Refugees replace Greece in the headlines

Angela Merkel changes image of Germany

How much has changed in a month! The headlines are no longer about the struggle of the Greek government and people to find a way forward for their becalmed economy but the more traumatic sufferings of the Syrian people fleeing their civil war. The latter is not new: the war has lasted four years and the numbers coming to Europe have been steadily increasing over the last twelve months. Germany was already committed to accepting large numbers of the refugees and local authorities an voluntary organisations were busy preparing to facilitate their arrival. But the numbers have increased, particularly coming through Turkey and the Balkans overland or via Greek islands. Most important Angela Merkel decided that the issue could no longer be treated as a subsidiary problem but had become the greatest challenge facing the European Union this year and perhaps for years to come. Not only the courage and humanity of her decision to prepare to accept up to 800,000 refugees this year and 500,000 a year subsequently, but the extent to which it is endorsed by large numbers of ordinary German people who have openly even enthusiastically welcomed the arrival of refugees, for example at Munich’s main railway station, have been remarkable. Opposition has so far been muted and mainly concentrated in former eastern Germany.

The image of Germany as rigid and hard-hearted particularly in Greece and other southern European countries but also more widely across the EU by its insistence on harsh fiscal austerity and its refusal to countenance debt forgiveness has been overturned. The Greek drama has not come to an end. A second general election this year is to take place on September 20th. However, for better or worse, the wings of the radicals are likely to be clipped. The main contest is between the traditional centre-right party New Democracy and a Syriza separated from its most leftwing component, and committed to implementing a programme of pragmatic reforms agreed with its creditors, not least the hardline German finance minister, Wolfgang Schauble. It has become clear that a dramatically different economic policy would only be possible if Greece were to leave the euro, a choice supported by a significant but minority section of the Greek population. The dramatic decline in living standards since 2009 and the 50% level of young people’s unemployment in Greece have had devastating consequences that are more comparable to the conditions of the 30s than anything in western Europe since the 1950. Nevertheless it is evident to Greece, which has received many desperate refugees on its easternmost islands, as well as the rest of Europe, that the plight of the Syrian people and other refugees is far worse.

 

Differences between east and west Europe

The refugee crisis has thus done a little to ease divisions between northern Europe and southern Europe, but has opened divisions between west Europe and countries in central and eastern Europe which feel that the refugee problem is not theirs. There are some differences between these former communist countries. The Hungarian government has made it clear that it feels little but hostility to the refugees coming through, even though it knows that they are all heading onwards, mostly to Germany. At least the Polish government has agreed in principle to take 2,000 refugees while putting forward the argument , up to a point valid, that Poland’s demography and economy make it much less suitable to taking large numbers of refugees than Germany. Donald Tusk, the former Polish prime minister, now president of the European Council, has shown the statesmanship to take a wider view of the issue than he probably would have if still prime minster of Poland.

The new president of Poland, Andrzej Duda, has pointed out that the situation in its neighbour Ukraine remains of concern to Poland, much more so than to countries further away from Ukraine. There are substantial numbers of Ukrainians in Poland. Although only a minority of those there at present come from eastern Ukraine and so are refugees rather than migrants in search of employment the numbers of both could rise if the situation deteriorated. In recent months Ukraine has not been very much in the news and to an extent no news is good news even if the low level war in the east continues to cause loss of life. The government is trying to put a bill through parliament to give very substantial powers to the provinces of Donetsk and Luhansk including control over the police forces and courts while allowing Ukraine to regain control of its eastern border, as agreed with Russia at Minsk. Such an eventuality looks theoretical at present but the bill shows that the government is rightly willing to make sacrifices in  the search for peace and stability. In doing so it provoked a violent response from the far-right Svoboda group which killed a policeman outside parliament and the loss of support in parliament from the nationalist Radical Party.

 

Quotas may not work but sharing is essential

The refugee crisis is seen differently across the 28-member EU, as is the case with other issues like the troubles of southern members of the euro zone. No one is suggesting that other countries should open the doors to the extent that Germany is doing. The 160,000 for the rest of the Schengen area proposed by the European Commission is several times lower than the number Germany is prepared to take. In the end rigid quotas probably will not work since it is hard to say how Syrian or other Muslim refugees could be settled in a country as hostile to them as Hungary even if its government agreed. Nevertheless a degree of sharing is required if the EU is to hold together.

EU’s neighbourhood policy has to include Russia

In 2003 the EU put in place a neighbourhood policy in preparation for its enlargement in 2004 to include ten additional members extending its new border eastwards. It was realised that by including those countries accepted as members into the EU, a new dividing line across the European continent could emerge between countries that as communist and then transition economies had previously had fairly close relations. The neighbourhood policy was designed to mitigate the new border by means of trade policies and a reasonably open visa regime and also to promote some of the political, legal and economic reforms which had been set as criteria for EU accession. It was not applied to Russia which would not have agreed to being monitored for progress towards standards set by the EU.

In theory pre-existing policies towards southern Mediterranean countries were incorporated into the neighbourhood policy but in practice they have remained different and this post is about the eastern neighbourhood and specifically Ukraine. Armenia, Azerbaijan and Georgia are important but do not border the EU. Belarus has been permanently under the grip of its dictator, Aleksander Lukashenko, who has not been interested in closer relations with the EU except on his own terms. Moldova is a small, albeit complicated, country.

With the Orange Revolution of 2004 which saw the election of Viktor Yevtushenko, who favoured liberalising reforms, as president defeating Viktor Yanukovych who resisted such changes. However President Yevtushenko was not a successful president and Yanukovych, after serving a period as prime minister,r was elected president six years later. Nevertheless Yanukovych did seem amenable to negotiating with the EU on its proposed Deep and Comprehensive Free Trade Agreement in 2013 and the outline of such an agreement was concluded in late 2013. Unfortunately this coincided with an attempt by President Putin to expand and deepen a Eurasian economic  and customs union between former Soviet countries, of which Ukraine was intended to be a key part. Both the EU and Russia considered that Ukraine had to choose rather than pursue a balanced policy of deepening economic relations with both its neighbours and Putin put pressure on Yanukovych to abandon the EU agreement in favour of the Eurasian economic customs union. Doing so angered much of civil society and led to the occupation of central Kiev by protestors and after violent confrontations in March 2014 Yanukovych fled to Russia. This was a deep humiliation to President Putin and Russia, which led to the reaction that has followed.

EU policy stumbled partly due to bad luck but also a flawed strategy

The ensuing conflict was to some extent bad luck as the unexpectedly strong support by much of the Ukrainian public for the EU agreement coincided with precisely opposite plans by President Putin. But there was also a flaw in the EU strategy. It had rightly looked at how to tackle the impact of EU enlargement on the EU’s new neighbours as a consequence of the enlargement but then failed to prepare for the impact of closer relations with the new neighbour Ukraine with that country’s own neighbour, Russia. It is possible that the democratic will of the majority of the Ukrainian people would have anyway brought it into conflict with Russi, and a minority of its population who feel themselves Russians, but the EU did not by any means do as much as it could have to make its agreement compatible with ongoing close economic relations between Ukraine, especially eastern Ukraine, with Russia. For example, the agreement provided for symmetrical opening of the Ukraine market to EU companies in relation to EU markets to Ukrainian companies, despite the much greater strength of the EU economy. This not only would be very tough for Ukrainian companies in trying to hold onto domestic markets but also make it more difficult for Russian companies to compete.

This is not to excuse the Russian response, which was effectively to annexe Crimea and then provoke a rebellion helped by Russian troops in the Donetsk and Lugansk regions of eastern Ukraine. However, the Russia led by Putin is the reality that the EU has to deal with and it now has to deal with a Ukraine whose territorial integrity has been violated and the best prospect in the medium term would seem to be that the Minsk agreement of February 2015 holds, and that the ongoing reduced level conflict since then reduces further rather than flares up again. For that to happen requires Ukraine to observe its side of the agreement as near perfectly as possible despite the fact that the other side is not doing so, so as not to provide any excuse for a major new conflict, and that it the government leans over backward to conciliate any sections of the population in the territory under its control that might be tempted to sympathise with the rebels. Rightly the EU is now including a Russian representative in ongoing discussions on the proposed trade agreement between Ukraine and the EU, whose implementation has been postponed.

At the same time, the EU should do much more through debt write-offs[1] and economic support to enable the government of Ukraine to put in place the reforms needed to create the kind of country that the electorate voted for in the 2014 elections, one where all, including powerful oligarchs, are equal before the law, there is a level playing field new businesses to grow and where trade with both the EU and wider world economy can expand.



[1] Writing in the Financial Times on May 18th, the former US Treasury secretary, Lawrence Summers, argued that the case for a debt reduction was as strong as any he had encountered in the last 25 years.

Ukraine: all sides, inside and outside the country, should strive for de-escalation

The more emollient tone adopted by Russia’s President Putin on May 7th in particular his apparent support for Ukraine’s election on May 25th, should be reciprocated by the EU. The rapid escalation in recent weeks to a state of near civil war in Ukraine is disastrous for all sides in and outside Ukraine. It represents a major disaster for the EU’s neighbourhood policy whose objective is to bring stability. It has suffered a major reverse from events in North Africa and Syria. Although developments across the Mediterranean have little do with any EU policies, this cannot be said of Ukraine, where the EU’s attempts to negotiate an association agreement have, albeit inadvertently, led to conflict. One mistake was to have presented the former Ukraine president, Victor Yanukovich with too sharp a choice between closer relations with the EU and closer relations with Russia. An imaginative approach could be to find away in which closer economic relations with the EU could be made compatible with closer relations between Ukraine and Russia (and indeed other ex-Soviet countries). If the outcome were to let Russia and other countries have more access to the EU market that would be no bad thing the only proviso being that Russian companies competing in the EU be subject to EU competition rules. This is in any case already an issue particularly in relation to Gazprom.

The EU should try to persuade the interim Ukraine government to hold back from further confrontation, to try tackle the Right Sector and other Ukrainian nationalist extremists more effectively, to promise full and guaranteed rights for Russian as a second language and ensure non-discrimination against Russian speakers and to be willing to enter a dialogue over increased local autonomy as a response to Russian demands for federalisation. The latter is the most difficult issue and there is concern about one country making demands on how another country should conduct its internal affairs. But a de-escalation now requires both sides to make conciliatory moves.

It is possible that Putin’s apparently conciliatory tone is a ruse and that possibility should prepared for. That said, it is hard to see what aim he would be looking to achieve if he is not sincere. It cannot be in his or Russia’s interest to have a failed state the majority of whose population is hostile to Russia as a neighbour. In the 100th anniversary of the start of the First World War it is worth remembering that a series of belligerent responses to the situation led to an outcome which was disastrous for all concerned, particularly Austro-Hungary, Russia and Germany but also the eventual victors, Britain and France.

EU and US have difficult balancing act vis-à-vis Russia in Ukraine

The dramatic events in Ukraine this year have in much commentary been portrayed as a struggle between Russia and the EU (with backing from the US) for the country with the EU and US criticized for allegedly acting in a pusillanimous manner while Russia under Putin is acting ruthlessly in pursuit if its interests. Although there is no reason for complacency in what remains a very volatile situation, the reality is that Putin’s ruthlessness has lost him influence in Ukraine outside of the Crimea while the hesitancy and muddle of the EU’s policy stance have not prevented its increased standing in the country.

 

Russia has lost support in Ukraine except Crimea

Crimea is an important exception but it was not traditionally part of Ukraine having been given to it by Nikita Krushchev in 1954. Although influenced by Russian propaganda, the majority opinion there favours Moscow over Kiev. In this situation Russia might well have pressed for a fair and open referendum with time for both sides to put their case and the outcome would have been a vote in favour of leaving Ukraine and joining Russia. By insisting on a referendum as early as March 16th under the control of Russian troops, it  ensured that no independent party could regard the referendum as legitimate.

Ukraine has often been described as a country split between those looking westwards (particularly but not only the territory moved from Poland to the Soviet Union by Stalin at Yalta in 1945) and Russian speakers who look towards Russia. This however was always over-simplistic. If it were that simple then the move to split as in the case of the Czech Republic and Slovakia would have been much stronger.

The pressure that Russia put on former president Yanukovich to crack down on the people occupying central Kiev in protest at Yanukovich’s decision to abandon the offer by the EU of closer links in favour of joining a post-Soviet customs union has led to the discrediting of both Yanukovich and Russia in the opinion of the majority of Ukrainians across the whole country other than Crimea. Although there have been demonstrations by Russian speakers in eastern Ukraine against the new government in Kiev and in favour of closer relations with Russia, they have been relatively small. The majority of Russian speakers seem at the moment to prefer living in an independent Ukraine to being in a client state to Russia. This is certainly what the majority of Ukrainians as a whole prefer. As a result for a long time in the future  Russia will have to live with a neighbour which is at best distrusting and at worst hostile.

 

Most of EU is reluctant to bring in Ukraine

Most countries in the EU are not keen on expanding to bring in Ukraine and this therefore is at best a long term prospect. In the event of Ukrainian accession other EU members would face the budgetary costs of supporting a country which is much poorer than most EU countries and the likelihood of strong migration flows if Ukraine was given the same right of free movement as accorded to existing member states. EU policy is motivated partly by its own founding treaties, which envisage the possibility of accession to all European countries, and partly by its interest in having a stable democratic neighbour. Because of its longstanding principles of conditionality to association agreements and eventual accession, it has come to be regarded in Ukraine as representing hopes for entrenching democracy, ending the imprisonment of major politicians by their opponents, reducing corruption and improving human and minority rights.

Relations between the EU and Russia will suffer as a result of Russia’s illegal annexation of Crimea. If Russia were to try to annex other parts of Ukraine, however, relations would deteriorate dramatically further.  For the moment Russia is insisting it will not intervene elsewhere in Ukraine but large numbers of troops and equipment near the border do not seem intended to reassure Ukraine or its friends in the EU or US.

What are Russia’s legitimate interests?

Substantial discussions took place on March 30th between the Russian foreign minister, Sergei Lavrov and the US secretary of state, John Kerry, who was to an extent speaking on behalf of the EU as well as the US. The dilemma is to what extent Russia  (or the EU and US) should be considered to have a legitimate interest in what happens in Ukraine. If the EU wants to have a stable and friendly so can Russia. Moreover it is reasonable to want the wellbeing of those who consider themselves to be Russians to be protected. But there comes a point whereby telling Ukraine how it should run its own affairs amounts to trying to undermine its independence. That point is crossed when Russia says it wants Ukraine to be reorganised on a federal basis. On the other hand a request that Russian be one of the official languages is reasonable. It is also reasonable to demand that if Ukraine does develop closer links with the EU, they do not weaken economic links between Ukraine and Russia.

Longer term aim for EU and US should not be “winning” against Russia

In the longer term the interests of the EU of US should not be to win a new zero sum conflict with Russia but to provide it with a way to return to normal relations with the rest of the world. After all Russia does not have to expand to become one of the world’s largest countries in both area and natural resources. It was recently seen as one of the BRICS of countries on the rise. Somehow Russia’s leader and population need to be persuaded that a return to nineteenth century power politics is not in their interest.

The EU should build carefully on popular support in Ukraine for EU association

The impact of EU policy towards Ukraine must be encouraging to EU policy makers. While inside the EU those wanting to leave the EU and/or the euro are still in minorities, the enthusiasm of the public in present circumstances is distinctly lacklustre, and it is hard to imagine hundreds of thousands of people encamped in EU capitals to demonstrate in favour of the EU as is happening in Kiev in favour of only an association agreement with the EU which does not yet offer a clear path to EU membership. What will happen in Ukraine remains unknown and the latest development is an agreement between Ukraine’s Yanukovych regime and Putin’s regime in Russia to buy Ukrainian bond and provisionally reduce prices of Russian gas — a respite from previous demands for higher prices backed by threats of cutting off supplies–provided that the Yanukovych regime remains in place and does not bow to popular demands to go ahead with the proposed EU association. However Yanukovych has alienated many of those who voted for him as well facing increasingly determined opposition from those who have always opposed him. Russia’s record of bullying appears to have reduced the percentage of the Ukrainian population who want to be closer to mother Russia and even Yanukovych himself who has always represented the eastward looking segment of the population has at times been hesitant about putting all his eggs in the Russian basket. The latest agreement does not include the Russian aim to establish a customs’ union together with a number of other ex-Soviet republics.

The EU has rightly not tried to present the struggles taking place in Ukraine as a proxy power competition between Russia and the EU for influence, although that is how it has sometimes been interpreted by the press. The whole purpose of the EU would be contradicted by participating in an old fashioned competition of great powers. The EU’s enlightened self-interest lies in achieving friendly relations with Ukraine and Ukraine, both of which are neighbours, without sacrificing its core values to do so. Doing so requires careful choices. On balance, the line of refusing an association agreement with Ukraine as long as Yulia Tyomoshenko, the former prime minister, is held in prison for evidently political reasons thinly disguised by a politically influenced legal process is right but so is the willingness under this condition to sign an agreement with Yanukovych government despite the likelihood  that it has corruptly used political power to advance the personal economic interests of Yanukovych and his family. As regards Russia, it should not have the right of veto of a Ukraine-EU association agreement, but it should be acknowledged that Russia has a legitimate interest in  aspects of such an agreement which would affect the close trading relations between Ukraine and Russia should be discussed and, in so far as possible, Russian concerns should be accommodated. The EU should wherever possible break down trading barriers and should do everything possible to avoid building new ones.

It is ironic that the release by Russia of Mikhail Khodorkhovsky, members of the Pussy Riot band and Greenpeace protestors in December indicates that the Putin regime is at present more concerned at its image at home and abroad that the Yanukovych regime. But there is reason to hope that ultimately Yanukovych will have to take note of the feelings of what is probably now a majority of the Ukrainian population that his policies are not serving their aspirations.