VIKTOR YAKUBYAN: GUAM AND GUM: GEORGIA, MOLDOVA AND UKRAINE SUSTAIN OTHERS’ LOSSES
Viktor Yakubyan – expert on South Caucasus

Regnum, Russia
June 24 2006

Any big political event or a chain of such events is interesting
from, at least, two points of view – informational and analytical. If
information is almost simultaneous to the process, analysis comes
much later – not only to reveal the motives of the actors but also
to compare their goals and achievements. In this article, I would
like to analyze the present situation in three CIS states: Moldavia,
Georgia, and Ukraine. No need to remind you about the well-known chain
of events in those countries, you have a detailed media coverage of
it. I would like just to show you the general logic of tendencies
that has led those countries to their present situation.

Georgia, Ukraine, and Moldova are three CIS states that have been
in growing political confrontation with Russia for several years
already, with each of them systematically counterpoising its "own"
interests to those of Russia. Experts are unanimous that in this
particular case those "own" interests are tightly bound to the
interests of the Atlantic bloc. The confrontation of those countries
with Russia comes not so much from their wish to cooperate with the
West as from the emphatically mono-vector nature of their foreign
policies. Today almost all the CIS countries – and Russia as well –
are developing their cooperation with NATO, but none of them are trying
to counterpoise polar interests in the situations they objectively
exist in. For example, in its foreign policy Azerbaijan is trying to
avoid collision of the interests of Iran, Russia and the US in its
territory or over its agenda issues. That’s why I am going to analyze
the situation not in terms of the full GUAM format – together with
Azerbaijan – but with focus on GUM – Georgia, Ukraine and Moldova.

In fact, several years have passed since Georgia and Ukraine changed
their governments and the Moldavian president revised his attitude
to Russia in the face of a new presidential election. What have
those countries come to and what have they got from their strategic
Russia-West contraposition?

Georgia

Despite being generally accepted, the view that Ukraine is the leader
in the GUM "confrontational bloc" seems not so very well grounded.

Initially, it was Georgia who took up the role of key resister to
the Russian sway and key political and economic link in the GUAM chain.

Georgia will also be the key respondent if the project fails. Already
today that country is feeling the painful political and economic
consequences of the inflexible policy of its leaders.

At the first glance, the internal political situation in Georgia seems
quite stable and safe for Mikhail Saakashvili, Georgian president
who came into power through popular support. At the same time, the
post-revolution period has seen some remarkable events that forebode
not so much the crisis of government as the crisis of statehood
as such.

After declaring the restoration of the country’s territorial integrity
as his priority, Saakashvili suggested quite an interesting mechanism
of achieving this goal – confrontation with Russia. By declaring that
Georgia has no problems with Abkhazia and South Ossetia and all its
problems are related to Russia, the Georgian president, in fact,
attempted to involve the western community in Georgian-Russian
relations and to fully shade the position of the unrecognized
republics.

Such a policy was obviously able to aggravate Russian-Georgian
relations, at best, and to spoil Russia’s relations with the so-called
friends of Georgia, at worst. The worst case proved impracticable as
despite various contradictions, Russia tries to be in constructive
dialogue with almost all the international process participants
and to discuss with them problems that are much wider in scope than
Georgia’s interests. Saakashvili doggedly tried to escalate tensions
in the conflict zone and thereby to turn the attention of the world
community to his country’s problems, which, as I have already said,
he has initially ascribed to Russia’s influence.

He has succeeded in a sense, but the question is what to do next. It
turns out that very few people actually want to conflict with Russia…

GUM’s task was to pool efforts to create a ‘sanitary cordon’ against
Russia and, together with Azerbaijan, to consolidate to gain control
over the self-proclaimed republics. This maneuver was followed by
an adequate response – Abkhazia, South Ossetia, and Transdniestria
also consolidated their efforts, which complicated their individual
problems and questioned the very expediency of Georgia’s policy. It
is becoming clear that Saakashvili will actually have to fight for
restoring his country’s territorial integrity, but, this time, at
two rather than one fronts.

Meanwhile, he has an invariable alternative – to agree with Russia.

In the meantime, Saakashvili’s rating precipitously fell following the
internal political events like the mysterious death of prime minister
Zhvania and the shift of several parliamentary forces and the foreign
minister into the opposition. Georgia’s policy on Ajaria, who, in
fact, lost its autonomy after the expulsion of Abashidze, made it
even harder for Tbilisi to find acceptable solutions to the conflicts.

In his attempt to keep the situation under control, Saakashvili formed
a rigid intra-party hierarchy, nominated radical figures into military
offices and as a result got a warning from US Deputy Secretary of
State Dan Fried that he is going back to authoritarianism.

The illogicality of Georgia’s consistent efforts to exacerbate its
relations with Russia – its key economic partner – ended in quite
logical consequences. Russia consistently enhanced its presence in
Georgia’s energy sector, with its surgery strikes on the country’s
key export items resulting in Tbilisi’s absurd announcement about
secession from the CIS. In fact, for Georgia the CIS membership is of
much bigger economic importance than for any other member-state. The
CIS countries are Georgia’s biggest foreign trade partners, with Russia
being traditionally on top with 16%. Until recently, 70-80% of Georgian
wines and mineral waters have been exported to Russia. Some sources
say that because of the wine embargo alone Georgia loses $18-25mln a
week. Besides, the winemaking infrastructure is tightly connected to a
whole cascade of raw material industries and services: vine-growing,
the production and import of mineral fertilizers, packing, railroad
operations. The natural result of these tendencies and of almost
redoubled fuel export price was the rise in consumer prices – 5.8%
since early 2006 and 10% against a year before.

Thus, the real results of the Georgian policy of the last years are
as follows:

1. Setback in the Abkhazian and South Ossetian peace processes;

Shattered foreign trade balance;

1. Slumping rating of the authorities;

1. Real prospect for becoming the biggest vinegar supplier.

Moldavia

I can definitely say that in this new prospective export item Georgia
may face a tough rivalry from Moldova, but, if seriously, the economic
situation in Moldavia does not have even this prospect.

Experts say that the Moldavian economy is on the verge of a large-scale
financial-banking crisis: currency reserves are steadily decreasing,
the negative foreign trade balance is spasmodically growing (43%). In
January-April 2006 alone Moldova’s foreign trade turnover dropped by
10%. After losing positions on the alcohol and fruit markets in Russia,
Moldova is steadily turning into a pure importer, with no progress
shown in trade with immediate neighbors – Romania and Ukraine. The
Moldavian export to the CIS has decreased by 15%, to the EU by 4%.

President Voronin continues hoping for financial injections from
the West, perfectly realizing that they will not save the country’s
traditional industries unless they regain sales markets. Moldavia’s
strategy of the agri-industrial complex development till 2015 plans
5-7% annual growth in agricultural produce. Meanwhile, in 2005
this index was just 1% and in 2006 it may go even lower because of
stagnating winemaking.

The Ukrainian-Moldavian anti-Transdnestr campaign for introducing new
customs rules has also ended in economic damage for Chisinau. The cargo
turnover via the Ukrainian-Moldavian border has dropped from 4.5mln
tons in January-April 2005 to 3.1mln tons in January-April 2006. In the
first quarter of 2006, the total volume of Ukrainian-Moldavian mutual
supplies dropped by $4.8mln or 3%. Experts say that the Moldavian
government’s promise to ensure 9-10% inflation in 2006 is unreal, they
say that, in fact, inflation will be no less than 13%. In January-May
2006, inflation grew by 7.2%. Last months, food prices grew by 1.6%,
non-food prices by 1.4%, service tariffs by 0.3%. Meanwhile, the
heaviest impacts of the rise in the Russian gas tariff are yet to come.

In the political agenda the "achievements" of Moldova are not much
different from those of Georgia.

Objectively unable to play more or less significant role in GUAM,
Moldova is just watching the game with a hope that it will get
dividends just because it is in the project. Obviously, Moldova is
not able to make any economic or political contribution to the bloc’s
maneuvers, but it will certainly have to reckon with the consequences
of the coordinated policy of "the union of the unrecognized" under
the "Kosovo precedent" aegis. The rigid contraposition of the EU and
Russian interests and the wish to force Russia out of the Transdnestr
peace process has made the positions of the sides even tougher and
that of Moscow – maximally tough.

Ukraine

Ukraine is facing the most complicated political situation of all.

Besides being the key potential importer of the Georgian and Moldavian
vinegar, that country claims to become the most consistent executor
of the European Charter for Regional and Minority Languages.

Speaking seriously, this long campaign seems to have knocked Ukraine
out of the general logic of the international political process. What
is beginning to happen in Ukraine proves that the country has lost
control over the situation. The best example is the last incident
with American marines and engineers in the Crimea. The Americans
seemingly failed to notice they were treated as occupants just because
the authorities were so busy with fighting for portfolios that they
simply forgot they had come. One might as well speak about chaos in
parliament and government.

Having come into power amid democratic slogans, "the orange trio"
has now gone as far as to charge each other with betraying "the
ideas of Maidan." By strictly counterpoising the planned accession
into NATO with the military-technical cooperation with Russia, the
Ukrainian politicians risk to bring to nothing the Ukrainian-Russian
defense cooperation. Russia is already saying it is ready to stop
military-technical cooperation. No doubt this will damage not only
the economy but also the defense potential of Ukraine and no need
proving that it will take the country years if not decades to repair
this damage.

Meanwhile, each day of de facto anarchy in Ukraine is making
things even worse and is bringing to the surface the apparent and
latent problems of the Ukrainian statehood. One such problem is
the country’s language division – hardly something coincidental or
inspired from outside. This factor was objective reality, and the
Ukrainian authorities should have accepted it, but the fact is that
it was just another opportunity for some political forces to reinforce
their own positions.

The long political uncertainty has slowed down the economic growth
set off by Leonid Kuchma. Despite its strong industrial and agrarian
potential, Ukraine has almost the lowest economic growth in Europe.

EBRD forecasts that this year, Ukraine will be the worst in economic
growth among 27 Central and Eastern European countries – only 1.2%
against twice as much last year. In 2005, the GDP growth fell by 3.6
times, the industrial output growth by 4 times as against January-June
2004.

Ukraine’s Clearing House says that in January-June 2006, the fixed
capital investment growth rate dropped by 4 times, with the share of
the state budget falling by as much. As of August 1 2005, the positive
foreign trade balance had plummeted by almost 21 times (!).

Ukraine has fallen back to the level of 2000. In January-July 2006,
the state budget got only 51.6% of the annual plan. Financiers say that
the political stagger of the Ukrainian establishment may shatter the
stability of the national currency. One more prerequisite for such
an outcome is rising fuel prices, growing inflation and augmenting
negative trade balance.

It should be noted that Ukraine’s advantage over Georgia and Moldova
is that if restoring foreign political stability it can relatively
compensate its economic losses by budgetary capital investments and
big foreign credits. Still, it is exactly political instability that
continues to be the biggest potential danger not only for Ukraine but
also for the whole GUM. We know that it pains them in Georgia to see
what is going on in Ukraine. We can understand them: being the engine
of the project, the Georgian leaders perfectly realize that their key
argument against Russia is exactly Ukraine. The first and foremost
trump of Ukraine is its role of a transit corridor between Russia
and Europe. Russia has covered this trump by a preventive measure –
it has begun to lay the Northern-European pipeline. In fact, this
project is a response to the Ukrainian elite’s vector contraposition
attempt coming from the Polish and Baltic "priorities."

The results of the "orange" revolution are as follows:

1. Economic stagnation, growing consumer, fuel, and transport prices;

1. Growing public tension fueled by continuing chaos in the government
and vague and sometimes mutually contradicting state priorities;

Growing contradictions in the Crimea, globalization of this local
problem;

1. Weakening power vertical, lack of control over regions as a result
of impulsive staff policy;

1. Weakening sovereignty and, as a result, interference of external
forces in the political fate of the country;

1. Loss of organic place in Europe’s geo-political construction –
Ukraine has turned from the key link between the CIS and Europe into
a conflict buffer between Russia and Europe and risks to lose the
confidence of both Russia and Europe;

1. Big business is losing because of unwise privatization, some
politicians are openly revengeful and thereby pose threat to the
national security.

In conclusion, I can say that the present tension in the anti-Russian
"arc" was expected by many – and, probably, even by the leaders
of those countries. When you are between two poles you can hardly
expect to avoid discharge. Still, the "sanitary cordon" project is
not over – it is at its climax. And much will depend on what comes
next in Ukraine. The "happy end" of the "portfolio passion" drama
has been followed by a new situation. It is clear that the backstage
confrontation will continue to deepen and each of the big political
leaders will try to prove that his voice is decisive. With her bitter
experience of short-lived premiership, the future premier Timoshenko
may well try to reinforce her positions by, probably, undermining
the positions of the president. Still, the key task of those actors
is not to allow the split of the country – for, as it turns out, the
western script writers made a major mistake when projecting Ukraine’s
place and role – they miscalculated that this country cannot perform
the role of a mono-layer buffer. Roughly speaking, if the western
part of the country becomes a buffer between Europe and Russia,
the eastern part will fence off Russia from Europe and its buffer.

Georgia, Ukraine, and Moldova are three CIS countries who have
undertaken confrontational, if not hostile, policy towards Russia.

They are openly torpedoing integration initiatives in the post-Soviet
area, particularly, by tearing the CIS from inside by means of GUAM and
by belittling the potential significance of EurAsEC. This is obviously
bad, not only for Russia but also for the other CIS countries. For
example, Georgia’s secession from the CIS cannot but cause harm to
Armenia, though, unlike Georgia, Armenia has managed to somewhat
diversify its foreign policy and has given the EU an even bigger
share in its export-import operations than to Russia.

In its turn, Russia, whose motto is "we will hold dialogue only
with those who are ready for one," has undertaken a number of
counter-measures. I can’t say that all of them are correct or
justified, on the contrary, many of them make things even worse.

Obviously, Russia is taking up a new attitude – "our losses are
becoming yours."