Europe is in the throes of disruptive change that will significantly alter the balance of power between the European Union and Russia over the next 10 years, with Ukraine at the heart of the transformation. As a former member of the Soviet Union with ties to Russia that go back centuries, Ukraine’s peaceful transition to democracy and aspirations to the EU present a significant challenge to Russia.
If Ukraine joins the EU, it will not only signal that Russia’s grip on it has finally loosened, but will prompt a reappraisal of Russia’s own relationship with Europe and lay the groundwork for Russia itself to join the EU within 15 years.
At the World Economic Forum in Davos this year, the Ukrainian president, Victor Yushchenko, gave an inspiring speech that spoke directly to his country’s ambitions. Mr Yushchenko had just swept to power in the tumult of the ‘Orange Revolution’ and had been inaugurated as president earlier that week. “Ukraine has manifested its European values and belongs to the civilisation of European nations. We are no longer at the crossroads or at its margin,” he said.
Mr Yushchenko’s vision for Ukraine is clear. He is positioning it for EU membership without waiting for formal notice from Brussels. But the implications of Ukraine’s stance toward Europe could have far-reaching effects beyond a bid for EU membership – setting wheels in motion for another, more unlikely EU entrant: Russia.
Ukraine’s prospects
Ukraine wants to join the EU for the same reasons as other countries – greater prosperity and access to markets. Its 50 million citizens have seen their neighbours’ success, and the country sees its economic future in joining with them.
However, there is also a psychological dimension: a desire for an acceptance as part of Europe and European society, an affirmation that Ukraine is European – not part of a Russian empire or Central Asia.
Ukraine was a member of the USSR. This aspect of the country’s character means that potential admission to the EU is qualitatively different than all other candidates, and raises the stakes for all parties involved. Admission to the EU would present a significant challenge to Russia, driving home a message that the old empire is truly dead, and that Ukraine is joining another powerful union.
Ukraine will have an ally in the US, which has a stake in seeing a peaceful and prosperous democracy emerge from a former-Soviet state. Ukraine has sought the good graces of Europe and the US through the peaceful Orange Revolution political transition, but also through its giving up of nuclear capabilities in 1994. In addition, both the EU and US will seek access to Ukraine to secure its strategic position as a trade partner to the East.
The joint statement issued in April 2005 by the US president, George W. Bush, and Mr Yushchenko make clear the US support of Ukraine’s aspirations towards the EU, the World Trade Organization (WTO) and NATO. “As Ukraine undertakes far-reaching reform at home, it can count on the US for support. We applaud Ukraine’s commitment to curb corruption, promote the rule of law and improve the business climate. Progress on reforms will allow Ukraine to realise its aspirations to move closer to, and ultimately join European, Euro-Atlantic and international institutions.”
Beyond approaching world leaders, Mr Yushchenko is making strong progress in the difficult work of reform that will help Ukraine in its efforts to be considered for EU candidacy. Economic reforms are under way, investment in creating a free market environment is thriving, the WTO admission process is on track, and Ukraine’s growing GDP, low labour costs and high level of education make the country an inviting location for industry investment.
Where Ukraine goes, Russia goes
Both the EU and Ukraine must manage their relationships with Russia in order for Ukraine’s EU entry to become a reality. The EU has conflicting feelings towards Russia that will have to be resolved for the prospect of accession to be extended to Ukraine. France, among others, does not want to interfere in a region with such close ties to a key ally, while the Baltic and central European states are less concerned.
Ukraine and Russia are intimately tied both politically and economically and have been for centuries, and Ukraine will not want to disrupt its strong trade relationship with Russia. However, if Ukraine proceeds on track with reforms, is offered EU membership, and joins, it will provide an example of post-Soviet development that will be watched intently by Russia. While Russia has a distrustful view of Ukraine’s European aspirations, this success may change Russia’s relationship with the Ukraine and soften its own stance toward the EU.
Russia and the EU
While Ukraine’s accession to the EU will provide a model for Russia, there are stronger forces driving Russia and the EU together. Though Russia spans Europe and Asia, and has been a world power, it is conceivable that it would give up partial sovereignty for membership in the EU.
Russia is no longer the world power it once was. It is plagued by critical problems – a demographic collapse due to ageing and AIDS, a crumbling military and a failing economy. In time, these weaknesses will cripple Russia and its geopolitical significance will fade unless it can ally itself with a strong partner.
The only options for allies are a rising China to the east and the EU to the west. China is a trading partner for Russia but an unlikely ally, given the vast cultural differences between the two countries. Ultimately, Russia’s cultural orientation is towards Europe, making the EU a better fit and a better market for Russia than China would be. Russia would also be strategically more valuable to the EU than to China for several reasons.
First is the issue of energy and resources. The EU needs a secure supply of cheap energy, and Russia is a major European supplier of natural gas. The two have come into conflict over pipeline access and pricing disputes. It will be to the EU’s advantage to bring Russia’s vast natural gas reserves inside the EU marketplace and mollify its use of energy as a political weapon rather than to proceed into an uncertain future with unstable pricing and access disputes.
Second is the question of access to markets. Beyond Russia’s energy resources, its primary advantage is its vast, well-educated population – despite its demographic difficulties. It will be mutually beneficial for the EU to gain access to Russia as both a market and source of human capital. Politically, a closely allied Russia and EU would solidify Russia’s commitment to the rule of law and to business, and prevent a slide toward authoritarianism. Socially, any aid the EU could offer Russia in the realms of public health, education and intellectual property rights management would be worth the investment, considering the proximity of their borders.
Another key issue is that of military capability. Russia’s ageing military is struggling for funding and maintenance, but its military stockpiles would be incredibly advantageous to the EU. The EU is not, and never will be, a military rival to the US – it is a post-military power that lags developing China in military capability. With Russia’s 8000 nuclear warheads suddenly under an EU banner, the EU would gain superpower military capability and could play as an equal against the US.
The road ahead
With the current constitutional crisis in the EU, it is clear that Europe’s priorities reside with issues of internal governance and its new members. But the failed constitutional referendums in France and the Netherlands may signal a new possibility for Russia’s entrance, as it forces a resolution of key integration issues.
It is conceivable that a tiered system of EU membership may emerge from this debate, with limited Schengen immigration accord status, economic access and benefits – clarifying roles within the current EU and smoothing the path for further EU enlargement. With a defined western European core, this more loosely organised 25-state EU might open the possibilities for the entrance of more politically, economically and culturally different entrants, significantly Russia.
While these developments could fail for many reasons, the past 10 years have been full of disruptive events for greater Europe, and the next 15 years promise no less.
Peter Schwartz is a co-founder and chairman of GBN Global Business Network, as well as former head of scenario planning at Royal Dutch/Shell. Chris Coldewey is a practice associate at GBN.
