Europe took important steps towards securing free trade with Georgia, Moldova, and Ukraine, but Azerbaijan and Belarus had their sights set elsewhere
Trade remained central to relations with eastern partners. The Commission successfully balanced flexibility with the need to take a firm position on conditionality on countries such as Ukraine and Armenia. A key question for 2016 will be whether the EU decides to engage with the Russia-backed Eurasian Economic Union (EEU), as Moscow hopes.
Trilateral talks between the EU, Ukraine, and Russia continued throughout 2015. Moscow’s efforts to insert itself into the agreement or to postpone implementation failed, and implementation of the DCFTA trade deal with Ukraine began on 1 January 2016. In response, Moscow imposed restrictions on trade with Ukraine.
Trade between the EU and Moldova increased substantially, thanks to the DCFTA that entered into force in mid-2014. The growth rate of exports to the EU dropped in 2015 from the 30 percent seen the previous year, due to the corruption scandal and resulting political fallout. In December, the DCFTA was extended to Transnistria. Georgia began implementing its DCFTA in 2015, though trade volumes with the EU did not rise dramatically. It did, however, attract foreign direct investment from China and others who want access to the EU market.
In December, the EU opened negotiations with Armenia on a new framework agreement that will replace the AA and the DCFTA that Yerevan decided not to ratify following its decision to join the EEU, under pressure from Moscow. Azerbaijan remained uninterested in a DCFTA, as the Chinese “One Belt, One Road” (OBOR) initiative provided alternative trade partnerships without demands for domestic reform. Consequently, EU trade with Azerbaijan sharply decreased in 2015.
Despite anxiety about Russia’s new military assertiveness, Belarus’s trade is still oriented towards Russia, with EU trade decreasing in 2015 compared to the previous year. The sanctions and counter-sanctions on Russia have made Belarus an important centre for smuggling European products to the Russian market.
