Today Ukraine is at the crossroads. A state in Eastern Europe is trying to puzzle out what went wrong in 2014. A revolution defined a Western vector of country’s development then. The country has signed the Ukraine–European Union Association Agreement and declared its movement towards entering the European community in the future.
However, the presidential elections have indicated that Ukrainian society is not satisfied with the current developments and requires changes. Serious economic challenges, the war in Donbas, political turmoil – Euromaidan had completely different expectations. In 2013, Ukraine got an alternative of joining the Eurasian Customs Union, offering prospects of better economic benefits for the country. Though this option was discarded, and many people now believe it was done wrongly.
European Union or Eurasian Customs Union?
The EU-CU dilemma came into the spotlight in early 2013. Ukrainian authorities turned their focus on integration with the European Union, but at the same time, they were out for comprehensive cooperation with the Eurasian Customs Union without entering it. In its turn, Moscow counted on Ukraine’s full-scale partnership in the CU. Kyiv was cautioned that simultaneous economic integration with several unions is quite complicated and might prove impossible for a big economy on the whole.
Ukraine found itself on the horns of a dilemma. Serious discussions on the course of the country flared up.
The basic argument of the opponents of the CU was that Ukraine might lose its sovereignty. Though more sensible politicians, like Viktor Medvedchuk, the then chair of the Ukrainian Choice organization and the current head of the political council of the Opposition Platform-For Life party, pointed out that the Eurasian Customs Union was an economic agreement of independent states. It would be an exaggeration to state that after rejecting the Russian vector, Ukraine preserved its sovereignty. Otherwise, the current candidates wouldn’t go for a bride-show to France and Germany hoping for approval. It’s just impossible to imagine Trump, Clinton, Macron or his competitor Le Pen in this role. However, it’s a reality in Ukraine, which has flouted Russia.
Opponents of the Eurasian Customs Union appealed to the fact, that European goods will become less available for an average Ukrainian, and Belarusian and Russian goods will be actively promoted if Ukraine joins the CU. They also spoke of a drop in quality of goods.
Soon the social-economic situation in the country has deteriorated, so Ukrainians had more important things to be concerned than the quality of the goods they buy. An average citizen spends two-thirds of his or her income on food and utility bills. The remaining miserable amount is not enough to cover the quality imported goods.
However, the alternative course had many advantages for Ukraine’s economy. First, recovering cooperation, i.e. the production chain of the Soviet era, could cause growth in a number of industries, especially in automobile, aircraft, and shipbuilding industries. Which in its turn would have provided steady jobs and income for the Ukrainians in the industry.
Second, a considerable reduction of gas and oil prices could eliminate financial burden which makes Ukraine be out of breath today. Back in 2013, Viktor Medvedchuk noted that in case Ukraine enters the CU the annualized gas savings would make 10 billion dollars. “This money could stay within the country’s budget and could have been used for social development. These tariff preferences might be compared to a 15 billion credit, which Ukraine’s government strives to get from the IMF together with unacceptable interests and commitment,” Medvedchuk noted.
Finally, Ukraine’s entering the CU could have provided access to the Eurasian Customs Union markets, with all export restrictions dismantled.
The CU supporters stated that being bound by a treaty, Ukraine could increase its export to the European Union even without the Association Agreement.
But since the major markets of Ukraine lie in the East, and not in the West, the benefits of free trade with Eastern countries would far exceed the Association Agreement with the European Union.
Despite all the arguments, Ukrainian authorities chose the Western vector of development in 2013. But having made a bet on a political and economic union instead of an economic one, Ukraine virtually won nothing but lost a lot.
Authorities against society
The deterioration of the country’s “state of health,” observed within the last few years, is not only due to a drop in the standard of living. Initially, the choice of the majority was violated and ignored. According to Viktor Medvedchuk, 46.2% of Ukrainians surveyed, were in favor of becoming a full member of the CU with Russia, Kazakhstan, and Belarus in 2013. Or 57.1% of those with a defined position.
“The answers of the citizens once again convincingly confirmed that the majority of Ukrainians is well aware of what is behind the slogan “The West will help us.” To help us become a global debtor and bankrupt? Will it help to destroy many of our industries, to become their raw material colony? Become a source of cheap labor and a trading area for their goods, which could be hardly called the best ones? Or are we trying to ignore that, for example, the markets are packed with imported apples and potatoes stuffed with nitrates, while our farmers are forced to throw out thousands of tons of their products,” the politician asked.
It’s quite difficult to object Medvedchuk in this situation. On March 21, 2014, the political part of the Association Agreement between Ukraine and the EU was signed. The period since the first rapprochement between Ukraine and the European Union is sufficient enough to sum up certain results. According to the government reports, Ukraine has increased its export to the EU by 42.6% of the total export volume. To compare: the export rate to the CIS countries was 14.8%. 42% is the record high for Ukraine’s trade with the EU countries but in terms of revenues Ukraine’s exports headed downhill.
The Europeans willingly purchase Ukrainian grain, oil, crops, corn, honey, and processed tomatoes, exported by Ukraine on the duty-free tariff quotas. But, due to these quotas, Ukraine fails to sale the whole volume of its production. Viktor Medvedchuk is right again: Ukrainian farmer stays alone with too large volumes of the home-grown produce. It is impossible to sell it and not profitable to remove from the fields. Because even the fuel for the vehicles (not to mention their amortization) is more expensive than the efforts for the harvesting of fruits and vegetables.
Is there some need to say about the destiny of such technology giants as Antonov, Yuzhmash, and others? They are in decline, surviving for crumbs, which support them from the total ruin. It is the downside of the European Association – West will not support the Ukrainian technologies to the detriment of its companies.
It is noteworthy that Europe is also unsatisfied with Ukraine, considering that the state fulfilled the obligations undertaken before the EU only by 42%. European Parliament lawmaker Rebecca Harms calls previous expectation from Ukraine “too optimistic.” In other words, the citizens of Ukraine and its partners are disappointed by the current course of the country.
The biggest failure
The current Ukrainian authority regards the so-called “gas independence” the biggest success and the greatest demonstration of separation from Russia. This independence is the greatest fiction and failure. Technically, it is believed that since November 26, 2015 Ukraine terminated importing Russian gas and, as they say, “got off the Russian needle”. In fact, Russian gas did not disappear from Ukrainian pipelines. The only difference is that it gets there by reverse. Ukraine has not gained gas independence. Ukrainians were forced to buy “European” fuel and pay a lot for it.
As Viktor Medvedchuk commented the situation, “when Dusseldorf+ scheme falls under investigation, resonance will be not less than it was after the investigation of embezzlement in Ukroboronprom. They are trying to fool people saying that gas is imported from abroad, but in fact, it doesn’t go further than the Ukrainian border,” the politician says. He adds: “Incomes from Dusseldorf+ make 400-420 million USD a year. And separate businessmen get income, not even the state”.
Ukraine has to avoid the gas strategy imposed from the outside and return to direct purchase from Russian Gazprom, getting rid of the mediators, Medvedchuk believes. It is rather easy to implement such strategy when you contact the partner directly, in particular, when you are in the same economic space.
Medvedchuk’s accurate predictions
A couple of years ago the Ukrainian authority was full of naive expectations about goods it will have from the European Cornucopia. In reality, disintegration with Russia and its partners on the Eurasian Customs Union led to multibillion losses.
A bilateral trade decreased by 29.5 billion USD over three years and by 40.2 billion USD over five years.
Bilateral trade with Russia dropped by 26.5 billion USD: from 38.2 billion USD in 2013 to 11.7 billion USD in 2018. Along with this, in the past 5 years Ukraine’s direct loss from curtailed export supplies to Russia totaled 49.4 billion USD.
As a result of a five-year-path to Europe, sociologists say that Ukrainians begin to realize the fallacy of the pro-European course set in 2014 and reduction of ties with CIS states. 75% of people surveyed in April 2018 said that Ukraine was moving in a wrong direction. South and East regions are unsatisfied most. Sociologists says that request for changes is increasing. Almost 70% of the respondents believe that the country needs radical changes, 16% would like to go back to the way things were before 2014. Mostly, people up to 40 years old along with wealthier and well-educated respondents want changes most.
Viktor Medvedchuk’s sad predictions made in 2013 are coming true. Threatening scales of labor migration, which the politician warned about, need special attention. Over 4 million migrant workers from Ukraine moved to the European labor markets, and this figure continues to grow. This labor migration could be prevented within the cooperation with the Eurasian Customs Union.
However, as Viktor Medvedchuk says, “those who claim “European values” should have courage to admit that the European democracy lies in the fact that the opinion of the majority is the law. The same goes with the fact that people have a right to speak out, especially if it’s about the decision on strategic issues the country faces. Democracy is when the minority does not impose its will on the majority”.