“Europe Folds To Russian Demands” – Zero Hedge

Posted on :Sep 12, 2014

By: Tyler Durden

Zero Hedge

September 12, 2014

While the world was poring through the details of the latest round of preannounced western sanctions against Russia – a round which Russia commented would have virtually no actual impact – and just as excitedly awaiting the Kremlin’s retaliation which Putin warned is coming shortly, far from the glare of the center stage Europe quietly folded to a bigger Russian demand namely to delay the implementation of a Ukraine free trade deal by more than one year until the end of 2015 and likely beyond.

As AFP reported, EU Trade Commissioner Karel de Gucht said, after talks with Russian and Ukrainian ministers, that the free trade agreement which Ukraine and its imploding economy had hoped would be implemented in the immediate future, will instead be delayed. Perhaps the date of the provisional launch has something to do with it: EU sources said the trade deal was to have taken effect on November 14, i.e. in the middle of Europe’s cold, snowy, GDP-sapping winter. The European Council of 28 members states must now sign off on the delay.

De Gucht said that once Kiev ratifies the EU Association Accord, expected next week and which was negotiated at the same time as the Deep and Comprehensive Free Trade Agreement, then Brussels would offer “additional flexibility” in the hope of meeting Russian concerns that its economy would suffer if the DCFTA deal went ahead.

This would be done as part of efforts to “fully support the stabilisation of Ukraine,” he said after talks with Ukraine Foreign Minister Pavlo Klimkin and Russian Economy Minister Alexi Ulyukayev. “Such flexibilty will consist in the delay until 31 December 2015 of the provisional application of the DCFTA,” he said.

Additional flexibility? That sounds very close to what Obama promised Putin’s right hand guy, Dmitry Medvedev, nearly three years ago.

Sometimes glitches in the matrix such as this one make one wonder just how much of what is going on right now between the “west” and Russia has been long pre-agreed and pre-approved by the “feuding” sides, and what is really going on behind the scenes.

But back to what the data available for popular consumption: in effect while Russia and the West are engaging in populism-happy trade and capital flow wars what is taking place at a higher level is far more nuanced, and it is here that a far more pragmatic EU is certainly concerned about pushing Russia too far.

The reason why Moscow is against the Ukraine free trade agreement is because Russia sees it as bolstering Kiev and potentially harming its own economy by allowing an influx of cheaper/better EU goods into the country, an important Russian market. Equally damaging, Moscow said these goods could then be sold on into Russia itself, damaging domestic industry.

Of course, with Europe launch sanction after meaningless sanction, in a world that is all about leverage and optics, the last thing the EU could afford is to be perceived as folding to the Kremlin in a matter which could really hurt the Russian economy. So instead DeGucht presented the delay as win-win for all sides, saying the preferential tariffs addressed “the very difficult economic situation in Ukraine” while the delay in implementing the deal leaves “15 months for either party to make remarks, proposals.”

One can just imagine the remarks and proposals that Putin would have uttered had Europe not delayed the agreement.

What’s more interesting, Russia may just win another major round in the political war that is taking place just behind the surface: the preferential tariffs announced in March and due to expire in October offered Ukraine significant reductions in customs duties worth about 500 million euros per year, the commission said.

Still, had the free trade deal passed today, it would have allowed the economically devastated Ukraine, whose economy is rapidly imploding, to boost its exports to Europe by one billion euros per year, according to the commission.

In June, the EU and Ukraine signed the long-delayed Association Agreement, the very deal whose 11th-hour refusal last year by then president Viktor Yanukovich plunged the former Soviet country into chaos. It sparked a wave of pro-European protests that eventually toppled the Kremlin-backed Yanukovich in February and ushered in a pro-Western government that deeply angered Moscow.

What goes unsaid is that the signed agreement was merely yet another optical pseudo intervention: in reality is provided nothing to Ukraine but simply sent signals to the global community that the “west” had the upper hand when it comes down to Kiev realpolitik.

If only for now.

But once the Ukraine people have been forced to go through a full winter with no benefit from the Russian bear, it remains to be seen just how enthusiastic they will be about the ongoing western-backed (and funded, and orchestrated) revolution.

As for Europe’s true “leverage” vis-a-vis Russia, the following quote from AFP encapsulates it best:

“If you want to solve a conflict, you have to be flexible,” a European source said when asked about the delay in the trade deal.

And speaking of memorable quotes, one my want to timestamp these:

In Kiev, Poroshenko thanked the EU for the new sanctions. “A friend in need is a friend indeed,” Poroshenko said.

“I feel a full part of the European Union family,” he added.

Let’s all check back on how Ukraine, and whoever is its president then, feels about being part of the European Union “family” in a year. Or less.

Gold Goliath is not your typical gold dealer.

Visit Us On FacebookVisit Us On TwitterVisit Us On Google Plus