The seemingly innocuous initiative to restore economic relations between Kyiv and Moscow is really Russia's latest move against the EU-Ukraine Association Agreement.
‘Post-truth politics’ continues to spread its ugly tentacles. The worst examples may currently be in America, but in Ukraine a campaign is gathering steam to ‘restore economic relations with Russia’. The campaign aims to abolish mutual sanctions on trade, which makes some sense, but blames Ukraine’s economic collapse in 2013-15 on its association with the EU, which does not.
More broadly, while a campaign for ‘trade instead of war’ sounds like common sense, it is worth noting that Russia is behind the campaign. Most of the campaigners are Ukrainians, but they are Ukrainians with a history of acting as Russian puppets. The Kremlin aims to sway war-weary public opinion in Ukraine and Europe into accepting a bad peace in the name of ‘normalisation’.
The campaign took off in September and October, after repeated calls by Putin for the “full” restoration of economic relations. It is all over Russophile channels like News One, owned by the MP Yevhen Murayev, and Vesti (‘News’), the free newspaper handed out at tube stations. Murayev has been joined by the usual suspects from the pro-Russian ‘Opposition Bloc’ like former energy minister Yuriy Boikoand the oligarch Vadym Novinsky.
The alliance organised an ‘International Economic Forum’ at the Kyiv Hilton on 21 September. The label ‘International’ was supposedly earned by the attendance of a handful of MEPs, like Romania’s Laurenţiu Rebega, deputy chair of the Europe of Nations and Freedom Group. A parallel parliamentary group aiming to collect signatures calling for the ‘mutual abolition of sanctions’ by Ukraine and Russia was set up in October, justified by supposed demands from businesses and their workers for the restoration of economic ties.
The campaign began just before Ukrainian hackers allegedly uncovered state secrets in e-mails from Vladislav Surkov’s office in the Kremlin, which revealed a long history of Russian meddling in Ukraine. The leaks also mention many of the same actors being used to spread the message in the current campaign to restore economic relations. In addition to Yuriy Boiko and the newspaper Vesti, these include friendly ‘NGOs’ like Civic Union, the Union of Factory Managers and Industrialists, and Ukrainian Choice, run by Viktor Medvedchuk.
But the campaign has also received significant support outside the Kremlin’s networks, as war-weariness and disillusion with Ukraine’s Western prospects sets in. Boiko et al have been joined by oligarchs in parliament’s ‘Renaissance’ and ‘Will of the People’ factions, such as Vitaliy Khomutynnik, who is close to Ihor Kolomoisky (the two factions often hold the balance of power in tight votes). It will be a worrying sign if more mainstream oligarchs jump on board the current campaign.
The claims made by the campaigners merit attention and rebuttal. In particular, the idea that Russo-Ukrainian trade collapsed because of unavoidable economic consequences of Ukraine’s association with the EU needs to be confronted head-on.
In a series of excellent reports, the German Advisory Group to Ukraine has noted that trade links to Russia have been over-estimated for some time and had begun to falter as early as 2011 due to Russia’s economic difficulties and Ukraine’s consequent diversification of its trade partners.
Nonetheless, it is certainly true that the precipitous drop seen in recent years –Ukrainian exports to Russia went from $8.9 billion in 2013 to $1.9 billion by 2016 – developed in tandem with progress towards Ukraine’s association agreement with the EU. But the fault does not lie with either Kyiv or Brussels.
Rather, the collapse is due to what one analyst called ‘Russia’s War on Ukraine’s Economy’ – a theory corroborated by the German Advisory Group to Ukraine.Trade first began its serious downward slide in the second and third quarters of 2013, as Russia piled on the pressure on Kyiv to walk away from negotiations with Brussels. It then accelerated as a consequence of increased economic and military war, with exports to Russia from Crimea and occupied Donetsk and Luhansk falling from $2.4 billion in 2013 then to $0.3 billion in 2016.
If the EU is guilty of anything, it is of not checking up on what happened after the trilateral agreement in September 2014, when the EU agreed to delay implementation of the Association Agreement in return for Russia lifting anti-Ukrainian sanctions. Instead, Russia’s trade war continued to intensify, with the ban on food exports from Ukraine starting in January 2016 when the agreement came into provisional force.
Despite this, the Ukrainian economy has since stabilised. The EU’s delayed implementation of the deal may not have been politically astute, as it encouraged Russia to believe it could block the deal, but it did give some breathing room to Kyiv by effectively opening EU markets to Ukraine but not vice-versa.
Ukraine’s exports to Europe are still primarily restricted to raw materials, but this has always been the case. The whole point of the Association Agreement and the Deep and Comprehensive Free Trade Agreement was to allow Ukraine to move up the value chain over time. The German Advisory Group to Ukraine argues that Ukraine’s export performance to Europe is gradually improving. So now would not be the best time for the EU to listen to a largely artificial campaign, which is at heart really just Russia’s next move in its longstanding campaign against the Agreement.