Everyone Loses: The Ukraine Crisis and the Ruinous Contest for Post-Soviet Eurasia

Moscow quickly walked back Ulyukaev’s concession. Putin wrote in a letter to EU officials that they could either agree to renegotiation of the DCFTA, or else Moscow would follow through on its threat to suspend the CIS free-trade arrangements and hike tariffs on Ukrainian exports to Russia. ‘We still believe that only systemic adjustments of the [DCFTA], which take into account the full range of risks to Russian–Ukrainian economic ties and to the whole Russian economy arising from implementation of the agreement, will allow [us] to retain [the] existing trade and economic [regime] between the Russian Federation and Ukraine’, he wrote.[71] The 15-month hiatus was a ‘period of clarification’, as the EU’s De Gucht put it, the purpose of which was to allow the EU to demonstrate to Russia that it had no reason to worry.[72] Russia and the EU were seeking geo-economic victory, not a compromise solution.

After 12 rounds of negotiations over 15 months, the talks unsurprisingly broke down at a final meeting in late December 2015. Russia reiterated its demand for a legally binding document to address its concerns and stated its intention to suspend the CIS trade arrangements vis-à-vis Ukraine. The EU accused Russia of putting forth ‘requests that were not substantiated’ and ruled out further talks until Moscow committed to holding tariffs on Ukraine steady. The Commission also issued a document in order to debunk ‘certain myths’ – that is, Russia’s objections to the DCFTA. The EU further reminded Russia that it never intended to compromise: ‘As has been conveyed from the beginning of the talks… the DCFTA cannot be amended – neither directly nor indirectly.’ In Putin’s account, the Russian delegation was told, ‘“The game is up”. [The EU delegation] then left [the room] and issued a press release [saying] that the Russian side broke off the talks’, a step he lamented as ‘not very European’.[73]

A number of Western analysts have joined the EU’s trade negotiators in pronouncing the concerns Russia raised during the trilateral talks groundless, and concluding that therefore Moscow must have other, hidden motives.[74] This explanation, while not necessarily inaccurate, relies on inference rather than evidence; the Russian negotiators could have been sincere but mistaken. The broader point is that the EU and Ukraine wanted to deepen their geo-economic integration without Russian involvement, and Moscow was not prepared to continue to extend preferential trade arrangements to Ukraine under these circumstances. While it seemed as if Ukraine’s president was prepared for a compromise on the DCFTA when he arrived at the Wales summit, the EU – for institutional-bureaucratic reasons – insisted the text could not be altered.

When the DCFTA went into effect on 1 January 2016, Russia suspended the CIS trade preferences accorded to Ukraine, effectively instituting a punitive tariff hike. Moscow also placed an embargo on Ukrainian agricultural imports similar to its countersanctions against the G7. In response, Kyiv banned a variety of Russian imports including meat, fish, vegetables, fruit, dairy and alcohol products. Taken together with tit-for-tat sanctions that cut direct air links between the countries (affecting up to 70,000 passengers per month), by 2016 Russian–Ukrainian economic ties had been almost completely severed. And the geo-economic stalemate was more intractable than ever.

CHAPTER FOUR The negative-sum game and how to move past it

Everyone loses

The crux of our argument is that the Ukraine crisis is the apotheosis of a broader regional dynamic: zero-sum policies producing negative-sum results. It is a game that has produced no winners. All major players are worse off today than they were when the crisis began.