MOSCOW TO KYIV, TBILISI, AND CHISINAU: EU DEALS WILL COST YOU

Radio Free Europe on July 6, 2014, reported that Russia has never hidden how it feels about neighbors forging closer ties with the European Union. Excerpts below:

So it was no surprise when Deputy Foreign Minister Grigory Karasin said there would be “grave consequences” for Ukraine when it signed a landmark deal on closer economic ties with Brussels on June 27. Georgia and Moldova signed similar deals strengthening both financial and political ties the same day.

Moscow, which frequently uses sanctions as a form of intimidation, has in the past banned Georgian mineral water, Moldovan wine, and even the Ukrainian chocolate produced by the country’s current president, Petro Poroshenko.

Now, with the historic EU deals already signed, many are expecting the punishment to get worse. We look at the countries involved:

MOLDOVA

As the poorest country in Europe, tiny Moldova is highly sensitive to any kind of economic blow. On July 2 — the same day Chisinau lawmakers ratified the EU deal — Moscow announced it would begin limiting its imports of Moldovan meat.

The restriction, which Russia claims is due to sanitary violations, prevents Moldova from exporting processed meats and prime cuts of pork, beef, horse, and lamb.

In addition to the meat restrictions, Moscow has also sought to exploit another point of vulnerability — Moldova’s breakaway region of Transdniester. The pro-Russian territory is still home to Russia’s Soviet-era 14th Guards Army and maintains a significant military arsenal.

On July 3, officials from Transdniester and Russia signed a package of agreements establishing closer cooperation on the economy, trade, transport, agriculture, and science. The deal allows Moscow to strengthen its presence in Transdniester, which borders part of Ukraine’s southern flank. Russian Foreign Minister Sergei Lavrov defended the deal as necessary due to “regional and economic conditions becoming more complicated.”

UKRAINE

The perceived loss of Kyiv is perhaps the biggest thorn in Moscow’s side. The Kremlin had desperately hoped to add Ukraine to its fledgling customs union — currently comprising just Russia, Belarus, and Kazakhstan — in its bid to create a post-Soviet counterbalance to the European Union.

Having successfully pulled Yanukovych back from the brink last November, Russia has since seen him overthrown in the pro-Western Euromaidan movement. Moscow’s subsequent annexation of Crimea and support of brutal fighting in Ukraine’s east show it to be in a thoroughly uncompromising mood.

Russian officials have already announced that they will pull out of their free-trade-zone agreement with Kyiv as soon as the EU-Ukraine deal comes into effect, and strongly implied that Minsk and Astana would follow suit.

“In spite of everything that’s happened, Russia still does not impose custom duties on the imports of Ukrainian goods,” Tatyana Golendeyeva of the Russian customs service said on July 4. “We are considering the issue of suspending the free-trade agreement or terminating it completely.”

The same day, Russia also banned a range of Ukrainian-made dairy products, claiming “microbial contamination” and other safety violations. The ban affects milk, cheese, and butter produced by a range of plants managed by the Kyiv-based company Milkiland Ukraine.

But perhaps the biggest lever Russia still has in reserve is natural-gas pricing. Ukraine and Russia are due to conclude gas talks by the end of the summer, and the mood is likely to be chilly. Gazprom is demanding that Ukraine’s Naftogaz cover some $2 billion of unpaid 2013 shipments before talks can even begin. Ukrainian Prime Minister Arseniy Yatsenyuk, meanwhile, will not proceed without a guarantee that gas prices for any future contracts drop from $485 per 1,000 cubic meters to $268.5.

Gazprom CEO Aleksei Miller has described Yatsenyuk’s position as “absurd, ultimatum-like and unconstructive.” The EU, which receives its Gazprom supplies via Ukraine, is eager to see a deal concluded by summer’s end. Russia, Ukraine, and the EU are due to resume talks on July 7.

GEORGIA

Ties between Russia and Georgia have remained frosty since 2008, when the two countries fought a five-day war over Georgia’s separatist territories of Abkhazia and South Ossetia. Both territories have since become self-declared states supported by Russia. But Tbilisi and Moscow have gingerly begun to repair ties, establishing direct contact between the two governments and agreeing for bans on Georgian water and other exports to be lifted.

Prior to signing the June 27 agreement, Georgian officials speculated, perhaps optimistically, the move would not prompt much “tough action” by Russia. But days before the signing, NATO announced it would not offer Tbilisi a formal step toward membership, with diplomats privately admitting the situation in Ukraine had stirred concerns about irritating Moscow.

Authorities in Georgia have also signaled they are hoping the EU deal will not upset their standing free-trade agreements with Russia and other CIS states. The two countries are due to discuss the issue at a meeting in the Czech capital, Prague, on July 7.

The Russian Foreign Ministry warned Georgia as early as May that it should “understand the consequences” of signing an EU deal. Possible pressure points include: a resumed ban on exports, currently at an all-time high; Georgian dependence on Russian oil; and the possibility that Russia may seek a Crimea-style annexation of South Ossetia.

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