they blame, quite rightly, on the Ukrainian ‘oligarchs’ who have entrenched themselves back in power since Viktor Yanukovych became President in February.

One problem has long been the lack of real enthusiasm on the EU side for further expansion into the region. More recently, the EU has also had to face the reality of competing with Russian influence in what President Medvedev called Russia’s ‘sphere of privileged interests’. Increasingly, however, the problem is with the states themselves.

First, these are new states whose statehood was often contested at birth in 1991 and has remained weak. They became independent as a result of collapsing central Soviet power: some had national revolutions, but in most Soviet elites and political culture remained entrenched. Corruption is rife, state capture by powerful vested interests is the norm, and institutional and reform capacities are weak.  

Second, they also have the economies of weak states. With the crucial exception of Azerbaijan, the local states have few natural resources or high-value manufactures, and have big agricultural sectors. They also depend on economic rents or Russian derivatives rather than adding value themselves – Ukraine makes profits from gas transit, Belarus from oil refining. Many sell raw materials or base products – particular Ukraine with steel – where export levels depend less on product quality than on global commodity prices. Moreover, the two most apparently successful economies in the region – Belarus and Azerbaijan – are the furthest from the EU model;  although of course their good fortune is not due to their domestic ‘model’ but to hydrocarbons in Azerbaijan’s case and to Russian support in the case of Belarus.

The emulation effect that spurred Central European reform in the 1990s is not working further east. Unlike the accession states of the 1990s, the states of Eastern Europe and the Caucasus have little incentive or capacity to adopt the acquis communautaire and move up the value chain.

Third, although they would no doubt protest loudly at such a description, states like Ukraine are better thought of as balancers rather than joiners. Playing a game of balance between Russia and the West allows the elite to stay in power, and preserve the oligarchical economy in an otherwise harmful equilibrium of semi-reform. Local leaders are modern-day Titoists. They are unable or unwilling to join Europe or Russia’s own alternative projects; but both Russia and the West are sufficiently interested to feed the game of balance with enough resources to allow local leaders to maintain the game, stay in power and excuse their own lack of reform. Some are reluctant balancers – Moldova’s current government, the Alliance for European Integration, might be a lot more pro-European if it had not seen how Russia treated supposedly pro-Western governments in Georgia and Ukraine before it. Some play the game with relish – ironically Lukashenka is suddenly becoming something of a regional role model in this regard. The increasing role of other powers in the region – Iran and Turkey, even Venezuela is promising oil to Belarus, but China above all – gives local leaders even more wriggle room, particularly because as Lukashenka said in characteristically unguarded fashion during his visit to Beijing this October, “China’s investment has never had any political strings attached”.

Fourth, elements of the ‘Beijing consensus’ are increasingly entering the region by the back door. As Yanukovych’s Ukraine rolls back democratic reforms, Foreign Minister Kostiantyn Hryshchenko says Ukraine should “use all that is best from China’s experience” and that “One of the assets of China’s model is the ability to think and act strategically” – which is of course easier in countries without political oppositions. Low-tax, low-regulation economic policies that used to be confined to Georgia are being contemplated in Ukraine too.

The EU can carry on with a one-size-fits-all policy of enlargement-lite in the region; but it is unlikely to work. The EU can work harder to turn balancers into joiners, and there are genuine prospects for changing the incentive structure in small states like Moldova, particularly if the EU can help build up long-term institutional capacities. But for the other states we should recognise the reality of each individual game of balance, and work within the limits of the possible to promote EU interests. 

To take three examples, first, we should work to Finlandise Ukraine. Its foreign policy is now officially ‘non-block’. NATO expansion is off the table. Yanukovych has leant towards Russia in the short-term, but has already reached the point where he needs other powers to balance Russia. The EU can accept Ukraine’s foreign policy constraints, while concentrating on helping it transform its economic and social structures.

A second strategy would be to Serbianise Georgia. Like Serbia and Kosovo, Tbilisi should be encouraged, if not to forget about its rebel provinces, then to abandon the kind of manifest destiny politics that subordinates everything else to the recovery of sacred lands; hopefully leaving Georgia free to concentrate on internal reform.

Third on the list is to Franco-ise Belarus. Like Spain in the dictator’s final years, a political opening is unlikely. But the ‘Belarusian economic model’ cannot survive. Despite the current crisis and slump in domestic demand, Belarus’s trade deficit is forecast to reach 14% of GDP in 2010, or more than $7 billion. Despite its ‘multi-winged’ foreign policy, Belarus cannot borrow enough to cover this – the economy will change before Lukashenka does, laying the basis for rapid development once he is gone.