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15 March, 2012  ▪  Oleksandr Kramar

A Trade and Demographic Donor for Russia?

Russia’s accession to the WTO signals a renewed effort to draw Ukraine into a Eurasian union

Russiahas officially joined the World Trade Organisation. This may have far-reaching consequences for Ukraine – albeit more in geopolitics than in trade or economy. And Russia’s partners in the Customs Union may soon follow suit and also become WTO members.

Unlike Ukraine, Russia does not derive any obvious benefits from its WTO membership. Two-thirds of Russia’s trade volume is energy resources, which are not governed by WTO rules. In contrast, other products that are competitive on world markets, such as metal and grain, are much less significant in the structure of Russia’s economy and exports. And yet Russia has greatly expedited WTO membership negotiations in the past year, essentially agreeing to demands set by its partners, which is something it had previously avoided. It even de facto recognized Georgia’s customs borders that include Abkhazia and South Ossetia. It appears that the Kremlin is now willing to make sacrifices for the sake of an ambitious goal.

UKRAINEAND THE CUSTOMS UNION: THE PATH IS NOW CLEAR

While the Ukrainian leadership kept repeating like mantras its declarations about Ukraine’s unchanged European choice, Putin always retorted: “We are not against it. We, too, are for integration from Lisbon to Vladivostok.” Nevertheless, the WTO was an immediate obstacle preventing Ukraine's membership into the Customs Union. Its founding members did not have WTO membership, and the prospect of complicating its relations with WTO partners had a cooling effect on even the most persistent supporters of Ukraine's Eurasian integration in the current government. Russia also had problems with Armenia and Kyrgyzstan – other potential members of the Customs Union and the Eurasian union, which already have WTO membership. In this context, with Russia, and later other Customs Union members joining the WTO, this final obstacle has been removed.

This may also explain the ‘unexpected change’ of Vladimir Putin’s stance on a free-trade zone in the CIS during the October summit of CIS leaders in Saint Petersburg, and his refusal to condition progress in the gas issue on Ukraine's immediate accession to the Customs Union. The agreement that was reached suggests the following scenario. Without making any sudden moves to the East, Ukraine will gradually lead negotiations with the EU up a blind alley and will wait to see “the first results of the performance of the Customs Union,” according to Viktor Yanukovych. By the end of 2012, Ukraine’s membership in the Customs Union and perhaps even in the Common Economic Space will be a done deal. All of this will be accompanied by mandatory assurances that Ukraine is ready, and even wants, to further integrate with the EU.

The integration and notification processes have been launched de facto: the Free-Trade Agreement has been signed with the CIS. In Saint Petersburg, Prime Minister Mykola Azarov essentially undertook the bringing of Ukraine’s legislation in line with the technical regulations of the Customs Union. Moreover, Ukraine has even pioneered a revival of the rouble zone by agreeing to switch to the rouble in its payments to Russia.

Meanwhile, a systematic campaign to brainwash the public is continuing in Ukraine. Speaker Volodymyr Lytvyn and Deputy Prime Minister Serhiy Tihipko have clearly said that if the EU puts forward some “excessive demands,” Ukraine may choose “the economically advantageous membership of the Customs Union.” How Ukrainian society will react to this is another matter, but the formal excuse – “Europe has turned us down” – is essentially ready to be employed. What remains to be done is to continue, and even step up, political repressions and frustrate the ratification, if not the signing, of the Association Agreement with the EU. But in fact, this has already happened.

The Ukrainian government is being actively prodded to go along this path. For example, Party of Regions MP Valeriy Konovaliuk has been very active recently. In November 2011, at the roundtable ‘What will Ukraine’s economy gain and lose from joining a free-trade zone with the CIS and the EU?’ he announced the creation of an interfaction group that would, “be lobbying for the Eurasian vector of Ukraine” in parliament. The motivation is noteworthy: Konovaliuk wants to preserve the non-competitive structure of Ukraine’s economy. He believes that we need to not only evaluate prospects, but also understand that, “in many fields (biotechnology, machine building, the industrial complex and agribusiness) we cannot compete with European producers to some extent.” He was unable to offer any reasonable reply to the question: “On this approach, what will change tomorrow if it has not changed in the past 20 years?”

These ‘movements’ by Konovaliuk are too revealing to be ignored. They dovetail with the way Putin has been blackmailing Yanukovych: “You are either friends with us, or the electorate is not friends with you.” Konovaliuk’s ‘interfaction group’ may become precisely the platform around which to rally pro-Russian ‘pragmatists’ who favour steps towards Russia-inspired integration projects.

UKRAINE, A FUSE AGAINST THE ‘ISLAMIZATION’ OF RUSSIA?

The Kremlin is in a hurry to complete integration processes as soon as possible. First, there is an economic stimulus. Russia has problems whose solution will require an influx of resources. Second, the ‘land-collecting’ enterprise will be psychologically incomplete if the Kremlin fails to include Kyiv, “the mother of all Rus’ cities.” Furthermore, the integrationists have one more concern: Putin’s brainchild, the Eurasian Union, risks becoming more Asian than European without Ukraine.

With Russia’s population dwindling, the proportion of the Asian population (almost completely Muslim) is growing in leaps and bounds. If the current demographic trends persist, the Caucasian and Volga Region’s peoples will exceed 19-20 million by 2020, while the number of Russians and other European peoples, and nationalities that can be actively Russified, will drop to 110-112 million. If Putin succeeds in making the Eurasian Union a reality by 2015, its ethnic composition will look like this: 117-118 million ‘Russians’ (counting Russified European minorities), over 80 million Muslims in Central Asia, the Caucasus and Volga Regions, and 7-8 million others. Thus, the Russian-speaking population will have to co-exist in a new supranational entity with a comparable conglomerate of peoples who will compete for resources.

Average Russians are very much concerned about this prospect, as is proved by past ethnic attacks. That is why Russian politicians have resorted to chauvinistic and often xenophobic slogans. For example, “For Russians!” was the key election slogan of Vladimir Zhirinovsky, leader of the Liberal Democratic Party. The communists have promised to restore the nationality field in passports and legislatively fix the status of Russians as the state-forming nation. A number of more conservative forces have started discussing the need to create the ideology of ‘liberal nationalism’ as opposed to the Kremlin’s imperialism.

However, Moscow is not going to abandon its plans to drag Central Asian and Caucasian countries into its union, especially considering their rich natural resources. At the same time, the demographic factor will have to be set off, and Ukraine’s population of nearly 45-million may be just what Russia needs.


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