January 30, 2014

Chimeras of Eurasian Integration 3

Aggravation of the internal political situation in Ukraine, with simultaneous complication of its international relations makes one suggest that there has not been without outside interference here. The situation is directly connected with Ukraine's geopolitical choice which has been on the agenda for more than twenty last years.

Thus, since the suspension of the European integration process of our state, in the Ukrainian society has been swirled the idea that “stabilization in Ukraine is possible only if there is radical rapprochement with the Russian Federation, including its accession to the integration structures at former Soviet territories”.

A number of pro-Russian politicians and organizations openly call on Russia to send troops to Ukraine for “taming anti-government protests of Ukrainian nationalists”. Mainly, such sentiments are fueled in the Crimea and Eastern Ukraine, where they, so to speak, mostly hope for Moscow.

Russia supports such sentiments, resorting to deliberate policy to renew its influence at the territories of the former USSR. Russian experts and politicians with their “Ukrainian” followers are trying to impose the idea that for Ukraine it is “more appropriate” to develop partnerships with the Russian Federation and the Customs Union, the financial position of which supposedly is more stable than that of the EU, and they are able to provide Ukraine real help in solving its political and economic problems.

In support of this idea, they are widely touting “achievements” of the Russian Federation both, economic (Russia is among the five most developed countries) and of foreign policy (including in terms of implementation of Russian integration initiatives in the post-Soviet space, avoidance of external military intervention into the Syrian events and strengthening Russia's positions in relations with the West).

But here we must note the following: based on estimates of independent Russian experts, the current state of affairs in Russia testifies to its rapid degradation. In particular, such estimates are in the report of the former Director of the Research Institute of Statistics of the Federal State Statistics Service V. Simcher “Double estimates of the main indicators of the development of the Russian economy”. Thus, according to him,

  • GDP growth in Russia, which was announced at around 1.8 %, in reality, is no more than 0.8 %;
  • Part of investment in GDP officially announced at 18.5  %, in fact is 12.5  %, which means that the Russian economy is speculative in nature, and it is not inherent in the transition to modernization principles;
  • Average inflation for the year is officially estimated at 6-8 %, and in fact — over 18 %. At this, the rise in prices of essential commodities is ahead of the rise in prices of other goods and services, which primarily affects the insolvent stratum of the population;
  • The gap between the income of the richest and the poorest of the Russian citizens is the following: officially — 16 times, but in reality — 28-36 times (which is higher than the corresponding figures not only in Europe, Japan and the United States, but also in Latin America). The acceptable level of this criterion for national security should not exceed 10 times;
  • The gap in GDP between regions is officially 14 times, in fact — 42 times, which significantly affects the standard of living across the country. In fact, Russia has ceased to be a united country, and this intensifies internal contradictions in Russian society, including those of inter-ethnic and inter-religious character;
  • Officially part of unprofitable enterprises makes 8 %, in reality — 40 %, which demonstrates the unprofitability of almost half of the Russian economy;
  • The level of general taxation of the received income officially is 45  %, but in reality — 90  % (which completely negates the motivation of small and medium businesses);
  • Part of the citizens-tax evaders officially is 49  %, but in reality — 75 %, which undermines the entire tax system of the Russian Federation (the government pretends that it collects taxes, and citizens pretend they pay them);
  • The official degree of depreciation of fixed assets of Russian companies is 49 %, but in reality — more than 80 %. According to Russian experts, it has irrevocably thrown Russia to the margins of the global scientific and technological progress;
  • The share of foreign capital in the Russian economy is officially 20 %, in fact — more than 90 %. Actually, the Russian leadership has lost control over the national economy under the guise of years-old slogans of “sovereign democracy in Russia” and “rebirth of the country as a great world state”;
  • The effectiveness of the country's modernization versus expenditure is officially 25 %, but in reality — 2.5 %, i.e., less than ten times. The difference of the money spent is criminal incomes of Russian oligarchs headed by V. Putin.

According to the forecasts of independent Russian experts, confirmed by the conclusions of specialists of world financial and economic institutions (including the International Monetary Fund), in the nearest future we should expect further complications of the economic situation in Russia. Primarily, this is due to the preservation of a stable trend of falling of the demand for Russian energy carriers that form the basis of Russian exports and revenues of the state budget of the Russian Federation.

It becomes clear that worsening of economic problems in Russia will affect the economic situation of the Customs Union — the basis of the Russian integration projects at post-Soviet territories. Suffice it to refer to the official figures provided by the Department of Statistics of the Eurasian Economic Commission after summarizing the Customs Union's activity in 2013.

Thus, in 2013 the mutual trade of member countries of the Customs Union fell by 6  %. At the same time the trade between Belarus and Russia fell by 13 %, while in other countries of the CU it remained unchanged. The volume of foreign trade of the Customs Union with third countries, when compared with the same period of the last year, has decreased by 0.7  %. Within this figure exports of member countries of the CU have decreased by 1.7 %, while imports have risen by 1.1 %. The foreign trade of the participants of the CU has decreased by 5.5 %.

Increasing problems in the Customs Union's activity, reduce the CU member-countries' interest in it and, in general, in the Russian integration initiatives. For example, during 2013 the number of supporters of the Eurasian Union among the Belarusian population has fallen from 44 % to 34  %, and in Kazakhstan — from 52 % to 45 %.

The Russian Federation's government experts believe that at such a state of affairs, to solve economic problems of Russia and to ensure further positive development of the Customs Union is only possible through the continued development of the CU. In particular, according to Russian economists' estimates, for the normal functioning of the CU, the volume of the common market of the organization should be 280-300 million consumers (170 million today).

This is precisely the reason why Russia strongly involves the CIS countries into its Customs Union. At this, special attention is being paid by the Russian side to Ukraine which has the greatest potential among the countries of the former USSR. This is evidenced by the increased Russian pressure on Ukraine in the period when it was preparing to sign an Association Agreement with the EU. After Ukraine's re-orientation to rapprochement with Russia and the Customs Union, the policy of pressure was replaced with the policy of financial and economic preferences.

It is possible that, given its inability to achieve the desired goals in the situation of mass demonstrations of the Ukrainian population for independence and the European choice of our country, Moscow will try to provoke an internal conflict in Ukraine. It will fully meet the interests of the Russian Federation, which include:

  • firstly, the final breakdown of the process of European integration of Ukraine. Thus, based on the statements of some European politicians, the latest events in Ukraine have virtually eliminated the possibility of its return to the process of signing an Association Agreement with the EU;
  • secondly, getting additional opportunities to force Ukraine to join the Customs Union. Further confrontation in Ukraine leads to economic losses, as well as the outflow of foreign capital and investments. On the one hand, this complicates Ukraine's paying back the received loans from the Russian Federation, on the other — it is forcing our government to appeal to Russia for the next financial aid. This increases the chances of Russia in matters of influence on Ukraine, including the issue of Ukraine's accession to the Customs Union, and Russia's taking possession of the Ukrainian economic assets;
  •  thirdly, to discredit Ukraine (as an unstable state) in order to convince the EU to support the Russian projects to develop new energy transportation corridors bypassing the Ukrainian territory. January 23, against the background of the worsening of the situation in Ukraine, Russia and the EU started negotiations on Russia's agreements with six countries of the European Union on the gas pipeline “South Stream”;
  • fourthly, creation of preconditions for a civil conflict in Ukraine in order to split it. According to Russian experts, it will greatly facilitate the implementation of Russian geopolitical goals in relation to Ukraine by establishing control over different regions of our country, including by military intervention into the internal situation in Ukraine under the pretext of protecting Russian compatriots in our territory;
  •  fifthly, undermining of the authority of the EU, as an influential international organization, as well as reducing the effectiveness of the EU policy in the East through creation of a powerful source of tension on its borders.

Ultimately, using a large-scale campaign of pressure, Russia has ensured that Ukraine refused to sign an Association Agreement with the EU. Further implementation of this scenario is being carried out under the current policy of the Russian Federation. Russia, on the one hand, is trying to demonstrate its non-interference into the internal affairs of Ukraine, while calling for a peaceful solution of the confrontation. And on the other, — is imposing its approaches to solving the problem, trying not to let Western countries and international organizations to the process of resolving the situation in Ukraine.