The Ukraine – is China a "third alternative"?

22:05 23.12.2013 • Armen Oganesyan , Editor-in-Chief, International Affairs

It is difficult to define the exact moment when in Europe there was a soft click of a switch and the "Belavezha Accords" were launched, which slowly but logically brought the European Union before our eyes. However, distinctly visible cracks appeared long before the financial crisis, which clearly polarized the interests of the "periphery" and the center, the new and old members of the club.

Today, sharp differences have come to light in the infighting between the founding fathers themselves, dissatisfied with Brussels and each other’s policies. This applies to such fundamental issues as competition in the domestic markets, the distribution of benefits and credits, and migration policy.

Brussels officials clearly cannot cope with snowballing growth, and problems in the economy and the social sphere. Naturally, they stand guard over the "constitutional" rules which are common to all members, but which have acquired such a number of exceptions and violations at the national level, that it is time to rewrite them again. Each EU Member State has its own "draft", which in their opinion, is justified and legitimate, because it reflects the national identity of their own country. In Brussels, they do not agree, and want everything to be rewritten from scratch in accordance with the Lisbon Treaty, and given to EU commissioners for ratification.

Recently, the British Prime Minister David Cameron threw a "bomb" into the noble assembly when he announced the measures necessary to restrict labor migration from Eastern European countries – members of the EU. The reciprocal openness of labor markets and freedom of movement are the cornerstones of a harmonized policy, and as some truly believe "are the key points in the attractiveness of the European Union." The reforms proposed by London made a clear discriminatory dividing line between Europe on the principle of "the poor are no friend of the rich."

For Britain to hospitably open its doors to new members of the EU, they would have to significantly increase the income and share of GDP per capita, which would take them years, if not decades.

Mariana Campeanu, Romanian Minister of Labor, said indignantly: "It is unacceptable that in the twenty-first century there are manifestations of racism and xenophobia, and especially sad that they have a place in the UK."

What is interesting is that this phenomenon was born of the realities in Europe, when the basis of the xenophobia is not so much racial intolerance, as the economy. But such an approach to migrant workers from Eastern Europe is supported by Austria, Germany and the Netherlands. It looks like they ignored the statement of European Commissioner for Employment Laszlo Andor, a native of Hungary, who said that the Commission will do its utmost to defend the right to freedom of movement of labor in the EU.

Experiencing a decline in production, the countries of Eastern Europe are particularly sensitive to the issues of employment of their fellow citizens. During the last few years, their economies have been fueled by EU loans at preferential rates. In the post-crisis shock the mutual competition for the right to receive dwindling financial assistance from Berlin and Brussels has increased substantially.

The shrinking labor market and restrictions in lending forced Eastern and Central Europe countries to be wary in their approach to associate membership for Ukraine, which could claim its share of the pie. Even in the long term. There is a dilemma before the policy-makers of the "Eastern Partnership ": how to attract Kiev and not exacerbate the fears of its Eastern European members?

From the beginning, it was stated that when it comes to the partnership with the EU, negotiation is inappropriate. This was said in response to the requests from Kiev to provide large loans for the transition to European standards. The amount of 150 billion Euros, which was mentioned by Yanukovych, terrified not only the "junior" but also the "senior" members of the EU. The simple fact is that Europe does not have such money for Ukraine.

Neither Brussels nor Berlin will achieve consensus on this issue within a united Europe. So what is left? You cannot promise solid loans which do not exist. It is impossible to negotiate with the IMF, which denies Ukraine special conditions for refinancing except for minor concessions. You cannot promise a share of the commodity market, when domestic competition is already overheated. Finally, it is not possible to make more room in the European labor market, around which passions rage. You cannot even guarantee the freedom of movement, if recent proposals from London are to be accepted. There remains only political pressure.

The failure of European diplomacy in Vilnius dealt a painful blow to the reputation of "mature integration." There was no "obvious attraction" as was said repeatedly by any European official. Today "natural magnetism" is compensated for by the visits of vast numbers of EU chiefs to Kiev, who shamelessly hand out tips and requirements, as if they had arrived at a mandated territory. Catherine Ashton even encouraged foreign ministers to go in shifts, one after another, constantly present in the capital of Ukraine, possibly to awaken in Ukrainians a universal instinct to European integration . History has not known such diplomatic behavior before.

Director of the Kiev Center for Political and Conflict Studies Mikhail Pogrebinsky believes that the steps of both Russian and European politicians are unjustified, in calling on the Ukraine to make its choice. "By definition the Ukraine cannot make a choice, it is doomed to sit on two chairs, at least, under the conditions which exist today in the Ukraine ", concluded the expert. Politically, recent events confirm this axiom, which, however, was far from certain in economic terms. But in the end, if Europe will accept the offer of establishing a Tripartite Commission consisting of EU-Russia - Ukraine, then an inherent form of compromise could be found in the idea of two chairs. That did not happen. But even a child can understand that whatever the outcome of the confrontation, the Ukraine cannot do without Russia.

Meanwhile, quiet and respectable as always, a "third force ", or if you prefer, a "third alternative" has appeared in the Ukraine Next year, Ukraine will receive $18 billion in loans and investments from China. Twenty major agreements have been reached covering a wide range of cooperation in the fields of investment and trade. In the next five years China plans to import products worth 10 trillion USD. As a new strategic partner, according to a Ukrainian portal called "Forum", Ukraine will have its own guaranteed quota of sales of its products in China, which has opened up unprecedented prospects for all sectors of industry and agriculture."

In the Crimea alone, it is planned to invest 13 billion dollars in the construction of a modern deep-water port and the reconstruction of Sevastopol port. China is ready to invest 15 billion dollars in the Ukrainian mortgage system. Today, the volume of trade already ranks China in second place on the priority list of Ukrainian foreign trade relations, and Yanukovych has signed an agreement with Beijing which may increase it threefold.

According to Ukrainian experts, "China considers Ukraine not just a window, but a springboard ... its partner for entry into the European market and cooperation with European countries and the CIS." Russia has a special interest in the plans of Chinese experts for constructing a plant for processing coal into a synthetic gas. The project, which was hastily declared a "breakthrough" in ensuring energy independence, and is a powerful lever in negotiations with "Gazprom" on prices for Russian gas.

Of course, it is easy to dismiss this topic, saying that this is an attempt by Kiev to play the China card to push the EU and Russia for greater tractability. However, where are Ukraine and China in economic terms? The weak cannot play against the strong, and especially such sophisticated partners, pursuing their tactical objectives. Also, sitting on a "third chair" is more comfortable for Kiev than the other two. China pointedly emphasizes that it is only interested in business; it does not impose any political conditions.

If cheap Chinese goods or joint production flood into Europe through the Ukrainian border, it is unlikely to please European manufacturers. Russia is also not fenced off hermetically from the Ukrainian market and also may face a new level of competition in the CIS markets.

An interesting question is raised: "How does China plan to treat Ukraine's rapprochement with the EU?" If the Ukraine is seen as a springboard for moving into Europe, its associate partnership will be in Beijing’s interest. According to the Ambassador of Ukraine in China Oleg Demin in China,  "China, of course, is interested in Ukraine being part of the European space ...” According to him, China’s proclaimed economic corridor of the Silk Road is well correlated with Ukraine's plans to join Europe.

As for Russia, the established connections, with its longest common border guarantee Russian energy interests a prospect of stable economic cooperation with China. However, Russia is not considered as an effective mediator for China in relation to other regions. If China is actively involved in the geopolitical game in the "triangle" of Europe -Ukraine- China, then Russia will have to deal with the new realities not only in Ukraine, but also in other CIS countries.


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