Customs Union expansion with Vietnam - Will it make it more attractive to Ukraine than the EU?

I have written very often about the DCFTA (and attached AA) agreements that are now agreed between the EU and Ukraine, even if not signed and ratified for the foreseeable future.  Far less frequently have I written about the Russian led Customs Union.

This is because, thus far, despite the offer of a $9 billion reduction in Russian gas prices, the Ukrainian leadership has refused to become a full member.  Instead it prefers a 3 (Russia, Belarus and Kazakhstan) plus 1 (Ukraine) engagement - which naturally has a much cooler response from Moscow.

Times change however.

The DCFTA is being held hostage to the politically driven AA by the EU because of issues such as perceived selective prosecutions of certain opposition politicians.  No movement from either side seems likely to occur and whether or not the October 2012 elections are technically free and fair or not, it already seems that the EU will not recognise them as free and fair whilst there are some opposition politicians in jail, and to be quite frank, jail is where they will be when the elections take place in all probability.

If the EU is relying upon Ukrainian public opinion to force the government to release these opposition leaders at the risk of losing the DCFTA and AA with the EU, then they could well be deluding themselves.  According to an IRI poll released a few days ago, only 37% of Ukrainians favour a trade agreement with the EU (down from 42% in November 2011), whilst 41% favour joining the Russian led Customs Union (up from 40% in November 2011).

Thus it appears from this poll, Ukrainian public opinion already marginally backs the Customs Union over the EU.

Further to this, since the surveys for that poll, Russia has joined the WTO providing a far more level playing field for Ukraine in the event of dispute as both nations are now subject to WTO rules and rulings.

Yesterday, somewhat unforeseen, Vietnam, another WTO member, revealed the fact that they are officially considering joining the Customs Union as well.  There is very little ambiguity in the words of Vietnamese President Truong Tan Sang.

What would be most appealing to Russia and Ukraine is a Customs Union space in the Asia Pacific, given the US and EU’s attempts to look towards that region.

As a geopolitical aside, but not to be ignored or necessarily treated lightly, Russian Navy CINC Chirkov claimed the same day as the Vietnamese President’s Customs Union announcement, that Russia considering new “material-technical support points” in Cuba, Seychelles, and Vietnam.”

Anyway, returning to the Customs Union and trade, there is surely going to be additional attraction for Ukraine should Vietnam join.  Very much like the EU, the more members there are, the less power any individual member has - theoretically - and enough smaller members can hold in check the bigger ones - especially if they are all WTO members held by WTO rules.

Now Ukraine is important to the EU.  There is no denying that.  Without Ukraine the entire EaP project is a joke.  Huge issues relating to border security, immigration, organised crime etc would present themselves for the EU if Ukraine simply stopped cooperating with the EU.  But Ukraine is certainly guilty of thinking it is more important to the EU than it really is.  After all if the EaP project fails, so what?  It will not be the first or last EU project to fail.

That said, the EU is also guilty of taking Ukraine’s trajectory westwards for granted, not matter how slow and unsteady that trajectory may be.

If the Customs Union begins to attract Vietnam and a few others from the Asia Pacific it will begin to look much more attractive than the EU, as it comes without the political strings required by the EU’s AA to allow for the signing and ratifying of the DCFTA.

The progress of Vietnam into the Customs Union will be very interesting to watch - as will be the casual effects both in the Asia Pacific and Ukraine.