Article 39 of the E.U.-Ukraine Association Agreement: Vital to Ukraine’s Independence and Prosperity

August 2, 2013
Anthony T. Salvia
Director, American Institute in Ukraine

Foreign Minister Leonid Kozhara said in a July 25 interview with Interfax-Ukraine that Kiev was on the cusp of complying with Brussels’ pre-conditions for signing the bilateral Association Agreement in November in Vilnius:

“Ukraine, together with the European Commission, has worked out a plan of action which is now being implemented. This plan of action is nearly 95% complete; there remain only a few problematic questions, which, I believe, we can settle in the course of September.”

Why then the persistent division in European ranks over whether or not to conclude an agreement with Ukraine? Some member states (Lithuania, Poland and Sweden, for example) see the Association Agreement as a splendid opportunity to strike a blow against Russian interests, and are loathe to let such pettifogging concerns as the fate of Mrs. Timoshenko stand in the way of a notable geostrategic coup; others (Germany for example), mindful of the unhappy experience of Bulgaria, Cyprus and Romania in the E.U., insist that Ukraine embrace European values as a prelude to closer relations with the E.U.

If Ukraine were in substantial compliance with Europe’s demands, as Mr. Kozhara suggests, the path would be open to a November signing ceremony. But Lithuanian Foreign Minister Linas Linkevicius, as quoted by Interfax-Ukraine on July 23th, suggests otherwise:

“There's no consensus. But this is not the biggest problem. The most important thing that we need to do is to put the train back on track and send it in a direction set by us... If there is progress in implementation, the situation will change ... The most important thing is to make the process irreversible.”

In other words, Europe must take charge and dictate terms to Ukraine. One can debate whether that’s a good thing or a bad thing, but it’s hard to imagine all of this being resolved before the end of September.

Interestingly, Kozhara, in the same July 25th interview quoted above, says Ukraine intends to continue its integration into the Eurasian Customs Union. Is this statement meant merely to mollify Moscow, or is it a serious suggestion to preserve Ukraine’s strategic options? With any luck, the latter.

Under the Association Agreement, Europeans will take over much of the national economy (in the process rendering lots of workers redundant as Europe buys up and shuts down industries deemed inefficient), there will be no appreciable upswing in Ukrainian exports to Europe because (1) Europe is economically stagnant at best, (2) Europeans do not want anything Ukraine produces and (3) discriminatory E.U. tariffs get fully lifted only in 2023; a tariff wall comes down against Ukrainian products bound for the country's largest export market (Russia and the CIS); there will be, pursuant to Title II, a “gradual convergence on foreign and security matters with the aim of Ukraine’s ever deeper involvement in the European security area” (in other words, ditch non-aligned status, and lend uncritical support to brilliant initiatives as supporting radical Islam in Syria as the U.S., U.K. and the E.U. are now doing); the list of things not at all in Ukraine’s national interest goes on and on.

As for Yanukovich, one would think he prefer not to be encumbered with this kind of political baggage as he launches his re-election bid.

Happily for Ukraine (and for Yanukovich), there is s a way out -- Article 39 of the Association Agreement. It allows both to have their cake and eat it too: Ukraine can be in the European free trade area and the Eurasian Custom Union at once. The wording of the article "On Agreements with other Countries" could not be clearer:

"This Agreement shall not preclude the maintenance or establishment of customs unions, free trade areas or arrangements for frontier traffic except insofar as they conflict with trade arrangements provided for in this Agreement."

Europe can be expected to howl about any effort on Kiev’s part to join the Customs Union, but then it would be up to them to pull the plug on the Association Agreement. Even if they took that step, it would be no skin off Yanukovich's nose as the Association Agreement contains next to no tangible benefits for Ukraine anyway. In the Customs Union, your domestic producers get unimpeded access to a growing Eurasian market of 160 million souls. This can do a lot to lift an economy languishing in the doldrums. The attendant reduction in gas prices and elimination of gas import fees will make it a lot easier to meet IMF demands without having to lower the boom on domestic energy consumers and raid pension funds.

Above all, you can go to the Ukraine electorate and say you upheld your promise to follow a multi-vector policy consonant with Ukraine's status as a European nation that straddles the borderland between Europe and Asia. You acted to prevent Ukraine from being a pawn in the great power ambitions of others. You resisted the entirely unreasonable insistence of others powers that you choose definitively between rival partners, because you understood instinctively that it was not in Ukraine's interest to do so, and that only by opting for both the Association Agreement and the Customs Union could Ukraine play the decisive role in laying the Cold War to rest, once and for all -- a truly historic achievement.

Can this scenario play out; will it? Ukraine's representative to the Eurasian Customs Union and ex-Minister of Economics Viktor Suslov says Ukraine has every right under article 39 to join the Customs Union -- as long as such membership does not contradict commitments undertaken in the Association Agreement. He says the two trade arrangements contradict each other only on some technical points. He says it is only a matter of political will on Kiev's part.

Since becoming head of state in 2010, Viktor Yanukovich has assiduously avoided getting himself – and Ukraine – boxed into a corner. For the good of Ukraine, and his own political welfare, he would be well advised to continue in that vein.