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Invigorated Customs Union Presents Russia's Neighbors With Stark Choice

Then-Russian Prime Minister Vladimir Putin (third from right) chairs a Eurasian Customs Union meeting in 2009.
Moscow seems to be growing frustrated with Ukraine's efforts to pursue closer ties with the European Union while simultaneously seeking benefits reserved for members of the Russia-led Eurasian Customs Union (ECU).

"You cannot be a little bit pregnant," Russian Foreign Ministry official Aleksandr Gorban said on January 1, referring to the choice facing Kyiv.

The ECU -- Russian President Vladimir Putin's premier foreign-policy project -- has been developing rapidly in recent years as it heads toward the ultimate goal of transforming into the Eurasian Economic Union by the beginning of 2015. But the ECU's emerging status as a potentially viable rival to the EU is creating intense pressure within countries like Armenia, Moldova, and Ukraine to pick one path or the other.

Both Moscow and Brussels see the choice facing these countries as a stark either/or decision that will likely have to be confronted within the next year or two.

Speaking to RFE/RL about the situation confronting Armenia, EU foreign policy chief Catherine Ashton's spokeswoman Maja Kocijancic ruled out the possibility of simultaneously joining the ECU and pursuing closer economic integration with the EU.

"If Armenia were to join any customs union, this would not be compatible with concluding a bilateral Deep and Comprehensive Free Trade Agreement between the European Union and Armenia," she said, "because a customs union has a common external-trade policy and an individual member country no longer has sovereign control over its external-trade policies."

Although Russia's admission last year to the World Trade Organization will go some way toward bringing EU and ECU regulations more into synch, the two organizations remain far apart.

Ukraine's Pivotal Position

Rilka Dragneva, a senior lecturer with the University of Birmingham's law school who specializes in legal institutions and harmonization, has suggested that the EU can do little to reduce the pressure on these countries because EU external policy is driven by political forces within the EU itself.

"[The EU] is not necessarily able to respond to the needs of partner countries such as Ukraine or Moldova," she said.

A young activist wearing a mask of Ukrainian President Viktor Yanukovych invites passersby to go through a symbolic gate with the words "Customs Union" and "Abandon Hope, All Ye Who Enter Here," during a protest in front of the presidential office in Kyiv in December.
A young activist wearing a mask of Ukrainian President Viktor Yanukovych invites passersby to go through a symbolic gate with the words "Customs Union" and "Abandon Hope, All Ye Who Enter Here," during a protest in front of the presidential office in Kyiv in December.
Of the former-Soviet aspirant countries, Ukraine has the most deeply developed relations with the EU, and so Kyiv is in the spotlight.

In a recent report for Carnegie Europe, analyst Olga Shumylo-Tapiola wrote that Ukraine is "a defining factor" for the future of the ECU.

"If Ukraine decides to join [the ECU], not only will it cause havoc within the European Union, but it will also mean that the post-Soviet economic model has been cemented in the region," she said.

Shumylo-Tapiola argues that if Ukraine rejects the ECU and signs an Association Agreement with the EU -- a prospect that is on hold because of EU concerns about the prosecution of former Prime Minister Yulia Tymoshenko and other officials from her government -- the ECU will be forced to turn away from Europe and focus its energies on Central Asia and even the Asia-Pacific region.

Heavy-Handed Tactics

Moscow seems eager to avoid being seen as forcing its neighbors into the ECU with heavy-handed tactics.

Instead, Putin has argued that ECU membership would be beneficial to Ukraine because it would be able to deal with the EU on better terms as part of a bloc rather than individually.

At the same time, however, Ukraine's continued reliance on Russian natural gas is a powerful tool, and Moscow has promised Kyiv deep rate reductions if it joins the ECU.

The ECU -- which currently comprises Belarus, Kazakhstan, and Russia -- has become increasingly robust during the last 2 years or so.

Unlike other, much more haphazard post-Soviet integration projects, the ECU is being implemented and firmly institutionalized, says Kataryna Wolczuk, a senior lecturer at the Center for Russian and East European Studies at the University of Birmingham.

"The Customs Union has been put on a new legal footing and it is much more thoroughly legalized," she adds. "It is based on law. Very comprehensive. So the legal basis is much better, very improved. And also it is [actually] being implemented."

Institutional Momentum

The Eurasian Customs Union Commission now employs more than 1,000 people. As of January 2012, the Eurasian Economic Community (Eurasec) Court became the official arbitration court of the ECU. It handed down its first two decisions late last year -- rulings that upheld the claims of private enterprises against ECU policies.

Nonetheless, according to Wolczuk, it is still very much a "Russia-dominated organization," with many key decisions still being made at the political-diplomatic level where Russia has many levers of influence.

Both Belarus and Kazakhstan have complained, for instance, that Russia uses sanitary and technical trade barriers to extract payments or protect markets.

Despite this, the ECU clearly has growing institutional momentum. Moscow's next step, it seems, is to step up the push for expansion. The Kremlin has extended invitations to all members of the Commonwealth of Independent States, and the ECU has risen to the top of the agenda in Moscow's relations with most of its neighbors.

As a result, Wolczuk sees the invigorated and dynamically developing ECU as a potential game-changer in Eastern Europe, and she maintains that the next couple of years will be crucial.

"How it is going to pan out will be very interesting," she says. "But no doubt the creation of supranational institutions related to the Customs Union is clearly creating something new in the region."

The pressure of the ECU-EU dilemma will play a key role in the presidential election in Armenia in February, as well as the parliamentary elections in Moldova in 2014 and the Ukrainian presidential election in 2015.

RFE/RL Brussels correspondent Rikard Jozwiak contributed to this report