As Ukraine inks EU deal, Moscow is not giving up

Maria Antonova
Russia's President Vladimir Putin attends a ceremony at the Grand Kremlin Palace in Moscow, on June 27, 2014
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Russia's President Vladimir Putin attends a ceremony at the Grand Kremlin Palace in Moscow, on June 27, 2014 (AFP Photo/Alexei Nikolsky)

Moscow (AFP) - The EU's move to sign accords with Ukraine, Moldova and Georgia is a major setback for Russian President Vladimir Putin, but the tug-of-war over Moscow's ex-Soviet sphere of influence is far from over, say analysts.

The association agreements have been met with barely concealed hostility in Russia, which will use every opportunity to undermine the three countries' EU integration while ensuring its own trade ties with Europe remain unaffected, the analysts told AFP.

"Russia has many options to use the carrot and stick with these countries," said Maria Lipman of Carnegie Moscow Centre.

Moscow argues the agreements threaten its domestic producers by allowing European goods to be re-exported from Ukraine through their less stringent customs channels.

The Kremlin wasted no time on Friday in warning that it could take retaliatory trade steps.

"It's possible that we have to take a series of measures to protect our economy," Putin's spokesman Dmitry Peskov said in televised remarks.

Vasily Nebenzya, a deputy foreign minister, said that Russia may hike its customs tariffs for Ukraine.

That would be a major blow for Ukraine, which sends around a quarter of its exports to Russia, including from key industries based in the already turbulent east of the country.

- 'Hysteria' -

The EU deal has been at the heart of Ukraine's crisis since last year, when former president Viktor Yanukovych backed out of it at the last minute and flew to Russia to firm up ties with the Kremlin instead.

Moscow hailed the decision, showering Ukraine with economic perks and welcoming it to join a customs union that would eventually develop into a comprehensive Eurasion Union of former Soviet republics designed to rival the European bloc.

But these steps triggered a revolution in Ukraine and the new government in Kiev has shattered Putin's union hopes, even if the crisis gave him the opportunity to seize control of the Crimean peninsula and ride a surge in popularity at home.

Konstantin Kosachev, of the Political Expert Group think tank, predicted "hysteria" over the accords. "The reaction in Russia cannot be positive," he said.

But Moscow still maintains a powerful influence in Moldova, Georgia and Ukraine -- all of which rely on economic ties with Russia and have voluble pro-Russian regions pressing to break away from their respective nations.

Putin this week ordered his rubber-stamp parliament to cancel the mandate it had given him to intervene militarily in Ukraine, but it could be quickly reinstated and he made it clear Russia reserves the right to protect Russian speakers throughout the former Soviet bloc.

A Crimean-style intervention in Moldova is unlikely but has not been entirely ruled out, said Lipman.

Last month, Russian Deputy Prime Minister Dmitry Rogozin headed a delegation to Moldova's breakaway Transdnestria region, meeting with separatist authorities and promising to support the local ethnic Russians.

Moldova's dependence on remittances from Russia leaves it particularly vulnerable.

"It would be easy to create problems for Moldovan migrant workers," Kalachev said.

- 'Outsmarted' -

Moscow's strategy now is to show the EU that "Ukraine is a weak country that does not control its territory" in order to "discredit Ukraine as a partner for the West," Lipman said.

Russia will continue to leverage its gas reserves to maintain influence over Europe, demanding that neither Ukraine, Georgia or Moldova join NATO.

"All of these countries must understand that in case of a conflict, the West will not truly protect them," Lipman said.

Meanwhile, Europe remains uncertain on how to proceed with Russia, whose gas exports are responsible for about a third of energy consumption in the 28-member bloc.

Some EU members have pulled out of Moscow-backed plans to build the South Stream pipeline project that would bypass Ukraine, but Austria this week gave its final approval to the scheme.

And France is pushing ahead with a $1.6 billion (1.2 billion euro) contract to supply the Russian navy with two helicopter carriers.

"The European Union proves that the economy is more important than politics," said Kalachev. "The sanctions are a paper tiger."

Putin's domestic popularity ratings -- which have surpassed 80 percent in recent months while many of his European peers have floundered in polls -- show that he has "outsmarted the world", he added.