Remember the EU trade agreement that set off the Maidan protests in Ukraine when former president Viktor Yanukovych turned it down six months ago? Well, his successor Petro Poroshenko signed it on Friday, effectively snookering Putin and raising anxieties about how Moscow might respond. Bershidsky considers what effect the deal will have on Russia:
In a document meant to dispel myths about the association agreement, the European Commission stressed that “there is nothing in the Agreement which will affect trade with any other trade partner of Ukraine, including Russia. Therefore no negative economic effects regarding trade with other trade partners of Ukraine can be expected as a result of the Agreement itself. Threats by Russia to raise its tariffs if Ukraine signs the Agreement are not based on economic reasoning”.
That isn’t strictly true. Russia and Ukraine already have a free trade agreement, signed under the auspices of the post-Soviet Commonwealth of Independent States. What scares Russia about Ukraine’s EU deal is the possibility that duty-free EU goods, passed off as Ukrainian ones, will flood the Russian market.
Steven Pifer worries that Putin may react more aggressively than he’s letting on:
Can Moscow now reconcile itself to the association agreement? A Russian deputy foreign minister warned of “serious consequences” but conceded that signing such a document was “a sovereign right of any state.” Mr. Putin’s spokesman said Moscow would take steps to avoid any negative impact on the Russian economy.
To be sure, Russia has legitimate interests at stake. Kyiv appears ready for a dialogue on minimizing the impact of the association agreement on Ukrainian-Russian trade. But will that satisfy Moscow? That is a key question. Russia has significant influence over the armed separatists in Donetsk and Luhansk, many of whom are Russian citizens, and has other leverage over Ukraine. Russia can use that influence and leverage to promote a ceasefire and a settlement, if it wants to. If Moscow instead chooses to continue its efforts to destabilize Ukraine, that will immensely complicate implementation of the Ukraine-EU association agreement.
And on the same day that Poroshenko signed the deal, Russia’s gas conglomerate threatened to reduce natural gas supplies to any European countries that try to re-export it to Ukraine:
In remarks to reporters, Alexei Miller, the CEO of Gazprom, spoke out against European contemplation of a maneuver called “reverse-flow supply”—taking Russian gas exported to Europe and re-delivering it to Ukraine. If successful, the stratagem would reduce Moscow’s ability to pressure Ukraine to pay a disputed $4.5-billion gas debt. “A reverse flow is a semi-fraudulent mechanism whereby gas runs in circles,” Miller said. “This is Russian gas.”
Ukraine already receives gas this way from Germany, which delivers it via Poland. And Slovakia has agreed to reverse-flow a small volume to Ukraine as well, starting in October. On June 25, Gunther Oettinger, the European Union’s energy commissioner, explored the idea of significantly enlarging the plan to effectively take care of all of Ukraine’s gas imports.
Putin is not as smart as he’d like us to think. I like to think of him as Cheney-smart.
The Dish 