WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

This year, the Eastern Partnership (EaP) celebrates its tenth anniversary. The EaP was formed on May 7^th 2009, as a forum for discussion and exchange between the EU and the six former Soviet states (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine). wiiw experts Vasily Astrov and Peter Havlik sat down to discuss the success and failures of the initiative, and to look ahead to what might come next.

Vasily: This year is the 10^th anniversary of the EU’s EaP Initiative, it is therefore legitimate to look back and assess. First of all, how would you characterise the EaP?

Peter: The EaP covers six countries in EU’s Eastern Neighbourhood: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. One of the few things they have in common is that they are all former Soviet republics. The EaP initiative was established in 2009, i.e. one year after the Russian-Georgian war. This war was a tipping point in the worsening of relations between Russia and the West, and this very much explains why the Polish and Swedish authorities launched the EaP initiative at the EU Summit in Prague. One of the EU’s reactions was to start an initiative to bring these six countries closer to the EU and to intensify cooperation with them.

Another thing these six countries have in common is that they are all rather poor, and several of them struggle with internal conflicts, many of which erupted already during the dissolution of the Soviet Union and are now largely frozen. There is, for example, the decades long conflict between Armenia and Azerbaijan over the Nagorno-Karabakh region, which is formally part of Azerbaijan but inhabited and ‘occupied’ by Armenia. There have been frequent military clashes between both countries over the disputed territory. The second conflict is in Transnistria, a pro-Russian enclave in Moldova – where Russian soldiers, many of them locally recruited, help to keep a ‘frozen’ peace. Two more conflicts are to be found in Georgia: Abkhazia and South Ossetia are legally parts of Georgia, but the Georgian authorities don’t have any control over them. Both declared independence from Georgia, but this was not recognized by anybody except Russia and a few small island states. A more recent, fourth conflict, is currently taking place in Ukraine after the Maidan revolution in December 2013 and is not ‘frozen’ yet. Crimea, a former autonomous region within Ukraine that was annexed by Russia after an (internationally not recognised) referendum in April 2014, is part of this conflict, but the real fighting is underway in Donbass. The latter conflict has already claimed more than 13,000 casualties and is counting.

The only EaP country which is not affected by any open conflict is Belarus. At the same time, it is a kind of ‘pariah’ in its relations with the European Union, with its President Alexander Lukashenko sometimes being called ‘the last dictator in Europe’. Belarus has much closer relations with Russia, formally being part of a common ‘Union State’, but is in fact trying to balance its economic and political relations with both the EU and Russia. Recently, relations with the EU were seen to improve, as Russia has been cutting its subsidies to Belarus. My impression is that Belarus is also being used as a geopolitical pawn in EU-Russian relations. 

Vasily: The Eastern Partnership initiative has now had 10 years to make it mark. How would you evaluate it – was it a success, a qualified success or a failure in your view?

Peter: As far as political relations are concerned, there was not much of a success. Internal conflicts in EaP countries are now probably more severe than ten years ago, especially in Ukraine, but also in Armenia, Moldova and Georgia not much progress was achieved. There are different explanations and views on who is to blame, but the fact is that some of these conflicts are one of the collateral results of the EaP policy as the countries concerned have been encouraged to make ‘either/or’ strategic choice of their integration direction. At the same time, the EU doesn’t have sufficient resources or initiatives to seriously interfere in these conflicts and doesn’t offer accession perspective.

In economic terms, the EaP results are mixed. It is often claimed that the EU is the EaP countries’ most important trading partner. This is true, but EU trade with EaP countries is strongly dominated by Germany, Poland and Romania. The shares of other EU member states are negligible. When it comes to single countries, Russia is still the most important trading partner, in particular due to Russian energy imports but also in exports, for example in Georgia.

The reasons for a high importance of Russia as a trading partner for EaP countries are manifold. Apart from geographic reasons, EaP countries are not very competitive, and their trade was mostly oriented to the Russian and other post-Soviet markets in the past. There are very few examples of successful reorientation towards the EU market, and those that exist are mainly in those EaP countries who have concluded Deep and Comprehensive Free Trade Area agreements (DCFTA) with the EU (Georgia, Moldova and Ukraine). But again, if we look into the details, we find this reorientation has been only in relative terms, i.e. as a consequence of decline in trade with Russia. It is also often stated that a lot of EU investment went to the EaP countries, but this was mainly of two sorts: In Ukraine, for example, most foreign direct investment (FDI) comes from institutional investors, such as the EBRD. Given the EaP countries’ weak competitiveness, there is very little investment from the private sector. In Georgia, FDI mainly comes from Azerbaijan, Turkey and China. Moldova now claims to have the closest trade relations with the EU, but this is mainly because of Romania (and to a lesser extent Italy). Romania accounts for about 70% of Moldova’s EU trade. Trade with Russia is still significant –despite the conflicts and occasional Russian sanctions, such as bans on imports of fruits, vegetables, wine, or mineral waters. Generally, economic and trade relations between Russia and most EaP countries are improving, Ukraine being an exception. Given all this, my assessment is that the economic effect of the EaP has been a qualified failure since both domestic reforms and EU integration did not proceed as expected.

However, the EaP was successful in establishing much closer people to people contacts. The EU abolished visa requirements for Georgia, Moldova and Ukraine - after years of hesitation and despite unilateral visa waivers by these countries for EU citizens many years ago (even Belarus recently abolished its visa requirements for short-term visits of EU citizens – again unilaterally). Visa liberalisation very much improved the opportunities to travel, to work (although not legally) or to study (Erasmus) in the EU – a very important issue, especially for young people.

Vasily: The EaP was designed as an alternative to EU accession. Is this lack of EU membership prospects a bottleneck, given the stated EU objective to create a ring of stability and prosperity in the Neighbourhood?

Peter: This is an extremely important point. Even the three countries that signed the DCFTAs and Association Agreements with the EU do not have the perspective of EU membership. This is very problematic, because these countries are now obliged to implement a whole set of EU rules and regulations (‘acquis’), which is very costly, as we also argued in earlier studies. It is also questionable whether the acquis’ implementation is an appropriate approach for countries that do not have an accession perspective, apart from having a much lower level of economic development and possibly other development priorities.

Many people – in the EU as well as in the EaP countries themselves – argue that the implementation costs have to be considered as an investment into reforms such as the rule of law, and technical and environmental standards. This is of course true, but whether it is possible to make these costly reforms attractive for a broader population is a big question. We also know from experience (including from the EU member states) that these reforms do not have only positive effects. Small scale agriculture and other firms in retail trade, for example, will suffer because of the huge competitive pressure from the EU after trade liberalisation and the limited capacity to meet EU technical regulations and standards for exports. Without any protection and appropriate transitory periods, many small farmers in Moldova or Georgia will go bankrupt, as they do not have the capacities to withstand this competition, nor the resources to implement the required sanitary and phytosanitary standards. This is a very serious issue not only that local labour markets will suffer, but it can also backfire and undermine the necessary popular support for reforms, as well as for a closer EU integration.

We also know that the EaP countries themselves are split in their political and social orientation between the West and Russia. Basically, the population is split in half in Moldova, maybe less in Georgia, but definitely also in Armenia and Azerbaijan. In Belarus, the majority of the population is definitely pro-Russian. The sad example of Ukraine (Crimea, Donbass) indicates also a pronounced divide along this line.

Vasily: You have already touched upon the points of internal conflicts and the role of Russia. It is an open secret that some of these conflicts originated exactly around the split you mention and have been related to the AA/DCFTAs. From this point of view – do you think it was a political mistake to exclude Russia from the EaP initiative from the very beginning?

Peter: Yes, this was definitely a mistake of the EU and the West in general. Especially the United States, which is also a very important player in the EaP, pursues own geopolitical interests aimed at preventing Russia’s rise. But it is also true that Russia did not want to become just another EaP country: it wanted to be a strategic partner of the EU. The discussion on the role of Russia in these conflicts is still ongoing, but it is a fact that since Russia was not involved, it perceived the EaP initiative as an attempt by the West to separate these countries from its sphere of influence, to expand NATO even closer to Russian borders and to ultimately weaken Russia. Russia already perceived previous NATO enlargements to Central and Eastern Europe in the early 2000s in this way, and this has long been Russia’s main geopolitical concern. In addition, if EaP countries trade more with EU and implement EU standards, they will trade less with Russia and thereby weaken its economic interests. On the EU side, the dominant narrative has been that all EaP countries are independent and therefore free to decide their economic policy, but I would argue that this argument is rather naïve and does not reflect geopolitical reality.

Vasily: Finally, let’s turn to the future. What is the outlook for the EaP in the next decade? What could the EU do better to establish a ring of stability and prosperity?

Peter: I am convinced that the most important thing to follow is a resolution of internal conflicts in this region. Although this is very difficult and requires much more than an EU initiative, this should be the priority focus of European Neighbourhood Policy over the next decade. Without a resolution of these conflicts, reforms cannot be properly implemented, economic development will suffer and political stability will be difficult to achieve. Such a policy will obviously require a different approach from country to country. Last but not least, and following this logic, the EU should involve Russia in this process and negotiate mutually beneficial integration solutions along the ‘Lisbon-Vladivostok’ trajectory.