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On 18 May 2015, the European Commission, Russia and Ukraine held their third trilateral meeting at ministerial level to discuss the implementation of the EU-Ukraine Association Agreement, more precisely on the establishment of the Deep and Comprehensive Free Trade Area (DCFTA). This format of formal trilateral talks started only in July 2014, in the context of the de-escalation process for the Eastern Ukraine crisis and in anticipation of the first Minsk peace arrangement of 5 September 2014. The question arises to what extent this trilateral dialogue contributes to a long-lasting solution of the conflict (i), whether it has implications for the existing sanctions regime (ii) and how it may affect the EU’s relations with the Eurasian Economic Union (iii).
Trilateral talks as an answer to Russia’s economic concerns
The first trilateral negotiations of June 2014 resulted in an important compromise solution. On the one hand, the EU and Ukraine agreed to postpone the provisional application of the DCFTA until 1 January 2016. Simultaneously, the EU promised to continue the application of its unilateral trade preferences to Ukraine until the same deadline. On the other hand, the Russian Federation did not suspend its existing free trade arrangement with Ukraine (the so-called CIS FTA of 2011).
This compromise essentially aimed to buy time for technical negotiations in response to a list of Russian concerns about the impact of the EU-Ukraine DCFTA. Three issues are significant in this respect. First, Russia claims that its domestic market will be flooded by EU products re-exported via Ukraine and thus circumventing the customs tariffs applicable in EU-Russia trade relations. Second, Russia’s exports to the Ukrainian market are expected to suffer from increased competition with EU products. Third, Ukraine’s commitments under the DCFTA to adopt EU technical product standards and sanitary and phytosanitary standards (SPS) may collide with the standards applicable in the Eurasian Economic Union and as such further complicate the export of Russian products to the Ukrainian market.
None of the identified economic concerns are inherently problematic in the sense that they can be addressed on the basis of effective customs cooperation, controls on rules of origin and arrangements on regulatory convergence and/or the principle of mutual recognition. This is precisely where the trilateral negotiations can make a difference. More problematic, of course, are the underlying (geo)political considerations and attempts to more fundamentally revise the EU-Ukraine AA. In this respect, the European Commission has drawn some clear red lines: it is absolutely impossible to change the text of the agreement and the entry into force of the DCFTA will not be further postponed after 1 January 2016 irrespective an earlier Russian request to do so.
At best, the trilateral negotiations can be regarded as a ‘confidence building measure’ within the broader context of the Minsk peace arrangement. They are a useful tool to address the economic implications of the new trade deal between the EU and Ukraine. However, the conflict in the Eastern part of Ukraine has more fundamental political roots, which are less rational than the calculation of customs tariffs or the organization of trade flows. As a result, they are also more difficult to solve. Daily reports about the use of violence in the region illustrate the fragile situation on the ground. Moreover, a quick look at ‘the package of measures for the implementation of the Minsk Agreements’ reveals how much work still needs to be done. In the current climate of distrust, the organisation of elections in the Donbas region, as well as completing the process of constitutional reform before the end of the year are tremendously challenging tasks. It is, for instance, not very clear how separatist leaders can legitimately be involved in such a process (an explicit Russian request) whereas all parties might obviously have different interpretations of the ‘decentralisation’ foreseen under point 11 of the Minsk II agreement. Hence, it is difficult to believe that the trilateral negotiations – how important they may be to tackle mutual misunderstandings about the implementation of the DCFTA – will allow for a quick and sustainable solution to the conflict.
Sustainability of the sanctions regime
Under the given circumstances, the EU has a clear vision on the continuation of the sanctions regime. At its meeting of 20 March 2015, the European Council “agreed that the duration of the restrictive measures against the Russian Federation […] should be clearly linked to the complete implementation of the Minsk agreements, bearing in mind that this is only foreseen by 31 December 2015”. Hence, in the coming months the Council will need to take the necessary steps to formalize this political commitment. In particular, this requires an amendment of Council Decision 2014/512/CFSP which is due to expire on 31 July 2015. This is only possible on the basis of unanimity among the 28 EU Member States.
It seems, therefore, no coincidence that the pressure on potential veto-players is mounting. On 19 May 2015, Russia announced that it may lift its embargo on the import of agricultural products for around 20 firms from Hungary, Cyprus and Greece. The three countries are not randomly chosen since they all have important economic links with Russia and, at the same time, face troubles inside the EU. However, from a legal perspective, their margin for manoeuvre seems limited. Acting in contravention to the commitment of the March 2015 European Council would clearly violate those Member States’ duty of loyal cooperation. This key constitutional principle also applies in the field of the EU’s Common Foreign and Security Policy (CFSP) as can be read in Article 24 (3) TEU. As argued by Christophe Hillion, an infringement of this general principle does not escape the jurisdiction of the EU Court of Justice because it jeopardizes the attainment of the Union’s external action objectives.
How to deal with the Eurasian Economic Union?
With the sanctions in place and the unstable Minsk peace arrangement, the long-term perspectives of EU-Russia relations are very bleak. As expressed in a recent draft report of the European Parliament’s Committee on Foreign Affairs, a return to ‘business as usual’ seems not in sight for the near future. Nevertheless, the question arises whether the trilateral dialogue and its concomitant constructive approach to solving the economic implications of the EU-Ukraine AA for Russia could not open the door to formal relations between the EU and the Eurasian Economic Union (EAEU) involving Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan? So far, the EU has consistently refused to formally recognize the EAEU as a partner for negotiations. This position was explicitly expressed by Commissioner Malmström in 2012 when she unequivocally declared that “the EU is not prepared at this time to step into any legal contractual relationship with the customs union.” More recently, she clarified that the EU maintains contacts with the EAEU “at technical level” and hinted at the Commission’s “conditional readiness to analyse further the possible interactions between the EAEU and the EU”.
Significantly, the “Issues Paper on Relations with Russia”, drafted by the EU’s External Action Service (EEAS) in January 2015, also suggested “some level of engagement with the Eurasian Economic Union” as part of a broader attempt to improve the strained relationship. On the one hand, such an evolution seems not illogical. The creation of the EAEU is a reality which cannot be ignored, particularly with regard to the definition of the EU’s trade relations with the EAEU member states. On the other hand, there is a clear pitfall that a formalization of the EU-EAEU dialogue creates a ‘bloc’ to ‘bloc’ dynamic which is potentially detrimental for the EU’s bilateral relations with the countries in the region. As the EEAS document also observed, any kind of engagement with the EAEU should not affect “the non-negotiable principle of free choice for all partners in the common neighbourhood.”
Hence, the key challenge is to find an appropriate balance between a regional and a bilateral approach to the post-Soviet space. In this respect, it is noteworthy that the EU seeks to step up its bilateral relations with the EAEU member states. With Kazakhstan, an enhanced Partnership and Cooperation Agreement was initialed at the beginning of this year. A new bilateral framework agreement with Armenia is in the making and for Belarus a resumption of the human rights dialogue is put on the agenda whereas the negotiations on visa facilitation are entering its final stages. Even Kyrgyzstan, the EAEU’s latest member, shows an interest in developing closer bilateral links with the EU.
Even though a certain level of engagement with the EAEU seems unavoidable, the parallel development of good and differentiated bilateral relations with individual EAEU member countries remains important. Together with the full implementation of the Association Agreements with Ukraine, Moldova and Georgia, this is a key priority for the EU in the years to come.
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Peter Van Elsuwege is Professor of European Union Law at Ghent University
The views expressed above belong to the author and do not in any way represent the views of the HAS Centre for Social Sciences.